Posted by: graemebird | April 12, 2007

Terge Amassing Some Terrific 100% Backing Information.

Terge has (perhaps inadvertently) been giving these very clear descriptions of how a trouble-free monetary system would work. It turns out we have our own local proto-perfect monetary system in the disguise of THE PERTH MINT.

Thats the best information I’ve gotten off anyone since I learned the specifics of liquified coal from Arthur Robinson.

“It turns out we have our own local proto-perfect monetary system in the disguise of THE PERTH MINT.” Thats actually great news. Because if you have to start these things totally from scratch its too hard an ask for a new government to get up.

But if we have the expertise already in the Perth Mint its just a matter of bringing on the three other metals, hiring out a few of the staff on secondment and perhaps cutting a deal with e-Gold to help us set it all up.

But then of course you don’t need to dirty the situation with government action at all. You just clarify the rules and make INTEREST on metallic or HYBRID LOANS non-taxable….. Non-taxable if the company has its on-call metals 100%-backed.

And let that slight interest rate advantage seemlessly overcome the network effects of centuries of less-then-perfect monetary arrangements.

But as anti-libertarian as this sounds: There will need to be a great deal of auditing of banks.

We will need to audit them at the start….

… And again during any time period where investment asset prices are rising quickly or where the nominal interest rate is higher then usual.

If neither of these two factors are present, which will be most of the time, then auditing costs will be minimal…

ANYWAY HERE IS THE POST that so far has been blocked by that unrighteous nutball Humphreys:

Thats terrifice Terje.

You’ve explained EXACTLY how a trouble-free monetary system would work.

You could bank on it that these certificates ARE IN SOME SUBTLE WAY PROHIBITED!!!!!!!! from being transferrable. Well perhaps I’m going too far here since there is very many ways in which the taking up of such certificates AS MONEY is prevented.

But the thing is this. If we had all these Perth Mint setups… And with electronic transferrability like E-gold as well as Cash,bars and coins….

….. If you didn’t audit them then they would eventually start lending your Gold out so that the certificates weren’t backed 100%.

And as soon as you get that happening you get a bifurcation of the economy. Like some sort of shredding of space-time into two parallel universes.

If you maintained the 100% backed warehousing and audited it rigourously then the financial economy and the real economy are really the same economy… And in fact you would never read the following words…. “the financial economy and the real economy”

Because with that warehousing scenario and without ever having fractional reserve, there is no two economies… and what was the financial sector now becomes barely noticeable and something that no-one really need take notice of.

Some research ought to be done about countries clarifying their property-rights with regards to money and that preceding a massive expansion in the countries economy.

I’m thinking of Sir Isaac Newton standardising the pound sterling. And reigning great vengeance on anyone who debased the coin of the realm.

Our greatest scientist must have worked it out just how important it was to clarify property rights in this manner.

His influence as to the power of the British Empire might have been stronger via this channel then all his mighty scientific discoveries.

We have more then one type of compulsion I think.

Hernando De Soto….. Probably the only non-Austrian (I think he’s basically a closet Austrian) economist alive today worth spending a lot of time listening to.

Well he has shown just how important it is to have that clarity-in-property rights. To have VERY clear property-titles. He shows that its when property-titles have been clarified THATS WHEN a formerly poor country can suddenly become rich.

Now I hope, of course, that one day we can get that clarification in property rights in a totally voluntary society. For that we’ll need a lot of work on natural law and we’ll need competitive courts and things. And I hope also that one day it will be practical to have private defense.

But look both these things are not possible without going through certain stages.

We need compulsion in defense (ie a defense budget) for the time being. Because we need to be able to have an air and submarine buffer that keeps the bastards right away from the continent and we need the capacity to be able to avenge ourselves by killing regime-leadership.

And in the same way that we cannot yet dispense with compulsion for national defense, well we ought not dispense with compulsion in a totally purist way when it comes to bringing total clarity to property-titles.

It is because we don’t have clarity in property rights when it comes to digging under roads and tunnelling under peoples property that we have to rely on government to provide our infrastructure…. (just for example) and so we have a lot of work to do in this clarification process for property that currently exists under ground and for the rights and obligations which ought to prevail when it comes to HOMESTEADING underground property titles.

So you all think its a big put-upon to dissalow fractional reserve?

Well you could allow it and minimise the monetary damage but always in the context of maximum clarity in property rights. No way could you leave it to the banks themselves or they would naturally try and fudge and homogenise less good money with better money. Then the bad money would drive out the good. And the whole thing would collapse all the way to where we are now.

But its too much of a wild card to be even allowing a highly differentiated fractional reserve product IN TRANSITION.

This is no game we are playing here. In transition we simply have to hit all the right targets and avoid a recession. You screw money up you can ruin millions of peoples lives and even make a war more likely.

So in transition we really need to at first get to 100% backed fiat… And then we can privatise with great confidence from that point.

Now of course I realise I haven’t made my case yet. But for that we need to get into monetary theory.


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