by Ralph Benko
“It’s not even a theory; it is a theology.” So Nouriel Roubini, with his best Strangelovian inflection, describes the gold standard to Yahoo Finance’s The Daily Ticker, and in doing so displays shocking ignorance of the gold standard and either the work of Ben Bernanke or a presumption that the rest of the world is ignorant.
In slurring supporters of gold as “lunatics and hacks,” Roubini falls into lockstep with other leading defenders of the status quo: Prof. Barry Eichengreen in “A Critique Of Pure Gold” in The National Interest‘s September-October issue, Thomas Frank, in the July issue of Harper’s Magazine, calling gold “yet another eccentricity of the right-wing fringe … into the mainstream of American life,” Paul Krugman’s July 6 New York Times blog post, “The Armageddon Caucus“: “Gold bugs have taken over the GOP,” Think Progress‘ June 9 report by Marie Diamond stating that “Tea Party groups are determined to make returning to the gold standard a litmus test for GOP presidential candidates. And it looks like they’re succeeding,” and the Roosevelt Institute’s Mike Konczal blogging on April 27, “Conservatives are organizing against a full employment mandate and rallying around the gold standard wing of their party.”
Professor Roubini launched an amusing 16 hour War via Twitter, tweeting against Tangent Capital Management’s James Rickards and his Currency Wars: The Making of the Next Global Crisis. But in prosecuting that war Prof. Roubini steps on a landmine. He attempts to refute Rickards by reference, in part, to the writings of one Ben Bernanke.
Whatever one thinks of Bernanke, this is the intellectual equivalent of an unforced error. As this writer previously has noted here then-Professor Ben Bernanke observed, in an NBER Working Paper written with Harold James, that the sustained deflation that was the precipitating factor of the Great Depression was not the fault of the gold standard, but was “the result of a mismanaged international gold standard.”
Years later, in remarks at Washington and Lee University in 2004, then-Governor Bernanke noted that
The gold standard appeared to be highly successful from about 1870 to the beginning of World War I in 1914. During the so-called ‘classical gold standard period, international trade and capital flows expanded markedly, and central banks experienced relatively few problems ensuring that their currencies retained their legal value.
And: “unlike the gold standard before World War I … the gold standard as reconstituted in the 1920s … proved to be both unstable and destabilizing.”
Thus, to rely on Bernanke in making his overheated abjuration of the gold standard Prof. Roubini has misstepped, badly. Roubini’s critique seems to be based on a failure to grasp the distinction between the classical gold standard and the gold-exchange standard.
Sure all of them would talk about how good the pre WW1 gold standard when it was kept in a glass cabinet but now that the Deluge threatens their Paper Mache Palaces and people like Ron ask about something a little more robust, they shriek and gnash their teeth. At least Madoff had the decency to give up.
ReplyDeleteIn slurring supporters of gold as “lunatics and hacks", Roubini has once again shown his true colors. He is the front man and mouthpiece for the PTB. His rantings reveal how frantic they have become as their Ponzi unravels. It is really quite entertaining to behold. He has condemned himself with his own words and reveals the he is in fact the lunatic and hack.
ReplyDeleteWhile the press, banksters, and wall street fawn all over him, proclaiming each utterance a pearl, more and more of us understand how irrelevant his ranting has become. He simply no longer matters - events have moved far beyond his influence. Soon he will be addressing empty auditoriums wondering where it all went wrong...
As Mr. T used to say: "I pity da fool!"