Srimad-Bhagavatam Canto 1, Chapter 17, Text 39
punas cha yachamanaya
jata-rupam adat prabhuh
tato ‘nrtam madam kamam
rajo vairam cha panchamam
punah—again; ca—also; yacamanaya—to the beggar; jata-rupam—gold; adat—gave away; prabhuh—the King; tatah—whereby; anrtam—falsehood; madam—intoxication; kamam—lust; rajah—on account of a passionate mood; vairam—enmity; ca—also; pancamam—the fifth one.
The personality of Kali asked for something more, and because of his begging, the King gave him permission to live where there is gold because wherever there is gold there is also falsity, intoxication, lust, envy and enmity.
Although Maharaja Pariksit gave Kali permission to live in four places, it was very difficult for him to find the places because during the reign of Maharaja Pariksit there were no such places. Therefore Kali asked the King to give him something practical which could be utilized for his nefarious purposes. Maharaja Pariksit thus gave him permission to live in a place where there is gold, because wherever there is gold there are all the above-mentioned four things, and over and above them there is enmity also. So the personality of Kali became gold-standardized. According to Srimad-Bhagavatam, gold encourages falsity, intoxication, prostitution, envy and enmity. Even a gold-standard exchange and currency is bad. Gold-standard currency is based on falsehood because the currency is not on a par with the reserved gold. The basic principle is falsity because currency notes are issued in value beyond that of the actual reserved gold. This artificial inflation of currency by the authorities encourages prostitution of the state economy. The price of commodities becomes artificially inflated because of bad money, or artificial currency notes. Bad money drives away good money. Instead of paper currency, actual gold coins should be used for exchange, and this will stop prostitution of gold. Gold ornaments for women may be allowed by control, not by quality, but by quantity. This will discourage lust, envy and enmity. When there is actual gold currency in the form of coins, the influence of gold in producing falsity, prostitution, etc., will automatically cease. There will be no need of an anticorruption ministry for another term of prostitution and falsity of purpose.
Now read this excerpt from Ron Paul’s drubbing of the present Monetary System entitled “The Case for Gold” (available in pdf format: mises.org/books/caseforgold.pdf)
The Moral Argument for Gold
A monetary standard based on sound moral principles is one in which the monetary unit is precisely defined in something of real value such as a precious metal. Money that obtains its status from government decree alone is arbitrary, undefinable, and is destined to fail, for it will eventually be rejected by the people. Since today’s paper money achieves its status by government declaration and not by its value in itself, eventually total power over the economy must be granted to the monopolists who manage the monetary system. Even with men of good will, this power is immoral, for men make mistakes, and mistakes should never have such awesome consequences as they do when made in the management of money. Through the well-intentioned mismanagement of money, inflation and depression are created. Political control of a monetary system is a power bad men should not have and good men would not want.
Inflation, being the increase in the supply of money and credit, can only be brought about in an irredeemable paper system by money managers who create money through fractional reserve banking, computer entries, or the printing press. Inflation bestows no benefits on society, makes no new wealth, and creates great harm; and the instigators, whether acting deliberately or not, perform an immoral act. The general welfare of the nation is not promoted by inflation, and great suffering results.
Gold is honest money because it is impossible for governments to create it. New money can only come about by productive effort and not by political and financial chicanery. Inflation is theft and literally steals wealth from one group for the benefit of another. It is possible to have an increase in the supply of gold, but the historical record is clear that all great inflations occur with paper currency. But an increase in the supply of gold—presuming that it is not accomplished through theft—is quite different from an increase in the supply of irredeemable paper currency. The latter is a creature of politics; the former is a result of productive labor, both mental and physical. Gold is wealth; it is not just exchangeable for wealth. Today’s notes are not wealth. They are claims on wealth that the owners of wealth must accept as payment. No wealth is created by paper money creation; only shifts of wealth occur, and these shifts, although significant and anticipated by some, cannot always be foreseen. They are tantamount to theft in that the assets gained are unearned. The victims of inflation suffer through no fault of their own. The beneficiaries of the inflation are not necessarily the culprits in the transfer of wealth; the policymakers who cause the inflation are.
Legally increasing the money supply is just as immoral as the counterfeiter who illegally prints money. The new paper money has value only because it steals its “value” from the existing stock of paper money. (This is not true of gold, however. New issues of paper money are necessarily parasitic; they depend on their similarity to existing money for their worth. But gold does not. It carries its own credentials.) Inflation of paper money is one way wealth can be taken against another’s wishes without an obvious confrontation; it is a form of embezzlement. After a while, the theft will be reflected in the depreciation of money and the higher prices that must be paid. The guilty are difficult to identify due to the cleverness of the theft. They are never punished because of the legality of their actions. Eventually, though, as the paper money becomes more and more worthless, the “legalized counterfeiting” becomes obvious to everyone. Anger and frustration over the theft results and is justified, but it is frequently misdirected and may even lead to a further aggrandizement of governmental power.
Ideally, the role of government in a sound monetary system is minimal. Its purpose should be to guarantee a currency and assure that it cannot be debased. The role would be similar whether it is protecting a government gold standard or private monies. Neither the government nor private issuers of money can be permitted to defraud the people by depreciating the currency. The honesty and integrity of the money should be based on a contract; the government’s only role should be to see that violators of the contract are punished. Depreciating the currency by increasing the supply and diluting its value is comparable to the farmer who dilutes his milk with water yet sells it for whole milk. We prosecute the farmer, but not the Federal Reserve Open Market Committee. Those who must pay the high prices from the inflation are like those who must drink the diluted milk and suffer from its “debased” content.
The Coinage Act of 1792 recognized the importance of not debasing the currency and prescribed the death penalty for anyone who would steal by debasing the metal coins. Yet today the Treasury is closing the very office set up to assure honest money, the New York Assay Office. Though largely symbolic since 1933, this office is the most important office of the federal government if we are ever again to commit ourselves to money that cannot be arbitrarily destroyed by the politicians in office.
Throughout history, rulers have used inflation to steal from the people and pursue unpopular policies, welfarism, and foreign military adventurism. Likewise throughout history the authorities who have inflated have resorted to blaming innocent citizens, who try to protect themselves from the government-caused inflation. Such citizens are castigated as “speculators” out of ignorance, as well as from a deliberate desire to escape deserved blame.
Gold money is always rejected by those who advocate significant government intervention in the economy. Gold holds in check the government’s tendency to accumulate power over the economy. Paper money is a device by which the unpopular programs of government intervention, whether civilian or military, foreign or domestic, can be financed without the tax increases that would surely precipitate massive resistance by the people. Monetizing massive debt is more complex and therefore more politically acceptable, but it is just as harmful, in fact more harmful, than if the people were taxed directly. This monetizing of debt is literally a hidden tax. It is unevenly distributed throughout the population, one segment paying much more than another. It is equivalent to a regressive tax, forcing the working poor to suffer more than the speculating rich.
Deliberately debasing the currency for political reasons, that is, paying for programs that the politicians need in order to be reelected, is the most immoral act of government short of deliberate war. The tragedy is that the programs that many believe helpful to the poor usually end up making the poor poorer, destroying the middle class, and enriching the wealthy. Sincere persons vote for programs for the poor not fully understanding the way in which the inflation used to finance the programs brings economic devastation to those intended to be the beneficiaries.
Great power is granted to the politicians and the monetary managers with this authority to create money. Bankers, through fractional reserve banking laws, can create new money. Those who receive the newly created money first benefit the most and have a vested interest in continuing the process of inflation. These are generally the government, large corporations, large banks, and welfare recipients. Paper money is political money with the politician in charge; gold is freemarket money with the people in charge.
John Locke argued for the gold standard the same way he argued for the moral right to own property. To him the right to own and exchange gold was a civil liberty equal in importance to the liberty to speak, write, and practice one’s own religion. Free people always choose to trade their goods or services for a marketable commodity. Money is the most marketable of all commodities, and gold the best of all money. Gold has become money by a moral commitment to free choice and honest trade, not by government edict. Locke claimed the right to own property was never given to the individual by society, but that government was established to ensure integrity in contracts and honest money, not to be the principal source of broken contracts or the instigators of a depreciating currency. Gold is not money because government says it is: It is money because the people have chosen to use it in a free country.
Eliminating honest money—commodity money defined precisely by weight—is a threat to freedom itself. It sets the stage for serious economic difficulties and interferes with the humanitarian goal of a high standard of living for everyone, a standard which results from a free market and a sound monetary standard. For centuries kings have used the debasement of coins to raise funds for foreign and aggressive wars that otherwise would not have been supported by people voluntarily loaning money to the government or paying taxes. Even recently, inflation has been resorted to in order to finance wars about which the people were less than enthusiastic. Inflation is related to preventable wars in another way. As the economy deteriorates in countries that have inflated and forced to go through recession and depressions, international tensions build. Protectionism (tariffs) and militant nationalism generally develop and contribute to conditions that precipitate armed conflict. The immorality of inflation is closely linked to the immorality of preventable and aggressive wars.
Money, when it is a result of moral commitment to honesty and integrity, will be trusted. Trustworthy money is required in a moral society. This requires all paper money and paper certificates to be convertible into something of real worth. Throughout history, money has repeatedly failed to maintain trust due to unwise actions of governments whose responsibility was to protect that trust, not destroy it. Without trust in money gained by a moral commitment to integrity, a productive economy is impossible. Inflation premiums built into the interest rates cannot be significantly altered by minor manipulations in the growth rate of the supply of money, nor by the painful decreases in the demand for money brought on by a weak economy. Only trust in the money can remove the inflation premium from our current financial transactions.
Trust is only restored when every citizen is guaranteed convertibility of money substitutes into tangible money at will. False promises and hopes cannot substitute for a moral commitment of society to honest money—ingrained in the law and not alterable by the whims of any man. The rule of moral law must replace the power of man in order for sound money to circulate once again. Ignoring morality in attempts to stop inflation and restore the country’s economic health guarantees failure. A moral commitment to honest money guarantees success. In the 7th century B.C., the Greeks began the first coinage, striking silver into pieces of uniform weight. Greek mints were located in temples. The Athens mint was either in or adjacent to the temple of Athene. This was done for a purpose, for the temple marks were designed—and accepted—as evidence of the honesty of the coins. In Rome, the coinage began in the temple of Juno Monere, from which we get our word “money.”
Biblical law, which informs the common law and has shaped the legal institutions of Western Europe and North America, regards money as a weight, either of silver or gold, and stern commands against dishonest weights and measures were enforced with severe punishments. The prophet Isaiah condemned Israel because “your silver is become your dross, wine mixed with water.” Debasement of the money was very severely condemned. In his Commentary on the Epistle to the Romans, Martin Luther wrote, “Today we may apply the Apostle’s words [Romans 2:2-3] first to those [rulers] who without cogent cause inflict exorbitant taxes upon the people, or by changing and devaluating the currency, rob them, while at the same time they accuse their subjects of being greedy and avaricious.”
It is not surprising, then, given this background, that the Congress of 1792 imposed the death penalty on anyone convicted of debasing the coinage. Debasement, depreciation, devaluation, inflation—all stand condemned by the moral law. The present economic crisis we face is a direct consequence of our violations of that law.
Now read the following article posted Nov 17, 2011 at Zero Hedge: “The Entire System Has Been Utterly Destroyed By The MF Global Collapse” – Presenting The First MF Global Casualty.
All Glories to Srila Prabhupada.