I think GOP knows it'll never happen, so they can put this out there to pander to their Tea Party backers. This is another item like auditing the Fed. It's the right thing to do, but I'm terrified of the transition.
We have a winner... pandering 101
Remember when political platforms laid out at party conventions used to actually be the direction that the party would follow? Now it's just a way to get votes.
"Drafts of the party platform, which it will adopt at a convention in Tampa Bay, Florida, next week, call for an audit of Federal Reserve monetary policy and a commission to look at restoring the link between the dollar and gold."
Great... let's get a commission together to hold hearings and waste time on something that will never happen. I guess in the end, these politicians on the committee can get gigs afterwards as spokesmen for cash for gold commercials that run during Hannity's shows.
My whole life
was like a picture
of a sunny day
“We can complain because rose bushes have thorns, or rejoice because thorn bushes have roses.”
― Abraham Lincoln
I also wonder what would happen if the US did tie their dollar to the value of gold, and then say some other country with a ton of natural resources (say China, Russia or Canada as examples) announced that they had found a massive gold deposit somewhere. All of the sudden the supply of gold goes up, price goes down and the US dollar's value would get messed up over something they have no control over. Hell if another country with a ton of gold reserves wanted to actively mess with the US economy all they would have to do release a ton of gold from their reserve onto the open market to tank the price of gold, sort of like how OPEC can control the price of oil by how they control supply.
Let's back up for a second, and think about this...
1) Does "China", for example, do something similar now? How? Hint - it involves our debt. They can manipulate our currency that way. Further, their currency is pegged to the U.S. dollar. So, your example wouldn't work.
2) The point of having a gold standard is having a store of value behind the dollar. Short-term volatility wouldn't really matter - once it's instituted. I mean, there's a reason there's a gold rush going on now, and it has nothing to do with a Gold Standard, does it? It has to do with the fact that there's a store of value there.
That's the whole point of adopting this unit. Could supply increase? Yes, but if you hadn't noticed, the money supply has increased rapidly since we discontinued the Gold Standard in 1970. You can see it here:
The point of considering adoptiong this, isn't to complicate things, it's to provide a store of value and a unit of account to our money. Further, it's to combat Fed officials from doing that excessive MS growth (above in that chart). Why? Because that excessive money supply growth (above in that chart) makes every fucking thing we own less valuable. Further, eventually because we are totally broke, our repeated attempts to print money will eventually cause hyperinflation which will destroy our country, just like we've seen repeated over and over in history - in Argentina, USSR, Germany, etc.
The Republican proposal for a commission to consider “restoring a link between the U.S. dollar and gold” has generated a lot of excitement among the internet’s many goldbugs. Forbes.com has provided some enthusiastic examples of this excitement, featuring promises that the gold proposal will do everything short of making your breakfast each morning.
I hate to rain on this party but I think one simple point is worth explaining: Restoring the link between the U.S. dollar and gold will not bring back the gold standard or any of its supposed advantages.
The gold standard was a system in which all the world’s major currencies had their values fixed against gold. For this reason, the world supply of gold dictated the global supply of money. Now this isn’t necessarily a sensible idea. Periods when gold supplies were fixed meant that a stable stock of money had to finance increasing amounts of transactions as the economy grew, so prices fell. In contrast, periods with major gold discoveries lead to global inflation.
Still, what one could say about this system was that it took the global supply of money out of the hands of central bankers and politicians (as long as the system stayed in place). The current Republican proposal would not do this. With no other country fixing their currency against the price of gold, decisions about the global supply of money would remain in the hands of the world’s central bankers.
What would determine the supply of dollars and inflation under the Republican proposal? Like all commodities, the price of gold is determined by supply and demand. Suppose there was a decline in the demand for gold or perhaps a large increase in its supply. Around the world, the price of gold would decline. In the UK, for example, with no commitment to keep sterling linked to gold, the price of gold might fall from £1000 per ounce to £900 per ounce.
In the U.S., however, the situation would be different. To maintain the commitment to keep the price of gold fixed against the dollar, the U.S. would have to print more dollars so that the dollar depreciated against other currencies (something that couldn’t happen under a proper gold standard). This additional money printing would lead to an increase in inflation in America. In general, the Republican proposal would see the value of the dollar swinging randomly based on global patterns of supply and demand in a volatile commodity market that tends to follow its own mysterious logic.
While its advocates may view this proposal as “fixing the value of the dollar,” the truth is that the dollar’s real value is measured by how many goods and services it can buy you, not by how many ounces of an arbitrary precious metal it can acquire. Indeed, all this proposal really does is fix the price of a particular commodity quoted in a particular currency.
Republicans are generally skeptical of government intervention in markets and there are good grounds for this skepticism. People should ask themselves why gold should be an exception to this general principle and whether this price-fixing exercise is a good way to determine the supply of dollars.
Whatever you think about the merits of the classical gold standard (and I think this article by Barry Eichengreen has it about right) and however dissatisfied people may be with the economic performance delivered by the Federal Reserve, there are no grounds for believing this proposal would provide the U.S. with sound money and economic stability.
The Republican Party platform calls for the creation of a commission to look at restoring the link between the dollar and gold.
As an academic, I am all in favor of scientific study. But in this case, a call for further study is just code for "This is a bad idea, but let's try it anyway."
The argument is similar to that put forward by those who want more research on the "link" between childhood vaccinations and autism. Extensive scientific investigations find absolutely no such link. Yet the die-hard believers continue to press for more wasteful spending on an idea that flies in the face of the evidence.
The gold standard's shortcomings should be obvious by now, but apparently the Republican platform committee — seeing the gold standard as a bulwark against a nonexistent inflation problem — needs a refresher course.
If the United States established a gold standard, the Federal Reserve would be required to exchange dollars for gold at a fixed price.
But what price? During the last 10 years, gold has fluctuated between $300 and $1,900 per ounce. Set the price too low and the Fed will run out of gold in a matter of hours; set it too high and the Fed will be flooded with gold. And even if Congress could find the "correct" price for gold, given worldwide fluctuations in the demand for gold, it is unlikely that the price would remain "correct" for long.
History provides ample evidence that the gold standard is a bad idea. After World War I, the major industrialized nations established the gold standard, which is widely seen as having contributed to the spread and intensification of the Great Depression. The gold standard tied the hands of monetary policymakers, forcing them to maintain high interest rates in order to maintain the price of gold, thereby making a bad economic situation even worse.
Had we been on the gold standard when the subprime crisis broke, the Federal Reserve would have had to raise interest rates instead of lowering them. Given that our economy was — and still is — struggling despite historically low interest rates, higher interest rates would have been devastating.
And if there is any doubt about the folly of tying the value of a currency to something outside a nation's control — and the price of gold is well outside the control of any government or central bank — look to Europe.
Instead of fixing their currencies to gold, the 17 members of the Eurozone fixed their currencies to a new currency, the euro. The euro worked well during its first decade, primarily because there were few strains on it. But starting in 2009, the stress became obvious: Greece had fiscal problems, Ireland and Spain had real-estate bubbles that burst, Portuguese consumers spent themselves into trouble, and Italy's economic policy was a complete mess.
If these countries had not been members of the Eurozone, they could have instituted expansionary monetary policies that would have helped their economies, such as devaluing their currencies to increase exports or lowering interest rates to stimulate economic growth. Instead, countries as diverse as Greece and Germany are stuck with the same monetary policy — and it is not working well for either of them.
The Republican Party proclaims itself to be the party of conservatism. But being a conservative should not mean promoting policies that have not worked for 100 years. Reestablishing a link between the dollar and gold would be a huge mistake. Establishing a commission to "study" the idea is a waste of time and money.
Richard S. Grossman is a professor of economics at Wesleyan University in Middletown, Conn., and a visiting scholar at the Institute for Quantitative Social Science, Harvard University. He is the author of "Unsettled Account: The Evolution of Commercial Banking in the Industrialized World Since 1800."
The Republican Party platform calls for the creation of a commission to look at restoring the link between the dollar and gold.
As an academic, I am all in favor of scientific study. But in this case, a call for further study is just code for "This is a bad idea, but let's try it anyway."
The argument is similar to that put forward by those who want more research on the "link" between childhood vaccinations and autism. Extensive scientific investigations find absolutely no such link. Yet the die-hard believers continue to press for more wasteful spending on an idea that flies in the face of the evidence.
The gold standard's shortcomings should be obvious by now, but apparently the Republican platform committee — seeing the gold standard as a bulwark against a nonexistent inflation problem — needs a refresher course.
If the United States established a gold standard, the Federal Reserve would be required to exchange dollars for gold at a fixed price.
But what price? During the last 10 years, gold has fluctuated between $300 and $1,900 per ounce. Set the price too low and the Fed will run out of gold in a matter of hours; set it too high and the Fed will be flooded with gold. And even if Congress could find the "correct" price for gold, given worldwide fluctuations in the demand for gold, it is unlikely that the price would remain "correct" for long.
History provides ample evidence that the gold standard is a bad idea. After World War I, the major industrialized nations established the gold standard, which is widely seen as having contributed to the spread and intensification of the Great Depression. The gold standard tied the hands of monetary policymakers, forcing them to maintain high interest rates in order to maintain the price of gold, thereby making a bad economic situation even worse.
Had we been on the gold standard when the subprime crisis broke, the Federal Reserve would have had to raise interest rates instead of lowering them. Given that our economy was — and still is — struggling despite historically low interest rates, higher interest rates would have been devastating.
And if there is any doubt about the folly of tying the value of a currency to something outside a nation's control — and the price of gold is well outside the control of any government or central bank — look to Europe.
Instead of fixing their currencies to gold, the 17 members of the Eurozone fixed their currencies to a new currency, the euro. The euro worked well during its first decade, primarily because there were few strains on it. But starting in 2009, the stress became obvious: Greece had fiscal problems, Ireland and Spain had real-estate bubbles that burst, Portuguese consumers spent themselves into trouble, and Italy's economic policy was a complete mess.
If these countries had not been members of the Eurozone, they could have instituted expansionary monetary policies that would have helped their economies, such as devaluing their currencies to increase exports or lowering interest rates to stimulate economic growth. Instead, countries as diverse as Greece and Germany are stuck with the same monetary policy — and it is not working well for either of them.
The Republican Party proclaims itself to be the party of conservatism. But being a conservative should not mean promoting policies that have not worked for 100 years. Reestablishing a link between the dollar and gold would be a huge mistake. Establishing a commission to "study" the idea is a waste of time and money.
Richard S. Grossman is a professor of economics at Wesleyan University in Middletown, Conn., and a visiting scholar at the Institute for Quantitative Social Science, Harvard University. He is the author of "Unsettled Account: The Evolution of Commercial Banking in the Industrialized World Since 1800."
Interesting note on the Euro and how a centralized currency among several countries doesn't really work.
The gold standard's shortcomings should be obvious by now, but apparently the Republican platform committee — seeing the gold standard as a bulwark against a nonexistent inflation problem — needs a refresher course.
....
But what price? During the last 10 years, gold has fluctuated between $300 and $1,900 per ounce.
Directed at the guy who wrote this piece - um.... don't you think that provides a bit of evidence of "inflation"? Why did gold go from $35 in the 1970s before Nixon ended the Gold Standard to hitting highs of $1900 an oz?
The Republican Party platform calls for the creation of a commission to look at restoring the link between the dollar and gold.
As an academic, I am all in favor of scientific study. But in this case, a call for further study is just code for "This is a bad idea, but let's try it anyway."
The argument is similar to that put forward by those who want more research on the "link" between childhood vaccinations and autism. Extensive scientific investigations find absolutely no such link. Yet the die-hard believers continue to press for more wasteful spending on an idea that flies in the face of the evidence.
The gold standard's shortcomings should be obvious by now, but apparently the Republican platform committee — seeing the gold standard as a bulwark against a nonexistent inflation problem — needs a refresher course.
If the United States established a gold standard, the Federal Reserve would be required to exchange dollars for gold at a fixed price.
But what price? During the last 10 years, gold has fluctuated between $300 and $1,900 per ounce. Set the price too low and the Fed will run out of gold in a matter of hours; set it too high and the Fed will be flooded with gold. And even if Congress could find the "correct" price for gold, given worldwide fluctuations in the demand for gold, it is unlikely that the price would remain "correct" for long.
History provides ample evidence that the gold standard is a bad idea. After World War I, the major industrialized nations established the gold standard, which is widely seen as having contributed to the spread and intensification of the Great Depression. The gold standard tied the hands of monetary policymakers, forcing them to maintain high interest rates in order to maintain the price of gold, thereby making a bad economic situation even worse.
Had we been on the gold standard when the subprime crisis broke, the Federal Reserve would have had to raise interest rates instead of lowering them. Given that our economy was — and still is — struggling despite historically low interest rates, higher interest rates would have been devastating.
And if there is any doubt about the folly of tying the value of a currency to something outside a nation's control — and the price of gold is well outside the control of any government or central bank — look to Europe.
Instead of fixing their currencies to gold, the 17 members of the Eurozone fixed their currencies to a new currency, the euro. The euro worked well during its first decade, primarily because there were few strains on it. But starting in 2009, the stress became obvious: Greece had fiscal problems, Ireland and Spain had real-estate bubbles that burst, Portuguese consumers spent themselves into trouble, and Italy's economic policy was a complete mess.
If these countries had not been members of the Eurozone, they could have instituted expansionary monetary policies that would have helped their economies, such as devaluing their currencies to increase exports or lowering interest rates to stimulate economic growth. Instead, countries as diverse as Greece and Germany are stuck with the same monetary policy — and it is not working well for either of them.
The Republican Party proclaims itself to be the party of conservatism. But being a conservative should not mean promoting policies that have not worked for 100 years. Reestablishing a link between the dollar and gold would be a huge mistake. Establishing a commission to "study" the idea is a waste of time and money.
Richard S. Grossman is a professor of economics at Wesleyan University in Middletown, Conn., and a visiting scholar at the Institute for Quantitative Social Science, Harvard University. He is the author of "Unsettled Account: The Evolution of Commercial Banking in the Industrialized World Since 1800."
Interesting note on the Euro and how a centralized currency among several countries doesn't really work.
I don't think he is saying that it doesn't work... i think he saying is that when countries get into difficulties it is harder to get out of them without control of the currency because you don't have the easy fall back of devaluing it
I don't think he is saying that it doesn't work... i think he saying is that when countries get into difficulties it is harder to get out of them without control of the currency because you don't have the easy fall back of devaluing it
Comments
We have a winner... pandering 101
Remember when political platforms laid out at party conventions used to actually be the direction that the party would follow? Now it's just a way to get votes.
"Drafts of the party platform, which it will adopt at a convention in Tampa Bay, Florida, next week, call for an audit of Federal Reserve monetary policy and a commission to look at restoring the link between the dollar and gold."
Great... let's get a commission together to hold hearings and waste time on something that will never happen. I guess in the end, these politicians on the committee can get gigs afterwards as spokesmen for cash for gold commercials that run during Hannity's shows.
was like a picture
of a sunny day
“We can complain because rose bushes have thorns, or rejoice because thorn bushes have roses.”
― Abraham Lincoln
Let's back up for a second, and think about this...
1) Does "China", for example, do something similar now? How? Hint - it involves our debt. They can manipulate our currency that way. Further, their currency is pegged to the U.S. dollar. So, your example wouldn't work.
2) The point of having a gold standard is having a store of value behind the dollar. Short-term volatility wouldn't really matter - once it's instituted. I mean, there's a reason there's a gold rush going on now, and it has nothing to do with a Gold Standard, does it? It has to do with the fact that there's a store of value there.
That's the whole point of adopting this unit. Could supply increase? Yes, but if you hadn't noticed, the money supply has increased rapidly since we discontinued the Gold Standard in 1970. You can see it here:
http://www.google.com/imgres?imgurl=http://thetruthwins.com/wp-content/uploads/2009/08/us-money-supply.gif&imgrefurl=http://thetruthwins.com/archives/instead-of-auditing-the-fed-obama-reappoints-bernanke&h=374&w=615&sz=11&tbnid=I9hv0W0wHUw9dM:&tbnh=74&tbnw=122&zoom=1&usg=__7strGdmMxfjVUm2x5Tj1pug5FRU=&sa=X&ei=RIA7UMK4LpKA6QH5yICQBg&ved=0CDcQ9QEwBA&dur=89
The point of considering adoptiong this, isn't to complicate things, it's to provide a store of value and a unit of account to our money. Further, it's to combat Fed officials from doing that excessive MS growth (above in that chart). Why? Because that excessive money supply growth (above in that chart) makes every fucking thing we own less valuable. Further, eventually because we are totally broke, our repeated attempts to print money will eventually cause hyperinflation which will destroy our country, just like we've seen repeated over and over in history - in Argentina, USSR, Germany, etc.
<object height="81" width="100%"> <param name="movie" value="https://player.soundcloud.com/player.swf?url=http://api.soundcloud.com/tracks/28998869"></param> <param name="allowscriptaccess" value="always"></param> <embed allowscriptaccess="always" height="81" src="https://player.soundcloud.com/player.swf?url=http://api.soundcloud.com/tracks/28998869" type="application/x-shockwave-flash" width="100%"></embed> </object> <span><a href=" - In the Fire (demo)</a> by <a href="
The Republican proposal for a commission to consider “restoring a link between the U.S. dollar and gold” has generated a lot of excitement among the internet’s many goldbugs. Forbes.com has provided some enthusiastic examples of this excitement, featuring promises that the gold proposal will do everything short of making your breakfast each morning.
I hate to rain on this party but I think one simple point is worth explaining: Restoring the link between the U.S. dollar and gold will not bring back the gold standard or any of its supposed advantages.
The gold standard was a system in which all the world’s major currencies had their values fixed against gold. For this reason, the world supply of gold dictated the global supply of money. Now this isn’t necessarily a sensible idea. Periods when gold supplies were fixed meant that a stable stock of money had to finance increasing amounts of transactions as the economy grew, so prices fell. In contrast, periods with major gold discoveries lead to global inflation.
Still, what one could say about this system was that it took the global supply of money out of the hands of central bankers and politicians (as long as the system stayed in place). The current Republican proposal would not do this. With no other country fixing their currency against the price of gold, decisions about the global supply of money would remain in the hands of the world’s central bankers.
What would determine the supply of dollars and inflation under the Republican proposal? Like all commodities, the price of gold is determined by supply and demand. Suppose there was a decline in the demand for gold or perhaps a large increase in its supply. Around the world, the price of gold would decline. In the UK, for example, with no commitment to keep sterling linked to gold, the price of gold might fall from £1000 per ounce to £900 per ounce.
In the U.S., however, the situation would be different. To maintain the commitment to keep the price of gold fixed against the dollar, the U.S. would have to print more dollars so that the dollar depreciated against other currencies (something that couldn’t happen under a proper gold standard). This additional money printing would lead to an increase in inflation in America. In general, the Republican proposal would see the value of the dollar swinging randomly based on global patterns of supply and demand in a volatile commodity market that tends to follow its own mysterious logic.
While its advocates may view this proposal as “fixing the value of the dollar,” the truth is that the dollar’s real value is measured by how many goods and services it can buy you, not by how many ounces of an arbitrary precious metal it can acquire. Indeed, all this proposal really does is fix the price of a particular commodity quoted in a particular currency.
Republicans are generally skeptical of government intervention in markets and there are good grounds for this skepticism. People should ask themselves why gold should be an exception to this general principle and whether this price-fixing exercise is a good way to determine the supply of dollars.
Whatever you think about the merits of the classical gold standard (and I think this article by Barry Eichengreen has it about right) and however dissatisfied people may be with the economic performance delivered by the Federal Reserve, there are no grounds for believing this proposal would provide the U.S. with sound money and economic stability.
The Republican Party platform calls for the creation of a commission to look at restoring the link between the dollar and gold.
As an academic, I am all in favor of scientific study. But in this case, a call for further study is just code for "This is a bad idea, but let's try it anyway."
The argument is similar to that put forward by those who want more research on the "link" between childhood vaccinations and autism. Extensive scientific investigations find absolutely no such link. Yet the die-hard believers continue to press for more wasteful spending on an idea that flies in the face of the evidence.
The gold standard's shortcomings should be obvious by now, but apparently the Republican platform committee — seeing the gold standard as a bulwark against a nonexistent inflation problem — needs a refresher course.
If the United States established a gold standard, the Federal Reserve would be required to exchange dollars for gold at a fixed price.
But what price? During the last 10 years, gold has fluctuated between $300 and $1,900 per ounce. Set the price too low and the Fed will run out of gold in a matter of hours; set it too high and the Fed will be flooded with gold. And even if Congress could find the "correct" price for gold, given worldwide fluctuations in the demand for gold, it is unlikely that the price would remain "correct" for long.
History provides ample evidence that the gold standard is a bad idea. After World War I, the major industrialized nations established the gold standard, which is widely seen as having contributed to the spread and intensification of the Great Depression. The gold standard tied the hands of monetary policymakers, forcing them to maintain high interest rates in order to maintain the price of gold, thereby making a bad economic situation even worse.
Had we been on the gold standard when the subprime crisis broke, the Federal Reserve would have had to raise interest rates instead of lowering them. Given that our economy was — and still is — struggling despite historically low interest rates, higher interest rates would have been devastating.
And if there is any doubt about the folly of tying the value of a currency to something outside a nation's control — and the price of gold is well outside the control of any government or central bank — look to Europe.
Instead of fixing their currencies to gold, the 17 members of the Eurozone fixed their currencies to a new currency, the euro. The euro worked well during its first decade, primarily because there were few strains on it. But starting in 2009, the stress became obvious: Greece had fiscal problems, Ireland and Spain had real-estate bubbles that burst, Portuguese consumers spent themselves into trouble, and Italy's economic policy was a complete mess.
If these countries had not been members of the Eurozone, they could have instituted expansionary monetary policies that would have helped their economies, such as devaluing their currencies to increase exports or lowering interest rates to stimulate economic growth. Instead, countries as diverse as Greece and Germany are stuck with the same monetary policy — and it is not working well for either of them.
The Republican Party proclaims itself to be the party of conservatism. But being a conservative should not mean promoting policies that have not worked for 100 years. Reestablishing a link between the dollar and gold would be a huge mistake. Establishing a commission to "study" the idea is a waste of time and money.
Richard S. Grossman is a professor of economics at Wesleyan University in Middletown, Conn., and a visiting scholar at the Institute for Quantitative Social Science, Harvard University. He is the author of "Unsettled Account: The Evolution of Commercial Banking in the Industrialized World Since 1800."
Interesting note on the Euro and how a centralized currency among several countries doesn't really work.
Directed at the guy who wrote this piece - um.... don't you think that provides a bit of evidence of "inflation"? Why did gold go from $35 in the 1970s before Nixon ended the Gold Standard to hitting highs of $1900 an oz?
He even said it.
<object height="81" width="100%"> <param name="movie" value="https://player.soundcloud.com/player.swf?url=http://api.soundcloud.com/tracks/28998869"></param> <param name="allowscriptaccess" value="always"></param> <embed allowscriptaccess="always" height="81" src="https://player.soundcloud.com/player.swf?url=http://api.soundcloud.com/tracks/28998869" type="application/x-shockwave-flash" width="100%"></embed> </object> <span><a href=" - In the Fire (demo)</a> by <a href="
I don't think he is saying that it doesn't work... i think he saying is that when countries get into difficulties it is harder to get out of them without control of the currency because you don't have the easy fall back of devaluing it
I got that... just making my own conclusions...
Carry on :thumbup: