The gold standard returns to mainstream U.S. politics, as a "gold commission" is part of the...


The gold standard returns to mainstream U.S. politics, as a "gold commission" is part of the official Republican party platform. The notion is widely condemned as "a clown idea"; even economists who support Romney believe "there are better ways" to achieve stability. But rather than a gold commission, another commission idea may have more staying power: one that would examine the Fed and its mandate.
Comments (48)
  • wyostocks
    , contributor
    Comments (9113) | Send Message
     
    New Fed mandate should be the unemployment line for all the Fed employees starting with Ben.
    25 Aug 2012, 09:13 AM Reply Like
  • frosty
    , contributor
    Comments (720) | Send Message
     
    The republican party should officially change its name to 'libertarian party'. They are still trying to find out who is John Galt?
    25 Aug 2012, 09:16 AM Reply Like
  • bbro
    , contributor
    Comments (11219) | Send Message
     
    Ben Bernanke saved this country from a depression...if we go to
    a Gold standard this website's name will be changed to "Seeking Cover"...
    25 Aug 2012, 09:20 AM Reply Like
  • Tack
    , contributor
    Comments (16278) | Send Message
     
    Institute the gold standard, then, all those folks bemoaning the so-called "Great Recession" can discover what a real depression feels like.
    25 Aug 2012, 09:27 AM Reply Like
  • WMARKW
    , contributor
    Comments (10787) | Send Message
     
    Really.....have you studied much about post WWI international economics and the reasons why the US decided to support the UK in returning to the Gold Standard at an inflated currency value that didn't support their real economy vs. the Gold Standard?

     

    Every post war expression of the reinstatement of the Gold Standard was tragically flawed because those participating were unwilling to allow the Gold Standard to express its reality on their economy. Much like today, everyone wants to be an export champion. Well that doesn't work. For every economic success there must be an economic also ran. The Gold Standard serves to address those inequalities.....but then no one wants to ever recognize the reality of those inequalities. Just like today the US doesn't allow the reality or our import relationship with China to be expressed.....because we have the "world reserve currency" thanks to our fiat system.
    25 Aug 2012, 10:06 AM Reply Like
  • Tack
    , contributor
    Comments (16278) | Send Message
     
    WM:

     

    I am an avid reader of history. What's your point?

     

    Gold standards have been associated throughout history with disastrous deflationary events, which, among other reasons, has seen their abandonment each and every time.
    25 Aug 2012, 10:11 AM Reply Like
  • WMARKW
    , contributor
    Comments (10787) | Send Message
     
    Yep....that's true....everytime a government didn't want to lose their gold because of their disasterous economic policies they undertook actions that in and of themselves caused the depressions you mention. It wasn't the Gold Standard that caused the Great Depression it was the massive inflation supported by the US and UK governments that ultimately led from boom to bust.
    25 Aug 2012, 10:15 AM Reply Like
  • Tack
    , contributor
    Comments (16278) | Send Message
     
    WM:

     

    I'm sure we could debate this endlessly, no doubt.

     

    I agree that politicians fuled the boom with too-easy money and way to much leverage allowed in stock markets (sound familiar?). But, in fact, the Great Depression was made "great" by the fact that the powers that be at that time decided that the best way to fight an overheated economy that was just about to contract, anyway, was to dramatically contract the money supply. As a result, the money supply of 1929 declined radically until 1935, at which time, the leaders recognized that this wasn't such a swell idea (duh!) and reversed course. Even so, the 1929 money supply level -- not even nearly high enough in a low-monetary-velocity depression -- wasn't regained until almost 1939.

     

    The idea that economic problems can be repaired by creating a deflationary environment is simply illogical on its face because when that happens, money (currency) becomes more valuable than the things it produces or buys, so people hoard money, making economic conditions quickly worse. Inflation can be a bane, too, but at least it provides incentive for money to be kept in circulation.

     

    There simply is no way to eradicate the follies of man. Neither attaching currencies to fixed entities -- be it gold, petunias or anything else -- will avoid periods of exuberance and despair, nor will it prevent leaders from doing whatever they consider expedient at the moment, including juicing the economies or junking the currency pegs altogether, should such exist.
    25 Aug 2012, 10:31 AM Reply Like
  • WMARKW
    , contributor
    Comments (10787) | Send Message
     
    You are correct - in some ways. But, it was not the politicians. It was the bankers led by the new Fed leaders and the UK central bank, and the JP Morgan gang who perpetrated the "un-natural" currency relationship - primarily in the UK, but supported by the US's cooperation. GB didn't want gold outflows - which is what reality would have called for.

     

    So, the expansion of the money you talk about was not an expansion of, nor a contraction of the gold supply. It was an expansion of the money supply via easy margin requirements, lending, etc. They attempted to "game" the system, which in all cases can be gamed for a period of time, but which system ultimately will demand a "reversion" to reality.
    26 Aug 2012, 04:15 AM Reply Like
  • surfgeezer
    , contributor
    Comments (10019) | Send Message
     
    W-The main thing you do not seem to get is Economic power is ALWAYS relative in a free market. Same is true for countries and their currencies relative strength to another in the world market or an individual and their hourly wage in the local job market.
    That economic power is what buys things. If you put a rock in the middle of the equation it is economic power , rock, buys things.

     

    Our economic power will vary, the FX markets change. Trying to set a price does not work and begs the question who sets the price of dollars to gold? It is set by free markets now as is our relative value to other countries. If you look at history tying to gold has NEVER stopped politican's from over spending. Our problem is our voters, gold will not solve it.
    27 Aug 2012, 01:12 AM Reply Like
  • WMARKW
    , contributor
    Comments (10787) | Send Message
     
    And what you do not seem to get is that in prior times under the Gold standard, the variable that changed in the equation was the foreign exchange rate - Dollars vs Pounds. When Gold flowed from one country to the other, the value of the currency declined relatively, and that was the mechanism that set the "market" rate for exchanges, not an arbitrary rate set by the US or the UK.

     

    When there was dis-equilibrium, the exchange rate set the prices of goods and services that were exported/imported. IT WAS the mechanism for stemming the flow of gold from one country to another. It was set by the market and it WAS NOT set by the politicians.

     

    Just as the ECB, the SNB, and Japan have tried to peg their currencies (China as well) those countries have stepped into the equation to fix a variable instead of letting the market fix it. Thus you have an un-natural market re: exchange rates and therefore currency flows, goods flows, etc.
    27 Aug 2012, 07:59 AM Reply Like
  • surfgeezer
    , contributor
    Comments (10019) | Send Message
     
    W- " When Gold flowed from one country to the other, the value of the currency declined relatively, and that was the mechanism that set the "market" rate for exchanges, not an arbitrary rate set by the US or the UK"
    You make my point for me. Inserting Gold in the equation, as I did for hourly wages is the same. The fact we have so much debt, and that is how other countries effect the Capitol flows is irrevelant to gold. As I said before gold standard does NOT keep voters from wanting freebies. Their IS no arbitrary rate set now, it IS the FX market that sets currency values and commodity markets that sets gold. Market based pricing IS the most effective. The quest for stability is a quest for the past and largely futile. Wether hourly wages or relative currency values.
    28 Aug 2012, 03:27 AM Reply Like
  • untrusting investor
    , contributor
    Comments (9903) | Send Message
     
    Economists and central bankers .... achieve stability ?? Where and when did they ever accomplish that with regard to US currency and purchasing power?
    25 Aug 2012, 09:42 AM Reply Like
  • surfgeezer
    , contributor
    Comments (10019) | Send Message
     
    You can't, the world is dynamic. Are YOUR wages perfectly stable? Lol
    28 Aug 2012, 03:29 AM Reply Like
  • Neil459
    , contributor
    Comments (2636) | Send Message
     
    With respect to the Federal Reserve a few changes would improve everything.

     

    1. Top 25 salaries based 75% on an absolute GDP Production level for Agriculture, Industry, and Manufacturing (ignoring service) and amount of increasing GDP (all minus any government effect).

     

    2. All retirement benefits would be provided by social security.

     

    3. All health benefits would be purchased privately and not provided by the government.

     

    I think that would basically do it.
    25 Aug 2012, 10:57 AM Reply Like
  • Michael Fitzsimmons
    , contributor
    Comments (11013) | Send Message
     
    if the republican party is really behind a "gold commission" then why is the RNC doing all it can to prevent ron paul, the true champion of real old-time republican policy (small government, low taxes, conservative fiscal and foreign policies, sound money, and the U.S. Constitution), from even speaking at the convention?

     

    the new-age "conservative republican" party is not my party of old, as in the IKE days. it is a radical party that is so hypocritical that it won't even let the one true decades long supporter of republican ideals even speak.

     

    as so many have said, i didn't leave the republican party, it left me.
    25 Aug 2012, 11:05 AM Reply Like
  • icandoitdon
    , contributor
    Comments (626) | Send Message
     
    well said.

     

    and let's not forget that it was IKE....a lifelong soldier...who warned against the military industrial complex the country has now become and that both parties embrace.

     

    they had it right the first time...we don't have a department of defense. we have a department of war.

     

    25 Aug 2012, 01:12 PM Reply Like
  • Freedoms Truth
    , contributor
    Comments (1044) | Send Message
     
    You are wrong. They are having his son Rand Paul speak and will have a tribute to Ron Paul there on 2nd night. That's a lot more than other retiring congresscritters get. They are bending backwards to be nice to his supporters, even though they are a 10% wing of the party and even though those supporters grumble and whine at the drop of a hat. This article itself is showing that in the platform they are making concessions to the AuditTheFed supporters, etc. There is more they have done. So the whining is misplaced. If they gave a slot to the guy who came in fourth in votes, then they need to bring out Newt and Rick S. too. Why? They got plenty of airtime in debates, time to hear some of the other voices in the GOP, like some great Govs like Chris Christie and Ron Paul's son Rand. As for "the one true decades long supporter of republican ideals" - put down the koolaid. It's hilarious how this old congressman gets worshipped worse than Obama - get real, these are just politicians!
    25 Aug 2012, 01:28 PM Reply Like
  • davidbdc
    , contributor
    Comments (3194) | Send Message
     
    If he's not speaking then how is icandoitdon wrong?

     

    Lets face it both Political parties are the problem. The parties themselves have become entities and the politicians are loyal to the party instead of the country.

     

    Until we elect someone outside of this realm nothing will change. And since Ron Paul is one of about many 4 politicians that are willing to tell their party to go to hell, he isn't speaking.
    25 Aug 2012, 03:12 PM Reply Like
  • surfgeezer
    , contributor
    Comments (10019) | Send Message
     
    The RNC knows that they will look silly if they advocate Gold. NO rational economist believes that is viable. Eichengreen makes a good case that at some point gold will part of a basket of currencies. It has zero chance now as to many countries rely on Importing to US. Ron Paul has lots of gold, he is talking his book. I agree with him on debt and other issues, but he is clueless on gold and the Fed.The RNC LOVES debt, despite the rhetoric, they are still pushing for tax cuts over debt reduction. Look at where the US debt has come from, it is not just random coincidence that the IT cuts of Reagan and Bush jumped deficits. I like the idea of spending cuts, but they didn't and still cut taxes. It is just math.
    28 Aug 2012, 03:36 AM Reply Like
  • scottennen
    , contributor
    Comments (5) | Send Message
     
    Ben Bernanke saved us!! Yeah Ben! Trillions in secret loans and overnight freebies to the zombie Euro slugs and countless trillions of worthless digital credits for the banksters to gamble with. Ben for President of the New Banana Republic of Digital Credits! Backed by the full faith and credit of OPEC of course. We'll get a gold standard as soon as the banksters get done hoarding it all. Shouldn't be too much longer now. Soon we will be stealing errrrr I mean liberating all the gold and oil in Iran so we will be rich beyond our dreams. Amerika F**k Yeah!!!
    25 Aug 2012, 12:40 PM Reply Like
  • OptionManiac
    , contributor
    Comments (3498) | Send Message
     
    Being tied to the gold standard is like Greece being tied to the Euro - all flexibility disappears.
    25 Aug 2012, 01:56 PM Reply Like
  • Whitehawk
    , contributor
    Comments (3121) | Send Message
     
    If there are "fiduciary" cheaters, a gold standard is tough to maintain. Historically, it has always been thrown out the window when governments overspent their stock (or multiples thereof) and interconnected special interests (including those in the banking system) posted considerable losses from speculative activity.

     

    The problem is that governments prosecute people who decide to trade and make agreements based on gold (and/or silver). Financial repression runs wide and deep.
    25 Aug 2012, 03:02 PM Reply Like
  • OptionManiac
    , contributor
    Comments (3498) | Send Message
     
    Sometimes governments spend because they have to - wars, natural disasters, the normal ebbs and flows of that giant uncontrolable thing called the economy. Without flexibility, there would be no solutions.
    25 Aug 2012, 05:11 PM Reply Like
  • Neil459
    , contributor
    Comments (2636) | Send Message
     
    "Without flexibility, there would be no solutions."

     

    or

     

    Without this easy short term solution to spend, spend, and spend some more the government might be forced to find a more permanent longer term solution.
    25 Aug 2012, 05:15 PM Reply Like
  • wyostocks
    , contributor
    Comments (9113) | Send Message
     
    "Sometimes governments spend because they have to......."

     

    And then there are governments that forever increase spending every year because they WANT to and always find another good cause to fund.
    25 Aug 2012, 09:56 PM Reply Like
  • OptionManiac
    , contributor
    Comments (3498) | Send Message
     
    There is no long term solution for a devestating hurricane or earthquake. During WW2, should the US have stuck to a strict budget?

     

    Do not let ideology prevent one from seeking solutions.
    25 Aug 2012, 06:03 PM Reply Like
  • davidbdc
    , contributor
    Comments (3194) | Send Message
     
    I'd agree on the part about war. But I'd disagree on the hurricane or earthquake - its called saving for a rainy day. And if our government quit spending like a drunken sailor then we could not only balance the budget but also save for natural disasters.
    25 Aug 2012, 10:31 PM Reply Like
  • WMARKW
    , contributor
    Comments (10787) | Send Message
     
    I guess the real question to me is simply this. Since all wars require an expenditure that is "un-natural", if there were NO way to finance wars by inflation, printing money, confiscating the wealth of the conquered, clipping coins, etc......would there then be ANY wars. A war would be a sure path to a country's economic ruin if it had to be paid for with "real" money.
    26 Aug 2012, 04:20 AM Reply Like
  • Econdoc
    , contributor
    Comments (2938) | Send Message
     
    it is like telling the doctor who saved your life with radiation therapy that from now on he must use leeches instead. unbelieveable.
    26 Aug 2012, 11:40 AM Reply Like
  • Neil459
    , contributor
    Comments (2636) | Send Message
     
    "it is like telling the doctor who saved your life with radiation therapy that from now on he must use leeches instead. unbelieveable."

     

    I'm sure this will be a real surprise, but doctors still use leaches. Why because the patient's life is more important than out of control spending. Not so with the federal government.
    26 Aug 2012, 01:56 PM Reply Like
  • DeepValueLover
    , contributor
    Comments (11171) | Send Message
     
    There are zero downsides to a gold/ silver/ platinum standard.

     

    It is a myth that such a responsible monetary scheme causes depressions.

     

    The only thing caused by a precious metals standard is an outbreak of balanced budgets and fiscal prudence.

     

    Oh, what a nightmare that would be!
    26 Aug 2012, 11:44 AM Reply Like
  • idkmybffjill
    , contributor
    Comments (1911) | Send Message
     
    "It is a myth that such a responsible monetary scheme causes depressions. "

     

    Oh really? Guess you forgot about the one that began in 1929? LOL
    26 Aug 2012, 11:55 AM Reply Like
  • Tack
    , contributor
    Comments (16278) | Send Message
     
    The classic poster child for gold-standard idiocy was the financial panic of 1859, caused in great part by the sinking of the Central America, carrying vast gold stores from San Francisco to New York.

     

    Imagine, global economies sent into a tailspin because one ship carrying some shiny metal sunk. The logical thinking, of course, mindlessly applied to that event, was that the sinking represented a genuine "disappearance" of real money, and the gold standard dictated that it could not be replaced.

     

    Belief in gold standards is insanely stupid, bordering on some kind of religious belief, completely devoid of logical or historical support..
    26 Aug 2012, 12:01 PM Reply Like
  • Poor Texan
    , contributor
    Comments (3527) | Send Message
     
    Did they ever find the Central America?
    26 Aug 2012, 01:09 PM Reply Like
  • Tack
    , contributor
    Comments (16278) | Send Message
     
    PT:

     

    Yes, 1987.

     

    Great book: http://amzn.to/OlD2i7
    26 Aug 2012, 01:25 PM Reply Like
  • WMARKW
    , contributor
    Comments (10787) | Send Message
     
    If you say so....
    26 Aug 2012, 03:06 PM Reply Like
  • Tack
    , contributor
    Comments (16278) | Send Message
     
    WM:

     

    You don't like good books? An enjoyable read.
    26 Aug 2012, 04:51 PM Reply Like
  • WMARKW
    , contributor
    Comments (10787) | Send Message
     
    The reply was to:

     

    "Belief in gold standards is insanely stupid, bordering on some kind of religious belief, completely devoid of logical or historical support.."
    27 Aug 2012, 08:01 AM Reply Like
  • Tack
    , contributor
    Comments (16278) | Send Message
     
    WM:

     

    Well, yes, history is replete with evidence of too many financial calamities to count, all directly tied to deflationary consequences of artificial pegs to gold. Only after various disasters were such pegs abandoned or modified.

     

    It's not possible to control the behavior of man by artificial means. Rules (pegs) can always be ignored or simply declared invalid, which is what has occurred each and every time some inanimate standard (gold) has been chosen to attempt to control human behavior.
    27 Aug 2012, 09:22 AM Reply Like
  • idkmybffjill
    , contributor
    Comments (1911) | Send Message
     
    Tack, there is no use arguing with gold bugs. I won't say that the argument about using gold as an inflation hedge isn't valid, but logic doesn't work with people who clamor for us to get back on the gold standard.
    27 Aug 2012, 09:24 AM Reply Like
  • Tack
    , contributor
    Comments (16278) | Send Message
     
    i:

     

    Too true.

     

    Funny enough, as I have demonstrated by examining the price of gold versus S&P500 since 1900, gold isn't even an effective inflation hedge, as equities have outperformed it by over 400%, not even including all the dividends collected over 112 years.
    27 Aug 2012, 09:27 AM Reply Like
  • WMARKW
    , contributor
    Comments (10787) | Send Message
     
    idk.....tell me where the logic fails above.....you're comment is baseless and meaningless.....do you have an opinion to proffer?
    27 Aug 2012, 09:51 AM Reply Like
  • WMARKW
    , contributor
    Comments (10787) | Send Message
     
    And once again.....not for your benefit, but for others, the price of gold was pegged and thus constant (virtually) until 1971. So why would you compare the S&P over a period of time when the price of gold was fixed? That's about as illogical as it get's.....hmmmmm, just imagine the graph of the S&P moving for 71 years and the price of gold not moving.

     

    And what about since 1971?
    27 Aug 2012, 09:53 AM Reply Like
  • WMARKW
    , contributor
    Comments (10787) | Send Message
     
    So your point is there is no sense in placing any restriction on the fiat currency system since someone (people) will always violate it. You are probably correct in that respect.....because leaders don't lead anymore, and crooks like Corzine don't go to jail anymore.
    27 Aug 2012, 09:55 AM Reply Like
  • Tack
    , contributor
    Comments (16278) | Send Message
     
    WM:

     

    Your argument is illogical, but you don't seem to realize it.

     

    The fact that the price was pegged way back at the turn of the century, just made it artificially low, even back then. If it were higher in 1900, then the returns on gold to present would be even worse.

     

    You want to compare it since 1971, feel free, but it doesn't alter the fact that gold is a poor alternate to equities over the longer haul.
    27 Aug 2012, 10:13 AM Reply Like
  • idkmybffjill
    , contributor
    Comments (1911) | Send Message
     
    WMARKW, what would you suggest we do if we were on the gold standard and an event like the one Tack mentioned occurs where a ship carrying a lot of gold sinks? What happens when economic output exceeds the amount of gold that has currently been mined?
    27 Aug 2012, 10:50 AM Reply Like
  • WMARKW
    , contributor
    Comments (10787) | Send Message
     
    Well, in the first place, there is no reason to move gold in transit like that anymore. Ownership and transfer of ownership can all be done digitally.

     

    Well, gold output has grown greater than 1% in perpetuity. There is no reason that output has to be linked to gold in the sense that prices of products can't be adjusted downward. No one complains about semi-conductor prices falling, or the price of electronics falling. The value of economic output measured in dollars may have no bearing whatsoever to the money supply or the velocity at which it turns over. Today, it's conceptually possible for almost any payment stream to be instantenous, thus the potential for velocity is not upper bound limited.
    29 Aug 2012, 05:47 PM Reply Like
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