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The St.Louis Fed Explains Why Banking Panics Are More Likely Under A Gold Standard
The U.S. and many other economies left the gold standard more than 40 years ago, yet advocates periodically call for its return, saying that it would curtail or prevent inflation. In these brief clips from the St. Louis Fed video series, David Andolfatto, a vice president and economist explains the gold standard noting "most economists believe a return to the gold standard would not be a wise policy," and "under the gold standard, banking panics are more likely to occur," and then pointing out somewhat stunningly that "however, the fiat system employed by the Federal Reserve has been largely successful in maintaining low inflation and price stability." Enjoy...
Part 1: What Is a Gold Standard?
At one point, most of the world’s economies, including the U.S. economy, were under the gold standard. In the U.S. in the early 20th century, $20 in paper money was redeemable for an ounce of gold. The U.S. abandoned the gold standard in 1971.
Part 2: Gold Standard and Inflation
Under a strict gold standard, governments cannot print new money to finance expenditures, theoretically reducing the risk of high inflation caused by printing too much money. However, the government can still manipulate the purchasing power of a dollar under the gold standard by simply changing the amount of gold equal to $1.
Part 3: Purchasing Power
Most economists believe a return to the gold standard would not be a wise policy. With the supply of gold relatively fixed, changes in demand would cause its purchasing power to fluctuate on a short-term basis.
Part 4: Benefits of a Fiat Money System
Under the gold standard, banking panics are more likely to occur. The relatively fixed supply of money would not allow banks to satisfy demand if a large number of consumers tried to withdraw their money at the same time. Under a fiat money system, governments can create additional money and use it for short-term loans to satisfy additional demand. Once consumers see their money isn’t in danger, the potential panic subsides.
Part 5: The Gold Standard and the Central Bank
No economic system can completely protect against the threats posed by recessions, stock market bubbles, unemployment and inflation. However, the fiat system employed by the Federal Reserve has been largely successful in maintaining low inflation and price stability.
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Only the Fed can protect you from ruin.
Trust us,,,
With gold money, banks that utilize fraudulent fractional reserve lending will lose their clients.
In the curent system, the entire levered ponzi scheme blows up.
It's a cryin' shame.
And the Gold Standard is another fraud where gold 'backs' currency but the paper is printed until that money scheme blows-up as well.
Only gold and silver money work.
Who's prices? Is this guy nuts??
"The lady doth protest too much, methinks."
Low inflation and price stability? Compare prices between 1914 and 2014. Anyone who truly believes this nonsense is a moron. Anyone espousing this garbage is only doing so because they need to perpetuate the lie for whatever selfish reason. Governments do it because it allows them to enslave people without them knowing it.
I wet myself i was laughing so hard watching these clips.
Interesting timing considering the Swiss Referendum.
yep "trust us, you need us" is pretty hilarious coming from the entity responsible for the dollar losing something like 96% of its purchasing power during the period you describe. And they have the nerve to call that "low inflation and price stability"?
Yeah... but, the looting by banksters is made much easier under the fiat system. Tell me, Mr. Pleb... which is preferable?
"Gold money is bad the people catch on too soon that something is wrong and we end up hanging from lamp poles."
Next time let me make the videos guys, I could have save you a ton on production costs by just scrolling that sentance across the screen.
Gee Tyler, could ya at least wait and post this after I've had a chance to get a beer?
"Once consumers see their money isn’t in danger, the potential panic subsides."
Dave. you ate up fukker, you are answering your own question.
If a bank has no hard asset to back the paper it pushes, then the money is always in danger.........
Your money is not in danger because we can print as much as necessary.
So don't worry, shut up and work hard for the same dollars we can print with a keystroke.
old money, banks that utilize fraudulent fractional reserve lending will lose their clients.
With the new style of manipulation, THIS GOLD model => http://bitly.com/1rdUK8e told us to get SHORT gold the end of OCTOBER, and that 900 an ounce could be coming on gold soon. OH DEAR!!!
Yes this is a ponzi, scheme, and YES there is a huge RALLY comign in gold, but look how they are taking it down first. SEll, get everyone short, and then comes the rally, force people out. This manipulation is the worst it has ever been. WOW.
True, but at the same time the banks are losing their depositors - the depositors are losing their money... and since no one can afford insurance when the government cannot freely print money... they are SHIT OUT OF LUCK... unless the government confiscates private gold supplies, and imposes state-monopoly gold ownership (again), since the original FDIC insurance of banks was financed by FDR's gold confiscation. (It's a Rinse, Repeat sort of thing, without even having to revisit the more thought out 19th century debates in England.)
I personally enjoy the freedom to legally stack gold in my vault at a low cost... and then lose said gold on boating trips.
Be careful what you wish for. As long as gold isn't "money" in a legal sense, it is more difficult for the government to outlaw and confiscate it, and FDR was a piker compared to the current crop of fascists in DC.
"Trust us,,,"
Yeah, well rob you and F you real good.
We wouldn't fuck you over like we did in 1921, 1929, 1937, 1959, 1971, 1980, 1987, 1992, 2000 and 2008.
We provide "stable" prices. You lost 98% of the value of the dollar in the 100 years of the Fed. In the near 50 years before that, under the gold standard prices didn't change at all. So, who's got your back? The Fed! Amirite?
too big too jail MY ASS
Ya. But at least its a few small banks in a few small towns.
None of this "too big to fail" shit.
Part 6: Gold Is Not Backed By Anything, But The US Dollar Is
A classic. Thanks for digging it out again. +1
She didn't get the gig because of her smarts
SHAVED OR STRIPE?
Maple leaf!
"Gold Is Not Backed By Anything"
Rich, what a F-in ditz.
They trted to scrub this video. Glad you had it. I used to watch it all the time when I was sad and needed a lift.
This has convinced me! Dumping my stacks for paper tomorrow.
"most economists believe a return to the gold standard would not be a wise policy," and "under the gold standard, banking panics are more likely to occur,"
Yeah ~ because when you don't own any gold to support your counterfeitting, all kinds of bad shit happens.
Most economists believe......
All kinds of insane shit, it's what keeps economics in business.
Please don't call economics a science, as it is based on unsubstantiated belief, nothing more.
Old joke.
Physicist, Mathematician, Economist stranded on a desert island and all they have is canned food - no opener.
Physicist grabs a stick, does a bunch of calculations - can't open cans.
Mathematician grabs a stick, does a bunch of calculations - can't open cans
Economist says 'First, let us assume we have a can opener'
Germany is going to get rid of all their nuclear reactors. And they will probably get it done before the FRNY produces the gold they habeous corpused.
+1 and I love you're username. Idiocracy is criminally under seen.
Can someone please explain to me how price stability and inflation can exist together? It seems to me that inflation would make prices rise, not remain stable. Perhaps this is some form of quantum-economics where you can be in two places at the same time?
Their target is 2% inflation. That's price stabmility. The fact that prices double every ~35 years is not important here.
I think their is the abuse of the word "inflation". Inflation by classical definition is an increase in the money supply. It can manifest in price increases but that is not normally a certainty. Gold stocks increase by an average of 3% a year. Conceivably you could see an increase in the money supply without a corresponding increase in price but rather an increase in the quantity of supply or a slight decrease in velocity.
I think thats the basic premise of Fisher's orginal theory of money MV=PQ. Been awhile and I think its more MV=PT but if M= Gold and Gold grows by 3% then producers increase Q or perhaps V drops. Not saying that it would have to, but its one way you can have inflation without a corresponding increases in prices.
rather simplistic but I think it makes the point. People who have a more advanced understanding please disaabuse me of this
QE unlimited is far superior to gold?
Is that what he just said?
Where was he educated, Retard University?
Hey compared to the SNB he's not that dumb. Over there, the stewards of a currency down 90% in the last hundred years and 50% in the last 15 versus gold are telling their people that it is gold that is a danger if you are looking to preserve wealth.
For Whom...
I think the message of the SNB is that THEY don't want to be forced to hold gold. I haven't seen anything that indicates that they don't see it as a good wealth asset.
The national currency is very different from private wealth holdingds. Central banks are not charged with making the country rich, they are supposed to supply a usable currency for the Swiss people. The people can then determine how best to preserve any excess production.
"The people can then determine how best to preserve any excess production."
Well, thats certainly the fiat printer's refrain:
"If granny doesn't like having her savings inflated away she can just learn to trade forex."
One other thing, just to get the thought down.
I really like that this referendum is about 20% gold (the ratio they had just 5 years ago) and not something like 40% or 100%
With 80% paper assets, they can still play plenty of reindeer games with their currency and be in a nice position when the system falls apart and there is some kind of "new bretton woods".
They have no excuse to scream about being totally hand tied by this requirement.
She sure shows her stupidity. Problem is she may have children. Maybe one of them will end up being a Keynesian economics professor at Princeton.
Federal Reserve has been largely successful in maintaining low inflation and price stability.
Fuckers don't grocery shop?
Sure, but food isn't included in their calculations. It's so convenient.
Baloney! More self-serving, nonsensical claptrap from the bankster crime syndicate.
... and then they fight you, and then....
More like "Banking for Dummies" by the St Louis Fed.
Not surprisngly, they avoid the main problem, and blame gold instead. It is Fractional Reserve Lending run amok, otherwise known as counterfeiting.
Bank panics are more likely when the gov't cannot freeze YOUR deposits and take your money as a bail-in No deposits, no runs
Their all in cahoots. The head of the Swiss bank said today gold is not the right choice. And i suspect the Swiss vote will not pass by all means.
Well, "all means" not including unrigged elections, that is.
"By all means necessary"
My cousins in Bellinzona say the groundswell is for a yes.
Don't know about the other Cantons.Polls are not allowed this close to a vote.
Many economists = many keynesians No Austrian economist believes it one bit.
Gold standard means fraud banks go under because they cannot inflate away their failure. No gold standard does not mean banking panic s don't occur. It means you get a currency crisis instead. How sad. The gold standard is coming back no matter what. Banks will have to latch onto it if they want to issue usable currency.
"With the supply of gold relatively fixed, changes in demand would cause its purchasing power to fluctuate on a short-term basis." - lol. No evidence that this happened under a gold standard. Where do they find these intellectually bankrupt individuals. God forbid we actually let the forces of supply and demand regulate the money supply.
Money is defined by constant marginal utility. Supply is irrelevant to something which has demand approaching the infinite.
There can never be enough money, hence why the balance sheet of the Fed has expanded while the gold price has fallen.
How the fuck can they say this shit with a straight face?
As Upton Sinclair put it so well:
"It's hard to make a man understand something when his salary depends on his not understanding it"
Calumny.
These people know only lies and trickery.
I for one don't want a "gold standard," I just want gold. With money that is set by voluntary agreement between people, the government/banking complex has no ability to make war and steal from people. That's what this is really about. Using gold and silver for a medium of exchange, people would quickly realize that they don't need banks. At all.
I don't agree with the silver part. Central banks will hold gold and they will probably influence the gold price for a while, silver is not held by the CBs though and it's price will be deterined by industrial use....but I up arrowd you anyway...
why are they talking about this. no one in there right mind would hold real money. there are no pictures of the queen on it.
So Obozo is on the three dollar note ?
and so we don't want a gold standard!!
We want the government to have ZIP to do with the price of gold. As soon as the government declares gold is worth $50,000 per ounce they'll print enough currency so that $50,000 per ounce will be too low. We have seen their tricks.
Gold works best as a privately traded wealth asset.
Let the governments have their fiat systems. At least when they get abused no one gets too terribly hurt. If your wealth is in gold you simply buy the new currency and continue on.
BTW GLD inventory is down to 722 tons. The question is how low does it go before those who can, give notice that they are redeeming their baskets and the whole paper gold thing collapses.???
Gold, better get some while you can.
If the banks weren't leveraged 30-fold, they would have wnough cash to satisfy withdrawals.
He is right for the wrong reason. Because they don't have any in Fox Knot. They will have to do an audit under the gold standard which will send confidence crush to the earth core.
Its comedy hour at the StLouis Fed
Bullard's Monica Lewinsky.
Once they've stopped ignoring you and started fighting you, you know you're making headway.
Someone needs to take the Fed's "Timely Topics" to the next level and archive these videos and use them in an interactive board game!...
Milton Bradley could spin it off as the next version of "Monopoly" and sell it as the real-life version of losing your "shirt" that it "is"!
Come with me and our friends at the Federal Reserve Bank and we will walk on water. Trust me... and we're going to start at the deep end.
Lying basterd just stop printing
Adolf Who?
Witnessing the SNB, and now the FED figthing for their life like this is hilarious.
It's the entire reason I pay attention to this.
If it passes, they can probably also increase their gold reserves to 20% by doing some accounting tricks with their bond portfolio. The referendum itself probably won't change much even if it does pass. For me its watching the following logic play out:
"Gold is a relic of the past. A silly trifle with no place in the modern world. Also, if anyone has to buy gold, or return custodial gold or count their gold while an outsider observes, all hell will break loose and the world will collapse in a flaming heap"
The SNB's "Fatal error of judgement" comment indicates we are moving along nicely.
You can actually feel them bristling at the very idea that anyone outside their little club has any sort of right to any input on the process by which they issue the liabilities that we all have no practical choice but to use.
I expect to hear one of them use the phrase "little people" or worse to describe us before this is over.
Unfucking believeable!!! Fear mongering on the economic level now. Yeah if you just stopped manipulating all markets perhaps price discovery would actually work naturally and we can all get back to a sane world. It boggles the mind how the elites have highacked the western world economies. China, Russia and the rest of the BRICS must be craping themselves with laughter. Things are unwinding pretty quickly now.
The ditzo reporter is right though - gold isn't backed by anything.
List of inherently valuable things that aren't backed by anything:
1. Jack Daniels
2. Chocolate
3. Sex
4. Precious gems
5. Rare works of art
6. Silvuh bars and coins
7. Maseratti cars
.....
Stuff only needs backing if it's inherently worthless, like paper money and other paper "assets"
Is the St Louis Fed trying to outdo the Onion? Hilarious.
Three simple laws would fix this mess.
You can't loan something that doesn't exist.
You can'r sell something you don't own.
You can't insure something if you don't own it.
If you could enforece these rules, it would put these Wall St banks out of Business overnight.
"The U.S. abandoned the gold standard in 1971...." No, no, no. The US defaulted on its currency promises in 1971. The US fucked its creditors in 1971. the US pulled a bait and switch in 1971. The US dollar lost its moral mojo beginning in 1971. The US proved to be no better than the fucking commies in 1971.
They lost me right there. Not going to waste any time on this claptrap. Oh, and I noticed the Bridget Brown video is once again scrubbed. I have a transcript, somewhere......
The real panic will be with the banks that don't have any gold when the BIG RESET button is pushed.
Not quite. Gold isn't the only asset that can/will be exchanged for value recieved. Banks that are holding land that they've foreclosed on will do well... as will banks that are holding other tangible assets that have intrinsic value.
Ah ha! Someone has caught on.
Its not far from the truth because you would need to do constant proof of reserves but you still have to place trust in their reporting. Its as if the only way around it would be to create a currency that had its own public ledger where anyone could remotley check for proof of reserves that doesnt require any trust in a third party...
After saying that their little video montage is complete nonsense.
Let's see... who OWNS the Fed again? Ah.....
I think I'll take that chance!!!!!
Gold didn't trigger the 20's crash either.
It would be a pretty good trick starting a gold standard with no gold. When you can sort that part out let me know. I like gold as much as the next guy.
Fiat or gold?
So stack on because we will be needing it from you to give you your gold standard.
Never mind enegy is an asset or any other real thing is an asset. Gold is not the only real thing on the planet. It must be the shinny stuff? Why? Who says? Energy has a greater demand than gold. TP would work better.
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Racist.
Why should the govt be dictating what we use for money. Let us use whatever we agree upon, like Jim Rogers thinks. Then it's just an investment decision.
All money printing is just wealth redistribution, stealing. The Fed "saves" us from runs and other economic problems by stealing wealth from those with money holdings and propping up banks and others with it. The more problems we have the more they get to steal.
Fucking liars relying on a stupid populace.
Meanwhile the NY Fed explains why the sky is in fact green
Entirely missed the point of a Gold-standard... that one may redeem Currency for Gold, and vice versa; if one held half one's money in Currency and half in Gold, then one's cash remains equal, except under a revaluation. That's why a Gold standard is Stable, it's so basic, such a fundamental concept to the Constitution, I don't know how he can call himself an American.
Even under a Bank run, the volume of Gold required to satisfy M1 would have to be miniscule. What is the average Branch Balance sheet in the US? pfft. and where, btw, are the smart people in the US?
Unfunded Liabilities -- well that is rather the point. Treasury holdings of Gold would then underpin those liabilities, making them funded. ...and then govt. would have to reign in its budget and crash the insane price structure of a phenomenally inefficient industrial complex.
..and the dollar would have a known value and the price of its Goods would be low, and its so-called management would receive realistic salaries.
isn't it interesting that the word "panic" is used with gold standard and "recession/depression" for fiat?
Who cares about banking panics when you have gold in their pockets.
He said nothing useful and looks like he spent the morning touring the St. Louis Budweiser plant.
A few more drinks and he would have just said, "Blah, blah, blah. Look, buddy, under a fiat system, we can fuck you. Capiche?"
I love the BS statement that the Fed is mandated to create 2% inflation. WTF??? That's not true. It's an another outright lie.
A turd that has actual value as fertilizer. Imaginary money has imaginary value.
"LOW INFLATION AND PRICE STABILITY"
Dollar losses 90+% of its value during Federal Reserves Reign lol... yea very successful.
Isn't it interesting that the top 0.1% own 90% of the wealth in the country, after your dollars were devalued 90%?
...Theft through inflation.
More panics under gold standard perhaps because of banks not gold. Banksters committing worse fraud gold standard trying to print more money than they should to side steps the constraints gold puts on them. We need a "prison standard" for these banksters if we are not going to execute them anymore.
As ron Paul said, yes that's exactly the point. You WANT more banking panics, it keeps the system stable by creatively destroying banks who do bad investments. You don't end up with large systemic actors that can take everyone down with them.
So the answer is to hold gold, but use the banking system to pay your bills. Then when the banking systems fails you pay off your debt with worthless money because everyone wants gold. Win-Win for everyone that is not a Muppet.
Gold & silver won't protect or preserve your "money" - as long as the politicians remain in power they can screw you out of it many ways, as Roosevelt did.
At least your central bank just treats you like you're idiots our reserve bank in NZ treats us like moronic children. They tell us that money is magic barter tokens WTF.
http://www.rbnz.govt.nz/research_and_publications/videos/whatismoney.aspx
price stability and low inflation. FED is living in a FARKED UP DISNEYLAND!
What causes banking panics? The answer is obvious... when depositors realize the banksters who have their gold are predatory crooks playing insider games with their deposited wealth.
And so, under a true gold standard, where money and all monetary assets are physical gold, people realize letting banksters hold their gold is nothing but a huge risk. And so, as people come to understand the dishonest and predatory nature of the banksters, they realize their insane to let banksters hold their gold, and so they go take it back.
Simple as that.
The fact is, banks are pointless. They do nothing but steal wealth, and the so-called services they provide are vastly better provided by the individual owners of gold themselves. Why let known dishonest predators hold your life savings? Only a moron would do that.
The appropriate result is... bank panics until no banks exist. After which, I can assure you, no bank panics will occur. In other words, banksters are the cause of bank panics.
PS: No system that has any form of "fractional reserve" can be called a "gold standard". Every possible "fractional reserve" system is fraud.
However, if an individual wants to lend his gold to another individual with specific payback terms, that lender has no basis to demand repayment terms not in their original agreement. The interest received is compensation for risk and the lack of access for the mutually agreed upon term of the loan.
Bank Runs are caused by a banking scam called Fractional Reserve Banking. The gold standard prevents another banking scam called counterfeiting Fiat currency. Before 1913 when we were on a 100% gold standard, we still had bank runs because bankers were allowed to steal depositor money to make interest income on loans.
When word got out that bank deposit money was spent on unauthorized loans, bank runs occurred like in 1907. During the 30s Depression, Senator Bronson Cutting led the movement to eliminate this bank deposit theft scheme.
He died in an airplane crash. As with the assassination of banking chairman Louis McFadden who called for the arrest of the FED for stealing America's gold, causing the 30s Depression and funding Hitler as it was later discovered, assassinations were a common occurrance to crusaders that defied the criminal banksters.