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Authored by Clive Maund via CliveMaund,com,

In case you haven’t noticed, we now live under tyranny, and over the next several years, thanks to the unquestioning zombielike submission of the masses, it is set to get a whole lot worse.

When this whole bizarre virus plandemic, or scamdemic, started to gather momentum I instinctively knew that something wasn’t right, that the official explanations didn’t add up, and that society at large was “being played” by those in power with an agenda. To anyone with even a modicum of real intelligence, the whole thing stinks of an elaborate plot.

So, driven by natural curiosity, and being a person who would rather know the truth, however awful, than go around with blinders on, I embarked on a quest to find out what was really going on, what was really behind all this, and for what it’s worth I am going to share my findings with you today.

Now I understand that there are those amongst you who are programmed by the system to label anyone who expresses views that deviate from what is portrayed as normal as a “conspiracy theorist”. If you are one of those you may want to click out now, but before you go, I want to point out to you that what I am writing about now, what we are living through, is not conspiracy theory, but conspiracy fact.

Let’s start with the timing. Why was the virus, or bioweapon if that’s what it is, released when it was? The answer to that is simple; after years of exponentially increasing fiscal profligacy, debt across all levels of society had risen to wild unsustainable extremes so that the world economic system was teetering on the verge of collapse – witness the Fed’s emergency interventions in the repo markets last Fall. If the system was about to collapse those in power didn’t want to take the blame for it, so they needed a scapegoat, enter the virus – “Oh it wasn’t our mismanagement that caused the system to implode it was the virus”

The old adage “Never let a good crisis go to waste” has been embraced with gusto by those in power. For decades, in our relatively free societies, they have had to content themselves with economic plunder – granting themselves inflated salaries and bonuses and stock options and positions on boards etc. but this virus scamdemic has presented them with the opportunity to wield what despots always crave which is raw, unbridled power over people – and the more of it they wield the happier they are. The scamdemic has presented them with the opportunity to implement a totalitarian regime and not just in one country or even a geographical region but for the first time ever over the entire world, and this will have one distinct advantage over all previous totalitarian regimes which is that there will be nobody left to fight back. The window of opportunity for the ordinary citizen to prevent this happening is already rapidly closing and if the current apathy, indifference and conformist stupidity of the masses continues, as it looks set to, then their fate will be sealed as they become entombed in a global gulag.

So who or what are the immensely powerful plutocratic forces that are intent on bringing about this global technocratic totalitarian regime? The first thing to understand is that all of the widely accepted leaders of society such as celebrities, the clergy and politicians are all marionettes – puppets – if they do not speak and act in accordance with the aims of the true masters of society then they are marginalized or replaced. Special mention at this time must go to spokespersons for the medical profession, who must of course be pro-vaccine. Alright, so who are they? Ask yourself a simple question – who has the power to create unlimited wealth for themselves and their favored associates at the touch of a few keystrokes? – you’ve got it – the Central Banks, who pass on the tab for their profligacy to society at large by steadily eroding the purchasing power of money. Thanks to the dollar being the global reserve currency, the Federal Reserve is the King of them all and calls the shots – all other Central Banks are subservient to it – Greg Mannarino even goes so far as to say that the Federal Reserve was behind the virus, and it is certainly easy to see why this might be the case. The Central Banks and the leading largely faceless men within them are the true Masters of the world, the real shadow government, and it is they who are behind this drive towards a global totalitarian society.

What are their goals? – they are already enormously wealthy so more money is not their primary objective. What they crave is more power – absolute power over people and their lives, that is what drives them. They are intent on creating a neo-feudal two-tier society, where they are the top tier – fabulously wealthy and wielding absolute power over everybody else who will exist – if they are permitted to – as an army of servants. This is of course a big reason for the lockdowns, to destroy the independent middle class and their businesses so that they then have to work for the large corporations owned by the elites and are thus more dependent on their Masters, as are those living on meager handouts. It is sad to witness businesses like restaurants struggling to survive doing things like spaced out tables or takeout in the brief interlude before more brutal lockdowns that are designed to finally wipe them out completely.

How is it possible to paralyze with fear billions of people with fabricated and lurid stories about a killer pandemic into giving up their basic rights en masse and submitting to being treated like farm animals? Simple – you control their inputs via the mainstream media. Ordinary people are not called “the masses” for nothing – they are largely ignorant, stupid and gullible, that’s why, instead of seeking to educate themselves about what is really going on, they fritter their lives away watching soaps, video games and following the lives of celebrities etc. By owning and controlling their favorite media, you control their limited thought processes and they are susceptible to any propaganda. Basically, by the skillful use of propaganda you can get the masses, who are about 70% of the population, to do anything you want, and they can then exert peer group pressure on more thoughtful individuals to conform, a classic and glaring example being the wearing of face masks, which is State sanctioned collective paranoia, and if that doesn’t work they are forced to conform and wear them by means of fines or imprisonment. Here it is worth noting that the most powerful institutions in the world, especially the banks, media and Wall St are heavily peopled by “the race who cannot be criticized”.

Virtually all media – newspapers, TV channels, radio stations, and now most websites are controlled by the same plutocratic forces, which is why you have to be careful what you say on Facebook and Twitter or they flick the switch and banish you. This is why, once the scamdemic started, the masses were bombarded with wall to wall 24-hour scare stories about the virus, involving lies exaggeration and distortions on an epic scale, with nonstop repetition drumming it into them. They foolishly and unquestioningly sucked it all up and submitted to being locked up in their houses for months, and now have to wear diapers on their faces to establish their credentials as dumbed down fearful submissive sheep.

When you confront them with this, they say “Oh, but people are dying!” (of the virus) to which the correct response is “So what? – people are dying all the time, of flu, old age and umpteen other illnesses” Then they try to quote alarming stats at you, if they remember them, not realizing that all these case numbers are gross exaggerations caused by phony test results and anybody who dies of anything being labeled as a Covid-19 death. On the television they quote death stats at you, intended to alarm, but when you do the basic math and compare the deaths, even if you take the grossly inflated figures at face value, and compare them to the total population of the country in question you realize that the percentage of people supposedly killed by the scamdemic is tiny, usually of the order of 0.5% maximum and usually much less, which is hardly the order of the Black Death, which killed 1 in 3. One tactic that they are currently using in the US is to do huge numbers of tests to bump the case numbers up in order to justify more lockdowns. These lockdowns are never justified in any case, because in a normal society you lock up the sick people, not the healthy people.

All of the draconian measures put into place around the world that are purportedly employed to protect the population from the virus, are actually intended to damage the immune systems of people by design, in order to make them weaker and more susceptible to illness later – and don’t forget if they are admitted to hospital with the flu, it will be labeled as Covid-19 to ramp the stats. Thus we have enforced house arrests, the lockdowns, which are designed to stop people getting out and taking air and exercising and spending time in the sun, which is important for the immune system, the masks, which restrict respiration, the social isolation which is intended to make people anxious and fearful and damage the social fabric. Plain common sense dictates that the right way to deal with a virus epidemic, especially one that only kills a small percentage of the population is to carry on with normal life and let it do what it will. Those who catch the virus will mostly recover, especially the young, and will develop some immunity. Another reason for flexing their muscles with the curfews, the lockdown orders and the mandatory mask wearing is to have the population accustomed to getting down on their knees before the power of the State as a warm up to full Martial Law.

There was and is absolutely no reason to deny people access to beaches or parks, as in this drone photo of Siesta Key in Florida on a sunny Summer day when the car park on the left is normally full. The reasons for doing so are malevolent – to damage the health and wellbeing of citizens and to demonstrate the power of the State…

This picture is a screen grab from the entertaining video Mavic Mini explores quarantined beach Siesta Key.

One of the big reasons that the NWO (New World Order) is determined to isolate people is to stop them gathering in groups the better to prevent the interchange of ideas, which might result in large numbers of people gathering and deciding to overthrow their common enemy, namely the Central Banks and the government, especially when the implosion of the debt bubble and / or hyperinflation renders them destitute and desperate – the NWO are thinking ahead. The storming of the Bastille in Paris in 1789 could not have happened if crowds had been prevented from gathering.

It’s very easy by selective editing and exclusion to control the minds of young people like this, whose literary education largely comes from Facebook and Twitter, many of whom don’t have a thought in their heads that wasn’t put there by someone else…

There are 3 key planks that the New World Order are going to use to impose their planned draconian totalitarian matrix on the peoples of the world:

1. a cashless society,

2. forced vaccination,

3. and forced mask wearing and these plans are already well advanced and already being imposed in the case of the mask.

The four main reasons that the NWO want to implement a cashless society are as follows.

One is that the banks can take a cut even of the smallest transactions.

Another is so that no-one can enter into financial transactions that are not subject to the scrutiny of the State and therefore they cannot escape the taxation dragnet.

Still another is to prevent bank account holders from withdrawing cash and possibly triggering runs on banks,

and the fourth big reason is that banks will be free to impose negative interest rates, which is a polite way of saying that they are going to plunder your accounts, and if they are in a really bad mood they can resort to bail-ins – outright theft from customers’ accounts.

A cashless society therefore means that the banks have absolute financial power over you and your life. No wonder they want to introduce it!

A big reason for imposing draconian restrictions on the population now and going forward is to coerce more people into accepting being vaccinated. The vaccination certificate will be presented as a passport to a relatively normal life. Initially it will be voluntary, and coercion will work with many people as they will not be able to do things like board planes and even eat at restaurants without the required certificate of compliance. Eventually, those who don’t comply who will wind up being a minority will be subjected to more extreme coercive measures bordering on being pinned down and given a jab. The propaganda machine is already going full bore using reverse psychology, by suggesting that initially there might not be enough vaccinations to go round, and that if you are “fortunate” you will get on the list to receive a shot. What the poor unfortunate fools lining up for these shots don’t realize is that these vaccinations will be full of all kinds of unpleasant gunk, some of which could be DNA altering, and they can at any time use these vaccinations to conduct selective culls – Bill Gates has made no secret of the fact that he wants to wipe out a large number of people. Another aspect of this vaccination scam that should be considered is that these vaccines are being fast tracked at such a rate that adequate safety checks cannot and will not be made and therefore they should be regarded as dangerous, and this of course may be due in part to the huge windfall profits in prospect for the companies involved.

The mask is the supreme symbol of the triumph of the will of the NWO over the mass of the population. It is rich in symbolism. To start with it doesn’t work, because virus particles are so small they go straight through it. The purpose of the mask is to demonstrate that the iron will of the State prevails – it is at once a symbol of compliance, a symbol of conformity, a symbol of submission, a negation of individual personality, since people can’t see your face, and best of all, through impeding normal respiration it damages your immune system and makes you more susceptible to catching the virus! The few thinking people who try to refuse to go along with this insanity will in time come under increasing attack from the majority, and are already being subjected to fines. CNN is airing pro-mask propaganda which goes something along the lines of “not wearing a mask says something about the person not wearing it” which is clearly an incitement to discrimination and possible violence. Actually they are right in a way – it says that he or she is not a mindless submissive sheep.

The 3 measures described above constitute a full frontal assault on the basis human rights of citizens.

• The cashless society makes citizens automatic victims of userers – the banks,

• forced vaccination makes them victims of Big Pharma racketeers and puts them at risk of death through eugenics programs,

• and the mask is an attack on one of the most basic human rights of all – the ability to breathe freely.

Taken together they should give you the clearest indication of what the gangsters behind this intricate and comprehensive plot have planned for humanity – and they are only just getting started.

I have told you on numerous occasions that democracy is an absurd self-defeating concept. The reason is simple – you cannot have a system where ignorant stupid people have the same vote as intelligent discriminating people, who they vastly outnumber. The result is mob rule and politicians getting voted into office not because they are conscientious individuals who will work for the betterment of the lives of their constituents, but because they kiss babies and promise the mob the Earth. The result is the current unsavory collection of shameless gangsters and opportunists who now run Western societies and who milk their constituents on the one hand while serving as compliant stooges for their NWO Masters on the other.

Thus, true democracy can only be a temporary state of affairs and must cycle through to tyranny, which is what we are seeing now, and in a way the masses deserve their fate. Whilst it is certainly not true of everyone, a very large number of people these days are brainwashed, careless, cowardly, indulged, insouciant, ignorant of what really matters, physically soft, timid and vapid individuals. If they weren’t, the NWO could never have pulled off what they have so far this year. Their assessment of the masses as gormless sheep that you can do anything to have been proven correct – just walk down any street these days and you will see this. There was a demonstration in Germany a few weeks ago by a quite large number of people who saw through the plot, but this was of course downplayed by the media, and unfortunately not repeated elsewhere.

In the United States, which is one of the countries that will be hardest hit by the economic meltdown, they are playing a very crafty game by pitting Left against Right and black against white. The name of the game is “divide and conquer” – the masses will be too busy hating and killing each other to go after their joint enemy. So the Left call for draconian State intervention to stop the spread of the virus and the Right call for draconian State intervention to stop the rioting, which was bankrolled by powerful forces.

We thus appear to be entering a new Dark Age, and unlike tyrannies of the past there is unlikely to be an early end to it, because it is truly global in scope. As the walls close in and the Matrix solidifies, all sources of dissent will be snuffed out and where deemed necessary, forcibly eliminated.

You might well think to yourself, or say, “Maund if you know all this why are you saying it?- there’s a risk of them coming after you, is there not?” While that is theoretically true, they are only really concerned by articles or reports of this nature that have a high circulation. Hardly anyone in comparative terms will read this and then it will disappear and be forgotten about. Of course, further down the road, when the Matrix really closes in, no dissent at all will be tolerated. The masses are so dumb that me writing this won’t make any real difference, it will only have an impact on the few that read it with whom it resonates. The masses are not going to watch a really important video like this by Greg Mannarino which has a relatively modest 31,800 hits when they can watch slush like this that has more than 642 million hits. It is this mindless obsession with trivia that is one reason why we are now falling into the abyss.

There are few grounds for optimism – the ease with which the New World Order got the masses to voluntarily shut themselves in their homes and wear face diapers etc. without much dissent will embolden them to go full steam ahead with their draconian plans for more severe lockdowns, permanent diaper wearing, the elimination of cash, contact tracing and endless surveillance and forced vaccination. The freedoms so effortlessly being given up will be very hard if not impossible to recover. It is important not to underestimate the ruthlessness of the enemy – in the space of just 6 months in a rampage of unrestrained malevolence they have all but destroyed the airline industry, the catering and restaurant industry, the travel industry and have decimated 50% of small businesses in the US, leading to about 40 million job losses. They have imprisoned people in their homes for weeks and sometimes months on end, denied children schooling and the necessary company of other children and forced the population to wear oxygen stealing masks and permanently damaged the health of millions through this means and by denying them access to air and sunlight. It should thus be clear that they are capable of anything, up to and including the mass murder of millions, which they may achieve through the intentional disruption of food supplies or through tainted vaccinations and perhaps both. Ominously they have been emboldened by their successes up to this point and can now be expected to push on until they have achieved their objective of absolute power over and total control of the population who can look forward to being exploited ever more severely in a neo-feudal Master-servant type society – which will be the reward for their cowardice and docile stupidity of recent months.

I don’t pretend to have all the answers on this. These are the pieces of the puzzle that I have been able to pull together over time, and fortunately we have enough here to see the big picture, and it isn’t pretty.

Asteroid 2020QG just made the closely pass-by of our planet on record. The most amazing part? Scientists didn’t even see it coming.

The asteroid came as close as 4,778 miles from the center of the Earth, according to NASA’s database of near Earth objects and a new report by Forbes. At its lowest point, it could have been just 1,000 miles over our heads – lower than almost all artificial satellites that are currently orbiting the Earth.

The asteroid wasn’t spotted until after it passed the Earth, which is wild considering it is officially the closest call since we started following such passes nearly 100 years ago. 

The asteroid had a diameter of about 10-20 feet, according to NASA, who also says that the asteroid likely didn’t pose a threat even if it had entered into the Earth’s atmosphere. It would have likely burned up in the atmosphere, NASA said.

Newly-discovered asteroid ZTF0DxQ passed less than 1/4 Earth diameter yesterday, making it the closest-known flyby that didn’t hit our planet.@renerpho
Simulation: https://t.co/a81R100OwV
Higher-res GIF: https://t.co/4Wxn0YNpVb pic.twitter.com/SMtVRbjYOA

— Tony Dunn (@tony873004) August 17, 2020

A similar sized asteroid was spotted in 2018 and, after entry into the Earth’s atmosphere, “only the tiniest bits” made it to the ground. It caused no reported damage or injuries. 

And because nothing involving science or outer space can be brought up without bringing up the world’s greatest faux-scientist, Elon Musk, Forbes commented that the object was “roughly the size of a Tesla Model 3, which makes you wonder for a second if the car Elon Musk famously launched towards Mars might have activated its autonomous boosters and attempted to make its way home.”

Authored by Charles Lipson via RealClearPolitics.com,

News reports have downplayed the significance of former FBI lawyer Kevin Clinesmith’s guilty plea, acknowledging he altered an official document in the government’s Trump-Russia collusion probe. There has been some coverage, mainly because it is so rare to see FBI agents charged with a felony and because it is the first tangible result of U.S. Attorney John Durham’s sprawling investigation of the investigators. But mainstream news outlets have minimized its importance. It’s only one count, they say, and it deals with a relatively minor crime by a mid-level figure.

That’s spin, and it’s wrong. This plea is like finding water seeping from the base of a dam. The problem is not one muddy puddle. The problem is that it foreshadows the dam’s failure, releasing a torrent. That’s what the Clinesmith plea portends.

What Did Clinesmith Admit?

Clinesmith acknowledges he altered an email from the CIA to the FBI, answering a question about Carter Page. Page is an American citizen and a Naval Academy graduate who spent considerable time in Russia. His time abroad raised a question for the FBI’s counter-intelligence division. Was Page a Russian agent? Or was he on our side, helping the U.S. gather intelligence about the Kremlin? The CIA would know.

The answer mattered because the FBI and Department of Justice were preparing warrants to spy on Page as a hostile foreign agent. The CIA gave them a clear answer in August 2016, before the first warrant was issued: Page was working for us. That answer was given to a still-unnamed FBI case agent, and we don’t know what he did with it. Did he show it to those preparing the warrant applications? Why else would he even ask the CIA for the information?

In 2017, after Clinesmith was tasked to the Mueller investigation, their team asked him to clarify Page’s relationship with U.S. intelligence. That’s when he took the CIA document and added a single word, “not.” The altered document said Carter Page was not a CIA asset. It was a deliberate lie.

Clinesmith is pleading guilty to inserting that word and changing the document. That’s a felony. What made his crime more significant is that the altered document was then presented to the secret court overseeing actions taken under the Foreign Intelligence Surveillance Act. The special counsel included it in the fourth FISA application to spy on Page.

All four were chock-full of deception and dishonesty, but misrepresented to the court as “verified.” All of them said there “was probable cause that [Carter Page] was a knowing agent” of Russia. He wasn’t, and the applications’ authors had plenty of reasons to know it.

Why were they so determined to spy on a relatively minor figure like Carter Page? Because he was involved in Trump’s world and knew many others who were. James Comey’s FBI and Barack Obama’s White House wanted to know everything Trump was doing. Page was one window into that world. (Gen. Michael Flynn was an even better one, and we know he was exhaustively investigated.)

The FISA applications were meant to give some legal cover to this domestic espionage. The FBI first tried to get a warrant on Page in summer 2016, but the judges said it lacked sufficient evidence. They fixed that by adding added the now-discredited Steele dossier and got the first warrant in late 2016. The FBI and DoJ never told the FISA judges that the crucial addition was funded by Hillary Clinton and the Democratic National Committee, filled with unverified allegations, and produced by a biased, partisan investigator. Clinesmith’s altered email was a later, and relatively minor, addition to this toxic mix.

What really mattered was less the inclusion of Clinesmith’s false document than the omission of the CIA’s truthful one. The truth would have raised a bright red flag. The judges would likely ask, “If Page has worked closely with the CIA, how can you simply ignore that and say he is a Russian agent?” In other words, an accurate document might have killed the warrant renewal and called the previous three into question. The Mueller team wanted to avoid that, so they never let the FISA judges see the authentic document or know about it. Their omission was fateful and almost certainly criminal.

The Bullet Points That Leave a Bloody Trail

Clinesmith’s plea deal matters mostly because it sheds light on Durham’s broader investigation and the malfeasance he’s uncovering. To see that, let’s focus on the “bullet points,” which leave a bloody trail to larger crimes.

• It was no surprise to learn last week that Kevin Clinesmith had altered an official document. Inspector General Michael Horowitz had already reported it, without naming the culprit. Durham had that information and could have indicted Clinesmith long ago. He didn’t because he was interviewing others about FISA abuses and didn’t want to give them any information from Clinesmith’s indictment. Releasing that information now shows Durham has completed his work on FISA fraud.

• Other, more senior FBI officials must have been involved in these FISA abuses, though Durham hasn’t said so yet. Some committed abuse themselves. Others knew about it or should have known. Still others must have discovered the misrepresentations, but failed to report them to the FISA court, as they were required to do. Those failures are felonies.

• Clinesmith has said he gave other FBI members the true document, not just the altered one. The 23rd paragraph of the charging information says Clinesmith “provided the unchanged C.I.A. email to Crossfire Hurricane agents and the Justice Department lawyer drafting the original wiretap application.” That’s a smoking bazooka.

• How can Durham prove the CIA’s truthful information was circulated and then hidden? By thoroughly checking the FBI’s internal document system. It should record everyone who received Clinesmith’s accurate (unaltered) document and those they later passed it to. If the agents and lawyers merely discussed the falsification, then prosecutors will need several witnesses to substantiate it.

• The real leader of the Mueller team, Andrew Weissmann, is still blowing smoke about these mounting legal problems. On Friday, he tweeted, “Clinesmith is charged with adding the words ‘not a source’ to an email about Carter Page, but nowhere does the charge say that is false, i.e. that Page was a source for the CIA.” Notice, Weissmann is not saying he knew nothing or that Page really was a Russian source. He simply saying that a 180-degree change in the document’s wording doesn’t mean what your lying eyes think it means.

• Weissmann’s comment shows the Mueller team is sticking with their existing disclaimer. Their report says they won’t speculate on “whether the correction of any particular misstatement or omission, or some combination thereof, would have resulted in a different outcome.” In order words, “We don’t see something. We don’t say something. And we don’t know if it matters.”

• Clinesmith actually worked on Robert Mueller’s team. He was tasked from the bureau to work with that team, which then submitted his falsified document to the FISA court. That’s crucially important. If attorneys on the special counsel team knew about his crime and did nothing to inform the court, if they continued to use a document they knew was fraudulent, they will face charges. That would implicate Mueller’s team for the first time in illegal activity to undermine the Trump presidency. That’s a much bigger matter than writing a biased report.

• We know from other declassified documents that it wasn’t just Mueller’s FISA application that had false information. All four applications did. Indeed, they depended on it, especially on the Steele dossier. Then-Deputy FBI Director Andrew McCabe testified that, without Steele, the warrants would not have been granted. Yet none of the agents and prosecutors ever told the FISA court about fraud, misrepresentation, and bias from Steele, Clinesmith, or others.

• The Mueller team must have known Clinesmith’s actions were a problem. They didn’t just get rid him, they tried to shift the blame. That’s the meaning of an opaque footnote in their report, which said that the bureau, not the Mueller team, supervised “an FBI attorney” who worked for the special counsel. Hey, it’s them, not us!

• This CYA footnote, clever as it is, doesn’t mean the Mueller team was ignorant of Clinesmith’s fraud when they submitted the FISA warrant application. Nor does it absolve them of responsibility for failing to tell the court promptly when they suddenly “discovered” it was inaccurate.

• Did Clinesmith act alone or did anyone tell him to alter the document? That’s a critical question, and Durham has not answered it yet. Nor has he said who knew what Clinesmith had done. Again, the key to proving that is either a paper trail or multiple cooperating witnesses. We should get Durham’s answers when he issues more indictments.

Who Should Be Nervous?

• Anyone who worked on Crossfire Hurricane with Clinesmith. You can bet he is telling Durham everything he knows. Any plea deal would require complete disclosure. Durham could have charged him with a more serious crime, requiring a longer prison sentence. Prosecutors don’t grant such leniency without getting something valuable in return (unless they are investigating Hillary Clinton, whose top aides received immunity for free). Durham is no such patsy. He would not go easy on Clinesmith unless he got useful information in return.

• Real trouble looms for anybody on the Mueller team or elsewhere at the DoJ and FBI who knew that Clinesmith had altered the CIA email to change its meaning. There’s even worse trouble ahead for those who ordered him to commit a crime. To prove those charges, Durham needs documents or multiple eyewitnesses. Clinesmith can point prosecutors in the right direction, but his word alone won’t do.

What Do We Still Need to Know About the FISA Investigation?

• The main questions are “how wide is this corruption?” and “how high up does it go?” Those go well beyond Clinesmith’s altered document. They include all the other lies in the warrants.

• Does Durham have enough evidence—and fortitude—to charge senior officials who signed false applications? They will say, as former-Deputy Attorney General Rod Rosenstein did to Congress, that they relied entirely on subordinates to give them complete, honest information. To rebut that, Durham needs hard evidence. He may also feel he needs evidence of intent. The higher up you go, the more evidence you need. We talk, rightly, about equality under the law, but, in practice, prosecutors want stronger, more unequivocal evidence to charge senior officials.

• Were all the lies and misinformation a concerted effort, a true criminal conspiracy? That will be one of Durham’s toughest calls, and it would need approval from Attorney General William Barr. Such a charge would ignite a political firestorm, fueled by partisan media. But, then, so does everything these days.

To return to the metaphor of the endangered dam… the Clinesmith indictment is a telling puddle where the ground should be dry. It’s a troubling omen for those who violated Carter Page’s rights, spied on the Trump campaign, and systematically abused the powerful tools of law enforcement. They are living downstream, and they should be worried.

Just days after Communist Party officials censored a prominent academic who dared to criticize the CCP and its glorious leader, Xi Jinping, more news of what appears to be a mounting purge of dissent in the aftermath of the coronavirus pandemic, as Beijing prepares a Russia-style vaccine rollout.

WSJ reports that one of Xi’s most senior allies has called for a Maoist purge of China’s domestic-security apparatus, insisting last month that it is time to “turn the blade inwards and scrape the poison off the bone.”

Within one week of the call, party “enforcers” launched investigations into at least 21 police and judicial officials. Dozens more have been taken down in the weeks since. So far, the most high-profile figure to face charges is the police chief of Shanghai.

In essence, President Xi, who won plaudits for his handling of the COVID-19 pandemic but is nevertheless weakened due to China’s weakened economy and rising tensions with Washington, is launching his own assault on the deep state, mirroring President Trump’s animosity and distrust toward his own intelligence machine.

While it’s true that China’s political system suffers from “endemic corruption”, that’s not the real reason President Xi is doing this now, contrary to what some western media outlets have suggested.

Instead, it appears President Xi is launching his own war against China’s “deep state” by launching a full-blown purge of the state security apparatus.

The ultimate goal of the campaign is simple: create police, prosecutors and judges who are “absolutely loyal, absolutely pure and absolutely reliable”.

During his 8 years in power, President Xi has made a big show of confronting corruption, but critics say he has barely made a dent. Rather, his efforts have had more of a redistributive effect: those who are loyal to the ruler can eat their full from the trough, but those who aren’t may see even a minor slip up cost them everything.

Now that Xi has experienced first hand how unforeseen events can rattle even the authoritarian supreme leader of the CCP, he’s realizing that if he’s going to accomplish his goal of ruling until at least 2035, he’s going to need more leverage over the police and security apparatus, so that when he goes for a third term as Communist Party leader in 2022, nobody will raise a hackle, said Wu Qiang, a Chinese politics researcher and former lecturer at Beijing’s Tsinghua University.

“Xi is especially reliant on this coercive state apparatus, yet also distrustful of it,” Wu told the Wall Street Journal.

We really couldn’t have put it better ourselves.

Authored by Paul Joseph Watson via Summit News,

North Korean dictator Kim Jong-un has ordered citizens to hand over their pet dogs so they can be killed and eaten as a new famine threatens the country.

Heavy rain, widespread flooding and crop damages have left the country short of food supplies, leading the Stalinist regime to demand more wealthy North Koreans give up their dogs, which are considered “decadent” luxury and “a ‘tainted’ trend by bourgeois ideology,” according to South Korean news outlet Chosun Ilbo.

“Authorities have identified households with pet dogs and are forcing them to give them up or forcefully confiscating them and putting them down,” a source told the newspaper.

The pets are rounded up, with some of them being sent to zoos and others being sold directly to the restaurant trade.

What’s next, cannibalism?

Back in 2017, North Korean defector Gim Gyu Min claimed that the famine became so chronic in the late 90’s that he witnessed people being forced to eat each other, including a mother who was arrested for cooking her own son in a cauldron.

“It was a common thing at the time. It was not surprising,” said Min.

Yet another reminder that Communism, wherever it is tried, always leads to starvation and brutality.

*  *  *

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While presumptive Democratic Party nominee for the 2020 presidential election, Joe Biden, has been a leader in the polls for quite some time now, the campaign of incumbent Donald Trump – as of Q2 2020 – still had deeper pockets.

As Statista’s Katharina Buchholz details below, according to the Federal Election Commission, Trump’s campaign had collected almost $343 million and had spent $279 million.

You will find more infographics at Statista

Biden’s budget was almost 20 percent below that at $237 million, of which almost $170 million had been spent.

While the next FEC filing deadline is still some weeks away, The New York Times reported that Trump also did better than Biden in July, raising $165 million compared to Biden’s $140 million.

Submitted by Christopher Dembik, head of Macro Analysis at Saxo Bank

Summary: No theme is more important in the macroeconomic space than inflation right now. All the clients we are talking to share their worries about inflation risk and are looking for investment strategies to hedge against inflation. In recent weeks, we have seen a series of upside surprises in inflation data, that mostly reflect the big imbalances in the economy following the COVID recession and some data noise. However, we cannot rule out that we will experience in the recovery phase a prolonged period of high inflation due to a sudden change in regime shift characterized by rising protectionism and more redistributive policies to fight against inequalities. If I could give only one piece of advice to investors, read everything you can about inflation and especially stagflation.

* * *

There is a large consensus among economists that the initial COVID-19 shock is a massive disinflationary impulse. However, there is no consensus regarding what may come next, let’s say in two or three years. Some argue that the massive surge in money supply will continue to inflate asset bubbles in real estate and in the stock market, as it has been the case since the GFC, but will have little impact on the real economy as a whole due to the persistent decline of both the money multiplier (the amount of money that banks generate with each dollar of reserves) and money velocity (the rate at which money is exchanged in the economy). Others fear that in the long run the boom in money supply combined with a regime shift characterized by rising protectionism and more redistributive policies to fight against inequalities will create lasting inflationary pressures and push inflation above the 2% threshold on a sustainable basis. This view is reinforced by the fact that inflation has always been responsive to sudden regime shifts in the past.

Most economists consider that the most powerful leading indicator for inflation is M2 money supply. It is fair to say that we have never experienced in the past, not even during the 1970’s stagflation, money supply growth as high as it is today in COVID-times, skyrocketing at more than 20% YoY.

We are not there yet. Recent upside surprises in inflation data, such as the surge in U.S. July CPI or the boom in U.S. unit labor cost in Q2, are not linked to the expected regime shift. To be fair, it mostly reflects data noise due to the strict lockdown and the following recession. If we dig into details, it appears that the strong CPI is the consequence of relative shifts in specific markets rather than a general increase in prices. In regards to the jump in unit labor cost by 12.2% in Q2, it is essentially the reflection of more job losses amongst low-wage workers, thus causing distorting measurements. For at least some period of time, we need to get used to inflation noise and refrain from drawing hasty conclusions regarding immediate change in inflation regime.

It’s all relative. In a very insightful interview to MACROVoices (see here), Vincent Deluard, macro strategist for StoneX Group Inc., proposes another way to approach the inflation problem. He rightly argues that inflation has not disappeared from the real economy over the past years, it is still here, but it cannot be captured by CPI as it measures the average inflation in the economy. Actually, focusing on CPI results in masquering the generational inequality problem:

“The great moderation of inflation in the past two decades has been the result of two offsetting forces. On the one hand, the cost of medical insurance premia, college tuitions, rents in major urban areas, and childcare has exploded. On the other hand, the cost of most of the things which can be bought at Walmart (and are generally manufactured overseas) has collapsed.

This had led to two very different experiences for inflation: retired boomers, who generally own their homes, live in the small towns and suburbs, shop at superstores and get their medical expenses paid by Medicare have experienced deflation (…). Conversely, new jobs openings for younger generations have been almost exclusively created in major urban areas where costs have exploded”.

Deluard draws two main conclusions:

• Generational inequality is prevalent in society.
• The level of inflation strongly depends on which age group you belong to.

Said differently, the young generations (Millennials and Gen-Z-ers), who contribute most to society based on productivity measure, pay more than anyone else and still face no access to capital to buy home and live properly.

By sacrificing the young and poor to save the old and rich, the COVID-19 crisis has strongly exacerbated generational inequalities and millennial anger against Boomers. One way to solve this issue is for politicians to step in and implement redistributive policies and other popular stimulus programs that can take the form of UBI/Helicopter money. Now that governments and the U.S. Congress are critical players in driving money supply growth, it is likely they won’t give up anytime soon this new power.

Inflation is always and everywhere a political phenomenon. Its evolution will mostly depend on future policy decisions that will be taken after the crisis. We think that redistributive policies and other stimulus programs will play a key role to create favorable conditions to an inflation episode once the recovery will start to materialize, let’s say in a 12-18 month horizon.

If we combine redistributive policies with the emerging trend of supply chain relocation and rising protectionism, we have a almost perfect inflation narrative for 2022 and beyond that can (temporarily) overwhelms deflationary forces driven by demographics and technology.

With the reform-minded business-friendly conservatives out, and the Peronistas back in power in Argentina, one of South America’s biggest and most troubled economies is struggling to get back on its feet, bolstered by the promise of more rope from the IMF and the country’s other creditors, despite arriving at its 3rd default in 20 years, and its 9th in history – the most of any country.

This unfortunate reputation has led some to joke that only three things in life are certain: death, taxes and another Argentinian sovereign default.

But as the country prepares for yet another refinancing thanks to the IMF, the government has revealed that the country’s already damaged economy has been absolutely hammered by one of the world’s longest, and strictest, lockdowns.

And even as new COVID cases have tapered off somewhat, Argentina’s death toll is quickly climbing the ranks of the deadliest outbreaks in the world.

According to Bloomberg, in the past seven days, Argentina has reported 22.5 deaths per million people compared with 28.1 in Brazil and 23.4 in the US, the homes of the deadliest outbreaks in the world.

Total deaths in Argentina have now surpassed 5,000 since the pandemic began.

The deaths, and the weariness of the Argentina quarantine, which has crushed the country’s economy while doing little to stanch the virus’s spread, have spurred more protests in the country.

🇦🇷 “We are not anti-quarantine, we are anti-corruption.”

Thousands in Argentine cities rallied on Monday against extended lockdown measures, economic hardship and planned judicial reforms pic.twitter.com/QMzOGRKOMo

— Bloomberg QuickTake (@QuickTake) August 18, 2020

Even worse, concerns are mounting that Argentina is undercounting cases and deaths. The positivity rate across the country has been hovering around 40% for the past week, similar levels to Mexico, which suggests that testing levels are insufficient.

But after 146 days of lockdowns, the government is facing pressure to reopen immediately.

Buenos Aires remains the epicenter of the virus. The city had 64% of all cases as of Wednesday, though it is Argentina’s most populous province.

The Argentine economy is expected to contract about 10% this year marking the third straight year of recession. The country’s leftist government will soon begin talks with the IMF over a new lending program to restructure some $65 billion of bonds, far more than Argentina will ever probably be able to repay.

Fortunately, markets remain confident that a bigger fool for the Argentine century bond, issued in 2017, can still be found.

This article is part of the Understanding Money Mechanics series, by Robert P. Murphy. The series will be published as a book in late 2020.

To fully understand our current global monetary system, in which all of the major powers issue unbacked fiat money, it is helpful to learn how today’s system emerged from its earlier form. Before fiat money, all major currencies were tied (often with interruptions due to war or financial crises) to one or both of the precious metals, gold and silver. This international system of commodity-based money reached its zenith under the so-called classical gold standard, which characterized the global economy from the 1870s through the start of World War I in 1914.

Under a genuine gold standard, a nation’s monetary unit is defined as a specific weight of gold. There is “free” coinage of gold, meaning that anyone can present gold bullion to the government to be minted into gold coins of the appropriate denomination in unlimited quantities (perhaps with a small charge for the service). Going the other way, to the extent that there are paper notes or token coins issued by the government as official money, these can be presented by anyone for immediate redemption in full-bodied gold coins. Finally, under a genuine gold standard, there are no restrictions on the flow of gold into and out of the country, so that foreigners too can avail themselves of the options described above.

To this day, arguments over the gold standard are not merely technical disagreements concerning economic analysis. Rather, the gold standard often serves as a proxy for “sound money,” which was a central element in the classical liberal tradition of limiting government’s ability to wreak havoc on society. As Ludwig von Mises explains:

It is impossible to grasp the meaning of the idea of sound money if one does not realize that it was devised as an instrument for the protection of civil liberties against despotic inroads on the part of governments. Ideologically it belongs in the same class with political constitutions and bills of rights. The demand for constitutional guarantees and for bills of rights was a reaction against arbitrary rule and the nonobservance of old customs by kings. The postulate of sound money was first brought up as a response to the princely practice of debasing the coinage. It was later carefully elaborated and perfected in the age which—through the experience of the American continental currency, the paper money of the French Revolution and the British restriction period—had learned what a government can do to a nation’s currency system. (bold added)

It should go without saying that in the present chapter, we are not offering a comprehensive history of the gold standard, even from the limited perspective of the United States. Rather, we merely attempt to explain its basic mechanics, and to highlight some of the major events in the world’s evolution from a global monetary system based on market-produced commodity money to our current framework, which rests on government-issued fiat monies.

The Precious Metals: The Market’s Money

In the previous chapter, we explained that money wasn’t planned or invented by a wise king, but rather emerged spontaneously from the actions of individuals. We also explained why historically people settled on the precious metals, gold and silver, as the preeminent examples of commodity money.

In more recent times—specifically after 1971, as we will document later in this chapter—most people on Earth use unbacked fiat money, issued by various governments (or central banks acting on their behalf), which is not redeemable in any other commodity.

Yet between these two extremes there was a long period when governments issued sovereign currencies that were defined as weights of gold and/or silver. In the US, coins stamped with certain numbers of dollars would actually contain the appropriate gold or silver content, such as a $20 Double Eagle gold coin containing 0.9675 troy ounces of gold. Furthermore, after the US government began the practice of issuing paper notes of various dollar denominations, anyone could present the paper for redemption in the corresponding full-bodied coins. Even during periods when specie redemption was suspended—as often happened during wars—the public generally assumed (correctly) that the government paper currencies would eventually be linked back to the precious metals, and this expectation helped anchor the value of the paper money.

Explainer: “Fixed” Exchange Rate vs. Government Price-Fixing

When multiple countries participate in a gold standard, it is typical to say their governments have adopted a regime of “fixed exchange rates,” where the various sovereign currencies trade against each other in constant ratios.

In contrast, economists such as Milton Friedman have written persuasive essays3 making the case for flexible or “floating” exchange rates, in which governments don’t intervene in currency markets but rather let supply and demand determine how many pesos trade for a dollar. Part of Friedman’s argument is that when governments do try to “fix” the value of their currency—usually propping it above the market-clearing level—it leads to a glut of the domestic (overvalued) currency and shortages of (undervalued) foreign exchange. So if economists are opposed to price-fixing when it comes to the minimum wage and rent control, shouldn’t they also oppose it in the currency markets?

Although Friedman himself obviously understood the nuances, this type of reasoning might mislead the average reader. Under a gold standard, governments don’t use coercion to “fix” exchange rates between different currencies. So the policy here is nothing at all like governments setting minimum wages or maximum apartment rents, where the “fixing” is accomplished through fines and/or prison time levied on individuals who transact outside of the officially approved range of prices.

Instead, under a gold standard, each government makes the standing offer to the world to redeem its own paper currency in a specified weight of gold. This offer is completely voluntary. No one in the community has to exchange currency notes for gold; people merely have the option of doing so.

However, given that two different governments pledge to redeem their respective currencies in definite weights of gold, it is a simple calculation to determine the “fixed” exchange rate between those two currencies. For example, in the year 1913—near the end of the era of the classical gold standard—the British government stood ready to redeem its currency at the rate of £4.25 per ounce of gold, while the US government would redeem its currency at the rate of (approximately) $20.67 per ounce of gold. These respective policies implied—using simple arithmetic—that the exchange rate between the currencies was “fixed” at about $4.86 per British pound. Yet this ratio wasn’t maintained by coercion, and the actual market exchange rate of dollars for pounds did in fact deviate from the anchor point of $4.86. It’s just that if the market exchange rate moved too far in either direction, it would eventually become profitable for currency speculators to ship gold from one country to the other, in a series of trades that would push the market exchange rate back toward the “fixed” anchor point.

To see how this works, suppose that the US government (back in 1913) began printing new dollars very rapidly. Other things equal, this would reduce the value of the dollar against the British pound. Suppose that when all of the new dollars flooded into the economy, rather than the usual $4.86 to “buy” a British pound,  the price had been bid up to $10.

At this price, there would be an enormous arbitrage opportunity: specifically, a speculator could start out with $2,067 and present it to the US government, which would be obligated to hand over 100 ounces of gold. Then the speculator could ship the 100 ounces of gold across the ocean to London, where the gold could be exchanged with the British authorities for £425. Finally, the speculator could take his £425 to the foreign exchange market, where he could trade them for $4,250 (because in this example we supposed that the dollar price of a British pound had been bid up to $10 in the forex market). Thus, in this simple tale, our speculator started out with $2,067 and transformed it into $4,250, less the fees involved in shipping.

Besides reaping a large profit, the speculator’s actions in our tale would also have the following effects: (a) they would drain gold out of US government vaults, providing the American authorities with a motivation to stop with their reckless dollar printing, (b) they would add gold reserves to British government vaults, providing the British authorities with the ability to safely print more British pounds, and (c) they would tend to push the dollar price of British pounds down, moving it from $10 back toward the anchor price of $4.86.

To be sure, I’ve exaggerated the numbers in this simple example to keep the arithmetic easier. In reality, as the dollar weakened against the British pound, it would hit the “gold export point” well before reaching $10. Through the arbitrage process we explained above, whenever the actual market exchange rate strayed too far above the $4.86 anchor, automatic forces would set in causing gold to flow out of US vaults and push the market exchange rate back toward the “fixed” rate. (This process would happen in reverse if the exchange rate fell too far below the $4.86 anchor and crossed the “gold import point”: gold would flow out of the United Kingdom and into American vaults, and set in motion processes that would push the exchange rate back up toward the anchor point.)

We have spent considerable time on this mechanism to be sure the reader understands exactly what it means to say there were “fixed exchange rates” under the classical gold standard. To repeat, these were not based on government coercion, and did not constitute “price-fixing” by the government. No shortages of foreign exchange occur under a genuine gold standard, because exchange rates are always freely floating, market-clearing rates.

It is difficult for us, growing up in a world of fiat money, to appreciate the fact, but historically people viewed gold (and silver) as the actual money, with sovereign currencies being defined as weights of the precious metals. As Rothbard explains:

We might say that the “exchange rates” between the various countries [under the classical gold standard] were thereby fixed. But these were not so much exchange rates as they were various units of weight of gold, fixed ineluctably as soon as the respective definitions of weight were established. To say that the governments “arbitrarily fixed” the exchange rates of the various currencies is to say also that governments “arbitrarily” define 1 pound weight as equal to 16 ounces or 1 foot as equal to 12 inches, or “arbitrarily” define the dollar as composed of 10 dimes and 100 cents. Like all weights and measures, such definitions do not have to be imposed by government. They could, at least in theory, have been set by groups of scientists or by custom and commonly accepted by the general public.

In concluding this section, we can agree with Milton Friedman that in a world of governments issuing their respective fiat monies, coercive government ceilings or floors in the foreign exhange market—enforced through fines and/or prison sentences—will lead to the familiar problems characteristic of all price controls. As Rothbard conceded, “the only thing worse than fluctuating exchange rates is fixed exchange rates based on fiat money and international coordination.”

However, the advocates of a genuine international gold standard stress that its underlying regime of (implied) fixed exchange rates would be even better, because it would effectively allow individuals around the world to benefit from the use of a common money. That is to say, for all the reasons that domestic commerce within the United States is fostered through the common use of dollars, commerce and especially long-term investment between countries will be enhanced when no one has to worry about fluctuating exchange rates on top of the other variables.

Colonial Era through 1872: Gold and Silver “Bimetallism”

Because the original thirteen American colonies were part of the British Empire, their official money was naturally that of Great Britain—pounds, shillings, and pence—which at the time was officially on a silver standard. (Indeed, the very term “pound sterling” harkens back to a weight of silver.) Yet the colonists imported and used coins from around the world, while those in rural areas even used tobacco and other commodities as money.6

During the Revolutionary War, the Continental Congress issued unbacked paper money called Continental currency. The predictable price inflation gave rise to the expression “not worth a Continental.” (We will cover this episode in greater detail in chapter 9.)

Among the foreign coins circulating among the American colonists, the most popular was the Spanish silver dollar. This made the term “dollar” common in the colonies, explaining why the Continental currency was denominated in “dollars” and why the US federal government—newly established under the US Constitution—would choose “dollar” as the country’s official unit of currency.7

It is crucial for today’s readers to understand that from the inception of the modern (i.e., post-Constitution) United States in the late 1780s through the eve of the Civil War in 1861, the federal government issued currency only in the form of gold and silver coins. (The one borderline exception were the limited issues of Treasury Notes first used in the War of 1812, which were short-term debt instruments that earned interest and did not enjoy legal tender status, but of which the small denominations of the 1815 issues did serve as a form of paper quasi money among some Americans.8)

In this early period, banks were allowed to issue their own paper notes that were redeemable in hard money and, to the extent that they were trusted, might circulate in the community along with full-bodied coins, but these banknotes were not the same thing, economically or legally, as gold or silver dollars. In summary, for the first seventy-odd years after the modern federal government’s creation, official US dollars consisted in actual gold and silver coins that regular people carried in their pockets and spent at the store. Indeed, so bad was the constitutional framers’ experience with the Continental currency, that they included in the Contract Clause the prohibition that “No State shall…make any Thing but gold and silver Coin a Tender in Payment of Debts.”

In the Coinage Act of 1792, the US dollar was defined as either 371.25 grains of pure silver or 24.75 grains of pure gold, which officially established a gold-silver ratio of exactly 15 to 1. Part of the rationale for this policy of “bimetallism”—in which new coins (of various denominations of dollars) could be minted from either of the precious metals—was that silver coins were convenient for small denominations (including fractions such as a half dollar, quarter dollar, dime, etc.), while gold coins were preferable for larger denominations (such as $10 and $20 pieces). By providing “dollars” consisting of both small-value silver coins and high-value gold coins, the idea was that bimetallism would allow Americans to conduct all of their transactions in full-bodied coins (without resort to paper notes or token coinage).

However, the problem with bimetallism is the phenomenon known as Gresham’s law, summarized in the aphorism “Bad money drives out good.” Specifically, when a government defines a currency in terms of both silver and gold, unless the implied value ratio of the two metals is close to the actual market exchange rate, one of the metals will necessarily be overvalued, while the other is undervalued. People then only spend the overvalued metal, while hoarding (or melting, or sending abroad) the undervalued metal.

In the case of the United States, when it established the 15-to-1 ratio in 1792, this was actually close to the actual market exchange rate between gold and silver. However, increased silver production led to a gradual erosion of the world price of silver, moving the actual market ratio closer to 15½ to 1. (This familiar ratio was partly held in place by France’s own bimetallic policy following the French Revolution, maintained by the French government’s large reserves of both metals.9)

As the world price of silver slipped relative to gold, the gap between market values and the US dollar’s definition eventually became so large that only silver was presented to the Mint for new coinage, while existing gold coins disappeared from commerce. As Rothbard reports: “From 1810 until 1834, only silver coin…circulated in the United States.”10 For a modern example of Gresham’s law in action, the reader can reflect that one would be a fool today to spend a pre-1964 quarter in commerce, since its silver content is worth far more than twenty-five cents.

The Coinage Acts of 1834 and 1837 revised the (implied11) content of the gold dollar down to 23.22 grains of pure gold, while leaving the silver dollar at 371.25 grains. Because there are 480 grains in a troy ounce, these definitions of the metallic content of the dollar implied a gold price of (approximately) $20.67 per ounce, and an unchanged silver price of (approximately) $1.29.

Thus the revised gold content of the dollar moved the gold/silver ratio to just under 16 to 1. This was now higher than the global price ratio of (roughly) 15½ to 1, meaning that the new definition favored gold and undervalued silver. Consequently, little silver was brought to the US Mint to be turned into new coinage—since the market value of the metal in a “silver dollar” coin was higher than $1—and the US, though still officially committed to a bimetallic standard, after 1834 flipped from a de facto silver standard to a de facto gold standard.

When the United States fell into Civil War in 1861, both sides resorted to the printing press and suspended specie payment. The North famously issued inconvertible paper notes called “greenbacks,” which led to large-scale price inflation. (We will cover this and other famous episodes of inflation in greater detail in chapter 9.)

US Participation in the Classical Gold Standard, 1873/1879–1914

The classical gold standard refers to the period beginning in the late nineteenth century when a growing number of countries tied their currencies to gold. Because the process was gradual, it is difficult to state precisely when the period began: “In 1873 there were some nine countries on the gold standard; in 1890, 22 countries; in 1900, 29 countries; and in 1912, 49 countries.”12

Recall from the previous section that going into the Civil War, the US dollar was defined in grains of the precious metals that implied a mint price of either $20.67 per troy ounce of gold, or of $1.29 per troy ounce of silver, for a gold-silver ratio of about 16 to 1. Because world prices of gold and silver were closer to 15½ to 1, there was little incentive to bring silver to the US Mint for conversion into coins.

Consequently, there was little opposition in 1873 when Congress discontinued the “free coinage” of the standard silver dollar (free coinage of fractional dollar silver coins having ended in 1853),13 as there had been little demand for the option. However, later in the decade, when world silver prices dropped—partly as a result of silver discoveries and partly as a result of other countries demonetizing silver, particularly the German Empire—the change of policy would be viewed in a different light. Indeed, pro-silver interests eventually referred to the momentous event as “the Crime of ’73.”14

The 1873 policy change, along with the growing limitations on the legal tender status of existing silver coins completed by 1874, officially ended the era of bimetallism in the United States:15 silver had been demonetized, rendering America a gold standard country. However, because the US remained in the “greenback” period left over from the Civil War, it actually was on neither metallic standard at the time, as it had suspended specie payment. Consequently, it can be argued that the US was not truly a participant in the classical gold standard until 1879, when the government resumed specie payment in gold (as required in the 1875 Specie Payment Resumption Act).

Artist’s conception of William Jennings Bryan after the Cross of Gold speech at the 1896 Democratic National Convention. McClure’s Magazine, April 1900

There was much drama in the battle between silver and gold interests, most notably William Jennings Bryan’s famous “Cross of Gold” speech—which called for a return to bimetallism and the free coinage of silver as a method of helping indebted farmers at the expense of the Wall Street elites—delivered at the 1896 Democratic National Convention, where he was nominated for president. Yet Bryan lost the general election to the pro-gold Republican William McKinley, who signed the Gold Standard Act of 1900 into law. This legislation codified the definition of the gold dollar that had been established back in 1837, which (we recall) implied a dollar/gold price of about $20.67 per ounce. This was the dollar’s gold content throughout the classical gold standard period, and would prevail until FDR’s devaluation in 1933/1934, described later in this chapter.

Although many modern economists scoff at the gold standard, in its “classical” heyday it was a quite remarkable achievement. Economic historian Carl Wiegand writes: “The decades preceding the First World War were characterized by a degree of economic and personal freedom rarely, if ever, experienced in the history of mankind.” He goes on to explain, “An essential part of this system was the gold standard.”

To give a flavor of this unrivalled degree of freedom before the Great War, consider this description from the famous economist Oskar Morgenstern:

[T]here was freedom of travel without passports, freedom of migration, and freedom from exchange control and other monetary restrictions. Citizenship was freely granted to immigrants…capital would move unsupervised in any direction….There were hardly any quantitative restrictions on international trade…[I]t was a world of which recently many…would have been inclined to assert that it could not be created because it could never work.

Alas, among the casualties of the world war would be the classical gold standard and its associated freedoms.

World War I and Its Aftermath

If the beginning of the classical gold standard is up for scholarly dispute, everyone agrees that it ended with World War I. Indeed, the Great War was only possible because the major governments abandoned their commitment to gold. As Melchior Palyi explains:

“This war cannot last longer than a few months” was a widely held conviction at the outset of World War I. All involved would go “bankrupt” shortly and be forced to come to terms, perhaps without a decision, on the battle fields. The belligerents would simply cease to be credit-worthy. Such was the frame of the European mind in 1914; the idea that credit and the printing press might be substituted for genuine savings was “unthinkable.” “Sound money” ruled supreme, supported by the logic of the free market. (bold added)18

Many commentators use war or other emergencies as examples of the problem with a strict gold standard—it allegedly ties the hands of government to respond in a crisis. However, that is an odd way of framing the matter. After all, printing unbacked fiat money doesn’t actually give the government access to extra tanks, bombers, and artillery; those all come from real resources, the availability of which is not directly affected by the quantity of paper money.

To say that World War I would have been “unaffordable” on the classical gold standard really just means that the citizens of the countries involved wouldn’t have tolerated the huge increases in explicit taxation and/or regular debt issue to pay for the conflict. Instead, to finance such unprecedented expenditures, their governments had to resort to the hidden tax of inflation, where the transfer of purchasing power from their peoples would be cloaked in rising prices that could be blamed on speculators, trade unions, profiteers, and other villains, rather than the government’s profligacy. This is why Ludwig von Mises said that inflationary finance of a war was “essentially antidemocratic.”

In light of these realities, when joining the war the major belligerents all broke from the gold standard, although the United States’s deviation consisted only in President Wilson embargoing the export of gold bullion and coin in 1917.20 After the war, the major powers made halfhearted attempts to restore some semblance of the international gold standard, but these were counterfeit versions (as we will detail below). The First World War thus dealt a mortal blow to the gold standard from which it never recovered.

We should take a moment in our discussion to explain the role of central banks, which also saw a major break with the start of the war. Although central banks were not necessary for the administration of the classical gold standard—the Federal Reserve didn’t even exist until late 1913—those countries that had central banks expected them to be independent from narrow political matters. Although the central banks engaged in discretion in influencing interest rates and providing credit with the aim of—in our modern terminology—smoothing out the business cycle, they were ultimately bound by the “rules of the game” of the international gold standard and had to protect their gold reserves.

Once war broke out, however, not only was the link to gold severed, but the role of the central bank changed as well. The central banks of the belligerent powers all became subservient to the fiscal needs of their respective governments. As American economist Benjamin Anderson described the wartime operations of the British and American central banks (and note that in later chapters we will elaborate on the mechanisms Anderson mentions):

The [British] Government first borrowed from the Bank of England on Ways and Means Bills, and the Bank bought short term Treasury Bills also. This had the double purpose of giving the Government the cash it immediately needed, and of putting additional deposit balances with the Bank of England into the hands of the Joint Stock Banks….This increased the volume of reserve money for the banking community and made money easy, permitting an expansion of general bank credit which enabled the banks to buy Treasury Bills and Government bonds.…[T]he exigencies of war justified everything…

Speedily, too, the British financial authorities learned the process of regulating outside money markets in which they wished to borrow…especially, the New York money market. If an issue of bonds of the Allies…was to be placed in our [US] market, it was preceded by the export of a large volume of gold, accurately timed, to increase surplus reserves in the New York banks and to facilitate an expansion of credit in the United States which would make it easy for us to absorb the foreign loan. (bold added)

After the wartime experience, the “traditional gold standard had ceased to be ‘sacrosanct,’” in the words of Palyi. “Events proved, supposedly, that mankind could prosper without it.” After all, if the gold standard could be violated and central banks could use their discretionary powers to help with the war effort, why not do the same for other important social goals, like promoting economic growth and reducing inequality?

Because of the severe wartime price inflation, after the 1918 armistice the major powers desired a return to gold. However, resuming specie payment at the prewar parities would have proven very painful, since their currencies had been inflated so much during the war. The United States, for its part, ended the embargo on gold export in 1919, but in order to staunch the resulting outflow of gold and maintain the prewar dollar-gold ratio, the Federal Reserve was forced to raise interest rates and massively contract credit, resulting in the Depression of 1920–21.

At the 1922 Genoa Conference, a plan was hatched for a “gold exchange standard,” in which central banks around the world could hold financial claims on the Bank of England and Federal Reserve as their reserves, rather than physical gold. However, so long as the Bank of England and the Fed themselves stood ready to redeem sterling and dollar assets in gold, there was still some discipline imposed on the system.

Yet even here, the redemption policy was only effective for large amounts and hence only relevant for large institutions, as opposed to the universal policy under the classical gold standard. As Selgin explains:

A genuine gold standard must…provide for some actual gold coins if pa­per currency is to be readily converted into metal even by persons possessing relatively small quantities of the former. A genuine gold standard is therefore distinct from a gold “bullion” standard of the sort that several nations, including the United States, adopted between the World Wars. The Bank of England, for example, was then obliged to convert its notes into 400 fine ounce gold bars only, making the minimum conversion amount, in ca. 1929 units, £1,699, or $8,269. (bold added)

The interwar gold exchange standard sought to “economize” on gold holdings: rather than storing physical gold in central bank vaults around the world, only the United States and Great Britain needed to redeem their currencies in the yellow metal, while the rest of the world could stockpile paper claims against the financial titans. Yet this system was very fragile, relying on cooperation among the central banks so as not to threaten the smaller gold reserves that were doing much more “work” than they had under the classical standard.

As an example of the necessary coordination, when then chancellor of the Exchequer Winston Churchill in 1925 sought to resume specie payments at the prewar parity and restore the pound to its traditional value of $4.86, in order to avoid a massive deflation in British prices, the Federal Reserve (under the leadership of Benjamin Strong) agreed to an easy-credit policy, thus weakening the dollar in order to close some of the gap between the currencies. Economists of the Austrian school argue that the Fed’s loose policies of the 1920s helped fuel an unsustainable boom that led to the 1929 stock market crash.

The Great Depression and Bretton Woods

In the depths of the Great Depression, the newly inaugurated president Franklin D. Roosevelt euphemistically declared a “national bank holiday” on March 6, 1933, in response to a run on the gold reserves of the New York Fed. During the week-long closure, FDR ordered the banks to exchange their gold holdings for Federal Reserve notes, to cease fulfilling transactions in gold, and to provide lists of their customers who had withdrawn gold (or “gold certificates,” which were legal claims to gold for the bearer) since February of that year.

FDR would issue an even more draconian executive order on April 5, 1933, which required all citizens to turn in virtually all holdings of gold coin, bullion, and certificates in exchange for Federal Reserve notes, under penalty of a $10,000 fine and up to ten years in prison. Although US citizens couldn’t buy gold, foreigners still traded in the world market, and there the US dollar now fluctuated against the metal, the $20.67 anchor having been severed. The Roosevelt administration in 1934 officially devalued the currency some 41 percent by locking in a new definition of the dollar that implied a gold price of $35 per troy ounce. However, this redemption privilege was only offered to foreign central banks; American citizens were still barred from holding gold, and even from writing contracts using the international price of gold as a benchmark.

As the Allied victory in World War II became more certain, the Western powers hammered out the postwar monetary arrangements in the famous Bretton Woods Conference, a nineteen-day affair held at a New Hampshire hotel which led to the creation of the International Monetary Fund (IMF) and World Bank. Following the war, the global financial system would rest on a refined gold exchange standard in which the US dollar—rather than physical gold—displaced sterling and became the sole reserve asset held by central banks around the world.

Under the Bretton Woods system, other countries could still hold gold reserves, but they typically defined their currencies with respect to the US dollar and dealt with trade imbalances by accumulating dollar assets, rather than draining gold from countries with overvalued currencies. In theory the Federal Reserve kept the whole system tied to gold by pledging to redeem for central banks dollars for gold at the new $35/ounce rate, but in practice even central banks were discouraged from invoking this option. Furthermore, governments only gradually lifted restrictions on international transactions following the war, so that the Bretton Woods gold exchange framework—tepid as it was—was really only fully operational by the late 1950s.

The Nixon Shock and Fiat Money

The US government relied on Federal Reserve monetary inflation to help finance the Vietnam War and the so-called War on Poverty. For a while other central banks were content to let their dollar reserves pile up, but French authorities eventually blinked in 1967, when they began to request the transfer of gold from New York and London to Paris. By 1968 the Americans had capitulated and let the unofficial market price of the dollar deviate from the official Bretton Woods value, relying on diplomatic pressure to dissuade other governments from exploiting the discrepancy and “running” on the Fed’s increasingly inadequate gold reserves.

Eventually the weight became too much to bear, and President Richard Nixon formally suspended the dollar’s convertibility on August 15, 1971. Along with other interventions in the economy (such as wage and price controls), this official closing of the gold window has been dubbed the “Nixon shock.”

Although Nixon assured the public that the gold suspension would be temporary, and that his policy would stabilize the dollar, neither promise would be fulfilled. From this point forward, the US—and hence the rest of the world—would operate on a purely fiat monetary system.