A Critique of the Gold Standard People

I’d drafted an essay as a response to an expat American chap that had struck up a conversation with me in a Hostel in Buenos Aires. He had very convincing ideas about how America was on the verge of apocalypse due to what he cited was it’s fraudulent currency system. After the dreadful events in Tucson a red flag has gone up in my mind and I feel compelled to rewrite the essay with a more critical examination of radical currency views.

The chap heard me discussing WordPress with a client on Skype while we shared a table in a common area. We started talking and when he learned I’m a designer he tried to finagle some low rate work out of me for one of his websites which I declined. The topic changed and he kindly shared his internet business strategy with me which amounted to creating hundreds of websites to fill gaps in search, identify good performing sites and invest in ads on those sites. As a designer I reacted negatively to this as it just seemed like creating a lot of badly designed junk to add to the clutter of the web. I asked him if he believed he was doing a good thing. I probably shouldn’t have because that opened up the floodgates of conversation of what he believed was ‘a good thing’ which was something I wasn’t prepared for.

He most certainly gave me a fake name that sounded like something out of a movie, but I’ll call him Chap (which is not the name he gave). I’m going to try and write a brief summary of what Chap told me. I have no way of verifying what’s true and some details sounded exaggerated to me.

Chap grew up on the west coast of the US. He studied economics in college. His thesis was on the history of currency. The research he did led to him developing very radical views about the US currency system. (I’ll try to explain his findings as best I can but I’ll admit most of it was technically economic and way over my head.) Currency as we use it has a 600 year history. It was based on a real gold or silver standard. He cited instances in history when certain powers had tried to sever the relationship between gold and currency such as right before the French Revolution where he told me the King had made it illegal for the people to continue to pay for goods in gold (he cited Marie Antoinette’s ‘let them eat cake’ as related to a deliberate shortage of currency in the populace). He said the US’s economic golden age was the early 20th century. He explained that people go where the capital is such as the droves of immigrants who came to the US in the late 19th and early 20th century. He said the gold standard held in the US until the 70s when France requested payment of US debt in the form of real gold. A ship full of gold bars was sent to France but soon afterwards Nixon enacted a law that severed the link between gold and currency. Chap blamed this fake currency system as the core reason for the unstable economy. He told me that the US is hemorrhaging wealth now and there is a mass exodus of the talented and wealthy because the US is no longer the pinnacle of opportunity. He referenced wealthy friends of his who had taken new citizenship on little known Carribean island countries and said he was in the process of doing the same. He was convinced the US would take steps to prevent the outflow of capital in the very near future (and he was going to beat them to the punch). He showed me reputable news sources that demonstrated to him that the US government is bracing for severe economic breakdown. He said that we were close to that breakdown when the economic crisis started suggesting that currency itself could have become void at that moment. He said that the military was doing drills of war games in supermarkets to prepare for such a catastrophe. He showed me a NYT article that reported the US has not closed the old Japanese internment camps and he questioned why (I’ll admit that fact is very chilling).

Chap was a proud libertarian. He admitted that he had guns of his own in the States. He apparently had given up on the country of his birth and was living a nomadic expat life supporting himself with various internet businesses and schemes (this conversation was was the first I’d heard of the ‘SEO empire’). He expressed a wish that the US pull through but was pessimistic that it could save itself unless it returned to the gold standard. He claimed to have spoken with a supreme court judge who knew nothing of the history if currency he’d explained to me that I’ve just attempted to summarize.

Needless to say all of this information was completely new to me and as I have never studied economics of any sort his theories were even a little persuasive. But I’m innately skeptical of conspiracy theory and doom and gloom scenarios. To offer a counterpoint to his pessimism I have to first go with my gut that he is wrong which is admittedly not the ideal place to start. At that moment I had no immediate response and the conversation ended there.

After weeks of contemplation, a first draft handwritten essay and in light of recent events I will dispute Chap’s prescription of returning to the gold standard as well as the idea that the US is experiencing rapid decline. I’m no economist so I’ll do this as best I can as a conceptualist, generalist and an exprientialist (just made this term up meaning one who gathers knowledge by seeking extra experience such as travel.)

My main criticism of returning to a gold standard is that with populations as they are there couldn’t possibly be enough gold to provide gold backed currency to everyone on the planet. A gold standard would be incredibly cruel to base the world economy on because it would essentially guarantee the permanence of mass poverty. I’ve written of my fondness for Alvin Toffler’s wave theory and I’ll throw Douglas Rushkoff into the mix (I haven’t yet read Rushkoff’s books but I’ve seen some of his video talks and I really responded to his ideas). Both of these thinkers talk about leaving a time of limited resources and moving to an era where wealth is generated by knowledge. Rushkoff specifically addresses the old money system as created by feudal lords to preserve a status quo. Both point the way to ‘alternative currency’ (a term which as become ubiquitous with radical conspiracy theorists overnight). But what they suggest as alt currency is not radical and can be seen as a helpful companion to the conventional money system (common things like credit card points, barter and the hidden prosumer economy of unquantifiable productivity to name a few).

To take a conceptual approach I’d like to suggest that things like inflation, recession, bubble and bust are all part of a dialectic to take us further away from a system of limited recourses. The final resolution of the dialectic is what Francis Fukuyama calls The End of History (which is broader than economics, it includes world peace). Fukuyama wrote a book of the same title shortly after the fall of the Soviet Union when the 90s certainly did hold the promise that major global conflicts had been resolved because the entire world was about to embrace liberal democracy (according to him the best system of government the world will ever have). If Fukuyama’s theory has any validity you could say we have been plunged back into history by a decade’s worth of negative events (September 11, unnecessary wars, economic crisis, resurgent authoritarian regimes).

If we can combine elements of Toffler, Rushkoff and Fukuyama perhaps we can arrive at a hypothetically similar place in an optimistic future. That world is a place where the economy is based on the unlimited resource of value creating knowledge, the limitations of currency have been transcended, poverty has been crushed, war is obsolete and the entire world has embraced real democracy.

As relates to currency perhaps all these economic difficulties are growing pains to take us into this better world of the future. It’s possible my most radical point has been to suggest that the world actually needs to be running on what Chap would call ‘imaginary currency’ because our society is expanding it’s valuable knowledge every day moving beyond the limitations of the old currency system. In this new system wealth can be created and there will always be enough for everyone.

When I invoke my own experience I can’t help but feel optimistic about the longevity of America. I had a very peaceful upbringing in the Northeast. I’ve had the privilege of education and I’ve managed to do work I’ve enjoyed. Despite what the media paints as a hyper-partisan environment I think in most places in the U.S. life on the ground is very agreeable. I was lucky enough to travel for a year abroad to 18 mostly Asian countries with my now wife during what many consider the worst time of the recession. When we returned my cousin asked me what the best country is. “America,” I responded without hesitating. Not that they weren’t amazing, but it becomes very obvious in many places that we have something special in America.

I don’t know if there is a close tie in to the imbalanced murderer from Tucson and the beliefs of the expat chap I met in BA. Chap was very intelligent and well in control of his faculties. I actually didn’t see his views as dangerous, but they did strike me as hyper-paranoid and embracing of fringe conspiracy theory. (Chap was suspicious of Wikileaks and believed Julian Assange could be a Rogue CIA agent. The information I’ve read about from Wikileaks has actually not seemed very controversial in terms of US policy and doesn’t seem good fodder for conspiracy theorists. Perhaps I’ll write something about Wikileaks when it digests more.) The realization that Chap and Laughner may hold similar radical political beliefs has made me replay that conversation with Chap. The political spectrum is wider than the mainstream Democrats and Republicans. Reading about passed assassinations in the 20th century reveals that most were committed by people with radical beliefs outside the mainstream often combined with imbalance (Kennedy, Lennon). After this tragedy I am even less inclined to embrace conspiracy theory and radical views. Just give me evidence and transparency. Hell, give me Wikileaks! (Actually my gut is inclining me to be critical of Wikileaks so stay tuned!)

Leave a comment

Your email address will not be published. Required fields are marked *