Friday, December 18, 2015

104. Counterfeit is fraud. Fraud is dishonest and wrong.

If the government wants to eliminate counterfeit products and return to honesty, it should start with its own money system. If only one coin - say a R100 coin was manufactured from a metal that at a particular point in time was worth R 100 and this coin was freely convertible with the paper money, we will not have inflation, will have an honest currency and we will become a true and honest society.

The rationale behind an honest coin is that people will not care to be in possession of these coins while the paper money retains its value - a hundred rand note will be of the same value as the coin. But as soon as the note starts losing its value people would want the coin (either hoarding it or melting it). The only way then to counteract this is for the government to maintain the value of the paper currency - this can only be done by not creating more money than is warranted by the production of real goods, services and value in the economy. As soon as people realise that the paper money has regained its value and is the same as the coin again they will revert back to using the paper money again and be indifferent to whether they use paper or coin.

Such a "honest coin" will act as a discipline on government and severely restrict government in creating currency to finance politically expedient schemes. We will become an "honest" country. Honest in currency and honest in the values that we uphold.

Until we do this, politicians will create money to run their schemes - including running expensive conferences with NGOs, church leaders and leaders of the community to improve the "moral fibre" of the nation.

This in itself is a sham - gorging themselves on the money extracted from the poor through "inflation tax", tax and other schemes based on a dishonest fiat currency. The reason that the government will be reluctant to introduce an honest coin is that they know that it will cost them to maintain the value of the fiat currency - it is however that very cost that will act as an automatic brake to inflation. As soon as people start melting the coin because they can earn more rands that way than by using it at its face value, the government will have to spend more paper currency to purchase the metal to manufacture the coin - this will only act as break to inflation if the money supply is not expanded to make such purchases possible! Otherwise the price of the metal in relation to the currency will continue to increase. An "honesty coin" is a sure way of preventing government increasing the money supply. A freely convertible "honesty coin will keep inflation in check and signal a return to fundamental moral values. C.M. Heydenrych

December 2015

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Here is another article on Counterfefeit:

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