VIDEO: Coley Testimony - HB3 Constitutional Tender Act

Coverdell Legislative Office Building (CLOB)
18 Capitol Square SW Atlanta, GA 30334

Atlanta, GA

Monday, March 7 · 9:00am - 12:00pm

After presenting testimony, I engaged in a dialog with Representative Bruce Williamson on fractional reserve banking. Bruce Williamson was a gentleman. He opened with a prayer that I would be blessed to hear and concur with any time. The problem we have is that neither Bruce, myself or government are the standard. A good man's character does not make an objectively immoral practice moral or right.

Representative Williamson claimed that Georgia banks don't create money, yet he later said:

I'm not disagreeing with the fact that it expands the money supply, but I don't see that that's inherently unhealthy.

Evidently Representative Williamson doesn't understand that "Expanding the money supply" creates new dollars and is inflation.

When I said that banks create dollars from nothing, Representative Williamson disagreed yet again, stating:

Its not nothing. Its promises to pay that provides the liquidity to shop keepers, to home owners...

And:

All you're doing there is allowing these promises to pay, that when you come to borrow the money to buy the automobile or piece of land or buy new shelving for your hardware store, all the bank's doing is turning around and lending you those dollars... It's not the collateral, its your promise to pay back.

In other words, his view is that the money is not created from nothing, rather it is created because the borrower promises to use his land, labor and capital to produce enough to pay the loan back, plus interest to the banker.  The banker has essentially no skin in the game.

If "its not the collateral", why does the banker take the borrower's collateral if the borrower doesn't pay?

In an honest system, the banker would have to loan out property that actually exists in order to earn interest. In the fractional reserve system, he creates money from thin air and then essentially loans your property to you - and gets paid interest for doing it. The bank brings nothing to the table except the legal privilege to create money.

When you borrow money for a piece of land, the money that you use to pay the seller comes from a ledger entry at the bank which is made because you agree to pay the money back. The only real asset in the transaction is the land. The banker has no equity or asset in the transaction at all. If you default, he gets the land.

Of course that ledger sheet trick works until the bubble pops, particularly when the bubble is combined with Sarbanes-Oxley and federal regulators.

Representative Williamson also stated plainly that leaving the gold standard was a mistake.

It all goes back to fiat inflation. I do not disagree one bit with the fact we should never have gotten off the gold standard. I think Steve Forbes has got it right, but all we are is dealing with the Federal Reserve Notes that our Federal Treasury is [unintelligible] the currency of the nation.

However, the Gold standard simply limited the amount of new money created from nothing by the Federal government. Creating money from nothing is always a problem because the mechanism makes an economy unsustainable. The economy is unsustainable because costless money causes a breakdown in the price mechanism and distorts the allocation of resources.  It also pillages and weakens the producers.  The banks create new money from nothing, much the same as the Federal Reserve. In fact, the banks are able to create nine new dollars for each one new dollar created by the Federal Reserve. Which is bigger? Nine or One?

If costless money is a problem and the banks create more than the Federal Reserve, then the banks are not innocent. They participate in inflating the money supply, or to use Representative Williamson's phrase in "expanding the money supply", which IS inflation. It disproportionately harms the weak and frugal. It enriches those who are granted a special privilege by government (banks) to create new money from nothing - at least from nothing that the banker owns. In the banks view, your property gives them the right to create money that didn't exist in order to charge you interest for using the money.  What a racket.  

There is so much more that can be said and the problems are far reaching and complex, but the bottom line is that fractional and fiat money cause theft and lead to poverty and oppression.

The American Dream By The Provocateur Network

Watch it.

Job Creation - Open Letter - Senate Press

Dear Senator Pearson,

I like your Senate Press article today and I appreciate your service, first in your role as a Producer and then as a senator.

You wrote: “Raising taxes is no way to stimulate the economy in a downturn.”

I would expand the thought to say: “taxes are no way to stimulate the economy ever.”

Government intervention always reduces production. Prosperity follows production.

Reduced production equals reduced prosperity.

The factors that are undermining our ability to produce are systemic. We must find ways to reestablish genuine production in Georgia; our state and our home. This must include finding ways to insulate our production and population from the devaluation of the dollar.

We will be wise to begin by keeping all the dollars we possibly can in Georgia in the hands of the citizens, while encouraging the use of precious metals in indirect exchange. We should pass legislation that keeps Federal taxes remittances in Georgia, to be paid to the Federal government for the value of services it provides, which are in the proper purview of the Federal government, after adjusting for inflation of the money supply.

Let the government and those it favors suffer the consequences of inflation for a change, instead of the people.

The rights of sovereign states will not be enjoyed unless we actively claim those rights as people of strength, courage and conviction. We must take back what has been taken away, while we still have a little strength left.

Mainstream academic thought would consider this a foolish approach, but the mainstream academic thought on the subject of economics is laughable, so we should not expect mainstream thinkers to understand. Or if they do, they are thieves and cowards for advocating for the Keynesian style economic system that is designed to destroy capitalism, and therefore to destroy liberty.

Keynes wrote the following in 1919:

“Lenin is said to have declared that the best way to destroy the capitalist system was to debauch the currency. By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens. By this method they not only confiscate, but they confiscate arbitrarily; and, while the process impoverishes many, it actually enriches some… Lenin was certainly right. There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose.”

When one can logically and mathematically understand and illustrate that a particular system serves the purpose of illicit wealth transfer, which is accomplished via the use of differing weights and measures, one can judge that system to be morally wrong. Our American system fits that description.

When one reviews history, one discovers that these market interventions via currency debasement are always seeds of greater oppression that lead to collapse of the productive capacity of a nation, and eventually the collapse of the nation.

When one considers that people eat food and use things, one may notice that for a nation to prosper, it must produce.

In addition to producing the things which constitute necessities, a nation must produce things valued by other people and nations if it hopes to continue trading with producers in the future. Producers exchange with producers.

Exporting inflation and selling debt to finance US purchases of foreign production is not a sustainable system. When our dollars lose their decreed value, if we are not producing, we will not be able to care for ourselves, and we will have nothing to exchange with producers for what we need.

Senator Pearson, I thank you for your service. I hope to have the opportunity to help you and others shrink government and restore production in the state of Georgia, leading the way for the same unified outcome in other states.

We need strong liberty warriors who step up to the battle line with fire in their eyes and their belly because they understand that we have been had, duped, abused, pillaged…

We have allowed a system of theft and control of production to sap the strength from our people, state and nation. We should be ashamed and angry. This is war, whether we acknowledge it as such or not. Just ask the ex-farmer, ex-textile owner or great American worker who is losing purchasing power and property daily.

"I believe that banking institutions are more dangerous to our liberties than standing armies." ~ Thomas Jefferson

The American system rips our production, property, savings, investments and retirement from our weathered and worn hands, a little bit more everyday.

Productivity retained in the hands of producers is the solution.

Georgia Senators: Know the truth. Stand. Cross the battle line. Restore liberty and prosperity in Georgia.

Blessings,

Shane Coley
47th District Senate Candidate
http://www.shanecoley.us
Real Solutions for Real Life

The Government Can

Who can take your money, with a twinkle in their eye; Take it all away and give to some other guy... The government, The government can.



Shane Coley for State Senate

Inflation and the Fall of the Roman Empire

Liberty is enjoyed by those who control the profit from property and labor. If someone else controls your profit, then they also possess and enjoy your liberty. Your profit is that which you earn by producing more than you consume.

Capitalism employs the checks and balances of scarcity, labor and property to allocate resources and social authority to the most efficient producers and organizers of production.

Capitalism does not exist in a system that confiscates profit from producers, to reallocate to capable non-producers and those benefiting from favored business license. Such a system is socialist, which is marketed as capitalism to the masses, in order to march quietly toward a totalitarian system of government.

Costless money transfers production, labor, property and life savings from the working people into the hands of a privileged class. This theft must end if we are to have a future hope of liberty and justice for all. There is a solution. Learn it, speak it and pursue it with all passion and great haste. -- Shane Coley

Inflation and the Fall of the Roman Empire

No Oversight of the Federal Reserve

No Oversight of the Federal Reserve.

American Capitalism Gone With a Whimper

This is a very interesting article from the perspective of a gentleman in Russia.

Reprinted from:

Mat Rodina and Pravda

It must be said, that like the breaking of a great dam, the American decent into Marxism is happening with breath taking speed, against the back drop of a passive, hapless sheeple, excuse me dear reader, I meant people.

True, the situation has been well prepared on and off for the past century, especially the past twenty years. The initial testing grounds was conducted upon our Holy Russia and a bloody test it was. But we Russians would not just roll over and give up our freedoms and our souls, no matter how much money Wall Street poured into the fists of the Marxists.

Those lessons were taken and used to properly prepare the American populace for the surrender of their freedoms and souls, to the whims of their elites and betters.

First, the population was dumbed down through a politicized and substandard education system based on pop culture, rather [than] the classics. Americans know more about their favorite tv dramas [than] the drama in DC that directly affects their lives. They care more for their "right" to choke down a McDonalds burger or a BurgerKing burger than for their constitutional rights. Then they turn around and lecture us about our rights and about our "democracy". Pride blindth the foolish.

Then their faith in God was destroyed, until their churches, all tens of thousands of different "branches and denominations" were for the most part little more [than] Sunday circuses and their televangelists and top protestant mega preachers were more [than] happy to sell out their souls and flocks to be on the "winning" side of one pseudo Marxist politician or another. Their flocks may complain, but when explained that they would be on the "winning" side, their flocks were ever so quick to reject Christ in hopes for earthly power. Even our Holy Orthodox churches are scandalously liberalized in America.

The final collapse has come with the election of Barrack Obama/ His speed in the past three months has been truly impressive. His spending and money printing has been a record setting, not just in America's short history but in the world. If this keeps up for more [than] another year, and there is no sign that it will not, America at best will resemble the Wiemar Republic and at worst Zimbabwe.

These past two weeks have been the most breath taking of all. First came the announcement of a planned redesign of the American Byzantine tax system, by the very thieves who used it to bankroll their thefts, [losses] and swindles of hundreds of billions of dollars. These make our Russian oligarchs look little more [than] ordinary street thugs, in comparison. Yes, the Americans have beat our own thieves in the shear volumes. Should we congratulate them?

These men, of course, are not an elected panel but made up of appointees picked from the very financial oligarchs and their henchmen who are now gorging themselves on trillions of American dollars, in one bailout after another. They are also usurping the rights, duties and powers of the American congress (parliament). Again, congress has put up little more [than] a whimper to their masters.

Then came Barrack Obama's command that GM's (General Motor) president step down from leadership of his company. That is correct, dear reader, in the land of "pure" free markets, the American president now has the power, the self given power, to fire CEOs and we can assume other employees of private companies, at will. Come hither, go [thither], the centurion commands his minions.

So it should be no surprise, that the American president has followed this up with a "bold" move of declaring that he and another group of unelected, chosen stooges will now redesign the entire automotive industry and will even be the guarantee of automobile policies. I am sure that if given the chance, they would happily try and redesign it for the whole of the world, too. Prime Minister Putin, less [than] two months ago, warned Obama and UK's Blair, not to follow the path to Marxism, it only leads to disaster. Apparently, even though we suffered 70 years of this Western sponsored horror show, we know nothing, as foolish, drunken Russians, so let our "wise" Anglo-Saxon fools find out the folly of their own pride.

Again, the American public has taken this with barely a whimper...but a "freeman" whimper.

So, should it be any surprise to discover that the Democratically controlled Congress of America is working on passing a new regulation that would give the American Treasury department the power to set "fair" maximum salaries, evaluate performance and control how private companies give out pay raises and bonuses? Senator Barney Franks, a social pervert basking in his homosexuality (of course, amongst the modern, enlightened American societal norm, as well as that of the general West, homosexuality is not only not a looked down upon life choice, but is often praised as a virtue) and his Marxist enlightenment, has led this effort. He stresses that this only affects companies that receive government monies, but it is retroactive and taken to a logical extreme, this would include any company or industry that has ever received a tax break or incentive.

The Russian owners of American companies and industries should look thoughtfully at this and the option of closing their facilities down and fleeing the land of the Red as fast as possible. In other words, divest while there is still value left.

The proud American will go down into his slavery with out a fight, beating his chest and proclaiming to the world, how free he really is. The world will only snicker.

Stanislav Mishin

John Maynard Keynes

Following is an excellent compilation of quotes about Keynes prepared by Dr. David Noebel of Summit Ministries and posted on the Worldview Times website. Dr. Noebel begins with a recent quote by Larry Summers from the Charlie Rose show and then follows with a series of quotes about Keynes. Keynes and those around him clearly desire the destruction of the capitalist system, the family and all other forms of personal liberty and private property.

Note that Larry Summers is a "top" Obama "economic" "advisor"

- Shane

Worldview Times - John Maynard Keynes

John Maynard Keynes
(1883-1946)

Prepared by David A. Noebel
Summit Ministries

Posted on the Rush Limbaugh website, February 19, 2009.

Charlie Rose: "What idea, what person has most Influenced your thinking on how to deal with this mess?"

Larry Summers: "Keynes. Keynes and those that followed him." February 18, 2009.

1. "Veritas [foundation] feels that without doubt the following study will prove that the Keynesian 'system'-if it can be called a system-is the primary economics system being taught in Harvard. Veritas also feels that "Keynesian economics' is a misnomer. It is not economics. It is a leftwing political theory." Zygmund Dobbs, Research Director, Keynes at Harvard. New York, NY: Veritas Foundation, 1963. 2.

2. "Even Whittaker Chambers … admitted: 'The simple fact is that when I took up my little sling and aimed at Communism, I also hit something else. What I hit was the forces of that great socialist revolution, which, in the name of liberalism, spasmodically, incompletely, somewhat formlessly, but always in the same direction, has been inching its ice cap over the nation for two decades.'" Ibid. 3

3. "Keynesism is so-called after John Maynard Keynes, British economist (1883-1946). His teachings are today considered an ideological base for British and American Socialists." Ibid. 8

4. "No matter what phase of left-wing infiltration we study, be it in government, in information media, in foundations, in labor unions, or whether we deal with Keynesian socialism, neo-Marxian socialism or with Bolshevik communism, the tracks lead inevitably to Harvard University." Ibid. 8

5. "There are three main trends of socialist thought in the Western world. They are: the communist soviet brand; social democratic neo-Marxism; and Keynesian theories which are actually an extension of the [British] Fabian movement. Curiously, Keynesism proved to be adaptable to the Fascists as well as the Socialist world." Ibid. 10

6. "The socialist lectures conditioned the young minds to hate capitalism as an outmoded and cruel system; the second phase was to despise and distrust individual capitalists as exploiters and reactionaries who oppose social improvements; and thirdly the fledgling radical is hooked by clever 'scientific examples' and formulae which prove to him that the present social order is predestined to collapse and socialism is foreordained to take its place." Ibid. 13

7. "Almost the entire membership identified as belonging to the first Ware cell (Soviet spy ring-ed.) came out of the Harvard Law School: Alger Hiss, Nathan Witt, Lee Pressman, John Abt and Henry H. Collins Jr. Harry Dexter White and Lauchlin Currie were teachers (Economics teachers-ed.) as well as students at Harvard." Ibid. 14

8. "Today [British] Fabians use the teachings of John Maynard Keynes as their catechism of political economy. The American Fabians have slavishly installed Keynesism as the new faith, both in the Universities and in Government bureaucracy. To lay bare and dissect these premeditated deceptions is the true task of the political science of our day." Ibid. 40

9. "Hugh tax-free Foundations, such as the Ford, Carnegie and Guggenheim Foundations, backed by billions of dollars, became the nesting places of Keynesism." Ibid. 41

10. "At the age of 20 (1903) Keynes became a member of a Fabian group at Cambridge which was headed by G. L. Dickinson, a prominent Fabian Socialist. As an undergraduate, Keynes, imitating his father, expressed strong opposition to the principle of private enterprise (Laissez-Faire)." Ibid. 43

11. "This was in line with the general attitude of the Fabian Society, which favored government run by the Civil Service and not a government responsive to the electorate." Ibid. 44

12. "It was during this period (1913) that Keynes adopted the concept of eliminating gold as a standard of the monetary system of the nations of the world. His notion of a managed currency (that he sold F. D. Roosevelt on twenty years later) was an old socialist catch-call, espoused by the Fabians since the turn of the century. It is a fundamental concept of State-Socialism." Ibid. 44, 45

13. "Keynes did not keep his Socialist convictions to himself in those days. His opposition to the private enterprise system was well known to London society. Clarence W. Barron, then publisher of the Wall Street Journal, while in London in 1918, made the following observation: 'Saw Professor Keynes of the British Treasury…Lady Cunard says Keynes is a kind of Socialist and my judgment is that he is a Socialist of the type that does not believe in the family.'" Ibid. 45

14. "Singing the Red Flag, the highborn sons of the British upper-class lay on the carpeted floor spinning out socialist schemes in homosexual intermissions…The attitude in such gatherings was anti-establishmentarian. To them the older generation was horribly out of date; even superfluous. The capitalist system was declared obsolete, and revolution was proclaimed as the only solution. Christianity was pronounced an enemy force, and the worst sort of depravities were eulogized as 'that love which passes all Christian understanding.' Chief of this ring of homosexual revolutionaries was John Maynard Keynes…Keynes was characterized by his male sweetheart, Lytton Strachey, as 'A liberal and a sodomite, an atheist and a statistician.' His particular depravity was the sexual abuse of little boys." Zygmund Dobbs, "Sugar Keynes." See Goggle "John Maynard Keynes: Lavender & Bolshevik." Or http://members.tripod.com/~BioLeft/keynes.htm For further information on Keynes' homosexual behavior note A. L. Rowse, Homosexuals in History. New York, NY: Macmillan Publishing Co. Inc., 1977,271f. Also, Mark Skousen, The Making of Modern Economics: The Lives and Ideas of the Great Thinkers. Armonk, NY: M. E. Sharpe, 2001, 325

15. "In this same work [The End of Laissez-Faire] Keynes showed an early bias (1924) against savings and investments as economic virtues. From virtues he transformed them into evils…Fabian Socialists have long considered those who saved and invested as a stumbling block against the march of Socialism." Keynes at Harvard, 49

16. "Keynes concept of controlling society extends beyond political and economic matters. He even advocates social control of the number of children per family." Ibid. 49

17. "Keynes is a Socialist that does not believe in the family. Naturally, in order to control the birth rate the State must break up the family as an independent and free unit." Ibid. 50


18. "Margaret Cole, English Fabian revolutionary, has stated: 'We Socialists used Keynes and the U.S.S.R. as touchstones." Ibid. 60

19. "The entire Keynesian apparatus is based upon the principle of control and regulation by government…capitalism should now be regulated and controlled by a central authority…One of the central themes in Keynes' system is a condemnation of the principle of 'savings.' …Here is [Keynes] General Theory in a nutshell, with its trans valuation of all values. The great virtue is Consumption, extravagance, improvidence [not providing for the future]. The great vice is saving, thrift and 'financial prudence.'" Ibid. 63

20. "The concept of eliminating savings is not an economic one but a political one. If there are no savings there is no private money for investment. Without private investors the government must provide investment capital. If the government provides for investment it has the power to dictate the conduct and processes of those who need investment capital…All this is demagogy and claptrap. It differs from the Marxist brand only in technical detail." Ibid. 64,65

21. "Another major prop of Keynes' theory is Mrs. Joan Robinson …What Keynesians do not say is that this lady is considered in international communist circles as one of the world's outstanding Marxists. Mrs. Robinson has widely publicized the fact that the difference between Marx and Keynes are only verbal. She later wrote: 'The time, therefore, seems ripe to bridge the verbal gulf.'" Ibid. 68

22. "Keynesian leftists…are confident that a great national debt and continuing inflation plus enormous internal and foreign commitments assure the continuance of Keynesian operations for generations to come regardless who is in power." Ibid. 77

23. "Stuart Chase, representing the Fabian socialists in the United States proposed Keynes as the socialist ideal long before Keynes wrote the General Theory in 1936. Chase outlined the Keynesian principle of abandoning the gold standard in 1932…Chase called his book A New Deal. It was written in 1931 and published in 1932. Franklin D. Roosevelt borrowed this socialist slogan as a label for his administration." Ibid. 78,79

24. "Curiously, the authorities used by Chase in his book the Economy of Abundance (1934) were G.D.H. Cole, J.A. Hobson, Julian Huxley, Bertrand Russell, J. M. Keynes, John Strachey and H.G. Wells, all spawned by the British Fabian Society." Ibid. 79

25. "An analysis of Keynesism in the United States is incomplete without a discussion of the role of Harry Dexter White while Assistant to the Secretary of the U.S. Treasury. Harry White was considered by Keynes as the 'central figure' in Keynesian manipulations in the United States. White played a major part in organizing Keynes' pet project-the International Monetary Fund. In the interim Harry Dexter White was exposed as an active Soviet spy…To this day, Keynesians see nothing wrong in White's Soviet role…This eulogy of Harry Dexter White was printed three years after he was exposed as a Soviet spy-typical of the attitude of Fabian socialist elements toward the whole coterie of spies and Fifth Amendment communists in the United States." Ibid. 83

26. "The line between fascism and Fabian socialism is very thin. Fabian socialism is the dream. Fascism is Fabian socialism plus the inevitable dictator." Ibid. 87

27. "The Keynesian formula fits all totalitarianisms. Juan Peron's dictatorship in Argentina used the Keynesian technique as authority in economic and political matters…Nehru traces the beginning of his interest in socialism to his Cambridge days when the Fabianism of Shaw and the Webbs attracted him…The Nazis did admire the Keynesian theme whereby the government has authority over the whole economic life of the nation…Sir Oswald Mosley, current Fascist leader was a leader of the Fabian Society at a time (1930) when Keynes' ideas were already the officially accepted Fabian line." Ibid. 89, 90

28. "Shortly before his death Schumpeter concluded that the basic leftist ideologies are based not on science but on a vision." Ibid. 96

29. "At the end of his life Keynes wrote: 'We were not aware that civilization was a thin and precarious crust erected by the personality and will of a very few [actually by a governing class] and only maintained by rules and conventions. It did not occur to us to respect the extraordinary accomplishment of our predecessors in the ordering of life or the elaborate framework that they had devised to protect this order. We completely misunderstood human nature, including our own.'" A. L. Rowse, Homosexuals in History. 277

30. "By a continuous process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens. By this method, they not only confiscate, but confiscate arbitrarily: and while the process impoverishes many, it actually enriches some…the process engages all of the hidden forces of economic law on the side of destruction, and does it in a manner that not one man in a million can diagnose." John Maynard Keynes, Economic Consequences of the Peace (1920)

Prepared by David A. Noebel, May 18, 2009
Summit Ministries, Manitou Springs, CO 80829

The Case for Natural Money

Critical Article: The Case for Natural Money



Ethics of Money Production

Its not your money!

Here we have Representative Joseph Knollenberg (R-MI) explaining to Neil Cavuto that the bailout funds are not the taxpayers money....

Whose money does he think it is?

Watch Peter Schiff speak truth

Watch Peter Schiff speak truth based on principle.

Five Guys Analogy

As the intent here is to illustrate principles and specific points, simple analogies will be used, studied in extremes. Simple illustrations with locked in variables will be employed. If these views are correct, then more complex models with more variables will provide the same results, given that one has sufficient time and the patience to work through the details.

Here will be presented an illustration in two forms. The first will illustrate what the purpose of inflation is NOT and the second will illustrate what the purpose of inflation is.

Here is a set of facts to work with for this exercise:

• Imagine a country



• With exactly five (5) guys




• Imagine that they each have ten gold coins valued at ten dollars each




• Imagine that they like using receipt money, so their coins are in a vault





• $100 each * 5 guys = $500 Total Money Supply



• Imagine that corn is priced at $1 per bushel

Illustrating what the purpose of inflation is NOT...

In this imaginary world, the five guys have an economic summit on January 1st each year. In year one, they meet and then go about their business. In this simple low velocity economy, each man uses his one hundred dollars in receipt money to purchase 100 bushels of corn.

In year two they meet and decide to “lubricate” their economy so they can be like the neighboring countries. They print an extra one hundred dollars each in receipts, thereby giving each man two hundred dollars.

$200 each * 5 guys = $1000 Total Money Supply





Has the wealth of their nation increased?

The answer is no. The paper is costless and therefore valueless in its own right. The paper references the same gold coins and therefore each receipt is now worth half as much. They still only have $500 in gold in the vault.

Has the value of the corn changed?

The answer is no. The corn has the same nutritional value and other value attributes as it did before someone pressed the “print button.”

Has the price of the corn changed?

The answer is yes. Since the receipts are half as valuable and the corn retains its same value, one now needs to spend two dollars (in terms of inflated receipt money) for each bushel of corn.

How many bushels of corn can each of the five guys purchase with their $200 of old and new receipt money? Corn is $2 a bushel now so they are able to purchase exactly what they could before; 100 bushels of corn. Nothing changed.

Therefore, one can see that inflation serves no purpose if everyone gets the new money on the same day. So what is the purpose of inflation?

Illustrating what the purpose of inflation is...

Let’s begin again with the five guys as at the very beginning. This time on January 2nd in year one, one of the five guys decides to become a beloved central banker. He decides to print an extra $500 in receipt money, place it in the bank and then borrow it.

Has the wealth of their nation increased?

The answer is no. The paper is costless and therefore valueless in its own right. The paper references the same gold coins and therefore each receipt is now worth half as much. They still only have $500 in gold in the vault. Yet in this case, the paper in the other four guy’s pockets lost half of its value; the banker enjoyed an increase in purchasing power at least equal to their loss.

Has the value of the corn changed?

The answer is no. The corn has the same nutritional value and other value attributes as it did before someone pressed the “print button.”

Has the price of the corn changed?

The answer is yes, but not yet. Since the receipts are half as valuable and the corn retains its same value, one now needs to spend two dollars (in terms of inflated receipt money) for each bushel of corn. However, the other four guys do not know about the new money so they continue to trade at the price of $1 per bushel.

Consider how this plays out. The banker has $600 dollars to spend. To keep the math simple, one can assume that the price changes do not occur until the January 1st summit a year from now. The four guys are going to be quiet, but happy, because each thinks that he is making really big money this year as his account swells from $100 to $200, since the banker is purchasing more corn than normal. For the purpose of illustration, it is specified that each of the four guys winds up with $200 dollars and one hundred bushels of corn. The banker, on the other hand comes away with 600 bushels of corn.

At the summit it quickly becomes clear that the banker has inflated the money supply, which halved the value of the dollars already in existence. The farmers should have been selling corn for $2 a bushel and clearly in the upcoming year they will only be able to buy 100 bushels of corn with their $200 dollars.

Since everyone ended up with the same amount of dollars relative to one another, one might conclude there is not really any harm done, but that conclusion would be wrong. Remember that the banker now has 600 bushels of corn when he should only have 100 bushels.

So now one can see the purpose of inflation.

When inflating with costless money, the purpose of inflation is to use NEW MONEY to purchase REAL ASSETS at OLD PRICES, thereby causing a wealth transfer from the people who get the new money last, toward the people who get the new money first. - Shane Coley

Observe the illustration closely. Whose money was the banker giving to each of the other four guys when he made his purchases of corn? The banker was actually giving the other four guys their own money back again and taking the fruits of their labor at the same time. What does this mean for those who are members of a society which operates under an inflationary monetary system?

Perhaps these illustrations help explain this popular quote attributed to a past Chairman of the Bank of England from a talk at the University of Texas in 1927:

Banking was conceived in iniquity and was born in sin. The bankers own the earth. Take it away from them, but leave them the power to create money, and with the flick of the pen they will create enough deposits to buy it back again. However, take it away from them, and all the great fortunes like mine will disappear and they ought to disappear, for this would be a happier and better world to live in. But, if you wish to remain the slaves of bankers and pay the cost of your own slavery, let them continue to create money.

Inflation & Moral Decay

Another destructive aspect of Inflationary monetary systems is the overall effect on morality. This will in no way be a thorough treatment or even a substantial review. The intent is simply to raise the point.

Consider this Bernanke quote for reference:

We conclude that, under a paper-money system, a determined government can always generate higher spending and hence positive inflation.

Ben Bernanke, “Deflation: Making Sure ‘It’ Doesn’t Happen Here” Remarks before the National Economists Club, Washington, D.C., 21 November 2002

First note that the Federal Reserve actions are linked to "a determined government".

Next we see that this determined government, acting through the Fed, "can always generate higher spending". In other words, the government can use the inflationary monetary system to, in effect, force citizens to spend, rather than save.

Keynesians claim that the key to economic vitality is spending, while Austrian economists contend that the key is savings. Since one would be hard pressed to produce widgets with no production tools and production tools are capital intensive, it makes sense that before a low cost, high quality, efficiently produced good can be made available for purchase, someone had to save enough to build the widgit factory.

In addition, savings is not the destruction of money, it is the deferral of spending. The money simply is held for future purchases. In addition, savings in a sound money economy lowers interest and enables the production of consumption goods in the future.

Enough of that. Effect on morality is the question we are considering.

If a determined government forces consumers to spend (as their only defense to rising prices caused by the government inflating the money supply), then consumers can only buy cheap goods or go in debt to buy before prices rise. In either case, a "consumption economy" is created. The market churns out large volumes of cheap goods that are replaced every few years. Durable goods are not very durable any more.

The virtues of saving and planning are replaced by the vices of irresponsible spending and debt.

This fosters an instant gratification mentality. Because no one looks forward in time considering what can be bought in the future, planning and frugality become a mockery. Because we are trained not to look forward, we certainly lose any grounds for looking back to discover and maintain tradition.

Consider the present conditions in the US. Households and businesses are in deep debt. The family is under assault. Integrity seems to be in decline. Instant fixes to every problem are on the shelf. Morality and frugality are mocked.

Inflation transfers wealth and productivity into the hands of the propagandist. The declining dollar trains people to seek instant gratification and live in perpetual debt. That is more than an unhealthy combination; it is a recipe for disaster.

Inflation as a Tool of War

The prevailing economic thinking that drives policy among the nations of the world, particularly the industrialized nations, is Keynesianism. Perhaps a few of Keynes own words would be instructive.

Lenin is said to have declared that the best way to destroy the capitalist system was to debauch the currency. By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens. By this method they not only confiscate, but they confiscate arbitrarily; and, while the process impoverishes many, it actually enriches some… Lenin was certainly right. There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose.

The Economic Consequences of the Peace, John Maynard Keynes, 1919

Lew Rockwell explains how the Fed enables war and destruction of liberty. War and Inflation is an excellent article.

War and Inflation by Llewellyn H. Rockwell, Jr.

The Purpose of Inflation

Some forms of increasing a money supply are ethical, while others are not ethical. Here we will offer a few comments and definitions which will help describe key features of an inflationary monetary system.

Inflation

Working definitions of inflation often include reference to money class and ethics of production, in addition to quantity. Here we will offer three definitions of inflation, including the most basic definition possible.

The first definition addresses only the quantity attribute in defining inflation.

Definition 1: Inflation is any increase in a money supply.

The next two definitions of inflation take into account the following three attributes:

• Money class
• Relative money quantity between money classes
• Ethics of money production and use

Definition 2: Inflation is defined as “an extension of the nominal quantity of any medium of exchange beyond the quantity that would have been produced on the free market" - The Ethics of Money Production, Jorg Guido Hulsmann

Definition 3: Inflation is defined as “the process of issuing money beyond any increase in the stock of specie” - (Man, Economy, and State, 3rd ed., 1993, p. 851, Murray Rothbard)

Purpose of Inflation

When inflating with costless money, the purpose of inflation is to use NEW MONEY to purchase REAL ASSETS at OLD PRICES, thereby causing a wealth transfer from the people who get the new money last, toward the people who get the new money first.

In other words inflation is a sophisticated form of ROBBERY made possible by legalized “money” creation ex nihilo.

Sound Money

Sound money is a commodity that is costly to produce and which has been voluntarily accepted by market participants for use in indirect exchange.