Friday, September 26, 2008

The Gold Standard The Solution to Our Financial Crises

In the panic that has surrounded the present crisis, the best, most honest, and easiest way to save the financial system, a return to the gold standard, has been forgotten.

The problem with the banking system at present is a lack of capital and liquidity due to the bad lending practices encouraged, and in some cases required by the federal government. With their asset prices falling, the banks are on the verge of bankruptcy.

This is a problem for all of us. If banks fail, our money in the banks will go down with them, lending will dry up and the economy will grind to a halt, millions of people will be out of work. So we have to save the banking system, but at the same time we don’t want to reward them for the part of the crises that is their fault. We want to insure that the American people can get to the money in their checking accounts.

There is a way to do this. The Federal Government, holds about 260 million ounces of gold most of which was stolen from the banking system as an emergency measure during the great depression. I propose that the gold held by the Federal Government be returned to the people it was taken from, the people and banking system of the United States.

Under my proposal, gold would be declared money of the United States at the rate of $15,000 an ounce. Then 70 percent of the gold reserves of the United States would be transferred to banks in proportion to the dollar amount of the their checking accounts, sweep accounts, and retail money funds.

However this transfer would come with strings. First the banks would be required to maintain 100% gold reserves against their checking accounts, sweep accounts, and retail money fund accounts. They would be required to pay out gold on any withdrawal from any of the forgoing types of accounts when the amount of the withdrawal exceeded $500.

The rest of the gold reserve of the United States would be used to produce, a gold, silver, and copper coinage for the United States. This would be used first to redeem all of the outstanding notes of the federal reserve and the token coinage as it now exists and to pay off as much as possible of the federal debt.

The result of this would be a banking system which could not default on its payments to depositors, though savings account holders and CD holders would have risk, but the strengthening of the books of the banks would secure most of these obligations. It would end the current crises without cost to the taxpayers of the republic. It would end the possibility of such crises in the future because it would end the fractional reserve system that introduces great instability into our otherwise healthy economic system.

I will no doubt be denounced as a “gold bug” for proposing this, but it is the paper bugs of wall street and the federal government that have brought us to this crises. It is gold that can lead us out.

The above is inspired by the work of the economist George Reisman.

Thursday, September 11, 2008

In honor of the dead of 9/11

On the anniversary of 9/11 I am going to make a proposal that I believe will help our nation and take the first steps towards making it a reality. I believe that it is time to stop accepting the educational status quo where by to many student get a mediocre education.

I believe that we as people totally separate from the state should commit ourselves, before this century is over, to providing a private education to every student. This goal will be difficult to achieve, but no other has a greater chance to revolutionize our society, leading to a freer and more prosperous commonwealth.

I am today founding a non profit organization to achieve this goal. This organization, the Privately Run Education for Every Child Trust, (PREFECT) will work to set up scholarship funds, encourage the founding of new private and parochial schools, help home schooling parents and in every possible way to advance the cause of a private education for every child.

PREFECT will work with teachers, students, parents and communities to build schools that meet their needs. I do not want this to be a political organization, I am willing to work with people across the political spectrum and from many different faiths or philosophies to advance this cause. I believe that teacher collectively run schools, private for profit schools, parochial schools, and the traditional private non profit schools are all part of the solution to our education problem.

I invite all those who want to build a new and better system of education for our children to join me in this cause.

I can be reached at