In God or in Gold we trust? That is the Question!

By Santiago Sevilla, Economist (University of Zurich)

Looking at the Ten Dollar Bill we ask ourselves if the L was taken out, when the
Dollar's convertibility into gold was abolished: Did it state "In Gold we Trust"?,
and only after that most astonishing event, inspired by Prof. Milton Friedman,
money needed God's support?
It appears that the Great Innocent Bystander did indeed, in His wisdom, keep the
Dollar as a viable currency, notwithstanding the disappearance of gold as its last
backing, and warranty.
The significance and transcendency of this rather magic coup, has not been
understood by Central Bankers. It means that the Dollar is not anymore a liability
for the FED, and Public Debt is nonsence, because the state can issue money. If
debt is payed with dollars produced by the US, why should the great nation go into
debt? The huge expenditure of interest can be suppressed into nothingness. It is
such enormous contradiction to let incurr in debt a mighty country that can print
money, that the Greek philosophers would have a fit of laughter hearing of this
absurdity. But Logics has fallen into disrepute among the high priests of Central
Banks. Furthermore, the very reason for taxation has disappeared, which is to
render money to the govenment for its expences and eventual dilapidation.
Obviously, the other argument for taxation, which is to develop a police state,
that wants to know everything
about personal income and property of the citizen, to use it against him in the
court of law, is not at all hindered by the new ability of the state to create
money without having to trust in gold. So, probably, taxation will never be
abolished, although the state does not need it really. But, all gentle readers
will cry out: But, what about inflation? If government uses moderation and
thriftiness, if checks and balances keep on working effectively, there will be as
little inflation as under the system today. And, do-gooders will also ask, what
about the re-distribution of wealth? Here the answer: There is no justification to
take the money from the rich, and give it to the poor! Robin Hood believed in re-
distribution, but he was an outlaw in Nottingham's times. The same is true for the
German highwayman and robber Schinderhannes.
The tax on inheritance is also a remnant from times of banditry, when jewelry,
money and other assets were taken by force from the living, and now are sacked
from the dead. This will not change much in the future, due to to the prevalence
of envy, hate and greed, beautified as an edifying ideology.
Regarding the nature of money, the rate of interest must be re-examined. The basic
dilema is to enquire if the FED is willing to create as much money as needed to
pay off interest, when the time is ripe for yield on securities such as Treasury
Bills, Bonds, and Promissory Notes.
If interest rates are risen by the will of the FED, then money should increase
"pari passu",
in accordance with the laws of Euler and Bernoulli. If not, it would represent
trickery , cheating and deception, with devastating results for the economy.
Remember Paul Volker!
But, let us not despair and die, because the Dollar Bill says it all: "In God we
Trust".