Thursday, November 24, 2011

Roubini : Supporters of a Gold Standard Are Lunatics and Hacks

"we are never going to go back to the Gold Standard " "this idea of a a gold standard is pushed every other day by these gold bugs is not even a theory it's a theology " says Economics Professor Roubini who sees the gold standard as dangerous. In fact, he said, the gold standard was a major reason for the Great Depression. "One of the major causes of the Great Depression was the existence of the gold standard and the return to the gold standard after World War I - that they restrained the ability of central banks to provide lender of last resort support to their banks created tight money, it created bank runs, and lead eventually to the Great Depression,"


Maytons said...

What a hoot! The gold standard has worked perfectly (and honestly) for thousands of years. It was central banking itself, such as the private Federal Reserve, that created the fallacy presented here. Fiat currency can never be honest as commodity currency cannot be dishonest.

celebrateoften said...

I totally agree with Maytons. Just study the history, you know.

asdfjkl said...

What you guys don't get is that because of population increase, we can no longer go back to the gold standard. In America, for example, there is about (depending on who's counting what) $8.5 trillion in circulation. In order to back that with gold, you need (duh) $8.5 trillion in gold.

Where are you guys going to get $8.5 trillion in gold? We could rip off every single wedding band and piece of gold bullion on the planet and not even come close. That amount of gold does not exist and you know it.

Also, "for thousands of years" mankind lived under the gold standard were also some of the most tumultuous and difficult times to live in. Medieval Europe had a gold standard, but also constant wars, very low life expectancy, disease, poverty beyond what we experience today, etc. Who would turn the clock back? Who would repeat history? (Probably the very people who don't learn from it.)

The few good times humanity had under the gold standard were in SPITE of it, not because of it. Period.

Anonymous said...

"To all Goldbugs: Fiat money is not the problem – the private issue of fiat money is the problem, which is like a private tax on all society."
Stephen Zarlenga, Director, The American Monetary Institute

Was it ever Feasible to Use Gold for Money?
Aside from going counter to the true nature of money as an abstract legal power, there is a very practical matter that supporters of Gold money can’t address: There is never enough supply of gold sufficient for such a moneysystem. The Gold supply has not kept pace with the growth of population and commerce. This periodically increased the real value of gold.
Money systems usually solved this problem by cheating – pretending to be operating a gold based system but really mixing private bank paper into the money supply, pretending it was convertible; leveraging the amount of gold in the system through fractional reserves of one type or another. Because this bestowed great power and unearned wealth onto bankers, there has never been a shortage of apologists for such mixed systems - we call them “economists!”

Stephen Zarlenga, Director, The American Monetary Institute

"Gold is not vital to human existence; it has, in fact, relatively few practical uses. Yet its chief virtues—its unusual density and malleability along with its imperishable shine—have made it one of the world's most coveted commodities, a transcendent symbol of beauty, wealth, and immortality. From pharaohs (who insisted on being buried in what they called the "flesh of the gods") to the forty-niners (whose mad rush for the mother lode built the American West) to the financiers (who, following Sir Isaac Newton's advice, made it the bedrock of the global economy): Nearly every society through the ages has invested gold with an almost mythological power.
Humankind's feverish attachment to gold shouldn't have survived the modern world. Few cultures still believe that gold can give eternal life, and every country in the world—the United States was last, in 1971—has done away with the gold standard, which John Maynard Keynes famously derided as "a barbarous relic."

From National Geographic

“It is absurd to say that our country can issue $30 million in bonds and not $30 million in currency. Both are promises to pay, but one fattens the usurers and the other helps the people. If the currency issued by the Government was no good, then the bonds would be no good either. It is a terrible situation when the Government, to increase the national wealth, must go into debt and submit to ruinous interest charges at the hands of men who control the fictitious value of gold.
Thomas Edison

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