Main stream economists are finally discussing what every Austrian economist has already known (and has already been advocating) since... before they were called "Austrian Economists".
That we need the gold standard.
http://www.nytimes.com/2010/11/14/opini … .html?_r=1
So put that in your pipe and smoke it, Keynes, Krugman, and just about every other "economist" out there.
Free market money is the only true money.
There isn't enough gold to go back to the gold standard buddy. What's your solution? BTW - I adore how you tell the entire system of economic debate on the floor for an op/ed piece by a journalist turned financial philosopher? I guess that goes along with being an Austrian school follower. As I recall, they tend to formulate all of their points in general terms rather than presenting even a single number on a page.
"There isn't enough gold to go back to the gold standard buddy."
Wouldn't that mean that there is a bunch of worthless paper out there? Are you sure you are making the correct argument?
Actually, I am. See, we are not on the gold standard, and therefore no gold back our dollars. That is the point of this entire post. Are you sure YOU are making the correct argument?
the statement "there isn't enough gold out there" is one of ignorance.
If you have one piece of gold in the world, then it's value is astronomical. But instead of one piece, we have over 25k Tons.
The beauty of gold is that it is malleable, and can be mixed with other metals , thus we COULD make a gold coin that was .00001% gold, and thus worth even less than a penny, if we wanted.
This is one of the numerous reasons why gold has always won out in free markets as money.
IN addition to this completely-unnecessary-to-argue-about quantity of money, we also have silver, copper, palladium, and other precious metals. Those can easily float freely in value relative to gold (kind of like the way that all the currencies in the world float freely against the dollar. Only with gold, you can't print $600b out of thin air.)
Thus, you are refuted. Please read my series "Evan's Easy Economics" for more arguments about the gold standard, and why our system of money is undeniably going to collapse some day (I'll give it a century, tops).
I know we are off the gold standard. It began in 1913 and was finnished in 71.
Read your quote. You implied that there is NOT enough gold to back the dollars currently in the market.
Of course there is a enough gold to return to the gold standard. The amount of gold doesn't matter it is the value given the gold per ounce that matters. Right now gold is worth $1400 an ounce. If we returned to a gold standard that number would change radically unless all currencies are revalued. Fiat money on the other hand has become so politicized as to be nearly useless.
This has happened more than once in history. The good faith used to back currency disappears as soon as a government goes on a radical devaluation/inflation strategy. It happened most recently in Zimbabwe resulting in prices rising so quickly that a loaf of bread had a morning price, a midday price and an evening price. This is where regulated markets have taken us.
Placing monetary policy in the hands of the fed and believing that the business cycle can be manipulated out of existence has nearly ruined the dollar as the global reserve currency. If it fails you won't have to worry about socialism any more. We will be so poor as a country as to look just like a socialist state.
A 10% inflation rate is not hyperinflation. As a country we haven't seen hyperinflation in any of our life times in this country. For hyperinflation a better example is Zimbabwe now, Hungary after WWII, Germany after WWI, China, Argentina and more. As the amount of currency is increased and the velocity of money increases inflation can turn into hyperinflation quickly.
Quantitative easing, currency creation, massive budget deficit spending all increase the money supply. The reason why we are not rushing into hyperinflation right now it the velocity of money remains very low - almost zero and has been that low for over a year.
Massive cash reserves being held by banks, businesses and individuals are helping prevent inflation. Those reserves are likely to be held for at least two more years in anticipation of a change in economic fiscal and regulatory policy after the 2012 election.
The inflation of currency has several effects not the least of which is reducing the value of Treasury notes held by foreign investors. In this regard China's holdings lose value as does the Social Security and Medicare obligations.
It is a game with our money and it is a dangerous one in that inflation is a value killer but deflation is even more dangerous and we are teetering on the brink. Japan languished in a stagnant economy for over a decade doing what we are currently doing.
So how is an economy tied to the amount of gold in a vault somewhere a free economy?
Everywhere the market has not been interfered with -- and gold was available -- gold has outdone every other commodity for the right to become money. This is because of numerous reasons that I've outlined in hubs of mine that you are free to read.
In a true free-market, we'd actually be allowed to use whatever we wanted as money. It would, most likely, be the most efficient to use gold.
It wouldn't be sitting in a vault- it would be in our hands.
The first thing this makes me wonder is if James Grant is in the same "invest in gold!" scam that Glenn Beck, Rush Limbaugh and other far-right populists have been shilling for over the last year or so...
When the Republicans advocate tax cuts as a stimulus to economic activity they are Keynesians, albeit "trickle down" Keynesians. As somebody said recently "We're tired of being trickled on!"
katrina VandenHuvel (?)
Tinkle down economics: Pissing on poor people!
Keynes didn't support what is being done now. His specific recommendation, though flawed, was for very specific kinds of spending. FDR was an adherent of most of Keynes ideas. Keynes' recommendations were also followed by the Fascists and Nazis in so far as they too used tax money and deficit spending to create specific public works projects and hire vast numbers of workers. The WPA, NRA and accompanying alphabet soup of public spending projects built roads, bridges, dams. They mirror the brigades of men with shovels in Germany and Italy digging road beds, filling in and draining swamps.
We have not seen the mass hiring of workers to build anything. The spending or non-spending from the stimulus plan has been an unqualified failure. Other than the Great Depression, no American recession has lasted as long or been as deep as this one. One can say all they want that the economy is growing and creating jobs but given the history of economic recoveries this one is pathetic and it is a direct consequence of public, fiscal, regulatory and monetary policies.
I never thought I would ever say this, but here goes, FDR would be preferable to the president we have now. At least he knew that business wasn't the enemy.
LOL. Why do we want to go to the gold standard? Because Austrian Economists and libertarians are obsessed about inflation and hyperinflation which will make money worthless.
So let's see.. What was the rate of inflation for 2009?
-0.34% That's a MINUS one-third of one percent for the YEAR.
Well, have we kicked into hyperinflation this year?
Not exactly - it's just over 1% for the year - so far.
What's the annual inflation rates over last decade so I can compare? From 2000 to now..
3.38% 2.83% 1.59% 2.27% 2.68% 3.39% 3.24% 2.85% -0.34% and 1.??%
How does that compare with 'hyperinflation' they warn about?
Look at annual rates in a decade of hyperinflation 1973 to 1982
6.16% 11.03% 9.20% 5.75% 6.50% 7.62% 11.22% 13.58% 10.35% 6.16%
Which brings me back to the original question? Why do we want to solve a problem that doesn't exist with inflation in the negative last year and just over 1% this year? The gold standard is the proverbial answer in search of a problem.....
Fair enough. What do you say in regards to the FED printing money out of thin air? Do you believe you can utilize deficit spending to stimulate the economy? With out causing inflation in the long run...
What the FED is doing is called "open market operations." It is orthodox monetary policy and the most effective arrow in the FED's quiver. The economic recovery package passed by Congress and signed by the president saved a lot of jobs but was not big enough and well-targeted enough to deal with unemployment. The recovery has been sluggish. Bernanke deserves support for what he's doing.
We went off the gold standard almost 100 years ago. Libertarians and/or Wall Street fat cats have been trying to undo that decision for almost as long. We have had the Great Depression in that time and hyperinflation, neither was caused by being off the gold standard. We have also - in that hundred years become the most prosperous nation on earth. It happened in the century we went off the gold standard.
Let the libertarians point to ANY nation on the gold standard who is better-off than America. How about a close second to the USA?
Deficit spending got the USA out of the Great Depression, but we did not have in the 1930's the debt that the GOP has run up. (See my previous post on the subject - Facts are not Spin. http://hubpages.com/forum/topic/59587)
Can the fed print a few billion without causing inflation - yes. Can they print a trillion - which is what the stimulus needs to be - I don't think so.
How about making gold worthless. Do I hear the sound of civilzation as we know it, crumbling. Tick...tick...tick.
i dunno about you, but a lot of things that I normally buy are much more expensive than they were just a few years ago.
And what about the 96% devaluation of the dollar since the Federal Reserve came into existence in 1913?
I would define hyperinflation as flight from a currency, when holders can't rid themselves of the currency fast enough. Buying any kinds of goods at any price beats holding the currency for another few minutes, thus making goods more expensive and the currency worth less by the minute. It differs from inflation, in which wage earners want more of the currency because the prices of goods have risen, and they believe their labor is worth more so they can buy more goods. In hyperinflation they have no desire for more. It's a complete economic breakdown, and once it starts, it can't be reversed simply by restoring discipline.
If you ran a foreign central bank and were sitting on massive amounts of dollars that were being devalued daily, you might well trade some of them for gold at $1400 or more, just to hedge the risk of future devaluation. I wouldn't call it a scam. At the rate that dollars are being "quantitatively eased" while our productivity stagnates and our debt mounts, at some point no one will want dollars any more and we will see what hyperinflation is like.
During the German hyperinflation people would paper their walls with currency because it was cheaper and more plentiful than wall paper. We risk wearing out the thin thread of trust from which the dollar currently dangles. We have been taken to task by every major government. Apparently our only supporter in this endeavor is Venezuela - not a good sign.
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