This page has been archived and commenting is disabled.

David Stockman: "The American Empire And The End Of Sound Money"

Tyler Durden's picture




 

In Chapter 12 of David Stockman's new book The Great Deformation, the outspoken truth-sayer discusses the realities of the end of the gold standard - from the the Bank of England's 'default' in 1931 to the 1960 London Gold panic (a shot across the Keynesian bow) and on to Nixon and Bretton Woods, Stockman explains how we are constantly deferring the day of reckoning...

"Richard Nixon soon found that meeting the nation’s obligation to pay its debts in gold and to uphold the Bretton Woods system were distinctly inconvenient to his own reason of state: reelection in 1972.

 

Moreover, he had found a polyglot of economic advisors who persuaded him to discard the essence of the old-time Republican financial doctrine.. and embrace the prosperity management model, turning fiscal policy into a hapless stepchild of the jobs count and the GDP measurements, and giving a public policy rationalization to endless raids on the Treasury by special interest groups and crony capitalists....

 

Worse still, severing the link to gold paved the way for the T-bill standard and a vast multi-decade spree of central bank debt monetization and money printing. Since a régime of floating-rate paper money had never been tried before on a global basis, the Keynesian professors and their Friedmanite collaborators can perhaps be excused for not foreseeing its destructive consequence.

 

The record of the next several decades, however, eliminated all doubt.

 

The combination of free markets and freely printed money gave rise to a toxic financial deformation; namely, the vast financialization of the world economy and the rise of endless carry trades, massive arrangements of speculative hedging, and monumental daisy chains of debts, owned by debts, owned by still more debts."

 

Stockman Ch12

 

- advertisements -

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Wed, 05/15/2013 - 22:09 | 3567610 Doctor of Reality
Doctor of Reality's picture

I'm going to bed!

Wed, 05/15/2013 - 23:08 | 3567776 Silver Bug
Silver Bug's picture

Gold and Silver are true money.

 

http://jamesturkblog.blogspot.ca/

Thu, 05/16/2013 - 00:05 | 3567897 markmotive
markmotive's picture

Sure, fiat money is sinking the Empire.

But the lax attitude of most American workers is definitely not helping.

Teacher gets busted by student:

http://www.planbeconomics.com/2013/05/viral-video-on-future-of-america-h...

Thu, 05/16/2013 - 03:29 | 3568069 bentaxle
bentaxle's picture

Yes, but we're printing money now. The day of reckoning will only happen when the printer fails, right?

Thu, 05/16/2013 - 06:22 | 3568153 LoneCapitalist
LoneCapitalist's picture

Or when the majority of people realize whats going on and reject fiat.  So.....  Yeah, when the printer fails.

Thu, 05/16/2013 - 09:54 | 3568727 Balanced Integer
Balanced Integer's picture

Yeah, sure. But where the hell can you even find one of those these days?

Wed, 05/15/2013 - 22:10 | 3567614 akak
akak's picture

"I am not a crook!  I am simply too big to fail!"

Wed, 05/15/2013 - 22:32 | 3567682 kito
kito's picture

Akak do you buy the comex gold shortage theory?

Wed, 05/15/2013 - 22:38 | 3567700 akak
akak's picture

I am no expert in such matters, but it does seem to me to be at the very least plausible.

If I were forced to make a bet on it, let's just say I would bet "yes" without too many qualms.

Wed, 05/15/2013 - 23:23 | 3567803 Dr. Engali
Dr. Engali's picture

Stopped by the dealer today and picked up some nice shiny gold and silver Eagles.

Wed, 05/15/2013 - 23:41 | 3567834 kito
kito's picture

Any shortage issues???

Wed, 05/15/2013 - 23:56 | 3567848 Dr. Engali
Dr. Engali's picture

I had to wait on the silver. The gold took two maybe three days and the silver took three weeks.

Thu, 05/16/2013 - 06:24 | 3568155 PiratePawpaw
PiratePawpaw's picture

@Kito

My experience with dealers is that they have some stock but are unwilling to sell "their" PM's at these prices. They are however willing to order you some from a supplier at whatever the price is and pass it on to you plus a fee.

Anecdotal I know; but it explains the waits and the premiums.

Thu, 05/16/2013 - 07:45 | 3568259 azzhatter
azzhatter's picture

I'm not too concerned with the premiums being up a little. Still better than fiat

Thu, 05/16/2013 - 07:44 | 3568258 azzhatter
azzhatter's picture

I buy silver weekly and last few orders have had delivery stretched out quite a bit but it's available.

Wed, 05/15/2013 - 22:43 | 3567714 wee-weed up
wee-weed up's picture

Nixon: "I am not a crook!"

Obama: "I am not a wuss!"

Wed, 05/15/2013 - 22:53 | 3567738 JLee2027
JLee2027's picture

[insert photo:Obama riding girls' bike]

Thu, 05/16/2013 - 00:14 | 3567913 Pure Evil
Wed, 05/15/2013 - 22:11 | 3567620 Charles Nelson ...
Charles Nelson Reilly's picture

NYT subsciber & Krugman Worshipper: But, but, but Paul Krugman thinks he's old and cranky and deficits don't matter because we owe the money to ourselves.

Wed, 05/15/2013 - 22:14 | 3567627 the Absurd
the Absurd's picture

Shortly after taking the Treasury post, Connally famously told a group of European finance ministers worried about the export of American inflation that the dollar "is our currency, but your problem."

John Connally

Wed, 05/15/2013 - 22:19 | 3567640 A Lunatic
A Lunatic's picture

If Thomas Jefferson, Alexander Hamilton, Andrew Jackson et al could foresee the devastation of free range central banking, the fucking keynesian professors and their Friedmanite collaborators could too.........

Thu, 05/16/2013 - 03:34 | 3568072 Urban Redneck
Urban Redneck's picture

Jefferson & Jackson would have killed Hamilton themselves.

Thu, 05/16/2013 - 09:58 | 3568749 Balanced Integer
Balanced Integer's picture

Jackson, maybe. Jefferson at least respected Hamilton as an intellectual equal, just the two had honest intellectual disagreements about central banking.

Thu, 05/16/2013 - 11:24 | 3569217 A Lunatic
A Lunatic's picture

Hamilton knew full well both the rewards (for those in power) and the ramifications (for the rest of us) of central banking; which is my point. It is impossible for those involved with this abomination today (230 years later) to plead ignorance of the consequences. But yes, Hamilton would be on my hit list should time travel ever become a viable option..............

Wed, 05/15/2013 - 22:37 | 3567696 kito
kito's picture

What's with this scribd shit in every post.....

Wed, 05/15/2013 - 23:33 | 3567821 tmosley
tmosley's picture

I know right?

I, for one, am tired of all these "sources" and "reading".  Let's have some crayon pictures, Tyler!

Wed, 05/15/2013 - 23:38 | 3567830 kito
kito's picture

Haha tmos......I'm only bitching about the platform delivery that has become more prevalent and is annoying to work with on my notsosmart phone.....

Wed, 05/15/2013 - 23:55 | 3567876 Dr. Engali
Dr. Engali's picture

I hear you. It pisses me off that Apple won't freaking do something about flash. I can't watch half the videos that are posted.

Thu, 05/16/2013 - 02:22 | 3568026 tango
tango's picture

Go to the App Store and search for flash substitutes. Several are. Available

Thu, 05/16/2013 - 06:57 | 3568191 Dr. Engali
Dr. Engali's picture

Thanks

Thu, 05/16/2013 - 07:02 | 3568198 koaj
koaj's picture

or you can buy an android device...

Thu, 05/16/2013 - 09:13 | 3568531 Sandmann
Sandmann's picture

Linux was developed for a reason

Wed, 05/15/2013 - 22:38 | 3567697 Atomizer
Atomizer's picture

A man seldom mentioned, but his ideology warnings have been coordinated openly from the White House.

Yuri Bezmenov

Wed, 05/15/2013 - 22:40 | 3567702 rustymason
rustymason's picture

This doesn't explain why Hollywood and most of the MSM STILL hate Nixon so passionately.

Wed, 05/15/2013 - 22:51 | 3567730 Diogenes
Diogenes's picture

He was a conservative and he won the presidency by one of the biggest majorities in history.

He only became paranoid when he figured out they really were out to get him.

Wed, 05/15/2013 - 23:19 | 3567787 Dr. Engali
Dr. Engali's picture

Nixon was no conservative. Unless you consider price controls, wage freezes, the expansion of government through the EPA, calling for mandatory health insurance , plus a plethora of other government expansionist policies conservative issues.

Wed, 05/15/2013 - 23:42 | 3567837 LetThemEatRand
LetThemEatRand's picture

Yes, but he said he was a conservative and that is all that matters to the vast majority.  Obama says he is a liberal.  Bush said he is a conservative.  And so forth.

Thu, 05/16/2013 - 09:17 | 3568550 Vendetta
Vendetta's picture

exactly

Thu, 05/16/2013 - 08:04 | 3568289 DanDaley
DanDaley's picture

The sine qua non of determining if someone is a statist or not is how they view guns; Nixon hated guns, expecially handguns, in the hands of free citizens.  End of story.

Thu, 05/16/2013 - 10:03 | 3568774 Balanced Integer
Balanced Integer's picture

Nixon was a die-hard conservative during his years in Congress. But true power corrupted him, beginning with his 8 year stint as VP, and culminating in his improbable ascension to the presidency. Power corrupts...it's a cliche only because it is so damned truthy.

Thu, 05/16/2013 - 07:34 | 3568238 DanDaley
DanDaley's picture

The reason they hated him is because he was in power and they weren't.  Plus, he created the EPA, one of the most intrusive, big government, control mechanisms ever conceived...how dare he...that's THEIR job!

Wed, 05/15/2013 - 22:41 | 3567711 JustObserving
JustObserving's picture

The American Empire and its money is enforced by the bomb and the drone.  What will bankrupt it is hubris and excessive spending.  The cost of the wars in Afghanistan and Iraq is estimated to be $4 trillion  to $6 trillion.   The Vietnam war cost only $738 billion in 2011 dollars and yet forced the US off the gold standard on August 15, 1971.  

Besides, US debt and unfunded liabilities are $450,000 per citizen and growing at $26,000 per citizen per year.  There is no way to handle this debt except by default or hyperinflation.

 

Costs to U.S. taxpayers of the wars in Iraq and Afghanistan will run between four and six trillion dollars, making them the most expensive conflicts in U.S. history, according to a new report by a prominent Harvard University researcher.

While Washington has already spent close to two trillion dollars in direct costs related to its military campaigns in the two countries, that total “represents only a fraction of the total war costs”, according to the report by former Bill Clinton administration official Linda Bilmes.

“The single largest accrued liability of the wars in Iraq and Afghanistan is the cost of providing medical care and disability benefits to war veterans,” she wrote in the 21-page report, ‘The Financial Legacy of Iraq and Afghanistan: How Wartime Spending Decisions Will Constrain Future National Security Budgets’.

Bilmes, who since 2008 has co-authored a number of analyses on war costs with the World Bank’s former chief economist, Joseph Stiglitz, noted that more than half of the more than 1.5 million troops who have been discharged from active duty since 9/11 have received medical treatment at veterans’ hospitals and have been granted benefits for the rest of their lives. More than 253,000 troops have suffered a traumatic brain injury.

http://www.ipsnews.net/2013/03/iraq-afghanistan-wars-will-cost-u-s-4-6-trillion-dollars-report/

 

Thu, 05/16/2013 - 08:09 | 3568301 Quinvarius
Quinvarius's picture

I submit that debt default historically causes hyperinflation.

Thu, 05/16/2013 - 09:15 | 3568540 Sandmann
Sandmann's picture

Israel will destroy the USA just as Austria-Hungary destroyed Germany in 1914

Wed, 05/15/2013 - 22:42 | 3567713 ebworthen
ebworthen's picture

"The combination of free markets and freely printed money gave rise to a toxic financial deformation; namely, the vast financialization of the world economy and the rise of endless carry trades, massive arrangements of speculative hedging, and monumental daisy chains of debts, owned by debts, owned by still more debts."

Precisely, absolutely, exactly.

Thu, 05/16/2013 - 02:05 | 3568014 Indrid Cold
Indrid Cold's picture

I keep looking for free markets but haven't found one yet. Please, enlighten me: where are all these free markets of which I hear so much lately?

Where in the U.S. of A. can I and a few of my fatcat free-market-loving capitalist pig friends set up and operate our own bank, investment house, or insurance company without the blessing of our beneficent regulators in the state or federal houses?

Or is it crony-capitalist insured-deposit backstopped-by-taxpayers freedom-from-suffering-losses markets we're mistaking for free markets these days?

We seem to be overlooking one of the partners in this dance.

I suppose it all depends on how you define free.

Thu, 05/16/2013 - 02:31 | 3568033 ebworthen
ebworthen's picture

"...crony-capitalist insured-deposit backstopped-by-taxpayers freedom-from-suffering-losses markets..."

You are right.

What were relatively free real markets in 1972 have devolved with every passing year into crony-capitalist playgrounds increasingly levitated by FED jizz, algo robot trading, ETF's, "vaporizing" of investor funds, LIBOR rigging, repeal of Glass-Steagall, bailouts, end of rule-of-law, shadow banking, derivatives, swaps, rehypothecation - all the wonderful inventions of modern finance.

All of these were essentially jump-started by leaving the gold standard and beginning the fiat debt fantasy bubbles.

But yes, you are right, no "free" markets anymore.

Thu, 05/16/2013 - 09:53 | 3568718 Graph
Graph's picture

 

Life is not fair and not that I know the answer.

People with money tend to keep comfortable professions for themselves and guard it from "outsiders" with considerable success. Heavy toil is "free" for others to take.

 

Thu, 05/16/2013 - 03:12 | 3568060 verum quod lies
verum quod lies's picture

You are correct. Stockman is a truth teller when it comes to finance and economics but a bit too free-wheeling with his terminology.

Thu, 05/16/2013 - 07:48 | 3568263 azzhatter
azzhatter's picture

Guys like Stockman will always be considered quacks until the event happens. Then it will be , We should have listened to him.

Thu, 05/16/2013 - 06:22 | 3568154 Debugas
Debugas's picture

definition of free market includes among other things:

1) No monopoly. That is no any single participant can have enough power to start dictating market conditions

2) full information disclosure about traded good that is quality composition of the goods how they were produced and at what actual prices deals were made

3) free flow of resources between market participants that is no trade barriers sanctions and preferences discriminating particular buyers/sellers

Thu, 05/16/2013 - 06:36 | 3568164 Ghordius
Ghordius's picture

1) contains also 1a) no oligopoly & 1b) no cartel & 1c) no collusions

Thu, 05/16/2013 - 08:38 | 3568380 marathonman
marathonman's picture

You can find the free market on Craigslist.

Wed, 05/15/2013 - 22:49 | 3567727 RaceToTheBottom
RaceToTheBottom's picture

This book should be manditory reading.

Hmmm, maybe when he comes out with a Stockman for Dumies book

Wed, 05/15/2013 - 22:54 | 3567741 Clowns on Acid
Clowns on Acid's picture

It needs more pictures and maybe a youtube video.....

Wed, 05/15/2013 - 23:13 | 3567790 noob
noob's picture

Scratch & Sniff ((MUST BE 18+))
http://www.youtube.com/watch?v=MmXcqh-3JMM

Wed, 05/15/2013 - 23:17 | 3567794 JR
JR's picture

“The costs of war would end up costing bankers the gold their paper banknotes required.

“At the end of WWII, the world monetary system was backed by 21,775 tons of US gold. But two decades later, most of that gold was gone, spent to maintain America’s vast overseas military presence; and, in 1971, the US was forced to end the convertibility of US dollars to gold.” -- Darryl Robert Schoon, Paper Banknotes & The Indebting of Nations

http://www.321gold.com/editorials/schoon/schoon112211.html

The Fed is the institution that has created the fiat money to fund the wars.

And Nixon, like the Bushes and the Obama, had the banking establishment making his financial decisions. And one wonders why Stockman, who would have known, weaves this anti-Nixon diatribe when it was the bankers and their instrument for the move, namely Paul Volcker, who was the major player in moving the USD off the gold standard under Nixon.

Former Fed Chair Volcker served not only “under” Nixon, but Carter and Reagan and Obama as well and is a big proponent of a single global currency.

And, as has been shown: “Volcker was the prime mover at the Treasury in establishing Bretton Woods II. Not to mention the role Volcker played in moving the USD off the gold standard. Volcker, founder of the G30, and his buddies (e.g. see G-30 manual on derivatives published in 1993) have not only known about but have methodically planned the global monetary regime that is now being instituted in response to the GFC caused by the derivatives time bomb.”

Wikipedia corroborates: “From 1969 to 1974, Volcker served as under-secretary of the Treasury for international monetary affairs. He played an important role in the decisions leading to the U.S. suspension of gold convertibility in 1971... advocating the pursuit of an international solution to monetary problems. 

Wed, 05/15/2013 - 23:41 | 3567836 W T F II
W T F II's picture

Stockmania...

Wed, 05/15/2013 - 23:45 | 3567845 LetThemEatRand
LetThemEatRand's picture

The end of sound money was a symptom.  The disease is the people who convinced Nixon to go off the gold standard.  They are the problem.  

Wed, 05/15/2013 - 23:53 | 3567864 Dr. Engali
Dr. Engali's picture

The disease is the ignorant stupid masses who want all these domestic programs while at the same time they allow the empire to continue these never ending wars. If the idiot masses would say "ENOUGH!" then the bankers could not get away with the shit they pull.

Wed, 05/15/2013 - 23:56 | 3567878 LetThemEatRand
LetThemEatRand's picture

The disease is the bankers who know full well that if they give the ignorant stupid masses all of these domestic programs they can do whatever they want.  Give an ignorant stupid mass an Obama phone and free shit from ChineseWallMart, and he'll sleep quietly while you rape his entire family.

Thu, 05/16/2013 - 00:05 | 3567895 Dr. Engali
Dr. Engali's picture

The willingness of the ignorant stupid masses to take that Obamaphone, and the free shit gives the bankers power over the ignorant stupid masses. If you live your life knowing that nothing is free, not even the time we are given, then you recognize that everything given to you has strings attached. Again if the masses said "No" that would take that power away.

Thu, 05/16/2013 - 00:10 | 3567904 LetThemEatRand
LetThemEatRand's picture

If a frog had wings.  The ignorant stupid masses are by definition ignorant and stupid.  They are not going to change.

Thu, 05/16/2013 - 00:14 | 3567912 Dr. Engali
Dr. Engali's picture

My point is that nobody has power over you unless you freely submit and give it to them, which the masses clearly do.

Thu, 05/16/2013 - 00:21 | 3567926 LetThemEatRand
LetThemEatRand's picture

My point is that a few people have power over all of us because of what the masses do, and there's no changing the masses.  Sound money blah blah blah.

Wed, 05/15/2013 - 23:51 | 3567868 slimething
slimething's picture

All you paranoid Austrian Schiffnuts have been predicting a crash for years and it never happened.

sarc/off

 

 

 

Wed, 05/15/2013 - 23:59 | 3567883 Dr. Engali
Dr. Engali's picture

Correction ... The crash in what used to be the markets hasn't happened, but the crash in the economy is ongoing. Take a look around at the rot permeating throughout this country and you'll see it's undeniable.

Thu, 05/16/2013 - 08:42 | 3568388 shovelhead
shovelhead's picture

I like to think of it as a slow sinking into a cesspool of debt and corruption while waiting for the big foot of the dirivative timebomb or war to finally push us under.

We actually have created so many different instabilities that what and when an event will happen is just a matter of time and hard to point to any one thing that can cause it.

We have a gaggle of Black Swans circling like buzzards.

Thu, 05/16/2013 - 00:06 | 3567898 alfbell
alfbell's picture

 

 

The bankers are not the disease. Nor is the political or corporate classes. I agree with Dr. Engali. It is the people. The citizens of a country should be educated, vigilant and involved in their government. Place the blame where it belongs... with us, our parents, their parents and their parents. That is the common denominator. Remember Ben Franklin's retort when asked what sort of government was structured for our new country: "A republic madam, if you can keep it."

Thu, 05/16/2013 - 00:25 | 3567930 NihilistZero
NihilistZero's picture

To be fair we have never been a nation of philosophers.  Once the poor and the uneducated are granted suffrage any Republic will fall.  Human nature itself says we are moments away from tearing each other apart.  We are fundamentaly insane as a species.  Dictatorship, whether benevolent or malevonent, seems our destiny as a whole.  I think only a warp drive which would allow the best of us to leave the masses behind can save us.

"You were made to be ruled" - Loki

Thu, 05/16/2013 - 01:41 | 3568005 buyingsterling
buyingsterling's picture

What you wrote is indisputably true. But it's not necessary to disenfranchise the masses. A regime of sound money and limiting the franchise to married property owners who have children would work. Of course any such change would have to be preceded by a dictatorship, it could never be voted into existence by this electorate.

Thu, 05/16/2013 - 01:51 | 3568015 NihilistZero
NihilistZero's picture

"married property owners who have children..."

So being that sound money would make property ownership skyrocket and the rubes love to marry and procreate, you give the masses the right to vote themselves goodies from the single entrepeneurs???  Don't think you thought that one through LOL!

Thu, 05/16/2013 - 10:18 | 3568859 Balanced Integer
Balanced Integer's picture

Strike the requirement for marriage, and I think this arrangement for the franchise would work spledidly. As has been pointed out, though, you would need a strong central ruling authority to enact such a change...be it a monarch or a dictator.

Thu, 05/16/2013 - 00:29 | 3567936 LetThemEatRand
LetThemEatRand's picture

"The bankers are not the disease. Nor is the political or corporate classes. I agree with Dr. Engali. It is the people."

In Ben Franklin's time, most of "the people" couldn't even read or write.  Many never left their homestead.  The mob, the oligarchs, the politicians, the King, always count on your exact attitude.

Thu, 05/16/2013 - 07:17 | 3568213 Cloud9.5
Cloud9.5's picture

It is true that most in the colonial period could not read and write. However they had plenty of experience with living under overlords and they had no concept of dependency.  They were a self-reliant lot.  The weak and imprudent were rapidly sorted out by the environment.  Everyone votes his self-interest.  The left has grown the underclass for the sole and express purpose of being able to harvest their votes every election cycle.  That has been a resounding success.  The future of this trend is going to be secured by the legalization of the illegals.

 

Detroit is our future.  Embrace it.  Plan for it.

Thu, 05/16/2013 - 09:01 | 3568468 rustymason
rustymason's picture
In Ben Franklin's time, most of "the people" couldn't even read or write.  Many never left their homestead.    "A native American who cannot read or write is
as rare an appearance... as a comet or an earthquake." -- John Adams (a contemporary of Franklin's.) Europeans were the original "native Americans" and they were, historically speaking, the best educated and most well-read populace the world had ever seen. I'd put their intelligence, work ethic, and love of reading far above that of most Americans today. Up until the 1900's, many people used to go to very long (several hours to days long) debates for entertainment.
Thu, 05/16/2013 - 09:11 | 3568524 Sandmann
Sandmann's picture

Speeches were constructed to inform and persuade rather than fill the time in during hors d'oeuvres. There was a real presence to preaching and moving people to support a policry rather than the dead teleprompter and prepared text distributed to media before delivery. The fact is people were more individuals then with thoughts, now they are battery chickens waiting to have their throats cut

Thu, 05/16/2013 - 00:14 | 3567910 enloe creek
enloe creek's picture

why are we allowing TPTB to for icate woth our descendants lives
it is obviously too much trouble to try to fix this shitstorm so let'ts let it blow up
then after the war and genocide if there is anyone left they can sort it out

Thu, 05/16/2013 - 00:18 | 3567920 realtick
realtick's picture

speaking of t-bills:

Quantitative Necrophilia – The 3 Month T-Bill Is Telling Us The Economy Is Dead

              http://chartistfriendfrompittsburgh.blogspot.com/2013/05/quantitative-ne...

 

Thu, 05/16/2013 - 00:25 | 3567931 long-shorty
long-shorty's picture

nice chapter. a few too many big words for my personal taste. "polyglot" on page 25 definitely doesn't mean whatever David Stockman thought it meant.

Thu, 05/16/2013 - 01:14 | 3567980 David Wooten
David Wooten's picture

Nixon was right to close the gold window - a window open only to foreign central banks and governments.  The American people were legally barred from owning gold at the time - even barred from holding gold overseas.  Had Nixon not closed the gold window, all the gold would have gone to a bunch of foreign governments and the window would still have had be closed when the bullion ran out. 

Three cheers for Nixon - who closed the gold window to foreign central banks, who ended the Vietnam War (that he inherited), and for ending the military draft.

Thu, 05/16/2013 - 01:44 | 3568003 Indrid Cold
Indrid Cold's picture

Does this help explain his demise?  Bueller?

Thu, 05/16/2013 - 07:30 | 3568230 Ghordius
Ghordius's picture

TUT TUT TUT - we foreigners were promised that the USD was as good as gold. one million bucks would be exchanged for one metric ton on demand

according to your logic I could paraphrase you: "Nixon was right to renege solemn promises to foreigners"

why was the gold running out? because on aggregate, American was consuming more from foreigner's production than what it gave them back (and this includes financial paper/promises)

and from that day, this trend got only stronger, to the point that most people nowadays don't even know that before Nixon, the US usually used budget surpluses to pay back (war) debts

Thu, 05/16/2013 - 09:11 | 3568522 i-dog
i-dog's picture

 

"most people nowadays don't even know that before Nixon, the US usually used budget surpluses to pay back (war) debts"

Correction1: Neither LBJ nor Kennedy (both were before Nixon, FYI) ran any surpluses.

Correction2: The pre-WW2 accumulated deficit was $35bn. The post-WW2 deficit NEVER fell below $214bn (from its 1945 level of $221bn).

Wat'choo bin smokin', Willis?

Thu, 05/16/2013 - 09:12 | 3568529 Sandmann
Sandmann's picture

War is how politicians slip out of the Constitution

Thu, 05/16/2013 - 11:42 | 3569315 Ghordius
Ghordius's picture

by the colourful beard of St. Ignatius, you must be right, i-dog. thanks for the corrections and my apologies. serves me well to shoot from the hip (and from old memory), of course LBJ was already spending like a sailor

let's restructure my rant: David Wooten, budget surpluses were not only expected, they were promised to both domestic and foreign creditors

And nobody called a simple budget surplus with some debt repayments "economy-killing Austerity", then, and budgets were made, instead of somehow done-by-sequester

rant end, flourish hat-tip to i-dog, exit Ghordius "Willis" Whitesmoke

Thu, 05/16/2013 - 09:41 | 3568655 David Wooten
David Wooten's picture

When an entity is bankrupt, the holders of its debt should all have an equal claim on its assets.  The American people's claim was not being treated equally to that of foreign governments when Nixon closed the gold window.  Certainly, it would have been preferable not to have printed up so many claims (dollars) to fund the Vietnam War and the 'Great' Society (and other government boondoggles),  but Nixon was not responsible for all of that.

Thu, 05/16/2013 - 08:54 | 3568445 shovelhead
shovelhead's picture

I was pretty happy about that draft business. I had #35 when it kicked in and an almost guaranteed S.E. Asian vacation.

He was a fine Dick by me.

 

Thu, 05/16/2013 - 01:36 | 3567998 alfbell
alfbell's picture

 

 

Nihilist and Rand: You indeed make me think. Your opinions enlighten. Yes, I believe I am wrong. Can never expect the masses to become sophisticated and intelligent. Someone must rule. I guess the Benevolent Dictator is the way to go. Someone who truly wants a strong country, strong economy, prosperity and happiness able to be obtained by anyone who applies themselves to it, etc. But then what happens when this great dictator, great father of the people dies? Back in the soup again. Better yet maybe... the guidelines created and followed by the great father are kept in tact, held as sacrosanct and a rotating group or watchdog committee sees to it that it is always followed and never perverted or usurped. We need to keep evolving.

Thu, 05/16/2013 - 01:56 | 3568016 NihilistZero
NihilistZero's picture

"Can never expect the masses to become sophisticated and intelligent"

Yes we can.

"We need to keep evolving"

This is how.

In reality our species is doing better than ever.  In time we may achieve a "Vulcan like" utopia.  But it won't be through central planning like the libtards think.  Nor will it be through a religious apocalypse like the fundies think.  It's going to take a lot of work and pain.  But perhaps in timewe will all grow together to explore the limits of the human experience.  The new movie sucks but a Star Trek future is still a worthy goal :-)

Thu, 05/16/2013 - 01:39 | 3568002 alfbell
alfbell's picture

 

 

Wooten: a fresh and interesting viewpoint about Nixon. Never looked at it that way. I still think all of our leaders and government systems have been dysfunctional. We've had a few truly great ethical minds in our country's history. Need more of it. As above, we need to keep evolving. The solution lies inside the mind and spirit of man. Not outside. This I'm quite certain of.

Thu, 05/16/2013 - 01:47 | 3568011 David Wooten
David Wooten's picture

Yeah, I agree they're all dysfunctional.  But, Nixon is the only one who is seen that way by the establishment.  So I thought I'd give him a plug or two.

Thu, 05/16/2013 - 05:13 | 3568118 falak pema
falak pema's picture

Money has always been seen as a means to an end.

Nixon and Kissinger saw it that way when they created the money machine of petrodollar monopoly. Their belief, as in current times fueled on Reaganomics and NWO,  is that the Empire's money cannot be challenged. Period. Stay on top of the heap and "debts" become "assets "as you can just walk in and claim anything by changing the rules of the game. "To the victor the spoils and tuff shit for the losers"...like Elstine, Saddam and Q-daffy etc.

More in line with this historical analysis of Stockman, is the stance of the man who said it best about the gold exchange standard's potential vices. Its inflationary fall in 1960 incurred his resistance to monetary corruption : Austerian Jacques Rueff who masterminded France's obstinate play of demanding gold payments in exchange for its burgeoning USD accumulation from french export surpluses generated in the 1960s (Yes, believe it or not France was like Germany today in those days). 

When the USD went fully viral in floating rate mayhem, post 1971, his belated swan song in defence of the gold standard had this ominous warning : The monetary sin of the West. It went largely neglected when it was published in 1972; as by then Rueff was considered a dodo in his own country.

In 1973, France's president Pompidou and finance minister Giscard, (next president), promulgated a LAW whereby french central bank would not print money anymore at zero or low interest to its fractional reserved banks or to create funds for government spending in form of bonds. Instead they, the banks, and the nation would borrow money from the euro/petro dollar pool of London, awash with Arab money surpluses, post 1973 oil crisis, to recycle ALL that monetary creation from oil revenues back into the western economy. "Why create local money in national economies when we are awash with petrodollars begging to be borrowed" went the Oligarchy song of Pax Americana hegemony. The Saud-US connection was working full swing rocked by Dr K's shuttle diplomacy. 

The uS's oil monopoly had created the infernal fractional reserve machine out of London and France now a chronic balance of trade deficit country, like the US and UK, was borrowing money on the money markets instead of using its own central bank to print it.

Friedmanian logic had won and Austerian logic had lost to serve the POLITICAL interests of US world hegemony.

Means n Ends...

With subsequent Reaganomics's full tilt deregulation, post 1980s, and consequential "taking candy from a baby" derivative wizardry in post Glass-Steagall revoke, all fueled by NWO outsourcing hubris  and "towering colossus" mantra, our western economies have gone totally overboard, as crime (or sin as Rueff called it) pays bigtime to the happy few, ...and RUeff must be laffing in his grave.  Now!

http://mises.org/document/3049/The-Monetary-Sin-of-the-West

PS : I am not an Austerian by conviction. But history cannot be violated when truth seekers are proven right in a particular context of monetary expansion gone viral. We owe this belated hat tip to Rueff. 

Thu, 05/16/2013 - 07:20 | 3568215 news printer
news printer's picture

probably

Thu, 05/16/2013 - 08:20 | 3568333 Flakmeister
Flakmeister's picture

Funny....

Not one mention of the role of US oil imports in all this... The Viet Nam war has been blamed for the end of BW but the putative gold reserves of Ft. Knox would have lasted about 3 years at the rate at which oil imports were rocketing as the US production  peaked in 1970....

And remember that dollars shuffled about internally, i.e. defense contractors, cannot cause the same effect as dollars exchanged for imported goods....

Thu, 05/16/2013 - 08:27 | 3568352 Quinvarius
Quinvarius's picture

The internet has made the ponzi economy impossible to maintain.  People are too educated on every historical fiat and economic failure.  They know the entire prop job gamebook.  They can get the economic data from anywhere on the globe in a heartbeat and compare it to historical norms.  The banksters have no monopoly on information and most don't even have good information.  The banksters trying to run this economy remind me of 90 year olds getting brand new computers.  They just don't understand how to use them, much less actually turn the dam things on.  They get so upset at their inability to produce outcomes, they end up resorting to force.  Dumping government gold stockpiles to move the price around is exactly the same as smashing a computer with a hammer because it isn't sending out your emails.  It is stupid, counterproductive, and you will only end up being forced to BUY ANOTHER ONE. 

 

Thu, 05/16/2013 - 09:56 | 3568737 ltsgt1
ltsgt1's picture

The sad truth is that we are lucky if only 5% of the masses in the west were educated on historical fiat and economic failure. Most are still following the trend and willfully participating in the Ponzi musical chair game even though the turntable is turning at stalling speed.

People in the east are fortunate that they are immune to the intoxicating musical Ponzi. I infer it's either due to their culture, education or just dumb luck. They have taken the seats while we are.stll running around in circle.

Thu, 05/16/2013 - 09:11 | 3568479 RougeUnderwriter
RougeUnderwriter's picture

I just read that Chapter yesterday - big time deja vu! Book is excellent but jumps around to much. One paragraph is 1972, the next 1960 the next 1914 - blows the mind but certainly makes the case against the FEDs Cronnie Capitalism Tinkering and Fiat Money. I hope the due is wrong or else we are in deep yougart! He seems to point out that almost all of our leaders (especially Republicans) got it wrong with fiscal and monetary policy. (Except Ike) As far as the ignorant masses are concerned, we all understand this thing is going to blow sooner or later with debt levels getting largerer and lareger and handouts becomiong the norm as oppsoed to something to be avoided. What will start the next run downward? Defaulting Euro nation or Euro itself, failed GSA like Fannie Freddie or Sallie, failed too big to fail bank, middle east war, bird flu, comet, global warming global cooling,  - how does it start this time?

Thu, 05/16/2013 - 09:13 | 3568518 shovelhead
shovelhead's picture

Dad said spending more than you make is the road to perdition.

Works for nations the same as families. There may be imbalances from time to time but you never allow TEMPORARY debt to accumulate beyond you're ability to service it.

Economists can call it hundreds of things, but Pops would call it broke.

People would understand things better if you called things what they really are.

No weasel words.

Thu, 05/16/2013 - 10:05 | 3568752 roadhazard
roadhazard's picture

Ike only told half the story, "beware of the MIC". He didn't know his VP was actually Americas first modern terrorist in waiting.

Thu, 05/16/2013 - 10:47 | 3569011 rosiescenario
rosiescenario's picture

Before Nixon we had LBJ waging a war and at the same time escalating social spending at home....sound familiar?

This, of course, was eventually followed by massive inflation. History may not repeat, but there might be something to be learned from it.

Do NOT follow this link or you will be banned from the site!