Ron,
I will attempt additional counterpoint to your arguments. It is clear you have great faith in the current system and would like to see it sustained, at least in a somewhat healthier form. This belief, though admirably pragmatic, is a bit more than we can realistically hope for at this point in the game.
The utility of Gold will not make its comeback, if at all, at the top of the bubble, so you may cast your worries aside in this regard. No, it will emerge from the rubble or not.
I have not read Greider's book and I will make an attempt to locate and peruse the weighty tome. However, the denigration of a gold standard arises from many quarters. Few arguments against gold that I have seen in print hold water upon critical inspection. A GOLD STANDARD, LIKE DEMOCRACY, IS NOT PERFECT. But it's a damn sight better than what we have now.
Why does everything have to be painted as a black or white alternative? In terms of backing, only enough gold to satisfy demand deposits is necessary, and not one ounce more. If you run your policies so poorly that every outstanding note is offered for exchange, then yes, you BETTER have 100% backing. Again, gold is "only" discipline. If policy is reasonable, 100% backing is not necessary and, in fact, wasteful.
The Great Depression had nothing to do with gold or the gold standard. Much like now, it was wayward lending practices enabled by fractional banking that led to the boom and then the bust. Note that within a decade and a half of the illegal establishment of our "Federal" Reserve System, America had its first lesson at the hands of the international bankers. This is another topic that, not incidentally, goes hand in hand with the rise of fiat currencies. And where was gold during all this? Doing its job. Serving as a store of value, siphoned away to the European banks in payment of debt agreements, thereby depleting America's reserves.
Your argument vis-a-vis 15th century Spanish inflation is irrelevant. As recently as your last post, you were decrying the paucity of minable gold as a "growth" impediment. Which is it?
If the use of gold attaches too high an inflationary cost to waging war, then I'm all for gold! Perhaps the human cost should be the first consideration? No? Well then, if gold is what it really takes to price war out of existence, then so be it. Lincoln knew exactly what he was doing, and feared the results of his monetary policies more than the War itself.
You may drop the argument about being forced to carry gold around in your pockets. Clearly, an improved system would still function with currency - but it will be backed by gold.
Japan is not the recent example I was thinking of in terms of economies being trashed. Try Indonesia, Thailand, Korea, Hong Kong, Brazil, Mexico, ad nauseam. And you may call for transparency until you turn blue, but wherever there are central banks with something to hide, there will be "transparency" problems.
Ron, your arguments ring hollow in several fundamental respects. You seem intent on maintaining the status quo, though you agree that the status quo has serious problems. You seem to be unduly concerned with the rise in value of gold, in what "appears" to be deflationary times, but that is exactly what gold SHOULD do, countering the "appearance" of deflationary times. You seem to worry that the movement of gold is somehow dangerous at this time, yet was its previous collapse not signaling the danger now already upon us? You claim gold is anachronistic, yet you fear its hoary power. Why? If gold truly is the side-show you make it out to be, surely you believe it will be of little import in the coming self-induced implosion?
Thanks for a most thought-provoking exchange of ideas! |
