mosler.org
ON GOLD AND FIAT MONEY
GREENSPAN: Well, you say central banks own gold -- or monetary authorities own gold. The United States is a large gold holder. And you have to ask yourself: Why do we hold gold?
And the answer is essentially, implicitly, the one that you've raised -- namely that, over the generations, when fiat monies arose and, indeed, created the type of problems -- which I think you correctly identify -- of the 1970s, although the implication that it was some scheme or conspiracy gives it a much more conscious focus
than actually, as I recall, it was occurring. It was more
inadvertence that created the basic problems.
But as I've testified here before to a similar question, central bankers began to realize in the late 1970s how deleterious a factor the inflation was.
And, indeed, since the late '70s, central bankers generally have behaved as though we were on the gold standard.
And, indeed, the extent of liquidity contraction that has
occurred as a consequence of the various different efforts on the part of monetary authorities is a clear indication that we recognize that excessive creation of liquidity creates inflation which, in turn, undermines economic growth.
So that the question is: Would there be any advantage, at this particular stage, in going back to the gold standard?
And the answer is: I don't think so, because we're acting as
though we were there.
Would it have been a question at least open in 1981, as you put it? And the answer is yes.
Remember, the gold price was $800 an ounce. We were dealing with extraordinary imbalances, interest rates were up sharply, the system looked to be highly unstable -- and we needed to do something.
Now, we did something. The United States -- Paul Volcker, as you may recall, in 1979 came into office and put a very severe clamp on the expansion of credit, and that led to a long sequence of events here, which we are benefiting from up to this date.
So I think central banking, I believe, has learned the dangers of fiat money, and I think, as a consequence of that, we've behaved as though there are, indeed, real reserves underneath the system.
Remember Mulam, Richard Benson posted we suckered those chinese with the biggest central bank heist EVER. Round eye beats slant eye once again!!
prudentbear.com
The Asians remain shocked and in disbelief. Just when Japan, China, Taiwan and Hong Kong had accumulated enough dollars to buy oil to keep them warm for many winters, it’s all over. In broad daylight, the Americans and OPEC cheered as the price of oil popped up from $30 a barrel to over $50 a barrel. Indeed, this jump in the price of oil increases the world’s daily oil consumption bill of 84 million barrels a day to $4.2 billion, from $2.5 billion (or $1.5 Trillion a year from $900 billion). The world now has to shell out an additional $600 billion a year of “lucky bucks” to the oil producing countries just to stay in motion. That’s quite a tribute to pay!
The American strategy for using oil to finance our deficit is, of course, brilliant. Our elected officials knew that at some point those independent foreign central banks would start getting edgy about buying more dollars to pay for America’s war and deficits. (The $650 Billion trade deficit is threatening the dollar.) So, which central banks can America continue to use as the fall guys to buy the dollar? Why not the Gulf Oil states, but where would they get the dollars to buy U.S. Treasuries? Well, with the Chinese piling up dollars and growing like crazy, at some point the oil market had to tighten. It was only a matter of time before the Chinese would start bidding up the price of oil. The Asians, therefore, are hung out to dry when the price of oil rises because they have to spend more of their dollars on oil.
With such a simple policy to fund our deficit for another year, it’s no wonder America can get by without any brain power at the Treasury Department. In effect, America and our Gulf Arab allies just pulled off the biggest central bank heist in the history of the world. The price of oil just went up 60 percent or more, which really cuts down to size those $3.4 trillion of net foreign holdings of U.S. financial assets. As a loyal American, we would like to cheer our government’s deft move to pick the pockets of our trading and financing partners. Moreover, America gets the Arabs to fund a large share of our deficit, subsidize our interest rates, and help keep our taxes low for another year! Surely, I can afford to buy another gas-guzzling Sport Ute, get a rifle, and wave a flag!
This program of oil for dollars and dollars for the U.S. Treasury deficit is the simple tribute that we, as the Super Power, can expect. America is well paid for keeping the world’s supply of “black gold” safe and available to all. Unlike Vietnam – when America was trying to finance guns and butter – getting others to pay now for our guns, allows us to milk the oil out of the sand and turn it into butter!
The next question will be how the Asians respond to a 60 percent hike in the price of oil? Please, stay tuned.
Dollars or GOLD - it makes no difference, you can't pour either one into an aircraft carrier, f16, or tank to make the military flow - that takes OIL - and the chinese have just learned what happens when they try to buy the real BASE of an ECONOMY - yellow gold is a joke - to the tune of the beverly hilbillies - black gold - texas tea - let me tell you the story about a man named Jeb. He came to florida and the skies burned red - he looked over at his brother and what did he see - ole george was bombing everybody - wmd's that is - big mushroom clouds - energy! Holiest of holies!
Next decade, when the slants have a lot of yellow gold, and come to buy unocal, and find that won't get them that ENERGY either - do you think maybe slant eye will feel foolish for hoarding yellow shiny metal that wont make tanks go? |
