Below is a short commentary on mortgage rates I received from Jackarine Ludwig of Aggregated Awareness:

The Mystery Behind the Parabolic Yield Curve is a nice report by Gary Dorsch, an American chartist I follow. Rarely does Australia get a mention in his reports. It is good that he’s done so now. His charts a good, because they tie in with political & economic events.

Although I don’t see the rise in the Australian yield curve as a mystery. And whether Wayne Swan wishes to call it the fault of the ‘bond vigilantes’ in the US Debt markets or not is irrelevant. Fact is, China is the biggest foreign holder of bonds, both from the US and elsewhere, including Australia. It is obvious that they are the ‘bond vigilantes’ which Swan refers to.

Regardless, it makes perfect sense from a fundamental supply/demand equation, that more supply would reduce prices, so I don’t know what Swan is complaining about? Under his, Ken Henry’s & Kevin Rudd’s command, the Treasury is going into record setting hock mode for the foreseeable future. By 2012, this government has projected a total deficit of A$300 billion. You read that right, that’s billion with a B. What did he reckon was going to happen? Bond Prices to rise & yields fall when he was getting involved in issuing more bonds? HaHaHaHa…What a fool. It is obvious to anyone with a brain, that more Australian bond supply would reduce bond prices & subsequently increase yields. Nothing conspiratorial there Mr. Swan.

If you wish to follow the short & long end bond yields of Australia, US & UK, may I suggest this site. It is updated daily.

Now if you didn’t think bond yields are important, then you have obviously never borrowed any money or paid any taxes. If you have borrowed money or paid taxes, then I can say that the yields on 3 year Aussie Treasury bonds, sets the mortgage rate for 3 year adjustable rate mortgages, and the 10 year Aussie Treasury bond sets the rate for longer term mortgages, the 7 year, 10 year or 15 year fixed rate mortgages. And these yields are the interest paid by your tax dollars toward those creditors who have purchased these bonds, both domestic & foreign.

For mortgages, the normal rule of thumb is that banks add 2.5% to the price of these bonds to come up with the mortgage rates. Although lately, because of the rising bond yield, and the fact that it’s politically unpalatable to raise home loan rates at the moment, the banks have been copping the bond rate increases and not passing it onto retail borrowers. Therefore, in the past month, banks have not been adding 2.5% to bond yields to calculate their mortgages, but more like 1.7% for the 15 & 10 year fixed mortgages. But I read a story yesterday that said that CBA were looking at raising rates again, but having just gone to their site we can see that they haven’t raise them yet.

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“Reflexivity can be interpreted as a circularity, or two way feedback loop, between the participants’ views and the actual state of affairs. People base their decisions not on the actual situation that confronts them but on their perception or interpretation of that situation. Their decisions make an impact on the situation … and changes in the situation are liable to change their perceptions … . The two functions operate concurrently, not sequentially” (George Soros, “The New Paradigm for Financial Markets”, 2008, p 10).

“Many critics of reflexivity claimed that I was merely belabouring the obvious, namely that the participants’ biased expectations influence market prices. But the crux of the theory of reflexivity is not so obvious; it asserts that market prices can influence the fundamentals. The illusion that markets are always right is caused by their ability to affect the fundamentals that they are supposed to reflect. The change in the fundamentals may then reinforce the biased expectations in an initially self-reinforcing but eventually self-defeating process” (Soros, op cit, p 57-8).

Does George Soros know what he is talking about? The fact that he has operated successfully in financial markets for a long time suggests to me that he might have a few clues about how they work. But I struggle to understand him.

As is the case with many other problems of understanding, I think my problem in this instance relates to definition of terms. What does Soros mean by fundamentals? If a process is eventually self-defeating then it seems to me that this means that it is inconsistent with the fundamentals of the real world – i.e. it is inconsistent with what we know to be true about such things as resource availability, technology or human nature.

When Soros suggests that market prices can influence the fundamentals he may have something less fundamental in mind such as widely accepted perceptions of investors and credit providers about particular markets or the wider economic situation. It seems plausible that a widespread view that housing was a very safe investment, for example, could be reinforced if house prices began to increase more rapidly and if credit providers perceived that this made lending more secure. Under some circumstances that might, perhaps, result in a self-reinforcing process of increases in house prices that would eventually become self-defeating, for example because increasing numbers of people might decide that they would be better off renting rather than owning a house.

If this is what Soros means by reflexivity, does it help to explain the current financial turmoil? In explaining his super-bubble hypothesis Soros writes:

“The belief that markets tend toward equilibrium is directly responsible for the current turmoil; it encouraged the regulators to … rely on the market mechanism to correct its own excesses. The idea that prices, although they may take random walks, tend to revert to the mean served as the guiding principle for the synthetic financial instruments and investment practices which are currently unravelling” (Soros, op cit, p 102).

It seems to me that the second part of that statement, relating to synthetic financial instruments, may help to explain the current financial turmoil. With the benefit of hindsight it is apparent that the world economy is suffering from, among other things, the development of a self-reinforcing belief system which led many financial firms to over-value synthetic financial instruments.

However, the first part of Soros’ statement doesn’t make sense. Regulators have not relied on the market mechanism to correct its own excesses. The current turmoil is partly a consequence of a history of financial firms being bailed out by regulators on the grounds that they were too big to be allowed to fail. George Soros is on much firmer ground when he recognizes that most reflexive processes involve an interplay between market participants and regulators (p77).

Hopefully, the regulatory environment that emerges from the current turmoil will recognise that participants in financial markets are human. It should not surprise anyone that when financiers are given incentives to behave imprudently they tend to act accordingly.

On Wednesday the Institute for Supply Management published its manufacturing report for June 2009. It’s overall index (PMI) bumped up for the sixth straight month and stood at 44.8%. The reading suggests, “the overall economy grew for the second consecutive month” in June.

The reading also shows the overall manufacturing sector still on track for a return to growth in the fourth quarter of this year.

Norbert J. Ore, chair of ISM’s Survey Committee was quoted as saying “Manufacturing continues to contract at a slower rate, but the trends in the indexes are encouraging as seven of 18 industries reported growth in June. Most encouraging is the gain in the Production Index, which is up 12.1 percentage points in the last two months to 52.5 percent. Aggressive inventory reduction continues and indications are that the de-stocking cycle is at or near the end in most industries.”

The overall manufacturing trend continues to collorate well with the several manufacturing graphs we’ve published and tracked earlier in the year.

With the June ISM index we have yet another concrete indictor that recovery has begun for this cycle.

Sometime in the next couple of months The Federal Government is going to give the state of California a lot of money. After lavishing more than a trillion dollars on Banks, Insurers and Auto Companies, there is a 0% probability that the government will sit back and let the largest state fail.

There real question is how do we go about propping up California. Whether we like it or not, California will set a precedent for the rest of the country. Believe it or not, California is not the only State struggling to keep its head above water. Congress and the administration need to have a strategy ready before Arnold comes crawling cap in hand to Washington.

Rather than putting together an ad-hoc plan for California, we should develop a national strategy for dealing with insolvent states. The plan that I am proposing is simple, non-intrusive and will ensure that Federal Government gets back every penny that it spends bailing out the states.

Federal loans should be made available to any state that chooses to accept them. In exchange, the state will be required to levy a 1% sales tax, whose revenue would be directed to the Federal government until the loan is repaid.

While, no one would enjoy paying the extra tax, it wouldn’t be nearly as devastating as the massive budget cuts currently facing states across the country. By securing a dedicated revenue stream, the loan would be risk free for the Federal Government. Furthermore, enacting a national policy would assure investors that state bonds were a safe investment, reducing borrowing costs for every state.

The greatest advantage of this plan would be in avoiding the political circus of negotiating a special bailout for every state in need. My plan would not solve the underlying problems facing California, but that is intentional. It is up to voters and politicians in California to find a long term solution to the state’s budget crises. Allowing Washington to interfere in the fine details of the State budget would be far worse.

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The Federal Reserve has embarked on a perilous journey of quantitative easing.  On 18 March 2009 I predicted the Federal Reserve Will Fail With Quantitative Easing.

In the June 2009 Special Issue from Sprott Asset Management the billionaire Eric Sprott declared, “The Federal Reserve’s policy of Quantitative Easing is failing.  The US budget is ludicrous, spending is out of control, spending promises are out of control, the world knows it – and we know it.”  The policy of Global Quantitative Easing is going to result in significant additional turmoil and destruction of wealth.

BUDGET DEFICIT

The Obama administration is robbing other people’s wealth and spending it like a starving laughing hyena scavenging the rotting pelt of an almost deceased diseased wildebeest.  As Mr. Sprott observes the projected deficit is $1.845T and must come from foreign and international holders, mutual funds, state and local governments, the Federal Reserve or other investors.

There have been plenty of public comments by various officials about avoiding the FRN$ as Resurgent Russia Is Discharging Dollars and Brazil Is Bucking The Buck.  China would rather have physical gold bullion such as the entire International Monetary Fund hoard.

Mr. Sprott concludes his analysis with “We have concluded that the majority of traditional buyers of US debt will be unable to increase their purchases this year”.

As I wrote about 9 June 2009 in Current Dollar Currency Controls “There is not enough real capital, private liquidity, to sponge up all the bonds the incontinent government is selling; 10-20x per month more than a few years ago.”

So who or what holds all these government liabilities that are spewing into the cesspool that constitutes the modern financial markets?

Well, 42% of US debt is with ‘Intergovernmental Holdings’.  As Mr. Sprott teases out, “The debt holdings are held in accounts for the various trust funds the US manages for its future obligations – the largest of which are set aside for Social Security and Medicare.”

MASSIVE INFLATION

Inflation, under the traditional definition in the Austrian school, is an increase in the currency supply.  The adjusted monetary base has exploded.

Some economists, either ignorantly or worse the deliberate psycho-sociopathic court economists like Paul Krugman and Greg Mankiw, assert that inflation is increased prices.  But just as wet streets are not rain so likewise rising prices are a consequence of inflation but not inflation.

Argentina, a country fraught with political risk, is politically manic depressive like California.  The Argentine economy continues evaporating like the dusty farmland of Salta and crime is escalating.  In the recent June elections Argentine President Cristina Fernandez de Kirchner lost significant political capital.  Her party’s legislative advantage disappeared and they retain only 36 of 72 Senate seats and her husband, former Argentine President Nestor Kirchner, lost his parliamentary seat.  This vexed country is a likely template for America’s future.

Like a snake striking a clueless mouse so likewise a currency crisis crumbles the businesses and fortunes of the unprepared with blistering speed.  Not only has there been massive inflation but  political risk in the United States, such as the new policy of preventative detention, is increasing and evaporating Treasuries.

There are few safe havens to consider and many begin to wonder how to buy gold or how to buy silver.  But perhaps the best investment is a 72 hour kit and three month supply of food; eat what you store and store what you eat.  Food is a great investment, not subject to counter-party risk, a natural hedge against inflation or hyperinflation and in most cases not subject to capital gains taxes or exchange controls.

PROMISE BREAKING

The United States has made too many promises and will be unable to perform.  Like a lame geriatric ward hosting a sprint race the United States is delusion about its own abilities and capacity to produce wealth.  The Federal government is a giant wealth vaporizing machine and for the safety of its citizens and the world its destructive force needs to be capped by the Constitution and its pieces traded off by the 10th Amendment.

This can be started by asking what is a dollar?  Another step would be to begin using digital commodity currencies, like GoldMoney, as an alternative to the current financial system with their destiny as an eventual substitute.  There can still be regeneration instead of repression.

But like a beautiful tapestry of freedom, peace and prosperity that hides a cement wall; the derivative illusion that has fooled the American people for four decades with their current standard of living is being viciously ripped away revealing the dark, dank cell of tyrannous government.  The irony is the politicians are taking actions not to live themselves but to ensure their human livestock dies.  The livestock is rapidly realizing this is not the hope and change they were looking for.

This massive real estate and stock market crash was foreseen and written about in 2004 by Robert Kiyosaki in Prophecy.  While his book made startling predictions on a massive scale I think they were still too small.

CONCLUSION

The massive budget deficit is causing the United States’ balance sheet to hemorrage cash.  To fill the gap they must issue an immense amount of debt.  The private market cannot sop it all up so inflation has exploded along with the policy of global quantitative easing.  America’s wealth generating capacity is being rapidly destroyed as millions of Americans lose their jobs and civil liberties.  The self-feeding cycle of budget deficit, declining dollar, job losses, budget deficit, etc. is accelerating.

This is neither an ordinary recession nor a generational depression.  This is The Great Credit Contraction and it has only begun.

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Further to my post of 6 May on the book Sutton, A.C., The war on gold, 1977, ‘76 Press, California, USA, below are some extracts from the book I’ve made for my personal reference:

Page 59: It is this disciplinary function of gold that is irksome to politicians and managed-economy bureaucrats and academicians. Politicians are always eager to buy votes with promises of perpetual prosperity, and bureaucrats are happy to go along to expand their own empire building.

Page 60: Of course, a market clearing price for gold (assuming a 100 percent cover for all present paper debts), might suggest a price of $800 to $1,000 an ounce. This would be a pleasant windfall for those with the foresight to own gold, but it would mean psychological devastation for those who have built their careers on the philosophy of helping everyone to live at the expense of everyone else. The latter need to conduct and anti-gold crusade for their own self-preservation.

Page 111: Defeat turned to disaster between November 1967 and March 1968, as the U.S. lost a staggering $3.2 billion from its gold stocks. By this time other European central banks followed the French example and told the United States that further defense of the dollar would require U.S. gold; none of theirs would be available. The end came on March 14, 1968, the day the Gold Pool lost 400 tons of gold to private buyers. The loss of 20 percent of the U.S. gold stocks within five months finally galvanized the Treasury into action. At the request of the Federal Reserve Bank and the U.S. Treasury, President Lyndon Johnson asked the Bank of England to close the Gold Pool operation.

Page 122: Certainly, a paper system will not last in open competition with gold and silver coins. It is recognition of Gresham’s Law that forces the U.S. Treasury to be vehemently against the issue of any gold coins, even and innocuous gold bicentennial memorial coin. While at the same time the Treasury must keep a damper on the price of gold in the market place.

Page 143: The remaining question is not whether the debt structure will collapse, but when. What do we mean by “collapse”? H.A. Merklein defines collapse as a “combination of unemployment and inflation so rampant that the market ceases to function effectively.” (“Can the U.S. economy collapse?” World Oil, December 1975.) Merklein suggests that, given a 50-percent inflation rate, “public confidence in government issued fiat money tends to break down … and barter begins to replace the money economy.” According to Merklein’s calculations, with a ten-percent unemployment rate, collapse could begin at 30-percent inflation - a figure exceeded by the United Kingdom, Argentina, and Italy in 1975. Even granted the existence of many unknowns, Merklein’s evidence does suggest the early 1980s as Doomsday for the United States.

Page 151: It was, in effect, a declaration of bankruptcy. When President Nixon closed the gold window he did not, as he said, demonetize gold. On the contrary, he demonetized the dollar! Regardless of his words, his actions emphasized the premium value of gold over fiat dollars. The propaganda war on gold by the U.S. since 1971 has been designed to prevent this single fact from penetrating the consciousness of the American public. When the real significance of the demonetization of the dollar is fully grasped by Americans, the result will be monetary panic, probably followed by the collapse of the debt pyramid.

Page 153: Then, on December 31, 1974, the United States removed the official ban on gold ownership by U.S. citizens. At the same time it began a massive internal propaganda campaign, with the help of an unquestioning media, against gold holding.

Page 157: The current battle – one the U.S. Treasury must win or go down in disgrace – is to prevent significant numbers of American investors from acting on the paper-gold equation. At all costs the American citizen has to be persuaded that paper dollars are at least equal to, if not better than, gold.

Page 159: The Treasury, the Federal Reserve System, and the Congress are under the illusion that they can decree what is money. They cannot. They can legislate legal tender, but that is not necessarily the same thing. Money is what people and countries will accept in exchange for goods and services. This may, or may not, be paper dollars. Historically, as we have seen, money has been gold, silver, copper, and even iron. These currencies have led to stable monetary systems. Money has also been leather, mulberry leaves, and rice paper; today it is wood pulp and ink and the present debt system. Historically, the latter have been the unstable systems. Why? Because at some point holders of these latter moneys look for something of intrinsic value as a store of wealth, and the find none.

Page 172: In early 1975 only about ten percent of South Africa’s gold output was used to mint the Krugerrand, the one-ounce coin that is held mostly by individuals, not central banks, as a hedge against inflation. By the end of 1975, 25 percent of the South African gold production entered the Krugerrand presses. As a result, significantly less gold reached the world bullion market. Test marketing promotion of the Krugerrand in Philadelphia, Houston, and Los Angeles had “staggering” and “incredible” results, according to coin dealers. A major New York advertising agency, Doyle, Dane, and Bernback, was hired by the Krugerrand distributor, Intergold, to promote gold coins directly to the America public, which previously had been exposed soley to the bear-market tactics of the U.S. Government. The response was truly “staggering.” By the end of 1975, Krugerrand sales were running at the rate of 5,000,000 coins annually – an amount equal almost exactly to the total proposed IMG annual sale for 1976.

Page 180: The Treasury plan obviously is to maximize uncertainty in the market to depress price, and it cannot maximize uncertainty by regular sales. It can do so only by random sporadic actions at critical market turns, for example in deflationary periods accompanied by maximum propaganda.

Page 200: The legalization of gold in the United States in 1975 was probably not a withdrawal from coercion but an interim effort to make the propaganda war on gold more credible. History suggests that gold will once again be made illegal in the United States and subject to arbitrary seizure by a police-state apparatus. Looking back over monetary history, we see that gold has always been prominent as a protector of individual sovereignty. Private gold ownership is inconsistent with the aims of dictatorship; a war on gold is a necessary concomitant to centralized political power. Wars and fiat currencies have always gone hand in hand.

Page 203: As we look into the future (in competition with the professional prognosticators), the domestic war on gold looks like this: there will be an increasing realization by the public that the ratio between paper-debt and gold in inexorably shifting in favor of gold. That public confidence is the all-important requirement to keep a paper-debt money system afloat . . . and this confidence is eroding. Surges in confidence-erosion will account for short-run increases in the price of gold, while for intermittent periods the government will regain some public confidence; when this occurs, gold will settle back to its approximate long-run ratio to paper-debt units. At some point, however, there is a distinct probability of panic – if debt holders see the debt pyramid collapsing or even anticipate its collapse. Particularly this will be true if there is general realization that paper assets are actually someone else’s debt and are inherently worthless. However, it is important to note a distinction between “realization” and “action.” Investors may “know” the pyramid is illiquid and in danger of collapse; they may not “act” on this knowledge. The herd instinct suggests that only a few will bail out in time; the majority will act in panic, too late.

Some commercial real estate business is stirring again.

The deals seem to be starting small, but never-the-less they are happening.

“Until a couple of transactions settled, you didn’t have a floor in the market,” says Jeff Pacy, a broker with Preston Partners in Lutherville, MD.

According to Pacy and other commercial real estate insiders outside of Baltimore, they are seeing a “sudden burst of business.” For commercial property under $10M, the pricing now seems to be right. Institutional buyers are also treading softly back into commercial property from the sidelines.

Sensing the recovering markets, those investors see demand growing and bargain basement prices says Jonathan M. Carpenter, vice president with Colliers Pinkard’s Investment Services Group. Some businesses are also looking to save some money by trading their monthly rent for a mortgage payment that they can finance.

And their bankers seem to be willing to lend again. Scott Nicholson, executive vice president and chief banking officer at Columbia Bank says that his bank is more likely to lend to owner-occupied commercial tenants as those loans tend to perform better over the long run.

You may recall additional federal programs that help small business. The U.S. Small Business Administration’s 504 loan program is designed to aid small businesses in getting the money they need to buy properties for their operations. Back in March, President Obama announced that the U.S. Treasury would invest $15 billion with the Small Business Administration (SBA) in order to further boost the secondary markets for such small business loans.

So we’ve, recently we’ve seen:

1. Homeowners with more manageable monthly payments
2. Housing starts bounce up
3. The number of residential foreclosures begin to fall
4. Jumbo mortgage activity increasing
5. Pending home sales jump up
6. Existing home sales rising

And now commercial real estate is showing recovery signs.

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For the first time in 10 months the Tenth Federal Reserve District is reporting factory production that is now net positive. The Tenth Federal Reserve District encompasses Colorado, Kansas, Nebraska, Oklahoma, Wyoming, northern New Mexico, and western Missouri.

The Kansas City Fed released its manufacturing report on Thursday and claimed that “manufacturing activity showed signs of a rebound in June.” The report also shows that firms in the region have net positive expectations for future factory activity.

The net percentage of firms reporting month-over-month increases in production in June was 9, up from -3 in May and -6 in April. The positive production netted increases in both durable and non-durable-goods production plants.

(Source: Kansas City Fed - click to enlarge chart)

Additionally, over half of companies in the region are now reporting satisfaction with their inventory levels.

Large increases also registered in future factory activity indexes from May to June. The future production index rebounded from 1 in May to 13 in June. Sub-indexes for future shipments, new orders, and order backlog all jumped up.

This positive report from the 10th district follows a string of positive manufacturing reports from across the country. Last week the Philly Fed reported its highest activity reading since September 2008. On Tuesday the central Atlantic regional Fed report showed manufacturing advancing considerably faster in June over May. And a week from Monday there was good news lurking under the June headlines for NY’s empire index.

There is a fascinating article in The Economist about how the world of derivatives has shaped up through the crisis.

I often encounter misconceptions about hedging. The one line that summarises the issue is this: The job of a hedging strategy is to combat extraneous economic exposure. Let me focus on currency exposure as an example, though the basic idea works in all aspects of hedging. A good currency hedge is one which neutralises the effect of currency fluctuations on the NPV of profit.

I have seen four major mistakes in the way people think about hedging:

1. Hedging seen as a way of eliminating currency risk in the translation of direct import/export proceeds. This is wrong because it’s an incomplete picture of what happens to the profits of a company when the currency moves. A lot of finance practitioners are confused on this subject, particularly in India where RBI rules have had mistakes on these things for decades. (While RBI staff made mistakes, that was no reason for currency hedging consultants and such like to also make the same mistakes).
2. Hedging seen as a profit centre. This is wrong because the job of hedging is to eliminate exposure of the NPV of profit, not to make money. Suppose a company embarks on a currency hedging program. Half the time (ex-post) the hedge will appear to have made money and half the time (ex-post) the hedge will appear to have lost money.
   For a company which has very big currency exposure, ex-post, half the time there will be massive cash losses on the currency hedge. If top managers, directors or regulators do not understand this correctly, it’s easy to jump into complaints about `massive losses on derivatives trading’. This emphasises the importance of seeing a hedging strategy and the economic exposure in an encompassing way. A person who closes out one element of an overall hedging strategy because that’s generated a lot of cash outflow in recent days is, well, wrong.
3. Hedging away the core sources of profit. A refinery is a bet on the `crack spread’, the gap between the price of crude oil and the price of petroleum products. The shareholder and owners of a refinery are inexorably speculators on the crack spread. If you don’t believe that this spread will do well, don’t build a refinery. For a refinery, this is core business risk, this is the source of profit. It is not an extraneous economic exposure. To try to hedge away this exposure is not correct.
4. Insecurities about imperfect hedges. Every now and then, a bright person complains that a proposed hedge has a substantial basis risk. The only perfect hedge is found in a Japanese garden. All realworld hedges are imperfect. The useful question is: Is an imperfect hedge better than no hedging?

The Economist article points out that with the upsurge in volatility, demand for derivatives has gone up, not down. Once most large firms of the world start doing balance-sheet scale hedging, derivatives positions will be much larger than they are today. The world needs bigger, not smaller, derivatives markets. We stumbled on our way to that world, and now have to figure out once again how we are going to get there.

In the world of OTC derivatives, firms face credit risk owing to contracts with banks and banks face credit risk owing to contracts with firms. In the good old days, these risks were mostly ignored, and OTC derivatives looked more attractive than exchange-traded derivatives (where posting collateral is unavoidable). Now, both sides are getting wary about what this involves. Banks have started charging higher prices for bearing this risk (either though a bigger price or through collateral requirement), and banks have started refusing to have exposures against certain firms. Both these phenomena should enlarge the footprint of exchange traded derivatives. All this flows logically but it was interesting seeing descriptions in the article about things actually shaping up this way.

On 25 June 2009 I was invited to the Cafe Libertalia to speak at a book club where I was given the latitude to choose the book for discussion.  I picked What Has Government Done To Our Money And The Case For A 100% Gold Dollar by Murray Rothbard. This book is an easy to read foundation for the student of the Austrian school of economics.  Therefore, I think everyone should get and read a copy.

What Has Government Done To Our Money is 119 pages while The Case For A 100% Gold Dollar is 61 pages.  It is printed on archival quality acid-free paper and has a sleek cover.  This book makes a great addition to any library.

WHAT HAS GOVERNMENT DONE TO OUR MONEY

This is a well done objective monetary history.  It discusses how money developed, the rise of fractional reserve banking and the constant meddling by government in money and currency.  A key reason governments meddle in the money and currency markets is because it is a source of funding.

The reader learns some some basics of history, government and economics such as the development of monetary names, benefits of money, a short discussion on legal tender application and an entire part on The Monetary Breakdown of the West.

THE CASE FOR A 100% GOLD DOLLAR

This is a persuasive essay on why a 100% gold Dollar should be adopted.  This essay originally appeared in the out of print and hard to find In Search Of A Monetary Constitution by Leland Yeager and published in 1962 by the Harvard University Press.  While the arguments Rothbard makes are sound; I do not really agree because of advances in information technology and monetary evolution over the past 47 years.

Four and a half decades ago there was no Fandango, online checkin for airplane flights, etc.  So likewise there have been advances made in monetary application and I am of the opinion that private digital commodity currencies, like GoldMoney, provide the most efficient solution to the monetary chaos the world has found itself in.

WHO THIS BOOK IS FOR

What Has Government Done To Our Money And The Case For A 100% Gold Dollar by Murray Rothbard is a quick and easy read divided into two main portions.  I think the objective presentation of monetary history is a good read for anybody.  The persuasive essay is a good read to for anyone who wants to stimulate their analytical capacities but keep in mind it is obsolete.  Therefore, I think everyone should get and read a copy of this book.

You can get a free digital copy from the Mises Institute or purchase a physical copy from Amazon.

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