24 June 2010

Mannkal Economic Education Foundation

For those goldbugs of a libertrian/Austrian economics bent (most seem to be, funnily enough) this organisation is likely to be of interest. Their mission:

We aim to strengthen the free market system in Western Australia and Australia, by promoting ideals of voluntary co-operation, choice, personal rights, limited government and responsible resourcefulness of individuals.

The Liberal Democratic Party may also be of interest. How can you argue with this Econ 101 on the WA branch's site:

9. Prices Rise When the Government Prints Too Much Money. When a government creates large quantities of the nation's money, the value of the money falls. As a result, prices increase, requiring more of the same money to buy goods and services.

10. Government Manipulation of Interest Rates and Money Quantity Causes Booms & Busts. Making money cheap (low interest rates) and abundant leads to excessive short term consumption which leads entrepreneurs to over invest in non-productive assets. Excessive demand for goods from consumers and entrepreneurs then raises the price of goods and money (higher interest rates) which results in the liquidation of non-profitable investments (mal-investments). The destroyed capital and associated production dislocation is the recession.


  1. More of my random thoughts.

    The Reserve Bank Act 1959 expressly prohibits persons and states from issuing 'a bill or note for the payment of money payable to bearer on demand and intended for circulation'.

    This would on the surface seem to negate any possibility of 'Real Bills' without federal legislation changes (which I expect are unlikely anytime soon).

    However, if you take the story back a step, where rather than 'pay bearer', a bill is marked to pay a nominated person, can you achieve the same effect? It's not as though the old problem where only a limited number of names can be recorded on a bill as it is transferred still exists in today's electronic world. Yes, it is still intended for use as 'currency' in a business context, but it is not nominated 'pay bearer' and as such is not covered by the law.

    In a similar way, negotiable cheques are not prohibited as they are not intended for circulation.

  2. LDP looks interesting. Apart from a couple of errors of definition which transform good general principles into poor social policy, I'd be happy to support them.

    Even with those, I think our system could do with a party along those principles, simply to balance the Greens out. It doesn't help our idea of what is centrist to have the Greens as our only alternative party of significance.

    No one is effectively making the LDP case in Australia, and it is one that needs to be made, regardless of ones position in the spectrum.

    If it didn't compromise my own access to occasional work, I'd join up just to see it progress.

  3. But a real bill is for gold, and as the government would never admit that gold is money, there should be no problem because the prohibition only uses the word money!

  4. Yes the theory is for gold. But before things go belly up, I think you'd get a lot more interest / participation in a real bill scheme if gold either wasn't involved or only involved as some sort of 'security'.

    Realistically, what we are talking about is negotiable trade credit. People understand that, and giving them a facility to sell 'trade credit' at a discount rate would I think be a winner for most. Adding gold into the system... may need to be done gradually as the benefit is not self evident at this stage and it would add an layer of complexity and confusion.

    Roll the bills first, transition to a gold basis later.

  5. Random query - does Perth Mint's processing time frame fit under the three month limit? May be an interesting avenue to explore in terms of paying your own suppliers. You guys are the 'goldsmiths' - pretty good place to start if you do want to involve gold in the system. It makes sense then, especially within the industry.

  6. In fact at the larger end of the market no one pays full cash for coins or bars - most deposit gold into our London accounts and only pay cash for the fabrication charge, so in fact gold as money is already operating.

    I am sure in a failing fiat currency it will not take long for our other cash based suppliers to start to request payment in gold.

  7. The jump there is still from 'payment in gold' to 'payment with a negotiable 90 day bill that will mature to gold', that can a) be sold on at a discount to realise the value immediately or b) be used as valid security for the issuance of a higher order bill.

    Which will require a market mechanism.