Article on returning to the gold standard

mariner67

In today's NY Times.....apparently a bad idea!

http://www.nytimes.com/2015/12/02/business/economy/the-good-old-days-of-the-gold-standard-not-really-historians-say.html?_r=0

ricko

Those who recommend the return to the gold standard are obviously unaware of the

weakness of such a program and the historical issues experienced when it was in force.

The financial system is definitely a fluid, reactionary process... and likely, to some extent,

manipulated. However, the world economy is such that without intervention, we would likely

have disaster. Cheers, RickO

secondrepublic

We had a full gold standard in effect until the early 1930s, and then a hybrid gold system under the Bretton Woods agreement until 1971, in which the dollar was pegged to gold at $35 an ounce. I'm not sure what "historians" they are consulting, but economic history tells us that the U.S. had phenomenal economic growth in the late 19th century, most of the early 20th century, and after World War II. The economic history since we got off the gold standard hasn't been so hot.

cohodk

The USA was a clean slate...no railroads, no highways, no power generation capabilities, no cities, no airports, ect. Of course you will have strong growth when you start from zero. After everything was built, which was mostly done by the 70's, what's next?

[P] The US also had its most severe recessions during the time it was on the gold standard.

[P] Don't confuse growth with a gold standard. Growth has much, much more to do with demographics.

roadrunner

The problems always came with cheating on the monetary standard in question. That's how the boom and bust cycles + bank runs occurred. Paper money was always around during the 19th century gold standard years. Blame the paper, not the gold. Europeans flocked to America in the 2nd half of the 19th century because there was a gold standard.



The last time the US had a complete and functional "gold standard" was in 1913. The gold standard was ignored around the world during WW1 as nations printed currencies to fund the war effort. The return to gold in the early 1920's was a shell of the former standard as there were no circulating real bills....the heart of any workable gold standard. Consider the period from 1920-1933 to be a gold "standard" in name only.



Bretton Woods (1944-1974) was just another variation of a toothless gold standard. One could call the US monetary standard from 1914-2015 a complete failure considering the purchasing power of that "standard" is over 95% gone. That "missing" 95% went somewhere....and it wasn't all into the people's pockets.



The bigger problem, however, is that economic conditions are unstable. And during recessions, printing money can help revive economic activity. Nations began to rebound from the Great Depression when they began to abandon gold. Most developed nations now ask central banks to strike a balance between stabilizing broad measures of price inflation and encouraging economic growth, and then leave it to the technocrats to decide how much money to print.



The US govt has been unable to restore favorable economic growth since the 2009 recession despite $TRILLIONS in QE and money printing....and a locked in 0% FED funds rate. I'd call that a big failure. Apparently, monetary levers that worked 4 years into the Great Depression, aren't working so good now 6-7 years into this cycle. Those levers have worked just dandy for boosting the stock market though....and crushing commodity prices. You mean nations need vibrant commodity markets to fuel growth? Get outta here!



Nations essentially abandoned workable gold standards during WW1 and really never came back to it. I find it odd that they blamed gold for causing the GD and the "cure" was getting off the 1930's gold "standard."

jmski52

The problems always came with cheating on the monetary standard in question.



And the cheating begins right up front with the banking system. Who benefits most directly from fractional reserve banking and money creation out of thin air?



That's just Step 1.



The money is never given to actual working people first. I'd like to see a system that worked by handing new money to everyone in equal doses before it ever entered the banking system.



Wouldn't it be a real hoot if bankers actually had to provide some kinds of real service and do some kind of actual work for their incomes?

derryb

Not a well thought out idea

"A government should never be involved in fixing the price of anything. Whenever it does so it does a spectacularly poor job of it; imbalances are built up, inefficiencies increase and everyone but the political class suffers as a result.

Remember, a gold standard involves a fixed exchange rate policy, where the government buys and sells gold at a fixed price. I ask you: Why should we let the government set the price of anything?"

ricko

Interesting article derryb....thanks....Cheers, RickO

TwoSides2aCoin

Let's raise minimum wage to $20 per hour and get some of these in every home.

derryb

Martin Armstrong on the gold standard

Overdate

Originally posted by: ricko
The financial system is definitely a fluid, reactionary process... and likely, to some extent,
manipulated. However, the world economy is such that without intervention, we would likely
have disaster.

Intervention is the cause of the recent multiple disasters, including the 2000-2006 housing bubble, the 2008 banking crisis and financial meltdown, bailouts in the U.S. and more recently Europe, stagnant worldwide economic growth, endless deficits amid zero interest rates, and now Brexit.

Intervention always favors some people at the expense of others, and is a major driver of the income and wealth inequality that is typically blamed on capitalism.

derryb

Originally posted by: Overdate

Originally posted by: ricko
The financial system is definitely a fluid, reactionary process... and likely, to some extent,
manipulated. However, the world economy is such that without intervention, we would likely
have disaster.

Intervention is the cause of the recent multiple disasters, including the 2000-2006 housing bubble, the 2008 banking crisis and financial meltdown, bailouts in the U.S. and more recently Europe, stagnant worldwide economic growth, endless deficits amid zero interest rates, and now Brexit.

Intervention always favors some people at the expense of others, and is a major driver of the income and wealth inequality that is typically blamed on capitalism.

While I agree with most of your assessment, 2008 was caused specifically by repeal of the Glass Steagall Act and an intentional lack of regulatory enforcement. In the previous crisis (LTCM failure), regulators were allowed to properly and effectively hold accountable those who were guilty.

It is the intervention since 2008 that has prevented the self diagnosis and cure (by the market) to correct itself; yes, at a great temporary expense. The cost of this mistake will continue to grow until the cancer consumes the patient. The intervention has intentionally driven dollars to the stock markets and to US debt. US bonds are beginning to loose favor as will equities. This is what will drive PMs in the future.

The problem with kicking the can down the road is that you run out of road before you run out of can.