Three Steps to Save America From Collapse
Three Steps to Save America From Collapse
p>George Gilder predicted the iPhone 14 years before its release…
He forecast the death of cable TV… and the rise of Netflix more than a decade before it existed…
He accurately tipped off President Ronald Reagan that the microchip would change the world…
And he believes his next prophecy will transform our civilization — and could even make you some money.
Continue reading to find out what George thinks can save America from collapse…
Three Steps to Save America From Collapse
[Editor’s note: The following article has been adapted from the book The Scandal of Money, written by George Gilder and originally published in 2016.]
“I am more convinced than ever that if we ever again are going to have sound money, it will not come from government. It will be issued by private enterprise.”
Liberal economist Friedrich Hayek said that in 1977.
Yet it rings more true today than ever before.
Our Federal Reserve System, which gives 12 bankers a monopoly on money, is broken. Its fruits are low growth, a shrinking job force, inequality, inefficiency and a hypertrophy of finance.
Nonproductive elites capture the bulk of the returns from money manipulation under government guarantees and the rest of the population lives on financial leftovers.
The Fed has become a fourth branch of government that alienates Main Street from Wall Street and Wall Street from Silicon Valley.
Our society is breaking up into separate and suspicious tribes ruled by federal bureaucrats deciding what money is worth and who gets it.
Our aging Federal Reserve System starves both small businesses and Silicon Valley of the capital needed to grow jobs and wages.
Fed policy translates into zero-interest-rate loans for the government and its cronies and little or nothing for savers or small businesses.
And it has transformed Wall Street from an engine of innovation into a servant of government power.
Yet is there hope?
I think so.
And I believe America can be set on the right path again with just three steps.
Step 1: Abolish Capital Gains Tax on Currencies
This country already allows gold currency. The Treasury mints millions of 1-ounce Silver Eagle dollars that are worth about $20 apiece and 1-ounce Gold Eagle $50 pieces that are worth $1,510 apiece.
Virtually all of these are hoarded.
Though it has been legal since 1987 to use them at their metallic value, that route leads to a capital gains tax on their appreciation.
Since the appreciation of a gold or silver piece is by reasonable definition all inflation, the tax is simple confiscation (like all capital gains taxes on spurious inflationary profits).
The move of gold and silver coins into circulation would offer a corrective of constitutional money for any dollar debauchery by the Fed.
Step 2: Remove Obstacles to Alternative Forms of Money
Despite imprudent governmental interference, the internet remains a bastion of American power, with U.S. companies such as Apple, Google, Amazon, Microsoft, Facebook, eBay, Cisco, Qualcomm and scores of others capturing the bulk of all internet revenues.
The internet plays a central role in the American economy. But there is a profound flaw in its architecture.
Its software stack lacks a trust and transactions capability. Its OSI (Open Systems Interconnection) model defines seven layers (including the physical layer, the data link layer, the network layer, the transport layer, the session layer, the presentation layer and the application layer).
While some of the layers have merged, none of the existing layers provides trust, validation, factuality or veracity of real monetary values.
The internet today desperately needs a new payment method that conforms to the shape and reach of global networking and commerce.
It should obviate the constant exchanges of floating currencies, more volatile than the global economy that they supposedly measure.
The new system should be distributed as far as internet devices are distributed: a dispersed heterarchy based on peer-to-peer links between users rather than a centralized hierarchy based on national financial institutions.
It should provide an automated system that benefits from Moore’s and Metcalfe’s learning curves to become more efficient with scale and capable of transactions of all sizes.
It should partake of the same monetary sources of stable value that characterize gold.
Fortunately, such a payment system has already been invented. It is set to become a new facet of internet infrastructure.
It is called the bitcoin blockchain.
The bitcoin blockchain is already in place. It functions peer to peer without outside trusted third parties. And it follows Nick Szabo’s precursor, bit gold.
Its value, like gold’s, is ultimately based on the scarcity of time.
With automation it will become capable of micropayments.
Even if bitcoin proves flawed, scores of companies are developing alternatives based on the essential blockchain innovation that can serve as a successful transactions layer for digital commerce.
The existence of such a system would enable sellers on the internet, such as content producers, to name their own prices and collect their funds directly.
And the very process that validates the transaction would prohibit spam. There would be no hassle of bartering content for advertising revenues at some aggregator such as Google.
Aggregators with advertising clout would merely add inefficiency to an automated system that rides a learning curve to minimize transaction costs.
The internet would have a money system of its own with a granularity commensurate with its huge variety and with the many gradations of value transacted as an internet user.
With a low market price for goods and services — Google and other players could charge millicents for their services and still make a mint — the internet economy would transcend its current den of thieves and hustlers of spuriously free goods.
It could attain its promise as a frictionless facilitator of human creativity rather than as a channel of chicanery.
Its markets would impel the world along learning curves of growth toward new realms of knowledge and wealth.
But the success of a new global standard of value on the internet entails a ban on taxation of internet currencies. If only government currencies escape taxation, alternative currencies such as bitcoin will always be relegated to niches.
Anyone serious about the reform of money must start by eliminating government obstruction of actual money.
Step 3: Fix the Dollar
That brings us to the third step: fixing the U.S. dollar.
How do we do this?
Monetary scholar Judy Shelton already devised a play. The chief instrument would be the creation of Treasury Trust Bonds — 5-year Treasuries redeemable in either dollars or gold.
They could be enacted either through legislation or as a Treasury initiative.
Legislation would specifically authorize the issuance of 5-year Treasury securities that pay no interest but provide for payment of principal at maturity in either ounces of gold or the face value of the security, at the option of the holder.
The instrument would be an obligation of the U.S. government to redeem the nominal value (“face value”) in terms of a precise weight of gold stipulated in advance or the dollar amount established as the monetary equivalent.
The rate of convertibility (in gold grams) would be permanent throughout the life of the bond; it would define the gold value of the dollar.
As Alan Greenspan declared in The Wall Street Journal during the previous era of monetary turmoil in 1981:
“In years past a desire to return to a monetary system based on gold was perceived as nostalgia for an era when times were simpler, problems less complex and the world not threatened with nuclear annihilation. But after a decade of destabilizing inflation and economic stagnation, the restoration of a gold standard has become an issue that is clearly rising on the economic policy agenda.”
In fact, Greenspan suggested that “Shelton bonds” would pave the path to the future…
“The degree of success of restoring long-term fiscal confidence will show up clearly in the yield spreads between gold and fiat dollar obligations of the same maturities. Full convertibility would require that the yield spread for all maturities virtually disappear.”
Of course, as Fed chairman, Greenspan went on to become a major “Maestro” of monopoly money at the Fed. And in his subsequent books he expressed many regrets and misgivings about the nature and role of central banks.
But in an era of new monetary turmoil, Shelton bonds still have traction.
In addition, as bitcoin blockchain innovations spread through the internet, borrowers could also issue bonds with a bitcoin payoff.
Denying the Prophets of Despair
As the prices of gold and digital currencies converge on their common foundation of time, these real monies could ultimately redeem the dollar and the global economy.
New systems based on gold and blockchain innovations can evolve into a new world monetary infrastructure.
Rooted in time, governed by entropy, intrinsically scarce and always reliable, the money of the future can provide for a true global economy of knowledge and learning.
Springing from the same information theory that is the basis of American enterprise, the new global money could extend the American dream of stability and futurity.
The prophets of despair, posing as economic wizards, do not have the last word. We do.
Restoring real money, we can recapture the future from both Silicon Valley and Wall Street.
Opening up the horizons of opportunity again, we can save Main Street from the menace of Monopoly money, transcending the dismal science of stagnation and decline and regaining the American mission and dream.