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I did a nice interview with David Lin of Kitco. Watch interview with David Lin of Kitco

Of the various “monetary aggregates” (at one point, I think over thirteen were identified), “M2” is perhaps the most commonly referenced. It is supposedly important. But why? To answer that, we have to first figure out what it is. For many decades, “monetarism” has been waved in people’s faces as the proper way of understanding money. But, Monetarism has always been a floating-fiat construct of economic manipulation. Basically, it conflates “money” (the circulating medium), with “credit” (a process of financing economic activity, via contracts denominated in money), and through this, the economy as a whole. The contemporary version of Monetarism is NGDP Targeting (also known as “Market Monetarism“) which, as should be obvious to anyone, attempts an overarching total control of the economy, hitting a prescribed NGDP target, via monetary manipulation alone. All of this is anathema to the Stable Value principles that most countries have always used. In the past, before 1971, the core of this “stable value” idea was the gold standard system — linking the value of currencies to gold. Today, most countries in the world do much the same thing by linking to the USD or EUR. In doing so, they must give up all ambitions to manage the domestic economy (perhaps by aiming at a specific NGDP), via some sort of currency manipulation. The idea of a currency of Stable Value is similar to other standardized weights and measures. An ideal currency is a sort of constant of commerce. This is actually inherent in what “money” is. If this constant of commerce remains constant — of stable value — then there is no particular monetary problem, although there may be many other non-monetary problems. With a currency of stable value, an economy might crash into disaster, as the US economy did in 1929-1932, with nominal

(This item originally appeared at Forbes.com on July 27, 2022.) In our new book Inflation, we talked about the example of Henry VIII of England, who, in 1544, undertook the “Great Debasement” of the long-reliable British silver penny. The silver content of the coin was reduced from 92.5% to a mere 25%. Or, it took about 3.7x more pennies to buy an ounce of silver. Not very surprisingly, prices in Britain soon soared about three times higher. Henry didn’t invent coinage debasement. The Greeks were doing it in the fifth century BC. The Romans debased the denarius so much that, over a period of decades, the price of wheat eventually rose two million times higher. Today, central banks do the same basic thing, but it is virtual. The value of the US dollar, compared to its old $35/oz. benchmark during the Bretton Woods gold standard era, has declined by about 50:1. It now takes about fifty times as many dollars to buy an ounce of gold.  The most recent step down in the dollar vs. gold took place in 2019-2020, when, in response to extremely aggressive base money expansion by the Federal Reserve, the dollar’s value fell from about $1200/oz. to about $1800. This roughly 50% increase in the “price of gold” would imply roughly a 50% increase in the price of everything else, “all else being equal,” as markets adjusted to the apparent new lower value of the dollar. This 50% rise in general prices doesn’t happen all at once. It takes time — a number of years — for it to slowly flush through the pricing system. This process has been called “cost-push,” “wage-pull,” or a “wage-price spiral.” We are experiencing this today. In Inflation, we also mentioned the example of Mexico. In the early 1990s, it took about three Mexican

I’ve been doing a lot of interviews recently, for both radio and podcasts, about our new book Inflation. This recent podcast I thought was particularly good, in part because of the participation of Dick Bove, a Wall Street economist. Anyway, we were able to get into a little more complicated topics — which I like, although perhaps most people would like things to be simpler. Click here for podcast interview with John Aidan Byrne and Dick Bove.

(This item appeared at Forbes.com on July 10, 2022.) Today, there is a spreading awareness that our monetary situation is rather rotten. Leaving things up to central bankers, who are obviously making it up as they go along, has not worked out very well. Most recently, these central bankers got very aggressive in response to Covid in 2020; and the “inflation” that has followed has not been very surprising. People generally find monetary affairs to be extremely confusing. But, in the end it really amounts to a choice of two alternatives: The Gold Standard, and the PhD Standard. Today, we have the PhD Standard. We have a bunch of eggheads with PhDs making stuff up as they go along. But, this is not the way we used to do things in the United States. For nearly two centuries, from 1789 to 1971, we did not have central bankers with unrestrained freedom to not only adjust the knobs and dials as they saw fit, but to invent new knobs and dials — “QE,” “QT,” “interest on reserve balances,” “Reverse Repos” — at what seems to be an accelerating pace. For a long time, we did not have a central bank at all. Rather, the United States used a Stable Value system. The value of the currency was linked to some external benchmark — gold. This was also what all the other major countries used too. For a long time, the value of the dollar was 23.22 troy grains of gold. Since there are 480 grains in a troy oz., this worked out to 480/23.22 or $20.67 per ounce of gold. Until 1971, there was only one permanent devaluation, by President Roosevelt, in 1933. This reduced the value of the dollar to $35/oz. This continued until the floating fiat era began in

Back in 2019, gold stablecoins existed, but they were barely viable with sub-$10 million market caps. Even the biggest USD stablecoin, Tether, was still only around $2 billion. But now, Tether is around $70 billion, and the gold stablecoins are getting up over $100 million. According to CoinMarketCap.com, there are two leading gold stablecoins at present: Paxgold (PAXG): $610m market cap. https://www.paxos.com/paxgold/ Tether Gold (XAUT): $451m market cap. https://gold.tether.to The reported market caps on these look pretty weird, though. Not the curve of organic expansion that we saw for USD Tether. But, maybe it is a plan to attain scale quickly. After the huge success of Tether and other USD stablecoins, these are no longer kitchen table operations. Larger-scale venture money is involved. This kind of crypto token can serve a purpose. However, a more centralized platform can also work well, and may be more viable for basic transactions. GoldMoney was the first example of this, although it never really realized its potential as a transactional device. Kinesis has set up an interesting platform for precious metals. Also, Coro has set up a gold-based platform that specifically targets transactional usefulness, with very low transaction costs and regulatory/banking system integration. It is not the kind of “pirate currency” that the crypto world promises, but probably more useful for 99% of daily business. WisdomTree, a large ETF provider, is also launching a similar platform that allows transfer of “digital gold.” I’ll also give notice to LD2 or “Liberty Dollar II,” a silver-based crypto stablecoin founded by Extra von NotHaus, son of Bernard von NotHaus. Bernard von NotHaus issued the Liberty Dollar, gold-backed private banknotes, starting in 1998, a breakthrough attempt to establish a private-sector currency alternative to the floating fiat USD. Liberty Dollar privately-issued banknotes Banknotes actually have a lot of difficulties

(This item ran at The Federalist, on April 19, 2022.) The U.S. consumer price index (CPI) in March was 8.5 percent higher than a year earlier, the highest “inflation” figure since the early 1980s. For a typical family, it now takes an additional $5,000 to buy the same stuff from a couple of years ago. Higher prices account for $3,500 of this, and $1,500 from higher taxes paid on income. What’s going on here? Is it a problem? What is the solution? Unfortunately, economists’ track record at diagnosing and resolving “inflation” problems over the past 70 years or so has been very bad. I put the word “inflation” in quotes because the term does not have an exact meaning. It arises from popular speech and has something to do with higher prices. From here, we should break down the possible factors into monetary factors, and nonmonetary factors. Both are at work today. What’s Causing Today’s Inflation “Non-monetary” factors are all the supply-demand-type issues that we can clearly see today. Much of the rise in the CPI comes from used car prices, which have soared due to shortages of new cars on dealers’ lots. A variety of similar supply-chain issues have left store shelves bare of a wide range of items. Government restrictions on housing development have created housing shortages in popular cities. “Monetary” factors are basically due to central bank policy. Since 1971, when the United States and the rest of the world left the Bretton Woods gold standard system, we have lived in an environment of floating fiat currencies. In the short term, the value of these currencies goes up and down somewhat unpredictably. In the longer term, there is a clear trend: The value of currencies goes down. A lot. Today, the value of the dollar is, by my estimate,

We’ve been doing some events related to our new book, Inflation. We did a “virtual event” with the Discovery Institute. Elizabeth Ames served as the moderator, which worked well since she knows the lay of the land. Click Here for a video of our virtual event with the Discovery Institute. This event was with the Manhattan Institute’s Adam Smith Society. Allison Schraeger served as the moderator. She hit the most important points. Click Here for a video of our event with the Manhattan Institute. Some of the podcasts I’ve been doing related to Inflation can be found at Padverb, a podcast aggregator/organizer: My feed at Padverb. I did a longer interview with Angelo Robles, with more of a family office/private wealth theme. It’s at YouTube. Interview with Angelo Robles via YouTube. Many thanks to all those who have taken an interest in our book. The response has generally been pretty good. We wanted a book that would reach out to regular people, not economic specialists or policy-wonky people. But, we also wanted to deal with economic subjects in a rigorous way, which also differs from a lot of mainstream economics. Also, we wanted it to be short enough that it would not be intimidating.

I heard that the IMF banned its members from basing their currencies on gold. In other words, the gold standard is illegal, for IMF members (basically everyone). Really? Here’s a look at the IMF’s Articles of Incorporation, where we find: And here: And here: This is some interesting commentary from Martin Armstrong: QUESTION: Mr. Armstrong; People are adamant that there is a move to return to the gold standard. They claim various scenarios. Is there any such plot by the IMF and it seems strange that the ECB gold reserves are minimal. Can you explain the truth in this matter?Thank youGS ANSWER: The IMF has actually been jockeying positions for decades to remove gold as a monetary instrument quite to the contrary of these reports. IMF Special Drawing Rights (SDR) was first established with one SDR being equal to 0.888671 gram of fine gold, which was the par value of the US dollar on July 1, 1944. The IMF acquired its gold holdings through four main channels. First, 25% of initial quota subscriptions to join the IMF and subsequent quota increases were to be paid in gold. This represents the largest source of the IMF’s gold. Furthermore, all payments of charges (interest on member countries’ use of IMF credit) were also normally made in gold. The structure was established with Bretton Woods and then a member wishing to acquire the currency of another member could do so by selling gold to the IMF. The major use of this provision was sales of gold to the IMF by South Africa in 1970–1971. Thereafter, member countries could use gold to repay the IMF for credit previously extended. The IMF has decided to either return gold to member countries or to sell some of its holdings. The reasons for this are varied; between