Money, Bona Fide
or Non-Bona Fide
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Money, Bona Fide
or Non-Bona Fide

Table of Contents
Preface

Chapter 1
Chapter 2
Chapter 3
Chapter 4
Chapter 5
Chapter 6
Chapter 7
Chapter 8
Chapter 9
Chapter 10
Chapter 11
Chapter 12
Chapter 13
Chapter 14

Chapter 11
Foreign Trade

Foreign trade should be carried on in the same manner as domestic trade. There is no difference in trading, or buying and selling across the border between the people in two countries than there is in trading across the border of two states or two counties, unless a government makes a difference. If a government did not interfere, then foreign trade would take place between the people of different countries in the same manner as it takes place with the people within the country .The trading would be done to the advantage of the people in each country. If each country used a bona fide medium of exchange, each person would know what goods or services he could get for the goods he was selling. When the government sets an artificial price on gold and adopts a money system that permits its money to buy its gold at a set artificial price, it interferes with the normal trading of the people of one country with those of another country.

Whenever the government sets a price on gold it nearly always sets it higher or lower than it would be if no such price were set. If the government wanted the price of gold to be normal in relation to all other commodities, all it has to do is nothing. The price of gold then would become normal and many problems in foreign trade would disappear.

When a government sets a price on gold that is too high, then gold comes into that country for an artificial reason, and other countries lose it for an artificial reason also. When a government sets a price on gold that is too low, then that country loses gold for an artificial reason. (Gold does not come into or go out of a country by itself. Someone brings or ships it into or out of a country [p. 91] in order to make an unearned profit from so doing. The government that sets the price makes the unproductive profit possible.)

Also when the price of goods exchanged in foreign trade is settled according to the artificial price of gold, it sometimes is to the advantage of the seller to take (buy) gold instead of other goods in payment for his goods. In other words, gold is his best buy. That is why he takes (buys) it. That is one of the reasons why gold leaves a country.

The normal way to sell goods to people in another country is for the person who sells the goods to take as payment other goods, or bona fide claims (media of exchange) for other goods, produced directly or indirectly by the person to whom the goods are sold. There should be no gold speculator as a go-between, and there would be none if some governments did not put a fixed price on gold. Then there never would be such a thing as a balance of payments deficit; there never would be a debt, in gold to a foreign country.

Also money should not be loaned to a foreign government or to people in a foreign country. Such loans are an unnecessary burden for them. The people in a foreign country need not borrow; they can issue their own money. The people in a foreign country can only pay for the things they buy with the goods and services they produce. Their own money (medium of exchange) represents a claim for their goods and services. They have the ability to fulfill the claims of their own money, but they may not have the ability to obtain foreign money to repay a foreign loan.

Therefore, if bona fide media of exchange were used by all countries and there were no set or fixed price on gold, there would always be a balance of trade for all countries. Each country would sell as much goods and services as it would buy.

It is not necessary that a country export more than it imports in order to have prosperity. This fact can more easily be understood if we imagine there are only two countries on this earth, and each country has to export six [p. 92] percent more goods and services than it imports in order to have prosperity. It would be physically impossible for such a thing to take place. If one country exported six percent more than it imported, the other country would export that same amount less than it imported. (We do not want a money system that will cause an unjust burden in one country in order to have prosperity in another country.)

There is no injustice in the act of selling the tools of production to people in a foreign country on time payments, provided that the payments are only payments for the cost or for the rent of the tools. The payments are to be permitted to be made with the bona fide money of the foreign country. The payments for the rent of the tools are to stop as soon as the total cost is paid or the tools are worn out, whichever occurs first.

When payments for the buying or renting of tools are made in that manner, the buyer or renter is able to make these payments with the things that are produced in his own country. His country’s money is a claim for the goods within his own country. If he has to make payments with gold or with the money of some other country, it may be physically impossible for him to acquire the gold or the other country’s money. The gold or the other country’s money may not exist within his country. Under such conditions he could not pay for the buying or renting of the tools. He would have to continue to be in debt.

Also, if he borrowed money, with interest, from the country from which he bought the tools, he would under those conditions never be able to get out of debt, just as it happens when anyone borrows the medium of exchange. Injustice arises when money is loaned, with interest, to a foreign country or a person in a foreign country. The injustice results when the foreign country, or a person in a foreign country, is asked to pay for goods, services, or loans with gold or with some other nation’s money.

BALANCE OF TRADE

There is a balance of trade when a country sells to other countries an amount of goods and services that [p. 93] equals in value the amount of goods and services it buys from other countries. When one country sells to other countries more goods and services than it buys from other countries, it has a favorable balance of trade. When one country buys from other countries more goods and services than it sells to other countries, it has an unfavorable balance of trade.

BALANCE OF PAYMENTS DEFICIT

When a country has an unfavorable balance of trade, it causes a balance of payments deficit. The United States has had a balance of payments deficit with other countries during the last several years. The deficit was not only the result of buying more goods and services from foreign countries than it did in former years but also it was due to gifts, loans, investments, and military expenditures made to and in foreign countries. The effect of all is the same: the foreign countries have billions of dollars’ worth of United States money or assets which can be converted into United States money) with which they can claim goods, services, stocks, bonds, or gold from the United States.

The balance of payments deficit can be corrected when they buy our goods and services. We have the goods and services. Why don’t they come and get them? The answer is simple: the United States made a promise in 1934 that people (bankers) in foreign countries may buy gold at $35 per ounce from the United States Government. They may buy all other goods and services in the United States at the going market prices.

We all know that the prices of most goods and services have increased from 100% to 400% since 1934. But the price of gold has remained the same by government edict. So the best buy of bankers in foreign countries is gold. But, as always happens when someone sells an item below the market price, he is soon sold out. That is the position the United States is in at this time.

The government officials made the problem by fixing the price of gold. The government should not set any price on [p. 94] it. Gold is a commodity like copper, beans, or wheat. About the only people who benefit when the government sets a fixed price on gold are those who make a business of buying and selling gold. There is nothing wrong in the business of buying and selling gold, if the government would treat gold as it treats all other commodities.

I might add here a brief explanation regarding the way money is handled in foreign trade under our present money system. Let us say a man in Germany sells an automobile to some person in the United States for $1000. The American sends a check of $1000 to the man in Germany. That check will buy $1000 worth of goods and services in the United States. The German could use it for that purpose, if he wanted to. The German also has the opportunity to go to a German bank and sell change) it for German money. That is what is usually done. So that is what he does. The German international banker (he is the money changer in this case) then owns $1000 of American money. He too could buy $1000 worth of American goods, services, stocks, or bonds with it. But because the United States government has promised to sell gold to foreign banks for $35 an ounce, the banker buys it; at that price gold may be his best buy. The gold may then leave the United States.

When the government sets a fixed price on gold, the effect that takes place is an offer to redeem with gold all the United States money held owned) by foreign banks.

When the foreign banks own 30 billion dollars’ worth of United States money and the United States has only 10 billion dollars’ worth of gold, the United States simply cannot redeem all that money with gold. It is no wonder our officials have a problem.

Such a problem would never exist if governments would permit the use of only bona fide money (medium of exchange). There never would be any balance of payments deficits or surpluses. There would be no need or use for The International Monetary Fund or Special Drawing Rights (SDRs). There would be no national or international financial crises. [p. 95]


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