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How to Make the Dollar Sound Again
The New York Times ^ | 13 Nov 2010 | James Grant

Posted on 11/15/2010 3:09:16 AM PST by Palter

By disclosing a plan to conjure $600 billion to support the sagging economy, the Federal Reserve affirmed the interesting fact that dollars can be conjured. In the digital age, you don’t even need a printing press.

This was on Nov. 3. A general uproar ensued, with the dollar exchange rate weakening and the price of gold surging. And when, last Monday, the president of the World Bank suggested, almost diffidently, that there might be a place for gold in today’s international monetary arrangements, you could hear a pin drop.

Let the economists gasp: The classical gold standard, the one that was in place from 1880 to 1914, is what the world needs now. In its utility, economy and elegance, there has never been a monetary system like it.

It was simplicity itself. National currencies were backed by gold. If you didn’t like the currency you could exchange it for shiny coins (money was “sound” if it rang when dropped on a counter). Borders were open and money was footloose. It went where it was treated well. In gold-standard countries, government budgets were mainly balanced. Central banks had the single public function of exchanging gold for paper or paper for gold. The public decided which it wanted.

“You can’t go back,” today’s central bankers are wont to protest, before adding, “And you shouldn’t, anyway.” They seem to forget that we are forever going back (and forth, too), because nothing about money is really new. “Quantitative easing,” a k a money-printing, is as old as the hills. Draftsmen of the United States Constitution, well recalling the overproduction of the Continental paper dollar, defined money as “coin.”

(Excerpt) Read more at nytimes.com ...


TOPICS: Business/Economy; Editorial; Government
KEYWORDS: bahog; centralplanning; currency; debt; dollar; economy; federalreserve; fiat; gold; goldstandard; roosevelt; thefed

1 posted on 11/15/2010 3:09:19 AM PST by Palter
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To: Palter

Plan A. Outlaw the Democrat Party.


2 posted on 11/15/2010 3:13:23 AM PST by screaminsunshine (Americanism vs Communism)
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To: screaminsunshine

Plan B. Shut down the New York Times


3 posted on 11/15/2010 3:25:34 AM PST by albie
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To: albie

Plan C give Voter#537 $1trillon and let him spend away. . .


4 posted on 11/15/2010 3:29:10 AM PST by DeaconRed (And the walls came tumblin DOWN! ! ! ! ! !)
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To: Voter#537

Plan D : outlaw public unions across the country


5 posted on 11/15/2010 3:47:17 AM PST by MrMarbles
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To: Palter

Video - The Federal Reserve is Laundering Money

http://www.youtube.com/watch?v=wpmlHTeVG9A&feature=player_embedded


6 posted on 11/15/2010 3:51:07 AM PST by preacher (A government which robs from Peter to pay Paul will always have the support of Paul.)
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To: Palter

Plan E: Replace paper dollar with silver dollar. Toss silver dollar into the air. Let it hit the ground. That’s how you make the dollar sound.


7 posted on 11/15/2010 3:53:15 AM PST by TruthShallSetYouFree (If not for the double standard, liberals would have no standards at all.)
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To: TruthShallSetYouFree

Plan F- End minimim wage


8 posted on 11/15/2010 3:54:38 AM PST by Chickensoup
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To: Chickensoup

Plan G - remove all bureacracies from the EPA to the ATF to the Department of Education.


9 posted on 11/15/2010 3:56:12 AM PST by Chickensoup
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To: Chickensoup

Plan H - Remove everyone in power in D.C. and NY and START OVER!


10 posted on 11/15/2010 3:59:34 AM PST by BuckeyeTexan (There are those that break and bend. I'm the other kind.)
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To: Palter

The gold standard didn’t work in 1890 and would work a lot worse now. The ONLY way to save the American currency is to save the American economy, i.e. to start producing things and selling them in the world again.


11 posted on 11/15/2010 4:19:07 AM PST by wendy1946
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To: Palter

The posters on this thread should be put in charge of The Fed. We’ve already demonstrated that we know the alphabet, which puts us on a higher intellectual plane than the current leadership.


12 posted on 11/15/2010 4:21:16 AM PST by TruthShallSetYouFree (If not for the double standard, liberals would have no standards at all.)
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To: Palter
Bernanke, Geithner, Paulson, Lloyd Blankfein, William Dudley, Gary Cohn, Jamie Dimon, Kenneth Chenault, John Mack and others represent a graver threat to our freedoms, to the sovereignty of our nation, and to the viability of our republic than the combined forces of ChiComs, Russians, and Iranians.

There is a permanent solution that will put an end to the bankers hegemony and control over our government and economy:

The immediate and total abolition of the Federal Reserve system and a return to a legal, transparent and sound monetary policy.

I invite you to watch Zeitgeist: Addendum, a superb documentary that clearly defines the genesis of the financial problem in our nation.

http://video.google.com/videoplay?docid=7065205277695921912#

13 posted on 11/15/2010 4:46:52 AM PST by GreatJoeMcCarthy
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To: wendy1946

It seems so simple and self evident. We began to slip when we started sending our manufacturing base out of the country. It worked OK for a while. But most schemes, even the irresponsible ones, will do OK for while. The rub comes along when you realize that along with that base you were also exporting jobs, the kind of jobs that had been the foundation of American success since its inception.

You are oh so correct, until we begin to once again make things here and sell them both here and there the economy will continue to deteriorate and at some point simple fail completely.

I am not real confident that we will, or even can, do what needs to be done. We are a generation, almost two, behind the curve. It takes a long time to get a stable of skilled tradespeople.

It seems so simple. And in fact, in my mind it is very simple.


14 posted on 11/15/2010 4:48:35 AM PST by jwparkerjr (It's the Constitution, Stupid!)
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To: Palter
It was simplicity itself. National currencies were backed by gold. If you didn’t like the currency you could exchange it for shiny coins ...

And one can still do the same today, without an "official" gold standard. Anybody can keep their assets / "money" in gold (coins or buliions or ETFs), silver, oil, stocks, bonds, foreign currencies or under the mattress...

Borders were open and money was footloose.

Whoopee! How's that so different from today?

It went where it was treated well.

As Walter Wriston has said, Money goes where it's welcome, and stays where it's well treated. That's a truism that stood for centuries and has nothing to do with "gold standard" but rather with the governments' fiscal, tax and regulatory policies. Right now "money" (USD$ and Euros) and especially "hot money" is flowing out of the U.S. and much of "peripheral Europe" and into Asia, because it's welcome in emerging economies and is not well treated in developed economies. Except when panic hits in other places on Earth and than "money" flows back into USD$ and the U.S. T-bonds.

The classical gold standard, the one that was in place from 1880 to 1914, is what the world needs now. In its utility, economy and elegance, there has never been a monetary system like it.

Yet during that "elegant" gold standard period there have been at least one severe recession, period of deflation, and at least one case of severe financial panic of 1907 which required strong and immediate action and showed the power of one man (Jonathan Pierport Morgan) taking charge of the group of top bankers to save the U.S. banking system from the brink of collapse. That event, and that power, has so shaken and spooked the U.S. government that it directly led to the establishment in 1913 of the U.S. central bank known as the Federal Reserve System, formed and based in part on the model of central bank of England known as Bank of England (aka The Old Lady of Threadneedle Street) which was founded in 1694. Other countries' central banks, e.g., Deutsche Bundesbank, Bank of Canada, Reserve Bank of Australia, all perform basically similar functions.

I generally like James Grant's broad knowledge of financial history, but he is distorting history here to try and "prove" his "gold bug" point and does what's known as "talking his book". There were problems with financial systems and the government deficits, debt and periods of inflation and deflation before and after the "gold standard," before and after the "fiat money" and before and after the formation of the U.S. central bank (the Fed).

15 posted on 11/15/2010 4:58:20 AM PST by CutePuppy (If you don't ask the right questions you may not get the right answers)
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To: CutePuppy
The problem with gold is that its value is entirely based on psychology and psychiatry and not economics or physics. The only two uses for the stuff are jewelry and electrical connectors and the quantity stashed at Knox alone has to be millions of times what the human race will ever need for bracelets or connectors. Moreover there are (much) cheaper metals to make bracelets and connectors out of.

If you're going to base money on anything in this day and age it has to be a typical basket of the goods and services a country actually produces.

16 posted on 11/15/2010 5:35:38 AM PST by wendy1946
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To: Palter
How to Make the Dollar Sound Again

Just keep heading in the direction 0 and his accomplices in the Kongress are heading and the dollar will sound just like a penny

17 posted on 11/15/2010 5:39:41 AM PST by from occupied ga (Your most dangerous enemy is your own government,)
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To: wendy1946
The gold standard didn’t work in 1890 and would work a lot worse now. The ONLY way to save the American currency is to save the American economy, i.e. to start producing things and selling them in the world again.

The gold standard worked excellently in the 19th century -- it was the greatest period of economic growth the world has ever seen.

We cannot "start producing things and selling them in the world again" until we have sound money. It is the constant inflation of the last several decades combined with the over-valuation of the dollar that has led to the disappearance of consumer goods manufacturing in the U.S..

The gold standard was an elegant and extremely efficient system of currency. The only times it didn't work were when government suspended it to fund wars.

I do not understand the fear of gold at FR. It is the only possible means by which consumers can regulate the value of our money.

18 posted on 11/15/2010 5:49:24 AM PST by BfloGuy (It is not from the benevolence of the butcher, the brewer, or the baker, that we can expect . . .)
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To: CutePuppy
Yet during that "elegant" gold standard period there have been at least one severe recession, period of deflation, and at least one case of severe financial panic of 1907

The Fed was created to save the banks from themselves. The panics you speak of were created (as they always have been) by banks lending out more money than the gold they held in reserve. They failed as they should have.

The New York bankers, though, convinced Congress that the legal ability to create more currency would benefit the country. And, of course, along with that came the power to bail out the banks when they over-extended themselves.

Too important to fail, you know.

19 posted on 11/15/2010 5:55:10 AM PST by BfloGuy (It is not from the benevolence of the butcher, the brewer, or the baker, that we can expect . . .)
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To: wendy1946
The problem with gold is that its value is entirely based on psychology and psychiatry and not economics or physics

The value of everything is based on the individual's subjectivity; and I suppose you could call that "psychology". The individual's decision-making process -- according to his own perceived needs and wants -- is the entire basis of economics.

There is absolutely no physics involved, though the modern "mainstream" economists (think Krugman, Bernanke, etc.) have tried mightily to pretend otherwise.

20 posted on 11/15/2010 5:59:29 AM PST by BfloGuy (It is not from the benevolence of the butcher, the brewer, or the baker, that we can expect . . .)
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To: BfloGuy
The gold standard worked excellently in the 19th century -- it was the greatest period of economic growth the world has ever seen.

That had nothing to do with the gold standard, though. The economic growth of the 19th century was driven by the Industrial Revolution -- which was really a "Fossil Fuel Revolution" more than anything else. If it weren't for the development of practical applications of coal and oil as fuels in industrial processes, we'd still be an agricultural economy here in 2010.

21 posted on 11/15/2010 6:39:10 AM PST by Alberta's Child ("Let the Eastern bastards freeze in the dark.")
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To: Palter

The simplest way to make the dollar sound is to stop importing oil. The way to do that is to convert short haul
trucks and busses to natural gas. Its the pickens plan


22 posted on 11/15/2010 6:41:42 AM PST by ckilmer (Phi)
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To: GreatJoeMcCarthy
You Sir have revealed the TRUTH.

Reading “THE CREATURE FROM JEYKLL ISLAND, A SECOND LOOK AT THE FEDERAL RESERVE” would be time well spent also.

Just to get a grip on what is the biggest scam in history.

23 posted on 11/15/2010 6:44:41 AM PST by Captain7seas
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To: GreatJoeMcCarthy
You Sir have revealed the TRUTH.

Reading “THE CREATURE FROM JEYKLL ISLAND, A SECOND LOOK AT THE FEDERAL RESERVE” would be time well spent also.

Just to get a grip on what is the biggest scam in history.

24 posted on 11/15/2010 6:44:47 AM PST by Captain7seas
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To: jwparkerjr; wendy1946

You are both 100% correct. The key to so many of our problems is that we have no industrial base. And it’s not like this is a temporary thing that will correct itself over time.

The only way, IMHO, that our industries can revive is by instituting some form of tariff system. Because no way can, say, a manufacturer in Ohio start a factory there and then compete with Chinese factories.

But we need those jobs in Ohio! And I would pay the extra cost the tariff would place on the shirt.

But here’s the problem: our Ohio manufacturer will be loaded down by government red-tape, regulations, and taxes. Next comes the union representative with all sorts of demands. After all, without foreign competition, what is to keep the unions in check?

The cost of the shirt would explode way past the additional cost due to the tariff.

It is a real mess, and would take bold coordinated national effort to solve.


25 posted on 11/15/2010 6:46:16 AM PST by Leaning Right
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To: Leaning Right

Getting rid of most regulation except for certain criminal laws, some zoning laws, and most taxes.

We can compete.


26 posted on 11/15/2010 8:06:02 AM PST by Chickensoup
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To: BfloGuy

Put it another way... Imagine all the pine wood in the US disappearing tonight: we’d be screwed. Imagine all the steel disappearing; we’d be screwed. Imagine all the concrete or all the corn disappearing; same thing, we’d be screwed. But if all the gold were to disappear, I don’t see how that would hurt anything.


27 posted on 11/15/2010 8:32:07 AM PST by wendy1946
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To: Palter; stephenjohnbanker; M. Espinola; Quix; blam
Then of course there is this truth to consider:

Is China's Renminbi Already The New Reserve Currency?

To answer this question please check you pants pockets for loose change.

28 posted on 11/15/2010 9:55:27 AM PST by ex-Texan (Ecclesiastes 5:10 - 20)
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To: preacher
Please Watch This Music Video on The Federal Reserve
29 posted on 11/15/2010 9:59:51 AM PST by ex-Texan (Ecclesiastes 5:10 - 20)
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To: ex-Texan

THANKS FOR THE PING.


30 posted on 11/15/2010 10:08:08 AM PST by Quix (Times are a changin' INSURE you have believed in your heart & confessed Jesus as Lord Come NtheFlesh)
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To: ex-Texan

I don’t think most people understand totally the idea of “reserve currency” as it currently means.

As far as I have been able to figure, it goes something like this:
the world was on the gold standard until the early 70’s

Then it was abandoned and that, at least in part, probably contributed to the hyperflation and sky high interest rates in the late 70’s, along with the oil instabilities.

Henry Kissinger comes along. He goes over to Saudi Arabia.

He negotiates a deal with the Saudis. He gets their agreement that if the US supports the House of Saud, then Saudi Arabia will price it’s oil ONLY IN DOLLARS. OPEC soon joins the agreement.

So any country that wants oil can buy it ONLY WITH DOLLARS and needs to do whatever it takes to get those dollar denominated assets. That move guaranteed the desirability of dollars. US Bonds, Treasuries, all that stuff.

Now IF any oil exporting nation or company were to decide it would accept alternate payments, say Euros or Yen or anything else, then basically, as far as America is concerned, it would be hit-the-fan time.

Oil would probably double or triple in “dollar” cost almost immediately.


31 posted on 11/15/2010 10:19:46 AM PST by djf (The word "concise" is too big!)
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To: ex-Texan

Panhandler: “ Do you have any spare change? “

Me: “ You mean change I never would had used, had I not had the great privilege of having run into you? “


32 posted on 11/15/2010 10:36:11 AM PST by stephenjohnbanker
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To: ex-Texan

Thanks for the ping!


33 posted on 11/15/2010 10:37:01 AM PST by stephenjohnbanker
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To: djf
When gasoline goes up a dollar a gallon people will start to demand a change in political direction. But if gas goes to $ 5 people will be marching in the streets like they are already in Europe. Hopefully many protesters will carry signs like this one:


The Fed has America by the short hairs. Personally I believe auditing The Federal Reserve is a must. Bernanke bribed members of Congress with money and favors to stop Ron Paul's effort last time. But I do not think Mr. B would get away with those tactics today.

34 posted on 11/15/2010 10:41:34 AM PST by ex-Texan (Ecclesiastes 5:10 - 20)
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To: ex-Texan
The problem with the Federal Reserve is that eventually a Barney Frank, Maxine Waters, or Ben Bernanke will get controll of the printing press.

Photobucket

35 posted on 11/15/2010 10:58:55 AM PST by preacher (A government which robs from Peter to pay Paul will always have the support of Paul.)
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To: wendy1946
You are right.

The problem with gold is that its value is entirely based on psychology ... and its "history" as a unit of monetary exchange, but neither one is a good reason to keep a country's currency tied to a gold "standard" which is just as fictitious, artificial and even less useful than, let's say an "oil" or a "basket of energy" standard. At least, with "energy standard" people would pay more attention to government's deliberately restrictive energy policies and how wasteful and permanently expensive wind turbine energy is, and price competitiveness of different sources of energy, within the basket, over time.

In 1933, U.S. Congress authorized Roosevelt's Treasury Department to raise the price of gold from $20.67 to $35 per troy ounce. "Stroke of the pen - law of the land. Kinda cool!" as Paul Begala famously said decades later. Abracadabra, presto-change-o, magically U.S. gold reserves became worth 69% higher! That was done during the "gold standard" and without any involvement from Federal Reserve. "Those who do not learn from history are condemned to repeat it."

Is that the direction some "gold standard / abolish the Fed" people want to go? To the Utopian Fairy Land of "gold standard," no semi-independent central bank (the evil Fed) and therefore no government deficits, no inflation, no deflation, little or no unemployment, economy growing at stable non-inflationary 5% a year...

The reality was, of course, far from idyllic, and in many ways much worse. It's the government fiscal policies and mandates, and regulations of the private economy that can make or break the economy.

Just as an example, Germany and Greece are on the same "Euro standard" under the same monetary policy, yet Greece is the socialist basket case and Germany (despite spending about $1 trillion in the past two decades to unify West and East) and a still pretty generous social welfare programmes is the strongest economy in Europe and one of the better ones in the world, at the moment. Enough said?

36 posted on 11/15/2010 12:07:07 PM PST by CutePuppy (If you don't ask the right questions you may not get the right answers)
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To: CutePuppy
This is the most intelligent treatise I've com across on the nature of money and who ought to have the authority to create it.

The gold standard caused no end of major grief all through the 1700s and 1800s and some of these people making arguments for bringing it back have never been near any sort of a real history book.

37 posted on 11/15/2010 12:16:38 PM PST by wendy1946
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To: Palter

Read tonight BUMP!


38 posted on 11/15/2010 7:06:38 PM PST by Pagey (B. Hussein Obama has no experience running anything, except his pedestrian mouth.)
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To: Palter; stephenjohnbanker; M. Espinola; Quix; blam; EggsAckley
'Making the dollar sound again' just ain't going to happen. We are so severely screwed and Mr. B is screwing the family pooch more every day.

'Nice doggy,' he says grabbing the ears in his left hand while unzipping his pants with his right.

Want to know what is really going to happen over the next two years _______ ?

Please Watch This Video

The entire U.S. will turn into Detroit if King Zero gets his way. With broken down $ 20,000 houses and rancid, full blown poverty on every corner

You heard it here first. . . . LOL !

39 posted on 11/16/2010 10:22:19 AM PST by ex-Texan (Ecclesiastes 5:10 - 20)
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To: ex-Texan

WELL PUT.


40 posted on 11/16/2010 11:11:49 AM PST by Quix (Times are a changin' INSURE you have believed in your heart & confessed Jesus as Lord Come NtheFlesh)
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To: Quix
Please Watch This South Park Video

And . . . It's gone ! LOL !

41 posted on 11/16/2010 2:58:47 PM PST by ex-Texan (Ecclesiastes 5:10 - 20)
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To: ex-Texan

Hmmmmmmm

The mind manglers manipulating again.


42 posted on 11/16/2010 6:03:48 PM PST by Quix (Times are a changin' INSURE you have believed in your heart & confessed Jesus as Lord Come NtheFlesh)
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