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| Last Updated: Aug 15th, 2008 - 11:26:43 |
Newsletters
:
2007 Newsletters
:
15 June 2007
Thought for the Day
A parliamentary select committee has been called to inquire into the future monetary policy framework with a view to determining "the effectiveness of current monetary policy in controlling inflation".
Milton Friedman, who won a Nobel Prize in Economics in 1976, has this to say; "Inflation is always and everywhere a monetary phenomenon. To control inflation, you need to control the money supply."
Last year our government increased the money supply by 16.5% and our inflation rate is now set to bound ahead.
On page 811 of Money, Bank Credit and Economic Cycles, Jesus Huerta de Soto concludes this discussion of banking:
In conclusion, if we wish to build a truly stable financial and monetary system for the twenty-first century, a system which will protect our economies as far as humanly possible from crises and recessions, we will have to:
(1) ensure complete freedom of choice in currency, based on a metallic standard (gold) which would replace all fiduciary media issued in the past;
(2) establish a free-banking system;
(3) insist that all agents involved in the free-banking system be subject to and comply with traditional legal rules and principles, especially the principle that no one, not even a banker, can enjoy the privilege of loaning something entrusted to him on demand deposit (i.e., a free-banking system with a 100% reserve requirement).
Wikipedia defines Free banking as; "a theory of banking which invokes only market forces, with a conspicuous absence of central banks and any banking regulations, with only the general commercial laws applicable."
In other words to solve our inflation problems we should remove governments and their Central Banks from the system and require ordinary Commercial Banks to only deal in money which is fully 100% guaranteed by gold. Any other method has been shown in history to fail with serious implications for the wealth of individuals. We have been through the hiccups of 1987 - 1989 in New Zealand and experienced in our recent past the severity of the problems that may arise. This will happen again and again until we learn the lesson. Anybody seriously interested in understanding this question should read Jesus de Soto's book.
There are only 900 pages!
Jun 15, 2007, 14:36
Newsletters
:
2007 Newsletters
:
15 June 2007
The Coming Collapse of the U.S. Dollar
For some time now we have been concerned about the state of the world's finances. Our currency is under pressure and the Reserve Bank is hoping that they can control the price of our money by buying and selling on the international market.
All the western currencies are inflating as governments seek to help their exporters and keep people "happy". What is interesting is that more and more people are starting to notice what is happening and to worry about the consequences.
What we have discovered here at the Foundation for Economic Growth is that currencies in the past that were not backed by gold or silver (fiat currencies) have all vanished. It is an inevitable result as far as I can see. In the process the currencies have a continual round of boom followed by bust (fast or slow) which is what we have been experiencing since 1971.
Our Central Bankers are desperately trying to keep the lid on the boiling pot but at some point they must fail. As more and more people come to understand that our money is just paper with no inherent value, so the concern will rise. This article is written about the USA situation - not dissimilar to our own - by an Indian accountant working in Chennai.
Our government is holding an enquiry into the causes of inflation at the present time. If they would read Milton Friedman they would have the answer: "Printing too much paper money". This current situation of large debts amongst the population and continual inflation of the currency cannot continue indefinitely. Therefore it must stop.
With our money supply increasing at more than 10% per year (16.5% last year) our statistic of GDP growth rate at 1% is a bit of a nonsense. We are already going backwards. When enough people know this then the fun really begins.
And for us, the only answer is to pay back debt and own real assets like REAL estate and gold and silver. Or find a currency that is sound. Best of luck!
Jun 12, 2007, 11:32
Newsletters
:
2007 Newsletters
:
15 June 2007
Return To The Gold Standard
Seemingly out of the blue, the U.S. Federal Reserve chairman is hinting at a return to the gold standard. If so, currency markets are in for a shock.
This happened four years ago. Nothing has yet changed. Major Central Banks are continuing to sell large amounts of gold. This is holding down the current price of gold. How long can this continue?
Jun 11, 2007, 17:10
Newsletters
:
2007 Newsletters
:
15 June 2007
What Goes Around
Inflation is always and everywhere a monetary phenomenon, said Milton Friedman.
The whole world is inflating. Can we control it?
Jun 11, 2007, 16:04
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