AndrewLib

Gold: Not Just for Gold Bugs Anymore

The "gold standard" of the 19th century as someone described was just there to ensure the busts. What does this mean, it means we still let people print "money" on top of their gold assets, then when they redeem and find they run out of gold and people panic we get a the bust after the boom. This system only regulates the credit expansion, but we are still faced with a group of people who have a monopoly of the printing of money. So yes, we would have booms and busts, however, the busts would be smaller and more often. This at least would be a step in the right direction. Until a "favoured" bank is due for bankrupcy or a certain voting group is due to lose its money, then governments need to intervene to keep their own jobs. So eventually we move down the road to full FIAT paper again.

However, a more radicle but unlikely solution would be to get rid of fractional reserve banking and move to a 100% reserve banking with every note redeemable in gold. Mises and Rothbard have both demonstrated that the money supply does not need to increase. This of course would change the nature of banking into warehouses for demand desposits and investment houses for interest bearing deposits (money you cannot withdraw without notice because it has been lent out). This is the perfect solution (read Murry Rothbard the case for a 100% gold dollar and "what has government done to our money"). However, this is NOT likely to happen. Why?

Because just like any monopoly the right for some to print money will not be given up lightly and we all know the history of the federal reserve and the fight against central banks that President Jackson had before that. No, what we will get is a new currency that will be back by some silly small amount of gold (or some other invented paper reserve asset), then they will break the gold backing (or inflate the reserve asset). We will be on a single global fiat and nothing will have changed. Individual countries will be utterly controlled by un-elected bankers (even more so than now) from a new world bank etc. Read Keynes he openly wanted this and considering Keynes is now the "economics" in unversities we cannot expect anything other than this from the current architects (after all they want socialism for the world).

Blogs and newspaper opinions about the new role of gold etc are really saying we will be putting the power of money back in the hands of the public. Will that happen? We have since world war I been moving progressivly to the left with the socialisation of everything, will these people and interest groups give up those rights and benefits at the expense of the prosperity of the public? I doubt it, if they were so inclined there would be no lobby groups and bail outs. The fact the intervention exists, is justified by thousands of payed academics and think tanks proves that this would not happen. The USA had the chance with Ron Paul and they blew it. The rest of G7 or G20 doesnt not have anyone in sight that has the wisdom and knowledge to perform such a feat. I think giving credit to the current financal talks as something that will move power away from banks, governments and guns a butter programs is rubbish or at best wishful thinking.