Kilowatt Money: Another Zombie Fiat Money Scheme
by Gary North: The
No-Name European Committee That Made the $13 Billion Guarantee to
movement had always been filled with monetary cranks. This has been
true for well over a century.
have never read a book on economics. They have never taken a class
in economics. They have zero practical experience in finance.
They come before
the conservative public and present crackpot schemes of monetary
inflation, all in the name of conservatism.
are equally unread, equally unskilled amateurs who think, "Gee,
that sounds great! Let's do it."
Let's do what?
These cranks never have a plan to get from here to there: the Promised
Land. They are like Moses with no escape route into the Promised
Land by way of the wilderness. They want to wave a magic wand and
get True Money (always capitalized).
schemes all partake of the same flaw. They want a government-appointed
committee of unelected experts to set up the money and banking system
at a zero interest rate. Usually, they want a central bank run
by engineers and government statisticians. But all of these schemes
rely on government statisticians. All of them reject a gold coin
standard where owners of private property gold coins and
bank accounts are in charge.
schemes begin with this presupposition, which is never admitted
by any of the designers: "We do not trust private property and the
free market. We trust only government experts." Their zombie followers
line up. "Yes, yes, we too believe only in government-employed experts.
This is because we are conservatives." Then out into they night
they march, looking for other conservatives with brains to eat.
They find them. They always find them.
The bank reformers
have no political support for their schemes. But they spend time
describing the wonders of their system. They call on people to get
behind it. Except for a few crackpot schemes, such as Social Credit
or Greenbackism, no one ever joins the political movement. There
is no political movement. There are only mindless zombies.
Here is a recent
example: "Electricity As Currency? 10 Reasons It Could Work." This
was subtitled: "Energy-backed currency concept"
It began with
a deliberate deception.
the good old days when gasoline only cost $1.50/gallon way back
in the ancient times of 2000? Why does it cost more than double
that today ($3.71)? A gallon of gas is still a gallon of gas, so
it seems obvious that the dollar has lost value.
If you are
going to prove currency depreciation by an appeal to statistics,
use the Consumer Price Index or the Median CPI. The CPI is most
common. Using the Inflation Calculator on the site of the Bureau
of Labor Statistics, we learn that consumer prices since 2000 have
risen by 35%. That is 2.3% per year. This is bad, but it is not
anything like mass inflation.
writer goes on:
rapid devaluation of the U.S. dollar makes it an unstable medium
of exchange and certainly not a good store of value two aspects
considered to be the main functions of money. This has led many
to examine the flaws of the current monetary system and search for
This is not
rapid devaluation. This is steady-as-you-go monetary depreciation.
Hardly anyone notices. Hardly anyone cares.
have suggested that returning to the Gold Standard (pegging the
dollar to gold) will help control the fraudulent expansion of the
money supply and protect the value of the currency.
This is familiar.
There is both economic theory and economic history that supports
say eliminating the interest attached to each dollar created will
get rid of scarcity and provide abundance.
This is Greenbackism.
of these ideas has merit since they correct some of what's broken,
yet they both also have flaws which make them difficult to fully
is totally wrong. It is intellectually bankrupt. Ellen Brown is
a prominent Greenbacker. For my detailed refutation of her economic
theory and her historical inventions, which she has never answered,
(She in fact is a Leftist. She has come out in favor of Bernanke's
invariably quote engineers and scientists who never wrote a detailed
theory of economics.
interesting alternative that has been proposed is using an energy-backed
currency. The idea is not new. Thomas Edison envisioned an "energy
dollar" after seeing the value of electricity, and Henry Ford also
conceptualized backing a currency by a "unit of energy" instead
of gold. Motivated by the failed monetary system during the Great
Depression, Ford even planned to support the idea with his own electric
dams. Of course the central bankers scolded Ford's idea because
it threatened their schemes.
knew nothing about economic theory. Neither did his friend Edison.
They were engineers. They wrote no treatises defending their positions.
more recent times the idea of using electricity as a currency has
gained some traction. An online ebook Energy Backed Money
was published in 2009 supporting the concept of backing the dollar
with electricity. Kilowatt Cards were introduced as gift cards for
electric power meant to be a transferable means of currency. And
former NASA scientist, Michael Rivero, proposed the Lectro, a universal
electricity based currency whose supply is controlled by production
and use of electric power.
are engineers with no economic theory to support their views.
have discovered a central flaw in the modern economy: government-licensed
fractional reserve banking. But they never identify the source:
government licenses to commit fraud of money creation. They offer
no theory of free banking or 100% reserve banking. They never alert
their readers to the central fact: these institutions are created
by government intervention. There is a reason for this. They always
call for a "nrew, improved" government-created, government-managed
monopoly over fiat money creation. Here is their unstated but always-present
assumption: "You can trust the government." You can, but you shouldn't.
attack on fractional reserves.
Federal Reserve Notes (dollars) are not backed by anything valuable
and their value is determined primarily by how much supply is in
circulation. The supply of money under our current system is lent
into existence as fast or as slow as the bankers or the government
determines, leaving a lot of room for manipulation.
Here is the
problem: there is lots of room for manipulation. This is the problem
with every system of money that is not a commodity-based money system
that is governed by the free market.
all money is lent into existence with interest owed to central bankers.
This is always
the creation of national governments. There is a simple solution:
revoke the legislation. Nothing else? Nothing else. This was how
Andrew Jackson got rid of the Second Bank of the United States in
1836. When it lost its government license, it went bankrupt.
attack on the existence of interest rates, which in fact are an
inescapable aspect of human action a discount applied to
expected future income as Ludwig von Mises taught.
this interest is money yet to be created in the system so there
are never enough dollars in the system to pay off the debt accrued
from the creation of the dollars themselves. This creates a false
scarcity and the perpetual need to expand the money supply, which
then breeds inflation. This simultaneous scarcity and inflation
have a tremendously negative impact on the economy, especially for
the poor. Ultimately, it's this interest on every dollar created
that inherently enslaves us all to the central bankers who hadn't
produced anything of value to demand our servitude.
This is crackpottery.
It says that there should be no interest rate. There is always a
discount for time. The surest mark of a crackpot is the call
for a rate of interest of zero. There are no exceptions to this
rule. Whenever you see a call for zero interest, you are seeing
the equivalent of a call for a perpetual motion machine.
only way to solve the inefficiencies of the current system is to
use a currency that has real value, whose supply is tied to an accurate
economic indicator, and doesn't need interest attached just for
the sake of creating it.
on interest denies a fundamental category of human action: "now,
not later." This was refuted by Austrian School economists in the
late 19th century. Read Chapter XIX of Mises's book, Human
call for a non-market standard of economic value.
has measurable value in our society and since everything in our
modern world runs on power, it may be the most accurate gauge of
economic activity we have.
it doesn't. Nothing in this world has a measurable value. There
is no yardstick of economic value. Value is subjective. It is constantly
changing, because individuals keep changing their scale of values
as conditions change, including their tastes.
electricity-backed currency would not be nearly as complicated as
our fractional reserve system. It could work something like this:
electric producers could issue certificates (money) as kilowatts
are produced and they would be removed from circulation once the
electric bill is paid (redeeming their receipts), thus always maintaining
a consistent and stable supply.
not measures of economic value. They are a measure of physical flow.
The measurement of this flow is in no way the measure of value.
The free market establishes economic value.
In good times,
these units of electricity keep getting cheaper. The price of a
kilowatt in 1910 was a lot higher than it is today. So, there is
fixed economic value. Electricity is always getting cheaper. When
money gets cheaper, prices rise. This is price inflation.
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is the author of Mises
on Money. Visit http://www.garynorth.com.
He is also the author of a free 31-volume series, An
Economic Commentary on the Bible.
2013 Gary North
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