The Fed Is Out Of Ammunition


Your last statement is probably the best reason, IMHO, why the U.S. wouldn’t support a gold standard; it would require too much honesty and result in too much loss of power for those in power. Governments hate deflation but they will cheerfully watch their citizens struggle like hell through inflation because citizens do the suffering while "their government" and big money benefits.

What constantly amazes me is the number of sharp folks I read here and elsewhere, much more economically knowledgeable than I and probably than our "leaders", who in truth have no idea what is going on and what will happen. Opinions go in all directions and have numerous variables. That is very worrisome.



Interesting article and as valid a view as any, we are in uncharted waters here despite similarities to previous crises. The question I have is; going forward what effects will this have on the status of the $US as world reserve currency? I believe other nations are now actively considering alternatives and who can blame them after the recent and ongoing abuse by the US of that privilege. One option is a standard unit of exchange based on a basket of commodities, not a currency as we know it but an incorruptible measure of exchange applying to all international trade and debt/credit. This could even arise naturally in response to international uncertainty but would gain widespread support in short order if fairly structured. God knows where this crisis will end up but those countries with large debt levels and a large consumtion based economy are incredibly vulnerable in a de-leveraging of this magnitude. As an aside I can't see the west's financial centres recovering to anything like their former levels, you can't expect this fiasco to be forgotten easily.



New Zealand

As it was pointed above, the pressure against the remonetization of gold has nothing to do with its amount. It has everything to do with how the monetary system influences and, in the long term, determines the balance of power in a society. For this reason the fiat currency regime will fight with everything they got to ensure their own survival. If this means ruining the rest of us, so be it. Commodity money is the money of the free person. Gold is not "legal tender" because it doesn’t need "legal tender" laws for people to accept it, it doesn’t need coercion, as depreciating paper does. As Adolf Hitler said: "Gold in the hands of the public is the enemy of the state". And the SOB knew about totalitarianism, one can give him that. There are several ways in which gold can be remonetized gradually. If I am not mistaken, Murray Rothbard proposes one such possibilities in his book "The Case Against the Fed". Here is an outline of another one, this one proposed by Antal Fekete:

The plan's most important purpose is to eliminate the monopoly that the Federal Government and its central bank have over what constitutes money in our economy. It will do this by repealing the "legal tender laws" that mandate our acceptance of Federal Reserve paper dollars for business transactions and purchases. The plan establishes a parallel monetary system to operate alongside our present Federal Reserve System, and thus it allows the people to reject the Fed's paper money if they wish. It does this by:

1. Opening the U.S. Mint to all citizens, miners, jewelers, processors, etc. to bring whatever gold and silver they wish to be minted into standardized gold and silver coins to circulate as money.

2. Putting all the gold that the Federal Government and its various agencies presently possess (gold that they stole from the American people in 1933) into a Rehabilitation Fund that will then be minted into gold eagle coins and apportioned out to state chartered Credit Unions according to the capital of their various subscribers.

3. The gold coins will then form the basis of the new parallel monetary system. With this gold as their reserves, the Credit Unions will then issue paper certificates to be used as money in society by their subscribers. The certificates will be REDEEMABLE at any time in gold and/or silver to whoever presents them to the Credit Union.

4. The Credit Unions shall have reserves of gold for no less than forty percent of their note and deposit liabilities. The remainder shall be covered by reserves in the form of gold-based short-term commercial credit, i.e., self-liquidating bills of exchange that mature in 91 days or less. Paper instruments such as Treasury bonds, notes and bills will not be eligible.

5. The Credit Unions' primary function will be to supply gold and silver redeemable currency for the payment of salaries and wages to employees and workers who choose (through collective bargaining agreements) to be paid in gold backed currency instead of irredeemable Federal Reserve notes.

6. These three factors (opening the U.S. Mint for all gold and silver to be minted into standardized coins, the chartering of Credit Unions to issue currency redeemable in gold and silver, and the revival of "bills of exchange" to provide the necessary elasticity of credit) will effectively establish a parallel monetary system to the present one we have now. No longer will the Federal Government and its central bank cartel be able to dictate that we only deal in its paper money that is relentlessly being debased every year by inflation.

7. The Federal Reserve's fiat paper money will now have to compete with legitimate redeemable gold and silver backed currency of the Credit Unions. Gradually over the years, gold and silver as money will become used more and more, and the various Federal Reserve banks will either have to convert to its usage or go out of business.

8. The greatest beneficiaries of the plan will be those workers and employees who opt to be paid in Credit Union currency rather than Federal Reserve notes. This can be done through union-negotiated contracts. Their wages and salaries will then hold their value. One's savings will not be worth 25% less ten years down the road, and then 50% less ten years later.

9. The plan is meant to get American citizens acclimated to using and saving gold and silver as money again. It will start out small, but should grow into a viable circulating money throughout society. But even if it remains small in its use, it will be immense in its effect because it will act as a competing form of money to the Federal Reserve's money. This will break the government's mega-bank monopoly, which will force the Federal Reserve to stop debasing the dollar.

The full article, from 2005, should be of interest to those who think that the monetary system is the fundamental problem we face, or at least what got us into this mess. It can be found at:

It is not lack of ideas what is stopping the people in power to fix this, it is lack of political will, or inability to oppose the vested interests of the international bankers that for some reason always get every single thing they want from the government.

The big question that has to be asked when one considers the possibility of the dollar going to hell in a handcart is where is the money going to flow. I mean there aren’t stronger currencies lining up, are there? [/quote]

I don’t recall reading anything here about the Amero. There are enough people out there who firmly believe the US is already printing a replacement currency. Google comes up with 1.4m results and you can see the coins spinning on a table over at YouTube.


In a way they are taking gold now. In my area, there are commercials for buying gold often on radio and TV. Many people are selling it and if the dollar becomes worthless they have a nice stack of paper. Interesting how the people in the know take action weeks even months before the fesses hits the fan.

I found this article "The G-20"s Secret Debt Solution" to be an interesting take on how governments could return to a gold standard.


Can somebody explainme why if we are in deflation mode the groceries are more expensive now?

Can we have both( deflation/inflation) and how that works? It is hard for me to understand the concept.


I know my house is going down in value but my grocery bill is going up. Rice is 50% more expensive than it was in Jan. 08

Has anyone else watched the Money Masters documentary? I’m impressed that it was made sometime in the 90’s. It’s over 3 hours long but we’ve all watched the crash course already so that shouldn’t be a problem.

I watched it and found it very informative and it touches on a lot of the same things Chris does. If anyone doesn’t fully understand our debt based economy, central banking, gold and silver standards, and fractional reserve banking it will provide useful information.

  • Jason


There is a post elsewhere on the site about this that pretty much sums it up:


  • Jason


Jason -

Might also recommend "Money As Debt" - also on Google Video.

It presents in simplified fashion, a monetary-theory basis for a debt-based currency, along with a description of fractional-reserve banking.

Produced by Paul Grignon, he presents his own economic/political "solution" near the end (as does Money Masters)

However, it does reiterate much of what Chris has presented as to the source and basis of a debt-based currency, with perhaps an equally absorbing presentation of fractional-reserve banking, and helps to establish an understanding of the concepts.

Sorry -

"Money As Debt"

Anyone here been checking out Max Keiser’s stuff?

Max seems to be way ahead of most and disparaged by just about everyone.

One buddy told me he sees Max as a traitor and akinto Tokyo Rose. So far I have found vastly more credibility in Max Keiser then in any of the Hank Paulson types who keep getting all the prime TV “news” spots. The homogenized, corporate owned news media (including PBS) is very good at killing any and all messengers who would expose the ballooning lies they more and more frantically want to sell us.

PBC presented two views on the City bail out deal last night. Both agreed wholeheartedly that City was too big to fail. No one ever questioned Government’s ability to bail out everyone every time forever. This one sided take on reality would be a joke if it were not so ubiquitous.

So here is a joke my mom told me growing up.

-Some people got back from the casino and their friends asked them if they had a good time. Oh yes, they said. We just kept winning and winning until we ran out of money.-

Hello Evelyn:
There are a million takes on it and all the links everyone posted are good.
I’ve simplified it down to my HS education as this:
Inflation- them printing gobs of money, what your buck can buy goes way down.
Deflation- them not printing, your buck can buy a lot.
Hyperinflation- them printing gobs and gobs and gobs and gobs of money and your buck is about worthless.
Personally, I don’t think inflation should be applied to goods or services, because in my humble opinion, the price of groceries or whatever is determined by TWO things: 1.) the value of our dollar and 2.) Oil. If we run out of oil, oil will cost a fortune and oil is in EVERYTHING especially our petro chemical farming.
If your asking why food costs the same and other products are falling in price that is simple. Right not it is because food is in demand and will always be. Consumer crud we don’t need isn’t being purchased as people wake up in a home valued below what it was a year ago and open up a 401k statement valued 50% less than a year ago and watch the news and see 10 million out of work and then watch the insame asylum "bail" out banks with money backed by our grandkids taxes and then admit they don’t know what the F&%# they are doing and made misstakes.
There is a glut of consumer junk out there as a result because now factories are shutting down in China. Prices will continue to plummet. GDP is 70% driven by consumers, most of that was consumers borrowed money. Now that consumers cant use their house as an ATM they have in 10 weeks put money on credit cards equivelent to the past 10 months of credit card charges. This will be the next domino to fall.
America is maxed out. There isn’t enough new debt to support the old debt. The opera lady is getting ready to sing.

I just feel like wiley coyote with an umbrella and a sign that says "yikes" while a boulder comes crashing down.
Reading the tea leaves I saw something bad coming up over a year ago, got out of usd backed securities and into international along with some gold. However I’m not sure that was the wisest action. Sounds like gold is the way to go no matter what in these uncertain times.


There is another branch of farming which is the way farming used to be done before agribusiness. Some call this alternative farming or sustainable farming. I suggest that everyone get to know small diversified local farmers in the area and find out about this alternative branch of farming. If you want a way to control your grocery bill, and to eat more healthy and nutritious, then please do some research to find out where your food comes from. This is also an entrepreneurial opportunity because food processing is labor intensive so if you link up with farmers you can provide for yourself and for others.

Remember, you can’t eat gold or silver but farming set up the right way generates food for people directly from the sun and renews the soil and doesn’t require fossil fuels. Gold and silver has its place in a portfolio but we need to move beyond static ideas of wealth and understand that labor and renewable resources are our future. Fortunately the future is brighter than what we have today - but the trick will be the transition. I hope that each of us thinks about this transition and takes steps to get there.

All the best,



Try this on for size Damnthematrix, I didn’t understand the Gold standard either, this helps:

Gold and Economic Freedom

by Alan Greenspan

[Editor's note - It may surprise more than a few gold devotees to learn they have an ideological friend in none other than Federal Reserve Board chairman Alan Greenspan. Starting in the 1950s, in fact, Greenspan was a stalwart member of Ayn Rand's intellectual inner circle. A self-designated "objectivist", Rand preached a strongly libertarian view, applying it to politics and economics, as well as to religion and popular culture. Under her influence, Greenspan wrote for the first issue of what was to become the widely-circulated Objectivist Newsletter. When Gerald Ford appointed him to the Council of Economic Advisors, Greenspan invited Rand to his swearing-in ceremony. He even attended her funeral in 1982.

In 1967, Rand published her non-fiction book, Capitalism, the Unknown Ideal. In it, she included Gold and Economic Freedom, the essay by Alan Greenspan which appears below. Drawing heavily from Murray Rothbard’s much longer The Mystery of Banking, Greenspan argues persuasively in favor of a gold standard and against the concept of a central bank.

Can this be the same Alan Greenspan who today chairs the most important central bank of them all? Again, you might be surprised. R.W. Bradford writes in Liberty magazine that, as Fed chairman, "Greenspan (once) recommended to a Senate committee that all economic regulations should have fixed lifespans. Senator Paul Sarbanes (D-Md.) accused him of ‘playing with fire, or indeed throwing gasoline on the fire,’ and asked him whether he favored a similar provision in the Fed’s authorization. Greenspan coolly answered that he did. Do you actually mean, demanded the senator, that the Fed ‘should cease to function unless affirmatively continued?’ ‘That is correct, sir,’ Greenspan responded."

Bradford continues, "The Senator could scarcely believe his ears. ‘Now my next question is, is it your intention that the report of this hearing should be that Greenspan recommends a return to the gold standard?’ Greenspan responded, ‘I’ve been recommending that for years, there’s nothing new about that. It would probably mean there is only one vote in the Federal Open Market Committee for that, but it is mine.’" – Editor, The Gilded Opinion ]


An almost hysterical antagonism toward the gold standard is one issue which unites statists of all persuasions. They seem to sense-perhaps more clearly and subtly than many consistent defenders of laissez-faire – that gold and economic freedom are inseparable, that the gold standard is an instrument of laissez-faire and that each implies and requires the other.

In order to understand the source of their antagonism, it is necessary first to understand the specific role of gold in a free society.

Money is the common denominator of all economic transactions. It is that commodity which serves as a medium of exchange, is universally acceptable to all participants in an exchange economy as payment for their goods or services, and can, therefore, be used as a standard of market value and as a store of value, i.e., as a means of saving.

The existence of such a commodity is a precondition of a division of labor economy. If men did not have some commodity of objective value which was generally acceptable as money, they would have to resort to primitive barter or be forced to live on self-sufficient farms and forgo the inestimable advantages of specialization. If men had no means to store value, i.e., to save, neither long-range planning nor exchange would be possible.

What medium of exchange will be acceptable to all participants in an economy is not determined arbitrarily. First, the medium of exchange should be durable. In a primitive society of meager wealth, wheat might be sufficiently durable to serve as a medium, since all exchanges would occur only during and immediately after the harvest, leaving no value-surplus to store. But where store-of-value considerations are important, as they are in richer, more civilized societies, the medium of exchange must be a durable commodity, usually a metal. A metal is generally chosen because it is homogeneous and divisible: every unit is the same as every other and it can be blended or formed in any quantity. Precious jewels, for example, are neither homogeneous nor divisible. More important, the commodity chosen as a medium must be a luxury. Human desires for luxuries are unlimited and, therefore, luxury goods are always in demand and will always be acceptable. Wheat is a luxury in underfed civilizations, but not in a prosperous society. Cigarettes ordinarily would not serve as money, but they did in post-World War II Europe where they were considered a luxury. The term "luxury good" implies scarcity and high unit value. Having a high unit value, such a good is easily portable; for instance, an ounce of gold is worth a half-ton of pig iron.

In the early stages of a developing money economy, several media of exchange might be used, since a wide variety of commodities would fulfill the foregoing conditions. However, one of the commodities will gradually displace all others, by being more widely acceptable. Preferences on what to hold as a store of value, will shift to the most widely acceptable commodity, which, in turn, will make it still more acceptable. The shift is progressive until that commodity becomes the sole medium of exchange. The use of a single medium is highly advantageous for the same reasons that a money economy is superior to a barter economy: it makes exchanges possible on an incalculably wider scale.

Whether the single medium is gold, silver, seashells, cattle, or tobacco is optional, depending on the context and development of a given economy. In fact, all have been employed, at various times, as media of exchange. Even in the present century, two major commodities, gold and silver, have been used as international media of exchange, with gold becoming the predominant one. Gold, having both artistic and functional uses and being relatively scarce, has significant advantages over all other media of exchange. Since the beginning of World War I, it has been virtually the sole international standard of exchange. If all goods and services were to be paid for in gold, large payments would be difficult to execute and this would tend to limit the extent of a society’s divisions of labor and specialization. Thus a logical extension of the creation of a medium of exchange is the development of a banking system and credit instruments (bank notes and deposits) which act as a substitute for, but are convertible into, gold.

A free banking system based on gold is able to extend credit and thus to create bank notes (currency) and deposits, according to the production requirements of the economy. Individual owners of gold are induced, by payments of interest, to deposit their gold in a bank (against which they can draw checks). But since it is rarely the case that all depositors want to withdraw all their gold at the same time, the banker need keep only a fraction of his total deposits in gold as reserves. This enables the banker to loan out more than the amount of his gold deposits (which means that he holds claims to gold rather than gold as security of his deposits). But the amount of loans which he can afford to make is not arbitrary: he has to gauge it in relation to his reserves and to the status of his investments.

When banks loan money to finance productive and profitable endeavors, the loans are paid off rapidly and bank credit continues to be generally available. But when the business ventures financed by bank credit are less profitable and slow to pay off, bankers soon find that their loans outstanding are excessive relative to their gold reserves, and they begin to curtail new lending, usually by charging higher interest rates. This tends to restrict the financing of new ventures and requires the existing borrowers to improve their profitability before they can obtain credit for further expansion. Thus, under the gold standard, a free banking system stands as the protector of an economy’s stability and balanced growth.

When gold is accepted as the medium of exchange by most or all nations, an unhampered free international gold standard serves to foster a world-wide division of labor and the broadest international trade. Even though the units of exchange (the dollar, the pound, the franc, etc.) differ from country to country, when all are defined in terms of gold the economies of the different countries act as one – so long as there are no restraints on trade or on the movement of capital. Credit, interest rates, and prices tend to follow similar patterns in all countries. For example, if banks in one country extend credit too liberally, interest rates in that country will tend to fall, inducing depositors to shift their gold to higher-interest paying banks in other countries. This will immediately cause a shortage of bank reserves in the "easy money" country, inducing tighter credit standards and a return to competitively higher interest rates again.

A fully free banking system and fully consistent gold standard have not as yet been achieved. But prior to World War I, the banking system in the United States (and in most of the world) was based on gold and even though governments intervened occasionally, banking was more free than controlled. Periodically, as a result of overly rapid credit expansion, banks became loaned up to the limit of their gold reserves, interest rates rose sharply, new credit was cut off, and the economy went into a sharp, but short-lived recession. (Compared with the depressions of 1920 and 1932, the pre-World War I business declines were mild indeed.) It was limited gold reserves that stopped the unbalanced expansions of business activity, before they could develop into the post-World Was I type of disaster. The readjustment periods were short and the economies quickly reestablished a sound basis to resume expansion.

But the process of cure was misdiagnosed as the disease: if shortage of bank reserves was causing a business decline-argued economic interventionists – why not find a way of supplying increased reserves to the banks so they never need be short! If banks can continue to loan money indefinitely – it was claimed – there need never be any slumps in business. And so the Federal Reserve System was organized in 1913. It consisted of twelve regional Federal Reserve banks nominally owned by private bankers, but in fact government sponsored, controlled, and supported. Credit extended by these banks is in practice (though not legally) backed by the taxing power of the federal government. Technically, we remained on the gold standard; individuals were still free to own gold, and gold continued to be used as bank reserves. But now, in addition to gold, credit extended by the Federal Reserve banks ("paper reserves") could serve as legal tender to pay depositors.

When business in the United States underwent a mild contraction in 1927, the Federal Reserve created more paper reserves in the hope of forestalling any possible bank reserve shortage. More disastrous, however, was the Federal Reserve’s attempt to assist Great Britain who had been losing gold to us because the Bank of England refused to allow interest rates to rise when market forces dictated (it was politically unpalatable). The reasoning of the authorities involved was as follows: if the Federal Reserve pumped excessive paper reserves into American banks, interest rates in the United States would fall to a level comparable with those in Great Britain; this would act to stop Britain’s gold loss and avoid the political embarrassment of having to raise interest rates.

The "Fed" succeeded; it stopped the gold loss, but it nearly destroyed the economies of the world in the process. The excess credit which the Fed pumped into the economy spilled over into the stock market – triggering a fantastic speculative boom. Belatedly, Federal Reserve officials attempted to sop up the excess reserves and finally succeeded in braking the boom. But it was too late: by 1929 the speculative imbalances had become so overwhelming that the attempt precipitated a sharp retrenching and a consequent demoralizing of business confidence. As a result, the American economy collapsed. Great Britain fared even worse, and rather than absorb the full consequences of her previous folly, she abandoned the gold standard completely in 1931, tearing asunder what remained of the fabric of confidence and inducing a world-wide series of bank failures. The world economies plunged into the Great Depression of the 1930’s.

With a logic reminiscent of a generation earlier, statists argued that the gold standard was largely to blame for the credit debacle which led to the Great Depression. If the gold standard had not existed, they argued, Britain’s abandonment of gold payments in 1931 would not have caused the failure of banks all over the world. (The irony was that since 1913, we had been, not on a gold standard, but on what may be termed "a mixed gold standard"; yet it is gold that took the blame.) But the opposition to the gold standard in any form – from a growing number of welfare-state advocates – was prompted by a much subtler insight: the realization that the gold standard is incompatible with chronic deficit spending (the hallmark of the welfare state). Stripped of its academic jargon, the welfare state is nothing more than a mechanism by which governments confiscate the wealth of the productive members of a society to support a wide variety of welfare schemes. A substantial part of the confiscation is effected by taxation. But the welfare statists were quick to recognize that if they wished to retain political power, the amount of taxation had to be limited and they had to resort to programs of massive deficit spending, i.e., they had to borrow money, by issuing government bonds, to finance welfare expenditures on a large scale.

Under a gold standard, the amount of credit that an economy can support is determined by the economy’s tangible assets, since every credit instrument is ultimately a claim on some tangible asset. But government bonds are not backed by tangible wealth, only by the government’s promise to pay out of future tax revenues, and cannot easily be absorbed by the financial markets. A large volume of new government bonds can be sold to the public only at progressively higher interest rates. Thus, government deficit spending under a gold standard is severely limited. The abandonment of the gold standard made it possible for the welfare statists to use the banking system as a means to an unlimited expansion of credit. They have created paper reserves in the form of government bonds which – through a complex series of steps – the banks accept in place of tangible assets and treat as if they were an actual deposit, i.e., as the equivalent of what was formerly a deposit of gold. The holder of a government bond or of a bank deposit created by paper reserves believes that he has a valid claim on a real asset. But the fact is that there are now more claims outstanding than real assets. The law of supply and demand is not to be conned. As the supply of money (of claims) increases relative to the supply of tangible assets in the economy, prices must eventually rise. Thus the earnings saved by the productive members of the society lose value in terms of goods. When the economy’s books are finally balanced, one finds that this loss in value represents the goods purchased by the government for welfare or other purposes with the money proceeds of the government bonds financed by bank credit expansion.

In the absence of the gold standard, there is no way to protect savings from confiscation through inflation. There is no safe store of value. If there were, the government would have to make its holding illegal, as was done in the case of gold. If everyone decided, for example, to convert all his bank deposits to silver or copper or any other good, and thereafter declined to accept checks as payment for goods, bank deposits would lose their purchasing power and government-created bank credit would be worthless as a claim on goods. The financial policy of the welfare state requires that there be no way for the owners of wealth to protect themselves.

This is the shabby secret of the welfare statists’ tirades against gold. Deficit spending is simply a scheme for the confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights. If one grasps this, one has no difficulty in understanding the statists’ antagonism toward the gold standard.

by Alan Greenspan

That was before Greenspan sold out. The man had a price you see.

In addition to a large garden and a greenhouse we also raise organic chickens. Easy, fund, cheap and very healthy. We buy chicken food from Mennonite farmers.
Farmers today are faced with a lot of issues as a result of dwindling prices. They are getting by with older equipment and buying less fertilizer and growing less. This will have an impact when we consider the exponential population growth - that is if things continue as is. The bright side to this is a lot of ethanol producers are going tango uniform.