Tea Party Economist
by Gary North: Obama’s
Brand of Marxism
piece for MarketWatch: "Fool's Gold Standard."
It was standard
stuff, i.e., a combination of economic stupidity, attempted cleverness,
and the rhetoric of contempt.
my special treatment, which I reserve for mainstream media journalists
who hate the idea of a world not run by the Federal Reserve and
who try to be clever. Weidner is not clever.
Let me explain.
I quote him verbatim and in context.
He begins with
decades the nation has a financial panic, and in doing so questions
its mode of currency. Should we be on a gold standard, or not?
I ask: Why
does the nation continue to experience these panics? Also, when?
I recall no financial panic comparable to 2008 in the past 70 years.
There was the S&L crisis of the mid-to-late 1980s. Government
regulation of the industry caused this crisis.
Let us review
chronology. Jesse Helms in 1980 called for a gold commission to
study gold. A Democrat Congress passed it, and Jimmy Carter signed
it. It was held in 1982, four years before the S&L crisis began.
It was a dead issue by 1986.
Also, no one
in Washington suggested a return to gold in 1982, other than Ron
Paul. No one suggested it in 2008, other than Ron Paul.
So, the article
begins with a false premise: a supposed relationship between financial
panics and calls for a gold standard.
There was price
inflation, 1971-1980, but no financial crisis. That decade of price
inflation was the result of the policies of the Federal Reserve
System under Arthur Burns and G. William Miller. Those policies
resulted from Nixon's unilateral killing of Bretton Woods on August
15, 1971. He killed the gold exchange standard, itself a Keynesian
imitation of the post-World War I gold exchange standard (1922 Genoa
Conference), itself a government-manipulated counterfeit of the
pre-World War I gold coin standard, which had ended in 1914.
crisis era is no exception. The Republicans have just put a plank
in their party platform that called for the formation of a gold
commission, a move that's generating some buzz on Wall Street.
It is generating
no buzz anywhere. The platform is taken seriously by no one, especially
of the House John Boehner. It merely reflects that Ron Paul
scared the Republican Establishment this time. He did not in 1982.
adopting a gold standard accomplish?
come through the worst recession since the 1930s. It's healthy
that we are challenging our monetary System, our fiat currency
and the Federal Reserve system.
Who are "we"?
No one on Wall Street. No one in the mainstream media. No one in
Washington, other than Ron Paul, who is retiring. Weidner knows
this. He is trying to tar & feather him, once and for all.
But if anything,
these cyclical crashes only underscore what a folly this is. Reinstitute
the gold standard? Please.
what people are doing now that Ron Paul is out of politics?
acknowledge what adopting a gold standard would do:
- It would
guard against inflation by linking currency to something in fixed
- In doing
so, it would lessen government's ability, through the Fed, to
manage wealth. That's because inflation effectively shifts wealth
from citizens, who can't print money, to the government, which
- It would
effectively fix international exchange rates something
that could potentially help us in our imbalance with China and
other countries that have gamed the foreign exchange system to
their advantage. (China would suffer inflation, U.S. deflation
making our goods more competitive.)
This is all
true. So far, nothing else has accomplished this in history. Bretton
Woods worked only when there was a gold-exchange standard (1946-1971).
So, he knows
what works. But then he offers reasons why not Really Dumb
It all sounds
wonderful, of course, until you consider the downside:
is a necessary part of a currency on the gold standard. It absolutely
crushes debtors. That's why politicians talked about the standard
nailing people to a "cross of gold." When you owe money
and your wages fall, you may be able to buy the same things at
lower prices and maintain a quality of life, but your debt gets
crushes debtors." I see. So, from 1879 to 1933 in the USA,
there were no debtors. They all were crushed. I had not heard this
What kind of
rhetorical nonsense is this?
The gold coin
standard was restored in 1879. The system had been abolished in
the early months of the Civil War, in order to allow mass inflation
of the currency to pay for the war. There was a bond market, 1879
to 1933 in the USA. Businesses issued them. So did governments.
Banks lent money. How? To whom, after the debtors were "absolutely
the rest of the article
North [send him mail]
is the author of Mises
on Money. Visit http://www.garynorth.com.
He is also the author of a free 31-volume series, An
Economic Commentary on the Bible.
2012 Gary North
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