Wednesday, November 23, 2011

Roubini: Supporters of a Gold Standard Are ‘Lunatics and Hacks’

Nouriel Roubini goes off on gold and gold bugs in a new interview with Yahoo's Daily Ticker. He calls the advocacy of a gold standard "theology, not theory."

Roubini ignores the Federal Reserve printing that occurred in the 1920's that led to the Great Depression and makes the absurd statement that all economists point to the gold standard as a cause of the Great Depression. Who does he cite? Keynesian monetarists, Ben Bernanke, Milton Friedman and John Maynard Keynes, himself.

Roubini completely ignores the definitive book written on the Great Depression, Murray Rothbard's America's Great Depression. Rothbard points out in his text that the problem was Federal Reserve money printing that caused the Great Depression and not the gold standard. If the Federal Reserve had maintained a gold standard they wouldn't have been able to create more money and cause the distortions and malinvestments that ultimately caused the liquidation of those malinvestments during the Great Depression. That's theory backed up with the facts of the history of the period.

If the United States was on any type of serious gold standard in the 1920s, Roubini has to explain how money supply increased during such a period. Don't wait up late waiting for an explanation. Roubini operates by spreading myth, using ad hominem atacks, anything but dealing in facts.


  1. Would Roubini call Joseph Schumpeter a lunatic and a hack?

    Schumpeter not only supported the gold standard but argued that one could defend it purely on non-economic grounds, as a limit on government power. (See quotes here.)

    I'm increasingly of the view that not only is gold important to the preservation of liberty but that popular democracy without a gold standard may be impossible. Just as 'taxation without representation' is antidemocratic, so is fiat money, at least fiat tends to be antidemocratic. Virtually all advances in democracy have resulted from tax revolts, gold standards make the revenues of the state and it's relationship to the electorate much more open and honest. Open government if you wish. Maybe the slogan should be "No democracy without gold."

  2. Another Keynesian hack destroyed.

    Wenzel, have you ever seen this clip of O Reilly being unable to pronounce "keynesian" correctly? This is hilarious and should be spread to show how ignorant the guy who attacks Paul constantly really is.

  3. I don't think you can even have a run on a bank under a true gold standard, AKA a 100% reserve. But mainstream economists don't like to talk about stuff like that.

  4. Roubini completely ignores the criterion of going back to gold at the right price. Even after having it explained to him he still didn't get it!

    The two greatest reasons for gold to be money is the stock to flow ratio caused by its use as money and little else, and the fact that no-one can be trusted to manage a currency.

    Evoking images of cults and barbarous relics was ludicrous - since currency can and is as arbitrary as pieces of paper it doesn't really matter what you use as long as it imposes discipline. Gold provides that as a minimum and it has other benefits also.

    Roubini accused Rickards of ignoring prominent economists throughout history whilst, at the same time, he ignores the fact that history clearly shows the greatest stability during times of true gold standards (not the exchange standards Roubini and others frequently mix up). For economies to function they require a numéraire - a stable measure for economic calculation. Without that the whole system is based on guess work, aiding the least responsible and subsidising the worst behaviour. It requires an expensive degree to be convinced otherwise.

    In a 100 years time, people will surely look back at the 20th century and gasp in amazement that people could be sucked in by "paper mania" when they read about it alongside "tulip mania". But, alas, each generation learns the hard way.

    Roubini needs to read Rothbard and actually, Rickards' book also since he clearly hasn't bothered.

  5. "Roubini needs to read Rothbard and actually, Rickards' book also since he clearly hasn't bothered.'

    Roubini is too busy talking to other insiders for that.

  6. Anonymous, Bill O'Really was obviously just playing the role of the everyday man. Of course he knew what Keynesian economics was beforehand.

  7. The great depression was caused by the level of debt, not the printing of money.

  8. There is nothing wrong with FIAT money any more then there is with paper gold backed money. In fact as we all know money can be just about anything society wants it to be. The problem that all money faces, including gold backed, is manipulation by the issuers. Gold backed money as you point out was manipulated by the Fed in the 20s. FDR manipulated it by artificially setting the price of gold at $35 where traded in that range for nearly 37 years. Even gold coins were often debased by governments to profit from seigniorage. Gold does not provide any assurances that the government or issuer will not debase it. At the end of the day its not the money that matters, its the debt. Excessive debt is what leads to the destruction of money, not what the money itself happens to be.

    In many ways its better for us gold bugs (yes I am one and have quite a bit of the yellow metal) that gold not be money, otherwise its price would be far more manipulated then it is today and we would have to find another hedge against political stupidity that results from politicians taking advice from hacks like Roubini. What Roubini seems incapable of grasping is that its the advice to governments from people in his trade over the last 90 years that has created this f'd up world that is coming unglued. If Shakespeare were alive today he would change his famous line in Henry VI to "the first thing we need to do is kill all the economists". Of course he would make an exception for the Austrians!

  9. N.Roubini-a practicing economist at the International Monetary Fund (IMF), the Federal Reserve, World Bank, and Bank of Israel.
    So what is he suppose to say?!"Yeah folks, I am a Harvard economist, trust me the gold standard is only way to go". Good luck with that.

    Roubinis,Stiglitzes,Krugmans, al. are hired to say what they are saying until the last nickel of real wealth is siphoned out of the bank accounts of dumb masses.

  10. He speaks of a financial crisis as if it is something bad.

    A quick and healthy wipeout-of-bad-credit-and-malinvestment crisis is a better thing than bailing-out-the-loosers and propping-up-the-mistakes.

    Your Captain Obvious.

  11. I don't think O Reilly actually knew what Keynesian meant, but tried to give the impression that he was acting to cover up his own ignorance. He just reads off a teleprompter, and we all saw on his tabloid show what happened when that wasn't working correctly.

    WE'LL DO IT LIVE, DAMNIT!!!!!!!!!!

  12. As Chair of the House Monetary Policy subcommittee, Ron Paul introduced a package of bills to restore Constitutional Money.

    The Constitutional Monetary Reform Bills are:

    HR 1098 which legalizes the setting of legal tender in private contracts; abolishes taxes on gold & silver coin trading.

    H.R.1098 -- Free Competition in Currency Act of 2011

    To repeal the legal tender laws, to prohibit taxation on certain coins and bullion, and to repeal superfluous sections related to coinage.

    HR 1094 which abolishes the Fed Reserve board of governors and puts it in receivership preparatory to abolition.

    H.R.1094 -- Federal Reserve Board Abolition Act

    To abolish the Board of Governors of the Federal Reserve System and the Federal reserve banks, to repeal the Federal Reserve Act, and for other purposes.

    HR. 2768 Would Cancel the Fed Reserve's fiat Treasury Bond purchases made with fiat FRNs

    Rep. Ron Paul on August 1, 2011 introduced legislation to lower the federal government's debt by canceling the roughly $1.6 trillion in debt held by the Federal Reserve.

    Paul has argued that the idea represents a quick way to make the growing fiscal crisis more manageable. Under his bill, H.R. 2768, the $1.6 trillion that the Treasury owes to the Federal Reserve would disappear.

    Continued here:

    The approach that Dr. Paul proposes is a continuation of his overall program to "Legalize Freedom..." as he says.

    Please support these bills! Urge your congressional reps to become co-sponsors, like over 300 did with Dr. Paul's Audit the Fed bill in '09.

    The good folks at DownsizeDC have an action item to support Dr. Paul's monetary bills (this action item is about HR.1098, but you can add comments about HR.1094 and 2768 to it):

    Here is a short video interview I did with Dr. Paul May 2011 on the issue of Pushing Back to Legalize Freedom:

  13. "You will know them by their fruits"... Any question in your mind who this toad works for???