Lessons From Libya
Photo credit: Luca Galuzzi - www.galuzzi.it
Of the 20 poorest countries in the world 17 are on the African continent.  With only 12% of the worlds population, it boasts 30% of the worlds Gold production.  Africa is a sleeping golden giant, and Gaddafi dared to wake it up.
Whatever your view or understanding of the late Colonel Muammar Gaddafi, he was certainly an economic visionary. During the World Mathaba Conference in 1986 and 2000, (organized by Gaddafi) he promoted a united Africa, a mass withdrawal of African member states from the World Bank and the formation of a Mathaba Bank as the “world bank” of African states. It is reported that Gerald Pereira, (an executive board member of the former Tripoli-based World Mathaba) recently voiced his view that “Gadhafi's creation of the African Investment Bank in Sirte (Libya) and the African Monetary Fund to be based in Cameroon will supplant the IMF and undermine Western economic hegemony in Africa.”

Gaddafi’s intentions were clear. His aim was for the gold dinar currency of African and Muslim nations to be the mainstay of the African Union’s trade with the world. For millennia civilizations on every continent have independently selected gold or silver as a preferred medium of exchange and there is good reason why the likes of Gaddafi see merit in its virtues for our modern world. Gold and silver are still a storehouse of wealth, a true measure of value, a secure protection of heritage, an adornment of beauty and a means of transferring the efforts and rewards of one’s labor, from one generation to the next. Further, gold and silver has no “use by date”… it can’t be counterfeited… it can’t be deflated by the printing of paper money… it is internationally accepted… trans-cultural… trans-lingual… trans-political… trans-geographical… and trans-millennial. Fire won’t burn it… water won’t ruin it… it can store much wealth in a small space… it requires no maintenance… does not need feeding… is not affected by inflation… or subject to weather conditions… its duration will last a thousand years… it’s easily transported… they are not making any more of it… and it’s a privately held tangible asset.

So there is sound reasoning why, as Chairman of the 53 member state “African Union”, Gaddafi advocated a “United States of Africa” be on a gold standard with clearly stated objectives, and if the Libyan economy was the example of the economic stability the member states of the Union could expect, who could say no. Just compare some key economic facts.

Gold holdings of the USA are quoted as being 8,133 tonnes. Although this figure has been challenged as fictitious, with a population of 307 million, this equates to 26.5 tonnes of gold per million people. But with it comes a public debt of 99.3% of GDP1.

The United Kingdom holds 310 tonnes of gold with a population of 62 million people. That’s only 5 tonnes of gold per million people, with a public debt of 81.9% of GDP1.

Australia holds 80 tonnes of gold. With a population of 22 million, that’s a mere 3.6 tonnes of gold per million people and a public debt of 23.6% of GDP1.

So what was Libya’s position?

Libya held 143 tons of gold with a population of 6.6 million. That’s 21.6 tonnes of gold per million people, but with a public debt of only 3.3% of GDP!

Could it be that Colonel Gaddafi knew something about national economics?

Africa is a sleeping golden giant, and Gaddafi dared to wake it up. Although the African landmass is home to only12% of the world’s population, it boasts 30% of the worlds gold production. With 42 of the 53 member states of the African Union known to have gold in their soil, optimistic exploration is now underway in the remaining 11 states. An African Union gold standard, together with low labor costs, enormous natural resources, and access to European markets would have placed Libya and the African Union (and any willing Arab or OPEC state) at an international advantage over the west, and lead the way for an emerging African superpower. But every action has an equal or opposite reaction, and in the wake of such rise you would find the demise of the US dollar.2

Historically something doesn’t add up here. Something is missing. Why is it that with all this wealth in Africa’s soil, of the 20 poorest countries in the world, 17 are on the African continent? And yet wealth is not foreign to Africa, as we have seen in Libya. Equatorial Guinea is another example, which last year reported a GDP per capita on par with that of South Korea3, a G20 nation, which is praised for being one of the 4 Asian Tigers.

However, I suggest the African Union will fail for want of two primary principles. Firstly, a unifying visionary leader who is prepared to think independently and is capable of breaking free from imperialist debt imposing institutions and their philosophies. (Until recently Africa had one.) Secondly, the ownership of that leaders vision within the culture and spirit of the community he leads. This second principle requires the people of that community to have a basic understanding of the five fundamentals of a sustainable laissez-faire market economy and to be open to truth. Only in this environment where the “followers” know why they believe what they believe can a nation or union of states resist foreign thought monopoly and avoid civil war. This second principle was sufficiently absent in Gaddafi’s plan to allow the amassing and infiltration of dissenters, fueled by NATO. But lest we in the west feel a rise in pride, we should remember, very few western “democracies” have either of these two principles, and in addition have unserviceable and unsustainable debt.

For the African Union, a gold “currency” would have been, and still could be a valuable catalyst to its economic liberty, particularly in the poorer African states which have known supplies of gold in their soil. Should small-scale mining be encouraged, as opposed to public company plunder, it could foster decentralized economic growth and individual wealth. The power and prosperity a grass roots gold standard could amass in the African continent is a staggering thought, and certainly has the potential to out perform many economies of established western powers. One can understand the sentiments of those who feel that the involvement of NATO in Libya was to ensure that “Africa and Co” didn’t go on a gold standard, after all it has been said “he who has the gold makes the rules”. But that statement has also been used to show the power of fiat currency, and it’s therefore no surprise to some that of the 28 member states in NATO, the USA and the UK underwrite 78% of the budget. So, who makes the rules?

However to be fair, it may well be a coincidence that Gaddafi, who backed a gold standard in preference to the US dollar was “challenged” by the west … and a coincidence that in 2000 Saddam Hussein was also “challenged” by the west when it was announced that only Euro or gold, and not the US dollar, would be accepted as payment for Iraqi oil … and a coincidence in 2007 that Osama Bin Laden was “challenged” by the west when he attempted to persuade 1.5 billion Muslims to abandon the US dollar and trade in the gold dinar … and a coincidence that all three are now reported dead.

The issue of a gold and/or silver standard as a powerful economic mainstay and market dominator, is well comprehended by a number of conservative economists, even if only in the safe confines of their thoughts. The few who advocate its virtues, and even fewer who have made serious moves to implement such a just system are courageous visionaries who deserve support by those in the marketplace seeking a sustainable alternative to fiat currency. It’s no secret that fiat currencies are only backed by the promise of the indebted government who issues them, and that those very governments ultimately only exist at the mercy of those behind the deceptive central banking systems. And lets not forget that all fiat currency enters the market as a debt. Gold or silver enters the market as an asset.

So, what of the future? Well one such player seriously seeking to break from the established world’s central banking system and “gather” gold to his nation, is the President of Venezuela, Hugo Chavez. Based on historical events, I suggest he will need to watch his back. As of 26 September 2009, Chavez, along with Argentina, Brazil and Bolivia, set up a regional bank and development lender called “Bank of the South” in an attempt to detach from financial institutions such as the International Monetary Fund. Sound familiar? Chavez first mentioned the project before winning the Presidential election in 1998. Chavez maintains that unlike other global financial organizations, the Bank of the South in Caracas will be managed and funded by the countries of the region with the intention of funding social and economic development in the absence of foreign political conditions. It is reported that the project is endorsed by Nobel Prize winning, former World Bank economist Joseph Stiglitz, who said: "One of the advantages of having a Bank of the South is that it would reflect the perspectives of those in the south," and that "It is a good thing to have competition in most markets, including the market for development lending."4 A good thing? Well the established powers behind the central banking monopoly may not agree.

In August this year, Chavez gave instructions for 211 ton of Venezuelan gold to be collected from storage in Canada, Zurich, USA and England, and shipped to the Central Bank of Venezuela. Within days gold broke USD1,900 a troy ounce. He, who has the gold, makes the rules! Add to this the fact that Venezuela is the 6th largest exporter of oil in the world (Libya was 11th) and déjà vu!

So with Chavez as a unifying visionary leader (e.g. ALBA)5, sitting on oil, talking gold and barter, bypassing the central banks of the West, and trading the SUCRE instead of the US dollar (first principle), Venezuela could well be the next casualty via pseudo civil war, just like Libya unless… Chavez can succeed in educating the people of ALBA as to why they are doing what they are doing (second principle). If he can, then Venezuela (and ALBA) will be well placed to repel sabotage via “civil” unrest, and on their way to economic liberty. But educating the masses to economics, truth and morality within any community is a very difficult thing to achieve, and has rarely happened in world history. It is here that an honorable plan like that of Gaddafi or Chavez may crumble from within and be exposed to attack. The demographics are overwhelming that the masses in any community, not knowing why they believe what they believe, are open to forfeiture of their sovereignty, “prone to be cloned”’ and manipulated for political ends and/or foreign interests.

So why is it that the west won’t lead the way on a gold backed currency, even though it could easily. All that’s needed to get started is for an independent thinking sovereign state to embrace the vision with integrity. Or maybe I just answered my own question.

When lecturing on economics in Canada in 2009 I made the statement that if Canada was to back its currency with a mandatory “fraction of a gram of gold per dollar”, the Canadian dollar could be the strongest currency on the planet, because even at a fraction of a gram per dollar, that’s a fraction of a gram more than any other currency in the world. A gold backed currency is morally sound, and as my father taught me many years ago, “good morals, is good economics”.

This then raises the question; is there an alternative to a political, state, or multi-national “union” that permits one to enjoy economic liberty, security, precious metal stability, and independence of thought outside of a centralized government control centre? Well I believe there is, and always has been, from as far back as history records trade.

Foundational to any laissez-faire market economy6, is the principle that the market determines the playing field. This is demonstrated in an individual’s perceptions and assessment of what is a fair exchange for goods and services, and even the medium selected for that exchange be it wheat, goats, legal tender or gold7. The anomaly in what I have just said is that fiat currency (legal tender) has never been selected by a market economy as a medium of exchange, but rather forced on a people by statute of the issuing government. The compulsion to use a valueless fiat currency as a medium of exchange and “value” in a market will inevitably repel a more esteemed medium of exchange (gold or silver) from that market. This is the basis of Gresham’s Law8. But these “better” items of exchange don’t disappear, they just take a back seat until they find their way to a less restrictive market where they continue to serve a different class of people who are capable of exercising individual thought on economics and “monetary policy”. These people are often found in quiet corners of our world, and some operate happily in an “underground” or “invisible parallel” to statutory and/or artificially regulated trading platforms. The existence of such a market with gold or silver as the preferred medium of exchange is as old as mankind, and the liberty enjoyed by the participants in this laissez-faire market economy has always been determined by a vote where it counts. Not in a political ballot box, but in the marketplace. A marketplace that is largely free of statutory bias, political contamination and monetary fiction. These people by nature are not centralized in location, loud in self-promotion or politically aspired, but are individuals like you and I who see benefit in participating in an economy in its purest form.

Trade in this market worldwide has never ceased. It still operates today9, particularly in the Middle East and Asia with gold and silver as the preferred medium of exchange. It is in these economic decentralized sub-cultures that the dreams of participating in a laissez-faire market economy, free of monetary fiction and political contamination are a reality. Such a market may well exist in a neighborhood near you. Enjoy!

Graham Daniels
November 2011
  1. International Monetary Fund 2011 estimates [www.imf.org]
  2.  It should be remembered that the only real buoyancy the US dollar currently has is the OPEC/USA agreement of 1974 that determined that OPEC oil would be traded exclusively in US dollars. No OPEC support for the US dollar, and its lights out for the greenback.
  3. WORLD BANK - World Development Indicators 2010 – GDP, Equatorial Guinea USD19,998; South Korea USD20,757
  4. Carroll, Rory (12 October 2007). “Nobel economist endorses Chavez regional bank plan”. The Guardian.
  5. Bolivarian Alliance for the Americas
  6. However for that laissez-faire market economy to be sustainable it must possess the fifth fundamental -“A Moral Code”
  7. For millennia, gold and silver have been the preferred medium of exchange by a free market for many reasons, not the least is that governments can’t “print” it.
  8. Gresham’s Law - paraphrased as “bad money drives good money out of circulation”. Thomas Gresham (1519-1579) English financier, stated in a letter written to Queen Elizabeth on the occasion of her accession in 1558: "that good and bad coin cannot circulate together"
  9. https://www.youtube.com/watch?v=hCXjS04xEZk