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Mr. Rawles:
The following response is not intended to be insulting, but I fear it must inevitably come across as such. L.C.’s ignorance is so astonishing in its breadth and depth that I do not know how else to address it. I therefore apologize from the outset for what follows, but understand that this is all intended in the sincere hope of increasing understanding and not some sort of “I know more than you do” contest. 

L.C. wrote: “I was moderately concerned for the first time reading your blog this past week in regards to the post on Gold and Silver Barter. [On October 27th–see the SurvivalBlog archives] In there you referred to the American public as having ‘been robbed’ [by inflation and debasement of our currency.]” 

Mr. Rawles made a precisely correct observation. For example, if you have money in savings earning 1.5% interest [per year], but a deliberate policy of monetary inflation is eroding the buying power of your money at, say, 2.5% [per year], then, yes, it would be safe to conclude that you are being robbed (and note that I have not even considered taxes in this equation). Bear in mind that inflation, by definition, is almost universally a central bank creation that can usually only exist with a fiat currency. (Yes, there are exceptions to this rule, but they are fantastically rare).

L.C. wrote: “My concern is that this is one of the few places where survivalists get the bad rap of being crazy.”
Those who truly understand what is going on in the world often are accused of being crazy by the less well informed – this is a common thread throughout recorded history. And sometimes the so accused ARE in fact crazy! But in many cases one finds that such people are not crazy, but merely far more perceptive than is the norm. There were those who foresaw where Hitler and his Thousand Year Reich were going long before Kristallnacht, and fled. They lived. Those who didn’t for the most part ended their lives in unspeakable, hellish agony in places like Auschwitz and Dachau. And yet, the folks who fled were no doubt regarded as “crazy” at the time. Tell me, which group would YOU rather have been in?
Much of what most survivalists believe is regarded as crazy by the mainstream. I would submit, however, that it is the mainstream that has it wrong, not the survivalists.

L.C. wrote: “I want to point out something: whether it’s gold, a paper dollar, or a rock, the value of whatever item is determined by faith, not intrinsic value. Gold is only valuable to us because we decided that shiny stuff was so important that we were willing to trade long, hard days of work for a little bit of it.”
This is partially correct; just correct enough to cause folks like L.C. to come to the precisely wrong conclusion! It would take perhaps several books to cure this profound misunderstanding; let me just state that gold was (and is, amongst more enlightened individuals) considered valuable for reasons far beyond mere faith. It was chosen as money in what can only be described as a harshly Darwinian process of “natural selection” that weeded out all other contenders (save silver, and perhaps copper or copper alloy for small denominations). Space does not permit me to delve into detail; I leave that as an exercise for the class to look up on their own time.

L.C. wrote:“At one point in our nation’s past we limited the currency in the market to be equal to the value of the gold the US Treasury has on hand – but there was a problem. By the 1950s, during our rebuilding of the country post-WWII, there was so much growth going on that we actually were outpacing the availability of gold in the market. We were slowly stifling our own economy because we could not produce more goods and services that there was physical gold in the market.”
Mr. Rawles addressed this pretty well, but I would like to add something here. Not all economic “growth” is beneficial in the long run. One can have healthy growth, and one can have growth that is more akin to a cancerous tumor. America’s “growth”, particularly over the last 40 years, is well and truly a cancer, which is in the end going to kill this once great nation.
And, no, we were not “stifling” our economy – that oft repeated myth has zero basis in fact or reality, and betrays a deep and profound ignorance of how money actually works.

L.C. wrote: “Finally, common sense prevailed when we realized something: The American public did not need gold, they needed dollars. They can not use gold in the grocery, the feed store, or the mall. Dollars they can use.”
Nonsense! What the American public actually needs is a stable currency – which is precisely what gold is! Unless you happen to think that paying $1 million for a 1st Class postage stamp is a great idea. I suggest you spend some time educating yourself on the concept of hyperinflation. Weimar Republic Germany in the 1920s is a good place to start, and provides an excellent case in point as to why sane people with IQs higher than room temperature do not advocate a fiat currency.
As an aside, why could not one use gold in a grocery store? Prior to 1933, folks would do just that! There were $1, $2.50, $3, $5, $10, and $20 gold coin denominations that were all legal tender. The statements quoted from L.C.’s e-mail are not merely ignorant, but irrational. I am sorry for what I am about to say, L.C., but in all honesty if you had asserted something this idiotic within arms reach I’d have slapped you into next week, just on general principle.

L.C. wrote: “People have more faith in the dollar than they do in the ounce of gold.” This may be true (to a point), but not in a good way. It basically means that people have more faith in a corrupt and evil politician’s empty promise, then the millennia proven security of gold. Hardly an example of sound reasoning! But then, the Sheeple believe many irrational and stupid things.

L.C. wrote: “Let the economy grow!” Just like that, eh? Instant economy, just add water and dollars and watch it grow? Sorry, I couldn’t resist. Actually, that has just enough truth to be superficially correct! But, as I pointed out earlier, it is not a healthy growth. It is a cancer, and it will in no uncertain terms destroy us.

L.C. wrote:“To imply that we have been fooled is to imply conspiracy and breeds distrust.” Well, yes, your point, please? The irrefutable facts are that we have been fooled, there is ample evidence to suggest at least an indirect conspiracy of philosophy (if not out and out corruption), and overwhelming proof that smart, sane folks should be distrustful, just as Germans should have been distrustful in the 1930s, and Russians from 1919 onwards. Folks in this day and age that are distrustful act so based on solid historical and economic facts. Those who choose to ignore history and basic reality will suffer accordingly – unfortunately, so will the rest of us. Truth is truth and reality is reality. We are being cheated in no uncertain terms. Calling attention to this fact does not itself breed distrust – it is the committing of this massive fraud in the first place that is responsible for that. Sticking your head in the sand does not resolve the fundamental problem, or make it go away. I should not have to explain this to an adult, but obviously…
Based on these statements, L.C., I would surmise that, had you lived in Germany in 1933, you would have swallowed Hitler’s National Socialist party line hook, line, and sinker. After all, you wouldn’t have wanted to “imply conspiracy” or “breed distrust” (though, admittedly, that might have been a good move, sparing you a trip to Auschwitz. On the other paw, you might have lived just long enough to get carpet bombed by B-17s…)

L.C. wrote: “We may differ here, but I believe that is completely possible to work within the system until there is no system. When there is no system, I will be beside the other readers here making the best of the barter system.”
“May differ” is a grand understatement of the highest order. Further, one may possess all sorts of beliefs, none of which having any factual or rational basis. And the barter system is fantastically inefficient; indeed, the term “barter economy” is truly an oxymoron.

L.C. wrote: “…Until then, I will happily use my U.S. Dollars to purchase those items, never once believing I have been duped.”
Ignorance is well and truly Bliss! It is not so much a question of not believing you have been duped, but rather whether or not you are capable of comprehending the fact of having been duped. Do not feel bad that you cannot at this point understand, for this colossal scam is subtle indeed – probably less than 1 in 10,000 can properly diagnose the problem. A hint: the dollars you used to purchase items today do not go as far as the dollars you used 5 years ago (or 25 years ago, for that matter). And don’t get me started on the pure fraud that is the Consumer Price Index!

L.C. wrote: “To summarize, whether it is gold, paper currency, diamond, or potato – the value of any item is what we’re willing to trade in labor or tangibles to obtain it.”
Absolutely true! But it is not the whole truth, by any stretch.

L.C. wrote: “The U.S. Dollar’s value is not, and should not be based on our perceived value of gold, since gold has no value of its own other than what we assign it.”
Very, very, VERY wrong on all counts. Why this is so requires a book, not a sound bite, to address. Again, a homework assignment for the class.

L.C. wrote:“Gather your junk silver and gold for WTSHTF, but don’t believe in it more than the dollar. Oh, and don’t worry about the feds coming to take away your gold – since we’re not on the gold standard then they don’t need it.” Actually, the government will confiscate anything they deem of value, whether it is gold, dollars, stocks/bonds, gasoline, food, etc. The whole concept of government is founded solely upon the principle of organized theft, and nothing else. There are no exceptions to this rule in all of recorded human history.
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The central problem here is that L.C. is so profoundly ignorant that he doesn’t know enough to know any better – hence is utter “certainty” in his pronouncements from on High – a certainty that can only exist in those who know literally nothing about the subject being discussed (or, perhaps more accurately, know just enough to be dangerous). Or, put another way, his statements are a priceless example of the “Law of Logical Argument”, wherein “Anything is possible if you don’t know what you are talking about.”
Reminds me of a woman who insisted (quite shrilly, I might add) that inflation was, and I quote, “caused by the CPI” ( Consumer Price Index), which is exactly like saying that my speedometer “caused” my car to drive at 65 miles per hour, and just as irretrievably stupid.
Fortunately, L.C. is, in my estimation, simply ignorant, not stupid. Very ignorant and misled, perhaps, but at least it is a curable condition. But how to undo a lifetime of Keynesian economics indoctrination! Where does one even begin?
Well, let us begin at the beginning. What, exactly, is “money,” anyway? Now, if you look in a dictionary it will tend to describe it in terms of coins or paper used as a medium of exchange, or as property, possessions or wealth. The former is correct, though very incomplete; at least it touches on the concept of a medium of exchange. The latter is actually wrong; money and wealth are really not the same thing. Here is the most succinct and essential definition you will ever find (or need): “Money is an information system we use to deploy human effort” – Michael Linton, originator of the Local Employment and Trading System. Kenneth Royce (a.k.a. “Boston T. Party”) expands this definition to state “Money is an information system we use to spread out human effort so as to form a wider front.”
A “wider front” against what? Against the formidable destructive forces of Nature – Entropy, decay, etc. Forces that will destroy any civilization.
Look at it this way – one person working alone is not going to be able to achieve much more than a precarious, hand to mouth existence, let alone build a civilization. Only large groups of people working together can do that. And there are only three ways to motivate people to work together: Love, Force, or Trade.
I very much doubt I will get folks to build me a home simply out of kindness (and I am not destitute enough for Habitat for Humanity to come by…). I suppose I could round up people at the muzzle end of my M1 Garand and “convince” them to build my dream home, but I expect the authorities would frown upon this. In any case, even if I were a Soviet Commissar with this sort of power, I doubt I would get a very high quality home out of the bargain, and I would probably need to watch my back.
In either case, Love and Force simply require too much up close and personal attention to be practical – this is in part why the Soviet Union collapsed. Only Trade can work to deploy human effort in any sort of meaningful manner. And Trade requires a functioning, uncorrupted money system in order to work properly.
If you can grasp and internalize the aforementioned definitions of money, you will be able to understand in truth how economics really works. Those who cannot (or will not) will never really understand, no matter how much they may delude themselves to the contrary. Argue all you want, you will be no less wrong then when you started.
Wealth, BTW, is perhaps best described as being the fruits of human labor, whether it is in the form of material goods or information (note that raw materials or land can also be considered wealth). Money, therefore, is used as a device to communicate the relative values of different forms of wealth. This last is my definition, based on my current understanding of economic matters, and I welcome other inputs.
So why does gold make a good form of money? There are a number of reasons, some of them hinted at by Mr. Rawles, but the most important is that it cannot be arbitrarily created out of thin air (i.e. “fiat”). When you have a fiat system, such as the modern “dollar”, you invariably start to introduce distortions in pricing that create a compounding “snowball” effect that will, eventually and inevitably, bring down the entire system.
Remember what I said earlier about money being a communications tool? Consider this: an army in the field relies on communications. If said communications are disrupted, then the lower echelons cannot report the tactical situation up the chain to the generals, who in their turn cannot issue commands to deploy their troops down to said troops. End result: the army is defeated.
Kenneth Royce put it best: “To destroy an army, destroy its communications. To destroy a civilization, destroy its MONEY.”
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Contrary to L.C.’s insane assertion that people needed dollars and not gold (betraying some of his obvious confusion about the concept of money), the ability to grow a money supply is not a good thing, for in the long run (and sometimes even in the short run) it will lead to economic ruin.
“But but but look at all the GROWTH!!!!” …or so I envision L.C. sputtering as he reads the above. And who can blame him? Have we not “grown” a great deal? Are we not much more prosperous then we were, say, 100 years ago? That depends. What L.C. certainly does not grasp, and perhaps most others here do not realize either, is that a significant portion of this perceived prosperity is created by *robbing the future* to pay for fun and games now. How this occurs is artful, to say the least.
One method is simply to incur massive debts that your children and grandchildren are expected to pay off. The U.S. Debt is somewhere in the multi-TRILLION dollar range – which, logically, will mean our descendents shall become, for all intents and purposes, slaves.
But the main method is simply through inflation. By arbitrarily printing more money, or simply injecting credit into the system, you invariably lower the value of dollars. Simple supply and demand folks! All else remaining equal, when something becomes more available, its value dwindles. Did you know that since 1913 (the year the Federal Reserve was formed) the dollar has literally lost 95% (perhaps more, now) of its purchasing power? And that the bulk of that loss started from about 1965-1975 (i.e. the years in which we eliminated silver from our coinage and repudiated the gold standard) onwards? This is NOT, in any way, shape, or form, a coincidence.
So what do you think happens to folks who try to save money? Well, if you get 1.5% interest on your savings, but inflation is 2.5% (or more; 6%-7% is a much more plausible figure), then, yes, you end up stealing from them. This is because the creators of this added “money” get to use it at its current “full” value – but those further down the food chain lose buying power because the added liquidity has caused prices of goods and services to rise (and savings just wither away, period). Thus, if you are saving for retirement, you are screwed.
Inflation is, in effect, a stealth tax – and a fairly greedy one at that. But it is the only way for government to grow itself. After all, the level of up front taxation required to support a government as bloated and massive as ours with an honest monetary system (i.e. gold based) would exceed 90% of an individual’s income (not exaggerating here, by the way). Which would, quite naturally, result in an open revolt of the “blood running in the sewers” variety in VERY short order.
Which of course leads to one of the main problems with L.C.’s rose-tinted lens view of the world, namely that much of the “growth” we have witnessed has been in government. Many of the readers here detest government intrusion into their lives, and yet have never once bothered to consider this essential truth: such a level of intrusion would be largely or even wholly IMPOSSIBLE without a fiat money system! Without the ability to inflate, all taxes have to be more or less direct. And as noted earlier the level of taxation in an honest system of money required to support such un-Constitutional abominations such as the IRS, DEA, HUD, ATF, etc. would simply be unsustainable. Only by creating a purely artificial “prosperity” through a policy of inflation can one simultaneously keep such parasitical organizations (would you spend money on ATF “services” if you had a choice in the matter…? Didn’t think so) afloat whilst also keeping the masses content and relatively happy.
As an aside, it should be pointed out that even folks who favor some sort of governmental control might balk at actually paying the costs of such. Continuing with the ATF example, if the gun-grabbers truly had to deal with the direct and indirect costs in an up front and direct manner, it is doubtful there would be any real support for such controls or this agency. It is one thing when the costs are completely hidden, but when, say, 25% of what you make goes to law enforcement, you take a sudden and very deep rooted interest in precisely HOW this money is being spent. Non-effective or even counter-productive use of such money (such as ATF, DEA, etc.) will be immediately highlighted and CUT, without further thought or discussion.
Only dishonest people (i.e. politicians, central bankers, socialists, etc.) want dishonest money.
But there is a far more subtle and sinister side effect that few indeed realize: the artificial prosperity I noted above also causes us to blaze through natural resources at a MUCH higher rate then would ever be possible under an honest monetary system. We are now starting to see resource depletion on a significant scale, from diminishing oil supplies to over fished oceans. We are quite literally stealing the future from our descendents.
What is the root of all evil? Not money, but rather the desire to get something at someone else’s’ expense. In this respect, the so-called “Greatest” Generation and their parents were probably the greediest, as they foisted all of this expense upon us (in fairness, though, they were duped to a significant degree – but they still should have KNOWN better. It is a universal moral law: you can’t get something for nothing!).
Folks, these bills are going to come due at some point! Yeah, maybe YOU don’t have to pay them, but I bet your children and grandchildren won’t adore you. In any case, it is a moral abomination to force others to pay your expenses; it is literally theft, albeit indirect. Perhaps you won’t face the music down here on Earth, but do not think such an evil thing will go unpunished forever. (There is a reason why the Bible considers usury to be wrong…)
There is only one way to, in truth, grow an economy: produce a larger surplus of useful goods and services. There are no true shortcuts to this! Anyone who says otherwise is trying to sell you something.
“Government” produces nothing (save mountains of paperwork, rampant corruption, and injustice), and offers very little of value in terms of services. Certainly the ATF, HUD, DEA et al could be swallowed up by a giant fissure in the earth and the only result would be the betterment of all life on this planet (if not, ultimately, the entire Universe). So what do we even want government for, anyway? Good question… honestly not much.
In reality, virtually all government services (the useful ones, that is) could just as easily be provided through other, more “libertarian” means. But setting that aside what we really want out of government is order, specifically “useful”, as opposed to surplus, order. In other words I want them to keep disaffected malcontents from flying passenger airliners into buildings, keep out “immigrants” whose goal is to subvert and take over our country, rather than become Americans, and prevent fanatic Chinese commies from launching nukes at us. Providing coordination and additional resources for local law enforcement to help track down serial killers, rapists, and other thugs might be nice, too.
But the problem is, we get “surplus” order – DEA thugs busting down some 70 year old grandmothers door at 4:00 AM because they were too stupid to get the right address, ATF sturmtruppen burning a bunch of religious dissidents alive in their church (or stomping on helpless kittens and roughing up pregnant women), Education bureau-rats forcing kindergartners to learn about gay lifestyles, EPA slime balls shutting down some small business over a paperwork infraction, BLM agents becoming cattle rustlers, etc. etc., ad nauseam.
This is what L.C.’s blind faith in fiat dollars has really bought for us: a bloated, incompetent, feral, and tyrannical, government. The sort of government that is rapidly starting to make Nazi Germany or Stalinist Russia look like a Libertarian paradise by comparison (don’t believe me? Give it a few years; you’ll see…) Whatever prosperity we have is in spite of, not because of, fiat dollars.
Had that commie moron FDR been impeached and put in prison for merely *suggesting* the confiscation of gold back in the 1930s (let alone his other crimes, creation of the BATF, etc.), the Depression would have been ended much sooner, the growth of the 1950s and later would have been genuine and sustained, government would be much smaller and less intrusive, far fewer resources would have been squandered, and the world, quite simply, would be better off.
Instead, we have skyrocketing inflation, which causes prices to rise, forcing minimum wages to rise, thus creating yet more inflation. This makes a mockery of trying to save for the future, so instead we over-consume resources. And why not? It is not as if there will be a tomorrow worth living in.
Inflation literally destroys money, as it introduces such distortions into the communications between markets and customers that it becomes impossible to “deploy a wider front”. Hence, inflation ultimately destroys civilizations. Just ask the Romans! They can tell you exactly what happens.
“The more things change, the more they remain insane.” – Bill Bonner, The Daily Reckoning, 11/10/05
One of the problems is that, while the Laws of Economics are as ironclad and brutal as the ones that govern physics, the results can be delayed – sometimes for years, decades, or even generations! Picture Wile E. Coyote, chasing poor Roadrunner, and missing his seemingly hapless and going straight-along right off a precipice. He sails on, looking back, plotting how to get himself turned around to catch the Roadrunner, when, suddenly, he realizes he is no longer upon terra firma. Then he looks up, holds up a sign saying “Uh-oh” or something like that, and then plummets downward. That’s about we are at right now. There is no way to run back to the cliff; we are way past that point. Only the Abyss awaits us
The distortions we are seeing now had most of their roots with the creation of the Fed in 1913 – some 92 years ago! Heck, all of those who made these monstrous decisions are long since dead and buried (and, hopefully, roasting in Hell). But their evil legacy lives on.
When you start down the road of fiat inflation and the false prosperity it creates, you bring into being certain unrealistic and false expectations. At the time, Social Security struck people as a good idea (yes, I would argue even without hindsight that it was a remarkably stupid idea, but then I am a good deal smarter than 99.99% of the rest of humanity. And those who actually know me would recoil in horror at such a revelation, given that my IQ is such a low benchmark.) but with the dramatic increase in life expectancy and equally dramatic decrease in fertility rates, to say nothing of the loss of wealth creation ability (i.e. manufacturing, etc.) there is literally NO WAY this can be sustained. It is obvious that it is just economically impossible – the realities WILL catch up at some point. And then there will be HELL to pay.
But the problem is, no one can conceive of a way out. Getting rid of the social welfare system is deemed “too cruel” to the parasites that benefit from it – there would be so much “suffering.” What the well meaning but irretrievably stupid people who espouse this fail to realize is that, by delaying the inevitable you only make things immeasurably worse – ESPECIALLY for those they are claiming to be “helping”.
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In a sane society folks who suggest implementing a fiat currency (or gun control, for that matter) would be laughed out of polite company, and regarded as mental and moral cripples. Such loathsome creatures would be ostracized until they educated themselves as to why it is such a fantastically bad idea, and then formally apologized to all and sundry for their appalling lapse in rudimentary logic and reason. Those holding public office who actively attempted to do such would simply be dragged out of their offices and publicly hanged (after, naturally, a beating remarkable in its savagery and thoroughness), with their bodies left to rot in the open as an object lesson for the next ten generations that some ideas are simply purely evil in and of themselves.
When I become Master of the Dark Side of the Force, there will be some changes in the way things are run… (“Oh Mighty Sith Lord, I have a proposal to print paper mon– ack! Cough! ACK!!! ….. ‘I find your lack of common sense… disturbing….’ *thud*)   – G.F.L.