Tue Apr 7th, 2009 at 04:17:11 AM EST
What Feteke forecasts, (pdf) takes a position that can only be described as Ursa Major Maximus! Alarmist is a significant understatement of what Antal E. Fekete of
Gold Standard University Live describes.
Tom thinks that I am an alarmist in believing that the permanent closing of the gold window at the Comex will mean a cessation in gold mining, loss of segregated metal deposits, and institutionalized theft of ETF holdings.
To answer this I have to go back to the collapse of the Western Roman Empire after the abdication of the emperor Romulus Augustus on September 4, 476 A.D. It was followed by the Dark Ages when the rule of law, personal security, trade of goods against payment in gold and silver could no longer be taken for granted. Gold and silver went into hiding, never to re-emerge during the lifetime of the original holders. It is plausible to see a causal relationship between the fading of the rule of law and the complete disappearance of gold and silver from trade. Virtually all observers say that the first event caused the second.
I may be in a minority of one to say that causation goes in the opposite direction. The disappearance of gold and silver coins as a means of exchange was a long-drawn-out, cumulative event. In the end, no one was willing to exchange gold and silver coins for the debased coinage of the empire. At that point the empire was bankrupt; it could no longer pay the troops that defended its boundaries against the barbarians threatening with invasion. This is not to say that the empire did not have other weaknesses. It did, plenty of it. But the overriding weakness was the monetary weakness. Centuries after centuries the Mint of the empire could attract less and less gold and silver. Because of this, the empire was forced to debase its coinage and the deterioration continued until the bitter end, when the gold flow to the Mint completely dried up.
Compare this with the Eastern Roman Empire that lasted until the fall of Constantinople to the Ottoman Turks in 1453 A.D., or almost one thousand years longer than the Western half, and during most of this time it could keep its Mint open to gold, producing the gold bezant, which also became the coin of the Muslim world. Is this difference between the two empires trying to tell us something about the importance, from the point of view of political and economic survival, of keeping the Mint open to gold?
Interesting gold bug discussion - afew
Fekete's desire to reverse the roles of physical security and monetary security in the decline of the Roman Empire in the West are at least consistent with his assessment of the ultimate value of gold, but I cannot agree with his judgment. It ignores the disruption of normal business activity in the western empire by repeated "barbarian" incursions and occupations, including Alaric's sack of Rome itself. Why should gold flow to a mint in Rome under such circumstances? So that it could more easily be found by armed invaders?
Fear that any gold found would be taken from one by those stronger and more numerous combined with Gresham's law seem better explanations for the withdrawal of gold and silver. The descent into the "Dark Ages" was mostly a phenomenon due to the collapse of literacy. This period is "dark" because historians have so few written accounts and records of the time. Gold, silver and rich estates themselves were increasingly in the hands of new owners who were not accustomed to doing business in writing, and the wealthy were the only ones who could afford written documents. The length of the "Dark Ages," from a western European perspective, can be better understood as being related to the time required to complete a massive demographic transition involving integrating the populations and traditions of the old Roman Empire with the entire population of, at the very least, all of the Germanic tribes from the north.
Today literacy is almost universal in the "developed" world and production of written documents is quite affordable. While I will not argue that, as far as its effects on our ability to conduct democratic collective governance, we have largely created a new society of literate ignoramuses, collective knowledge is always best utilized by only a few in society and that knowledge is unlikely to be lost to the extent it was during "The Dark Ages." Part of that knowledge consists of understandings of alternatives to a single fixed standard of value and knowledge of economic modes of operation that are sustainable.
While I am loathe to disappoint fans of Mad Max and admirers of the Post Apacalyptic Barbarian Scenario everwhere, I believe that, faced with the Abyss, we can either pull back or climb out in a much shorter time than previously.
Hope springs eternal in the human breast.
Man n'er is but is always to be blest. --Alexander Pope