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"Who controls the food supply controls the people; who controls the energy can control whole continents; who controls money can control the world" - Henry Kissinger

and yet...

"Sooner or later everyone sits down to a banquet of consequences" – Robert Louis Stevenson

Jim Grant says monetary activism is an insidious virus in the political bloodstream. He's right

In response to an FT article by Jim Grant on 5th January 2015, entitled 'Monetary activism is an insidious virus in the political bloodstream'


1. Humankind can have a) free trade under a rule of law, or b) warlords who take what they want by force and/or slavery, or c) central planning that pretends to be a variation on the former, though in many ways appears to have more in common with the latter

2. We've tried all three throughout history and, in theory at least, it is generally accepted in the West that free trade is best. Unfortunately, the theory seems to have got lost somewhere in the bowels of the Federal Reserve and/or the economics department at Princeton

3. Free trade, when we were still serious about it, required sound money to function well.  If I sell you my cow, I need to know that the 'money' you pay me will buy me my preferred 1.5 pigs when I go shopping tomorrow

4. Independently of each other, over several millennia, on separate continents, humans chose gold as money. Why - because it was universally considered to be desirable, portable, indestructible and divisible - it served as a store of value as well as a medium of exchange. Until we invented banknotes, neither was there any counter-party risk. It didn't have to be gold, it could have been cockle shells, it wasn't - gold was the choice of the free market

5. Gold, or indeed anything that cannot be manipulated by the central planners, or the governments they work for, or the bankers that they work for, or the academics that the bankers sponsor, is a frightful pain in the bum for these people. So much so that it has become fashionable to refer to it as a 'barbarous relic'. Suggest to almost anyone these days that we would benefit from a return to free trade and honest money, and they will probably think you are an old dinosaur that doesn't quite understand 'economics'. They may never have studied the history of money themselves, but that won't deter them from the judgement

6. Strange then, that Professor Krugman, when pushed to answer the question (I paraphrase) "but the dollar, isn't really backed by anything at all is it?", the guy who Japan are using to give credibility to their latest bout of monetary insanity, replied (I quote)…"it is backed by men with guns"

Now where were we?  Free trade, warlords, or central planning - Which one did we say was the barbarous relic?

Thank you Mr Grant, keep up your great work. In answer to your last point:

"Sooner or later, there will be a recession and a wicked bear market in stocks — there always are. How will the central bankers then respond? In outdoing even what they did before, what will they do to your money?"

I don't know for sure, but whatever it is, it won't be honest, it won't promote free trade, and it won't work.

Progress happens despite governments not because of them

Three moles in a hole