Thursday, September 15, 2011

The IHS Master of Ceremonies on Why the Gold Standard is Crazy

The Institute for Humane Studies is about to hold its 50th Anniversary dinner on October 14. (Charles Koch, IHS chairman)

As is becoming custom at these Beltarian events, Megan McArdle has a starring role. This time as the master of ceremonies. A friend emails a McArdle oldie but goodie post, where she lists 7 things wrong with Ron Paul's view on gold. She writes Ron Paul's position correctly:

1. The Federal Reserve destabilizes the economy with its "boom and bust" monetary policy. But she then tells us why this is wrong (and you better be sitting down):
This is hard to square with the fact that the longer the Federal Reserve has been in existance [sic], the more stable the economy has been.
Ah, yes, this is what she must have been thinking of regarding the lack of downturns since the Fed has been in charge (shaded areas are recessions)

She, then, correctly states Ron Paul's position:

2. Americans don't save because they're afraid inflation will erode their savings

But she then tells us:
This is daft.
And that:
After thirty years of stable monetary policy, a good portion of the population doesn't even remember high inflation
Stable monetary policy? Well, most people may want to forget how high their house prices were during Alan Greenspan's monetary printing, but that sure was severe price inflation. And there is plenty more coming at the consumer level
She then states another Ron Paul position:
3. American exporters are whipsawed by our fluctuating currency.
And argues:
Unless Dr. Paul has plans to put the entire world back on the gold standard--which I mote would require the kind of powerful international organization he's so suspicious of, or invasion--our currency will still fluctuate relative to others if we're on the gold standard.
McArdle is half right here, with the United States on a gold standard, American consumers will have a major edge with any countries that inflate their currency, since our currency is likely to climb in buying power against those currencies. So prices will in some cases fluctuate, but to the benefit of American consumers. Thus, I am not sure if McArdle is confused here, or anti-consumer.

Another Ron Paul position:

4. Fiat money inflation benefits those shadowy figures who receive access to artificially inflated money before the inflationary effects kick in
And she argues:
Those shadowy figures being the bankers who loaned it to you so that you could buy your house.
Oh yeah, Lloyd Blankfein and Jamie Dimon, just great guys. Because she is a Beltarian, it probably never crossed her mind that these guys playing footsie with the President, over at the White House, might be a problem.

Another Ron Paul position:
5. Fiat money inflation "also benefit big spending politicians who use the inflated currency created by the Fed to hide the true costs of the welfare-warfare state".
McArdle's response:
This is an extraordinarily primitive view of the money supply. The Federal government is not Caesar cutting his denarii with lead. The revenues from seignorage on 2% inflation are trivial. The Federal government gets the money for the "welfare-warfare" state just where it says it does: by taxing the bejeesus out of your wages.
Primitive view? Does McArdle seriously think the welfare-warfare state is being covered by taxes? Is she not aware of the ballooning deficit?

Another Ron Paul position:
6. Congress does not have constitutional authority to delegate its power "the authority to coin money and regulate the value of the currency".
McArdle sort of agrees with this:
Hmm. Okay
But then adds the snarky:
I'm pretty sure none of our legislators are qualified to operate a printing press, much less the annealing ovens and upsetting mills needed to mint coins.

And finally this Ron Paul position:
7. Congress "should only permit currency backed by stable commodities such as silver and gold".
And her response:
Commodities, almost by definition, are not stable. The price of gold looks as if it used to be stable, because the dollar was fixed relative to an ounce of gold.
Well, uh, Ron Paul in a recent debate pointed out that roughly 50 years ago you could pay ten cents for a gallon of gasoline and that the dimes which were made of silver back then are now worth the same (because of their silver content) as a price of a gallon of gasoline today. That's sounds pretty stable to me.

Yup, that's these are views of the IHS 50th Anniversary master of ceremonies.

My friend concluded his email:
Baldy Harper—a hardcore Rothbardian austro-libertarian—is spinning in his grave, thank god for the Mises Institute!


  1. I would disagree on #2 there from your friend. Americans don't save. We spend because we love to spend. Does inflation push this? Sure, but if overnight the dollar turned into a hard backed currency that did not devalue, Americans would still spend like drunken sailors.

    We've been conditioned to spend more than we earn for a century. Much like Russia before us, it will take generations to undo the damage we've done to ourselves.

  2. Gold standard is crazy because your owners will have a more difficult time owning you.

  3. The funniest part of Megan McArdle is her repeated insistence that she is not in any way beholden to the Kochs.

    I don't think she's lying; I've counted many DC journalists among my friends in the past, and one psychological trait they mostly share is a naivete about their jobs: their unspoken belief is that enormous corporations who are in bed with the US government pay them to write their thoughts on paper *because their ideas are so important and (equally important) because they are such good writers*.

    Humans are good at self-deception, and DC journos especially so: they don't even consciously notice the intellectual boundaries their paymasters set. They do know they exist, of course, since they know what to say and what not to say if you want those checks to keep coming, and what not to write if you want to move up the letter. The self-deception in that case is: "Those are crazy beliefs anyway, and I'd never write about them even if I could."

    They would never self-describe as "statists" or "scribes," but that's what they are. "Journalists" sounds so much nicer, but they are really just scribes, like establishments have kept around them since Babylon to confuse the people.

    Anyway, that's Megan McArdle.

  4. She sounds like a real winner. I guess that's one reason why I keep hearing that the Koch brothers are not in our camp.

  5. @Silver Bully: I'm not sure, I think that a lot of it also has to do with the huge amounts of credit and a sort of credit culture has exploded in the last two, maybe three, decades. I saw a graph somewhere and Americans used to save quite a bit more than they do today. I suppose one could argue this: why save when I can just borrow my way. Sounds familiar?

  6. Anon 5:18

    Yep, that's true of a lot of other "professions" as well.

  7. I disagree with Silver Bully. Americans used to be big savers, when their money would still be worth the same if they held it for years and then spent it. Now, savers are punished with decreasing purchasing power, so it pays to spend now and have something for your money.
    Make money again be backed by gold, and you will see plenty of savers.

  8. I've started to love exposing things like this on Twitter- throwing their obvious bias and power-worship in their faces. Libertarians are supposed to want the state to be minimized (at least) but these "beltarians" (awesome neologism) are just lipstick on a pig, leading semi-liberty-minded people astray for their corporate masters.

    Tweet her @asymmetricinfo (what a deliciously ironic nom de guerre) and use to shorten the link - it's and see if she will respond to the post. Just mention "EPJ" in the tweet- she's not stupid- she knows we are after her. We need to call these people out ~ they are trying to destroy Ron Paul, since he represents a threat to the cozy DC niche they've carved out.

    They are Trojans, provocateurs, infiltrators. The (T)Reason readers need to see their real agenda.

  9. Correct...Only FOOLS save money when it is devalued/printed everyday. The system is setup to destroy savers and reward debters/speculators.

  10. An 800 year old Koch, Walter Williams, *and* Megan McArdle. Obviously keeping in mind IHS' 70 something donor base.

    They should just reanimate Harper's corpse. It will be as vibrant as the entertainment.

  11. It is crazy to not want to be owned by a bunch of crotchety old counterfeiting murdering psychopaths.

    Got Gold?

  12. I blasted her for trashing Ron Paul on Fox News about a month ago telling her I could never subscribe to Reason magazine if she can't even stick up for a principled libertarian like Dr. Paul. She actually responded telling me to consider subscribing due to the positive articles on him!

    Reason should just come out and endorse Rick Perry instead of trying to be somewhat libertarian.

  13. Since Radley Balko left Reason, I have no reason to go back to Reason. My reason? Very little real reasoning at Reason.

  14. "The revenues from seignorage on 2% inflation are trivial."

    Once again an apologist for the FRS has flung a red herring about seignorage. David Andolfatto, too, likes to do that.