Gold and Economic Freedom (by ALAN GREENSPAN)

Gold-Eagle.com ^ | 1967 | ALAN GREENSPAN

[NautiNurse]

nanak was required to post the same article a second time because:

a) the first time didn't seem to get enough responses
b) the first time didn't have the headline it deserved
c) I need my name in headlines
d) all of the above

[endthematrix]

Posted a second time?

Gold and Economic Freedom
Posted by (Unknown)On News/Activism 12/31/1969 4:00:00 PM PST

Gold and Economic Freedom
Posted by NettlemanOn News/Activism 08/04/1999 4:47:27 PM PDT

Gold and Economic Freedom
Posted by BoblemagneOn News/Activism 10/23/1999 10:42:19 AM PDT

Gold and Economic Freedom
Posted by djfOn News/Activism 03/13/2001 8:36:51 PM PST

[LowCountryJoe]

Stop the criticism! Somebody found it so pertinent to the prevailing mood of the day that they assigned this thread to be viewed on all major topics pages...so back off.
[/sarcasm]

[ghostrider]

Most folks are not into economic logic, because it is intangible, complex and time consuming. Even economists have short attention spans for economic theories of others. The "mind cliques" here on FR regularly issue "talibanesque" responses to most anything that causes them to read economic logic that hurts their mind. It is ironic that conservative economic theory is so widely trashed on a conservative forum. But, the same thing happened when some people tried to call attention to the stock market bubble. Conservative social, conservative moral, conservative political, conservative patriotic and conservative economic thinking may not always be best, but it has worked well. There is absolutely nothing wrong with your article - except the "mind cliques" want you to ignore classical economic theory and accept their liberal logic.

This whole argument of fiat verses tangible "money" reminds me of the childhood story, Three Little Pigs." Except in real life, the wolf is trying to explain to Practical Pig why he should build his house out of straw like his lazy party loving consumption oriented brothers.

[nanak]

The "mind cliques" here on FR regularly issue "talibanesque" responses to most anything that causes them to read economic logic that hurts their mind.

I agree. Most of them think, "Well, Thomas Jefferson was and IDIOT. What did he know about money and banking? Keynes was the architect of today's economic prosperity."

When all is said and don, Thomas Jefferson will be hailed as a GREAT ECONOMIST finally when elitist bankers from COUNCIL ON FOREIGN RELATIONS and TRILATERAL COMMISSION have finally achieved their aim of distroying our economy by running their FED RESERVE printing presses at MACH-10 speeds.

"It is a [disputed] question, whether the circulation of paper, rather than of specie, is a good or an evil... I believe it to be one of those cases where mercantile clamor will bear down reason, until it is corrected by ruin." --Thomas Jefferson to John W. Eppes, 1813. ME 13:409

Thomas Jefferson on Politics & Government

Thomas Jefferson on Money and Finance

[LowCountryJoe]

Where does gold derive its value from? Where does a fiat money derive its value from? Does either one have an inherent protection from volatilities that may result from a change in the demand to use either as a means to facilitate transactions? Even if gold is granted its empirical standing as a valuable commodity through the demand for it, what happens when the supply of gold is increased greatly due to a major finding?

You are absolutely correct, economic analysis is indeed complex.

See post #6, posted eight days ago! I saw Nanak coming.

[ghostrider]

Although many years ago I was schooled in economics and finance, I am certainly no expert. However, I learned enough to know that a good economist can dream up many pleasant sounding theories, and a good salesman can sell most of them. So, the world is full half baked, over sold economic theories and burned out, illiterate suckers who who "bought" into them. When some economic view is pushed so hard by so many salesmen in the political and media establishments, it is usually wrong for the masses and right for the few.

I have listened to many slick arguments concerning tangible assets verses intangible "money." Certainly, the faith and credit standing behind an intangible can give the illusion of a tangible. However, all the salesmen in the world can do no better than create an illusion. On the bottom line and in the end, something is either tangible or it is not. Gold is tangible and enduring. Government IOU's are intangibles spun by the salesmen to be tangible, and they are definitely not enduring. Eventually, the US Dollar will go the way of all government backed IOU's. It's best hope for long term survival is in a museum. When that time comes, the argument will be as it always has been - Gold verses the next dream scheme presented by the politicians and bankers. The more dollars and dollar credits created, the more difficult it will become to spin the illusion of intangibility. When the illusion begins to fade the masses will be left holding the intangible dollar and the few will be holding the value.

[wu_trax]

Is there any other major currency in the world that is covered by gold? If a central bank acts responsible there is no need for any gold standard or whatever.

If the Federal Reserve makes mistakes it doesn't mean that the whole system doesn't work.

[ghostrider]

If a central bank acts responsible there is no need for any gold standard or whatever.

That two letter word, "If" throws everything into the world of liberal purist theory. Jimmy Carter was also a liberal purist. He said that if people treat one another with respect, there is no need for wars! He found that to be a basis for disarming so that peace would take hold of the world. Liberal purist theory works good in the movies, in school books and for political yarns. We all know that the world is not the liberal utopia envisioned by so many of our "intellectuals," but rather a place of devilish cut throat competition and treachery. "If a politician (or banker)" will bust a liberal dream every time.

[Nick Danger]

That two letter word, "If" throws everything into the world of liberal purist theory.

The man's comment had to do with a gold standard. Your reply takes a figure of deserved ridicule, Jimmy Carter, who has nothing to do with this discussion, and holds up his idealistic views on war as an example of what's wrong with saying that if central bankers act responsibly, there is no need for a gold standard.

As a form of argumentation, that really sucks. It is not just unpersuasive, it is "slick argument from a salesman" of the sort you were decrying yourself only 3 notes ago.

Try again.

[wu_trax]

look, two out of three big central banks managed to keep their currencies value stable, one didn't. does that mean that the whole system doesn't work or that some people at the Federal Reserve didn't exactly know what they are doing (I'm not even sure what they have done wrong, during the last stock bubble they hardly had any choice, but to increase the amount of dollars in circulation, there were just too many people who wanted them.)?

Other than that, i hear a lot of people here complain about China pegging its currency to the dollar. if we would still have the gold standard like in the time after ww2, every currency would be.

And even if the current system doesn't work perfectly, would you rather have inflation / deflation purely at random without any possibility to control the amount of money in circulation?

[ghostrider]

You have restricted your field of vision to the gold issue, but I think the gold issue is simply a sub-part of a much bigger issue of liberal thinking verses traditional thinking. The university "intellectuals" (85% liberal), who dream up this stuff, don't teach only gold issues, they teach a thought process which encourages the acceptance of liberal thinking. Jimmy Carter is the perfect example of liberal thinking in contrast to the traditional. The thought mechanism is the same whether it be the desire for a liberal utopia with respect to war or with respect to economics. If one thinks of the underlying mechanism as the cause, and the sub issues as the symptoms, then it is perfectly logical to expand the discussion to include other related sub issues. If you do not agree, then it is reasonable for you to state your opinion and/or ask me clarifying questions. As far as a form of argumentation that sucks, how about firing shots before asking questions?

[decimon]

Gold and Economic Freedom Posted by (Unknown)On News/Activism 12/31/1969 4:00:00 PM PST

First posted by some drunk on New Year's Eve., 1969.

[ghostrider]

I have heard these arguments before. They are the mainstream and widely accepted by most people. I realize that I am in the minority, but I just happen to disagree with the fundamental premise that big banks and politicians can be trusted to put the interests of the people first. I realize my arguments are simple, but I believe people are intrinsically selfish and greedy and some control (not necessarily gold) is necessary to insure that the persons authorized to run the proverbial presses are doing so in the interest of the country rather than for a special interest.

[In veno, veritas]

ROTFL!

[Nick Danger]

That reply amounts to saying that you reserve the right to arbitrarily label any opinion that you don't like as "liberal," and therefore deficient. It's a glorious form of namecalling, but namecalling nevertheless.

There are many ways that one might arrive at the opinion that gold is obsolete as the governor on the creation of money. One such way would be to have lived through a deflationary period caused by gold-induced brake-slamming during a time that should have seen exceptional growth because of new technology adoption.

In particular one need not get there by proceeding toward utopia from the head of a pin. That may be the only way that you can deduce, but there are others, such as the one I described.

Having reached a conclusion that gold is obsolete for the purpose of governing a money supply, the question then becomes, "What takes its place as the thing which prevents kings and politicians from burying us in funny-money?"

There are innumerable answers to that question, but certainly one of them is some collection of Wise Men(tm) who just plain guess as to how much money there ought to be, with their guesses predicated on various price signals like interest rates and so on.

This process is really no different than the one that the board of wise men who run gold mining companies use to decide when to mine at a higher rate, or when to invest in a new mine, or a bigger mine.

No matter how it gets arranged, there will be humans in there making mistakes all along the way. I know of no reason to believe that the sort of humans who run gold mining companies are any smarter than the humans we have on the Federal Reserve Board of Governors.

The only differences I see are that (1) gold operates like a ratchet, in the sense that once mined, gold can't be unmined; and (2) the Federal Reserve can increase credit a lot more quickly than the Homestake Mining Company can find a new deposit and bring it into production, and that time span difference can be critical if the economy is trying to grow rapidly.

I don't think that "liberalism" has much to do with the choice. It's pretty much a practical thing of how we go about providing a convenient medium of exchange so that we can conduct economic activity expeditiously.

Money is sort of like electricity in the sense that 99% of us want to go about our business without worrying about how the electricity is made, whether by coal or nuclear. There are people who want to turn that decision into an ideological crusade, but most of us don't care and dismiss such people as cranks. "But it's nuclear! It will surely blow up! Radiation! Booga! Booga!"

To which, I think the right answer is, "Oh, shut up." That's my opinion.

[Nick Danger]

First posted by some drunk on New Year's Eve., 1969.

Also known as "time zero" to UNIX machines that lost the time stamp on the post.

[ghostrider]

That reply amounts to saying that you reserve the right to arbitrarily label any opinion that you don't like as "liberal," and therefore deficient. It's a glorious form of namecalling, but namecalling nevertheless...

To which, I think the right answer is, "Oh, shut up." That's my opinion.

It appears that you narrowly read what you want to be there, and get nasty with those who may have a different opinion. That is in itself a good standard by which to judge your opinion.

[wu_trax]

fine, then make laws. make it the 'prime directive' for the central bank to keep the inflation rate low and make sure that as long as it isn't they don't even try to boost economical growth with their monetary policy. We did that with the ECB, for me thats enough to trust in our currency.

and look around, so far Greenspan has acted in the interest of your country. you do have relatively strong economical growth, low interest rates and a low inflation, what more do you want?
(i do realize that there probably is a bubble somewhere in between all that, but there hardly is anything a central bank can do about it.)

now look what you would have with a gold standard: with the fixed exchange rates like in the old gold standard the world couldn't handle all the flows of international investments. it would simply not be possible without some flexibility in the exchange rates.

so now you will say 'then lets just fix the dollar to gold, who cares about the rest of the world anyway?'. in that case look back to the late 90s, when everyone was buying dollars like crazy, the dollar would have become even stronger, meaning that even more jobs would have been outsourced to Asia.

i even doubt that a strong economical growth is possible with a gold standard. look at this: you have economical growth, meaning there are more goods available. you have the same amount of money in circulation but more goods, that means falling prices. if prices fall in an economy, why should i invest? its not worth it. i probably would even stop buying goods for consumption, because i would probably get them cheaper if only i wait a little.