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December 1, 2008

God's Money and Alchemy

Source: Ron
The Neo-Alchemy of the Federal Reserve

Source: The Federal Reserve
Deflation: Making Sure "It" Doesn't Happen Here

At the beginning of the newly flourishing field of chemistry, alchemists seriously thought they could find a chemical reaction which could turn lead into gold. When they failed to do so, alchemists became laughingstocks. So some people point to this failure of alchemy as an example proving that Gold is God's money, because only God can make more of it.

Today, we have neo-alchemists that do indeed have the ability to turn a few dollars into many more dollars. The science is proven; the invention is real. Their invention is the printing press, and no one today is laughing.

So, why does our money say, "In God we Trust"? Our money is not gold; it is not God's money; so why do we trust it? Since we can only trust God and the golden money he has given us, then what keeps the value of printed money high?

Well, there is that other Biblical principle of having "faith". Having pretty much lost our faith in God, Americans have replaced this principle with one called "the full faith and credit of the United States".

Why then do Americans have faith in the credit of the United States?

Well, that is because Americans living today have never been through hyper-inflation, as our Founding Fathers had with the hyper-inflation of the "Not worth a Continental" Continental dollar of the American Revolution.

Americans have faith in the U.S. dollar because the media-Scribes have told us to have faith. Eighth years ago, at the beginning of the Bush Administration, the media-Scribes told us to buy and we did. In doing so, we kicked the football down the field. We bought mini-mansions on shady credit, along with a lot more Chinese goods. Currently, the Fed is attempting to kick the ball further down the field with another $8 trillion in yet more debt.

Fed Chairman Ben Bernanke set himself up in his own speech since -- Alchemy does not exist but neo-alchemy does. By giving this parable as he calls it, he shows exactly why gold is valuable and paper money is not. Gold is valuable EXACTLY BECAUSE alchemy does not work, thus limiting its supply to the amount of effort it takes a man to dig a deep enough hole in the ground to get the gold out. The printing press is no parable -- it exists. The only thing "limiting the supply of money" is the "faith" we have that the Fed will not print an endless supply of it.

According to Bernanke's own theory and argument, paper money should have no value.

    Federal Reserve Board Meeting on Nov. 21, 2006

    "A little parable may prove useful: Today an ounce of gold sells for $300, more or less. Now suppose that a modern alchemist solves his subject's oldest problem by finding a way to produce unlimited amounts of new gold at essentially no cost. Moreover, his invention is widely publicized and scientifically verified, and he announces his intention to begin massive production of gold within days.

    What would happen to the price of gold?

    Presumably, the potentially unlimited supply of cheap gold would cause the market price of gold to plummet. Indeed, if the market for gold is to any degree efficient, the price of gold would collapse immediately after the announcement of the invention, before the alchemist had produced and marketed a single ounce of yellow metal."

    -- Federal Reserve Chairman Bernanke in 2002 speech

Fed Chairman Ben Bernanke has faith in his ability to regulate the value of worthless paper. He seems to forget however that events can get out of his control, forcing his central printing press to run continuously. The Wiemar Republic of Germany was forced to print literally wheelbarrow amounts of money to pay off the foreign debts incurred as a result of WW1 and the subsequent war reparations it was required to pay. Today, America has incredible amounts of foreign debts that may come due instantly, if our debtors become nervous about little things, like say, -- the 75% increase in money supply over just the last 2 months.

    cont of Federal Reserve Board Speech

    What has this got to do with monetary policy?

    Like gold, U.S. dollars have value only to the extent that they are strictly limited in supply. But the U.S. government has a technology, called a printing press (or, today, its electronic equivalent), that allows it to produce as many U.S. dollars as it wishes at essentially no cost. By increasing the number of U.S. dollars in circulation, or even by credibly threatening to do so, the U.S. government can also reduce the value of a dollar in terms of goods and services, which is equivalent to raising the prices in dollars of those goods and services. We conclude that, under a paper-money system, a determined government can always generate higher spending and hence positive inflation. Of course, the U.S. government is not going to print money and distribute it willy-nilly

    -- Ben Bernanke

If America has a "run on the central bank" from China, Arab countries, Europe and others, the value of the U.S. dollar can deflate to the cost of printing paper, just as Bernanke's analysis of the alchemist inventing artificial gold will drop the price of gold to the price of lead. This can happen if Bernanke does nothing and declares America bankrupt.

If Bernanke tells the world that we cannot repay our debts and refuse to pay, then the dollar becomes worthless.

If, on the other hand, Bernanke says that he will pay off all debts, then he will have brought America into the age of hype-inflation.

Usually, these things see-saw back and forth. Hyper-inflation follows hyper-deflation and vice-verse from country to country. America had hyper-deflation about the time Germany had hyper-inflation. This time around, perhaps China will have hyper-deflation, while we have hyper-inflation.

Article located at:
Last Hope for America
Christian Libertarian: Harmonious Union
Church and State
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