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Source link: http://archive.mises.org/12448/charles-goyette/

Charles Goyette

April 12, 2010 by

Charles Goyette gave a wonderful closing speech at our Phoenix Mises Circle last weekend. Mr. Goyette hosted a series of monetary conferences 25 years ago, arranging for Murray Rothbard and then little-known Texas congressman Ron Paul to be keynote speakers.

Here is my review of Goyette’s book as posted on LRC last year.

The current investment climate is more perilous than ever. The Federal Reserve’s balance sheet continues to grow stuffed with the dubious paper purchased from the too-big-to-fail banks that are now wards of the state. The music stopped and there were no chairs, but the Fed and the Treasury snapped their fingers and trillions of dollars later the chairs appeared, the band played on and the banks live on. The taxpayers are now the not-so-proud owners of AIG, General Motors, Fannie and Freddie and dozens of banks. Where did the money come from? Out of thin air.

Every paper currency in history eventually reaches its intrinsic value – zero – and the Fed’s Ben Bernanke is doing all he can to see that the dollar becomes worthless sooner rather than later. As Marc Faber told an investment conference crowd recently, Zimbabwe’s serial inflator Robert Mugabe is Bernanke’s mentor.

Investors live in the here and now. We can’t pick what our investment climate will be. If only we could live our lives with the market deciding what money is and 100-percent reserve banks protected our money on deposit. No such luck. The financial waters are treacherous and we must navigate them.

Charles Goyette provides a roadmap for survival with his newly released book, The Dollar Meltdown: Surviving The Impending Currency Crisis With Gold, Oil, And Other Unconventional Investments. The former Phoenix radio talk-show host has learned from some of the brightest minds in economics and investing. It’s the rare book that engagingly teaches sound economic theory, provides the history of how we got in this mess and then provides solid investment advice that considers the precarious times we live in. As ambitious as this sounds Goyette’s fast-paced book gets it all done.

The author brings the reader up to speed writing about the bailouts and the nation’s debt. After explaining why gold has been the market’s choice for money for thousands of years, he writes about every saver and investor’s nightmare – inflation – using the modern example of Mugabe’s Zimbabwe, a once prosperous nation reduced to a Stone Age economy with the continuous printing of paper money. Everyone is a billionaire but nobody can buy anything.

Goyette looks to Murray Rothbard to explain the history of America’s Federal Reserve and fractional reserve banking, and to Ludwig von Mises to see what the crack-up boom might look like. He makes the poignant point that hyper-inflation is not just something engendered in banana republics. Israel experienced triple-digit price inflation in the late 1970s and early 1980s.

Every once in a while dissatisfaction with the dollar makes the news, most recently with super model Gisele Bündchen demanding to be paid in euros rather than dollars. But the Brazilian bombshell was not the first. Goyette writes that Bette Midler demanded gold Krugerrands to perform overseas in the 1970’s. No doubt the Devine Miss M was influenced by then manager and boyfriend Aaron Russo.

Ultimately inflation leads to a state-controlled economy and America is headed that way, evidenced by Washington picking which businesses survive and which are left to fail, not to mention how much executives – high level and low – can be paid. So what’s a person to do? There is no academic hemming and hawing with Goyette and don’t be looking for stock tips. The author suggests investing in real things and he especially likes the yellow metal. What’s especially valuable is the primer he provides for buying physical gold – something that many people ask about.

All the other ways of investing in gold are addressed along with a separate discussion about silver. Goyette knows the whole energy independence chatter is nonsense and spends a chapter discussing what the world will not be living without in our lifetimes – oil.

Specifics are provided on how to invest in other commodities and what to invest in to take advantage of the coming bond market crash. Goyette’s explanation of how volatility can eat up an investment in leveraged funds is especially helpful as well as his tip about TIPS.

For readers who want more information, the author’s suggested readings at the end of the book will arm investors with ongoing market and economic knowledge.

At the book’s end Goyette’s sadness of America’s loss of liberty is evident. He worries what will become of this country’s prosperity and freedoms. But he doesn’t waste time urging his readers to write their congressmen or elect the right people. It’s too late for that. Protect your assets, get out of the dollar.

{ 13 comments }

Mike Sproul April 12, 2010 at 3:04 pm

“If only we could live our lives with the market deciding what money is and 100-percent reserve banks protected our money on deposit”

It’s been done. As I recall, the Bank of Amsterdam (est. 1609) charged storage fees of about 3%/year on deposits, so its depositors would have lost about the same amount as holders of US dollars have lost since the Fed was established.

And what do you do if the market decides, as it has many times in the past, to use fractional-reserve notes and deposits as money?

Slim934 April 13, 2010 at 7:12 am

Except that the sort value loss would have been entirely different.

There would not have been an arbitrary movement of purchasing power from one sector of the economy to another. There would be no action on the part of political leaders to cajole the banks to finance it’s debt. The bankers could not arbitrarily enrich themselves by virtue of having the money supply within its complete and totally control.

Not to mention the fact that non-business cycle coupled with steady natural deflation would have increased the purchasing power of their money at a greater rate than it was being extracted in deposit holding fees: resulting in more VALUABLE money as time progressed.

I imagine certain sectors of the market would choose it: in the short term. That is until they spike bank runs on their facilities leaving only the 100% reserve banks solvent.

Beefcake the Mighty April 12, 2010 at 3:19 pm

God, Mike Sproul just never gives up, does he?

Michael A. Clem April 12, 2010 at 3:45 pm

C’mon, Mike! You know that storage fees charged for deposits doesn’t have the same, widespread impact that the Fed’s inflation has had. Furthermore, with competition and modern technology, there’s no reason that the storage fees couldn’t be reduced to a much smaller percentage.
And while I can’t say for certain that the market has never chosen to use fractional reserve notes, I’d be willing to bet that FRB has been imposed more often than it has been willingly chosen.

David Bratton April 12, 2010 at 4:46 pm

@Michael A. Clem: “I’d be willing to bet that FRB has been imposed more often than it has been willingly chosen.”

See A HISTORY OF MONEY AND BANKING IN THE UNITED STATES pages 115 thru 122. In the free market banks do typically choose to engage in FRB and if allowed to work the market does effectively suppress the practice and keep it to a minimum.

David Bratton April 12, 2010 at 4:37 pm

@Mike Sproul: “And what do you do if the market decides, as it has many times in the past, to use fractional-reserve notes and deposits as money?”

There is nothing wrong with fractional reserve banking as long as the free market is allowed to decide when a bank has failed.

billwald April 12, 2010 at 9:35 pm

Money is not a store of value. Money is a government cosigned IOU that can be exchanged for goods and services.

tralphkays April 12, 2010 at 10:20 pm

Mike Sproul said: “It’s been done. As I recall, the Bank of Amsterdam (est. 1609) charged storage fees of about 3%/year on deposits, so its depositors would have lost about the same amount as holders of US dollars have lost since the Fed was established.”
This is a wonderful example of Mike Sprouls ignorance. On average since the Federal Reserve was established in 1913 (I think that is the right year) the dollar has lost 3% per year and apparantly the bank of Amsterdam charged 3% storage fee on deposits of hard money, but it isn’t really the same cost. The American dollar has lost on average 3% in absolute terms, all the while that the American economy was growing massively; the huge increase in goods available means that the actual inflation rate must have been many times 3%. Measuring the change in purchasing power of the dollar while ignoring the increase in goods bidding for those dollars is simply moronic. If the money supply had remained constant, then a 3% storage charge would have unquestionably been more than offset by the increase in purchasing power of the dollar brought about by the incredible growth of the American economy.

Gernot Hassenpflug April 13, 2010 at 2:09 am

I thought what the goverment prints is referred to as currency. Money on the other hand *is* a store of value. Certainly then money makes the best currency.

Mike Sproul April 13, 2010 at 8:40 pm

David Bratton:

“There is nothing wrong with fractional reserve banking as long as the free market is allowed to decide when a bank has failed.”

Amen. Of course there are lots of people on this blog who would disagree. They generally claim that the new money depreciates existing (base) money, as if the fractional reserve bank is no better than a counterfeiter. The backing theory holds that the issue of fractional reserve money by a private bank does not affect the assets or liabilities of the bank that issued the base money, and so the value of the base money is unaffected.

Michael Clem:
“storage fees charged for deposits doesn’t have the same, widespread impact that the Fed’s inflation has had. Furthermore, with competition and modern technology, there’s no reason that the storage fees couldn’t be reduced to a much smaller percentage.”

If I carry around $100 in my wallet, then a 3%/year inflation costs me $3 per year. The rest of my assets move more or less in step with inflation. Also, the benefits of all that modern technology have probably been nullified by all of our modern banking regulations.

tralphkays April 14, 2010 at 12:44 am

Another unsupported claim by Mike Sproul: “The backing theory holds that the issue of fractional reserve money by a private bank does not affect the assets or liabilities of the bank that issued the base money, and so the value of the base money is unaffected.”

It never ends with Mike, no matter how convincingly he is shown to be wrong.

tralphkays April 14, 2010 at 2:39 am

Mike Sproul readily admits that everything in the universe responds to supply and demand, except for his magical money. He claims to have invented a money whose value is independent of its abundance, no matter how much of it there is, the value stays the same. Why isn’t he laughed off this site? He postulates a form of money which has an OBJECTIVELY determined value. This value is an unchanging quality inherent to his money apart from the subjective valuations of people, because that is the only way its value could be independent of its abundance. How hilarious! An objective theory of value, yet he has never described how one measures this value, or what units are used in this measurement. He uses a circular argument where the money price of an asset determines the value of money that is used to set the price of the asset. A great comedy routine! He never bothers to explain how the assets of a bank came to have the value that he begins his circular argument with. Of course if he could explain how those assets had come to have those particular values (money prices) in the first place, then he would not be able to support his absurd theory. Better to ignore inconvenient facts and PRESS ON. Maybe everyone here IS laughing at him and I just misunderstood……I certainly hope so……

jerry April 14, 2010 at 3:04 am

Mike Sproul – obviously we know you think your “theory” is brilliant and we know the number of threads you are willing to pollute with it is unbounded. However, to convince anyone else who might be in limbo, you might want to point out why and how the clear statements which you made on another thread tied you in a knot from which you had no option but to simply walk away whistling like it never happened.

http://blog.mises.org/12367/should-the-quantity-of-money-be-increased/comment-page-1/#comment-683011

Are you going to answer or not?

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