Mainstream-right is beginning to sing the praises of a gold standard.
A return to the gold standard by the United States within the next five years now seems likely, Steve Forbes predicted during an interview with Human Events.
“What seems astonishing today could become conventional wisdom in a short period of time,” Forbes said.
If the gold standard had been in place in recent years, the value of the U.S. dollar would not have weakened as it has and excessive federal spending would have been curbed, Forbes told Human Events.
Bottom line: Ron Paul is making an impact, though Forbes, a mainstream elitist, who has never found a military-industrial complex advertisement that wasn't to his liking, for the magazine founded by his grandfather, appears to distance himself from Dr. Paul and throws out the name of Rep. Paul Ryan as a gold advocate. Hmm, after a bit of research, the closest I could come to a link between Ryan and gold is that Ryan attended a conference where someone else gave a speech an endorsed gold.
It's good to see those calling for a gold standard to be expanding, but any mainstream advocate must be watched closely so that they don't start spinning the concept of a gold standard to mean something different than what it means now. A gold standard is one where the the dollar is freely convertible into gold. In other words, if you have a dollar, you will be able to walk into a bank and convert it into a certain fixed amount of gold. If this is what Steve Forbes means by a gold standard, then he should be welcomed to the club. If he means something else, he should be booted over to the printing plant where they print dollar bills and made to inhale the fumes from green ink for the remainder of his life.
I think there is no chance of this happening in five years. Everybody that gets money from government will hate this idea. Because of this, it would require such a massive paradigm shift that it makes it outside the realm of possibility. In policy circles, people only consider solutions when the problems are dire and immediate. I think the dollar would have to suffer an epic collapse in order for people to consider the something else.
ReplyDeleteI have to disagree. I think once things get out of control, then people are just pushing towards a real change. And who are they gonna believe? Obama & Co. or somebody who had been warning about that for decades (such as Ron Paul)?
ReplyDeleteOnce food prices really get out of control, I think there will be massive riots and eventually the economy will really collapse. And once it does, people just demand a more stable currency (such as the one based on gold). So far the inflation has been relatively slow... in terms of how people see and feel it. But once they realize that prices are doubling after every few month (or even week), they are really starting to understand what's causing it.
EST: I don't expect hyper-inflation as you seem to be. I don't doubt that the price inflation and debt burden of future entitlements will be bad, very bad. But the dollar has a long way down to go before being returned to gold standard. It would take a total collapse and a catastrophe like hyper-inflation for that to happen.
ReplyDeleteWhat I think will occur is an experience similar to the inflation of the 1970's. I think it's likely that over ten years, the dollar will lose half of it's current value, just like then. People will be getting crushed, but this isn't hyper-inflation as it is usually defined----that would require a 25-30% devaluation per year.
Don't forget that the markets try to work things out no matter what. Even in their current hobbled and over-regulated form, the today's markets are much more diverse and resilient than in the 1970's. There will be some (although minimal) downward pressure on prices because that's the nature of markets. No one can predict what new technologies will help create new cost-cutting efficiencies.
half of its value in the next ten years? you're very optimistic. in the last 3 years alone, the dollar has lost 1/3 of its value (in terms of gold going from $1000 to $1500).
ReplyDeleteand as we all know, that's just the beginning.
Anon at 3:09
ReplyDeleteBut gold isn't the only thing to measure the dollar against. Yes, the dollar is being devalued, but this isn't the dollar endgame. With that said, a devaluation of 50% over 10 years is still very bad. I just don't think that that statistic is enough to bring back a gold standard.
There's this Forbes piece in Human Events and then Nathan Lewis (Daily Reckoning) also had a piece on the gold standard.
ReplyDeleteSo the Rockefeller elites are prepping our minds for it.
Maybe gold standard versus paper is another intra-elite dialectic.
It's as likely as Mr. Forbes flat income tax.
ReplyDeletePersonally, I believe our economic model is flawed. We would be much better off with a system like Worgl, Germany used in 1932 based on Silvio Gesell's "The Natural Economic Order".
ReplyDeleteThe gold standard is not a panacea in and of itself.
ReplyDeleteWe don't just want a gold standard. We need gold and silver circulating and reciprocally valuing each other. The free market needs to determine the ratio at which they trade against each other. A fixed ratio would be artificial.
The Federal Reserve must be ended and replaced with nothing. Fractional reserve banking must be completely ended. Paper money must be ended. In short, it must be impossible for bankers, politicians, or government agencies to manipulate, expand, inflate, deflate, or otherwise tamper with the money supply.
There must be NO "backed" currencies. We don't want "backed" anything, we want gold and silver money. Circulating.
There must be a practical and generous transition from Federal Reserve notes to silver and gold.
Where, exactly is all the gold going to come from? Gold is already fairly rare, there simply isn't enough to cover even a small run, should it happen, and believe me, it will at the first sign of trouble.
ReplyDeleteWithout enough gold no dollars could be printed so the economy would choke. Either there would be a smothering effect on the economy or the gold to dollar ratio would be so tiny as to be completely absurd and not worth anything anyways.
People seem to think a gold standard would fix everything. It won't. Even when almost all countries had gold and silver standards there was still economic collapses, inflation and deflation. Economies often, OFTEN suffered and stagnated because of a lack of gold and silver to back the money supply. Economies still suffered from burdening debt, even on the gold standard.
The gold / silver standard isn't magic. It can't magically make people behave.
If you don't understand history your destined to repeat it.