Nomination of Lagarde as President of the ECB – A Testimonium Paupertatis

Open letter to the European Council

Dear leaders of Europe and fellow Europeans,

as a longtime proponent of Europe, European integration and the institutions of the European Community, I write this open letter to convey my thoughts on the nomination of Christine Lagarde as next President of the European Central Bank (ECB) by the European Council, and to voice my discontent with this nomination. In short I cannot help but think: what a political testimonium paupertatis.

Please allow me to explain for there are good reasons in support of this qualification. Regardless of our opinions in this matter, I am sure we can all agree Europe simply is too important. Committed to a shared European spirit, I write this open letter.

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Towards a Trias Pecuniae

Abstract
This article presents the idea of a trias pecuniae as a synthesis of the commodity and credit theories of money. The margins of error provided by the rigidities of a classical gold standard and the flexibilities of a purely fiat standard as grounded in the commodity and credit theories of money have historically proven insufficiently robust to prevent episodes of inflation, financial excess and wealth inequalities. In conclusion, it is argued how through checks and balances, societies are able to grant citizens an unalienable right to the freedom of wealth with an effective and simple check. This article puts forward an analytical framework derived from approaches in philosophy (i.e. two theories of causality), law (through a so-called monetary matrix) and political theory (i.e. Montesquieu’s trias politica) to consistently untangle the elements that characterize the two money theories and the three theories of banking attached to them. In conclusion, the trias politica is applied to all wealth, allowing the discernment of three wealth powers: the fiscal power, the monetary power, and the credit power. The checks necessary to serve societies to remain in balance can be implemented by making the relations between the people and each of these institutional powers reciprocal. Essentially, when future income is removed from the equation of eligible collateral on the basis of which each of the wealth powers is able to enter into arrangements of credit, a society tackles all sources of inflation and financial excess. Through these checks, societies are able to eliminate the tendency of income and wealth disparities to become ever greater, not by top-down measures and interventions, but by means of laws that apply equally to all persons, natural and legal, thus leveling the playing field for the management of all wealth in a bottom-up fashion.

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Dr. Zijlstra’s Legacy and the 21st Century Renaissance of Gold

If you read the series of analyses by Dr. Jelle Zijlstra, one of the world’s most informed central bankers of his era (1967-1981), you have read a little over half a “modern book” on the historical backgrounds of the international monetary framework and the reasons for the Bretton Woods framework to collapse. My selection of translations portrays a great similarity to the extent that the essential point is repeated again and again and which is most eloquently described in Zijlstra’s autobiography of 1992: “Gold as the monetary cosmos’ sun”.

Here are my thoughts on why his analysis is highly relevant to today’s financial crisis.

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Nationalized ABN Amro offers fool’s gold

In March, Dutch nationalized banking giant ABN Amro send its trading clients a letter explaining that they have changed the conditions for precious metals trading. In their letter [1], the bank explains that they will no longer deliver physical precious metals (gold, silver, platinum and palladium), that they administer prices slightly differently, and that they have found a new custodian. ABN Amro suggests that clients do not have to do anything, stating “we will administer and manage your precious metals holdings in the new manner”.

Of course clients do not have to do anything, but given the new conditions [2], this is hardly advisable or prudent. Investors with precious metals holdings with ABN Amro are potentially facing fatal risks.

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Analyse: de gouden standaard, de goudwisselstandaard en de euro

De aanleiding voor een uitgebreide analyse over de gouden standaard, de goudwisselstandaard en de euro is gevonden met een onjuiste veronderstelling van professor Bas Jacobs van de Erasmus Universiteit. Hij verwijt Europese politici te snel te willen bezuinigen. Zijn kritiek is echter onterecht. Aan de hand van de uitleg van de Franse econoom Jacques Rueff gaat deze analyse in op de verschillen tussen de gouden standaard en de goudwisselstandaard. Rueff, zo zal blijken, wijst op de cruciale rol die de Amerikaanse dollar speelde bij de totstandkoming van de Grote Depressie.

Professor Bas Jacobs uitte onlangs kritiek op de euro: “De euro lijkt te veel op de gouden standaard”. Jacobs gebruikt echter een argument tegen de gouden standaard die betrekking heeft op de goudwisselstandaard. De auteur op basis van wie Jacobs zijn conclusie trekt, en ik zal eerlijk bekennen dat ik dit werk van de auteur niet ken, is Peter Temin. Hij schreef het boek “Lessons from the Great Depression” en zou dus één en ander moeten weten over de oorzaken van de Grote Depressie.

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Kapitaalpassiviteit

Deze column verscheen op 23 december 2011 op MarketUpdate.nl.

Eén van de belangrijkste economische vragen wordt door deze crisis ondergesneeuwd. Dat is hoe de reële economie ervoor staat? Het financiële geweld is nu eenmaal alles overheersend. De reële economie wordt door het gevoerde monetaire beleid ondergraven: het zorgt voor een misallocatie van middelen.

Het mes snijdt aan twee kanten
Wat produceert een huis? Het is wellicht een ongebruikelijke vraag, maar als u er een antwoord op probeert te vinden dan komt vermoedelijk uit bij immateriële zaken. Bijvoorbeeld woongenot. Maar de vraag is relevant vanwege iets anders; want waar investeren wij ons kapitaal in en waarin niet?

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Valse Sirenen

Deze column verscheen eerder in de Nieuws-Flash! van 1 juli 2010.

De Griekse schuldencrisis lijkt voor veel criticasters van de euro, met name vanuit de Angelsaksische hoek, als een rode lap op een stier te werken. Niet alleen is Griekenland failliet; het is vooral het bewijs van een euro die gedoemd is om te mislukken. De hele situatie met Griekenland en de Europese schuldencrisis doen mij denken aan de Griekse mythologie. Europeanen worden vanaf alle kanten gelokt door Sirenen die, erg aantrekkelijk en met een verlokkelijke zang, hun slachtoffers trachten te verleiden zodat zij met hun schip te pletter slaan tegen de rotsen.

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Dr. Zijlstra’s Final Settlement: Gold as the Monetary Cosmos’ Sun

Originally posted on April 29, 2012 on MarketUpdate.nl and GATA.org.

Whenever I am in Amsterdam, I go to a bookstore and browse the second-hand shelves in the economics section. Recently I found two books by Dr. Jelle Zijlstra: “Dr. Jelle Zijlstra, Conversations and Writings” (1979, second edition) and “Per Slot Van Rekening” (1992, fifth edition). The latter title is a Dutch figure of speech that may be translated as “The Final Settlement.”

Jelle Zijlstra was a renowned Dutch economist and one of Holland’s finer statesmen. Early in his career in 1948, shortly after World War II, he became a professor, specializing in the velocity of money. By 1952 he was appointed minister of economic affairs, then Dutch treasurer from 1958 to 1963 and again from 1966 to 1967. During his last term as treasurer he led the Dutch Cabinet as prime minister as well until 1967, after which he became president of De Nederlandsche Bank (DNB). While president of the Dutch central bank he was appointed as the president of the Bank for International Settlements (BIS) as well, positions he held until his resignation in 1981.

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