Reader Mail #15 - Productive Work Supports the State

I'm starting to appreciate Kung-Fu Monkey's blog. It's been promoted from my "hitlist" to my "read regularly" rotation. He's employed as a writer in the entertainment industry, which probably explains why his posts are well-written. He sounds like a closet agorist, even though he doesn't consciously know it yet. I liked this post.

Anyone who asks why the all writers don't just start their own studio system should consider this: What would your life be like if, in order to keep your current job, you suddenly had to learn to do the of every person in the company above you, and a couple of your co-worker's jobs, just to stay employed. Given the choice of that radical new existence or just, say, making a bit of noise to make sure they're fairly compensated for their work, I'd bet most people would go for the bit of noise.

The above paragraph doesn't just apply to screenwriters. It applies to pretty much every job in every industry. What Kung-Fu Monkey fails to recognize is that most of those upper-management, HR, and accounting jobs are ONLY necessary due to a corrupt economic and political system. In a truly free market, a writer or other worker could start his own business with very little required overhead.

What does a writer do? He writes stories or scripts and sells them. Why should writers have to go to the hassle of funding their own studio, just to get a fair market price for their scripts? In a truly free market, there would be lots of independent studios. Individual writers could focus on writing and selling their stories. The presence of many independent competing studios would guarantee that prices would be fair. In the present, there are a few studios organized as a cartel. That means that there's no other vendors for a writer to sell to. If a writer wants to sell to someone other than a cartel member, he has to completely create his own competing studio.

The above argument applies to ANY industry. There's nothing special or noteworthy about writers.

He had another excerpt I really liked. The writer found a way for a pilot to pay for itself, via various advertising deals paid for in advance. This was too much of a threat to existing business models.

We lay out the model. The Studio Human nods. He says "That would absolutely work."

"But it would put everybody in this building ..." He then pointed out his window to an adjacent office structure, "... and everybody in that building out of a job."

Again, this applies to reform in ANY INDUSTRY. Why should we abolish government? Think of all the people that would lose their job. They would do productive work instead.

This post on the Extrapolated Everyday Bull**** Comparison promoted Kung-Fu Monkey from my hitlist to my "read regularly" list.

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There's a lot of phony anarchists out there. On "Human Iterations", the author equates agorism to cheating on your taxes. That's like saying it's immoral to prevent other people from stealing from you. If you're really an anarchist, you should also believe that all forms of taxation are theft.

Without taxes, there is no government. Without the ability to use violence to steal, there is no government.

If you want to fight the government, you have to fight economically, because that's the only method that has a chance of succeeding.

That author didn't have comments enabled on his blog, so I asked him by E-Mail. He said it was meant as a joke. However, he said that other means besides economics are going to be required to achieve change. He said that, even en masse, people refusing to pay taxes wouldn't hurt the government. Really? Imagine 100 million americans refusing to pay income taxes, and having the spare resources to organize their own private police force? That would pretty much be the end of the government.

If you're not going to fight economically, what is left? What else are you going to do, stand around getting tasered?

Personally, I'm much more interested in the economic issues. I think that economics is the key to everything. Many people think "economics is nonsense", because the economics taught in state-funded schools REALLY IS nonsense. Could you imagine what would happen if university economics courses did a serious analysis of the negative effects of taxation and a corrupt monetary system?

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Kevin Carson says that he's concerned that his web writings may someday cost him his job. A potential employer who Google searches his name may refuse to hire him based on his political views. Dilbert's author lost his regular job based on his comic strip.

If loss of job is a concern, why not blog under a screen name instead of your real name?

After all, isn't an anonymous online identity as "legitimate" as your state-given slave name?

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I read a post on the Ron Paul forum saying that Ron Paul's campaign is strangely appealing to white nationalists. I've had my blog quoted on all sorts of weird discussion forums. I've been cited on pro-free-market websites and on pro-communist websites.

It's amazing how ethnic group XYZ thinks the government is discriminating against them in favor of group ABC. At the same time, ethnic group ABC thinks the government is discriminating against them in favor of group XYZ. The skill and extent of the brainwashing is impressive. Of course, the handful of people who control the government are discriminating against everyone but themselves.

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I found this thread on the Ron Paul Forum to be interesting. The US government admits to planting spies on Arabic blogs, to disrupt anti-American debate. Of course, isn't it obvious that there are also people disrupting debate on the Ron Paul Forum?

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I really am appreciating Google Reader. If you get my blog via the RSS feed, you should check out "FSK's Shared Items" if you haven't already. Google Reader allows me to share what I think are the best articles from other blogs I read. That has its own separate RSS feed.

I really like the "shared items" feature of Google Reader. It's an excellent way for people to share the best articles in other blogs. Everyone should have a Google Reader "shared items" widget on their blog.

I also use Google Reader to keep track of my blog "hitlist". I keep track of when I added the blog to my hitlist, along with how many times I decided to "share" a post from that blog. The blogs with the most "shares" get promoted to my regular reading list. The others get demoted to the "honorable mention" or "reject" category.

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According to Google Analytics, someone in Novosibirsk, Russia is an active reader of my blog now. Is that person working on a Russian language equivalent of the content from my blog?

Unfortunately, on the Map Overlay screen, Google Analytics doesn't give a breakdown of Absolute Unique Visitors by region. I can't tell if it's the same visitor a bunch of times, or several different visitors.

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I was watching some of the commentary on the writers' strike. One person suggested that so many people are willing to write for free/cheap, that it makes it harder for the professionals.

Is it immoral for me to blog for free? Of course not, I can do whatever I want with my spare time. Am I undermining the "professional writers" in newspapers like the NY Times? I sure hope I am! If they are so corrupt that they can't write about the truth, then they deserve to lose their market share.

Hopefully, other people benefit by reading my blog. If I educate enough other people, there may be a direct personal benefit for me later. If blogging for free is an investment in the future, then it might make economic sense to do it. There's no chance that a mainstream media outlet would hire me to write an article on the Compound Interest Paradox or agorism. If they're going to be that corrupt, then they deserve to have their business model undermined.

Another commentary on the writers' strike suggested another problem. Due to the "dumbing down" of mass culture, the most talented writers are forced to work as amateurs for free. Corporations intentionally dumb down their product. However, wouldn't it be practical for someone to make a TV station that catered to the most intelligent 1% of the population? It seems weird to me that niche product hasn't really materialized, unless there were other factors manipulating the market. If there's a Food Network, how come there isn't also an Anarchists' Network?

On The Reason Anarchists Are Weak, Ineffabelle writes:

Agreed with this post, but as a corollary:
The reason for the enormous level of violence directed at "anarchist" and "anti-globalist" protestors is not ONLY to discredit them. You wouldn't need a small army of riot police to take down a handful of thugs, some of whom were red-market agents provocateur.
It is to psychologically brutalize the protestors in general, especially the more non-violent ones, in order to infect them with violent tendencies. (if you notice any accounts of protests that got attacked by police they always go after women and more timid/frail people much more brutally. The "tough guys" are usually arrested and let go later, with little interaction. ) And people with that psychological infection are more easily "turned" later on, because they are already compromised.

I think the key is to distract people with pointless protest methods.

People think "I was injured by a policeman. I'll sue the government!" That's a waste of time.

"The government is evil. I'll participate in a peaceful (or violent) protest!" That's a waste of time.

IMHO, the *ONLY* protest mechanism that works is the agorism solution. Only by creating wealth outside the control of the state, refusing to pay taxes, and switching to a fair monetary system, do you undermine the evil power of the state.

Actually doing this is INCREDIBLY difficult. As a stopgap measure, I would advocate spending 5-10 hours/week building an alternate economic system, while still keeping your regular slave job. Personally, I'm going to stick to blogging until I can find some in-person trading parters.

This is exactly what happened in the late 60s/early 70s.
When the hippies were peaceful dropouts, they were actually much more of a threat to the establishment than when they started "fighting back".
The establishment wants you to "fight", because that's a battle they can win, and psychologically, they can absorb you later when you're disillusioned.

If you fight back violently, it's very easy to arrest and jail you. If you resist nonviolently, it becomes harder for a judge and jury to convict you without looking foolish themselves.

I'm not sure what would happen if there was massive economic resistance. That hasn't been tried yet. Are the bad guys going to start arresting people for working?

Were hippies building their own alternate economic and political system? I never heard about an underground hippie economy. If they weren't doing that, then they were not a threat.

If you fight violently, you're fighting on the establishment's terms. They have more and better-trained police than any group of amateurs could have.

If you fight in a government court, you're fighting on the establishment's terms. You aren't going to achieve real change by fighting in a government court.

People need to realize that the only way to defeat the bad guys is to create wealth that they can't easily steal.

Agorism works because it peacefully competes with the establishment.
At some point an agorist organization might employ violence, but only rigorously in self-defense, and only in situations where it is feasible to do so.

Agorism has not been proven to work yet. After all, there's still a red market! However, I think that it would be hard to get a jury conviction in a case of agorist grey market activity. In the USA, the presumption still is that whatever you do in private is none of the government's business, provided you stay away from forbidden activity like drug dealing and prostitution. I haven't seen a lot of stories of agorists getting arrested, going to juries and being convicted or acquitted, so it's hard to be sure.

Agorism is the most promising philosophy I've found. I think that 1%-2% of the population need to be active participants before I would call it a success. Once you have a certain critical mass, the growth will be exponential.

On Reader Mail #12 - Are You Sure You're an Anarchist?, Ineffabelle writes:

There's quite a bit of good stuff in this one.
Personally at my job I set up point of sale systems and write support software for small businesses, mostly restaurants that cater to non-corporate communities in Brooklyn. So I actually do think I'm producing honest wealth.

This is the exact opposite of the point I made in that post.

I can work for a financial firm in good conscience, knowing that my job is completely and utterly pointless. If my job is useless, I'm not contributing to the evil power of the state. My salary is merely a share of stolen government property. All government property is unowned property, so it isn't immoral for me to claim a share of unowned property.

If your work is productive and useful, then you are supporting the evil power of the state. Do you pay income taxes? If you live in NYC, there goes a direct 50% to the evil power of the state: 25% Federal, 15% Social Security and Medicare, 10% state and city taxes. Plus, there's the effect of inflation eroding your salary and savings; your pay increases probably don't keep up with the true inflation rate. The state gets paid more for your labor than you do! Your managers (and their managers) are paid partially based on your productivity, and they also pay income taxes. The owners of your employer's business also pay taxes on the return on their investment. If the owners have accepted "venture capital", then their business is ultimately owned and controlled by banks.

Unfortunately, by doing work that is actually productive and useful, you're supporting the state more than someone whose work is pointless! You support the red market more than an IRS agent does!

Unless you're doing useful and productive work OFF THE BOOKS (agorist-style), the very act of working supports the red market! That's the whole problem with the current economic system. Literally, you can't work without supporting the bad guys!

The restaurant industry has resisted the cartelization that plagues other industries. A skilled cook working with fresh ingredients will always outperform pre-prepared and re-heated food, at only a slightly higher cost. If I have a choice of spending $6 for a fast-food meal or spending $10 for a decent hamburger, I and many other people will usually choose the latter. This guarantees that, in spite of state regulations, there will always be a certain number of small restaurants.

Food cost must necessarily be fixed and low, because otherwise the poor people would start having food riots!

I am still economically constrained by the effects of our financial system on the labor market however, which leads to a sort of indirect exploitation. My boss is able to get much more production out of me than I am able to get in wages from him.

The state isn't just stealing from you directly via taxes. The difference between the fair value of your labor and your actual salary also accrues primarily to the state. The state restricts your ability to find a job where you could be more productive.

The usual retort is "If you don't like it, start your own business", but there are many obstacles to starting a successful business. If you need to raise millions of dollars to get started, only someone with the right connections has a chance of success. In software, there have been occasions where a handful of people started a business that became spectacularly successful. However, the terms of your employment contract probably says that all software you write when not at work belongs to your employer. Further, Amazon.com was not the first online bookstore and eBay was not the first online auction house; their political and financial connections enabled them to succeed where others failed.

Even if I managed to write some "killer app" and start my own website, I would immediately find lots of imitators from well-funded opposition. They would file a bunch of patents, and I would be unable to improve my business without running afoul of their patents. Even if I patented my own business model, I still would need to raise money to apply for the patent and then fight patent lawsuits.

One of the problems that agorism faces is initial capitalization, which is why it hasn't taken over yet. Saving currency doesn't work, and a lot of profit from isolated black market operations gets eaten by the cost of self-protection/surreption. (One of the problems with wholesale black market operations is that they favor the violent, due to a lack of private protection agencies)
Agorists don't have a safe information network yet in order to coordinate their information and gain larger markets, make arbitrage gains, etc.
As the pink and red markets fail more, more gaps will open for agorist actions to take place, for instance grey market protection services and encrypted/anonymous networks and such.
In the mean time, there are some simple rules of thumb for would be agorists to help create an initial capitalization that might help jump-start things. I will post my ideas on this on my own blog tonight.

Raising capital for an agorist business is hard. The best way to get started is to find something you can do for 5-10 hours/week, and then pay for growth from earnings. Eventually, you would be able to quit your regular slave job.

Saving Federal Reserve Points is useless. If you hold Federal Reserve Points, you're just losing your savings to inflation. If you trade with the state's worthless paper money, you are indirectly supporting that state. Actually, you could trade with Federal Reserve Points, provided you immediately spent them buying a tangible asset. It's tricky, because if you work off the books, you can't deposit that cash in your bank account without getting caught. You'd have to find a gold or silver coin dealer that accepts cash. A licensed gold or silver gold dealer probably is obligated to report to the government someone who makes frequent cash purchases, so you'd have to buy from someone you trusted.

If you enter any long-term contracts, you should insert gold clauses to prevent the value of the contract from being eroded by inflation. Ideally, agorists should always quote prices to each other in real money (gold or silver). They can settle in fiat money, based on the current spot price. If you think of your salary in terms of gold or silver, it's much more meaningful. If you make a graph of "salary divided by gold price", almost everyone would find it to be a decreasing function.

There are problems with using gold and silver as money. It's very hard to trade back and forth between physical metal and Federal Reserve Points, without paying a substantial transaction fee. If you use an on-the-books coin dealer, you risk having your transactions reported to the red market. Most businesses still expect to be paid in Federal Reserve Points, so if you have physical gold or silver it will be hard to make purchases outside the agorist community.

I've been considering that as a possible agorist business, opening an coin dealership. I'd probably have to offer a wider bid/ask spread than the online dealers offer to cover my risk, but I would offer to make anonymous cash transactions to trusted trading partners. In the present, I have zero trusted trading partners! I read that in-person coin dealers offer pretty high bid/ask spreads, so perhaps I could offer a wider bid/ask spread than online dealers, but offer a tighter spread than an on-the-books in-person dealer.

For example, suppose someone wanted to buy an ounce of gold from me, offering to pay $880 cash for an anonymous transaction. I already have $880 in my bank account, so I could buy an ounce of gold legally online for $860 and give it to the buyer, booking an $20 profit. I can't deposit that $880 in my bank account without triggering government spying regulations. However, suppose I normally spend $500/month on purchases. For the next 2 months, instead of using my ATM, I spend the money the anonymous purchaser gave me, thereby "laundering" it. If I had friends and relatives helping me, I could handle larger transactions. For example, if someone wanted to buy 10 ounces of gold from me with cash, I could repeat the above process and have 9 friends help me.

I could do the converse if someone wanted to sell me an ounce of gold for cash or sell me 10 ounces of gold. I can withdraw $850 cash from my checking account without arousing suspicion. Unfortunately, I can't withdraw $8,500 cash from my checking account without arousing suspicion, but if I had 9 friends helping me we could withdraw $850 each. If I seriously was running an agorist coin dealership, ideally I would have a stream of buyers AND sellers, and hopefully I could match them up. I could even keep track of bids and offers and open my own exchange. I could say "Person #1 is willing to buy 10 ounces of silver for spot. Person #2 is willing to sell 100 ounces of silver for 1% over spot. Person #3 is willing to buy 1 ounce of gold for spot, etc."

It really isn't practical to open an agorist bank. The state distorts the credit and capital markets too much. An agorist bank that deals in Federal Reserve Points would not be able to make loans at a practical rate. A corporate bank can issue loans at 6% while inflation is 15% because the bank is allowed to borrow from the Federal Reserve at 4.5% and use leverage ratios of 20x or more. An agorist bank would not be able to borrow from the Federal Reserve. An agorist banker who issued Federal Reserve Point-denominated loans at 8% or 10% would still be losing ground to inflation. The would-be agorist would be better off funding his business from personal savings or a home mortgage, instead of funding it by borrowing from another agorist.

Suppose I decided to offer a gold-denominated bank. I would lend gold, or gold-denominated debt. In other words, if you borrow an ounce of gold, you can borrow a physical ounce of gold or the equivalent in Federal Reserve Points based on the current spot price. However, inflation is around 15%. If you borrow gold-denominated debt, you'd be borrowing at a rate of 15%, adjusting for inflation! The borrower can get better terms from a corporate bank, by mortgaging their house. I couldn't even offer a warehouse service to depositors, because I could not offer assurances that the red market won't raid me and steal my metal. At best, I could offer a distributed network; instead of storing all my metal in my residence, I can store some in the residence of each of my friends. If the network has 100 or more people, it becomes impractical for the red market to raid them all simultaneously.

A corporate bank can rely on state violence to help it collect if a debtor defaults. The cost of debt collection is externalized from the bank to the state. It's Distributed Costs and Concentrated Benefits again! An agorist banker would be lacking private justice systems to help him collect his debts. That's the reason disputes among drug dealers always are settled with violence and bloodshed; they're locked out of state justice systems for settling disputes, and private alternatives haven't evolved yet.

An agorist dealing on a small scale, such as manufacturing and repairing air conditioners probably would be able to resolve his disputes peacefully. Just like in the BitTorrent economy, someone who repeatedly defaulted on their promises would find themselves banned from the community. It is possible to resolve disputes nonviolently.

What a horrible economic system we live in, where the best safe rate of return an investor can hope for is 0%, by buying and holding physical metal! If you had enough laundered money, you could buy land and rental properties. However, land comes with property tax obligations; you don't really own your land!

Ineffabelle mentions that she writes software. It is possible to write a P2P software network that would enable an agorist economy; all transmissions would be encrypted by default, and it would have to be heavily decentralized, even more so than BitTorrent. I already outlined a specification. At this point, it's probably more beneficial to educate people than write software tools that would be useful.

On The Social Credit Monetary System, Ineffabelle writes:

The SCMS could also operate by a series of circulating IOUs, with various trust agencies competing with different ratings systems. Redemption would be in either other IOUs or partial redemption of the services and goods promised by that IOU. You could write an IOU for silver if you wanted to, or gold, or shoes or shirts.
As far as any issuing authority goes, any problems of interchangeability could be solved by competing clearing houses, which might operate alongside the "trust" agencies, only they would literally exchange people's IOUs at a rate determined by their preferred trust ratings.

It's hard to circulate paper, because you may not trust the issuer. If you circulate paper, there's a counterfeiting problem. I think electronic credits is better. Pretty much everyone has a computer with Internet connection.

The problem with writing an IOU for a shirt is that not all shirts are equal. Metal coins make great money because they are fungible. Every 1 ounce .999 fine silver coin is equivalent to every other 1 ounce .999 fine silver coin. If you give me an IOU for a shirt, and I know you can sell shirts for 1 ounce of silver each, I would prefer to accept an IOU for an ounce of silver instead of an IOU for a shirt. If I trust you, I won't need to ask for physical silver unless you had an imbalance of trade or I needed to trade with strangers. If I ask a stranger to accept one of your shirts, an IOU for a large shirt won't work if he's medium. I know that physical silver is always tradeable.

That's the reason the free market selected gold and silver as money before the state started interfering with money. It's very easy to trade gold or silver, or trusted promises for gold or silver. It's very hard to trade other barter credits, unless the counter-party wants exactly what you have. Other standards, such as "hours of labor" also fail because everyone's labor is not valued equally.

Until the state is defeated, any implementation of a fair monetary system has to be completely decentralized. Otherwise, the centralized vendor becomes an attack point. The key is to write software that enables the average person to behave correctly without much effort. Besides, the first participants in an agorist economy would probably be people of above-average intelligence.

Clearing houses would probably assure the transactions of all its members. You would only need a clearing house when dealing with a stranger. If your partner is trusted, you can just deal with them directly. For example, if you're trading with a stranger, you need to be sure he isn't an undercover red market agent. The clearing firm would be taking responsibility that the people it's representing aren't really undercover cops.

On The Subprime Mortgage Problem was Created by Bankruptcy Reform!, Ineffabelle writes:

Although in the long run, mortgages are better as a default for the banks, because they can foreclose on them. I know that that causes liquidity problems higher up the chain, but some people will probably create firms that buy defaulted mortgages at a discount and foreclose on them as their business model.

A default on a credit card leaves a bank with nothing. A default on a mortgage leaves a bank with a house. If the bank is large and diversified, it will hold onto the house until the next boom phase of the business cycle, when it can sell the house at a profit.

I read that in house foreclosure auctions, the bank will almost always place a bid equal to the value of the remaining loan amount. This guarantees that the loan portfolio doesn't show a loss due to a default. This means that the bank is not forced to write down other shaky mortgages in its portfolio. The bank may take a loss on its purchase of the house, but that falls under another accounting rule. Besides, the bank can hold onto the house until the next boom phase of the business cycle and sell it at a profit then.

On the Ron Paul Forum, someone asked:

Hasn't Congress violated its charter to regulate the value of money:

Powers of Congress:

To coin Money, regulate the Value thereof, and of foreign Coin, and fix the Standard of Weights and Measures.

Technically speaking, Congress has not violated its charter by setting the value of the dollar.

Congress has chosen to set the value of the US dollar at zero. There is nothing in the Constitution that says that money must have a value greater than zero.

This response is half-joking, half-serious. The official opinion of the Supreme Court is that the Federal Reserve does not violate the Constitution, so setting the value of money to be zero must be acceptable.

On Barry Bonds and Abuse of Government Power, Steroid Nation says:

Actually MLB memos indicate steroids and PEDs were prohibited as early as 1991.

http://grg51.typepad.com/steroid_nation/2007/09/illegal-perform.html

http://www.typepad.com/t/app/weblog/post?__mode=edit_entry&id=41654308&blog_id=372688

http://sports.espn.go.com/espn/eticket/story?page=steroidsExc&num=19

Furthermore, the drugs that Bonds allegedly used are illegal as PEDs.

There's a blog dedicated to athletes and steroids? That is amusing, surprising, and unsurprising at the same time.

The second link you gave me is broken. If you're going to post a link to your own blog, can you at least post it in user mode, not in blog admin mode?

I didn't know that baseball had an anti-steroid policy back in 1991. The mainstream media sources I read indicated that baseball didn't have an anti-steroid policy until the players' union renegotiated their contract a few years ago.

Another interesting idea mentioned in those links is "steroids are illegal, so MLB didn't have to specifically ban it". Player contracts probably give the team and league the right to discipline players if they do something illegal.

However, that does not invalidate the fundamental point of my post. What right does the government have to ban people from using steroids? Even if they are harmful, why should the government ban them from being used? It's irrelevant that their primary use is by athletes looking for performance enhancement contrary to the rules of their league.

This enforcement action was paid by money stolen from me by taxes. Why does MLB get to externalize its contract enforcement costs on the government? Why should the government subsidize MLB, in helping it resolve a dispute with players who used performance enhancing drugs? Why can't MLB pay the cost of investigators checking into players breaking its contract?

Why should I be forced to subsidize MLB?

Why should money stolen from me be used to resolve a private dispute between MLB and Barry Bonds? If you figure that over $10M was spent on the investigation so far, that means I personally paid $0.04 in taxes to fund the investigation. You might say "so what, $0.04", but when you multiply it by all the inappropriate government actions, it's a huge amount of money. It's Distributed Costs and Concentrated Benefits.

My point is that MLB should be forced to directly pay the cost of enforcing its contract with its players. Why should MLB get to force me to pay for it by taxes? It's not one isolated incident. It happens over and over again.

In a truly free market, MLB should be forced to hire private investigators and a private police force to make sure its players don't use performance enhancing drugs.

On OPEC Currency Advice, an anonymous reader says:

Makes a change seeing the truth so clearly when compared to mainstream media, where 'serious' current affairs programs avoid such simple and obvious 'news'.

Obvious news goes unreported by mainstream news sources. "If you want a sound and stable currency, use gold or silver." is kind of simple. Of course, the "official" viewpoint is that a gold or silver standard has been roundly discredited.

Historically, every unbacked paper currency has collapsed in hyperinflation.

If you like ideas censored by mainstream media, here is another: "Health care is expensive because the government artificially restricts the supply of doctors." No mainstream media source will ever discuss the effect of government restrictions on the supply of doctors. For example, if an insurance company is paying too much on doctor salaries, they should be able to hire and train their own doctors, without approval from the AMA.

On OPEC Currency Advice, Lexx says:

The European Central Bank only has 500 bil reserves so you are right about the backing of the money.

But with oil prices rising and a dropping dollar the Euro is the stronger currency stronger at the moment.

Switching to the Euro by the OPEC would only make the Euro stronger imho.

I don't follow the Euro as much as I follow the US dollar. Nobody even *KNOWS* how much gold the US government has. Allegedly, the US gold supply has been unaudited for decades! Ron Paul says that he would do a full audit of US gold inventory, if elected President.

You have to be careful when central banks report their gold inventory. If the gold has been lent out for short sales, central banks still sometimes claim that gold as an asset on their balance sheet! You would have to carefully read the EU central bank financial statements to figure out how much gold they ACTUALLY have. They might not even disclose gold leases. Why should the central banks have honest accounting?

I know without even looking it up that the Euro is unbacked fiat debt-based money. *ALL* the major world monetary systems are fiat debt-based money. There is no country anywhere that has a fair monetary system and fair taxation system.

If OPEC switched from the dollar to the Euro, that would put inflationary pressure on the dollar and deflationary pressure on the Euro. OPEC member countries themselves would not benefit much. All that means is that the EU instead of the USA would receive a massive seignorage subsidy.

The problem is that OPEC countries agree to sell oil at a fixed dollar price years in advance. Inflation makes these futures contracts worth a lot less. An OPEC member country doesn't have to sell oil futures; they could sell all their oil on the spot market. If OPEC member countries didn't sell any futures, and they IMMEDIATELY spent their dollars on tangible assets, they wouldn't be screwed over by inflation of the US dollar.

They could, in theory, achieve the same result by buying Euro futures or gold futures, so they would be hedged against inflation of the US dollar.

I don't consider the inflation rate of the Euro relative to the dollar to be meaningful, because they're both unbacked fiat money. It's like asking what the value of zero divided by zero is!

In the present, the Federal Reserve is much more concerned about bailing out large banks in the USA, than it is concerned about OPEC countries losing to inflation.

Wow! Two comments on the same post! That's a lot by FSK standards. I look at other blogs and see 100+ comments.