The great currency debate: public fiat money vs. gold-backed money

We often cite and excerpt Ellen Brown, who is, along with Bernard Lietaer and Thomas Greco, amongst our 3 preferred monetary transformation excerpts.

To help situate Ellen Brown’s positioning in the larger currency debates, here’s a good explanation of one of the key debating points by Eric Blair.

Eric Blair:

“There seems to be another currency war brewing right here in America. The debate between the two most popular proposed solutions of adopting the Greenback or the Gold Standard has just officially begun. Last week, Gary North, a Goldbug and author of Honest Money, wrote a scathing attack of Web of Debt author Ellen Brown, a Greenbacker. He took select samples from her book in an attempt to tie her public bank solution to Hitler, but failed to address the “interest-free” philosophy of her policy. Despite that, he does manage to frame the Goldbug’s argument against the Greenback, or public banking, as inferior:

Brown is a Greenbacker. She is open about this. Most people have never heard of Greenbackism. It has been a fringe movement in American political life ever since the 1860s. The Greenback Party in the 1870s was the first American political party to come out in favor of a pure fiat money economy, a paper money system controlled by Congress with currency irredeemable in gold coins or silver coins.

The Greenbackers are committed to paper money. They are opposed to any form of gold standard. They are opposed to fractional reserve banking. They are opposed to central banking, unless the central bank is 100% owned and controlled by Congress.

A rebuttal piece was then written by Interest-Free Currency activist Anthony Michgel in defense of Brown and the Greenbacker’s where he goes after North and claims interest-bearing gold can never work.

What it is all about is the Goldbug people versus the Interest Free Money crowd. It is one of the most crucial debates around. As I have mentioned before both on this site and elsewhere, Gold is the preferred currency of the Banking Fraternity and they plan to reinstate it in their world currency, which is coming closer every day….

Because North has managed to do something profoundly dishonest and unwise. In this enormous article of his he actually does not mention the problem of interest at all.

This is so totally unfair to Brown’s work, because this is surely one of the most important aspects of her narrative….

Interest free money, either printed debt free by the Government or through interest free credit either by private organizations or again by the State, is simple, proven technology and centuries old.

Yes, many systems have been abused resulting in inflation.

No, interest bearing Gold is definitely not an acceptable solution.

Brown’s public banking movement appears to be immediately workable and is gaining ground with the first pragmatic step being to establishing state banks — as proven in North Dakota — who has a state-owned bank and boasts the lowest unemployment and the only budget surplus of the United States.

The public banking movement opposes the Federal Reserve, like Paul, because it is unconstitutional, but also for a variety of other intellectually defensible positions, starting with the fact that they are a private monopoly who care not for Americans or the country. There are very real concerns that this group of banksters may maintain dominance of a gold-based system since they already have possession of most of the world’s gold — including much of the mining as well. Furthermore, if they can continue to create money on a fractional basis — even if backed partially by gold — and can continue to charge and determine interest, they’ll still possess the power enslave-by-debt people, industry, and entire nations. Finally, the private profit motive of international banksters, driven by interest, has historically proven to encourage wars as evidenced by their funding of both sides of all wars. This would also seem to give them dubious power to determine the outcome of those wars.

It is true that gold has been valued in society for thousands of years and it will likely continue to maintain its terrific investment value for the foreseeable future. Gold clearly has a physical value derived from the incredible energy it requires to mine and refine it. But gold, as a limited resource, is interest bearing and can be hoarded by those with the wherewithal to do so. This would seem to suggest that gold could then be manipulated by the few who control vast sums of it. And that sounds a lot like the economic tyranny we face today with the private Fed.

North attacks Greenbackers because they “are opposed to central banking, unless the central bank is 100% owned and controlled by Congress” as if to say, how dare the people demand ownership of their own currency. It shows a blinding distrust for Constitutional government and obvious preference for private banking interests. Goldbugs seem caught up on the fact that a unit of exchange must have intrinsic value, either backed by gold or as an instrument of debt, or both. They feel so strongly that fiat currencies are utterly unreliable, but spend little time discussing the motive behind the interest and supply manipulators.”

5 Comments The great currency debate: public fiat money vs. gold-backed money

  1. AvatarMyst


    Why do you need to categorize these three as “preferred”? Why not keep an open mind? There are many other worthy voices in this field who deserve an audience.

    Although I appreciate Eric Blair’s intention to defend Ellen Brown, who does excellent work (in contrast with North), his explanation is not especially “good” as you declare. There are several flaws in it. For example, his account of gold’s value is very limited and misleading, and the whole dichotomy he and you present between gold and the greenback is false to begin with.


  2. AvatarMichel Bauwens

    Hi, keeping an open mind does not preclude preferences, and you will see in that many open money thinkers are represented. But I did form my own opinion after 2 years of monitoring this space, and this ‘preference’ reflects that. In my view, the credit commons and autonomous open money must be an ongoing process and effort, but cannot scale quickly enough in crisis, and this is where Ellen Brown’s public credit and banking comes in. As for the other debates, I don’t see how going back to gold can offer any solution for current economies, though I’m not averse to experimentations with various kinds of backup for money (like energy for example). I’m not an expert, but I broadly agree with Ellen’s basic argument: money that is plowed in the productive economy, is NOT inflationary, only speculative money is.

  3. AvatarMyst

    Thank you for your response, Michel.

    I understand now that the preference expressed is your personal preference, which is understandable. My comment was based on “We often cite…”. I thought you were expressing a P2P Foundation position.

    I also understand and agree with your point that in a crisis, there is not enough time to introduce a revolutionary or immature system. A multi-phase process would be more pragmatic, beginning with available, proven systems. I also agree that Ellen Brown’s strategy is an excellent choice for immediate deployment while longer term strategies involving systemic changes are debated and gradually developed to maturity.

    But is Ellen’s strategy, based on the Bank of North Dakota model, sufficient given the rapidly accelerating worldwide crisis? I believe it is an important component, but not sufficient in itself. There is another strategy which is complementary, namely, a viral campaign designed to educate and empower people around the world to immediately free themselves from the rapidly deteriorating fiat currency system and indirectly from the centralized oppressive centralized power structures which depend on that system for their existence.

    This campaign is legal, peaceful, within the means of almost everyone worldwide and is immediately actionable; does not require legislation, political parties, or charismatic leaders. I’m referring to the campaign to buy silver: exchanging soon-to-be-worthless debt notes for a hard physical asset that has historically been recognized as money for thousands of years.

    Like yourself, I have closely followed the money/currency space, for more than two years. I am familiar with almost all the material referenced on your Money Category page, having researched much of it in depth, and am familiar with the pros and cons of precious metals as currency and as the basis of a currency standard. I well understand that they have drawbacks and are therefore, by themselves, not an adequate long-term solution. But I believe that they have a place in a healthy money system due to their scarcity and unique properties; and more importantly, they can play a critical role in the transition that is already upon us.

    The campaign to buy silver has already gone viral, under the slogan “Crash JPMorgan, buy silver”. This campaign advocates that everyone buy one or two silver coins as a political action to bring about the end of precious metal price suppression, which occurs solely to prop up the fiat currency Ponzi scheme, and which in turn enables massive wealth transfer and impoverishment of the masses, not to mention wars and environmental degradation.

    There have been a flood of original, creative YouTube videos and blog articles appearing on this theme, and they are having the desired effect, with January, 2010 U.S. Mint coin sales smashing records. There is a major shortage of silver developing, which will result in the default of the fraudulent derivative scheme being used by the banking cartel to suppress the prices of silver and gold and hence precipitate a return to sound money.

    At first, this means a return to gold and silver as money. As flawed as that system may be, it provides a bridge to more progressive, advanced and fairer systems still under development that is easily within the reach of the billions worldwide who understand intuitively that a silver coin in hand is worth more than a paper debt note, but who can not yet comprehend what a “credit commons” is.

    It is no accident that the deposed leader of Tunisia wife absconded with millions worth of gold bullion, rather than bonds, stocks, currency or any other pieces of paper. It is no accident that China is strongly encouraging its population to personally possess gold and silver and have drastically increased both internal production and imports. Meanwhile all central banks have switched from net buyers to sellers of gold. Russia announce plans for 100 tons per year purchases of gold. They all recognize that the great Keynesian experiment is over and are positioning themselves accordingly.

    Whatever solution humanity devises for money, it must work with where humanity is now. Whatever faults gold and silver may have, they have one very superior quality which is an immediate antidote to the worldwide plague of corruption and fraud, moral hazard encouraged by the debt-based money system, namely, it cannot be easily counterfeited. That property is needed with the same urgency that CPR is needed to keep a patient alive — broken bones can wait to be mended later.

    I could give more details about the recently discovered vulnerability of the banking cartel in the silver futures market, the diligent work of GATA and the courage of whistleblowers like Andrew Maguire, the corruption and collusion of the CFTC and SEC. I could mention popular movements around the world moving in the same direction as the campaign to buy silver (and gold) in the west, like the resurgence of the Dinar and Dirham in Indonesia. I would think the P2P Foundation would be interested in these very important money-related developments, particularly because of the decentralized and grass roots nature of many of them. But I see nothing about them, or the people behind them, or some important related media productions such as Zeitgeist: Moving Forward or The Secret of Oz on your Money page. Is this a preference? And if so, is it your personal preference or a P2P Foundation preference?

  4. AvatarMichel Bauwens

    Thanks for sharing your interesting point of view. I’m certainly open to your contributions on that topic. The movements you describe I have no particular affinities to. Gold and silver may be interesting personal, or perhaps even collective, survival strategies, in that they prevent harm and provide some wealth insurance, but I personally do not yet understand how they would fit in a transformation scheme. Of course, I may be ill-informed or misunderstand the issue, so to get some overview of this part of the movement, which has indeed been under-reported here, could be useful to our readers!

    Perhaps you could write a series of two, one: Do gold and silver still have a role in monetary transformation; and two: Global movements around monetary reform, where you could concentrate on what we have missed so far,


  5. AvatarMyst

    I would like to correct the date given in my comment above for record US mint coin sales: January, 2011, the month just ended. A final tally is now available: nearly 6.5 million ounces of silver coins sold, which is 50% greater than the previous record for a month.

    I would also like to take the opportunity to provide more details for those interested. I appreciate Michel’s willingness to post this lengthy comment despite his belief that going back to gold (and I presume silver) cannot offer any solution for current economies. I noticed that my previous comment made it into the search engines, so the following will become available to the internet even if not of interest to the P2P foundation.

    The global campaign to buy silver as a political action only began on November 11, 2010. Less than three months later, thanks to grass roots activism around the world, the campaign is helping to put tremendous pressure on the banker’s paper currency counterfeiting scheme designed to keep the world in debt slavery.

    This pressure is being felt most acutely at a vulnerable point in the global financial network, the COMEX (COMmodities EXchange) silver futures market, which has been the primary focal point of precious metal price suppression for several decades. Future contracts are a type of financial derivative in which a seller agrees to deliver a commodity such as wheat or copper at a certain price on a certain date. Unfortunately, due to lax regulations and enforcement, it is possible to perpetrate fraud in this market. There are currently many law suits pending against JP Morgan Chase triggered by revelations by whistleblower Andrew Maguire last year.

    Maguire’s testimony was the long awaited smoking gun. Long-time crusaders for honesty and fairness have been attempting to expose corruption in the precious metals markets for more than a decade, even as far back as 1989 when Ted Butler warned the CFTC (Commodity and Futures Trading Commission) about silver manipulation by the bankers. But like the willful ignorance by the SEC (Security and Exchange Commission) of Bernie Madoff’s Ponzi scheme, the CFTC still accommodates and protects the large banks and governments behind the manipulations more than 20 years later.

    Realizing that we can not count on the government to protect the interests of citizens against the voracious bankers, some of us looked for a vulnerability in the banking cartel’s dominance over the global monetary system, which in turn gives them great leverage over politicians and regulators. Guided by our understanding of the nature of complex systems, of which the global social and financial systems are examples, we identified a critical point that might bring about a paradigm shift with relatively modest efforts, as in the famous butterfly effect of chaos theory.

    It was financial writer Mike Krieger who recognized the opportunity to bypass the need for legislative or regulatory remedies with direct action by the people, by turning the banker’s manipulation strategy against them in a judo-like maneuver. Financial broadcaster Max Keiser, who had followed Mike’s work, took up the cause and (prompted by my suggestion), convinced Broadcaster and activist Alex Jones to make use of a recently discovered “critical point” in the internet (suggested by a listener): to ask his many listeners to make “Crash JPMorgan, buy silver” appear as a top Google search term, thereby triggering a flood of blog articles which piggyback on the widely followed Google Hot Trends list.

    Max explained Mike’s basic concept, that it is within the means of ordinary people to topple the banking cartel’s dominance by cooperatively joining forces in taking simple action that is legal and that the establishment has little defense against. The power centers expect and are prepared for protests and demonstrations. They have their media spin doctors, riot squads and detention centers in place, and have compromised the politicians and regulators who might be in a position to bring about constructive change.

    But the simple act of buying one or two silver coins, if done by enough people, could remove all currently available silver from the hands of the bankers and thus force a default of their fraudulent futures contracts. The corrupt basis of the entire global debt-based money system and the layers of unbacked derivatives on top of it would be exposed in a chain reaction through all markets.

    One trick the bankers can’t perform yet is alchemy. They can’t easily counterfeit physical gold and silver. They’ve tried to do the next closest thing, rigging the commodity markets so that their counterfeit futures contracts (paper gold and silver) effectively suppress the price of physical gold and silver. They do this to prop up their global central bank network, which manages boom and bust cycles designed to extract wealth from the masses for the enrichment of the elite. Paper currency backed by debt is accepted only as long as people have confidence in it. For confidence in the paper system to be maintained, gold and silver must be dismissed as an obsolete anachronism of the past, despite its preference by much of civilized humanity for at least 5,000 years.

    The bankers love debt and they love counterfeiting (fractional reserve banking and unbacked derivatives). Honest money is their enemy. As explained in the movie The International, the bankers love war, because both sides end up indebted. The recent revolutions in Tunisia, Egypt and elsewhere have been triggered by drastically rising food prices. This is directly caused by the bankers. It is not, primarily, a problem of supply/demand or environmental anomalies. As in 2008, the flood of paper money generated by central banks (most notably the Fed) goes not to relieving distressed economies (which the banks engineered to begin with), but goes to Wall Street speculators who pump money created out of thin air in to the hottest speculation available as if the world were their casino. The bailout and quantitative easing paper went, first to bonuses paid to themselves, then to equities (stock market) and commodities, including food such as wheat and corn. Bankers think nothing of making their billions from the suffering of humanity. If their speculations in food commodities result in the unnecessary starvation of a million people (as it did two years ago), that is nothing to them.

    The only problem with driving up commodity prices to make a huge profit from a captive market (people must eat to survive) is that gold and silver are traded on the commodity markets, and thanks to banker propaganda, are largely considered commodities instead of money. So, in the part of the pump-and-dump cycle where commodities are pumped up, special maneuvers are needed to suppress precious metals else they be lifted with the tide. In 2008, the maneuvers worked, as gold and silver plunged when the dollar and other commodities skyrocketed, and so frightened investors fled to dollar-based safe havens. But not this time. Although attempts at suppression have been fierce, gold and silver have held their ground against the onslaught of unbacked selling of futures contracts by the banks. In attempting to stem the unwanted effect of their own strategy using fraudulent means, they have created a critical point in the complex world financial/social system, a point where the people can take back the wealth that has been stolen from them, steadily over time through inflation and periodically in windfalls through the inevitable foreclosures and bankruptcies associated with boom/bust cycles.

    The banks have backed themselves into a corner by selling contracts to deliver physical silver that cannot possibly be honored, due to their inability to counterfeit real precious metal. In the past, they have relied on artificially driving the price of silver down by supplying even more contracts at progressively lower prices, overwhelming legitimate demand, so that most of the contracts expire worthless. Those that don’t, have often been settled with fiat paper, with a bonus payout as enticement. But now that the people are wise to the scam, they are demanding physical delivery, and the bankers are terrified. They are resorting to more and more desperate tactics, including raising margin rates three times in six weeks, and convincing the CFTC to postpone a congressionally mandated deadline in January, 2011 for restricted position limits. The bankers know that their game will be over when gold and silver rise to their realistic non-suppressed value, so in desperation they keep doubling down, like gambling addicts, putting their very existence in jeopardy as the game of musical chairs winds down.

    The showdown is the March futures contract delivery month. If the bankers somehow survive that, there will be another showdown in June. It’s just a matter of time. Then, bank holidays and overnight dollar devaluation are likely, and gold/silver will jump drastically in price, as measured in fiat currency. There is still a window of opportunity to trade what will eventually be worthless paper currency for something that has had universally recognized value for thousands of years, at what will be seen in retrospect as a fantastic discount.

    Why the emphasis on silver instead of gold? Several reasons beyond the fact that it is more affordable to ordinary folks. (A one ounce gold coin goes for $1340, silver $28.) The silver market is much smaller than the gold market and therefore was easier to control and corrupt by the bankers. (By controlling silver they also indirectly control gold.) By the same token, it is the easiest to take back by ordinary folks pooling their resources. Also, due to excessive price suppression over decades, and the fact that silver is an important industrial metal (particularly in modern electronic and green industries), it has been consumed at a high rate depleting above ground reserves. (This is, in itself, very wasteful — thank you again, bankers.) Meanwhile, it has not been cost effective to open new mines.

    But gold is almost as important as silver in this cause, so if you prefer gold then by all means get some, if only a token coin as a stand against banker abuse of the world, if not as some financial security.

    As I close I just noticed a quote from the Financial Times: ““Precious metals traders in London and Hong Kong said on Wednesday [February 2, 2011] they were stunned by the strength of Chinese buying in the past month. ‘The demand is unbelievable. The size of the orders is enormous,’ said one senior banker, who estimated that China had imported about 200 tonnes in three months.” To put this in perspective, China had the world’s fifth largest gold reserves at 1054 tonnes as of a month ago, according to Wikipedia. The writing is on the wall — in this case the Great Wall.

Leave A Comment

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.