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Financial Collapse Welcomed With Bold Return To Gold Standard

Federal Reserve Becomes Aware of the Fraud of Fractional Reserve Banking

Sunday July 27th, 2014:

WALL STREET, New York City -- Bucking the institutional inertia that has plagued orthodox economics for the better part of a century, daring individualist and WordPress blogger Kenneth Ulrich shocked world monetary authorities this week with his radical plan of returning to the gold standard. Foreign exchange markets around the world were shut down while investors tried to incorporate his startling insight, awaiting what is now widely expected to be a fundamental change in monetary policy.

"We were complete idiots," billionaire foreign exchange investor George Soros told the Financial Times. "What the hell were we thinking?"

The Federal Reserve Board was floored upon hearing word of Ulrich's cogent argument, which illustrated not only the folly of their desperate and ultimately self-defeating attempts at quantitative easing --- derived strictly from impeccable a priori logic, rather than shoddy abstruse mathematics typical of Ivory tower elitists --- but also their misguided notions of price stability and counter-cyclical policy, forcing them to recognize that they are the cause of the business cycles they were tasked with regulating.

With a volatile mix of fraudulent currency and fractional reserve banking acting as the core of the financial system, the Federal Reserve Board suddenly realized they were little more than criminals colluding with Wall Street. Inflating away the value of the currency at the expense of savings, with the insidious power of invisible taxation, the absurdity of their race to the bottom with other countries was overwhelming.

"We need to reconsider everything we have been doing," Federal Reserve Chairman Janet Yellen was quoted saying by the Wall Street Journal. "It turns out my whole life has been a lie. A horrible, huge Keynesian lie. Oh, God."

The striking proposal of the Irrefutable Praxis blogger, a self-described freethinker and anarcho-capitalist, was to revive the long forgotten practice of a pure fixed-rate monetary exchange based on gold, which no one had ever thought about since the last time it was abandoned for absolutely no reason in the Great Depression.

"Not to be confused with the dollar peg," Ulrich insisted, "Bretton Woods was socialism. It was impossible to rationally calculate anything."

Former Ayn Rand acolyte and Chairman Alan Greenspan remarked, "I guess the whole thing had really slipped my mind. I mean, we had all this gold backing our currency, obviously. But we never thought to just peg it and let the banks do whatever."

"It was once possible to bring your money to a bank and they would have to exchange it for a specified quantity of gold they held in reserve," Greenspan explained with some nostalgia of the antique practice of specie exchange, which was routinely suspended whenever expedient, "it served to discipline the whole system."

Now a rock star among academic economists, Ulrich suggested they start over from scratch with the timeless authority of The Theory of Money and Credit, first published by Ludwig von Mises shortly before World War I. Proceeding from sound reasoning rooted in the axioms of human action, his followers agree his method bears no resemblance whatsoever to narrative masquerading as logic.

"His masterpiece is the greatest work on monetary theory ever written," Ulrich said of the profound treatise on money and banking, which was written prior to the existence of the modern financial system, "it is absolutely indispensable to a sound understanding of economics."

With irrefutable deductions derived from first principles --- which are immune, he bragged, to empirical data --- you are inevitably led to a paleolibertarian minimalist state, or anarchy founded upon the natural law of voluntary contract rights. Which may or may not be an absolute monarchy with a self-interested sovereign, he noted, to keep focus on the long-run and prevent the rise of coercion.

But steering away from the road to serfdom begins with the "barbarous relic" of gold, using the famous phrase coined by Keynes, who Ulrich notes was "a third-rate economist and well-known sodomist."

"Without central banks being able to force interest rates below their natural level, thus causing credit bubbles in a purely exogenous manner," Ulrich argued as the incisive thesis of his viral blog post, whose basic premise was rejected even by the theory's co-founder, second-rate economist F.A. Hayek, "the free market would quickly equilibriate itself and liquidate malinvestment. Which is exactly what we need now with our exorbitant levels of leverage."

Paul Krugman threw his Nobel Prize in the trash upon reading Ulrich's blog, according to sources at The New York Times who witnessed his nervous breakdown, repeating "I was such a fool" and "it will only be worse later" over and over again in a traumatized daze.

His masterful argument did not even bother mentioning the backing of the currency by a fixed supply of U.S. government bonds after the Civil War --- or the seasonal havoc in interest rates that caused, or the existence of the European central banks, or the history of severe panics and bank runs from that period. It would only have stood as testament to the inescapable corruptive power of the state.

Nor was there any hint of the clearinghouse system that preceded the Federal Reserve, presided over by J.P. Morgan as the lender of last resort, which Congress regarded as the New York bankers creating money out of thin air for themselves at the expense of the rest of the country.

Decrying what he regards as foolish deviations from the sound laissez-faire principles this country was founded upon --- referring to the extensive state intervention in development in the early nineteenth century, as well as the institution of slavery, or the industrial espionage of New England textile mills, or the plutocracy of tariffs and subsidies, or perhaps the dispossession of land from indigenous populations, or maybe federal soldiers firing into crowds of striking railroad workers --- Ulrich insisted upon the undeniable superiority of free-market capitalism, which somehow both does and does not exist.

"Of course the government was founded by statists trying to profiteer by writing the laws in their own interests!", the hostile Ulrich scoffed defensively, "As Murray Rothbard said, it is always a spectrum! No system has ever been purely socialist or capitalist. That's how we know the good things that happen are the market, and the bad things are always the state!"

"Where would we be now if we had been true to our ideals?" Ulrich asked rhetorically, presumably imagining a world without limited liability and bankruptcy laws, mandatory accounting standards, labeling regulations, patents and copyrights, or government funding for infrastructure or research and development. With thousands of privately issued currencies in the same country, whatever that would mean, as well as privatized militias, courts, and debtors' prisons, liberty would reign with no social safety net other than charity.

Wildcat banking would somehow be restricted to holding full reserves of whatever, Ulrich argued convincingly, or else they would be committing fraud. It would not just be replaced by unregulated financial intermediaries engaging in feedback loops of speculative credit, completely solving the problem of boom and bust cycles forever. Without large corporations, concentrations of capital, and much lower standards of living, he added: "Imagine how much better things would have been by now. That would be freedom."

"What is most important is the perennial gale of creative destruction," he said, quoting the great Austrian economist Joseph Schumpeter, who was actually arguing for the irrelevance of price competition in markets dominated by oligopoly, "because that is the heart of capitalism."

Now recognizing they had no right to borrow and lend money on behalf of their citizens in the first place, world governments are expected to default on all debts and "let the chips fall where they may." With the imminent collapse of financial markets, speculators have begun hoarding metals for the upcoming liquidity trap, just as Keynes would have predicted.


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