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Jim Grant Joins The Chorus Demanding A Return To The Gold Standard

Tyler Durden's picture





 

We salute Jim Grant for joining the ever greater chorus demanding a return to the gold standard: "Let the economists gasp: The classical gold standard, the one that was in place from 1880 to 1914, is what the world needs now. In its utility, economy and elegance, there has never been a monetary system like it." And no, as Jim Rickards among others claim, a return to the gold standard would not be deflationary...if gold were to be converted to the USD at between $5,000 and $35,000/oz.

How to Make the Dollar Sound Again, by James Grant

Originally appearing in the New York Times

BY disclosing a plan to conjure $600 billion to support the sagging economy,
the Federal Reserve affirmed the interesting fact that dollars can be
conjured. In the digital age, you don’t even need a printing press.

This was on Nov. 3. A general uproar ensued, with the dollar exchange
rate weakening and the price of gold surging. And when, last Monday, the
president of the World Bank suggested, almost diffidently, that there might be a place for gold in today’s international monetary arrangements, you could hear a pin drop.

Let the economists gasp: The classical gold standard, the one that was
in place from 1880 to 1914, is what the world needs now. In its utility,
economy and elegance, there has never been a monetary system like it.

It was simplicity itself. National currencies were backed by gold. If
you didn’t like the currency you could exchange it for shiny coins
(money was “sound” if it rang when dropped on a counter). Borders were
open and money was footloose. It went where it was treated well. In
gold-standard countries, government budgets were mainly balanced.
Central banks had the single public function of exchanging gold for
paper or paper for gold. The public decided which it wanted.

“You can’t go back,” today’s central bankers are wont to protest, before
adding, “And you shouldn’t, anyway.” They seem to forget that we are
forever going back (and forth, too), because nothing about money is
really new. “Quantitative easing,” a k a money-printing, is as old as
the hills. Draftsmen of the United States Constitution,
well recalling the overproduction of the Continental paper dollar,
defined money as “coin.” “To coin money” and “regulate the value
thereof” was a Congressional power they joined in the same
constitutional phrase with that of fixing “the standard of weights and
measures.” For most of the next 200 years, the dollar was, in fact,
defined as a weight of metal. The pure paper era did not begin until
1971.

The Federal Reserve was created in 1913 — by coincidence, the final full
year of the original gold standard. (Less functional variants followed
in the 1920s and ’40s; no longer could just anybody demand gold for
paper, or paper for gold.) At the outset, the Fed was a gold standard
central bank. It could not have conjured money even if it had wanted to,
as the value of the dollar was fixed under law as one 20.67th of an
ounce of gold.

Neither was the Fed concerned with managing the national economy. Fast
forward 65 years or so, to the late 1970s, and the Fed would have been
unrecognizable to the men who voted it into existence. It was now held
responsible for ensuring full employment and stable prices alike.

Today, the Fed’s hundreds of Ph.D.’s conduct research at the frontiers of economic science. “The Two-Period Rational Inattention Model: Accelerations and Analyses” is the title of one of the treatises the monetary scholars have recently produced. “Continuous Time Extraction of a Nonstationary Signal with Illustrations in Continuous Low-pass and Band-pass Filtering”
is another. You can’t blame the learned authors for preferring the life
they lead to the careers they would have under a true-blue gold
standard. Rather than writing monographs for each other, they would be
standing behind a counter exchanging paper for gold and vice versa.

If only they gave it some thought, though, the economists — nothing if
not smart — would fairly jump at the chance for counter duty. For a
convertible currency is a sophisticated, self-contained information
system. By choosing to hold it, or instead the gold that stands behind
it, the people tell the central bank if it has issued too much money or
too little. It’s democracy in money, rather than mandarin rule.

Today, it’s the mandarins at the Federal Reserve who decide what
interest rate to impose, and what volume of currency to conjure.

The Bank of England once had an unhappy experience with this method of
operation. To fight the Napoleonic wars of the early 19th century,
Britain traded in its gold pound for a scrip, and the bank had to decide
unilaterally how many pounds to print. Lacking the information encased
in the gold standard, it printed too many. A great inflation bubbled.

Later, a parliamentary inquest
determined that no institution should again be entrusted with such
powers as the suspension of gold convertibility had dumped in the lap of
those bank directors. They had meant well enough, the parliamentarians
concluded, but even the most minute knowledge of the British economy,
“combined with the profound science in all the principles of money and
circulation,” would not enable anyone to circulate the exact amount of
money needed for “the wants of trade.”

The same is true now at the Fed. The chairman, Ben Bernanke, and his
minions have taken it upon themselves to decide that a lot more money
should circulate. According to the Consumer Price Index, which is
showing year-over-year gains of less than 1.5 percent, prices are
essentially stable.

...

To reinstitute a modern gold standard today would take time, too. The
United States would first have to call an international monetary
conference. A chastened Ben Bernanke would have to announce that, in
fact, he cannot see into the future and needs the information that the
convertibility feature of a gold dollar would impart.

That humbling chore completed, the delegates could get down to the
technical work of proposing a rate of exchange between gold and the
dollar (probably it would be even higher than the current price of gold,
the better to encourage new exploration and production).

Other countries, thunderstruck, would then have to follow suit. The
main thing, Mr. Bernanke would emphasize, would be to create a monetary
system that synchronizes national economies rather than driving them
apart.

If the classical gold standard in its every Edwardian feature could not,
after all, be teleported into the 21st century, there would be plenty
of scope for adaptation and, perhaps, improvement. Let the author of
“The Two-Period Rational Inattention Model: Accelerations and Analyses”
have a crack at it.

(read the full Op-Ed here)

 


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Sun, 11/14/2010 - 16:38 | Link to Comment Calvin Jones an...
Calvin Jones and the 13th Apostle's picture

Bernanke would jump off the nearest bridge before he'd ever agree to do anything like this.  Maybe that's Grant's idea.  I don't know.

Sun, 11/14/2010 - 20:19 | Link to Comment Bendromeda Strain
Bendromeda Strain's picture

And no, as Jim Rickards among others claim, a return to the gold standard would not be deflationary...if gold were to be converted to the USD at between $5,000 and $35,000/oz.

 

Tyler, I know you are pretty tight on your cites, but Rickards said almost verbatim those words on his last KWN interview dated 11/9. Returning to gold wouldn't need be deflationary at a higher price. Rickards knows this.

Sun, 11/14/2010 - 22:13 | Link to Comment beanieville
beanieville's picture

I demand the return of the clam standard.  We should trade clams and lobsters.

Sun, 11/14/2010 - 22:55 | Link to Comment Jack Burns
Jack Burns's picture

"We should trade clams and lobsters."

 

Behold, a rich endowment!

http://reason.com/assets/mc/mwelch/2009_11/lobster_girl.jpg

 

Mon, 11/15/2010 - 15:19 | Link to Comment Zero Debt
Zero Debt's picture

I find the clam and lobster standards highly objectionable.

If we would have to re-price clams (or lobsters) in consideration of the total global stock of clams versus the global M3 nobody would be able to afford a clam and there would soon be no base money left as the clams would become extinct quickly.

Even with a gold standard, the total value of all circulating currencies in the world PLUS the total value of all gold ever mind is LESS than the total US government obligations. I just can't see where Obama would be able to mine 80 T USD of gold or fish up 80 T USD of lobsters/clams/seashells/unicorns to pay off all these obliations.

 

 

Mon, 11/15/2010 - 18:28 | Link to Comment honestann
honestann's picture

See, we told you gold was massively undervalued.

However, all debts denominated in FederalReserveNotes are invalid anyway, since the FederalReserve and fiat currency are fiat, fake, fraud, fiction, fantasy and massively unconstitutional.

To abandon all these debts has another important function - to teach everyone in the future never to accept fiat, fake, fraud, fiction, fantasy paper BS.

Sun, 11/14/2010 - 20:52 | Link to Comment StychoKiller
StychoKiller's picture

Bernanke would jump off the nearest bridge before he'd ever agree to do anything like this.

You write that like it's a bad thing! :>D

Mon, 11/15/2010 - 09:29 | Link to Comment Jim Willie CB
Jim Willie CB's picture

Lira is a sharp bold cookie. He ignores the powerful feedback loop mechanism on the hyper-inflation claim to hit by next year. The uniformly rising cost structure will result in added profit margin pressure for businesses in the USEconomy that bring about even greater profit margin erosion. That will force a steady and relentless job cut trend in direct response. Lira does great work. A bit cocky, he ignores a basic fact of economic life, RESPONSE MECHANISMS. In my Hat Trick Letter work, I always factor in the vicious feedback loop effect. This one will be powerful and will cause tremendous job cuts, followed by public outcry. Worse, it will result in known wrong project bids, which will later cause devastating losses and company shutdowns like in the construction business. Got half a million more comments on this important topic. I suspect Lira will be half right, by that I mean the price inflation needle will move halfway to where he expects it in his hyper-inflation scenario. The Jackass and Lira agree on the direction, just not the speed of movement, since the feedback will be horrible. Just imagine all the company liquidation sales and the competition, pitting dead businesses in liquidation against live businesses threatened!! 

Sun, 11/14/2010 - 16:41 | Link to Comment unwashedmass
unwashedmass's picture

 

and the article is on the NYT editorial page. Ben has to be crappin' his pants as the crowds are starting to turn on him.

Sun, 11/14/2010 - 20:36 | Link to Comment MeTarzanUjane
MeTarzanUjane's picture

Right next to the article written by Nobel Prize winner Paul Krugman. I'm sure he's shaking in his golden slippers.

Mon, 11/15/2010 - 07:36 | Link to Comment honestann
honestann's picture

Those types of morons will not recognize what's happening until somewhere in the following sentence:

ready... aim... fire !!!

We all look forward to that day.

Sun, 11/14/2010 - 16:49 | Link to Comment DosZap
DosZap's picture

Well,more and more WELL respected people are advocating this,or a form there of.All I can say is if it were to even get semi serious talks going among the Soverigns, all public holdings would be devalued, and confscated.

Going back on the Std, might be a good idea, just not for those of us around the world have chosen to protect ourselves with it as insurance.

It might get revalued, but not before the publics holdings were taken at face value, or VERY little above.

I do not want a GS it would not work, not with the players we have stil in control.

Sun, 11/14/2010 - 19:04 | Link to Comment JLee2027
JLee2027's picture

DosZap said" I do not want a GS it would not work, not with the players we have stil in control."

 

 In fact, Marco Polo said of Kublai Khan and the use of paper currency:

"You might say that [Kublai] has the secret of alchemy in perfection...the Khan causes every year to be made such a vast quantity of this money, which costs him nothing, that it must equal in amount all the treasure of the world."

Even Helicopter Ben would be impressed. Marco Polo went on to say:

"This was the most brilliant period in the history of China. Kublai Khan, after subduing and uniting the whole country and adding Burma, Cochin China, and Tonkin to the empire, entered upon a series of internal improvements and civil reforms, which raised the country he had conquered to the highest rank of civilization, power, and progress. ...

"Population and trade had greatly increased, but the emissions of paper notes were suffered to largely outrun both...All the beneficial effects of a currency that is allowed to expand with a growth of population and trade were now turned into those evil effects that flow from a currency emitted in excess of such growth. These effects were not slow to develop themselves...The best families in the empire were ruined, a new set of men came into the control of public affairs, and the country became the scene of internecine warfare and confusion." (- Daily Reckoning)

 

http://www.thedailybell.com/800/Depression-2010-Western-Fiat-Money-Finished.html   Moral of the story is that Obama, Bernanke, Geithner, etc, their time is limited. They'll be in power until the currency collapses.

Mon, 11/15/2010 - 08:52 | Link to Comment -Michelle-
-Michelle-'s picture

There is nothing new under the sun...

Mon, 11/15/2010 - 18:29 | Link to Comment honestann
honestann's picture

If you read my posts (above in this thread) about what exactly is a real, honest, ethical gold standard... you would see that it works just fine... superbly in fact.

Yes, we must stop letting the predators enslave us.  We are not slaves... they only claim we are.  If you believe them, you are a poor abused, self-enslaved fool.

We do not accept being poor abused slaves any longer.  We own gold (and silver, and other real, physical, valuable goods).  If they demand we give them our real, physical goods, we will refuse ("I don't have any [any more]").

If that is impractical for any reason (unlikely), we shall convert our gold into other real, physical goods.  If they decide to wander down the periodic table of elements and attempt to confiscate all 92 or 103 elements, let them try.  They will not get very much from us... except for lead, if you catch my drift.

The gold standard will work.  But it will only come to pass when all of us convert our fiat, fake, fraud, fiction, fantasy paper assets into real, physical goods like gold, silver, platinum, palladium, nickel, copper, lumber, seeds, farmland, productive equipment and so forth, and refuse to accept fiat paper for goods we produce.

We must make the gold standard exist, and work.

Hold your wealth in fiat at your own peril.

Sun, 11/14/2010 - 17:05 | Link to Comment poggi
poggi's picture

Jude Wanniski in 1997: http://www.polyconomics.com/memos/mm-971229.htm.  Remembered fondly.

The role of gold as numeraire is what remains, and that role will remain as far as the eye can see. Ordinary people, as opposed to government, must have a numeraire which enables them to accurately price present goods against future goods against foreign goods and foreign future goods.

 

http://www.polyconomics.com/memos/mm-980114.htm

 

A "strict" gold standard is not uninformed 19th century thinking. It is uninformed 20th century thinking. The gold standard worked in the 19th century not because banks held gold in equal reserves to the notes they issued, but because the United States government guaranteed its national debt in dollars at a specified weight of gold. The establishment of the government standard is what enabled the private banks to issue notes that could circulate from one sphere to another, although their primary function was to intermediate bills of exchange denominated in dollars, even though those dollars technically did not exist. The great classical economists of the 19th century, from David Ricardo through Karl Marx, understood that gold's principle function as money was to provide a numeraire through which the markets could infer all other exchange rates, i.e., "prices." Money is functioning at the peak of efficiency when the bank need hold no gold. That is, as long as the bank has assets that enable it to acquire gold at a moment's notice, it does not have to hold the specie itself.

Sun, 11/14/2010 - 17:28 | Link to Comment nuinut
nuinut's picture

as long as the bank has assets that enable it to acquire gold at a moment's notice, it does not have to hold the specie itself.

That's a great theory, but where exactly does the buck stop?

The bank is relying on who to supply them with physical gold at a moments notice?

And upon whom is that party relying to supply them, and so on and so forth.

What if demand is great; how will they pay if the price rises dramatically? Counterparty risk must be removed from the system, and physical in your possession is the only way to do it. Take responsibility for yourself, and expect likewise of others. Problem solved.

 

If the opportunity is there for shell games to be played, it will be taken; that's human nature.

Don't give the opportunity.

Mon, 11/15/2010 - 07:25 | Link to Comment honestann
honestann's picture

The ONLY honest, ethical, practical solution is:

 ---  pure physical gold standard

Anything else is pure fraud.

Add the following definition to every dictionary:

paper (noun): fraud.

Because given the diabolical nature of predators today, any form of paper gold, gold receipts, fractional reserve practices, or similar --- will instantly empower the predators-that-be to print fiat paper, buy every politician (and every real, physical good on earth), and enslave everyone yet again.  We've been through this already several times.  Wake the frack up, humans!

Sun, 11/14/2010 - 17:05 | Link to Comment trav7777
trav7777's picture

BACK to a gold standard?  we never had one, jfc.  We were on a silver standard, or bimetallism to be more accurate.

NOTHING about the gold standard prevents the same type of bullshit we've been seeing.  You people actually believe the BANKS won't print paper gold?  JFC the BOE did this for CENTURIES.  How the hell you think Britain became a world empire?

The gold standard WILL NOT CREATE MORE OIL SUPPLY.

Sun, 11/14/2010 - 19:02 | Link to Comment BennyBoy
BennyBoy's picture

The Gold Standard was manipulated by the banks back then and would be again. So easy to do.

A mixed commodity bag may work better. We are on the Oil Standard now.

All CB's need to be completely transparent no matter what system is adopted.

Any and all transactions to be posted within 5 minutes of being done. No exceptions. All banks in trouble would fail quickly. No time to have 2 sets of books or off blance sheet items.

Perhaps the rate of monetary growth would equal population growth.

 

Sun, 11/14/2010 - 19:39 | Link to Comment dkny
dkny's picture

Why should the rate of money growth equal population growth?

Why should it even grow?

Mon, 11/15/2010 - 07:20 | Link to Comment honestann
honestann's picture

The fact is, no matter what the exchange rate between gold and other goods becomes on a real, honest, pure physical gold standard... the system will automatically equalize in fairly short order.

For example, if the initial "value" (conversion rate) for gold was accidentally set too low initially, gold mines would close, reducing supply below the growth of goods and population, restricting gold supply, which would gradually lead to slower rising gold prices (a balance).  The same process works in reverse if the initial "value" conversion rate) for gold was accidentally set too high initially.

It may not be obvious, but in the end (after a few months, or years at most), the gold standard would be very stable whether the supply of gold increased slowly or not.  My guess is, gold supply would not quite keep pace with the growth in goods and population, which would effectively create a modest equivalent of "interest" on gold savings even when burried in your back yard.  This is good, but is not necessary.

Mon, 11/15/2010 - 09:25 | Link to Comment ExistentialSkeptic
ExistentialSkeptic's picture

Your understanding of the consequence of mis-priced conversion is wrong -- you are thinking of gold the way you would any commodity.  In actuality, the ability to add to the flow (open more mines as in your example) is very limited.  Any government setting convertability at any fixed price would find themselves out of gold quickly.

Mon, 11/15/2010 - 18:38 | Link to Comment honestann
honestann's picture

Oh yes!  Of course that's true.  I would never, ever support government setting prices of anything.  In fact, if you read what I wrote above in this thread, you'll see that it is absolutely necessary for the unit of value (or "currency") to be "1 gram of gold".

The only "price fixing" involved is to define:

one gram of gold == one gram of gold

No way around that price fixing - that's pure reality.  No way a gold standard can have "dollars", "pesos", "euros", "yen" or other bogus names.  The only "money" that could exist is "n grams of gold" - period.

What I mean by the initial exchange rate might initially be slightly too high or too low is this.  If we switch to a real, honest, physical gold standard, the exchange rate between eggs and gold, and every other real, physical product [and service] might be slightly higher or lower than the long term exchange rate that would automatically occur.

NOBODY sets these exchange rates!  Or to put it more accurately, every producer of goods sets the exchange rate for his goods versus gold.  If he cannot exchange all the goods he produces, he may decide to lower the exchange rate to assure he sells all the goods he produces.  Or if he cannot keep up with demand at his initial exchange rate, he might decide to raise the exchange rate to match demand with his productive ability (get as much for his product as the market will bear at the quantity he attempts to sell).

Sun, 11/14/2010 - 19:38 | Link to Comment dkny
dkny's picture

I believe Murray Rothbard pointed out in his book The Mystery of Banking that coupled with printing was also the oh-so-common suspension of the obligation to redeem. Additionally, there was the aspect of threat of force by the state which eventually conveyed legal tender status on BOE notes.

So, if you have perversions of the gold standard system with such elements as fractional reserve, lender of last resort, and legal tender for the notes of the lender of last resort, then you are not really on the gold standard.

Sun, 11/14/2010 - 21:55 | Link to Comment Freewheelin Franklin
Freewheelin Franklin's picture

Free banking, Bithchez.

 

Competing bank notes, Bitchez.

 

Repeal the National Bank Act of 1864 & 65, Bitchez.

Sun, 11/14/2010 - 20:40 | Link to Comment MeTarzanUjane
MeTarzanUjane's picture

"The gold standard WILL NOT CREATE MORE OIL SUPPLY."

Trav and B9K9 are my 2 favorite ZH'ers. They get it.

Sun, 11/14/2010 - 20:58 | Link to Comment StychoKiller
StychoKiller's picture

increasing the number of FRNs in circulation in either cyberspace or meatspace doesn't seem to add to oil supply either.  Check your premises.

Sun, 11/14/2010 - 21:13 | Link to Comment MeTarzanUjane
MeTarzanUjane's picture

That is not Trav's argument, it has never been his argument regarding oil.

Sun, 11/14/2010 - 22:58 | Link to Comment oddjob
oddjob's picture

Peak Oil is a silver/copper play.

Sun, 11/14/2010 - 23:21 | Link to Comment zaphod
zaphod's picture

No, "us" people understand that a gold standard requires convertability to physical gold, that prevents the banks from printing paper gold. That is the mechanism that keeps them somewhat honest.

No converability, no gold standard.

 

Mon, 11/15/2010 - 07:13 | Link to Comment honestann
honestann's picture

No paper gold == no convertability.

Therefore, no paper gold.  That is the answer.

Nobody needs so-called "paper gold", and only a braindamaged moron who has learned nothing from the past 100 years of fraud would ever even imagine so-called "paper gold" as part of a new gold standard.

The entire notion is 100% totally freaking insane.

There must not be convertability, but only because there must not be any form of so-called "paper gold".  Once you or any sucker is willing to accept receipts for gold, you (and the rest of us) are finished.  The predators-that-be will instantly print up enough pieces of paper gold to buy every real, physical asset on earth (not to mention every politician), and you and everyone else will instantly become their slaves again.

Wake up!  Gold is valuable enough that you can outright buy a house with a quantity of gold you can carry in a [reinforced] briefcase or bowling bag.  And that is today, before the relative exchange rate of gold to other goods rises a factor of 10x to 100x as would probably happen naturally on a gold standard.

Please stop habituating stupid thought.

Just because you carry paper-fiat and metal-fiat today doesn't mean you need to carry paper-fiat tomorrow, even paper-fiat that supposedly is a receipt for gold.

No more paper gold.  No more paper scams!

Mon, 11/15/2010 - 18:43 | Link to Comment honestann
honestann's picture

Repeat after me 1,000,000 times:  no convertability.

In fact, no paper gold.

In fact, braindead humans out there, please just read that phrase "paper gold".

If you do not recognize the phrase "paper gold" as a blatantly self-contradiction and inherent fiat, fake, fraud, fiction, fantasy... you are terminally braindamaged or braindead.

In the world we live in today, which is infinitely more intellectually corrupt than any previous time in history:

A gold standard must not recognize paper gold.

The predators-that-be will instantly take control of any such system, and create infinitely more pieces of paper gold than the physical gold that supposedly backs it (but in fact they already sold or leased).

Wake the frack up, humans!

One important reason the  gold  standard existed is because you can carry enough gold to buy almost anything you could possible want or afford with a quantity of gold you can carry in your pocket, or at worst in a couple [reinforced] bowling bags (to outright buy a house).

We cannot afford, and do not want, any "paper gold".  So-called "paper gold" is a self-contradiction and pure, unadulterated, inherent fraud and theft.

No paper gold.
No fractional reserve practices of any kind whatsoever.

Otherwise, don't even bother.

Sun, 11/14/2010 - 17:07 | Link to Comment nmewn
nmewn's picture

"You can’t blame the learned authors for preferring the life they lead to the careers they would have under a true-blue gold standard. Rather than writing monographs for each other, they would be standing behind a counter exchanging paper for gold and vice versa."

Excellent insight.

Reminds me of the old Richard Pryor joke line where he says..."and we would compliment each others lies".

Sun, 11/14/2010 - 17:10 | Link to Comment nuinut
nuinut's picture

Physical gold only (NO PAPER GOLD) freely floating is what is required.

The classical gold standard allowed the lending of gold, which is the source of all the problems.

Sun, 11/14/2010 - 17:17 | Link to Comment Internet Tough Guy
Internet Tough Guy's picture

Just say no to a fixed gold price; it never works, the government cheats. Floating gold price, Freegold, can't be cheated. Freegold, bitches.

Mon, 11/15/2010 - 06:57 | Link to Comment honestann
honestann's picture

No, no, no, no, no.  You have the right intention, but you formulate the idea in the worst way possible.

The unit of any real, honest gold standard is:

one gram of gold

Not "dollar" or "peso" or "euro" or "yen" or any other fraudulant artificial bogus name.  These are not units of anything, as proved by the endless devaluations of these supposed units against gold and other currencies over the centuries.

one gram of gold will always and forever equal one gram of gold.

No more fraud.  No more fictions!  No more word games!

Sun, 11/14/2010 - 17:17 | Link to Comment drbill
drbill's picture

No Central Bank, or the government that they have bought, will ever willingly go back to a gold standard. Gold puts the people in charge. Going back to gold would mean to give up control. The government (a.k.a. politicians that the banks have bought) will resist gold with their last dying breath. Let's hope they die sooner rather than later. The longer they take to die, the more damage they will do.

Sun, 11/14/2010 - 17:17 | Link to Comment RobotTrader
RobotTrader's picture

Nice theory, but it will never happen.

We'll NEVER go back to a gold standard,  not in our lifetime.

Sun, 11/14/2010 - 17:18 | Link to Comment Internet Tough Guy
Internet Tough Guy's picture

Right and wrong. We won't go back to a fixed price gold standard. Euro is already on a floating standard, and have been for 10 years. Get thee to FOFOA.

Mon, 11/15/2010 - 07:45 | Link to Comment honestann
honestann's picture

Yes.  In any real, honest gold standard, the value (and name) will be "1 gram of gold", not "dollar" or "euro" or "peso" or "yen" or any other stupid name.

Note: For the few absolute numbhead dimwits in the room:
one gram of gold will always equal one gram of gold.

Translation:  depreciation is impossible.

Sun, 11/14/2010 - 17:45 | Link to Comment SWRichmond
SWRichmond's picture

We'll NEVER go back to a gold standard,  not in our lifetime.

I am ranking that statement right up there with "Don't bet against the Fed."

Sun, 11/14/2010 - 18:22 | Link to Comment -1Delta
Sun, 11/14/2010 - 18:36 | Link to Comment LeBalance
Sun, 11/14/2010 - 18:43 | Link to Comment Dollar Bill Hiccup
Dollar Bill Hiccup's picture

That's right friend.

The Bernank will save us. With the quantitative easing ...

Sun, 11/14/2010 - 20:44 | Link to Comment MeTarzanUjane
MeTarzanUjane's picture

I rip my nose hairs out by the root. I pinch them between the index and thumb and rip. I like the pain but I don't like the infection that sets in a day or two later.

Sun, 11/14/2010 - 21:57 | Link to Comment ColonelCooper
ColonelCooper's picture

Try the dingle hairs.  Nearly equal pain, way fewer infections.

Sun, 11/14/2010 - 17:54 | Link to Comment equity_momo
equity_momo's picture

RT , you understand heatmaps , momentum and lingerie catalogues but when it comes to anything cerebral , be a good boy and stfu.

Never say never.

Sun, 11/14/2010 - 19:07 | Link to Comment AUD
AUD's picture

Only because the government will never acquiesce to having its debt repayable in gold.

Otherwise we never would have lost the gold standard.

Mon, 11/15/2010 - 06:50 | Link to Comment honestann
honestann's picture

Exactly.

And you can be certain, if the market and/or other countries ever force the USSA to return to the gold standard, the USSA will pay off all its debts in fiat currencies.

As much as I hate the predators-that-be, I must admit that I consider this appropriate --- all debts contracted in fiat paper should be settled in fiat paper.

That will be a good lesson for the future... to prevent morons from ever accepting or lending fiat paper.

Sun, 11/14/2010 - 20:07 | Link to Comment tmosley
tmosley's picture

This is certainly true.  You're short gold now, so if we went back on a gold standard, you would immediately go bankrupt and kill yourself.

I guess you WON'T enjoy your grinding poverty.

Sun, 11/14/2010 - 20:35 | Link to Comment ctiger2
ctiger2's picture

Personally, I'm already on a Silver standard.

Mon, 11/15/2010 - 06:47 | Link to Comment honestann
honestann's picture

I'm mostly on a gold standard.

But in my case, I am [finally] almost ready to leave the USSA permanently, and cannot convince myself to attempt to transport that much silver.

What really matters is... we're on a reality standard !!!

Mon, 11/15/2010 - 14:48 | Link to Comment nuinut
nuinut's picture

What really matters is... we're on a reality standard !!!

The only sort that  matters! The rest will join, eventually.

The large proportion of the world who never left it will soon be receive a large dividend.

Mon, 11/15/2010 - 18:45 | Link to Comment honestann
honestann's picture

And most of them deserve it.

Mon, 11/15/2010 - 02:45 | Link to Comment deKevelioc
deKevelioc's picture

We'll NEVER go back to a gold standard,  not in our lifetime.

Planning on checking out so soon?

Mon, 11/15/2010 - 06:45 | Link to Comment honestann
honestann's picture

Let's hope everyone who supports fiat theft checks out soon.  That is certainly what they deserve for sanctioning and supporting predators who lie, cheat and steal from everyone.

Sun, 11/14/2010 - 17:20 | Link to Comment Stevm30
Stevm30's picture

Even the classical gold standard was based on the flawed fractional reserve banking system. 

Until we remove any government props to banks who overprint paper and get caught by "runs" - we will not solve the problem.

Sun, 11/14/2010 - 17:26 | Link to Comment drbill
drbill's picture

Ding ding ding! Give that man a cigar.

Sun, 11/14/2010 - 20:51 | Link to Comment MeTarzanUjane
MeTarzanUjane's picture

Fuck gold we got donuts. Opium for the masses.

http://ewpopwatch.files.wordpress.com/2008/03/obama_runs_on_dunkin1.jpg

Sun, 11/14/2010 - 21:06 | Link to Comment Andrew G
Andrew G's picture

Correctamundo, dude... having a gold standard on its own won't prevent the banks from conjuring their private credit and then going bust during debt deflation (after giving themselves big bonuses during the boom years). Private debt issuance need to be regulated at the same time.

Mon, 11/15/2010 - 06:44 | Link to Comment honestann
honestann's picture

People must understand the following.

Any real, honest, ethical "gold standard" is inherent incompatible with any form of fractional reserve practices.

Therefore, the assets banks hold are 100% real, physical goods (typically, gold coins and bars).  In some cases, some clients of the bank might sign agreements that let the bank lend their gold or other assets [on their behalf] in exchange for repayment of a greater quantity of those assets at a fixed time in the future.  During that time, the client has no right to extract his assets from the bank (or the borrower).

Without fractional reserve practices... which are 100% incompatible with a real, honest gold standard, none of the problems claimed by detractors can exist.

Of course, some individual problems can occur.  A client may allow a bank to lend his gold/assets to someone who cannot repay.  In that case, up to 100% of the assets of the borrower are liquidated as necessary to repay the owner of those assets (but not one gram of gold more than is necessary to repay).  The defaulter should be allowed to choose the order in which his assets are liquidated, unless it is clear that all his assets must be liquidated.

There is no need to "regulate" private debt of this kind.  What happens at time of default must be stated in the contract between the two parties (saver and borrower, or perhaps bank and borrower).  Also, what happens when a borrower defaults must be specified in the contract between the asset owner and the bank that executes the contract with the borrower.  Some folks might prefer gains and losses to be spread across all folks in a "loan-pool", and other folks might prefer to realize all gains and losses of their loans to others.

Sun, 11/14/2010 - 22:01 | Link to Comment Freewheelin Franklin
Freewheelin Franklin's picture

The "runs" or "Panics" didn't really start until after the National Bank Act by Pres. Lincoln.

Sun, 11/14/2010 - 22:43 | Link to Comment shortus cynicus
shortus cynicus's picture

Exactly.

It doesn't matter what is an underlying value of currency, if some people 'doing Gods job' may counterfeit it for creation of bubbles and crisis.

Under this circumstances we shouldn't call current financial events 'crisis', in my opinion, system works perfectly as designed!

Mon, 11/15/2010 - 06:35 | Link to Comment honestann
honestann's picture

Without fractional reserve practices, such painful imbalances do not exist.  Or at least, they are never so extreme as to not rebalance automatically and without systemic problems.  To be sure, natural events like drought will continue to exist, and will jar certain markets significantly, but not the entire system the way we see it today.

But again, NO fractional reserve practices.

Sun, 11/14/2010 - 17:33 | Link to Comment New_Meat
New_Meat's picture

Yamada on Bloomberg arguing for a basket of commodities as the monetary basis:

http://noir.bloomberg.com/tvradio/podcast/cat_economics.html

does say that just gold won't work/be workable.  More practical since, as she says: "... but I'm no economist."

- Ned

Sun, 11/14/2010 - 17:43 | Link to Comment Quinvarius
Quinvarius's picture

Consumable commodities cannot be used as money because they are consumed.  If we used oil as money, Iran would own the world.  Food spoils.  Gold is the only thing that truly works. 

Sun, 11/14/2010 - 20:59 | Link to Comment BigJim
BigJim's picture

Precisely!

People calling for currency to be based on a 'basket of commodities' don't understand money.

Sun, 11/14/2010 - 21:02 | Link to Comment StychoKiller
StychoKiller's picture

Precisely!  No one seems to understand the necessity of having a fixed reference point.  It's extremely hard to use a tape measure when one end is not held in place.

Sun, 11/14/2010 - 17:39 | Link to Comment deez nutz
deez nutz's picture

Never going to happen our economy depends on credit and creating money out of thin air.  Put us on the gold standard and credit cards, 0% car loans and 5% down mortgages dry up and take the rest of the country with it.  We are too far gone.

Sun, 11/14/2010 - 21:05 | Link to Comment StychoKiller
StychoKiller's picture

Easy credit terms are what got us into the present ju-ju-flop situation.  How can you advocate a return to sanity by doing the same thing over and over?  We already KNOW what the result is gonna be!

Sun, 11/14/2010 - 23:21 | Link to Comment deez nutz
deez nutz's picture

 

  

Sun, 11/14/2010 - 23:50 | Link to Comment deez nutz
deez nutz's picture

Our nation is like a person who is pinned between a vehicle and cement wall.  Legs are severed but the individual is still alive because the vehicle that did the damage is saving his life by stopping the bleeding.  Take the vehicle away and the life goes with it. 

easy credit did all the damage, now can't end the easy credit.

I'm your vehicle baby
I'll take you anywhere you wanna go
I'm your vehicle woman
By now I'm sure you know
That I love ya I need ya 
I want to, got to have you child
Great God in heaven, you know I love you

 

Mon, 11/15/2010 - 06:31 | Link to Comment honestann
honestann's picture

wrong, wrong, absolutely totally completely wrong.

Mon, 11/15/2010 - 06:30 | Link to Comment honestann
honestann's picture

Tough doodoo.

Furthermore, to stop taking destructive actions does not have negative consequences overall.  Sure, people will need to change their behavior and habits, but those changes have positive consequences

To say, "we took so many destructive actions, we must always take destructive actions" is blatantly absurd on its face.  Only morons believe that kind of claptrap.

Mon, 11/15/2010 - 16:08 | Link to Comment deez nutz
deez nutz's picture

Only morons believe that kind of claptrap.

I don't believe it either but that is what we are seeing going on.  GM just loaned a neighbor's kid (20 yr old making 18k) a brand new Silverado for $36,000.  We are already back to 5% down mortgages (0% through the VA and Dept. of Ag.) and now they are disregarding FICO scores in some cases.  Credit cards are just starting to flood into the mail boxes again. 

When the lending to losers stops, so does the economy.  They know already this already and that is why the FED is buying it up!.

Mon, 11/15/2010 - 19:07 | Link to Comment honestann
honestann's picture

Absolutely correct.

But ALL that would immediately end the moment a country (or planet) adopts the honest, physical gold standard that I described elsewhere in this thread.

Without fractional reserve banking/practices, none of this insanity would or could exist.  Nobody would lend money to losers with 0% to 5% down payment for homes, much less cars (which lose 15% of their value the instant they are driven away)!

The economy would be in vastly better shape if the productive folks were not all run ragged trying to keep up with the endless efficiencies of providing "the [supposed] good life" to losers and predators.

What makes an economy "good" is NOT the height of the total aggregate pile of garbage humans consume!  That's just crazy talk!  The 80% of humans who do not produce anything of value should receive... nothing.  This is the one and only way they will have an incentive to be productive.

Also, quality is much more important than quantity, and most measures of a "good economy" ignore the quality aspect of life (and the economy).  That too is absurd.

What makes for a good economy is:

#1:  producers exchange the goods they produce for goods others produce.

#2:  leaches and predators receive and consume nothing.

#3:  humans also value quality, time to relax, time to research and practice their own interests, etc.

#4:  productive efficiency.

By the way, the "clueless" have one huge advantage under the new gold standard (as well as a need to freaking "get real" and "become productive").  I refer to the fact that all debts denominated in fiat currency are null and void - so they start with a clean slate (no debt).

Sun, 11/14/2010 - 17:44 | Link to Comment SWRichmond
SWRichmond's picture

The more prominent people who call for a gold standard, the more people are going to become aware that any such standard would occur at a significantly higher price than today's.  The physical rush is on.  Buy and hold physical, and prepare to be "recapitalized."

Sun, 11/14/2010 - 19:09 | Link to Comment Arius
Arius's picture

 i wonder for how long can physical satisfy demand at these prices ?  unless you sell everything how can you satisfy the demand?  you are not talking about mom and pop or "contrarians" you are talking about people with a lot of cash...how can these demand be satisfied?  unless one plans to sell the whole store...only someone like summers would fight to the end basically burning down the place and not admitting that you are wrong...  it just doesnt make any sense to me...

Sun, 11/14/2010 - 21:07 | Link to Comment StychoKiller
StychoKiller's picture

Say goodbye to the false wealth of holding FRNs, Dorothy -- Kansas is going bye-bye!

Mon, 11/15/2010 - 06:26 | Link to Comment honestann
honestann's picture

But please remember this... so you don't fall into the same simple-minded mistake that others fall into.  At some point (or points) the relative value of other real, physical goods will be rising slower or faster than gold.  Therefore, the smartest of the smartest will not blindly hold gold "no matter what"... unless gold continues to rise faster than other goods.

The smartest of the smart will keep rebalancing their holdings in those goods that relatively speaking are increasing in value faster than others.  At some point, if gold is rising too much quicker than other real, physical goods, the smartest of us will convert [some of] our gold into those goods --- for as long as they are performing better.

One huge point of a real "gold standard" is... we want to hold our wealth in real, physical goods.  That does not mean "only gold".  That means any real, physical good that is durable and non-perishable enough to hold its value for a significant time, and is easily exchanged for other goods (at least gold).

Sun, 11/14/2010 - 19:12 | Link to Comment Fred Hayek
Fred Hayek's picture

Excellent point.  I hadn't thought of that.  Merely the talk will serve to spike demand. 

Exercise free speech my countrymen!

Sun, 11/14/2010 - 17:47 | Link to Comment ft65
ft65's picture

There is no way of returning to a gold standard. The gold standard was just another bullshit mechanism for the crooked bankers to control the money system. Once there was insufficient gold reserves, they dropped it like a hot potato. Even using gold as a currency reference is pointless, because we all know the price can be manipulated. The only way this crisis is going to be fixed is for the financial system to collapse, and a return to barter. But none of us are ready for that kind of world. The mess will continue a bit longer yet, it will probably take for several billions of the poorest folk to die off first.

Sun, 11/14/2010 - 21:13 | Link to Comment StychoKiller
StychoKiller's picture

The longer TPTB delay the inevitable, the closer those Deaths come to fruition.  Keeping idjuts like Barney Frank and Maxine Waters in power only increases the delay!

Mon, 11/15/2010 - 11:25 | Link to Comment RockyRacoon
RockyRacoon's picture

Oh, but John Boner can fix it!  Relax.

Sun, 11/14/2010 - 21:27 | Link to Comment ColonelCooper
ColonelCooper's picture

Wrong. 

Your post was like something Mako would write.  Post lobotomy.

Mon, 11/15/2010 - 01:46 | Link to Comment RockyRacoon
RockyRacoon's picture

Yeah, it was wrong. I got tired just thinking about how to reply to it.  There was just no place to start.   Some basic, yet common, misconceptions were glaringly exposed.

Mon, 11/15/2010 - 06:20 | Link to Comment honestann
honestann's picture

Of course gold can be manipulated, if:

 --- any form of fractional reserve banking exists.

 --- commodity futures are not settled in the commodity.

Absent those scams (maybe there are others that are essentially equivalent), the gold standard does not support any manipulations.

In fact, the real, honest "gold standard"  is  the barter system!  The primary role of gold is simply to provide an easy, efficient, convenient way to compute the exchange rate between any two arbitrary goods.  The gold standard does not require you or anyone else to actually trade or receive gold for other goods --- the producers and exchangers of goods decide what to exchange.

The fact is, the collapse will massively help poor folks... in most ways.  True, most of them will be shafted when converting their fiat, fake, fraud, fiction, fantasy currencies for gold at the beginning... because they are "late to understand what is coming".

However, all their fiat debts will be erased (no trivial issue for most).  And they will receive the entire value of their subsequent work thereafter --- which will let them crawl out of poverty much quicker than they can today.

Sun, 11/14/2010 - 17:50 | Link to Comment Quinvarius
Quinvarius's picture

Many are angered at this story.  Interesting.  The gold standard is not the whole answer.  We need to get rid of the Fed, fix fractional reserve banking, crush the modern banking system, but the results will be worth it.  People will be able to work for a living, save money, and retire.

Sun, 11/14/2010 - 19:15 | Link to Comment Arius
Arius's picture

they are angered because they are most probably short gold...basically the regular sheep waiting to be slaughtered...in the meantime, they can go on picking their pennies and all of a sudden will lose it all..same story different day...just sheep

Mon, 11/15/2010 - 06:12 | Link to Comment honestann
honestann's picture

Everyone who holds dollars is short gold to the same extent.  Enough said?

Mon, 11/15/2010 - 09:36 | Link to Comment ExistentialSkeptic
Sun, 11/14/2010 - 18:06 | Link to Comment Bob
Bob's picture

Something has to limit expansion of money supplies to real growth. 

Trillion dollar debts are absurd.  We've lately gotten used to talking about such numbers as if they're reasonably fathomable. 

Yet here's something I just learned a few minutes ago:

1 light year=6 trillion miles.

We're talking about dollars in such numbers that if they referred to distance--a real physical thing--they would have to be expressed in fucking light years.

Sun, 11/14/2010 - 18:08 | Link to Comment Shameful
Shameful's picture

It's my most sincerely hope and prayer that after the coming spin through hell that scientific notation is renamed economic notation.  Hell perhaps it will spur kids to learn math.

"Hey Billy how much did the bike cost?"

"It was on sale!  1.865326*10^27 dollars!"

Sun, 11/14/2010 - 19:18 | Link to Comment Arius
Arius's picture

"Hell perhaps it will spur kids to learn math."

thats what i call positive thinking...


Sun, 11/14/2010 - 18:10 | Link to Comment nuinut
nuinut's picture

Relativity, Bob. The numbers are simply a mathematical tool to demonstrate that the system has not actually collapsed yet.

Celebrate those high numbers. They are marking our progress. Credibility is waning.

Sun, 11/14/2010 - 18:46 | Link to Comment Dollar Bill Hiccup
Dollar Bill Hiccup's picture

The Bernank can print at WARP speed.

Sun, 11/14/2010 - 19:11 | Link to Comment trav7777
trav7777's picture

In that case, money supply must fall because the global economy is facing contractionary forces.

The problem is not with money supply, it is with the fact that the money we use is debt with interest.

Sun, 11/14/2010 - 21:16 | Link to Comment StychoKiller
StychoKiller's picture

Gonna be a lot of destitute folks that were only wealthy in paper terms.  Too bad, so sad (for them!)

Sun, 11/14/2010 - 20:26 | Link to Comment bonin006
bonin006's picture

If we don't go on the gold system the next currency can be Light Year Dollars (LYDs), to replace the old FRNs at the rate of 5,865,696,000,000 FRN to 1 LYD

Sun, 11/14/2010 - 18:06 | Link to Comment 10044
10044's picture

We already have a gold standard, it's called LBMA and COMEX.

Sun, 11/14/2010 - 18:14 | Link to Comment nuinut
nuinut's picture

That's a paper standard, as was the classical gold standard at any time lending of said gold was allowed.

Obviously, neither work, due to the printing and the counterparty risk.

At least people are acknowledging that the current system does not work; it's a big step in the right direction.

Mon, 11/15/2010 - 06:09 | Link to Comment honestann
honestann's picture

Exactly.

All fractional reserve practices must end.

All fractional reserve practices are exactly equivalent to letting some favored predators create and lend so-called "value" out of thin air.  That is totally corrupt, and self-contradictory.  Anything supposedly created out of thin air does not have value.  And in fact, nothing real is actually created out of thin air, only the appearance of value (like a funhouse mirror that takes "one dollar" and creates 10 additional images of one dollar (not 10 additional dollars).

Mon, 11/15/2010 - 12:03 | Link to Comment RockyRacoon
RockyRacoon's picture

Why is not the ability to buy a $500,000 house with zero to 2% cash down not the same thing?   A lot of things would have to end that use similar leverage.

Mon, 11/15/2010 - 19:12 | Link to Comment honestann
honestann's picture

These scams are only possible BECAUSE the lenders create the "money" out of thin air (via "fractional reserve banking").  Once we switch to a real, physical gold standard, the only thing that anyone (including banks) will have to loan are the real, physical gold coins deposited by real, living, breathing, productive human beings.

Today, all bank loans are LITERALLY created out of thin air.  The banks LITERALLY just credit your account with the amount of the loan, and tell the federal reserve they have done so.  That is exactly how the fiat "money" pops into existence.

Once this practice ends, NOBODY would ever lend on the bases we see today, because everyone loaning their wealth would need to produce and save for a long time to accumulate that much wealth.  All these insane practices would immediately VANISH.

Sun, 11/14/2010 - 18:14 | Link to Comment bugs_
bugs_'s picture

who is buried in grant's tomb?

Sun, 11/14/2010 - 18:42 | Link to Comment doolittlegeorge
doolittlegeorge's picture

that would be "General Grant" I think.  Quite the tomb, too.  I don't recall.  Were we on a gold standard then? And what keeps a bank from simply "creating one"?  Why do we need the government to create it?  "Now that they have all our money" and all.

Sun, 11/14/2010 - 18:22 | Link to Comment Batty Koda
Batty Koda's picture

Don't the power elite own a most of the world's gold supply? If I remember correctly the Vatican has the largest gold holdings on the planet, so if gold suddenly jumped to $35,000 an ounce then instead of the top 1% holding 90% of the wealth the top 1% would hold more like 99% of the wealth. Doesn't sound like a radical solution to our problems to me.

I've got a sneaking suspicion that the PE are trying to subtley push the world back onto the gold standard now that they hold so much of it. The easiest antidote to the corruption between politics and finance would be to make the polical system transparent and punish politicians appropriatly for corruption (life in prison or death).

Sun, 11/14/2010 - 20:38 | Link to Comment Percy Pickle
Percy Pickle's picture

What Clint said below. A true floating-price-physical-only gold market automatically knee-caps all the cheating paper-money-tricks currently used by the parisites to extract wealth from the producers of the world. So yes, the Gold Holders would still be rich, but the little working guy (me) can protect his savings and get rid of the banker sitting at the dinner table for his free meal.

Mon, 11/15/2010 - 06:02 | Link to Comment honestann
honestann's picture

Exactly.

True, it will be great if we can re-capture all the wealth stolen by the paper-and-fraud pushing predators-that-be over the past several hundreds years.  All productive folks should support that!

But at least we need to escape their scams... escape the endless ways they have in their fiat, fake, fraud, fiction, fantasy paper-pushing system to steal the wealth from every productive human on earth.

First and foremost we must end this predatory system.  That is our greatest gain, and our most urgent priority.  Balancing out previous harms is important, but futile unless we fix the system.

Sun, 11/14/2010 - 21:18 | Link to Comment StychoKiller
StychoKiller's picture

"Holding" ALL the Gold will do nothing for you!  You have to "Spend" it and get people to exchange things you value, like a yacht, for some of the gold you hold -- otherwise the worker bees starve, then you will too!

Sun, 11/14/2010 - 21:32 | Link to Comment ColonelCooper
ColonelCooper's picture

Spot on.  Which is one other reason that TPTB hate money spent on physical.  It is one of the few ways to actually remove money from the system.  It is the ultimate "money in the mattress", and does not contribute to fractional lending. 

Too fucking bad for them I guess.

 

Mon, 11/15/2010 - 00:14 | Link to Comment trav7777
trav7777's picture

why would you want to do that when you can fractionally lend it and end up owning everything?

Mon, 11/15/2010 - 02:58 | Link to Comment Percy Pickle
Percy Pickle's picture

I agree! The difference in this scenario is that true money does not generate 'interest'. That forces capital to be invested in truly productive ventures - things that actually create value for all parties, and not just paper scams. Buy that yacht, great - the worker bees get full recompense for their efforts (building the yacht) without having the value diluted by the parasites. I don't give a damn about gold, but I do object to having my productive effort siphoned from me every day of my working life. "We cook your food; we haul your trash ..."

Mon, 11/15/2010 - 04:12 | Link to Comment nuinut
nuinut's picture

Percy, I like your way with words.

Personally, I don't much care for gold either. I do, however, care for freedom.

Don't we all?

 

Mon, 11/15/2010 - 05:59 | Link to Comment honestann
honestann's picture

And freedom... and avoidance of scams... is exactly and exclusively what the real gold standard provides.

Mon, 11/15/2010 - 05:57 | Link to Comment honestann
honestann's picture

Yikes!  People just don't get it.

Sure, predators do hold large quantities of gold.  They also hold huge quantities of land.  The also hold huge quantities of yachts.  They also hold huge quantities of oil and/or oil futures contracts.  The also hold huge quantities of other goods.  After all, they are rich.

The point is, to a huge, mammoth, astronomical degree, these "super rich" got their wealth through various kinds of scams.  The one and only way to take back what they stole or defrauded is to do so.  But you cannot just say "only the gold was stolen", because obviously everything they have was stolen.

But that's not even the most important point.  Even if we let those scumbag predators keep all their ill gotten gold, silver, land, cars, yachts, buildings and endless other goods... we stop them from further financial scams when we switch to a gold standard with no loopholes (no fractional reserve anything).

You might be surprised how quickly the rich become poor when they can no longer steal and defraud with impunity via the existing fiat, fake, fraud, fiction, fantasy that is the modern "paper based financial system".  They will spend their wealth to survive and enjoy life.  Others will earn by producing real, physical goods of all kinds.

Make no mistake about this:

In a gold standard, gold has no more value than any other real, physical good.

If you produce olives, the "gold standard" provides a simple, convenient way to compute the exchange rate between your olives and any other goods.  It does not even make you exchange your olives for gold, though you likely will find that momentarily convenient (until you want to exchange that gold for other goods).

The point is, you or anyone else who is productive can quickly accumulate gold... and/or any other real, physical goods that humans value and enjoy.  And those who simply consume will quickly trade away their gold (and land, cars, planes, yachts, etc).

Before two decades pass, almost all wealth in the form of gold, silver, land, farms, airplanes... and everything else... will be in the hands of producers.

And this is the most important of the roles of the real, honest, ethical gold standard... to route wealth to those who are productive, not destructive.

Mon, 11/15/2010 - 08:15 | Link to Comment Batty Koda
Batty Koda's picture

If all we did to stop the rich stealing from the poor was to abolish fiat currency the rich would just adapt to this new system and be pleased that the wealth of everybody owning currency has been transfered to gold holders.

As alluded to above fractional reserve banking and usury are still possible under a gold standard, in fact these were invented in the middle ages by goldsmiths, the first banks. Maybe the gold standard is part of the solution but I personaly think on it's own it would just make things worse. The banks would carry on their scams and the average person would lost ALL their savings probably their house, car ect because they are unable to make their payments. 

Prosecuting the criminals in the government, financial sector, corporations ect is the most important thing. Then we need to re-regulate banking to stop banks being "2B2F" and from creating damaging speculative instruments like derivatives.

Mon, 11/15/2010 - 12:15 | Link to Comment RockyRacoon
RockyRacoon's picture

...these were invented in the middle ages by goldsmiths...

Yup.  And the guillotine, tar & feathering, public stocks, and other fun activities came about due to the mis-deeds of the money changers.   Those festive activities can be revived when needed.  Fun for the whole family!

Mon, 11/15/2010 - 12:24 | Link to Comment Batty Koda
Batty Koda's picture

You've gotta take the bitter with the sweet. We British had the most aesthetically pleasing method, we'd "hang, draw and quarter" people charged with treachery. That would really draw a crowd.

Mon, 11/15/2010 - 08:24 | Link to Comment SWRichmond
SWRichmond's picture

You're hitting on point that is totally lost on most of today's "investor" class.  Gold is simply an objective physical standard, and one that is comparable (but superior for several reasons) to other objective physical standards.  As such, it is more trustworthy than paper standards.  Perfect?  Hell no, but the perils of paper are all too obvious by now, aren't they?

As I have stated many times before, most of the interactions that most of the rest of us will have with the other humans on this planet are economic interactions.  In order for us to make our own ways in this life, we must be self-supporting.  In other words, we must be self-supporting in order to express our liberty.  If we are not capable of supporting opurselves, then there is no way we can call ourselves "free".  If we are living in an economy that has been destroyed by paper looting, looting that was enabled by the destruction of objective standards, then we are arguably not free.  Human liberty is first expressed as economic liberty.  Economic liberty requires an objective standard for we humans to use in our economic interactions, one that is most resistant to corruption and is therefore most trustworthy. The ability to artificially manipulate the value of "money" is the ability to manipulate life itself, which means it is the ability to negate liberty.

Since government is the legal monoploy on the use of force, corruption is the antithesis of liberty.  We know that any government is always sought out by the rent-seekers (corruptors).  Since the central bank is the financial enabler of the modern welfare-warfare state, since the central bank has been granted the right to manipulate the value of "money," and since the central bank is the embodiment of the notion that an economy of 300 million souls can and should be "managed" by a policy board of wise men, the central bank is the thing that must be ended.

Mon, 11/15/2010 - 20:01 | Link to Comment honestann
honestann's picture

Yes, first central banks, fiat currencies and fractional reserve banking must be ended.

Then governments must be ended.  I kid you not.  The fact is, governments do not exist - they are pure, unadulterated fictions.  In fact, the most fundamental law calls all organizations "fictitious entities".  That clearly recognizes in no uncertain terms that governments in fact do not exist.

That is one reason governments need "consent of the governed".  Well, I do not consent, and I never have.  Those of us who do not want a slave-master need not recognize or obey anyone representing themselves as authorized by government, corporation, court, etc.

Of course, the thugs paid by the predators-that-be "posing as government" will not listen, so we must find a way to enforce our status of "opted-out" == "not governed".  Humans must do this, and must do this soon, since modern technologies are getting to the point that very soon those of us who "opt-out" or "refuse to consent to be governed" will simply be killed off or locked up forever.  This is what the community of "liberty advocates" should be doing, and must do.

Sun, 11/14/2010 - 18:35 | Link to Comment Clint Liquor
Clint Liquor's picture

It doesn't matter if it's Gold, Seashells, or the giant money stones of the Pacific Islanders. Something that cannot be created at will, is necessary.

The FED creates 'money' from thin air, loans it out, and sits back and collects interest.

This would be like you writing out a deposit slip for a million dollars (with no accompanying funds) giving it to your bank and having them pay you interest. It is absurd and unsustainable.

Sun, 11/14/2010 - 18:46 | Link to Comment doolittlegeorge
doolittlegeorge's picture

i say it's not absurd!  i say "it's a joke"!  you know, "ha, ha!" let me guess..."that doesn't make you feel any better."

Sun, 11/14/2010 - 18:48 | Link to Comment kinetik
kinetik's picture

How many dollars are there 'out there'?  How many ounces of gold.  Divide one by the other and there's your beginning exchange rate.

/ahem

Mon, 11/15/2010 - 07:44 | Link to Comment nmewn
nmewn's picture

Seems rather hyperinflationary doesn't it ;-)

Sun, 11/14/2010 - 18:57 | Link to Comment Thomas
Thomas's picture

PS-Jim has been on the gold standard kick for years. He was writing "gold's day in the sun will return" in the late 90s"

We will not, IMO, willingly go on the gold standard. Curiously, there is a country today that uses, however, that uses gold for daily transactions: Zimbabwe. 

Sun, 11/14/2010 - 19:37 | Link to Comment bronzie
bronzie's picture

Zimbabwe is using gold because of the massive failure of their fiat currency

in the absence of trust and confidence in the govt and monetary system the only thing of value is real money, aka gold

Sun, 11/14/2010 - 18:57 | Link to Comment bank guy in Brussels
bank guy in Brussels's picture

Absolute fascinating on the gold standard issue, are the writings of the brilliant Antal Fekete, who says that what nearly everyone is missing on this subject, is the fact that what made the gold standard successful, and not a disaster, is the free circulation of what were called 'Real Bills' as explained by Adam Smith.

Any gold standard without 'Real Bills' will fail and collapse, says Fekete, as it did after World War I. In fact, Fekete says that the lack of free circulation of 'Real Bills' after World War I, are what really caused the Great Depression of the 1930s.

Fekete says that Real Bills are what enabled the massive amount of global trade before 1913, trade levels which he says were not equalled until the 1990s.

'Real Bills' are the free circulation of self-liquidating letters of credit, binding to payment in gold in a short term (usually 91 days). ... They are freely traded, like cash, at a 'discount rate' which may be extremely different than 'interest rates' ... 'Real Bills' are a beast of their own kind ... Fekete says the invention of Real Bills during the Renaissance, are what made the wealth of the Western world possible.

As Fekete explains them, the Real Bills are a totally non-inflationary form of credit, because always liquidating into gold in a short term, and not even requiring banks or borrowing in order to circulate.

Fekete says the Real Bills are absolutely essential, because they enable most commercial credit needs to be filled without 'borrowing' or, as he puts it, 'invading' the gold supply of consumers or banks etc. - They essentially enable most short-term commercial credit needs to be filled by what is a clearing function, rather than a lending function.

A good essay by Fekete here -

http://www.safehaven.com/article/3426/detractors-of-adam-smiths-real-bil...

Sun, 11/14/2010 - 19:13 | Link to Comment trav7777
trav7777's picture

I've only posted like 50 times on these threads about RBD.

People are incapable of listening; they have their pet "gold standard" fetishes and they are highly resistant to persuasion

Sun, 11/14/2010 - 20:12 | Link to Comment tmosley
tmosley's picture

Possibly because you are not persuasive.

Indeed, you might even be anti-persuasive.

Gold standards do, in fact, work very well, so long as they are not administered by the government, and gold is allowed to flow.  When governments get involved, they are opened up to manipulation.

Sun, 11/14/2010 - 20:16 | Link to Comment AUD
AUD's picture

+ a million, billion, trillion sovereigns!

Mon, 11/15/2010 - 00:16 | Link to Comment trav7777
trav7777's picture

A gold standard is STUPID.  STUPID.  Illogical, moronic, and dumb.

Why in the hell should GOLD be the only thing that qualifies as money?  Let the fuckin MARKET decide.

Mon, 11/15/2010 - 05:40 | Link to Comment honestann
honestann's picture

PLEASE --- read all my posts in this thread, then respond.  I think you do not understand the nature of a real, ethical gold standard.

The reason "gold" is the only thing that qualifies is:

#1: part arbitrary
#2: part practicality

The main purpose of a "gold standard"... or any "real, physical standard" is to provide a basis to exactly compute the exchange rate between any two real, physical goods [or services].

In other words, if you wish to exchange the "eggs" you (and your pet chickens) produce for some "lumber" (or "nails", "roof tiles", etc), you perform the following trivial computation:

A:  the exchange rate of eggs to grams of gold?

B:  the exchange rate of lumber to grams of gold?

You now know how many of your eggs you must trade for the quantity of lumber you want.  Period.

Note that no real, physical gold is involved.

Of course, many or most folks who have the lumber you want may - or may not - want [that many] eggs.  So often you will find it much more convenient to exchange your eggs for gold, then exchange the gold for eggs.  The only reason you choose gold is... there is no question what is the appropriate exchange rate and everyone knows they can immediately exchange the gold they receive for goods they want.

Thus, gold serves two possible roles:

#1: compute the exchange rate.
#2: sometimes exchange goods via a 2-step process.

Now, for this purpose, just about any real, physical good could be the basis of the standard.  Probably you would an "egg standard" that specifies the exchange rate of every real, physical good [and service] in terms of "one 25-gram egg".  But sorry, you are unlucky and the world settled on gold instead, out of the thousands of possible candidates.

So, then why gold instead of one of these thousands of other candidates?  The answer is simple.  Sometimes people like to exchange the goods they produce for goods others produce, but want to wait until later to receive the goods they wish to purchase.  You, for example, might want to buy a tractor.  You might compute that it would take you 3 months of production to accumulate enough eggs to exchange for the tractor.  But hey, that won't work --- because your eggs will spoil before 3 months passes.  Hey, that's a bummer, if not a scam, huh?

This forces you to exchange your eggs for something that will not degrade between the time you exchange your first eggs... and you finally are ready to get the tractor you want.  Thus you must exchange your eggs for something durable, something that does not degrade [very quickly].

For this purpose, gold is perfect, because it does not degrade... even in very hostile environments (as in salt water on the ocean floor for hundreds of years).  And gold is also perfect to hold and exchange because you need not hold a huge quantity of gold while you "save", or carry a huge quantity of gold when you exchange your gold for that tractor you want (probably only 1~5 pounds).

Note: the gold standard absolutely  does not  force you to save your wealth in the form of gold.  You can exchange your eggs for silver, nickel, lumber, ceramic tiles, or any other real, physical good or combination of goods.... then exchange those goods for your tractor later on, either directly (silver for tractor) or indirectly (ceramic tiles for gold, then gold for tractor).

This really should make you "lighten up" about the "gold standard".  Unlike other systems, nobody forces you to do anything.  The primary function is to provide a simple set of "exchange rates" for all combinations of goods.  This is of great convenience, and gold is best only because it is so convenient to hold and transport and exchange.

Unlike fiat scams, the gold standard does not force you to do anything whatsoever.

-----

So, just as you propose, the gold standard does allow any real, physical good to serve to hold/save value and exchange goods.  That is entirely up to you and others, the producers of the goods.

Thus, in your terms, the only thing the gold standard provides is a convenient way to compute the exchange rate between any two goods.  Since this doesn't actually make you do anything whatsoever (even compute in this way), what is your gripe?  Answer: nothing of substance.

Mon, 11/15/2010 - 12:45 | Link to Comment RockyRacoon
RockyRacoon's picture

Well done, sir.  A nice cut/paste to save for future use.

Sun, 11/14/2010 - 19:13 | Link to Comment AUD
AUD's picture

Sure, but following Melchior Palyi, on whom incidentally Fekete draws alot of his work, real bills should be the realm of commercial banks, not government 'perpetuals' or long term industrial credit or speculative financial bills....

Sun, 11/14/2010 - 19:18 | Link to Comment Fred Hayek
Fred Hayek's picture

Interesting.  Thank you.

Mon, 11/15/2010 - 05:08 | Link to Comment honestann
honestann's picture

The practice of "real bills" invites fraud.  I would advise everyone to not support any formal kind of "real bills".  They only provide a way for gangster banksters to re-establish their predatory scams.

However, as much as I dislike them, in their essense (as long as they are not formalized), they are ethical as a contractual arrangement between a buyer and seller.

In effect, a "real bill" is a contractual agreement to "exchange the real, physical payment [in gold] a certain number of days after goods are delivered" (or something similar).

Since any honest gold standard cannot restrict the right of individuals to formulate contracts to their mutual advantage, a gold standard could not prohibit contracts and agreements like these.

These "real bills" are, almost, a 30-day post-dated check drawn on an account that contains real, physical gold.  However, everyone must understand that this involves very, very, very, very, very, very extensive risk in the ethics-free reality we live in today.  This risk exists precisely because the predator class has thousands of years practice turning every break in the "value chain" into fraud and theft to their benefit.

So, while those who advocate "real bills" can give examples where they would be useful... they are utterly and fundamentally wrong to claim they are necessary in any viable economy.  That is blatantly false, and their widespread adoption can and will be extremely dangerous.  It will be very quickly that governments force the banks that clear these instruments to subtract a "tax" or "transaction fee" to be sent to the predator class.  Today, this is 100.000000000% certain.

Sun, 11/14/2010 - 19:03 | Link to Comment keating
keating's picture

So, let me, a bear of little brain start by complementing the new cartoons on QE. They are great.

 

Second, to me, money has two functions. It's stuff I use to buy something, and its a way to store and accumulate wealth. Assume I have a bullion account at a bank, where if I buy gold, I buy physical gold, take delivery, don't loan it out, make sure no one else loans it out. I keep a credit card with a low balance and buy stuff during the month. At the end of the month I pay off the card balance and sell enough real gold to pay those bills. Other than the government claiming that the gold now worth more in less valuable dollars, has caused a taxable capital gain, I am on the gold standard. As long as the credit card can deal with many currencies, I carry the gold standard with me at all times.

 

If I think investment in a company or real estate will do better than gold, take out the credit card, and go for it. I could care less if Bernake prints dollars and destroys them because my savings are immune to one nations idiocy. I log on to Amazon.com and order what I want from Canada, Mexico, New Zealand.

 

Now, why isn't everyone who is concerned about the dollar doing what I am doing? Well, the transaction cost of gold, silver, and jewelry is too high, so it would make sense for a bank to provide a buyers club, as well as safe deposit boxes.

 

But, if I ran a bid ole corporation or a bank, this is how I would keep all company cash and liquid assets. Imagine an asset that has grown 20 times in a century, that has 100 times as many paper promises to deliver the metal than the actual metal that exists. And to boot, you can smile at Glenn beck, because when the crisis comes to the US dollar, you have no problem.

 

If gold falls, and you want out, you can sell all your gold quickly in major exchanges. Imagine trying to get out of an ETF in a hurry, or some Mutual Fund or worse, hedge fund. I been really schooled at how much the financial instutions cook up schemes to screw their customers, and they never go to jail for it.

 

So, welcome to the gold standard. It is available immeditely. And you can sleep at night.

Mon, 11/15/2010 - 04:57 | Link to Comment honestann
honestann's picture

We can sleep at night --- IF (and only if):

#1:  No fractional reserve practices exist.

#2:  You (or your bank/warehouse) holds all your wealth in real, physical gold coins or bars.

#3:  That banks/warehouses inherently have no way to generate fictional receipts (in any form) for the real, physical gold they hold for you.

It is very unwise for people to wander around with "gold receipts" in their wallets.  Gold is plenty compact to carry around in your pocket or purse.  And the moment it becomes common for banks to issue "gold receipts", they ALWAYS HAVE and ALWAYS WILL issue more of these "gold receipts" than they have real, physical gold in their vaults.

Do not let those predators issue ANYTHING paper.  The moment you allow them to lie, cheat, steal and enslave --- they will.  They always have.  This must stop, but will never stop unless paper receipts are shunned.

Mon, 11/15/2010 - 12:54 | Link to Comment RockyRacoon
RockyRacoon's picture

I carry various coins including an Ike dollar, some "gold" dollars like the new Presidential issues, a clad Kennedy half -- and a silver American Eagle.  Sure, the silver gets a nice patina in the pocket, but it's a convenient way to carry a $25 bill!  If I buy something with the Eagle I've spent $1 because that's the face value, per the Treasury.  Some folks don't mind taking "$1" for their goods or services.  Funny how deflation works.  Just a 1 ounce gold Eagle has a face value of $50.  No wonder the Banks don't want a circulating legal tender of the very same gold and silver coins the Mint produces.

Sun, 11/14/2010 - 19:05 | Link to Comment PeaBird
PeaBird's picture

Let the economists gasp: The classical gold standard, the one that was in place from 1880 to 1914, is what the world needs now

I agree. But if Grant's case is to be realised & sustained, then if we go down this route, we would also need to rekindle Real Bills maturing into gold, in order to finance world trade. Since 'the classical gold standard...from 1880 to 1909' also had a real bills component...which is what made it so successful to allow for the ebbs & flow of world trade.

The world has already tried a pseudo gold standard without real bills after WWI, when Britain tried to revalue Sterling to pre-WWI levels without the accompanying Real Bills, and that experiment fell on its face badly.

Without Real Bills along side a gold standard, any future rekindled gold standard would not survive it's first Christmas shopping season.

And if any idiot replies to this post saying that Real Bills are inflationary, I'm going to slap them in the head to wake them up out of their myopic slumber...

Want to know more about Real Bills? Read Antal Fekete...the man knows what he's talking about in these matters.

Sun, 11/14/2010 - 19:15 | Link to Comment trav7777
trav7777's picture

yes.  the gold standard merely liquidated Real Bills.  As did silver in the original Sterling Bill.

Really, anything can serve this purpose but the immutability of metals along with their ascription of value by people made them suitable for it.

Sun, 11/14/2010 - 19:17 | Link to Comment technovelist
technovelist's picture

Every economic transaction can be consummated by exchanging gold for goods or services, or by creating a claim on existing gold in the form of debt. Creating "money" in the form of "real bills" (or in any other way) is an attempt to get something for nothing via inflation.

This is explained in great detail at http://mises.org/daily/1833

Sun, 11/14/2010 - 21:03 | Link to Comment nmewn
nmewn's picture

Thanks for the link.

Mon, 11/15/2010 - 09:31 | Link to Comment technovelist
technovelist's picture

You're quite welcome!

Sun, 11/14/2010 - 22:47 | Link to Comment BrosMacManus
BrosMacManus's picture

Apologies for my ignorance up front, but what's to stop the ME/House of Saud from becoming the singularity? Would not the resource rich countries by necessity become the new central banks, or organize together in resource blocks to effect the same result? All countries are beholden to oil, and until an alternative is found and rationalized, how can any monetary standard based on a finite or depleting resource create a stable economic or geopolitical system? If you believe Fort Knox still hold 8,000 tonnes, at today's Au prices it'd be bone dry in ~20 months, shipping it overseas for oil imports. Why would any oil importing country want this, including China?

Mon, 11/15/2010 - 04:49 | Link to Comment honestann
honestann's picture

Which is yet another reason gold is a vastly superior real, physical good to choose as the "standard of exchange".  Read my other posts in this thread to understand what this means.

Gold is excellent because it is exceedingly difficult and expensive to extract, so its quantity has been and always shall be stable (absent the extremely unlikely discovery of cheap ways to transmute elements, or synthesize elements from beams or clouds of protons, neutrons and electrons).

Mon, 11/15/2010 - 00:21 | Link to Comment trav7777
trav7777's picture

ABSOLUTE horseshit.

A Real Bill was drawn on something that HAD to be extinguished in 91 days.

The mises paper is full of shit.  Fuck the gold standard; it is an arbitrary and illogical thing, basically a fetish.

I don't know who wrote that stupid mises link but in their classic example, the Real Bill is EXTINGUISHED.  ALL real bills are REQUIRED to be extinguished.

Any notion that this is inflation is ABSURD; any inflation would be entirely transient. 

Mon, 11/15/2010 - 09:42 | Link to Comment technovelist
technovelist's picture

The entire purpose of the fallacious "real bills" doctrine is "economizing" on the use of gold, which is another way of saying "inflating". And as for your claim that any inflation would be transient: If 10% of the "money" in society consists of "real bills" at any time, then that would amount to 10% inflation compared to using only gold as money.

Q. E. D.

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