Well, it’s not ‘the end of history’, as Francis Fukuyama originally forecast in 1989. As events, as much as Samuel Huntington’s 1993 counter-thesis ‘The Clash of Civilisations’, have shown. For Fukuyama, it was ‘the politics’ that mattered. And these ‘ended’ when the Berlin Wall fell and, soon after, victory in the Cold War was declared by liberal democracy, happily “free from such fundamental internal contradictions” that undermined alternative forms of government. For Huntington, it was all about ‘the religious’, ‘the ethnic’. Since history, like nature, abhors a vacuum, ‘politics’ would be replaced by something .... like 9/11, and the Iraq and Afghanistan wars.
What if both are wrong? What if it’s ‘the economic’? And record gold prices (in all currencies) ‘prove’ it? In late 1993 Huntington challenged his critics to come up with an “alternative paradigm that accounts for the more crucial facts in equally simple or simpler terms.” A little late, here goes.
The deepest and most enduring schism in and between societies is that dividing creditors and debtors, and surplus and deficit countries. In turn, these sides champion hard or soft money, deflationary or inflationary policies. In the ‘good old days’ this was an even fight. Indeed, the climax of the ‘Gilded Age’ of prosperity in America at the end of the nineteenth century was marked by three successive defeats for the soft-money candidate, William Jennings Bryan.
The “plain people of this country” were Bryan’s army. And you’d “search the pages of history in vain to find a single instance in which the common people of any land ever declared themselves in favor of a gold standard”, ie hard money. For Bryan “the idle holders of idle capital” (with assets to defend) were pitted against “the struggling masses” (with debts to burn, they hoped). And “where, in law or morals” was the “authority for not protecting the debtors?” Or, as his more memorable rallying cry went: “you shall not press down upon the brow of labor this crown of thorns. You shall not crucify mankind upon a cross of gold.”
This was probably the high water mark for the forces of hard money. Their ‘cross of gold’ discarded in the 1930s, now they have simply been outnumbered by debtors. And in democracies, power is a numbers game. In America today almost half the working population pays no Federal income tax, compared with only a fifth as recently as the late 1980s. What is this great subsidized majority going to vote for? Smaller government and fewer benefits - ‘hard choices’? A strong dollar that keeps inflation low and the real value of their debts up? Or personal profligacy funded by government excess?
The dwindling minority of (‘idle’ but taxpaying) creditors has worked this one out. And it is investing accordingly, in an asset viewed beyond the grasp of the mob or its elected representatives:
A few hard money guerillas survive, in what some might call the backwoods. Ten American states are considering bills to reintroduce ‘Constitutional Money’. Namely, proposals to break the Federal Reserve’s monopoly (of paper currency) and return to Article 1, Section 10 of the 1787 Constitution which forbade states from making “anything but gold and silver coin a tender in payment of debts.” Stranger than the fiction of Ayn Rand? (In whose 1957 novel ‘Atlas Shrugged’ society’s creditors, its movers & shakers, fled a rapacious government to a hidden valley where gold and silver were the basis of transactions and savings.) Or the golden nail in the coffin of Fukuyama’s thesis that democracy is not “prey to ... contradictions so serious that they will eventually undermine it as a political system”?
What if both are wrong? What if it’s ‘the economic’? And record gold prices (in all currencies) ‘prove’ it? In late 1993 Huntington challenged his critics to come up with an “alternative paradigm that accounts for the more crucial facts in equally simple or simpler terms.” A little late, here goes.
The deepest and most enduring schism in and between societies is that dividing creditors and debtors, and surplus and deficit countries. In turn, these sides champion hard or soft money, deflationary or inflationary policies. In the ‘good old days’ this was an even fight. Indeed, the climax of the ‘Gilded Age’ of prosperity in America at the end of the nineteenth century was marked by three successive defeats for the soft-money candidate, William Jennings Bryan.
The “plain people of this country” were Bryan’s army. And you’d “search the pages of history in vain to find a single instance in which the common people of any land ever declared themselves in favor of a gold standard”, ie hard money. For Bryan “the idle holders of idle capital” (with assets to defend) were pitted against “the struggling masses” (with debts to burn, they hoped). And “where, in law or morals” was the “authority for not protecting the debtors?” Or, as his more memorable rallying cry went: “you shall not press down upon the brow of labor this crown of thorns. You shall not crucify mankind upon a cross of gold.”
This was probably the high water mark for the forces of hard money. Their ‘cross of gold’ discarded in the 1930s, now they have simply been outnumbered by debtors. And in democracies, power is a numbers game. In America today almost half the working population pays no Federal income tax, compared with only a fifth as recently as the late 1980s. What is this great subsidized majority going to vote for? Smaller government and fewer benefits - ‘hard choices’? A strong dollar that keeps inflation low and the real value of their debts up? Or personal profligacy funded by government excess?
The dwindling minority of (‘idle’ but taxpaying) creditors has worked this one out. And it is investing accordingly, in an asset viewed beyond the grasp of the mob or its elected representatives:
- in gold coin - American Eagle sales an 11 year high for May
- in gold bars - the securitized version, gold ETFs; 5 million ounces of the largest of these were bought in the thirty days after the Greek crisis broke, 23 April when Athens officially requested a bail out, more than in the month after the fall of Lehman Brothers, 15 September 2008
A few hard money guerillas survive, in what some might call the backwoods. Ten American states are considering bills to reintroduce ‘Constitutional Money’. Namely, proposals to break the Federal Reserve’s monopoly (of paper currency) and return to Article 1, Section 10 of the 1787 Constitution which forbade states from making “anything but gold and silver coin a tender in payment of debts.” Stranger than the fiction of Ayn Rand? (In whose 1957 novel ‘Atlas Shrugged’ society’s creditors, its movers & shakers, fled a rapacious government to a hidden valley where gold and silver were the basis of transactions and savings.) Or the golden nail in the coffin of Fukuyama’s thesis that democracy is not “prey to ... contradictions so serious that they will eventually undermine it as a political system”?
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