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 ...
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.
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
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.
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.
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.
Getting rid of most regulation except for certain criminal laws, some zoning laws, and most taxes.
We can compete.
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.
Is China's Renminbi Already The New Reserve Currency?
To answer this question please check you pants pockets for loose change.
THANKS FOR THE PING.
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.
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? “
Thanks for the ping!
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.
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?
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.
Read tonight BUMP!
'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 _______ ?
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 !
WELL PUT.
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