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Must Read: Jim Grant Crucifies The Fed; Explains Why A Gold Standard Is The Best Option

Tyler Durden's picture


The Federal Reserve Bank of New York has invited some of its public critics to visit the bank to unburden themselves of their criticisms. On March 12, it was Jim Grant's turn. The text of his remarks follows. (highlights ours)

Piece Of My Mind

My friends and neighbors, I thank you for this opportunity. You know, we are friends and neighbors. Grant’s makes its offices on Wall Street, overlooking Broadway, a 10-minute stroll from your imposing headquarters. For a spectacular vantage point on the next ticker-tape parade up Broadway, please drop by. We’ll have the windows washed.

You say you would like to hear my complaints, and, on the one hand, I do have a few, while on the other, I can’t help but feel slightly hypocritical in dressing you down. What passes for sound doctrine in 21st-century central banking—so-called financial repression, interest-rate manipulation, stock-price levitation  and money printing under the frosted-glass term “quantitative easing”—presents us at Grant’s with a nearly endless supply of good copy. Our symbiotic relationship with the Fed resembles that of Fox News with the Obama administration, or—in an earlier era—that of the Chicago Tribune with the Purple Gang. Grant’s needs the Fed even if the Fed doesn’t need Grant’s.

In the not quite 100 years since the founding of your institution, America has exchanged central banking for a kind of central planning and the gold standard for what I will call the Ph.D. standard. I regret the changes and will propose reforms, or, I suppose, re-reforms, as my program is very much in accord with that of the founders of this institution. Have you ever read the Federal Reserve Act? The authorizing legislation projected a body “to provide for the establishment of the Federal Reserve banks, to furnish an elastic currency, to afford means of rediscounting commercial paper and to establish a more effective supervision of banking in the United States, and for other purposes.” By now can we identify the operative phrase? Of course: “for other purposes.”

You are lucky, if I may say so, that I’m the one who’s standing here and not the ghost of Sen. Carter Glass. One hesitates to speak for the dead, but I am reasonably sure that the Virginia Democrat, who regarded himself as the father of the Fed, would skewer you. He had an abhorrence of paper money and government debt. He didn’t like Wall Street, either, and I’m going to guess that he wouldn’t much care for the Fed raising up stock prices under the theory of the “portfolio balance channel.”

It enflamed him that during congressional debate over the Federal Reserve Act, Elihu Root, Republican senator from New York, impugned the anticipated Federal Reserve notes as “fiat” currency. Fiat, indeed! Glass snorted. The nation was on the gold standard. It would remain on the gold standard, Glass had no reason to doubt. The projected notes of the Federal Reserve would—of course—be convertible into gold on demand at the fixed statutory rate of $20.67 per ounce. But more stood behind the notes than gold. They would be collateralized, as well, by sound commercial assets, by the issuing member bank and—a point to which I will return— by the so-called double liability of the issuing bank’s stockholders.

If Glass had the stronger argument, Root had the clearer vision. One can think of the original Federal Reserve note as a kind of derivative. It derived its value chiefly from gold, into which it was lawfully exchangeable. Now that the Federal Reserve note is exchangeable into nothing except small change, it is a derivative without an underlier. Or, at a stretch, one might say it is a derivative that secures its value from the wisdom of Congress and the foresight and judgment of the monetary scholars at the Federal Reserve. Either way, we would seem to be in dangerous, uncharted waters.

As you prepare to mark the Fed’s centenary, may I urge you to reflect on just how far you have wandered from the intentions of the founders? The institution they envisioned would operate passively, through the discount window. It would not create credit but rather liquefy the existing stock of credit by turning good-quality commercial bills into cash— temporarily. This it would do according to the demands of the seasons and the cycle. The Fed would respond to the community, not try to anticipate or lead it. It would not override the price mechanism— as today’s Fed seems to do at every available opportunity—but yield to it.

My favorite exposition of the sound, original doctrines is a book entitled, “The Theory and Practice of Central Banking,” by H. Parker Willis, first secretaryof the Federal Reserve Board and Glass’s right-hand man in the House of Representatives.

Writing in the mid-1930s, Willis pointed out that the Fed fell into sin almost immediately after it opened for business in 1914. In 1917, after the United States entered the Great War, the Fed set about monetizing the Treasury’s debt and suppressing the Treasury’s borrowing costs. In the 1920s, after the recovery from the short but ugly depression of 1920-21, the Fed started to implement open-market operations to sterilize gold flows and steer a desired macroeconomic course.

“Central banks,” wrote Willis, glaring at the innovators, “…will do wisely to lay aside their inexpert ventures in halfbaked monetary theory, meretriciousstatistical measures of trade, and hasty grinding of the axes of speculative interests with their suggestion that by doing so they are achieving some sort of vague ‘stabilization’ that will, in the long run, be for the greater good.”

Willis, who died in 1937, perhaps of a broken heart, would be no happier with you today than Glass would be—or I am. The search for “some sort of vague stabilization” in the 1930s has become a Federal Reserve obsession at the millennium.

Ladies and gentlemen, such stability as might be imposed on a dynamic capitalist economy is the kind that eventually comes around to bite the stabilizer.

“Price stability” is a case in point. It is your mandate, or half of your mandate, I realize, but it does grievous harm, as defined. For reasons you never exactlyspell out, you pledge to resist “deflation.” You won’t put up with it, you keep on saying—something about Japan’s lost decade or the Great Depression. But you never say what deflation really is. Let me attempt a definition. Deflation is a derangement of debt, a symptom of which is falling prices. In a credit crisis, when inventories become unfinanceable, merchandise is thrown on the market and prices fall. That’s deflation.

What deflation is not is a drop in prices caused by a technology-enhanced decline in the costs of production. That’s called progress. Between 1875 and 1896, according to Milton Friedman and Anna Schwartz, the American price level subsided at the average rate of 1.7% a year. And why not? As technology was advancing, costs were tumbling. Long before Joseph Schumpeter coined the phrase “creative destruction,” the American economist David A. Wells, writing in 1889, was explaining the consequences of disruptive innovation.

“In the last analysis,” Wells proposes, “it will appear that there is no such thing as fixed capital; there is nothing useful that is very old except the precious metals, and life consists in the conversion of forces. The only capital which is of permanent value is immaterial—the experience of generations and the development of science.”

Much the same sentiments, and much the same circumstances, apply today, but with a difference. Digital technology and a globalized labor force have  brought down production costs. But, the central bankers declare, prices must not fall. On the contrary, they must rise by 2% a year. To engineer this up-creep, the Bernankes, the Kings, the Draghis—and yes, sadly, even the Dudleys—of the world monetize assets and push down interest rates. They do this to conquer deflation.

But note, please, that the suppression of interest rates and the conjuring of liquidity set in motion waves of speculative lending and borrowing. This  artificially induced activity serves to lift the prices of a favored class of asset—houses, for instance, or Mitt Romney’s portfolio of leveraged companies. And when the central bank-financed bubble bursts, credit contracts, leveraged businesses teeter, inventories are liquidated and prices weaken. In short, a process is set in motion resembling a real deflation, which then calls forth a new bout of monetary intervention. By trying to forestall an imagined deflation, the Federal Reserve comes perilously close to instigating the real thing.

The economist Hyman Minsky laid down the paradox that stability is itself destabilizing. I say that the pledge of a stable funds rate through the fourth quarter of 2014 is hugely destabilizing. Interest rates are prices. They convey information, or ought to. But the only information conveyed in a manipulated yield curve is what the Fed wants. Opportunists don’t have to be told twice how to respond. They buy oil or gold or foreign exchange, not incidentally pushing the price of a gallon of gasoline at the pump to $4 and beyond. Another set of opportunists borrow short and lend long in the credit markets. Not especially caring about the risk of inflation over the long run, this speculative cohort will fund mortgages, junk bonds, Treasurys, what-have-you at zero percent in the short run. The opportunists, a.k.a. the 1 percent, will do fine. But what about the uncomprehending others?

I commend to the Federal Reserve Bank of New York Financial History Book Club (if it doesn’t exist, please organize it at once) a volume by the British scholar and central banker, Charles Goodhart. Its title is “The New York Money Market and the Finance of Trade, 1900-1913.” In the pre-Fed days with which the history deals, the call money rate dove and soared. There was no stability—and a good thing, Goodhart reasons. In a society predisposed to speculate, as America was and is, he writes, unpredictable spikes in borrowing rates kept the players more or less honest. “On the basis of its record,” he writes of the Second Federal Reserve District before there was a Federal Reserve, “the financial system as constituted in the years 1900-1913 must be considered successful to an extent rarely equaled in the United States.” And that not withstanding the Panic of 1907.

My reading of history accords with Goodhart’s, though not with that of the Fed’s front office. If Chairman Bernanke were in the room, I would respectfully ask him why this persistent harking back to the Great Depression? It is one cyclical episode, but there are many others. I myself draw more instruction from the depression of 1920-21, a slump as ugly and steep in its way as that of 1929-33, but with the simple and interesting difference that it ended. Top to bottom, spring 1920 to summer 1921, nominal GDP fell by 23.9%, wholesale prices by 40.8% and the CPI by 8.3%. Unemployment, as it was inexactly measured, topped out at about 14% from a pre-bust low of as little as 2%. And how did the administration of Warren G. Harding meet this macroeconomic calamity? Why, it balanced the budget, the president declaring in 1921, as the economy seemed to be falling apart, “There is not a menace in the world today like that of growing public indebtedness and mounting public expenditures.” And the fledgling Fed, face to face with its first big slump, what did it do? Why, it tightened, pushing up short rates in mid-depression to as high as 8.13% from a business cycle peak of 6%. It was the one and only time in the history of this institution that money rates at the trough of a cycle were higher than rates at the peak, according to Allan Meltzer.

But then something wonderful happened: Markets cleared, and a vibrant recovery began. There were plenty of bankruptcies and no few brickbats launched in the direction of the governor of the New York Fed, Benjamin Strong, for the deflation that cut an especially wide and devastating swath through the American farm economy. But in 1922, the first full year of recovery, the Fed’s index of industrial production leapt by 27.3%. By 1923, the unemployment rate was back to 3.2%. The 1920s began to roar.

And do you know that the biggest nationally chartered bank to fail during this deflationary collapse was the First National Bank of Cleburne, Texas, with not quite $2.8 million of deposits? Even the forerunner to today’s Citigroup remained solvent (though for Citi, even then it was a close-run thing, on account of an oversize exposure to deflating Cuban sugar values). No TARP, no starving the savers with zero-percent interest rates, no QE, no jimmying up the stock market, no federal “stimulus” of any kind. Yet—I repeat—the depression ended. To those today who demand ever more intervention to cure what ails us, I ask: Why did the depression of 1920-21 ever end? Given the policies with which the authorities treated it, why are we still not ensnared?

If you object to using the template of 1920-21 as a guide to 21st-century policy because, well, 1920 was a long time ago, I reply that 1929 was a long time ago, too. And if you persist in objecting because the lessons to be derived from the Harding depression are unthinkably at odds with the lessons so familiarly mined from the Hoover and Roosevelt depression, I reply that Harding’s approach worked. The price mechanism is truer and enterprise hardier than the promoters of radical 21st-century intervention seem prepared to acknowledge.

In notable contrast to the Harding method, today’s policies seem not to be working. We legislate and regulate and intervene, but still the patient languishes. It’s a worldwide failure of the institutions of money and credit. I see in the papers that Banca Monte dei Paschi di Siena is in the toils of a debt crisis. For the  first time in over 500 years, the foundation that controls this ancient Italian institution may be forced to sell shares. We’ve all heard of hundred-year floods. We seem to be in a kind of 500-year debt flood.

Many now call for more regulation— more such institutions as the Treasury’s brand-new Office of Financial Research, for instance. In the March 8 Financial Times, the columnist Gillian Tett appealed for more resources for the overwhelmed regulators. Inundated with information, she lamented, they can’t keep up with the institutions they are supposed to be safeguarding. To me, the trouble is not that the regulators are ignorant. It’s rather that the owners and managers are unaccountable.

Once upon a time—specifically, between the National Banking Act of 1863 and the Banking Act of 1935—the impairment or bankruptcy of a nationally chartered bank triggered a capital call. Not on the taxpayers, but on the stockholders. It was their bank, after all. Individual accountability in banking was the rule in the advanced economies. Hartley Withers, the editor of The Economist in the early 20th century, shook his head at the micromanagement of American banks by the Office of the Comptroller of the Currency—25% of their deposits had to be kept in cash, i.e., gold or money lawfully convertible into gold. The rules held. Yet New York had panics, London had none. Adjured Withers: “Good banking is produced not by good laws but by good bankers.”

Well said, Withers! And what makes a good banker is more than skill. It is also the fear of God, or, more specifically, accountability for the solvency of the institution that he or she owns or manages. To stay out of trouble, the general partners of Brown Brothers Harriman, Wall Street’s oldest surviving general partnership, need no regulatory pep talk. Each partner is liable for the debts of the firm to the full extent of his or her net worth. My colleague Paul Isaac, who is with me today—he doubles as my food and beverage taster— has an intriguing suggestion for instilling the credit culture more deeply in our semi-socialized banking institutions.

We can’t turn limited liability corporations into general partnerships. Nor could we easily reinstate the so-called double liability law on bank stockholders. But what we could and should do, Paul urges, is to claw back that portion of the compensation paid out by a failed bank in excess of 10 times the average wage in manufacturing for the seven full calendar years before the ruined bank hit the wall. Such a clawback would not be subject to averaging or offset one year to the next.  And it would be payable in cash.

The idea, Paul explains, is twofold. First, to remove the government from the business of determining what is, or is not, risky—really, the government doesn’t know. Second, to increase the personal risk of failure for senior management, but stopping short of the sword of Damocles of unlimited personal liability. If bankers are venal, why not harness that venality in the public interest? For the better part of 100 years, and especially in the past five, we have socialized the risks of high finance. All too often, the bankers who take risks don’t themselves bear them. By all means, let the capitalists keep the upside. But let them bear their full share of the downside.

In March 2009, the Financial Times published a letter to the editor concerning the then novel subject of QE. “I can now understand the term ‘quantitative easing,’ wrote Gerald B. Hill of Stourbridge, West Midlands, “but . . . realize I can no longer understand the meaning of the word ‘money.’”

There isn’t time, in these brief remarks, to persuade you of the necessity of a return to the classical gold standard. I would need another 10 minutes, at least. But I anticipate some skepticism. Very well then, consider this fact: On March 27, 1973, not quite 39 years ago, the forerunner to today’s G-20 solemnly agreed that the special drawing right, a.k.a. SDR, “will become the principal reserve asset and the role of gold and reserve currencies will be reduced.” That was the establishment— i.e., you—talking. If a worldwide accord on the efficacy of the SDR is possible, all things are possible, including a return to the least imperfect international monetary standard that has ever worked.

Notice, I do not say the perfect monetary system or best monetary system ever dreamt up by a theoretical economist. The classical gold standard, 1879-1914, “with all its anomalies and exceptions . . . ‘worked.’” The quoted words I draw from a book entitled, “The Rules of the Game: Reform and Evolution in the International Monetary System,” by Kenneth W. Dam, a law professor and former provost of the University of Chicago. Dam’s was a grudging  admiration, a  little like that of the New York Fed’s own Arthur Bloomfield, whose 1959 monograph, “Monetary Policy under the International Gold Standard,” was published by yourselves. No, Bloomfield points out, as does Dam, the classical gold standard was not quite automatic. But it was synchronous, it was self-correcting and it did deliver both national solvency and, over the long run, uncanny price stability. The banks were solvent, too, even the central banks, which, as Bloomfield noted, monetized no government debt.

The visible hallmark of the classical gold standard was, of course, gold—to every currency holder was given the option of exchanging metal for paper, or paper for metal, at a fixed, statutory rate. Exchange rates were fixed, and I mean fixed. “It is quite remarkable,” Dam writes, “that from 1879 to 1914, in a period considerably longer than from 1945 to the demise of Bretton Woods in 1971, there were no changes of parities between the United States, Britain, France, Germany—not to speak of a number of smaller European countries.” The fruits of this fixedness were many and sweet. Among them, again to quote Dam, “a flow of private foreign investment on a scale the world had never seen, and, relative to other economic aggregates, was never to see again.”

Incidentally, the source of my purchased copy of “Rules of the Game” was the library of the Federal Reserve Bank of Atlanta. Apparently, President Lockhart isn’t preparing, as I am—as, may I suggest, as you should be—for the coming of classical gold standard, Part II. By way of preparation, I commend to you a new book by my friend Lew Lehrman, “The True Gold Standard: A Monetary Reform Plan without Official Reserve Currencies: How We Get from Here to There.”

It’s a little rich, my extolling gold to an institution that sits on 216 million troy ounces of the stuff. Valued at $42.222 per ounce, the hoard in your basement is worth $9.1 billion. Incidentally, the official price was quoted in SDRs, $35 to the ounce—now there’s a quixotic choice for you. In 2008, when your in-house publication, “The Key to the Gold Vault,” was published, the market value was $194 billion. Today, the market value is $359 billion, which is encouraging only if you personally happen to be long gold bullion. Otherwise, it strikes me as a pretty severe condemnation of modern central banking.

And what would I do if, following the inauguration of Ron Paul, I were sitting in the chairman’s office? I would do what I could to begin the normalization of interest rates. I would invite the Wall Street Journal’s Jon Hilsenrath to lunch to let him know that the Fed is now well over its deflation phobia and has put aside its Atlas complex. “It’s capitalism for us, Jon,” I would say. Next I would call President Dudley. “Bill,” I would say, pleasantly, “we’re not exactly leading from the front in the regulatory drive to reduce the ratio of assets to equity at the big American financial institutions. Do you have to be leveraged 89:1?” Finally, I would redirect the efforts of the brainiacs at the Federal Reserve Board research division. “Ladies and gentlemen,” I would say, “enough with ‘Bayesian Analysis of Stochastic Volatility Models with Levy Jumps: Application to Risk Analysis.’ How much better it would please me if you wrote to the subject, ‘Command and Control No More: A Gold Standard for the 21st Century.’” Finally, my pièce de résistance, I would commission, staff and ceremonially open the Fed’s first Office of Unintended Consequences.

Let me thank you once more for the honor that your invitation does me. Concerning little Grant’s and the big Fed, I will quote in parting the opening sentences of an editorial that appeared in a provincial Irish newspaper in the fateful year 1914. It read: “We give this solemn warning to Kaiser Wilhelm: The Skibbereen Eagle has its eye on you.”


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Fri, 03/30/2012 - 11:40 | 2303625 Badabing
Badabing's picture

Go Jim!!

But do you think the Fed will listen?

Fri, 03/30/2012 - 11:46 | 2303647 SHEEPFUKKER

I hear crickets.

Fri, 03/30/2012 - 11:52 | 2303664 economics9698
economics9698's picture

I always like reading about ending the Federal Reserve.  It’s up there with declaring bankruptcy and watching the entire evil mother fucking bankers and politicians fry in a vat of scalding hot oil.

Fri, 03/30/2012 - 12:09 | 2303710 LowProfile
LowProfile's picture

Yes, but I just wish Grant would realize that the best solution is NOT a gold standard, but to allow gold to trade FREE OF ENCUMBERANCE, TAXES, AND DERIVATIVES OF ANY SORT against fiat. 

Ron Paul apparantly understands this, but doesn't tout it because most people aren't hip enough yet to understand what that means, so instead he usually talks about a gold standard, or gold-backing.

This avoids the government-created problems that arise from a traditional gold-standard.

Fri, 03/30/2012 - 12:15 | 2303729 Spitzer
Spitzer's picture

Thats right, Its called freegold.

Use fiat as a medium of exchange and gold as the store of value. It works well already in countries where their fiat is never used as a store of value.

Jamaica for example. Nobody in Jamiaca uses the Ja as a store of value yet their fiat works fine as a meduim of exchange.

Fri, 03/30/2012 - 12:28 | 2303767 Dre4dwolf
Dre4dwolf's picture

Gamers do this all the time, they trade in commodities (in virtual worlds).


MMORPGS have free-floating economies and it works great... inflation is not a problem even with all the automatic china bots farming the in game "currency"... because players just trade items/materials for other items/materials but always reserve the use of gold as an "option".... the currency is free floating against the price of other assets (which could be compared to gold/silver).

Gold and Silver store value because well they have use and real world needs... so the silver is constantly "in demand" by industry (assuming a healthy growing economy).

If it works in a virtual world rought with fraud, hacks, exploits, bots, chinese gold farmers.... (the most corrupt and degreaded system you could think of with zero enforcement) than it would work in our "not so perfect" world also!.



China has actually argued that virtual game currency is as real as the FIAT we used in our day to day lives because assuming the game is not rigged, it takes real world energy to accumulate this junk in the virtual worlds.


The problem is virtual economies can't feed non - virtual people ;P... atleast not yet.... but assuming one day we reach a level of abundance and enough of a population is actively playing in a virtual world... it could become "a job" to sit there and play those games.... and corporations could form to hire "gamers".


Fri, 03/30/2012 - 13:11 | 2303917 crawldaddy
crawldaddy's picture

but it doesnt work in the MMO world. Inflation is all over the place in those games. Gaming economies are not working, your assumption is totally off base.

Fri, 03/30/2012 - 20:47 | 2305388 strannick
strannick's picture

The Fed loves hates gold for the same reason Grant loves it. It restricts the Fed's monetary policy.

Fri, 03/30/2012 - 20:58 | 2305408 Spitzer
Spitzer's picture

The dollar does not have to be pegged to gold to restrict the fed. It can do it on its own. It will as time goes on

Fri, 03/30/2012 - 13:37 | 2304070 nugjuice
nugjuice's picture

A major problem with your assumption, at least the one that immediately strikes me, is that this game currency of "gold" is created out of thin air. You do quests to obtain gold, but this is nothing like a job in real life. If 100 people do the quest that day the NPC farmer doesn't offer to pay them less than if 20 people did the quest. Sure enough, he hands out 100 gold coins whether one basement dwelling pre-teen does the quest, or 5,000 Chinese Farmers do. You'd better believe it would make a difference in real life.

I see your basic logic saying that an unmanipulated market is the best market, and agree with you. But it isn't really a complete comparison

Fri, 03/30/2012 - 14:50 | 2304394 Belarusian Bull
Belarusian Bull's picture

The logic of MMO games economy, is that you have to spend time and effort in order to earn money. Be it quests, or farming for raw materials then selling them, hunting for monsters or bying raw materials and crafting tradeable items, it all requires you time and effort.

That's why every penny in a MMO is earned, and those games never experience any economic crises.

P.S. They don't have central banks as well.

Fri, 03/30/2012 - 16:43 | 2304798 Amagnonx
Amagnonx's picture

Well, MMO's do have a lot of inflation - though this could be managed by design, but thats not really what we would like I think.  Prices also swing around a lot, thats mainly because of the interference of the 'central planners' though - the devs, and in a game you dont starve to death because of it - but real life isn't quite so gentle.


I don't think we want an MMO currency, though there is a virtual currency called bitcoin which is of finite supply by design - I do think that this currency may one day 'rule them all' - it is finite, divisible, recognizable (I understand it is self referential - that is each piece will recognize another piece) - it has advantages over gold in that it can be stored and transmitted electronically, its drawback, being virtual. 


While its designers say its not able to be counterfiet - I think that is the thing that really needs to be proven to people, and only time will prove that.

Fri, 03/30/2012 - 14:10 | 2304242 Panafrican Funk...
Panafrican Funktron Robot's picture

Thank you for bringing up this point, this will be come more obvious with the advent of Diablo III (with their "real money" auction house).  If the market in that game goes like I think it will, I will probably do it professionally.    

Fri, 03/30/2012 - 13:01 | 2303883 LowProfile
LowProfile's picture


"Thats right, Its called freegold."

Exactly.  But I always use the long explanation because "Freegold" isn't part of the global parlance.

Fri, 03/30/2012 - 13:05 | 2303896 n8dawg84
n8dawg84's picture

I don't quite understand about freegold, though I've seen the term used around this site.  Is there a link where I could read a bit more about the subject?  Thanks in advance


Fri, 03/30/2012 - 13:15 | 2303936 V in PA
Fri, 03/30/2012 - 16:10 | 2304679 Spitzer
Spitzer's picture

Nate dawg.

read up on freegold at the FOFOA blog and also read up some on my blog here-

Fri, 03/30/2012 - 19:04 | 2305213 i_fly_me
i_fly_me's picture

It is fascinating that intelligent folks who otherwise abhor centralized control of market prices would be proponents of a fixed price for gold.  Gold, freely priced against all currencies is the answer.   Less control ... not more.

Fri, 03/30/2012 - 22:52 | 2305488 DoChenRollingBearing
DoChenRollingBearing's picture

@ Spitzer

+ $55,000

Freegold: yes

"Gold Standard": no

I wrote a piece on "Marginal Utility and Gold" at my blog.  gmail me or use Google to read the article ifyou are interested.  FOFOA has a massive following, no?

Fri, 03/30/2012 - 12:58 | 2303869 Stackers
Stackers's picture

LowProfile: Paul does tout this. He simply calls it the "free market competing currancy"

Fri, 03/30/2012 - 18:37 | 2305141 DorseyCecil68669
DorseyCecil68669's picture

my friend's aunt makes $72/hr on the internet. She has been without work for six months but last month her payment was $19183 just working on the internet for a few hours. Here's the site to read more .....

Fri, 03/30/2012 - 21:18 | 2305439 economics9698
economics9698's picture

Tyler kill this spammer.

Sat, 03/31/2012 - 07:45 | 2306028 Chaffinch
Chaffinch's picture

Freegold might work great, but until it's tried we don't know for sure. As Jim Grant says, the classical gold standard may not have been perfect, but it 'worked'. Green because anyone who is arguing for any system involving gold and/ or silver instead of the paper/ digital mess we are currently in gets my support - we must not start dividing up into differing pro-gold factions or we stand no chance at all.

Fri, 03/30/2012 - 12:55 | 2303846 vast-dom
vast-dom's picture

hear this, again:

"As you prepare to mark the Fed’s centenary, may I urge you to reflect on just how far you have wandered from the intentions of the founders? The institution they envisioned would operate passively, through the discount window. It would not create credit but rather liquefy the existing stock of credit by turning good-quality commercial bills into cash— temporarily. This it would do according to the demands of the seasons and the cycle. The Fed would respond to the community, not try to anticipate or lead it. It would not override the price mechanism— as today’s Fed seems to do at every available opportunity—but yield to it.


My favorite exposition of the sound, original doctrines is a book entitled, “The Theory and Practice of Central Banking,” by H. Parker Willis, first secretaryof the Federal Reserve Board and Glass’s right-hand man in the House of Representatives.

Writing in the mid-1930s, Willis pointed out that the Fed fell into sin almost immediately after it opened for business in 1914. In 1917, after the United States entered the Great War, the Fed set about monetizing the Treasury’s debt and suppressing the Treasury’s borrowing costs. In the 1920s, after the recovery from the short but ugly depression of 1920-21, the Fed started to implement open-market operations to sterilize gold flows and steer a desired macroeconomic course.

“Central banks,” wrote Willis, glaring at the innovators, “…will do wisely to lay aside their inexpert ventures in halfbaked monetary theory, meretriciousstatistical measures of trade, and hasty grinding of the axes of speculative interests with their suggestion that by doing so they are achieving some sort of vague ‘stabilization’ that will, in the long run, be for the greater good.”




Fri, 03/30/2012 - 13:06 | 2303902 Chupacabra-322
Chupacabra-322's picture

@ vast-dom,

ok, I hear you.  So when does Congress revoke the Fed's Charter? 

Fri, 03/30/2012 - 13:11 | 2303914 vast-dom
vast-dom's picture

when congress is revoked in it's current deplorable damaging state? i have zero-expectations that the right thing will ever be done as matter of policy; something that approaches a correct policy will only ever be achieved as matter of (extreme) necessity. 

Fri, 03/30/2012 - 13:18 | 2303953 Chupacabra-322
Chupacabra-322's picture

@ vast-dom,

forgot to mention.  The B.R.I.C.S. have already announced this week about international trade between them with use of thier own currencies.  Not long before the flow/flood of US dollars begin to return home plus hyper-inflation.  We're going to end up like the Weimer Republic. 

Fri, 03/30/2012 - 13:19 | 2303963 vast-dom
vast-dom's picture

Chup: let's just hope it happens sooner rather than later as delays at this point become a kind of quasi magnifier multiplier to the inevitable disaster. 

Fri, 03/30/2012 - 20:09 | 2305319 Chump
Chump's picture

Not if those dollars don't get into the hands of actual people.

Hyperinflation during a time of wage deflation is a non-starter.

Thu, 04/05/2012 - 20:59 | 2320990 moonshadow
moonshadow's picture


in a global economy? we'll see

Fri, 03/30/2012 - 11:59 | 2303687 jus_lite_reading
jus_lite_reading's picture

Jim Grant and Ron Paul are VERY dangerous people...


... to the frauds and Wall Street scum who have taken control of this once great nation!!


THUS this is the reason the GOP has made sure RON PAUL won't win... the AIPAC (a disgusting vile organization that must be abolished) has done everything in its corrupt power to make sure RON PAUL will not get "elected" (as if voting even counts in this country anymore)


But the people are wising up!! WATCH OUT FRAUDS!! YOUR DAY IS ALMOST HERE!!!


>end: rant

>run: happy iPad kool aid induced coma



Fri, 03/30/2012 - 12:30 | 2303777 The Limerick King
The Limerick King's picture



An ode to a genius named Grant

And his great intellectual rant

When asked to reply

Ben said with a sigh

I'd like to rebut him, but can't....


Fri, 03/30/2012 - 12:59 | 2303872 azzhatter
azzhatter's picture

In a battle of wits, Ben is unarmed

Fri, 03/30/2012 - 15:40 | 2304559 marathonman
marathonman's picture

Long live the King!

Fri, 03/30/2012 - 20:46 | 2305385 peekcrackers
peekcrackers's picture

Jim Grant walk softly and ware a bow-tie


Fri, 03/30/2012 - 12:41 | 2303799 Bastiat
Bastiat's picture

Back in mid-90s when Wall St was ramping up the sale of derivatives to munciplaities (floaters with interest rate swaps, most commonly), Jim Grant was the only one in the national media crying foul, pointing out these were bombs and saying municipalities had no business in this crap.  We saw the results in Jefferson County and nearly saw the whole sector collapse in 2008.  Muncipalities all over the western world were sucked into the this crap.  Italy sued some of the bankster TBTFs over it.  This story is far from over.

Grant is the man:  Alpha Geek!

Fri, 03/30/2012 - 12:06 | 2303701 fightthepower
fightthepower's picture

I wish he would mention Rothschild ownership.



Fri, 03/30/2012 - 12:14 | 2303728 Bansters-in-my-...
Bansters-in-my- feces's picture

@ fightthepower.

I gave you an up arrow.

You allready had an up arrow when I gave you one.

It should have totaled you two then.

BUT ,It still was a total of one up arrow.

Something funny going on.

Fri, 03/30/2012 - 13:11 | 2303923 fightthepower
fightthepower's picture

I forgive you.

Fri, 03/30/2012 - 21:03 | 2305416 Withdrawn Sanction
Withdrawn Sanction's picture

I wish he would mention Rothschild ownership.

He did...obliquely, in that inimitable and suave James Grant sort of way.

Someone else may have commented on this already. If so, sorry but it bears repeating, and if not it needs stating, "My colleague Paul Isaac, who is with me today—he doubles as my food and beverage taster ..." is a nicely veiled reference to Louis McFadden, an arch critic of the Fed, who was twice poisoned at speaking engagements where he denounced the Fed (and was once shot at as he exited a cab in DC on the way to an engagement).  On the 2nd poisoning attempt, the Rothschild lackeys succeeded in killing a good man.  (Pssst, except we're not supposed to know they own a part of the Fed, since the identities of Class A stockholders is considered privileged information, under the FRA of 1913.  Transparency, my butt.)

Fri, 03/30/2012 - 12:07 | 2303705 mayhem_korner
mayhem_korner's picture

But do you think the Fed will listen?


If the Fed intended to listen - and let others hear - they would have staged this as a debate with the Bernank at GW earlier in the week.  THAT would've been worth some corn poppin'.

Fri, 03/30/2012 - 12:10 | 2303716 Ruffcut
Ruffcut's picture

It don't make no damn difference. The assholes would lie, as usual, on how much gold there was to back the currency.

Without any integrity, it all fails.

Fri, 03/30/2012 - 14:11 | 2304134 gaoptimize
gaoptimize's picture

No one knows if there is someone at the Fed who has misgivings about their enterprise, second thoughts about the hellbent path they have set forth on.  Maybe that person is Dick Fisher, or a family member or friend that can reach into the heart of these men.  It is never a waste of breath to speak truth to power.

Fri, 03/30/2012 - 17:18 | 2304925 OpenThePodBayDoorHAL
OpenThePodBayDoorHAL's picture

I cannot begin to say how much I enjoyed reading this article. I can fantasize for a while about a Ron Paul presidency, with Jim Grant heading the Fed. We would enter an era of peace and prosperity the world has never seen.

Fri, 03/30/2012 - 18:27 | 2305109 Chaffinch
Chaffinch's picture

I've read a lot of good stuff on ZH - but that was the best by a long shot!

Fri, 03/30/2012 - 11:39 | 2303626 LawsofPhysics
LawsofPhysics's picture

We already have an "oil standard" of sorts, but yes more lecturing to the choir on ZH while the MSM says bad news is good news.

Fri, 03/30/2012 - 11:40 | 2303630 SteveGennisonBa...
SteveGennisonBallWasher's picture

Off topic but hilarious-

NEW YORK (CNNMoney) -- Total student loan debt has topped $1 trillion ... but there's no need to panic.

Most borrowers have a reasonable amount of debt, and the total balance is not likely to cause major damage to the economy like the mortgage crisis did, experts say.

Fri, 03/30/2012 - 11:47 | 2303651 Osmium
Osmium's picture

But more people are going to college these days, said Sandy Baum, senior fellow at the George Washington University School of Education. This is prompted in part by the economic downturn: When people lose their jobs or the economy turns shaky, a lot of folks return to school to learn new skills or bolster their resumes.

Learn new skills?  They need college courses to learn how to ask "would you like fries with that?"

Those are the only jobs available.


Fri, 03/30/2012 - 17:07 | 2304890 Chump
Chump's picture

I can't find a fucking thing.  Even shit factory jobs loading fucking trucks that I'm ashamed to say I've applied for and not even been called back.  And I'm a "professional" something or other, forgot by now.

People who are spending money to go back to school are in for a rude awakening.  Better off flipping a coin on a penny stock.

Fri, 03/30/2012 - 18:16 | 2305088 Moe Howard
Moe Howard's picture

Buy a hoodie and a S&W and go into the "independent" banking business.

Fri, 03/30/2012 - 19:47 | 2305288 Chump
Chump's picture

If it comes down to A.) that or B.) sell my physical, I think there are some new Wells Fargo branches all over the fucking place that could see some excitement.

Not trying to be alarmist, but shit is getting real out here.  DHS doesn't need 250 million flex tip .40 cal rounds (these rounds penetrate armor but expand in flesh) for border-hopping Mexicans.  Our "leaders" may be evil and corrupt, but they are not stupid.  (Except Pelosi, that bitch is dumber than a bag of hammers).  We are exactly three days of supply-chain interruption from complete chaos in this country, and TPTB know it.  No better opportunity to quit with the facade of a Constitutional Republic and get this shit started proper.


Fri, 03/30/2012 - 23:40 | 2305615 oldman
oldman's picture


Fri, 03/30/2012 - 23:38 | 2305624 oldman
oldman's picture


Now, you are talking like a do-nothing dude; especially if everyone stays home sick for two weeks(like losing your physical in a canoe) rather than a 'national strike' which is illegal.

Doing-not-a-thing until the country comes to a halt and the 1% really want to talk. Non-violent, passive but, 'getting over this damned flu---everyone has it, boss'.

Too easy, you say? OK, go out into the street like my heroes in Occupy and get beaten, burned out, jailed, or living in court for a while; or get your weapons and go violent---really kick ass!

My choice is easy; I'm retired and living out of the US of A, but if I was there, I'd a damn sight rather be paid 'sick leave'/ vacation pay or just stay home in a safe place without pay for two weeeks before throwing myself to the pigs as a practice target.

OK, I know, 'Shut up,oldman!  you're a commie, a liberal, a John Bircher, a--------------do-nothing dude'             om

Fri, 03/30/2012 - 19:55 | 2305304 Chump
Chump's picture

Oh, and this hoodie looks like a good investment:


Fri, 03/30/2012 - 12:14 | 2303727 zuuma
zuuma's picture


Experts agree, borrowing $35k  for your Masters in Puppetry at Uconn is an excellent idea!

Coupled with your previous $26k in loans for you Bachelors in Womens Studies

Only $60,000!!. Reasonable! Unforgiveable.

Now, why aren't those dang new cars & houses selling?

Fri, 03/30/2012 - 13:44 | 2304124 Zero Debt
Zero Debt's picture

The opportunity to mingle and network with the Rotschild and CIA alumni from the Puppetry program far outweighs the cost as I see it.

Fri, 03/30/2012 - 14:47 | 2304349 bluebare
bluebare's picture

Master's in Puppetry aka Muppetry at Harvard Business School.  Our confidential survey says that most program graduates  now work at large multi-national financial institutions and have repaid their student loans with money stolen from, well, everybody.

Fri, 03/30/2012 - 15:42 | 2304576 marathonman
marathonman's picture

"Muppetry" Freakin' Brilliant!

Fri, 03/30/2012 - 11:43 | 2303640 boogerbently
boogerbently's picture

That's what I'm talking about. Why I STILL hold the gold.

Impose responsibility by a return to the gold standard. Then run the price of gold up to give your $$$ more "value" (and increase your "printing" ability).

Fri, 03/30/2012 - 17:12 | 2304902 Chump
Chump's picture

A question I haven't been able to resolve though involves this list:

What are the dynamics of a gold standard when CBs own thousands and thousands of tonnes of the stuff?

Bernanke: "Oh, you own 500 ounces of gold?  That's cute.  You can go die in a fire now."

I own some physical because fiat is going to die, but what arises from its ashes?

Fri, 03/30/2012 - 22:59 | 2305515 DoChenRollingBearing
DoChenRollingBearing's picture

Another fiat will.

Gold needs fiat...

"Marginal Utility and Gold" at my blog, gmail me or just use our friend Google, I think you may like the article.

Sat, 03/31/2012 - 18:06 | 2306873 Prometheus418
Prometheus418's picture

That's why I don't own any gold- or at least, not enough to mention.  Silver, on the other hand....

Fri, 03/30/2012 - 11:43 | 2303642 TTaco
TTaco's picture

Link for the speech please

Fri, 03/30/2012 - 11:45 | 2303646 Tyler Durden
Fri, 03/30/2012 - 12:16 | 2303731 slyhill
slyhill's picture

free pdf dl is here ->

Fri, 03/30/2012 - 13:15 | 2303937 disabledvet
disabledvet's picture

No one listens. They enjoy our..."peculiarities." Hobbes' Leviathan" is the order of the day. And we are the automons.

Fri, 03/30/2012 - 11:44 | 2303643 evolutionx
evolutionx's picture


We now live in a world where governments print worthless pieces of paper to buy other worthless pieces of paper that combined with worthless derivatives, finance assets whose values are totally dependent on all these worthless debt instruments.  Thus most of these assets are also worth-less.


Fri, 03/30/2012 - 12:18 | 2303737 dick cheneys ghost
dick cheneys ghost's picture

As a good US citizen, I called Homeland Security, CIA, FBI and ATF and told them that The FED and the Wall St money center banks were counterfeiting money..........


They said they would get back to me...

Fri, 03/30/2012 - 13:41 | 2304100 AlaricBalth
AlaricBalth's picture



Don't wait for the phone to ring...I am sure you will hear them outside soon.

Fri, 03/30/2012 - 14:53 | 2304396 bluebare
bluebare's picture

I e-mailed the White House today requesting 5 minutes with the President to discuss the administration's failure to provide me with my "fair share" of the bailouts and QE to date as well as to provide me with assurance that that my family would get their "fair share" of any new programs that are being considered. 

They said they would get back to me...


Fri, 03/30/2012 - 15:45 | 2304587 marathonman
marathonman's picture

Go ahead and get those personal effects in order.  You's probably going to dissappear real soon.

Fri, 03/30/2012 - 11:45 | 2303645 Everybodys All ...
Everybodys All American's picture

I would simplify it by saying if I were president I would have you all arrested for the constant debasing of our currency.

Fri, 03/30/2012 - 12:02 | 2303693 machineh
machineh's picture

... and sentenced to rustication: scooping out midwestern hog wallows with your bare hands, while the local militia prods your ass with pitchforks and shotguns.

Microeconomics up close and personal, bITcheZ!

Fri, 03/30/2012 - 11:46 | 2303649 vmromk
vmromk's picture

FUCK the FED and more importantly FUCK Bernanke.

Fri, 03/30/2012 - 12:40 | 2303801 fightthepower
fightthepower's picture

Fuck you Ben Bernanke!

Fri, 03/30/2012 - 11:47 | 2303650 john39
john39's picture

the only problem i have with a gold standard is the fact that the parasites have used decades of money printing to control real assets, including gold.  So, until they are removed from the equation, a gold standard will only perpetuate their reign of greed and inequity. 

Fri, 03/30/2012 - 12:34 | 2303786 JOYFUL
JOYFUL's picture


The Coinage Act of 1873 ended the free coinage of silver, which ended the silver standard in the USA.  This in itself was a result of Bismarcks' decision to move the newly united Germany to a gold standard, resulting in severe depression on both sides of the Atlantic, and setting up a pattern of economic dislocations that culminated in the 1st World War....

ironic then, Grant's well chosen quote -

The classical gold standard, 1879-1914, “with all its anomalies and exceptions . . . ‘worked.’"

....such as to say,

"until it didn't."

For most of the C19th America was on a bimetallic system, and prospered greatly for being so. Gold standard systems suffer the inherent defect of being suseptible to manipulation, and the free availability of coinage in both gold and silver is a monopolists' worst nightmare, as was proven in the case of the Venetian progenitors of our current day financial bullies.

Beware the prophets of gold! Their voices are sweet , but their fruits are bitter...The “dollar” as used in the Constitution means the weight of silver in the Spanish milled dollar. Without amendment of the Constitution, any other definition of the dollar is unconstitutional. []


Fri, 03/30/2012 - 22:49 | 2304914 pvzh
pvzh's picture

Dislocations in gold standard were not consequence of the gold standard in itself, but were a result of fractional reserve banking. Expansions and contractions (sharp) of private- and central-bank credit based on fractional reserve practices brought these collapses. Fraud is the problem not gold. Gold at least provided means to circumvent the fraud: "take the ball home and refuse to play". Unfortunately, people in general are not very vigilant and do prefer "easy" money / credit, so it is relatively easy to sell them, first, bi-metallic standard at fixed (favourable for silver) rates then "elastic"-"managed" gold standard, then non-redeemable "gold standard", and finally no gold standard. Each time iteration does not work blame lack of "elasticity" / "liquidity" and promise everybody more money.

Besides, going to silver standard will cause far more dislocation than going to gold standard because currently there are far less monetary silver right now then gold.

Sat, 03/31/2012 - 10:06 | 2306160 JOYFUL
JOYFUL's picture

Please re-read my comment. By doing so, you will discover that:

a)I said that "Bismarks' decision to move the newly united Germany to a gold standard... set up a pattern of economic dislocations that culminated in the 1st World War".....not "Dislocations in gold standard" whatever that may mean. Economic dislocations, not gold standard disclocations.

b)the entire essence of my comment was in support of "bimetallism" - not "going to silver standard"...which happens to be supportive of free price discovery in abeyance of the 'fraud' which you claim to be of primary importance.

Only when you address the matters I actually commented upon will it be safe to assume that you were actually responding to my comment and not simply talking to yourself.

Sat, 03/31/2012 - 15:41 | 2306695 pvzh
pvzh's picture

First, gold standard does not "create" dislocations. Gold is merely an accounting tool. It reveals mal-investment that accumulated in economy for whatever reasons. You and many others blame the messenger. That was my point. So, Bismark and gold standard has very little to do with economic dislocations. They were blamed for them, but they are not the cause.

Second, bimetallism is the problem, especially, in the variety that existed in the 19th century (fixed exchange ratio), because there cannot be a fixed exchange ratio between 2 essentially different things. If you impose one, you will create distortions that eventually manifest itself in dislocations sooner or later. This is an intrinsic problem of bimetallism. If you adopt floating exchange rate between gold and silver, then you need to chose what metal will act as the accounting tool for the legal and government purposes (collecting taxes and paying fines). Even if government does not outlaw private parties from exchanging, lending, and paying in something else the designated metal will be at a premium justified by higher utility in payment. Thus, there can be either silver or gold standard. Bimetallism post-revolutionary war was a cumbersome political compromise. There are no point to resurrect it.

Sun, 04/01/2012 - 02:58 | 2307220 JOYFUL
JOYFUL's picture

Thank you for your thought-provoking response. Clearly we are far apart in our understanding of the events consequent to Bismarcks' action.*

The trick in any kind of discussion in the comments section is to keep things pithy: you’ll agree, I would hope, that few things are worse than trying to read an interminable article length posting. 

With that in mind, I’ve decided to collapse my response to your previous into a few paragraphs that most accurately describe the effects of withdrawing silver from circulation as money, and it’s replacement solely with a gold standard.Which of course is what England and the USA did in the C19th, to be followed by Germany as previously discussed. You argue that these moves were neutral of economic consequence, yet a large body of testimony from witnesses of the time would indicate otherwise. I’ve chosen just one to get across the flavour of the matter.


An Englishman, Samuel Smith, M. P., presented the case of the effect of declining asset value as consequence of gold being substituted for silver:

"trade is largely carried on by borrowed capital, or, in other words, by the use of credit in some shape or other; the vast banking deposits are mainly loaned to traders; a very great deal of the invested capital of this country is lent upon mortgages upon trading property such as ships, factories, and warehouses ….the constant decline in prices within the last few years has virtually swept away his [the trader’s] own portion of the capital, and only left him enough to pay the loans and mortgages….. I have no doubt that this exactly describes the condition that confronts numbers of traders in this country and other countries having the gold standard. A great portion of the commercial capital of the country has passed into the hands of the mortgagees and bondholders who have neither toiled or spun. The discouragement this state of things produces is intense. After it has gone on for several years, a kind of hopelessness oppresses the commercial community, all enterprise comes to a standstill, many works are closed, labor is thrown out of employment, and great distress is felt, both among laborers and the humbler middle class.”

Would you not agree that this quote would go far to accurately describing the present situation in which the USA finds itself? Credit contraction to small businesses, asset deflation, consumer price inflation, etc....of course you will state that we do not run on a gold standard so what is the point??!? Well, the point is that we are running now on an oil as money system(petrodollar) that for some 40 years now has masked the direct effect of making USD paper the sole arbitrator of trade balance fluctuations...the final stage in a gradual process of erosion of real price discovery started in that period of the C19th when silver was being shunted out of the money system. Concurrently that period saw the rise of the huge monopolistic cartels: in the same states at the same time! USA, England, Germany, with their corporate behemoths like Krupp, Standard Oil, Jardine Matheson took greater and greater swaths of trade and production at the expense of smaller companies forced out of business by predatory practice and governmental connivance. Arguments that this is merely coincidence rely upon the poorly documented nature of the evidence of the connection. 

But evidence there is...enough for me to argue that the long term consequences of the monometallist movement were kartel sponsored wars that continue right to this moment....BUT, this post having reached the limited of acceptable length, I will stop here and hope that the thread has not gone totally stale.  If it has, perhaps we will be able to continue on in another. I'll be out for most of the day but will try to check in at mid morning Amerika time.

*On one thing we are already in agreement though...a gold standard cannot cause is the action of humans, in the political realm which is the cause of economic dislocation (other than those attributable to acts of nature of course), in the same way that guns do not kill people, people use guns to kill other people! The gold standard itself is neutral, till used as a tool of hegemonic powers to unbalance the natural flow of trade. which, when left undisturbed, counters the great concentration of wealth and power in the hands of those who deserve neither.  Stay tuned.

Wed, 04/11/2012 - 13:59 | 2335129 pvzh
pvzh's picture

You are confusing the situation. Withdraw of silver from circulation was "wrong" thing to do, but keeping it in circulation at fixed exchange rate was not good thing either. To demonstrate more clearly what I am trying to say to you. Let us reverse the situation: we demonetize gold instead of silver -- the effects will be the same if not worse... Is now "silver standard" responsible?

The point is money supply must be stable. The best way to achieve it is to decide on what is "standard" (gold, silver, platinum, copper, whatever) and keep it, and outlaw fractional reserve banking because it is in essence fraud on par with counterfeiting.

Surely, it will not prevent depressions altogether because the source of them is accumulation of stupid and irresponsible actions of people (like borrowing and using all forms of credit "extensively"). However, hard money abates these depressions, makes pain distributed more fairly (no bailouts), and gives people means to be prepared for them (saving in hard money is beneficial, it gives you opportunity for investments during depression, and the investment / spending of these savings of hard money during depression is what abates the depressions).

Fri, 03/30/2012 - 21:27 | 2305449 mr. mirbach
mr. mirbach's picture

I just finished watching Bill Still's "Secrets of Oz" and I rate it as a MUST SEE.  It covers a great deal of historical facts regarding the never ending quest of the banking cabal to control the money supply.  Banksters are foisting the same shit now that they have been foisting for millenia.

Fri, 04/06/2012 - 01:28 | 2321360 Nukular Freedum
Nukular Freedum's picture

problem with bimetalism is that constant price fluctuations serve to drive one or other commodity out of circulation since one metal will always be undervalued relative to the other.
Also there is the "small change" problem. For these reasons we are likely stuck with fiat in some form.

I do not believe that the classical gold standard pegging currencies at a fixed rate to gold is commensurate with Libertarian values since the fixed rate is determined by govt fiat. If gold and oil is fully tradable in currency this should be sufficient, in theory to keep the currency honest.
 But the real secret, as hinted in Jims brilliant article, is to let the money markets determine the money rates, not a central planning agency like a Central Bank, this prevents the jiggery pokery everyone complains about viz the Fed. "What is commensurate with free-markets" is the question. Free- banking anyone?

Fri, 03/30/2012 - 11:49 | 2303653 spentCartridge
spentCartridge's picture

That's the cat out of the bag then?

Fri, 03/30/2012 - 11:50 | 2303658 Jason T
Jason T's picture

Vote Ron Paul and Grant's our man at the Fed.  

Fri, 03/30/2012 - 11:50 | 2303659 espirit
espirit's picture

I am all for a real standard, pm backed fiatsco, or just plain "golden rule".

But I often think about the possibility of an angry hoard of 95 percenters without pm's. 

Fri, 03/30/2012 - 14:50 | 2304395 Seer
Seer's picture

"But I often think about the possibility of an angry hoard of 95 percenters without pm's. "

Any different than these "95 percenters" without fiat?

Fri, 03/30/2012 - 11:51 | 2303661 The Big Ching-aso
The Big Ching-aso's picture



Nowadays, a gold standard will take a lot of mettle.

Fri, 03/30/2012 - 12:06 | 2303700 machineh
machineh's picture

Then 'petal to the mettle,' hey? 

Fri, 03/30/2012 - 12:37 | 2303791 The Big Ching-aso
The Big Ching-aso's picture



More like peddle to the mettle.

Fri, 03/30/2012 - 13:24 | 2303995 AcidRastaHead
AcidRastaHead's picture

Sorry got here late, who's peddling mettle because I'd like to buy some.

Fri, 03/30/2012 - 14:53 | 2304401 Seer
Seer's picture

Or, for those with older bicycles: pedal the metal...

Fri, 03/30/2012 - 13:26 | 2303930 hamurobby
hamurobby's picture

I'll bite,

What it will take is a realistic price to back up the paper, liabilites, etc, that has already printed and promised. At that, gold would be way north of 100K an ounce. And according to Fofoa, probably end up near 250k. at that price, there will be enough gold.

Fri, 03/30/2012 - 11:54 | 2303672 spekulatn
spekulatn's picture

The best read all week. Well done, Mr. Grant.


From yesterday,

Fri, 03/30/2012 - 11:55 | 2303673 genaknosc
genaknosc's picture

So many words. Somebody please summarize.

Fri, 03/30/2012 - 12:00 | 2303690 slyhill
slyhill's picture

Grab your big mac, dancing with the stars is on.

Fri, 03/30/2012 - 12:02 | 2303694 AlaricBalth
AlaricBalth's picture




Federal Reserve - Bad

Gold Standard - Good

Fri, 03/30/2012 - 13:45 | 2304127 Boxed Merlot
Boxed Merlot's picture

As said above..."the Federal Reserve note is...a derivative that secures its value from the wisdom of Congress and the foresight and judgment of the monetary scholars at the Federal Reserve."


What could possibly go wrong?

Fri, 03/30/2012 - 18:18 | 2305091 Amagnonx
Amagnonx's picture

Its all about that thing that separates men from apes called thinking, but you needn't trouble yourself with such things - here's a banana ..

Fri, 03/30/2012 - 11:57 | 2303682 CvlDobd
CvlDobd's picture


Best read in a long time.

Fri, 03/30/2012 - 11:58 | 2303683 Crash N. Burn
Crash N. Burn's picture

"one might say it is a derivative that secures its value from the wisdom of Congress and the foresight and judgment of the monetary scholars at the Federal Reserve"

-ve value?

Fri, 03/30/2012 - 12:00 | 2303689 AlaricBalth
AlaricBalth's picture

But "Bayesian Analysis of Stochastic Volatility Models with Levy Jumps: Application to Risk Analysis" was such a good page turner. I especially liked the chapter on Bayesian inference for stable distributions. Could not put it down. 


Fri, 03/30/2012 - 14:26 | 2304293 gaoptimize
gaoptimize's picture

But there was something fishy about his modeling with Poisson jumps.

Fri, 03/30/2012 - 12:01 | 2303691 Silveramada
Silveramada's picture

Mark Faber(the economist) said that on a gold standard, due to the printing galore already in place, gold should be many 1000's /oz.

if you consider Elliot's wave extension of fifth wave extension on the gold/silver secular bull market, you have gold at 30,000$/oz by 2015/2016, the formula is driven by the Fibonacci sequence...

good deal at 1650$/oz and 32$/oz , no?

Fri, 03/30/2012 - 12:12 | 2303717 mayhem_korner
mayhem_korner's picture



You left out the CB manipulation part.  Really drags out that Fibonacci thing...

Fri, 03/30/2012 - 12:24 | 2303755 Silveramada
Silveramada's picture

sure is manipulated, silver twice as manipulated, and exchanged in paper multiples of 150/1 oz available, at least. The wave is just a math. guess, but the idea is the parabolic, vertical move to come in PM's prices once the average Joe and people start understanding that currencies are worth 0... then is going to be fun

Fri, 03/30/2012 - 12:53 | 2303841 trembo slice
trembo slice's picture

The people probably won't figure it out until the USD is dropped as the world's reserve currency.  Which will mean an end to the petrodollar system and an end to the international demand for the dollar.  The day of reckoning is only hastened with our reckless policies, and our lust for war.  Just the other day the WSJ published the article about 61% of US debt being bought by the Fed...

People without PMs are gonna get fucked.

Fri, 03/30/2012 - 12:59 | 2303871 Silveramada
Silveramada's picture

yep, we agree on this 100% without any keyboard abuse...

Fri, 03/30/2012 - 13:02 | 2303887 trembo slice
trembo slice's picture

haha, definitely.  I was just a little grouchy this morning.  A bit of a headache, you know, nothing personal!

Fri, 03/30/2012 - 13:19 | 2303958 Silveramada
Silveramada's picture

same here, we are all together in this mess and trap that the FED, central banks, the elite, the zionist power, have prepared for us. The oligarchy control most countries, is really gonna be hard, once the dollar implodes and our standard of living is gone...

Fri, 03/30/2012 - 16:00 | 2304646 Seer
Seer's picture

"vertical move to come in PM's prices once the average Joe and people start understanding that currencies are worth 0"

The "average Joe" doesn't really have any currencies anyway...  We're really talking about the "non-average Joes," no?  the ones who have milked this currency thing way past its expiration date and will now look to suck on something else...

As has been stated before, we'll be climbing out of one bed and hoping in another with these same bastards... (if you don't think that they've got their own "vaults" then you're clearly thinking that you're smarter than your masters [of course, this begs the question: WTF do you have masters if you're (now) so fucking smart?)]).

Fri, 03/30/2012 - 12:12 | 2303718 JustObserving
JustObserving's picture

Silver should be 1/15 th the price of gold since silver is 15 times more common than gold in the earth's crust.  Besides, most of the silver mined in human history has been used in applications.  About three quarters of the silver mined this year will be used up in industrial applications.  So silver should be about 1/10 the the price of gold, if not more.

As Sprott points out, silver is the most manipulated of commodities.


Fri, 03/30/2012 - 12:27 | 2303763 Silveramada
Silveramada's picture

Mike Maloney point is the same: silver to overshoot to 10:1, considering that 16:1 was reached also in 1980... soon baby

Fri, 03/30/2012 - 13:28 | 2304021 MarcusLCrassus
MarcusLCrassus's picture

Something to point out, though is that historical gold/silver ratio went out the window when the Americas were found.  There was so much silver found by the Conquistadores and those that came after them that that old historical ratio is not really valid anymore.   

Fri, 03/30/2012 - 16:09 | 2304675 Seer
Seer's picture

"most of the silver mined in human history has been used in applications"

So, atom #47 can be destroyed?

I think that you're saying that it has become too dipersed for "recovery." (lots of "used" stuff has been "reclaimed" - but, might be kind of hard to differentiate, muddied pool...)

Sat, 03/31/2012 - 00:01 | 2305686 oldman
oldman's picture


And you want a free market?

"Should be, shouldn't be'

What's wrong with owning both and not having a fucking position on 'this or that'

I know it is not your fault---we were all conditioned to take sides

nothing personal, Just          i'm the same                om

Fri, 03/30/2012 - 12:22 | 2303748 Badabing
Badabing's picture

The “paper /physical  ratio” is the hidden true price of gold /silver!

If a bank can buy one oz of physical and use it like it was 100 ozs the worth is 100x.

Some day this shit will stop!

Fri, 03/30/2012 - 18:27 | 2305107 Amagnonx
Amagnonx's picture

While I don't dispute your conclusions - expecting Elliot waves and Fibonacci whatsists to provide useful long term predictions, is like dipping crickets in ink and expecting them to write the enclycopedia Brittanica.


The market moves to fundamental forces, that are interpreted by human beings - who are a unpredictable and fickle lot.

Sat, 03/31/2012 - 02:16 | 2305859 oldman
oldman's picture



Not any more, my friend.

There is no market

Just a single machine

with memory of markets

but without people

people WERE always the market

now the people are out                         thanks        om

Fri, 03/30/2012 - 12:04 | 2303697 l1b3rty
l1b3rty's picture

ditch the gold standard and buy silver!

We want competing currencies and a freeeee market wwooohooo

Fri, 03/30/2012 - 12:09 | 2303703 LouisDega
LouisDega's picture

Try Jim Cramers pounding the table technic next time

Fri, 03/30/2012 - 13:35 | 2303966 AcidRastaHead
AcidRastaHead's picture

Yup, Grant should do a line, get some graphics, sound effects and a catchphrase or two.  Quoting books from the turn of the 20th century just doesn't rally the troops like it used to .... in the 20th century.

Fri, 03/30/2012 - 12:07 | 2303704 Bansters-in-my-...
Bansters-in-my- feces's picture

Do the Rothschilds think gold is money...?

Fri, 03/30/2012 - 12:08 | 2303706 GeneMarchbanks
GeneMarchbanks's picture

The semantics of the word 'deflation' are not at issue. Grant is self-censoring for the sake of making this seem like an academic debate of opposing theories when the issue is obviously a moral one.

The racket of the S&L crisis came back almost thirty years later except this time they covered most of their bases and lubricated the right people so as to finally create an illusion of 'systematic crisis'.

Fri, 03/30/2012 - 12:10 | 2303714 tony bonn
tony bonn's picture

deliciously erudite, exquisitely divine.

eh garcon, pusissons-nous avoir une autre serviette, s'il vous plait?

god bless jim grant!!!!!

Fri, 03/30/2012 - 12:23 | 2303719 Paul Atreides
Paul Atreides's picture

Hold gold and retire before you're old!

P.S. That was an excellent read, thanks for posting Tyler and thanks for writing Mr. Grant!

Fri, 03/30/2012 - 12:13 | 2303721 asteroids
asteroids's picture

I love Jim. I may differ with his opinions. But, he writes beautifully.

Fri, 03/30/2012 - 13:25 | 2304001 JW n FL
JW n FL's picture


and how do you diaagree with Jim?

what is your back ground or expertise in?

Do you have some Sourced and Sited Numerical Facts that you would like to share??

or will we be suffering your feelings?

Please, you have the floor! We ALL! just cant wait!

Fri, 03/30/2012 - 12:13 | 2303723 JW n FL
JW n FL's picture

Jim is Fighting the FED!

Which is RUN, Managed, Directed and Controlled by ZIONISTS!


The difference between Zionists and Jews (not that you haven’t seen this video 100 times posted by me for you to provide yourself some distance from your Zionist Tendencies, Dave)


Maybe you need to Understand (as well) how someone, anyone can JUMP! To the conclusion that Zionists play a part of Americas WOES! When Zionists clearly maintain the Majority of Management Positions on Wall Street! Just like the Zionists Maintained the Majority or Management Positions during the ENTIERTY of the Slave Trade?


Maybe the First and Second Largest Lobbies in America (going back a couple if NOT! a few decades) are Majority Controlled by ZIONISTS as well bears no scrutiny? Given what the end result of that control has meant for America?


No! I am just a Nazi.. and it really is ALL MY FAULT!


Never mind those Zionists behind the curtain!


Keep trying Dave!






Fri, 03/30/2012 - 13:30 | 2304034 Chupacabra-322
Chupacabra-322's picture

Political Zionism:

The social movement which creates and sustains the physical nation of Isreal.  The driver for World Government through Isreal in the tradition of the Heretical Frankist Jews. 

This definition is embodied by The Rothschild family.

Not all Jews are political Zionists.  Not all political Zionists are Jews.

The political Zionist movement feeds off Jews in the sameway the the Nazi movement feed off the Germans.

Political Zionism is the greatest enemy of the Jews.

Fri, 03/30/2012 - 12:17 | 2303734 Tense INDIAN
Tense INDIAN's picture

a gold standard is the best option......really....what about the tremendous money supply contraction that would result .....that would be a bigger problem than a little money printing and rollver of debts........but the real question is who will still be in control of central  banks even after a gold standard.......the same Illuminati gangster.......nice way of using the alternate media ...and duping the supposedly awakened people

Fri, 03/30/2012 - 12:22 | 2303749 SheepDog-One
SheepDog-One's picture

Right, we could have a gold standard, but we sure wont have $1.5 quadrillion in currency floating around anymore. I dont know how many people will really like the result of the avg yearly salary being way less than it is now, and a DOW of 2,000 or so. Getting rid of the central bankers is a fine idea and all, but the reality afterwards will probably mean people way more pissed off than they are even now. Bottom line most people love being slaves, and like complaining about it.

Fri, 03/30/2012 - 12:44 | 2303815 Badabing
Badabing's picture


Why don’t we use gold for savings and as barometer for governments printing of fiat.

The paper notes will be used as a medium of exchange but gold will be the reference point.

Naturally for this to work gold can not be manipulated, how can that happen?

Is it a pipe dream or will this system have to crash and burn?  

The FOFOA dilemma

Fri, 03/30/2012 - 12:51 | 2303838 SheepDog-One
SheepDog-One's picture

I think before it changes, yes it will have to crash and burn.

Fri, 03/30/2012 - 13:26 | 2303994 hamurobby
hamurobby's picture

Wait, thats the wrong way to go. If gold (and silver) were acordingly priced to back the currency and promises made, there would be no problem. There might be a big scramble to secure ones pm but nothing else would have to change except there would suddenly be accountability and more handouts would be very limited. If we repriced everything back to the pm exchange rate now, that would be a real problem!

Sat, 03/31/2012 - 18:48 | 2306909 Prometheus418
Prometheus418's picture

IMO, that's the way it should be used. 

I don't know that I really want a gold standard regulated by the US government- that feels like just another way for them to rape us and leave us in ditches for dead.  What I'd rather see, personally, is a wide-spread localization movement that uses whatever any given community supports as transactional day-to-day currency, with silver for larger trades between towns and districts, and gold as the means of trade between nations and states.  Not because a law was passed, but simply because enough people finally gain the sense to just say no to government controlled and manipulated currency.

An excellent way for this to get started and working would be for every state in the US to remove all taxes (including capital gains) from gold, silver and platinum.  For the time being, myself and others in my area are using the idiotic "head shop" model for PM trades.  I don't know if it is fully legal or not, but in private trades, we are using the concept of like-kind commodity exchange by pricing in ounces and not referencing dollars.  (I call this the head shop model because the place where I buy tobacco sells bhongs as well, and I've seen them enforce the use of the term "water pipes" with thier customers to stay in the little gray area that is on the right side of the law.)  To make it technically "work" (Though I guess I'll find out one day if I ever end up in court over it) I turn down PM transactions if dollar price is mentioned.  

My theory is that if dollars are mentioned, it breaks the like-kind exchange argument, in that a prosecutor can claim that even though no paper bills were involved, the use of the placeholder "dollar" when setting the price is a de facto currency conversion at the point of sale, and subjects the transaction to both sales and capital gains taxes because it is no longer a like-kind commodity exchange.  

In reality, it is only language that is chaining us to this system- as long as you use the term dollar, you are subjecting yourself to the rule of the Federal government and affirming their right to tax you.  They have no way of taxing or regulating trades that bypass that system that I am aware of, so don't use the term or their paper cash, and you can stay outside of the system.  

There is a precedent for this in my area, that has been occuring for years and years without a problem- no one wants to pay taxes on a car a dozen times, so most older vehicles that are sold privately end up with "trade" written in under the "amount" line on the title transfer so that there are no additional taxes assigned beyond the set fee.  No one that I am aware of has ever been fined or prosecuted for this, and it happens a lot.  The DOT hates it, but they can't do a thing about it. 

Now, with all that being said- if we end up with a "gold standard," you can expect to be taxed on transactions denominated in ounces as well.  Better to keep government out of the loop, and change minds privately.  If I understand it correctly, this is how Freegold is really intended to work- with like-kind commodity exchange of oz for goods, and a veneer of low nominal paper price laid over it for reporting purposes.  In my reading of it, FOA describes this in terms of oil, where the nominal price of the barrel is $8 (IIRC) but the paper currency is accompanied by a "gift" of gold that has a nominal value of $10,000/oz.  Don't know where he came up with the numbers, but the concept makes sense to me.  Traders and government agree that the "price" of the oil is $8, which lowers the taxes for the trader- and makes the government look good because they are percieved as keeping inflation in check.

Fri, 03/30/2012 - 18:23 | 2305102 Seer
Seer's picture

That people are going to be a LOT more "pissed off" is NOT in/the question.  A transformation WILL happen.  The Question is: what are we to be afterward? will we have learned anything? will we stop lying to ourselves?

Fri, 03/30/2012 - 12:58 | 2303867 LawsofPhysics
LawsofPhysics's picture

FYI- gold as a store of value and fiat as a medium of exchange is already happening all around the world.  In fact many commodities (such as oil) also serve as a good store of value.  The point being, when the fiat dies and another takes it place, will you lose all your purchasing power or will you have something to offer in exchange for the "fiat du jour?"

Fri, 03/30/2012 - 12:19 | 2303739 SheepDog-One
SheepDog-One's picture

Great end the FED, lets get started on that.

Fri, 03/30/2012 - 12:23 | 2303750 Flakmeister
Flakmeister's picture

A gold standard is sort of like democracy...

A bad idea that only happens to be better than the preponderance of competing ideas.

However, if you impose a gold standard and see the US economy absolutely collapse...I may have missed it but it bears pointing out that the putative gold holdings of this country are good for about 18 months of oil imports...

I do not claim to know how to implement it, but the only rational standard is one based on energy....


Fri, 03/30/2012 - 12:45 | 2303817 GeneMarchbanks
GeneMarchbanks's picture

'I do not claim to know how to implement it, but the only rational standard is one based on energy....'

If you're the military or a transportation company then yes. If you're a citizen of modest means and less dependence on energy fluctuation then not really.

You already have a system based on energy. Supply is the issue not demand, the US has nothing but roads so demand has been settled for the near future. It's called Inelasticity of Demand meaning you demand constantly. Here's your(US) largest problem and it's not an intellectual one: the (brown) people that you depend on for energy care not for the petro$ as a viable long term contract of exchange. Fix that and you'll be fine.


Fri, 03/30/2012 - 13:13 | 2303893 Flakmeister
Flakmeister's picture

You are no nearer to a solution....

And the current system  is not based on energy... Given that you can create petro-dollars at seeming will and exchange them at gunpoint for oil, where is the self-regulation that a sound monetary system must have?

Current international movement of oil corresponds to roughly 5 billion a day or ~1.8 trillion a year (IIRC, not that far out of line with the current value of all existing gold in vaults...)  Me thinks that therein lies a clue... I do not have charts handy, but one reason the oil-Au ratio has held is that the growth in supply has roughly tracked over the years...

Why couldn't an average person be paid in BTU-bux so some such? It would certainly change the perception and creation of value, something our species could use (unless you think expanding mindless consumerism is good plan)

As far as demand goes, well, the idea is that if you demand energy you had better create something with that energy to enable yourself to pay for your continuing demand... 

Fri, 03/30/2012 - 13:37 | 2304083 GeneMarchbanks
GeneMarchbanks's picture

'Given that you can create petro-dollars at seeming will and exchange them at gunpoint for oil, where is the self-regulation that a sound monetary system must have?'

You describe the state of affairs, at least in this arena, correctly no doubt. I sympathize, I really do. Here:

'Why couldn't an average person be paid in BTU-bux so some such?'

is where you start seeming like some kind of 'let's-build-society according-to-science' Comte follower. BTU-bux? That is beyond being just plain idealistic. 'Money' is social phenomena, not a 'natural' one, like energy. Instituting a social contract based on energy is not only impractical but entirely naive. You're replacing a faith based monetary system with what exactly? Some intellectual interpretation of the dynamics of petrochemicals and their usage?

Fri, 03/30/2012 - 14:10 | 2304219 Flakmeister
Flakmeister's picture

I can very easily argue that all choices for a monetary basis have serious issues...

My rationale for energy as the basis is that all economic activity relies on the ability to transform surplus energy into an exchangeable good. It only stands to reason that the foundation of an economic system should be the very thing that it is based on... Everything else is a derivative or fiat...

Like I said, I have no idea how to implement such a system and I am sure as hell not so naive as to believe that this discussion is anything but moot... 

By the way any commodity based medium of exchange is ultimatel energy based as energy is needed to produce/extract more of said commodity... One could choose something like gold for its convienient properties and fix the "energy exchange rate"....

As you say money is a "social phenomena" and we likely further agree that exploitation of a monetary system for the gain of a few is a "social phenomena"....

Looks like a Catch-22 to me....

Fri, 03/30/2012 - 13:00 | 2303877 LawsofPhysics
LawsofPhysics's picture

So we would have to become energy independent.  Are you saying this is a bad thing or a good thing.  We still have lots of resources to sell as well.  Hey China, wnat more soybeans?  I will accept gold and silver OR fiat that I can exchange for gold and silver.

Fri, 03/30/2012 - 15:58 | 2303922 Flakmeister
Flakmeister's picture

Not at all.... re: independence... But I think that the vast majority of posters here have no idea what that would entiail in the short run or the long run....

For example to make my point, all I have to do is point to the abuse and scorn that the Volt recieves here.... In an energy independent US, the asshats would line up to trade their left nut for a Volt....

I would venture that most here that criticize the currrent situation, if given a good evenhanded overview of the what things would be like in an energy independent US, would say, damn it, print the petro-dollars and keep me plugged into the Matrix....

Edit: Energy independence in of itself is neither a good thing or a bad thing... imagine importing energy and using it in high value added manufacturing/production....On the otherhand, importing energy for the equivalent of a joyride down Ventura Blvd. is hardly a sustainable practice...

Sat, 03/31/2012 - 17:49 | 2306853 Ghordius
Ghordius's picture

I'm also appalled by the scorn against the Volt - and I still find strange that half of the long-range trucks in the US are not on NatGas already...

Fri, 03/30/2012 - 12:23 | 2303752 Yardfarmer
Yardfarmer's picture

Mr. Grant is much in agreement with Martin Armstrong who reiterated his belief in a recent interview with Ron Hera that the Federal Reserve was originally a benign agency akin to the FDIC whose only intentions were to act as an "insurance mechanism" and was not the nightmarish and conspiratorial ogre gorging itself on the debt enslavement of the American people.

 "The politicians have completely distorted what the Federal Reserve was supposed to be.  In order to issue all the debt for the wars, the politicians instructed the Federal Reserve not to buy corporate paper but to buy federal paper.  Throughout World War II they also instructed that the Federal Reserve maintain the par value of those bonds...Central banks can step up and add cash to the system when necessary, taking in the longer term assets.  That was basically the original idea of the Federal Reserve."


Armstrong places the blame for the fiscal and monetary crisis squarely on the shoulders of the politicians in Congress whom he says have spent us into oblivion with "$60 trillion in unfunded liabilities" in addition to driving american corporations off shore with punitive and regressive taxation.


I suppose then that the "Creature from Jekyll Island" therefore is a mere hobgoblin of G. Edward Griffin's feverish imagination, and Colonel Edward House and the private banking cartles of the Warburgs and Rothschilds somehow just happened to gain control of the US Treasury.


Mr. Armsrong however is adamant in his assertion that a return to the gold standard is counter productive and that in fact he agrees with Bernanke that the gold standard was in part responsible for the massive economic dislocations we are now experiencing. 



Fri, 03/30/2012 - 14:05 | 2304225 WaterWings
WaterWings's picture

I don't blame Armstrong for smoking some hopium in these trying times.

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