Friday, December 31, 2010

John Zube's Bibliography on Monetary Freedom

John Zube, a German-Australian libertarian activist, is the one who has saved the idea of Panarchy from oblivion and has promoted it in the most continuous and consistent way. John's essays are listed here and he is also tirelessly compiling a comprehensive encyclopedia on free banking with plenty of information useful to all those who want to go beyond the tyranny of legal tender and state banking. 

My specific place in John Zube's Bibliography on Monetary Freedom is reproduced below with appreciation:


MATONIS, JON W., A Critique of Marx's "The Power of Money in Bourgois Society in the Economic and Philosophic Manuscripts of 1844". 16 Aug. 85, 8pp. in PEACE PLANS 810.

MATONIS, JON W., Anarchy and Money. Short statement only, in PEACE PLANS 645. 1984 manuscript, 20pp, with select bibliography, 48x, in PEACE PLANS 740.

MATONIS, JON W., Announcement for Articles & Outline for THE JOURNAL FOR MONETARY FREEDOM. 48x, in PEACE PLANS 740.

MATONIS, JON W., Digital Cash and Monetary Freedom. - [1995] - Digital Cash and Monetary Freedom by Jon W. Matonis. - - & on xyz other URLs. Matonis advocates a privately-managed digital cash system. The Internet is a new world and a new world demands a new currency - a new standard of value. This standard should be dictated by the market. - Roy Davies

MATONIS, JON W., Hint on a monetary penal clause in U.S. legislation. 1/2 page only, in PEACE PLANS 25.


MATONIS, JON W., Issue Papers 1 & 2. 2pp, on Alternative Currencies, Issue Paper 3: Free Banking/Free Money. 6pp, 29x, in PEACE PLANS 741. No. 4: The Direction of the Free Money Movement. 12 June 88, 2pp, in PEACE PLANS 810.


MATONIS, JON W., The Direction of the Free Money Movement. Issue Paper No. 4, 12 June 88, 2pp, in PEACE PLANS 810.

MATONIS, JON W., The Political Appropriation of the Monetary Unit. 1985 manuscript. - shortly mentioned in PEACE PLANS 645. Matonis tried to established an Institute for Monetary Freedom and a journal. As far as I know, nothing has come of these plans. The reason may be that there is still no directory to all who are strongly in favor of this liberty. - J.Z., 7.6.98. - The full 1985 manuscript, 50pp, 48x, in PEACE PLANS 740.


MATONIS, JON W., to WATNER, CARL. 2 Nov. 86, 1p., in PEACE PLANS 740.

MATONIS, JON W., to ZUBE, JOHN & from J.Z., 18 July - 8 Aug. 86. 48x, in PEACE PLANS 645,

MATONIS, JON, Directory of Journals Representing Free Banking. 1990. 20 entries, 1/2 page, in PEACE PLANS 1745-1748, March 02, p.780. - I have not yet extracted these and references from all other PEACE PLANS files for this bibliography. One person can only do so much. - J.Z., 30.6.10.

MATONIS, JON, The Land of Vespucci. Jan. 26, 1983, 3pp, in PEACE PLANS 1745-1748, March 02, p.650. - Capital goods are not a good basis for the issue of currency. Even 100% covered gold certificates still need "shop foundation" - for if you convert them into their metallic cover, you can neither eat nor drink it. - J.Z.

Venezuela to Devalue Currency Again

By Kejal Vyas and David Luhnow
The Wall Street Journal
Friday, December 31, 2010

CARACAS—Venezuela will devalue its "strong bolívar" currency on New Year's Day, the government said Thursday, the second such devaluation within a year and at least the fifth major devaluation during the decade-long populist government of President Hugo Chávez.

Hugo Chávez, center, visits a homeless shelter in Caracas this month. Devaluation is likely to spur inflation, hitting the poor—a key constituency.
News of the devaluation came just after the central bank said the Venezuelan economy contracted 1.9% in 2010, the second consecutive year of declining output in the oil-rich nation after a 3.3% decline in 2009.

Both pieces of news suggest Mr. Chávez is having an increasingly difficult time balancing his populist policies with economic reality, according to economists. His government's widespread nationalizations of private industry have sapped economic growth, while public spending has sparked inflation that the government has tried to contain by measures such as price controls.

One such price control is the exchange rate. In January 2010, Mr. Chávez's government devalued the strong bolívar from its previous official rate of 2.15 per dollar to 4.3 per dollar. To help the poor, however, the government set up a stronger rate of 2.6 per dollar for imports of food, medicine and other essentials.

On Thursday, the government said it would scrap the 2.6 rate—and keep the higher 4.3 per dollar rate.

It will also keep intact another exchange rate, called the SITME, of 5.3 bolívars per dollar, which is used to provide companies with limited access to greenbacks.

The move will help "simplify transactions," Planning and Finance Minister Jorge Giordani said in a news conference broadcast on state-run television. He added that the changes will help Venezuela achieve its target of 2% economic growth for 2011.

Economists were skeptical, saying the measure will do little to tackle the country's financial constraints.

The devaluation is aimed at strengthening the economy and public finances by providing more bolívars for every dollar of Venezuelan oil exports.

Venezuela's finances have been stretched by increases in public spending, even as oil prices have weakened in the past few years.

In addition to the devaluation, Mr. Chávez is planning to push through an increase in the value-added sales tax in coming months to lift government revenues. Shoring up public finances would also improve Venezuela's capacity to repay its debts.

The devaluation, however, will add to inflation by raising the cost of imported goods. Venezuela's annual inflation rate of 26.9% is already among the highest in the world.

Barclay's Capital estimated that the latest overall devaluation of the bolívar was about 23.5% of the average weighted exchange rate. Goldman Sachs estimates about 40% of dollar sales in Venezuela have been at the stronger rate of 2.6 bolívars to the dollar.

Rising prices are likely to hit the poor hardest, making life more difficult for Mr. Chávez's key constituency. Economists had been expecting some kind of devaluation, saying Mr. Chávez would want to take a political hit well in advance of 2012 elections. The former army officer, in power since 1999, is running again.

Ordinary Venezuelans reacted to the move with a mixture of dismay and resignation. "We don't have an economy based in reality," said Francisco Holinek, a furniture salesman in Caracas, the capital.

Despite the coming devaluation, the bolívar will still be overvalued against the dollar, economists say, leading to a scarcity of dollars. The lack of dollars at official rates has led to a thriving black market, where the dollar currently fetches more than 8 bolívars.

"The government will continue to tightly ration foreign dollars to guard reserves," said Tamara Herrera, an economist with Venezuelan research group Global Source Partners.

The new devaluation will do little to address Venezuela's underlying economic problems. In the past few months, Mr. Chávez has stepped up the pace of nationalizations, further weakening the private sector.

A long recession has done little to damp the president's antics on the global stage. He recently refused to accept the credentials of the man nominated to be U.S. ambassador to Caracas, causing Washington this week to revoke the visa of Venezuela's U.S. ambassador. Analysts say the tit-for-tat isn't likely to affect Venezuelan oil exports to the U.S.

Populist policies are returning to haunt some of Mr. Chávez's allies, too. In Bolivia, President Evo Morales is facing widespread street protests after cutting back on fuel subsidies. Mr. Morales explained the move as an attempt to boost domestic fuel production, which has lagged since he effectively nationalized the energy industry in 2006.

For further reading:
"Chavez Devaluation Too 'Timid' as Bolivar Remains Overvalued, Goldman Says", Bloomberg, December 31, 2010
"Venezuela's Chavez devalues bolivar currency again", Reuters, December 30, 2010

Sunday, December 19, 2010

Are the Central Banks Running a Fractional Gold System?

By Alasdair Macleod
Thursday, December 16, 2010

This thought is prompted by a forensic study of the Bank for International Settlements’ records and accounting procedures with respect to its dealings in gold, which was presented by Robert Lambourne to the Gold Symposium in Sydney on 9th November. The link to his report is here. Lambourne points out that the BIS was founded in 1930, when settlements between central banks routinely involved gold, and the primary function of the BIS was to facilitate these settlements without the physical transfer of bullion. This involved gold accounts being maintained at the BIS for gold owned by central banks, with other central banks at the main depository centres. Lambourne cites the example of the pre-war German Reichsbank, which held gold through the BIS in Amsterdam, Berne, Brussels, London and Paris.

Central banks were offered two different types of account at the BIS, earmarked and sight: earmarked accounts recorded gold held separately and specifically for a central bank, and sight accounts were non-specific. Earmarked gold is allocated, while sight gold is unallocated; earmarked is custodial and sight is co-mingled.

The flexibility of the system allowed a central bank to diversify its gold reserves in a number of centres through a politically neutral institution, and it made sense to allocate some of this into a fungible account to settle transactions with other central banks. But that was pre-war, and before the US, with the co-operation of the IMF and other European central banks, demonetised gold.

Today, the BIS still operates earmarked and sight accounts for central banks, but crucially, rather than have the bulk of gold in earmarked accounts with a smaller float in fungible sight accounts, the bulk of central bank gold is now held in unallocated sight form. Lambourne brings this point out in his analysis of the 2009/10 BIS Annual Report, which shows in Note 32 that the BIS holds only 212 tonnes for central banks in earmarked accounts, and 1,704 tonnes on its balance sheet in sight accounts.

Furthermore, the BIS accounts disclose that almost all of the 1,704 tonnes is held at central banks in unallocated sight form. This confirms that the central banks themselves also operate sight accounts.

So to summarise so far, out of 1,912 tonnes at the BIS, 90% of it is now unallocated and nearly all of this gold is held in unallocated accounts at other central banks. While this sight gold at central banks is technically deliverable on demand, there is no apparent requirement for them to actually have it. It is therefore entirely possible for a central bank to retain only a small portion of the total owed on sight accounts, which after all is what banks have done from time immemorial.

The temptations to use physical gold from these unallocated sight accounts to supply the market have been enormous, given the progressive demonetisation and discreditation of gold by the BIS founder members. It is easy, without proper audits, to keep these activities secret from the markets and even from other central banks not in the inner circle. It would be very interesting to know, for example, the terms under which India agreed to buy 200 tonnes of gold from the IMF. Did she actually take delivery into an earmarked account, or was it a pure paper transaction across sight accounts? If she had insisted on an earmarked account, would the deal have gone to someone less picky? Was the IMF gold itself earmarked or sight, existing or non-existent? As an outsider from the inner BIS circle the Bank of India is not in a position to suspect she may be the victim of a pyramid scheme run by her superiors; nor indeed is any other of the minor central banks with sight accounts in London, New York or Zurich.

We must hope for the sake of financial stability that such suspicions are without foundation, but this hope is untenable while the major note-issuing banks refuse to provide independent audits of their activities. If these central banks have been operating a fractional sight system, then it could explain how they have managed to supply so much bullion into the markets while appearing to maintain their official reserves.

China and Russia must be watching this with great interest. We can assume that their intelligence services are more aware of the true position than the general public, and if they also conclude that the Western central banks are running a fractional system using sight accounts, this knowledge hands them great economic power.

It is relevant to bear this in mind, because it will condition the US’s response to what is developing into a destructive gold crisis. Political and strategic considerations will have to be weighed as well as purely financial and practical ones. It would be downright stupid, for example, for the US to confiscate privately owned gold, without international agreement from Russia China and India as well as the Europeans to take similar action. And how co-operative would any nation be when they discover that the gold they thought they had at the BIS, the Fed and the Bank of England has actually vanished?

This is important because the basic problem is that government and banking debt around the world are both rapidly moving towards default, and since governments are guaranteeing the lot, the pace of monetary creation is accelerating. The consequence is that the gold suppression schemes, which have existed for the last one hundred years in one form or another, are finally coming to an end. We are trying to guess how dramatic that end will be. It will be difficult enough to stop a run by unallocated account holders on the bullion banks, without forcing a cash-payout amnesty. But if the central banks themselves cannot supply the necessary bullion to prevent this, the prospect of a total collapse of paper money will be staring us all in the face.

Sunday, December 12, 2010

Modern Hawala: Do You Need to Transfer Money Privately?

By Bill Rounds, J.D.
Thursday, September 24, 2009


That’s hawala, not koala and there are many hawala benefits. For those unfamiliar with a hawala system, a hawala money transfer is a way to send money via a hawaladar or hawaladars, usually across long distances, at a far lower cost than sending money by wire or bank transfer. Hawala banking with hawala transactions and hawaladars have been used for thousands of years, mostly among African, Asian and Middle Eastern cultures. Although the advent of modern banking has made hawala banking less common than before, the introduction of severe restrictions to banking privacy through legislation and enforcement has made a hawala system via a hawala network is a very attractive option again for privately transferring money.

The transfer of money via a hawala banking system is extremely private and is unlikely to be reported or discovered by anyone other than the hawaladar, the transferor and the tranferee. In a world where bank privacy is increasingly hard to find, this is a welcome feature of hawala banking. In the hawala system, hawaladars are the brokers or facilitators of the transaction. This transactional privacy has made hawala banking an evil villain for enemies of personal privacy and financial privacy. False and exaggerated allegations of money laundering and terrorism funding through hawala money transfers and hawala transactions have incorrectly characterized the hawala network while hawala banking is actually the most efficient and ancient of all money transferring systems.


The most common use for a hawala system is to send hawala money transfers to another person who is at a great distance from you. For hawala transactions, the money sender contacts a local hawaladar and gives him the money he or she wants to send. The hawladar then contacts another hawaladar in the destination city for the money and arranges to have the hawaladar in the destination city turn over the money to the recipient, minus a small fee. In the hawala transactions no money actually physically travels the distance at that time but the hawaladars keep a tally of the total owed and then settle the difference at a later date. The exact methods can differ greatly from hawala network to hawala network but this is the general overview of how hawala banking works.


The hawala system can exist outside of the traditional legal system because hawaladars generally engage in hawala transactions with other hawaladars based on a long relationship of mutual trust, often built up over generations of hawaladars. Thus with hawala banking there is no need for formal legal protection, which is expensive, and there is a very low risk of default when you transact with such well known individuals.

This hawala system is by far the most private form of transferring money. The entire hawala transaction can occur over a couple of phone calls, emails, text messages, or instant messages. Although the United States requires registration of these kinds of hawala banking services, it is very hard to enforce such a requirement because of the difficulty detecting the hawala transactions. No formal records of the individual hawala transactions are usually kept after the hawala transaction has occurred. All that exists is usually a running tally of what is owed, often encrypted or coded by the hawaladars in the hawala network. This is far different from the extensive disclosures required by banks for a similar transaction.

The hawaladars also have the benefit of being able to settle accounts in a hawala transaction with something of value other than a currency. These non-cash hawala transactions can be used to avoid currency controls, official exchange rates, import or export duties, or other undesirable tax effects through the hawala system. These legal, privacy and economic advantages allow the hawaladars to perform the service of a hawala money transfer at a much lower cost than is usually available through bank money transfers.

Read the follow-up articles:

Hawala Banking And Currency Controls Part I, November 17, 2009
Hawala Banking And Currency Controls Part II, November 20, 2009

Bill Rounds, J.D. is a California attorney. He holds a degree in Accounting from the University of Utah and a law degree from California Western School of Law. He practices civil litigation, domestic and foreign business entity formation and transactions, criminal defense and privacy law. He is a strong advocate of personal and financial freedom and civil liberties.
This is merely one article of 75 by Bill Rounds J.D.

Saturday, December 11, 2010

Could the Wikileaks Scandal Lead to New Virtual Currency?

By Keir Thomas
Saturday, December 11, 2010

It's not an exaggeration to say that the recent Wikileaks scandal has shaken the Internet to its core. Regardless of where you stand on the debate, various services have simply refused to handle Wikileaks' business--everything from domain-name providers to payment services--and this has led to many questioning how robust the Internet actually is.

Hackers have already stated their aim to create their own DNS system, which will bypass officialdom. This uses peer-to-peer technology to get around the problem, a favorite of hackers because it's impossible to regulate.

But how about an entire currency based on peer-to-peer technology?

That's what's on offer from Bitcoin, a decentralized virtual currency that could either be the best idea since they figured out how to slice bread, or just another hacker's daydream. As the Wikileaks debacle continues, it's being increasingly discussed in various sections of the Web as a possible solution to the PayPal online payments monopoly.

Read the rest of the article.

For further reading:
"Amazon, P2P and non-centralised infrastructure", Simon Phipps, December 10, 2010
"Gov't crackdown spurs initiatives to route around DNS", Keith Dawson, December 7, 2010
"Things Fall Apart; the Centre Cannot Hold", Glyn Moody, December 6, 2010

Wednesday, December 8, 2010

Observations on the Digital Currency Industry

Mark Herpel of Digital Gold Currency Magazine has published some important observations of the digital currency industry for 2011.

2011 Observations on the Digital Currency Industry

Saturday, December 4, 2010

Could Gold ETF Providers Offer Bullion-Backed Currency?

By Paul Amery
Tuesday, November 9, 2010

Could gold ETF providers develop their product to offer bullion-backed currency?

Gold ETFs and ETCs have been perhaps the biggest success story in the exchange-traded products market’s near 20-year history.

These bullion trackers have greatly democratised access to precious metals. They’ve offered investors exposure to gold and silver more efficiently and at a much lower cost than the traditional route of buying coins or bars. Price competition amongst issuers continues to push costs down, dealing spreads are tiny, and competing products like Bullionvault are also there to keep ETP providers on their toes.

In fact, exchange-traded precious metals have offered one of the few means for the average investor to defend his or her hard-earned savings from the currency depredations wrought by Greenspan, Bernanke, King and their fellow central bankers over the last decade. I’m one who’s been able to make use of them for this purpose – I hold both gold and silver ETCs in my personal pension plan.

But while gold and silver have performed two of the three commonly held functions of money very well – by acting as a store of value and a unit of account (try looking at the performance of equity indices in gold terms and you might reconsider your view of the strength of the share markets) – they are still hardly used, in “developed” markets at least, in their third, and historically their primary function: as a medium of exchange.

In other words, you can easily buy gold and silver in ETC/ETF format to hold in your brokerage account or savings plan, but you can’t (yet) easily do your weekly shopping in gold or receive your salary in ounces of silver.

Several variants of bullion-backed electronic currency have been launched over the last decade in an attempt to fulfil this role, as a means of everyday payment, and thereby to compete with national currencies. None has yet grown to significant size, while some have been plagued by allegations of fraud. In one well-publicised case, a digital gold currency (eGold) attracted a lawsuit from the US Department of Justice that is still being contested by the currency’s operators.