Information Clearing House started off a recent issue with quote from Kenneth
Gerbino, referred to as "former chairman of the American Economic Council", who
notes, "Historically, the United States has been a hard-money country. Only
[since 1913] has the United States operated on a fiat money system. During this
period, paper money has depreciated over 87%."
In contrast, when the dollar was gold and gold was the dollar, "During the
preceding 140-year period, the hard currency of the United States had actually
maintained its value. Wholesale prices in 1913 were the same as in 1787."
I thought that this would have ended the discussion, and thus our work was done
and we could call it a day, go out for pizza and
beer and maybe hit a few strip clubs, but suddenly at Bloomberg.com I read,
"Gold Standard Is Wrong Salve for Global Ills".
I agree with this only because there IS no soothing salve for the globe's
economic ills with which to effect a cure, which means that there is no
economic "solution" to over-indebtedness and governmental stupidity that does
not involve incredible pain, herein defined as incredible inflation in the
necessities of life and the incredible deflation of everything that is not.
I am pretty smug about this because I already know that every other government
in the Whole Freaking History Of The World (WFHOTW) wanted to spend more money
than it could take in through taxes and plunder, and the ones that tried to use
a fake, fatuous, foolhardy fiat currency made only of paper and promises ended
up destroying themselves and ruining their people by creating so much money and
credit, which is why the Founding Fathers, who knew this first-hand, wrote into
the constitution that the dollar shall only be of silver and gold, which is the
only thing that can prevent the government from destroying the US by the
over-creation of money and credit!
And now the Fed and the Treasury are doing that very thing right now, creating
money at rates that are completely unprecedented in American history and,
probably, the history of the world!
Tragically, all of this money supply inflation will, as it must, result in
consumer price inflation, which is the bane of all economies, although you
would not know it from the deplorable Fredric Mishkin, whom the Bloomberg
article refers to as "an economics professor at Columbia University's Graduate
School of Business and a former Federal Reserve governor."
He says that with the price of gold futures fluctuating from US$253 to $1,034
an ounce during the past nine years, this automatically means that pegging
currencies to bullion "would probably not produce the price stability that the
advocates of the gold standard seek." Hahahaha!
The dollar goes to (in the original Spanish) El Grande Squatto Mundo because
Mishkin and his brain-dead econometric cronies at the Fed and most of the
nation's universities keep encouraging interest rates to be constantly lower
than the rate of inflation, which increases borrowing, which further inflates
the money supply, which makes the prices of the assets go up a lot, and the
prices of everything else to drift upward, too, in response to all of this new
money and credit; so when gold goes up in response to the Fed's irresponsible
creation of money and credit creating inflation in prices by reducing the
buying power of the dollar, Mishkin says that this means that gold is not
stable! Hahaha! Too much! Hahahaha!
In fact, "hahaha" does not even BEGIN to cover it, and I will emend that last
paragraph to end with "Hahahahahahahaha!" to indicate something really rude and
disrespectful.
The Bloomberg article goes on to say that the gold standard is not necessary,
although "no doubt, the abundant liquidity created by asset-securitization,
derivatives and Asian countries amassing huge reserves while pegging their
currencies to the dollar fed both bubbles and greed. Yet these excesses could -
and should - have been harnessed by alert central banks acting in concert."
Hahahaha! Like that's going to happen! "Trust us!" Hahaha!
This reminds me of Oscar Wilde saying, "I can resist everything except
temptation", and who also famously said, "The only way to get rid of a
temptation is to yield to it."
Richard Daughty is general partner and COO for Smith Consultant Group,
serving the financial and medical communities, and the editor of The Mogambo
Guru economic newsletter - an avocational exercise to heap disrespect on those
who desperately deserve it.
(Republished with permission from
The Daily Reckoning. Copyright 2008, The Daily Reckoning.)
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