Friday, July 17, 2015

Texas Gold Bank Delusion

Texas passed a law setting up their own gold and silver money bank (in then old sense of the word) and that is good in its own right.  But this is delusional:
Other experts also highlighted those effects. “Over time, as residents of the state use both Federal Reserve notes and silver and gold coins, the fact that the coins hold their value more than Federal Reserve notes do will lead to a ‘reverse Gresham’s Law’ effect, where good money (gold and silver coins) will drive out bad money (Federal Reserve notes),” explained constitutional-tender expert William Greene in a paper for the market-oriented Ludwig von Mises Institute.
Gold and silver is useful as money when relationships will not be formed, or they are being liquidated.  Otherwise, credit all the currency that is needed, that is to say vendors extended usury-free time to pay.

As recently as say 1975 the vast majority of transactions, food, housing, gas, clothes, medicine were all paid on time with no interest.  The banks were able to crowd out this good bene-credit with their mal-credit, the problem we have today.

Plus it is a state bank.  There is no role for the state in business or monetary matters, it is purely a private function.  This is true in places like Hong Kong where competing companies issue the currency, and in as a legal fiction in the USA where the Federal Reserve is a private company.

What we need is private banks, in the old style, with zero connection to nor regulation by the state.  Then we can begin to return to peace and prosperity.

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