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 ...
Plan A. Outlaw the Democrat Party.
Plan B. Shut down the New York Times
Plan C give Voter#537 $1trillon and let him spend away. . .
Plan D : outlaw public unions across the country
Video - The Federal Reserve is Laundering Money
http://www.youtube.com/watch?v=wpmlHTeVG9A&feature=player_embedded
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.
Plan F- End minimim wage
Plan G - remove all bureacracies from the EPA to the ATF to the Department of Education.
Plan H - Remove everyone in power in D.C. and NY and START OVER!
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 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.
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.
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).
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.
Just keep heading in the direction 0 and his accomplices in the Kongress are heading and the dollar will sound just like a penny
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.
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.
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.
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