A Defense of Sound Money and individual Liberty

No one knows the future and we don’t even know the truth of our present state – or in the words of Johannes Wolfgang von Goethe:

“It is easier to perceive error than to find truth, for the former lies on the surface and is easily seen, while the latter lies in the depth, where few are willing to search for it.”

Over the past decade I have plunged into a study of geopolitics, history, different monetary, economic and political systems and philosophies. The writers who impressed and influenced me the most, where those who promoted individualism over collectivism, freedom over slavery, non-aggression over using force as a legitimate way to solve problems. Among them were Ludwig von Mises, Murray Rothbard, Harry Brown, Hans-Hermann Hoppe, Artistoteles and Thomas Aquinas to name just a few.

Therefore, when I think about gold, I also think about values associated with it. The most important aspect to me is striving for personal and individual happiness or the right of every person to pursuit his own way of happiness. It is my conviction that only sound money can be the fundament for a sound society. This is why I became a friend of the Austrian School of Economics, which stands for private ownership, free markets and financial sovereignty, resting on the premise that things are settled into order despite the apparent chaos of individual actions.

My personal motivations for holding physical gold and silver in my own possession are rather straightforward and, I think, easy for many people with similar ideas and concerns to identify with.

First there is the rational and logical aspect of it all:

John Maynard Keynes turned the world upside down with his argument that saving is not the lifeblood of investments; on the contrary, it is a burden for the economy. His opinion was that wise and all-knowing planners at a central switch point could correct macro economic imbalances by manipulating market signals. The implication of such a system is that it enables a massive centralization of power and we all know that Power corrupts and absolute power corrupts absolutely! In addition, it contradicts all historic records and much of common sense, as it is clear, even to a child of 10, that the driving forces of economic health, are savings, financial prudence and investment, not reckless spending, mindless consumption and debt.

The problem is exacerbated by the fact that paper money used to be a property title, but now it is a debt security. It is nothing more but collateral: the promise of the former generation that the future generation will pay off the debt via taxes and inflation. The money you earn is losing purchasing power, as the central banks are printing more and more and devaluating the currency. In such an environment the population is automatically divided into “winners and losers”: Organizations and institutions closer to the new money production, to the government and central banks, receive the newly created money first and thus can buy at existing price levels before they rise – this is wealth redistribution or, better said, indirect and outright theft.

Liberty dies by inches:

Another, quite compelling, line of argumentation comes from a civil liberty point of view. Liberty dies inch by inch by inch and since 9/11 inches have turned into meters, as governments have increasingly expanded their power and diminished individual liberties. Henry Hazzlit wrote in an article back in 1956: “the greatest threat to American liberty today comes from within. It is the threat of a growing and spreading totalitarian ideology.”  He marked three main tendencies, or tenets, in the slippery slope towards totalitarianism. The foremost among those is the pressure for a constant increase in governmental powers, for a constant widening of the government’s sphere of intervention, which includes the tendency toward more and more government spending. That means in effect that the individual is able to spend less and less of the income he earns on the things he himself wants, while the government takes more and more of his income to spend it in the ways that it thinks wise. As government control becomes wider and deeper, individual discretion and the individual’s control over his own affairs, necessarily becomes narrower and shallower.

Geopolitical power shift from west to east:

Yet another aspect is the ongoing geopolitical power shift from west to east. With unemployment levels at record highs, especially amongst the youth in the western world, combined with a deteriorating real economy, the prospects of a sustainable, or at least tolerable, future slowly fade away. We all know from history that when empires collapsed, so did their currencies. Today it seems that the actual monetary system is at war most likely with reality, with currencies racing each other to the bottom. At the same time, we have ongoing geopolitical proxy wars unravelling, with uncertain outcomes and even muddier motives and interests behind them, in Eastern Europe, Middle East, Central Asia as well as North Africa. The past decades of constant conflict especially in the Middle East, along with the accelerating religious wars, has and will lead to further radicalization of the masses. Aggression can only bring out more aggression and this will lead to additional tensions in the western world. One therefore needs to consider that by using, saving or investing in the paper money system, also helps the state finance foreign interventions and enables the perpetuance of conflict.

Government forced education and propaganda:

It might seem like an uphill battle, but it is my personal view that true change will come though education, information and free debate. Thomas Jefferson once said “educate the masses – they are the only sure reliance for the preservation of our liberty”. Unfortunately, it is my impression that the wrong kind of education has taken over in the fields such as economics, finance and political science; a “one-size fits all” system, which is dominated and controlled by the government isn’t actually what Jefferson meant.

Also, the fact that 6 companies in the US control the media landscape today is not really a promise for the propagation of manifold opinions and different voices. Edward Bernays, the Father of Propaganda, once said,

“The conscious and intelligent manipulation of the organized habits and opinions of the masses is an important element in a democratic society. Those who manipulate this unseen mechanism of society constitute an invisible government which is the true ruling power of our country…We are dominated by the relatively small number of persons, who understand the mental processes and social patterns of the masses. It is they who pull the wires which control the public mind”.

Nevertheless, there still is a silver lining:

We should not underestimate the power of the internet as the modern equivalent of the Gutenberg press. A gigantic information and knowledge base is now at your finger-tips. The days of government controlled radio and television channels are numbered, which will bring us back to the age of free competition of ideas. A return to Sound money, I believe, will be one the clear victors in such an ideological arena.

Gold and silver should not be seen as a trading vehicle, instead you have to look at it as your insurance in a highly uncertain world and you shield against a possible crash of the monetary and financial system.

Although it is impossible to determine when it will happen exactly it should be obvious by now that the coming years, especially in the western world, will be dominated by a declining real economy, higher unemployment rates, financial repression measures such as higher taxation and government restrictions. Interest rates, which are kept artificially low, in combination with a moderate inflation rate, are leading to low or even negative real return on investments.

Direct and unencumbered physical ownership of precious metals stored outside the banking system is therefore essential, if you are interested in a real and practical insurance against the ongoing problems in our monetary system and the uncertainties in our world today.

Claudio Grass

Precious Metal Advisory Switzerland

Ambassador of the Mises Institute, Auburn (AL), USA