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Gaddafi’s pan-African gold-backed Payment System

It’s clear that Gaddafi’s plan for an independent pan-African currency and payments system threatened, violated the Unipolar establishment.

Authored by Serban V.C. Enache via Hereticus Economicus:

A fine RT interview with Moussa Ibrahim, Gaddafi’s ex-spokesperson. While pointing out the role of NATO and mainstream media in Libya’s destruction, Ibrahim accepts and explains the blind spots / failures in Gaddafi’s rule. Three things he mentions: that they failed to shift away [diversify] from the oil-export economic model, that they didn’t seek an alliance with Russia and China, that their political process wasn’t inclusive enough. Ibrahim also talks about the good things Gaddafi’s rule achieved, in the larger context of African struggle for liberation and economic independence. Gaddafi was hoping to accumulate 4 thousand tons of gold [as reserves] for his pan-national project of an African Central Bank alongside the creation of an African currency.

I have to say that while the goal is noble and strategic, the way of going about it wasn’t inspired. Sure, gold is a commodity which can be used as a hedge against inflation, but in order to build up stock of it [which incurs physical costs of transport and storage], they had to net export oil in order to purchase foreign currency with which to buy the gold. It would have been a lot simpler and less costly [in real terms] to have this African Central Bank issue a free floating fiat currency, controlled by a democratic board composed of African member states. Give permanent extrinsic value to this currency through taxation [preferably a land-value tax] and issuing it to employ labor, land, and capital [machinery and equipment] for productive purposes which benefit the African nations. You don’t need physical commodity reserves in order to facilitate settlement payments, provide overdrafts, buy Government and or private sector assets or liabilities, or provide loans for long term investment. The classical gold standard era [1880-1914] is a myth. Credit [mostly unbacked by metal] was the predominant form of money throughout that entire period.

To illustrate the power of fiat, these two examples should suffice… The Allies [USSR included] won WW2 using fiat money. Had they stuck to the gold standard during that time [i.e. allowing the currency to be redeemed in metal], they would have gone bankrupt and lost the conflict. Nazi Germany became an economic and military superpower without gold. At present, it’s estimated that 16 percent of the world’s gold and 22 percent of its silver is currently sitting inside tech all over Japan. That’s a productive role for these commodities, instead of using them as a speculative tool. And just like commodities, IOUs [credit, debt, money, contracts] can be used for productive or speculative purposes. Don’t torch the paper along with the ink and quill, just remove the bad clauses in the contract – another way of saying don’t throw the baby out with the [dirty] bath water.

Hitler said, “We were not foolish enough to make a currency [backed by] gold, of which we had none, but for every mark that was issued we required the equivalent of a mark’s worth of work done or goods produced… we laugh at the time our national financiers held the view that the value of a currency is regulated by the gold and securities lying in the vaults of a state bank.” In 1833, economist Friedrich List argued the same principle. “People will probably ask me, where will Bavaria get the money to complete such giant works [railways]? I answer, that I have not yet seen any silver or gold in any of the canals or railways. To build them we use only consumer goods, steel, stones, wood, manpower, the power of animals. But is there not a surplus of all this in Bavaria? To the extent that we transform this surplus into canals and railways, which are not yet in existence, we create permanent and enduring value, we create an instrument which doubles the productive power of the entire nation. The money, however, does not leave the country, it only settles accounts.”

What the detractors of fiat money don’t understand is the distinction between IOUs and commodities, between IOUs recorded in expensive medium [gold, silver etc] and inexpensive medium [paper, plastic, electronic entries]. Fiat money has no intrinsic value, but it does have extrinsic value. The trap developing nations fall into is accruing reserves in foreign currencies [numbers which they own, but that exist on the electronic spreadsheets of foreign central banks]. This is alright so long as those countries you’re exporting to remain friendly. If they’re geopolitically aligned against you, however, they can freeze those accounts you own – undoing all the work you put into exporting goods and resources in exchange for their money. And now you’re left with no foreign funds necessary to pay for imports.

Anyway, it’s clear that Gaddafi’s plan for an independent pan-African currency and payments system threatened, violated the Unipolar establishment. NATO can’t allow sovereign nations to be truly sovereign and escape US dollar hegemony. They’d rather go to war over it, fund death squads, assassinations, levy sanctions, the works…

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Andrea Ostrov Letania
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“In 1833, economist Friedrich List argued the same principle. “People will probably ask me, where will Bavaria get the money to complete such giant works [railways]? I answer, that I have not yet seen any silver or gold in any of the canals or railways. To build them we use only consumer goods, steel, stones, wood, manpower, the power of animals.”

But Germans are people who could actually make stuff.

Africans are famous for destroying things. So, fiat African currency would have to be backed by something like gold since black work ethic and productivity are so unreliable.

Jane Karlsson
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Jane Karlsson

Libyans seem to have done very well with respect to work ethic and productivity when they were working for themselves. Are you sure your views are not coloured by the experience of whites trying to make blacks do things of which they don’t see the point?

I went to an expensive English boarding school where we were expected to obey orders even when the orders were manifestly counterproductive. I well remember the feeling of hopelessness and lassitude, and I did not do well. Many years later I went to Oxford as a mature student and got a First.

Old Linka
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Old Linka

Che Guevara and Chinese execs said the same thing about African labor.

Jack_Garbo
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Jack_Garbo

Tell me which colonial slave labor has a work ethic? Previous pre-Western African empires built cities, bridges, canals, ports. They actually made stuff. Get your time lines right before denigrating people in a current situations.

Olivia Kroth
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Libya got cheated and bombarded by NATO. Libya will be a lot better off when following Russsia.

therevolutionwas
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therevolutionwas

If you like State power getting things like wars accomplished, fiat fake money is the way to go. If you want a money that will hold the value of all the labor you do to accumulate that money and restrain the State from acting rashly with the value of your hard labor, you want gold and silver. China knows this. Russia knows this. A lot of central banks around the world are beginning to realize this. Gold backed currency is coming. It is the only honest money.

Pierre Vaillant
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Pierre Vaillant

A metal standard is a State-imposed system, and a poor one at that. The price of commodities are easily manipulated by cartels. Money is supposed to circulate, not get hoarded. Government money is a tax-credit. There’s no such thing as “honest money.” “The […] fetish of the sound school is the balanced budget. Drawing an entirely false analogy from personal and business life, the conservatives argue that just as a private individual must balance his budget, so must a government. Oddly enough, this rule is relaxed in time of war. It is apparently quite proper to finance the destruction of… Read more »

Steve Brown
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Steve Brown

Not really, a ratio can exist. In fact the IMF attempts to do that with SDR’s, + note that the Fed/Treasury still pegs the price of gold at $42 USD per oz, a component I think you are missing. Indeed the old Swiss franc was based on 20% gold backing until it threatened to usurp the USD as a reserve currency, which the Swiss did not want responsibility for, as the old swiss franc was destabilizing to the “world currency order”) . So the Swiss went to the CHF. You also miss that currency markets are gamed too, and the… Read more »

MMT Right Winger
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MMT Right Winger

Man, why do you think countries trade? Do you think they can eat paper or gold? No, they want output which they can consume and use, not just to hold and look at. Ever heard of Spoofing? https://www.zerohedge.com/news/2018-04-17/gold-manipulation-spoofing-futures-and-banging-fixes-same-banks-same-trading-desks
Commodities markets don’t discipline currency markets. The only way Russian and Chinese currencies can become compromised is if these States stop taxing in rubles and yuans. The root demand for money is state money taxation. Money convertible into metals is a state self-imposed constraint which limits its space for fiscal and monetary policy.

Pierre Vaillant
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Pierre Vaillant

The IMF uses SDRs for internal accounting purposes. SDRs are allocated by the IMF to its member countries and are backed by the full faith and credit of the member countries’ governments. The makeup of the SDR is re-evaluated every five years. The SDR isn’t regarded as a currency or a claim against the IMF assets. Instead, it is a prospective claim against the freely usable currencies that belong to the IMF member states. The Articles of Agreement of the IMF define a freely usable currency as one that is widely used in international transactions and is frequently traded in… Read more »

BIll Hader
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BIll Hader

Money by decree is fake? So I guess when you get paid your salary or dividend you say no, thank you? Also, getting wars accomplished means producing food, bullets, rifles, tanks, fuel, bombs etc. If using fiat money is the best way to produce the means of death? Then why not use fiat money to produce the means of life? The State simply places orders to factories to produce civilian cars instead of tanks, to produce concrete for housing instead of military bases, to produce fertilizer instead of napalm etc.

Steve Brown
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Steve Brown

It’s not fake so long as folks believe in it. Once folks lose their trust, then it’s fake. The other red herring is that gold (real gold) has no value, because you can’t brush your teeth with it, so one day gold will be filling landfills. Funny the things folks believe.

BIll Hader
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BIll Hader

LoL, Brown. Way to write a total strawman post.

Steve Brown
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Steve Brown

So Paul Singer, Renaissance and Citadel capital and all the other hedge funds and their managers, not to mention the FR dealer banks and plutocracy in general, are going to voluntarily put their dosh into ‘good causes’ like education, health and housing? That is just pure delusion. And not related to the base argument about the basis of the monetary system being exponentially compounding debt, which is all a US FR note represents, besides the trust people place in it.

Vera Gottlieb
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Vera Gottlieb

And the American “empire” will continue to destroy any country/person not willing to bend. How much longer will the rest of the world look on and do nothing? No “empire” is invincible.

Steve Brown
Guest
Steve Brown

Still the question is how to dethrone King $..? As I’ve written about below, how about a freely convertible yuan partially backed by gold? Like the old pre-2000 Swiss franc was. China would of course have to link its currency to debt instruments like Chinese bonds. There is some movement at HSBC to open up China bond markets, but HSBC is a primary dealer of the Federal Reserve, and also corrupt, so that may not happen any time soon which is unfortunate. The key to toppling the US Axis of Evil is of course to end the reign of the… Read more »

JPTA
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JPTA

The key component is demand. Once there’s sufficient demand, the rule of the all mighty dollar is overthrown. The fundamentals backing the financial system is the most important, and without a military cooperation on top of economic cooperation between those states who desire a multipolar world, that revolution can’t happen.

Steve Brown
Guest
Steve Brown

The ‘gold standard’ still exists in the form of the global gold carry trade. The gold carry trade involves those sovereign nations and entities that are allowed to participate. The gold carry trade and gold swaps relate to currencies (which involve real gold and not paper) and to some extent underpin the currency markets, and also provide methods for financial transactions that cannot be accomplished by the usual paper. The gold forward rate, called GOFO, is the interest rate on sovereign gold in the carry trade, and those rates were made secret from 2014 going forward. After the financial collapse… Read more »

BIll Hader
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BIll Hader

Thomas Edison was pro-fiat money, anti-usury, and against the gold standard / gold pegs. “Make it perfectly clear that I’m not advocating any changes in banks and banking. Banks are a mighty good thing. They are essential to the commerce of the country. It’s the money broker, the money profiteer, the private banker, that I oppose. They gain their power through a [unclear] and false value given to gold. Gold is a relic of Julius Caesar and interest is an invention of Satan.” “Of course, as long as the world is on the gold basis, we shall have to recognize… Read more »

Steve Brown
Guest
Steve Brown

You didn’t read my post. Have you ever heard of GOFO and the gold carry trade, what it means and what it does? That the gold carry trade and gold swaps related to currency swaps and other sovereign trades underpin the most important sovereign financial transactions in existence? Do you have any idea why the treasury holds 8 tonnes of gold and will not sell it, and the reason why the Treasury values gold at $42 USD per ounce? Your argument is the current mantra that gold may as well fill landfills, has no meaning and no intrinsic value, that… Read more »

Bill Hader
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Bill Hader

Bernanke answered publicly in a congress hearing why it buys gold: tradition. It serves no operational purpose.
You’re putting words in my mouth. I never said commodities don’t have intrinsic value. The GFC was caused by the FIRE sector and private sector deleveraging, not about fiat money or gold. It’s not different than a repeat of the Roaring Twenties. It would have happened with or without gold. If you care to troll, troll somebody else.

Dave Patterson
Guest

had high hopes there for a second, but the guy still isn’t understanding the central problem with fiat money in the modern world – it is controlled by bad people and used for bad purposes, and, the big kicker, they are allowed to charge interest on ‘money’ they create out of thin air, which keeps the whole inflationary growth model of modern capitalism fueled. He does have the first part right – the issuance of the fiat money needs to be controlled by an honest democratic government working of, by and for ‘we the people’ rather than a predatory capitalist… Read more »

Pierre Vaillant
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Pierre Vaillant

I’ve read plenty of articles from this author via the Duran, on usury, rent-seeking, the banking sector, how it works, and how it can be turned into a public utility basically. Modern capitalism is finance capitalism. Interest has been around for ages, and certainly in our epoch, the big capitalist nations do not experience inflation, on the contrary, they experience deflation. That’s why you see the 10Y US bond appreciating, that’s why you hear Central Bankers complaining about too low inflation and asking governments to take some fiscal measure to revive demand, something which monetary policy can’t due in a… Read more »

Steve Brown
Guest
Steve Brown

“the big capitalist nations do not experience inflation, on the contrary, they experience deflation.” wow you cannot be serious, man..! And not all ‘gold bugs’ or monetary Realists argue for full reserve banking, or a 100% gold standard. Switzerland maintained a 20% gold-backed franc for example, until the Swiss franc threatened to compete with the USD as world reserve currency. Even the US had a silver certificate system until Nixon went full fiat in 1971. That was when the former United States was having trouble paying for the Vietnam war. Unfortunately warmongers love their paper and seems there are a… Read more »

Deno
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Deno

That’s why the US has been in Afghanistan up teen years due to fiat money How ironic

Deno
Guest
Deno

in the aricle it war would be short with a gold standard that is really good

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