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Grand Illusion: The Federal Reserve (Part 3)
The US had something like a "gold standard" well after the fed was established. We went off the "gold standard" completely in 1971 when the French called our bluff on Vietnam war spending. Prior to that time, a holder of US currency could exchange dollars for gold. Realizing that the Nixon administration was printing money to finance the Vietnam war, the French sought to convert their foreign exchange holdings for gold. The result was that the gold reserves were in danger of being completely redeemed, and the US shut down the gold window. Not long after, we had the OPEC oil shock, which was motivated by the Saudi's objection to the US backing Israel in the 1973 war. The result of these events was the era of stagflation.
Recent inflation and asset bubbling is directly related to our government's issuing monetized debt to finance wars: Vietnam, Cold War, Iraq, War on Terror, etc. This is a far more grave threat to our currency than lever-pulling by the members of the federal reserve system.
Mar 11, 2009. 12:45 PM
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A Stairway to Retail Heaven (Part 2)
Nice article. In fact, your last few have been really good reads.
Over the last five years or so academics and a few Wall Street economists would occassionally tut-tut on NPR over the trade imbalance and the reality that the US was driving global demand only on credit supplied by our trading partners.
Although outside the scope of this piece, we may soon have more effects beyond BK retailers in this country. China's export economy is falling off a cliff. Factories will be shuttered and its trade surplus will shrink. If so, will they be willing and able to buy all those new T-bonds to finance our fiscal stimulation?
Mar 4, 2009. 06:35 PM
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