Category: 2011 Part2

The Gold Standard, Part 7

Joseph Dewey
This entry is part 2 of 31 in the series 2011B

Plan Two

Many who want some type of gold standard to increase our financial stability think that a 100% gold standard would be impractical but we should return to fractional banking where the dollar is backed by gold reserves.  Under this system, instead of issuing a dollar for each dollar’s worth of gold, we could issue $4-$10 for a dollar’s worth. In other words, up to 90% of our paper or digital money would be by fiat.

Something like this was allowed during most of the years the nation was on a gold/silver standard. Under this standard people are allowed to exchange their dollars for gold, but the theory is that not enough of them would do this to cause a depletion of gold reserves.  Besides, if a person wanted gold he could purchase it from a dealer as well as bothering Uncle Sam for redemption.

Gold coins would also be allowed to circulate as money so if anyone preferred that over the partial fiat backed paper or deposited money he could use physical coins.

When we were on the gold standard the danger of gold depletion came not as much from individuals redeeming dollars for gold, but from other nations.  Attacking another nation’s gold reserves was a way to destabilize or control them.

From FDR to Nixon we were on a gold standard but it was illegal for people to own gold neither could they redeem dollars for gold.

Before FDR it was legal to own gold and the dollar was redeemable for gold.  I do not know any gold standard advocates who want to return to the FDR model but many want to return a standard where their dollar is redeemable for gold with private ownership allowed.

Suppose Congress was willing to cooperate with gold standard advocates.  Would it be practical or even possible to return to even a fractional standard, let alone the fully gold backed one?  Let’s take a look at the problems.

To make the gold standard work, not only would the United States have to go on it but the majority of nations that we deal with would need to also.

This is a point that I haven’t seen examined much by gold standard advocates.  When we were on the gold standard on bygone days other nations were on it with us.  We were all in the same boat.  If another nation threatened to deplete our gold reserves they could be threatened in return.

Today no major nation operates on the gold standard so if we went on it we would be on it alone.  This would be unprecedented in the history of the world.  What makes this idea even more precarious is the dollar has replaced gold as the standard of world currency.  This is a fact of which many seem not aware.

This means that it would be much more dangerous for the USA to go on the gold standard than any other nation.

Why?

Let me put it this way.  If France were to go on the gold standard and its currency collapsed because of a run on its gold then the French currency would collapse but the rest of the world would survive.

But if we unilaterally went on the gold standard and there was a run on our gold then not only would the dollar collapse, but the economy of most of the world would be destroyed.

Of all the nations that would be injured China would be the most immune because its currency is the least tried to the dollar and world banking system as a whole. In a world financial collapse they just may be the last man standing.

It would be ironic indeed if a communist country outsmarted the capitalists at their own game.

If we unilaterally went on the gold standard we would place ourselves in a precarious situation indeed.

For one thing, to return to the gold standard we first need to have enough gold in stock to back up any demand there may be for dollars that are presented for gold redemption.

We presently have 147.3 million ounces of gold in reserve.  At the time of this writing the value of gold is around $1400.  This means that our government owns just over $206 billion worth of gold in which to back currency.  How far would this go?
http://www.usmint.gov/about_the_mint/fun_facts/index.cfm?action=fun_facts13

Not far.  That would hardly cover the amount of money we are currently borrowing in a month.

The budget for 2011 is $3.82 trillion.  This amount alone is 18.5 times the value of our gold stock. Our Gross National Product is over $14 trillion or 67 times as much as the value of our gold supplies.  We couldn’t come close to backing the money in circulation with gold.
On top of this the United States owes over $14 trillion in debt.  If we were on the gold standard then less than 2% of those loans turned in for gold would completely deplete us and destroy the dollar on a gold standard.

If we were on the gold standard China alone could destroy us by demanding only a portion of their U.S. dollars (totaling $1,160,000,000,000) be redeemed for gold. Even Britain who holds a mere $272,100,000,000 has enough to break our potential gold bank.

Let us suppose for a moment that we were somehow blessed with enough security so our gold reserves would not be depleted. Could we safely transition to a gold standard? What would happen to the value of a dollar?

Our current money supply in circulation is around $14 trillion, not counting the additional $14 trillion of debt for which we are responsible.

Our country claims to have 147.3 million ounces of gold in reserves.  I say “claims” because many are suspicious that backroom deals have been made with the gold and it may no longer even belong to us.  Even so, for the sake of this treatise we’ll assume we have the gold.

If we attempted to back up $14 trillion with $206 billion dollars worth of gold this would mean that each ounce of gold would represent over $95,000!  If we think the price of gold is high now, well… just consider this figure.

This would lead to a deflation of the money supply to adjust to a market value of gold that would make the deflation during the Great Depression seem like the good old days.

Gold standard advocates admit there could be a big adjustment in the money supply and the value of a dollar but they blithely state that the amount of gold we have in reserves does not matter for our economy will adjust and then all will be well. Some go so far to say that we could be on the gold standard even if there was only one ounce of gold in all the world.  That once would be worth trillions and each dollar would only represent a few atoms of gold.

Theoretically this is possible though such a value system would certainly eliminate the possibility of minting gold coins.

Some give examples less extreme.  They say that if the money supply contracted so each of the new dollars was worth ten of our present dollars that the prices of everything would just adjust.  They say that a loaf of bread that now sells for $3.00 would sell or 30¢ after the adjustment.  A car that sells for $20,000 would cost just $2,000 and a $300,000 house would go for $30,000. They admit that the adjustment would be painful for a while but afterwards things would be better than ever.

During the Great Depression we had a contraction of money supply by about a third.  Imagine the misery we would go through if the contraction was 90% or more. There would be misery, starvation and thievery like the world has never seen.

And do you think that foreign nations to which we owe trillions would accept only 10% of their debt as payment?  Of course not.  They would want the whole thing and if we attempted to pay them off 10¢ on the dollar war may wind up being the end result.
The obvious conclusion is this.  Going back to the gold old days of the gold standard would be as difficult as going back to the good old days of relying on the whale oil standard rather than electricity.

That doesn’t mean that gold standard advocates do not have some good points.  Their idea of allowing gold, silver or other items of solid value to be exchanged as legal money is good and such implementation could do much to increase stability and allow us to prepare for a potential economic collapse.

The Utah legislature sees the value of doing this and on March 10, 2011 passed a bill which would allow “gold and silver coins to be used as legal tender in the state — and for the value of their precious metal, not just the face value of the coins.”
Washington Times; March 11, 2011
The government does mint some gold and silver coins but their value is artificial.  The one ounce silver eagle is only worth a dollar and the one ounce gold coin $50 for legal exchange.  Since the real value of these coins is around $40 and $1400 (at the time of this writing) then the only people who purchase these coins are collectors.

Utah is changing the game so gold and silver coins can be used as money for their real value. The bill also has another great idea incorporated in it.  It allows people to exchange coins without having to account for capital gains.  This means that if you receive a gold coin valued at $1000 and spend it when it is worth $1400 you do not owe a tax on the $400 profit.

There is still a huge disadvantage for people in Utah though. The bill only deals with state laws and not the federal.  This means you will not be able to pay federal taxes with gold or silver (who wants to) but you still have to report the $400 as a capital gain on your federal income tax. This could mean that keeping track of all the receiving and spending of coined money may be a bigger inconvenience than the tax itself.

Utah made a positive move in getting the dialog started, but we need federal law changed as well as state law if the use of gold and silver coins is to approach a practical level.

If gold and silver coins, as well as other private tender, were to become fully legal with no capital gains then we would see a gradual influx of solid money into system that could operate as a security net to the current Federal Reserve notes, or whatever other issue the government approves of in the future.  It would also stimulate gold and silver production in order to infuse additional coins into the system.

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Copyright 2011 by J J Dewey

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Divine Carelessness vs Recklessness

Joseph Dewey
This entry is part 1 of 31 in the series 2011B

Unfortunately, it is human nature to interpret things in terms of black and white so I thought I would make a pre-emptive post and prevent any future misunderstanding on the principle of Divine Carelessness.

So how is it that anyone could misunderstand this idea?

The answer is – it is possible simply by the fact that the phrase has the word “carelessness” in it and we associate it with good action rather than bad.  This can cause the back and white mind to figure that anything he wants to do that is careless is now a good thing.

So…  What is the difference then between Divine Carelessness and just plain carelessness, or even recklessness?

There are a number of them.  Here are a few.

(1) When the path of Divine Carelessness is taken the end will be good.  In other words, the person will be better off for his actions than if they were not taken at all. With regular carelessness he will generally be worse off.  I say generally because even a stopped lock is right twice a day and a careless decision will sometimes create an advantage.

For instance, it would be an act of carelessness and recklessness to spend your family’s grocery money on the lottery.  But there’s a small chance you could win and then be you would glad you played.  Even if you did win this would not be an example of Divine Carelessness. People who take this type of chance once will do it again and lose in the end.

(2) The source of the decision to act with Divine Carelessness comes from a contact with the soul.  The person receives a message or confirmation and internally knows it is right even though everything and everyone external tells him no.

Regular carelessness happens because of personality impulse.

In the movie “The Adjustment Bureau” David (Matt Damon) seems to make a careless move by defying, not only angels, but God Him(Her It)self.

BUT…

He did this because of an internal registration from the soul which he knew was correct.  To his credit, instead of following all the outer voices of authority, the only one he did follow was the internal one.  As a result the end result of his decision was positive.

It is interesting that in my mission story I tell readers of how I met the girl of my dreams, fell in love, but was told to not marry her, similar to what happened to Matt Damon – except I obeyed and he did not.

Did I do wrong?  Wouldn’t it have been divinely careless to throw caution to the wind and pursue her to the end as Damon did with his girl?

Hopefully, my readers can see why this would not have been divinely careless.

The answer is it would not have been a Divinely careless act or decision, as I would have been in disregard of the command I knew had came from the inside, from my soul.

Because I internally knew she was not the one I was supposed to marry then it would have NOT been Divinely Careless to go against the God Within – even though my astral body wanted more than anything to pursue her.

Then it is interesting that my final companion (Artie) was also confirmed through my soul.  In this case nothing stopped me from pursuing her even though all outside influences seemed against it.

(3) Divine Carelessness is the result of the correct use of the Second Key – and comes from good judgment. Regular carelessness comes from bad judgment.

(4) Divine Carelessness is not really careless.  It just seems careless to orthodox people.  Regular carelessness is what it appears to be – an irresponsible action.

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Copyright 2011 By J J Dewey