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Life on the Gold Standard



September 10, 2010 – Comments (7)

John Tammy of Forbes describes what he thinks the world will look like once the dollar is back on the gold standard (which he thinks will come about by mid-decade):

"Jobs will be plentiful because all jobs are the result of delayed consumption. Rather than worry about how they'll find work, by 2015 the world's citizens will reclassify their problems with the more pressing question being where they will choose to work ... Most important of all, stable money will foster an era of world peace. With gyrating currencies no longer slowing global exchange on the way to trading friction, the world's division of labor will expand on the way to a self-interested avoidance of war." 

This seems rather utopic. Tammy notes that the dollar has been off the gold standard since 1971. I'm not sure anyone can describe the decades before then as abundantly prosperous or exceptionally peaceful. Quite the opposite, in many ways. 

Liaquat Ahamed, in the book "Lords of Finance," takes a more historic view:

"While it may have succeeded in controlling inflation, the gold standard was incapable of preventing the sort of financial booms and busts that were, and continue to be, such a feature of the economic landscape. These bubbles and crises seem to be deep-rooted in human nature and inherent to the capitalist system." 

7 Comments – Post Your Own

#1) On September 10, 2010 at 1:16 PM, chk999 (99.96) wrote:

Tamny doesn't seem to read much history, does he?

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#2) On September 10, 2010 at 2:32 PM, rofgile (99.23) wrote:

"Jobs will be plentiful because all jobs are the result of delayed consumption"

Great theory... Mr Tammy!

Lets all cut our spending at KMart, Blockbuster, Sears, Macy's, and see how plentiful jobs become!

How much do they pay this guy to write this high quality journalism?


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#3) On September 10, 2010 at 3:33 PM, Robuh (24.80) wrote:

There goes two minutes of my life that I'll never get back.

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#4) On September 10, 2010 at 11:51 PM, ChrisGraley (29.48) wrote:

This is like that Yogi Berra AFLAC commercial.

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#5) On September 11, 2010 at 12:10 AM, catoismymotor (< 20) wrote:

Most important of all, stable money will foster an era of world peace.



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#6) On September 11, 2010 at 12:33 AM, whereaminow (< 20) wrote:

So much horribly wrong here, I can't believe these people are viewed as experts on even wiping their own butts.

America was not on a gold standard in the 1960's.  The law was a gold standard.  The practice was print whatever money you want and hope no one comes to collect the gold.  You can blame a lot of people in that era for hurting Americans (and others), but blaming it on a standard that wasn't followed is um, well, what do you think the word for that is?

Nor was it a gold standard before that. A gold standard means that your dollar is redeemable in gold, not other dollars.  So, America had been off the gold standard in 1933, when FDR confiscated the citizens gold and locked it up in Fort Knox.

Again, you can blame a lot of people for a lot of things in the 1930's, but you can't blame a standard that wasn't followed.

Nor was it a gold standard before that.  In 1926, when England was broke from war debts and desperately trying to hide the fact that they had printed more money than they had gold (again, not following the law), in response the Federal Reserve purposely inflated the dollar at the request of the Bank of England.  This created the stock market boom of the late 20's.  Is that the gold standard's fault?  

With each step further back in history you find another case where economic calamity followed a break from the gold standard (usually for wars.)

The only reality about the gold standard is that once a government is on it, those in power will do just about anything to get off it.  It's a real drag on their full time jobs, which is extracting as much wealth as they can from their productive citizens.

The only monetary standard wise Americans should be interested in is the removal of legal tender laws, removing the banking cartel's monopoly on the issuance of currency. You can put the government on a gold standard, but you can't keep them there.

David in Qatar

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#7) On September 15, 2010 at 5:51 AM, KurtEng (31.15) wrote:

A gold standard doesn't necessarily prevent inflation. The cyanide process of extracting gold from low-grade ore created inflation in many gold standard economies. Gold discoveries have caused booms and busts in many towns where there was previoulsy little economic activity. Milton Friedman argues that when US went from a bimetallic standard to a gold standard in 1873, it reduced the money supply and caused a depression. Precious metals seem like a very stable commodity until one studies just how they are produced.

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