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Too Left-Wing to Fail
April 2, 2013 | 14 comments
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How to Clean Up Washington’s Mess
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Feature
Let’s Return to the Gold Standard
Ron Paul and Lewis Lehrman have been right all along, never more so than in this age of massive debt.
The futile search for El Dorado, the city of gold, is the stuff of legends, among them a sardonic poem by Edgar Allen Poe about a knight who wasted his life in that pursuit. At first glance, the quest for something far more substantial, an international gold monetary standard, might seem equally Quixotic in today’s world where those who govern are disdainful of standards of any kind, including those laid down by the United States Constitution.
But first glances can deceive. The popular pressure for serious monetary reform is building as consumers see their buying power eroded by the sinking value of the dollar. Congressman Ron Paul, despite his naïve foreign policy views, is doing well on the presidential campaign trail on the strength of his demand for abolition of the Federal Reserve Board and a return to sound money. His message is getting a surprisingly receptive response from young audiences on college campuses.
The November 2011 Cato Institute monetary conference in Washington assembled a number of first-rate economists even more critical of fiat currencies than Congressman Paul, if that is possible. Kevin Dowd, a monetary specialist currently teaching at London’s City University, warned that, “if the Fed persists along its declared path, the prognosis is accelerating inflation leading ultimately to hyperinflation and economic meltdown.” That path, which Fed Chairman Ben Bernanke has taken few pains to conceal, is toward inflating away the debt and deficits the Obama administration and congressional Democrats have racked up over the last three years as they have pursued their goal of putting the federal government in charge of all economic behavior.
Speakers at the conference used words like “immoral” to describe an inflationary policy that robs the poor, destroys the savings of the elderly, erodes the middle class as living standards fall even for people with jobs, and accommodates government profligacy that enriches the politically connected (think Solyndra).
The conference marked a change from many past monetary discussions in that the conferees had lost all fear of uttering that naughty word, “gold.” Indeed, the consensus view seemed to be that in these parlous times a return to the gold standard might very well be the only way to restore order in the bawdy house Washington has become.
PAST SHYNESS ABOUT mentioning gold in polite company was a result of what might be called the disinformation campaign, highly successful, that the political left has conducted since FDR nationalized monetary gold and launched the New Deal in 1933. The left has blamed the “gold standard”—with breathtaking over-simplification—for the 1929 Crash, saying it starved the economy of money. The causes of the Crash were far more complex, and if anything, quite the opposite. First of all, the classical gold standard didn’t exist in the 1920s, but had been replaced by a far looser “gold exchange” standard, which allowed greater manipulation of monetary policy by the Fed. The central bank at that time had been in business only 16 years and badly mismanaged its new experiments in controlling the money supply.
At any rate, the subsequent Depression wasn’t caused by the Crash—the market actually was recovering nicely in 1930. Rather, it was caused by the muddle-headed federal policies that followed the Crash. Herbert Hoover raised taxes and tariffs, bless his heart. FDR, after winning election in 1932 with some reasonable ideas, declared war on private business. Private investment plummeted.
The left’s clamor for tax increases and its traditional business baiting—now taking the form of stifling over-regulation—is once again much in vogue among the political classmates of Barack Obama. And it is having effects not unlike those of the Great Depression as both business and consumer confidence is dampened by uncertainty.
As part of the gold standard disinformation campaign, left-wing “progressives” liked to quote their favorite economist, John Maynard Keynes, in his description of gold as a “barbarous relic.” In fact, the prolix Keynes had many opinions, and frequently reversed himself, actually praising the gold standard long after his “barbarous relic” remark uttered just after World War I as he argued, quite correctly, against the harsh reparations forced on Germany by the allies. In April 1922, in the Manchester Guardian, he argued that a reintroduction of the gold standard “would promote trade and production like nothing else,” and lead to more efficient capital allocation.
That doesn’t sound like he thought gold “barbarous.” Quite the contrary. But leftists and statists are marvelously selective in choosing only those Keynesianisms that fit well with their agenda of expanding the power and scope of government. The gold standard, when it existed, was a barrier to such aims, which is why advocacy of a return sends them into such hysterics.
IN FACT, gold has served as a reliable form of money through most of history. The Spanish conquistadors in the 16th century stole what they could from American aborigines to turn Spain into perhaps the wealthiest and most powerful colonial power of that era. Throughout monetary history, it is not gold that has been the exception to the rule, but the absence of gold. Totally “fiat” currencies, having no backing other than limited credibility of political regimes, are strictly a modern creation, if you exclude periods like the Revolutionary and Civil wars, when paper was used to pay the troops and suppliers. The old expression “not worth a continental” was derived from the short half-life of the paper issued by the colonies to finance the Revolution.
The return to those dubious greenback experiments occurred in August 1971, when President Richard M. Nixon “closed the gold window” and put paid to the post-World War II Bretton Woods international monetary system. Prior to then, gold had had some role in lending credibility to the U.S. dollar for most of the country’s history. Under Bretton Woods, the link was somewhat tenuous—too tenuous to keep the system alive, as it turned out—but it was there. The system specified that the U.S. dollar would be the international standard to which other currencies would be fixed. The dollar, in turn, would be exchangeable for gold among national central banks at a fixed rate. It wasn’t exactly iron discipline imposed on the world’s politicians, but it functioned reasonably well for 27 years until it was scuttled by the U.S. itself.
The downfall of Bretton Woods began when the administration of Lyndon Baines Johnson indulged in spending excesses trying to launch a big social program (Medicare, etc.) at the same time the U.S. was spending heavily to try to contain Communist expansionism in Vietnam. Nixon, acting on political advice not much better than Johnson’s, administered the coup de grâce.
The real gold standard was far more durable. Great Britain operated a true gold standard, meaning that the pound was freely exchangeable for gold by anyone, for 200 years. It was blown apart, along with much of Europe, by the huge costs in lives and treasure of World War I. The British standard was established by the famous scientist, Sir Isaac Newton, when he was director of the mint, and carried forward by the Bank of England, which started life as a private bank with a government charter to supply legal tender. The British Empire, one might say, was built on the solidity and reliability of the British pound sterling. As its reputation for soundness spread to all corners of the globe, willing trade partners signed up. And the empire was built on trade, not military conquest.
The U.S. adopted a true gold standard in 1879, and it lasted until 1914 as well, when it too fell victim to the cataclysm in Europe. Prices during that 25-year period were the most stable of any sustained period in U.S. history and the U.S. prospered. Far from being a restriction on real economic growth, the gold standard was a boon. Confidence in the future value of money spurs long-term investment.
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Clint| 2.13.12 @ 6:36AM
" Does Dr.Ron Paul really want to take us back to the Gold Standard?
In one word: No. That is a catch-phrase used (by those who are not familiar with his points) in an an attempt to misinform others (who are even less familiar with what he wants) about his allegedly "backwards" policy proposals. The truth is he does not want to "go back" to a gold standard. He wants to go forward to something that has never existed.
So, what does he really want?
Dr.Ron Paul wants gold and silver to be able to freely compete, as currencies, with government established currencies (like the federal reserve notes that are currently bearing the legend “dollar”) on an even footing. He wants to do this by removing any and all tax burdens from exchanges of gold and silver."
The Tea Party Rebellion Heads To A Brokered Convention.
Jack in Wi.| 2.13.12 @ 7:26AM
The analysis of Mr. Mallon is good, except in regards to his comments on Ron Paul's foreign policy. Endless war and the gold standard don't get along very well. There is no way that this country can ever return to fiscal solvency as long as we have the oversears empire. For 100 years the USA has tried to be the policeman of the world. The Federal Reserve and our endless over seas entanglements started with Woodrow Wilson. It is time to drive a stake through the heart of Wilsonianism. End the Fed. Bring the troops home. Concentrate on this country and let the world run itself. Wars always lead to high inflation and high taxes. Greenspan and Bernanke though that they could get us through these wars without either. Well we see how that turned out.
CD File| 2.13.12 @ 8:31AM
I agree wholeheartedly, the militarism cannot exist outside of our current insane monetary policy, how else could you pay for it? My view is most of these conflicts are manufactured to promote this as we are always discovered to be financing both sides in one form or another.
unger| 2.13.12 @ 7:14AM
It is clear from your comment that you did not finish reading the article.
SpiralArchitect| 2.13.12 @ 2:37PM
Fortunately you seem unfamiliar with Jack & Clint.
Keep up the good work.
Clint| 2.13.12 @ 6:22PM
Unfortunately, Spiral Artifact Is An Israel Firster Smear Bund Clown.
The Tea Party Rebellion Heads To A Brokered Convention.
oldfart| 2.13.12 @ 7:53AM
A hidden indicator might be the movement of money into the antiques market. Been to an auction lately? Prices paid for even half way descent items are moving ahead quickly.
How about the change in prices of Continental scrip and Confederate money on eBay? While gold seems to be stable and silver is depressed due to the drop in industrial demand where are people that have money 'stashing' it?
Another indicator is the interest on credit card interest rates. The banks pay you ½ percent on standard savings deposit but charge 18 to 20% on purchases not paid off every month. Smart people have paid off their credit cards, paying cash for purchases and stashing funds in 'safe' places.
My point is that, right now, everyone is holding their breath, waiting. I am not sure a move back to any kind of gold standard would work until the 'pain' of the next 12 to 18 months is worked through.
Currency markets of fiat money are a bad place to be right now for people that don't have lobes of steel.
People don't like bold changes until they are backed against the wall or bent over a barrel.
Is change coming? You betcha. Is it change we can believe in? That question is no longer valid.
Clint| 2.13.12 @ 7:54AM
It's Clear That Those Of Us, Who Get It, Support Dr.Ron Paul.
Dr. Ron Paul,
“We should start ending the Fed by allowing competition. I don’t like the fact that they have monopoly control. It’s a cartel: they print the money. The Constitution really doesn’t give them that authority. The Constitution said that only gold and silver can be legal tender. I want to legalize competition and allow individual Americans to use gold and silver in competition, as money. Today if you do that, you can go to jail.
“I don’t like the idea that the power gravitates to the Federal Reserve. They literally can have a yearly budget bigger than the whole Congress, then what they do is kept secret. We don’t know where they spend the money. We’re just starting to crack that nut in order to get some of this information and we should continue to do it.”
The Tea Party Rebellion Heads To A Brokered Convention.
Fred Farkel| 2.13.12 @ 8:31AM
Romney/ Paul, that's the ticket, get on board with success. WHo needs conservatives, right??
Clint| 2.13.12 @ 8:42AM
Hey Fartel,
You Israel Firster Smear Bund Cowards Are Bankrupting America, Using Our American Warriors For Your Cannon Fodder & Pissing Away American Treasure Policing The Middle East For Your Israel Firster Agenda.
The Tea Party Rebellion Heads To A Brokered Convention.
Dick Nome| 2.13.12 @ 3:38PM
Hey Islamist Firster, they are coming for you and that old crackpot you support.
Clint| 2.13.12 @ 6:25PM
Hey Israel Firster Dick Knob, The Attendants From The Institute For The Criminally Insane Already Came For You.
Rob Seabrook| 2.13.12 @ 8:01AM
So, another convert to the revolution. I'm heartened by the cracks in the media blackout of Paul's candidacy. Maybe someday we will see the rest of the MSM join in on a serious discussion of the policies put forth by the good doctor. Unfortunately, I'm not holding my breath. Probably the most salient point in the article is that the FED and the political and corporate establishment will move heaven and earth to ensure fiat money is never replaced. Of course, history shows that the elites never affect any meaningful change in the status quo, unless forced to by the peasantry. The "let them eat cake" crowd has had it their own way for 100 years to varying degrees. It's time they were shown the door.
Von Mises Jr.| 2.13.12 @ 8:04AM
A simple way to understand the gold standard is to understand how countries settled their finances in the past.
Initially, gold was shipped to the creditor country. Later, contracts were based on the value of gold. To prevent a country from inflating away its debt, the future payment would be adjusted to the price of gold. Therefore, if you devalued your currency by half, the contract dictated you pay twice as much to the creditor nation.
Today, we are told we cannot audit the gold. We don't know where it is, or who owns it. The Fed's books are secret and sealed.
Based on the old model, a nation could impoverish its inhabitants. Today, a sudden crash of the value of major monetary systems could not only lead to impoverishment, but war. If not due to default and an angry creditor nation, situations such as the Weimar Republic experienced hyper-inflation, and then adopted war socialism.
Al Adab| 2.13.12 @ 10:20AM
JR:
What might your namesake think? At the current price we could issue gold backed dollars and take a zero off the end of debts and checks. Might be nice to have 25 cent coffee again.
Von Mises Jr.| 2.13.12 @ 10:52AM
Rothbard's "What has Governemnt Done to our Money" explains that money can be anything that is accepted as a medium of exchange. Silver or other metals serve well.
The threat is when everyone loses faith in the fiat currency. Then we are reduced to barter.
What happened in Argentina is that they re-established a currency at one-to-three rate; effectively redistributing two-thirds of people's wealth in one fell swoop. The winners are the ruling class that owns all the hard assets and metals that become more valuable as our bank accounts and retirement funds crap the bed.
Von Mises lived 1881 to 1973, so he saw the hyper-inflation of the Wiemar Republic that led to Nazi Germany. He and Hayek fled separately for their lives.
"Socialism" by Mises explodes Marxism and its "One World Government" predominantly on the inability to calculate prices that is a monetary argument. Then planners must plan without feedback from the markets.
Past socialist governments co-existed with America and other capitalist countries, so at least they were able to mimic them to some extent.
So whether they understand it or not, Obama and the Progressive's "Utopia" is a regression to the distant past. They should be properly named the Regressive "Utopian" Party.
Old Soldier| 2.13.12 @ 8:05AM
I'm actually far more intrigued by currency competition than just the gold standard. I trust American Express more than the Fed.
(Yes, I read "The Unincorporated Man")
JimH| 2.13.12 @ 8:39AM
A gold standard is definitely an improvement over the fiat currencies around now. But how about a true free market solution; Get rid of any legal tender laws and let any bank or other financial institutions issue their own currencies backed by whatever they want, gold, silver, platinum or old comic books and let the market determine which ones to use and their relative value. As Old Soldier says, I to trust Amex more than the Fed.
SpiralArchitect| 2.13.12 @ 2:42PM
The saturation of varied currencies reminds me of the old story og Babylon.
There is a sound reason one/single currency is used today. Granted the reason has been abused and obscured in the recent decades.
tdiinva| 2.13.12 @ 8:45AM
The Gold Standard has become the Libertarian's national health insurance -- a talisman of ideological purity.
The Gold Standard prevented neither inflation nor financial panics.
The Gold Standard did not prevent the 1929 crash but it did make worse when the Fed was forced to contract the money supply to safe it in 1931.
The Gold Standard did not prevent the Panic of 1907.
The Panic of 1893 was result of the Gold Standard.
The great inflation that followed Jackson war on the Second Bank of the United States and subsequent decade long depression in the that lasted from 1837-49 was not prevented by the Gold Standard either. The economy did not revive until the California gold rush which in the end generated inflation.
The Gold Standard is not a panacea. It is a crutch used by the "stop me before I spend again" crowd to avoid responsibility.
Ryan| 2.13.12 @ 9:09AM
Fiat money systems are faring worse, however. I think that the only other solution would be an absolute prevention of printing another dollar.
I think you ARE somewhat wrong on one other point - gold standards have a tendency to not inflate currency prices.
I like Ron Paul's ideas - though I think I prefer a "basket of metals" approach, which helps increase liquidity.
CD File| 2.13.12 @ 11:09AM
Constitutional money is that "Basket of metals" It is based on Gold AND Silver (tangible items) I've never read any vitrol against the copper penny or nickle half-dime because it is also tangible.
tdiinva| 2.13.12 @ 11:21AM
There is a deflationary bias in a gold standard but when a new source of the metal is found inflation can be dramatic. As Milton Friedman point out in several books and articles, Spanish power declined after the discovery of gold in the new world as the flow of the metal into Spain set off a dehabilitating inflation.
Your real gripe is with a fractional reserve banking system which existed under the Gold Standard as well. Jackson’s war the Second Bank was driven by the Bank’s propensity to redeem gold certificates issued by institutions that operated under less than sound banking practices. However, you can't run a modern economy on anything else. Banning fractional reserve banking would result in an end to the financial intermediaries who keep capital markets liquid.
Ryan| 2.13.12 @ 11:32AM
Which is why the basket-of-metals approach is necessary, because it helps to prevent inflationary issues when gold is dumped into a market.
Capital markets will find away around such issues, because we'll also find out that an economy based on saving, rather than borrowing, is a bit more stable (and honest). That's the problem the fractional reserve is running into right now - it's based on the theory that we need to borrow to grow.
If the money supply remained stable, you may have a point. The problem is that it hasn't, and inflation is eating away at any profits, and particularly savings.
tdiinva| 2.13.12 @ 1:28PM
A unitary reserve banking system is called a safety deposit box or matrice. Want a house? Save up for 30 years to pay for it. Want to sell the house? You have to wait around to find someone who has saved for thrity years and wants your house. Fractional reserve banking has been around since the creation of money. Without it, you have pretty much a barter economy.
Ryan| 2.13.12 @ 1:31PM
I'm not blanketly arguing against using debt. What I AM arguing against is the entirety of a system predicated on the usage of debt - as opposed to savings.
We don't necessarily need a fractional reserve system to lend money.
tdiinva| 2.13.12 @ 2:59PM
Yes you do. Without allowing fractional reserve banking there is little incentive for financial intermediation. If you want to borrow money you have to identify people who would be willing to loan you money and negotiate a separate price with each one. Not an easy task. Alternatively you could issue equity and finance all your long term purchases as if you were a corporation. That might work for a business but it would be very hard for most individuals. If you bought your house as a joint stock venture your effective interest rate would be much higher than it would be if there were financial intermediaries.
But for argument sake suppose you ended fractional reserve banking in a fiat money system. The financial markets would operate in the same way as they would under gold or other commodity standard. There would be little or no leverage and prices would tend toward stability or deflation. We would have to put up with a vastly lowered standard of living because we wouldn't really be operating in a fully monetized economy.
Ryan| 2.14.12 @ 8:25AM
The situation you describe isn't necessarily a bad proposition, simply because far too much is done with debt instead of equity. It's a society-wide paradigm shift that we need to consider. Credit should not be easy.
And frankly, we could do with a stable currency, and some modest deflation wouldn't hurt, either. You're not exactly arguing a bad thing.
We are losing too much in our savings right now.
I don't know that your "standard of living" argument holds up - you really don't have a historical context where it didn't necessarily work. Many societies were rather prosperous on a gold standard, and were undone by other measures.
Keep in mind, I'm not arguing for a blanket gold standard, either. I would actually like to see a fiat system compete with a basket-of-metals approach (which increases liquidity) and a floating price on gold (rather than the government setting the price arbitrarily).
axbucxdu| 2.13.12 @ 6:54PM
Banking systems that competitively issue notes and fractional reserve banking are not mutually exclusive concepts. Although the notes are backed by specie, the volume of them in circulation is free to expand or contract as real economic demand requires. In Free Banking, specie is not typically used in everyday transactions.
The kernel of the system, is, however, asset-backed, unlike the numbers produced by Benny's computers.
Clint| 2.13.12 @ 9:14AM
" Does Dr.Ron Paul really want to take us back to the Gold Standard?
In one word: No. That is a catch-phrase used (by those who are not familiar with his points) in an an attempt to misinform others (who are even less familiar with what he wants) about his allegedly "backwards" policy proposals. The truth is he does not want to "go back" to a gold standard. He wants to go forward to something that has never existed.
So, what does he really want?
Dr.Ron Paul wants gold and silver to be able to freely compete, as currencies, with government established currencies (like the federal reserve notes that are currently bearing the legend “dollar”) on an even footing. He wants to do this by removing any and all tax burdens from exchanges of gold and silver."
The Tea Party Rebellion Heads To A Brokered Convention.
2Anglico| 2.13.12 @ 1:24PM
tdiinva, the "panics" you cite had nothing to do whatsoever to the gold standard. These "panics" happened because PEOPLE "panicked" because the BANKS could not make good on their deposits. That is, there was a run on the banks by people wanting their dollars, which were backed by gold. The banks did not have enough dollars on hand.
You are COMPLETELY wrong about the gold standard not preventing inflation. A basket of goods that cost $200 in 1800 cost $202 in 1900.
The "Creature from Jekyll Island" caused inflation. Roosevelt confiscated everybody's gold in the '30's because the price of gold was drifting up past $35/OZ. Actually the dollar was just LOSING value due to Fed policy.
You just wait till there is a modern day run on the banks, they don't even have many paper dollars, everything is digital/virtual dollars.
One real world example: A fine tailored men's suit cost 1-$20 gold piece (about 1/oz of gold) in 1920. What kind of suit could you buy with 1/oz of gold today ($1,725)???
tdiinva| 2.13.12 @ 4:04PM
Well, I could buy 4-6 suits at a sale at Macy's or other fine retailer. That sounds like deflation to me.
The Gold Standard mayh have not started the panic but it certainly put a limit ont he liquidity that might have reduced losses. But to school you a little bit. The banking system collapsed in 1931 because of the operation of the gold standard forced the Fed to contract the monetary base to stem gold outflows. It turned a bad recession into the Great Depression (see The Great Contraction in "A Monetary History of the United States", Friedman and Friedman).
The panic of 1893 was entirely a product of the Gold Standard. Gold outflows reduced US Treasury reserves to near zero and the banking system locked up.
axbucxdu| 2.13.12 @ 11:05PM
Fiat gold versus fiat paper is a distinction without a difference. Both terms are contaminated by the word fiat. Neither choice has a long term hope in hell of maintaining fidelity in a dynamic system like an economy.
Ryan| 2.14.12 @ 8:37AM
That's a major oversimplification, and was a mistake of the Fed rather than a problem with the Gold Standard.
Laurel | 2.13.12 @ 1:31PM
Exactly!!!!!
JimH| 2.13.12 @ 9:49AM
I’m a big fan of Terry Pratchett. I’d like to point out that his novel Making Money (one of the Discworld series) while not advocating a gold standard, makes the point that ultimately, regardless of how it is backed, a currency is only as good a people’s faith and willingness to accept it.
axbucxdu| 2.13.12 @ 7:11PM
All the more reason to adopt a system whose natural tendency is toward stability, a system that maintains that faith and willingness and not, as is the case now, abuses it. c.f. Free Banking.
Skip| 2.13.12 @ 9:56AM
More Clint and Jack brownshit tactics? Wonderful.
Einsatgruppen Clint, go back to the Stormfront boards.
14/88, dude!
Hobbes| 2.13.12 @ 2:13PM
Just say it Skippy: Any one who wants to save America from bankruptcy is a Neo Nazi. Those who want to see America crash and burn are patriots. Just so we are clear. Now let's go invade Iran so Israel doesn't have to.
Clint| 2.13.12 @ 6:40PM
Uh Oh !
Israel Firster Smear Bund Clown,Skippy Plays His Dog Eared Nazi Card On Tea Party Clint.
Apparently, Israel Firster Smear Bund Jerk , Skippy Misses His Brother Scooter.
Bibi/Skipp 69, Dudesses !
Harry the Horrible| 2.13.12 @ 10:20AM
Gee, if we go to some sort of physical standard, how will the Federales level their invisible tax on us and all the world? That invisible tax is called "inflation."
The dollar of 1961, when I was born, was worth SEVEN TIMES the value of the dollar today.
Old Soldier| 2.13.12 @ 11:15AM
Yes - If we took away their printing presses, the politicians pause before spending more money than exists.
hunter| 2.13.12 @ 10:20AM
All the wealth in California, is in the bureau of ingraving printing offices in San Fransicko, in California, in somebody elses name. Soo if you're headed for California... Is how the song should go. I don't remember the name of the tune. Any how it is true. It only costs approx. 2-3 cents to print a hundred dollar note. And when the giverment spends it on some bridge to nowhere they instantly get 15 t0 30% return. Then after the contractors pay the laborer, there is another 15+ % return. Depending on the velocicity of the hundred dollar bill it could change hands several times per week, each time there is a 15-30% return or gain on the 3 cent investment! What a deal. Its even better with the creation of electronic money. Soon people will reconize the dollar for what it is, worthless paper. We better have something to use for real currency when it does. Not if it does.
johnd2| 2.13.12 @ 10:25AM
Unfortunately there is not nearly enough gold in the whole world to back up all the currencies of the world. It may be very very difficult, but a better solution is to turn all sorts of comodities into forms of currency. One could pay bills in
wheat certificates etc.
SpiralArchitect| 2.13.12 @ 3:33PM
very practicle. Everyone using whatever 'certs' they please. I am sure most retailers wouldn't mind carrying the burdon of transferring or calculating the exchanges. Nah, no problem there.
john dubose| 2.13.12 @ 4:42PM
Actually.. We are blessed with massive cheap computer power and lots of communication bandwidth. It might work.
William R| 2.13.12 @ 4:50PM
Gold Myth #1: Not Enough Gold to Go Around
http://www.thegoldstandardnow......-go-around
fckewe| 2.14.12 @ 1:28AM
Current bank reserves of 83 BLN. Does that include the value of all USD traded stocks, options, bonds, CDO's, CDS's, traveler's checks, American dollars and American COIN worldwide, the values of all credit cards, loans, mortgages and subsidies that would be payable IN GOLD, on demand or default, if we were back on the Gold Standard?
I didn't think so. Think Iceberg and Titanic. The hugest part of the danger is below Ron Paul's surface only vision for a 100 year ago america.
axbucxdu| 2.13.12 @ 7:01PM
Very good, but it's already been done several times throughout history, and always after, you guessed it, a society repudiates fiat money. Exasperation sets in, then commodity (asset) money returns. Specie can be anything, gold silver, copper, anything but another's debt.
Say Baptist| 2.13.12 @ 10:40AM
We can't go forward or backward to gold because it's environmentally hazardous! Strip mines and hydo-mining scar the earth. The cyanide process pollutes the soil (as does the old mercury method. Perhaps we should do as the Romans and pay people in salt (give them a 'salary')
WalkingHorse | 2.13.12 @ 10:54AM
Somebody here wrote that a gold standard is "not a panacea". That is patently obvious to the most casual observer. What a precious metal currency standard does is to eliminate a risk that has plagued people for all recorded history: debasement of the currency by political actors.
A precious metal currency standard will no more repeal the business cycle than will Keynesian pump priming. A precious metal currency will not repeal the effects of the law of supply and demand. Nor will it prevent people from doing stupid things, individually and in groups.
But a precious metal currency standard offers the prospect of a more stable storehouse for wealth than fiat currencies, largely confirmed by the bulk of historical evidence.
It is worth noting that $1US c. 2012 is worth a hair under 4 cents US c. 1913. That reflects the effects a smoothed inflation rate of around 2%/year for a century. If you think 2% inflation is benign, your planning is insufficient to take the interests of your descendants or yourself should you live for a very long time.
WalkingHorse | 2.13.12 @ 10:56AM
Apologies for the fractured editing in the last sentence. It should read:
"If you think 2% inflation is benign, your planning horizon is insufficient to take into account the interests of your descendants or yourself should you live for a very long time."
Kingofthenet| 2.13.12 @ 11:38AM
I can't wait to use a 2012 $20 gold piece...it should be about the size of a childs aspirin.
fckewe| 2.14.12 @ 1:23AM
The size of the 'bayer' logo on an asprin and just about as thick.
Buck Ofama| 2.13.12 @ 12:50PM
To start:
EXPEL THE COMMIE RAT COCKSUCKER from the white house.
Get out of the middle east; let the rag heads kill each other.
Close our useless military bases.
Make welfare tit-suckers do civil service.
fckewe| 2.14.12 @ 1:23AM
Do you have a job Buck?
Merry Crystal| 2.13.12 @ 2:22PM
Great piece.
James Dines lives!
There is a way to get back on the gold standard that bypasses the lawyers.
Buy gold, YOURSELF.
The fools who continue to believe in fiat money, who don't protect themselves by sticking as many of their printing press "dollars" back in the face of the "progressives" in return for real gold, deserve what they get.
All the voting for Ron Paul, and other useless complaining, is so wimpy!
Who would need any "high commission" with "smart" people to fix the money problem, when gold hits $10,000?
Since most people are too stupid to understand that when gold goes UP in dollars, the dollar is going DOWN in truth, however, what’s probably needed is a hyperinflationary event, to shock the Americans out of their delusion.
Be smart---NOW!
YOU buy gold, and forget about all the poor dumb asses who go along with the progressives, as well as the equally dumb people who think they can stop the wasting value of the dollar with “commissions”—with all due respect, to Mr. Lehrman and Mr. Melloan.
aware| 2.13.12 @ 3:57PM
And a farm.
Merry Crystal| 2.13.12 @ 6:24PM
Yup.
Or, a stockpile of food and water, etc.
Or both.
I'm afraid people have been brainwashed so completely that moral hazard is the least of their problems. REAL insurance is called for---
to wit, PHYSICAL survival stuff.
There could be a lot of people with only PAPER insurance policies to eat!
cicero| 2.13.12 @ 4:25PM
The problem is never dishomest money, but dishonest government. Whatever currency you have confidence in works. It is only a medium of exchange. The problem comes in when the government continues to spend on things that have no worth - things that the citizenry would not pay for if they had a choice. As there is no VALUE in the product purchased, the value of the currency used to purchase it is zero. If I buy an apple for a dollar, the dollar and the apple are equal in value. That makes any apple that someone is willing to buy theoretically worth the next dollar. However, if the farmer just declares the apple to be worth a dollar, and nobody will give him a dollar for it, that apple and all others is worth nothing.
Translate that to government spending. If the government spends a dollar on a service that nobody wants, or needs, the next such service has no value. When government keeps spending dollars on that same service that no one wants or needs, it still does not acceed to the value of the dollar. It just knocks the bottom of the value of the dollar. I see no problem pegging your currency to the value of the goods and services produced by the users of the currency. However, when you include as a service all banking transactions, even those that represent inter-bank borrowing, which represents no production of goods or services, you have a scewed basis for your money supply. But, I am only talking Econ 101. For some reason, our elected geniuses seem to have skippedd that course on their way through Harvard. Or, maybe they just slept through it so they could be fresh and awake for Psych 101, or Gender Studies.
POST American| 2.13.12 @ 11:42PM
----------------------FINAL WORD----------------------
---STILL WAITING for that --first-- article
taking hold of the criminal legacy of the
UN-Constitutional, USURY driven,
inter-generational, debt serf
generating, EUGENICS mongering,
psychopathic, Globalist 'FED'.
---------ANYTIME BOYS
-------------------------ANYTIME. . .
Osamas Pajamas| 2.13.12 @ 11:47PM
Good article, also check out Rothbard --- "WHAT HAS GOVERNMENT DONE TO OUR MONEY?"
Complete book, free in pdf ---
http://mises.org/books/whathasgovernmentdone.pdf
fckewe| 2.14.12 @ 1:22AM
George, yammering on about "the gold old days" is quaint and maybe even humorous in a politically Charlie Chaplinesque way, but fiscally, it is foolishness. No ONE, not even Saint RonPaul himself, has a PLAN to safely reorganize the debt and the entire American monetary system. Not even the outline of the idea of an imagining of a PLAN.
All you jackasses have is blather and more blather and hoopla and yammering. Give Me aworkable PLAN, and i will seriously consider reverting to 100 year outdated monetary system, based on thesupposition that GOLD is the ONLY and MOST valuable substance that will EVER exist.
How are you going to pay people, in dust or nuggets per hour? how are we gonna squeeze .0000000000005 oz of GOLD into a parking meter? Tell us George, Tell us all what Saint Paul has in Mind for us in the last decade of his life.
aware| 2.14.12 @ 6:09AM
The debt can never be paid, period. This is the end game of debt based paper money. There is no way to "reorganize" a debt that exceeds all assets other than default and bankruptcy. This is the reality that we are trying to ignore. Tears, not gold, is the currency that will be used for this.
A return to a gold standard will not make this go away. But it would have kept it from ever reaching the world shattering scope it now is.
As to the parking meter, don't go all simple on us, nobody is saying we all carry sacks of gold dust around but that what we use as a medium of exchange be backed by gold(or silver), that is redeemable in gold upon request . The reason this is preferable is because politicians and bankers(the lowest, most contemptible life forms on the planet) can't "create" gold with a few keystrokes. In other words, instead of you being at their mercy, they are at yours.
Or maybe you like having the criminal class control your money? Look at how that is going. Currently somewhere north of 6 to 800 trillion in debt for a world with about 200 trillion in assets.
A lot of tears, an ocean of tears and soon the crying will begin.
Ryan| 2.14.12 @ 8:41AM
You've hit on my one complaint about goldbugs - how to effectively get back into a gold standard without catastophe.
Your complaint about using gold for everything is a little off, though - a "basket of metals" approach - where metal like silver is used - can work as well.
axbucxdu| 2.14.12 @ 9:02AM
F|_|ckYou, you may want to study Free Banking episodes to see the outline of a workable plan that is backed up by historical experience.
And before ya get all hot and bothered, start with some research by once Minneapolis Fed economists Rolnick and Weber. I also recommend following that up with Vera C. Smith's The Rationale of Central Banking and the Free Banking Alternative. No blather, hoopla, or yammering included.
By the way, the government's debt does not need to be reorganized. We simply need to demand that the FRN give up its monopoly control over a market it has unconstitutionally cornered for the last century. Over time, open competition would force Guv bonds and notes to seek their intrinsic value: zero. This implies an effective default of course, but little else is mathematically tenable anyway.
The Bruce| 2.14.12 @ 1:47AM
First, I'm all for the "Gold" standard.
Second, I still fail to understand how we get back to it after 40 years of being unhinged from it.
For nearly 200 years, an ounce of Gold was worth anywhere between $20 and $35 USD. As a result, the purchasing power of the USD has remained relatively stable. Since decoupling the USD from gold (the last 40 years), an ounce of Gold is now worth upwards of $1700 USD per ounce. If we were to get back onto the Gold standard (and/or silver, for that matter), I'm not sure how the global economy would respond as a result.
At this point, would we be cutting off our nose to spite our faces, economically speaking?
Osamas Pajamas| 2.14.12 @ 3:00AM
A bimettalic precious metals standard consisting of gold and platinum or gold and silver or a trimetallic precious metals standard consisting of gold, silver and platinum. Coinage and notes to b denominated NOT in "dollars" and "cents" but in weight and fineness, for example, "0.10 ounce 99.999% fine gold," "1.0 ounce 99.999% fine gold," etc, etc, and the same method for silver and / or platinum.
Skip| 2.14.12 @ 9:27AM
Meh.
When cataloging "useless douchecanoe" one can only reference Clint.
How does one reply to his stock brownshirt tactic of calling anyone who disagrees with his insipid views as an "Israelfirster!!!!!"?
Why, with more unintelligible jargon, of course!
"Israel Firster Smear Bund Jerk", rinse, repeat.
Add something of value, douche.
WM| 2.14.12 @ 2:37PM
Paul's H.R. 1098 is a lead-in to Hayek's excellent vision for a system of competing private currencies:
http://mises.org/books/denationalisation.pdf
Solo| 2.15.12 @ 9:24PM
We suffered 5 full blown depressions while on the gold standard. None since abandoning it.
It's true that the gold rate was held steady between $20 and $35 per oz for over a century. But when gold was $20 a middle class income was about $5 per week.
Price of goods are up but so is income. Its all relative. It's a function of an increased money supply.
Go to the gold standard and you will reduce the money supply. Less money for investment because of tighter lending standards. That equals less opportunity for start ups.
This places more and more wealth into fewer and fewer hands. (Which is EXACTLY the way it used to be under the gold standard)
All we need to do is get the government out of the business of business and force them to stop spending so damned much money we don't have and our currency will stabilize.
POST American| 2.15.12 @ 11:24PM
--------------------BOTTOM LINE-----------------------
POST the engineered WWI
POST the engineered sinking of the Lusitania
POST the Bolshevik coup d'etat
POST the engineered extermination in
the Ukraine
POST the systematic and massive
empowerment of Stalin
POST the support for the 'fierce'
EUGENICS programs of Cold Springs
Harbor and the Kaiser Wilhelm Institute
POST the engineered 'Great Depression'
"The Federal Reserve has pumped
so many BILLIONS into [--NAZI--]
Germany that they dare NOT name
the TOTAL."
-Rep Charles McFadden
(1935)
PRE World War II
PRE Nazi Halocaust
PRE the handover of China to MAO
PRE the BETRAYAL of FINAL victory
in Little Korea
PRE the handover of the ENTIRE
American economy into the hands of
the acknowledged world leader in
MASS GENOCIDE
PRE the engineered 'first' meltdown
of 2008
PRE the FINAL, definitve takedown
of the American Republic --AND--
American sovereignty itself
-------------------'ORDO OB K---OZ'---------------------
------HAD ENOUGH?
--------------------TIME TO MOVE---------------------
Julian Alien| 2.16.12 @ 10:48PM
You can do this with monopoly money if you like ,you can do it with homemade written paper.I am looking for an angel investor to help me make the best game board in town,with the Fed.,the chairman, the President,and the rest.Parker it is Has Been now..FUN,FUN,FUN!