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Feature
Fight The Fiat
Papering over U.S. debts and trade imbalances will take more bills than we can print.
(Page 3 of 3)
American economic reconstruction, grounded by the true gold standard, would lead to a resurgence of rapid growth, empowered by renewed confidence born of market expectations of a stable long-term price level. With American leadership, other nations would follow. By re-establishing an effective and equitable international adjustment mechanism, international monetary convertibility to gold would end perennial deficits, manipulated currencies, and the threat of currency wars among the major nations.
The true gold standard — that is, a dollar convertible by statute to a specific weight of gold, joined to the windup of the official reserve currency role of the dollar — would make vast sums of money available for long-term productive investment. With a stable long-term price level, speculators worldwide would abandon unproductive inflation hedges. This dishoarding would yield immense, liquid savings for productive investment in real goods and services. Equity and true capital investment would gradually displace debt and leverage. Under conditions of stable money and stable exchange rates, savings would be redeployed by entrepreneurs and investors in new and innovative plants, technology, and equipment- minimizing unemployment, as skilled and unskilled workers are hired to work the new facilities. The export production machine of the United States would be reoriented to produce for the world market, which would engage all the positive and equitable effects of economies of scale and free trade.
This is the true road of American monetary and economic reconstruction. Let us begin the great work before us.
About the Author
Lewis E. Lehrman is a senior partner at L. E. Lehrman & Co. and chairman of the Lehrman Institute.
Letter to the Editor View all comments (36) | Leave a comment
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aware| 8.10.12 @ 6:30AM
As long as we have a choice of continuing the can kicking or taking our medicine, the can kicking will continue. There will be no monetary reform this election.
To do the right thing now would involve much pain, while doing nothing means even more pain in the future. But the future, even if it's next week, is not now. This means in the minds of men there is a chance of avoiding pain. So there will be no doing the right thing until no choice is possible.
I seriously doubt either of the candidates even knows how money is "created" in a fractional reserve system.
Dodd2| 8.10.12 @ 7:28AM
I could not agree more with what Aware said.
TLP| 8.10.12 @ 8:16AM
He's absolutely right.
It'll never happen.
But, that is what needs to be done.
It's time Government started Playing by the Same Rules, as we have to, when it comes to Balancing our Financing.
Unfortunately, we're dealing with a Political Party that hasn't Passed a Budget, in 4 Years.
Tell me, again, why anyone with his head NOT up his Ass, would vote for Democrats.
But, we're supposed to believe No Budget Harry Ried, when he says he gets a phone call from some No Named Ex Employee at Romney's Ex Company?
Tell me, again, why anyone with his head NOT up his Ass, would vote for Democrats.
Bob Grant| 8.10.12 @ 9:46AM
TLP,
New fox poll: Obama 49 Romney 40
Apparently, more a more people are choosing their ass as home for their heads.
MK48| 8.10.12 @ 10:28AM
As Iv'e said polls are overrated......they lie just like "the one".
JD| 8.10.12 @ 1:38PM
I believe this poll. The Liar in Chief's lies are working. The public is focused on this Romney-is-the-devil image Obama has been crafting. The issues are long-forgotten.
TLP| 8.10.12 @ 4:51PM
If this is true, and enough of the people are as Stupid as The TV GUIDE says they are?
We will get the Government we deserve.
I'm still of the thought that GOD will not let this happen.
We'll see.
Von Mises Jr| 8.10.12 @ 8:08AM
I have seen Lewis Lehrman on Kudlow many times and he would be a great pick for Federal Reserve Chairman or Treasury Secretary along with John Taylor in a Romney Administration.
I would not even attempt to critique his analysis since I believe his general statements and conclusions are exactly true, and his detail is way beyond my pay grade.
I would simply point out that the United States government has not been innocent and exploited over the last century as he suggests. Especially since FDR, our government has engaged in etatist (intervention or socialism) in farming, manufacturing and other industries both with subsidies and tax policy. Moreover, they have done the same in jumping in bed with crony capitalist creating de facto monopolies that stifle economic growth and lead to war socialism.
It has been conducted by both parties and this central planning protecting their favored son in business always and everywhere leads to poverty, misery and war. Per Mises, this is what led to both World Wars: inefficient central planning and protectionism that necessarily follows.
Romney and Lehrman are men that could turn this ship around. Pray for their ascendency in November.
Jacob McCandles| 8.10.12 @ 10:27AM
I'm far from an economist, but it seems to me:
1. Our leaders are doing everything they can to cause inflation
2. The stock market loves it.
3. Our media is largely ignoring or in denial about it.
Mike G| 8.10.12 @ 11:03AM
I think the media is ignoring it because they don't understand it. There is no way for them to explain something they don't understand.
Von Mises Jr| 8.10.12 @ 11:32AM
All they need to know is it redistributes wealth.
By creating many more dollars, the real value (purchasing power) of the dollar plummets. Mr. Lehrman mentions this a couple times in his article that the value of the dollar since the creation of the Fed is pennies on the dollar.
So seniors are especially hurt by this as prices soar and their Social Security and interest payments lag way behind.
It is also a way to repudiate national debt owed to foreigners and seniors since inflation shifts real gains away from debtors and to creditors. If you borrow and then pay back in cheaper dollars, the person who loaned you the money gets hosed.
Hyper-inflation also leads to financial collapse. So the revolutionaries love it since it will destroy our Republic and give them the opportunity to usher in socialism in the chaos.
That is all “Pooper Scooper” Anderson or Wolfie Blitzed need to know.
Mike G| 8.10.12 @ 11:41AM
Agreed, but what you've said here is more than a sound bite, i.e., too much for them to comprehend and explain.
Pecos Pete| 8.10.12 @ 8:53AM
Lehrman would be an excellent choice for Treasury Secretary.
JimH| 8.10.12 @ 9:28AM
Of course the one GOP candidate who might actually have supported this position and done something about it in office has been regularly derided as at best, some sort of crazy uncle by many on this site.
Bob Grant| 8.10.12 @ 9:42AM
Jim,
The problem is Ron Paul is no leader. A great congressman but possesses zero leadership skills.
He would, however, make a great fed chairman under president Romney.
MK48| 8.10.12 @ 10:29AM
The jew hater..................RP ?
Kwan| 8.10.12 @ 9:58AM
Financial sanity will be absent from the United States until the electorate throws the Democrat-Communist bums out of office. Otherwise we remain on the road to national bankruptcy. The country cannot afford to finance an ever expanding underclass with trillion dollar deficits forever and ever just so Obama and the Democrats can have a guaranteed voting block in their back-pocket.
ElGordo| 8.10.12 @ 11:01AM
ROMNEY'S POLICY WILL BRING US PROSPERITY & STABILIZE THE DOLLAR
Romney would utilize our new energy resources, eliminate our dependence on mideast oil & bring an era of prosperity to the U.S. Even with onerous federal government rules, look at how prosperous No. Dakota has become with drilling for natural gas .
.
We are on the verge of an American energy opportunity that will liberate us from relying on the Middle East, create millions of new jobs in the United States, improve our balance of payments (strengthening the dollar) & lower the cost of energy for consumers & for businesses.
.
Further, as a leader in energy production, the U.S. could affect the world price of oil and indirectly control the international actions of Venezuala, Russia, Iran, Iraq, and other nations heavily dependent on income from oil.
Through tv ads & speeches, Romney should show the difference between a vibrant Romney economy based on our new energy resources versus the regressive economy of Obama under green energy.
Kingofthenet| 8.10.12 @ 11:18AM
Quick! Sell everything, buy Gold Bars and sleep on a park bench!
JD| 8.10.12 @ 1:39PM
Thank you for representing liberalism so well.
TLP| 8.10.12 @ 4:53PM
He's not Kingofthenuts for nothing.
Bob Grant| 8.10.12 @ 6:04PM
Empty, meaningless snark.
Who Knows?| 8.10.12 @ 11:21AM
Thanks for the wonderful history lesson, and dream of a future that SANE leaders would choose.
However, ask Uncle Miltie---is “Free To Choose”, the book, the blueprint for what HAS HAPPENED since it came out. No.
If there’s only one thing I’ve learned, after half a century as an adult who’s been increasingly aware of economics and politics, it’s that sanity is the one word NOT applicable to our top dogs. Why, it was just “yesterday”, 1967 or 68, that LBJ made guns & butter a famous phrase, as he spent wildly on his Great Society AND the Vietnam War.
In retrospect, that was just a template for further priming of the inflationary pump, so that today we have Obama literally going for broke by spending like there’s no tomorrow---and, for him and the USA the tipping point “tomorrow” gets closer and closer.
Hubris brings nemesis. Period.
In essence, those in charge of the dollar printing press only THINK they’re smarter than you or me, AND the market--- fooled by their mastery of econometrics and other high level “scientific” economics: PhD’s, piled higher and deeper.
Sanity is to work, save 10% or more, and invest this real wealth in real---physical---things, that have proven to hold value and even grow, over time. Got sanity?
There was the tulip mania, and now it’s the dollar mania.
“Mania”?
Maniacs!
Who Knows?| 8.10.12 @ 11:36AM
Furthermore, we might rehabilitate another hoary economic term---soft landing.
Lehrman, in my reading of this great article, recognizes that it’s too late for such a future to happen. He is saying, IMHO, it’s either gold or not.
And, as a longtime gold bug myself, who revels in either-or simplicity, this is THE monetary true or false moment. It’s fiat currencies or not!
“Fiat”—let it be!
You see, Bernanke and his types over time are playing God, trying to mimic the “Let there be light” biblical creation myth, when it comes to money. However, THEY can’t create gold----it just IS!
They are gold diggers, in the fooling-you sense! Carnival con men, moving the pea around, tricking the rubes.
Remember “momentum trading”, at the peak of the dotcom bubble? Why, I do! Those who were making money hand over fist, as the price of stocks of companies who had yet to even make a profit, doubled, and doubled, again, said you’d be stupid to fight the trend.
The end of the dollar trend won’t be your friend---buy gold!
TLP| 8.10.12 @ 4:55PM
Can I buy some Meth from you?
Who Knows?| 8.10.12 @ 7:48PM
Poor TLP.
Johnny one note.
axbucxdu| 8.10.12 @ 12:46PM
The old gold standard was just another form of government fiat. While it imposed more discipline on fiscal policy, whenever the going got tough, the USG pulled the plug on it, either through confiscation by FDR, or by stealth with Nixon closing the gold window.
Privatise the damn note issue, let those notes compete freely against the FRN, and then we'll see how many prog pipe dreams can pay for themselves.
JD| 8.10.12 @ 1:32PM
Inflation is redistribution. That's all you need to know. That's why Democrats love it. That's why they love their monetary system.
That, and the fact that they've trained the public and their media to believe that any problem caused by "complicated financial mumbo jumbo" must be Republicans' fault!
Drunken Sailor| 8.10.12 @ 3:09PM
Interesting how the trolls avoid this subject but are all over the other ones today. Nothing like cold, hard, facts to make them run away I guess.
Rhoetus| 8.11.12 @ 11:50PM
Henry Hazlitt warn us about the Bretton Woods agreement when it was adopted. Both the Republican and Democrat parties have run from the truth preferring to kick the can down the road in order to stay "politically viable". Now we have a world drowning in toxic debt.
BackToBasics| 8.12.12 @ 12:14AM
from the article - "In a word, the official reserve currency role of the dollar enables America to buy without paying."
Ironic how what seems like a strength, dollar-reserve currency, is sowing the seeds of a future fall.
Lehrman makes sense with the arguments he gives for establishing a gold standard. Others disagree and think the current system of fiat-money is the most advantageous for worldwide wealth-creation.
But if the current fiat-money system crashes what will it be replaced with; a gold standard, worldwide debt forgiveness, steep decline and another 500 years of the dark ages? It just seems like the current system is destined to fail. Smart and more traditional economic thinkers, like Lehrman, may have some answers to consider.
JamesDrouin| 8.12.12 @ 11:00AM
A scholarly article that fails to address THE fundamental problem of US debt:
Unrestrained spending by political class.
Basing the dollar on gold, or silver, or pork bellies for that matter, won't change those spending patterns.
Rhoetus| 8.12.12 @ 9:07PM
Leaving the gold standard enabled the congress to spend freely with the Fed as their conspirator expanding the currency without limits.
Rex| 8.13.12 @ 9:39AM
Romney and Ryan are fiat money politicians.
Why would they "take the hit" on change?
LOL
Rex| 8.13.12 @ 9:51AM
You can take these nuggets to the bank:
(1)The election will bring no changes in monetary policy
(2)Furthermore,there will be no change until economic conditions give us no choice.
(3)LL is a brilliant guy,but he has absolutely no influence.
Rex| 8.13.12 @ 12:25PM
21 individuals respond to a major article by Professor L,what a joke.
I have been trying to discuss these issues since Nixon ordered us to be paper trained,no one cares.
LOL