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A Return to the Gold Standard is a Must

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Money printer extraordinaire and Federal Reserve Chairman Ben Bernanke is at it again. He and several of his central banking buddies in Europe and Asia are going to lend dollars to non-U.S. banks that lack adequate liquidity to operate. Many of the recipient banks are feeling the pinch because of their exposure to the Greek debt crisis.

Of course this isn’t the first time the Fed has lent our money to foreign banks to stave off their insolvency. In July of 2009, Bernanke testified in front of Congress that the Fed had loaned over $550 billion to foreign banks during the height of the financial crisis in 2008. And thanks to the Dodd-Frank Wall Street Reform and Consumer Protection Act a one-time General Accounting Office audit uncovered a remarkable $16.1 trillion in Fed loans to various banks including non-U.S. ones during the same time frame.

Now, it’s bad enough the Fed has and will again use our money to bailout foreign banks that were irresponsible. But, the latest round of foreign bailouts comes at a time when it is being reported that tent cities filled with homeless folks are becoming commonplace across America and some Americans are resorting to dumpster diving to feed their families. Is this what America is coming to? Our central bank helps Greek citizens retire at fifty while our citizens live in nylon igloos while wallowing in trash dumpsters for their next meal? Worse yet, besides Ron Paul, no member of Congress or the Obama administration has expressed any outrage over the foreign bailouts.

The whole sordid affair is yet another reason why we need to return to a gold standard to protect the integrity of the dollar. As Congressman Paul has stated many times, we must return to the constitutional mandate requiring gold and silver be used as money. Article 1, Section 10, Clause 1 of the Constitution states in part, “No State shall…emit Bills of Credit; make any Thing but gold and silver Coin a Tender in Payment of Debts…”

Many anti-constitutionalists will argue that the clause only applies to the states and the federal government can use what it wants for money. Thus the current fiat dollar system is legal.

But upon closer examination of history, the anti-constitutionalists are proven wrong once again. During the colonial period of our country’s history, the Spanish milled (silver) dollar was the predominant medium of exchange in the original Thirteen Colonies. . In July of 1785, Congress voted unanimously to make the dollar the monetary unit of the United States to emulate the Spanish milled (silver) dollar. On August 8, 1787, Congress resolved that the new American dollar would contain three hundred and seventy-five grains and sixty-four hundredths of a grain of fine silver. This measure of silver made the new American dollar equal in value to the Spanish dollar.

At the same time in Philadelphia, the Constitution was being written by many of the same people who adopted the silver dollar standard for the country in the Continental Congress. Thus, these men as well as their Constitutional Convention colleagues were well aware that the silver dollar had become and was the official monetary unit of the United States. As a matter of fact, the term “dollar” is referred to twice in the Constitution – Article 1, Section 9, Clause 1 and in the Seventh Amendment.

Where it is not mentioned is under Congress’ powers in Article 1 Section 8. Additionally, gold and silver are not mentioned there either. The only requirements for money in that section are that Congress has the power “…to coin money and regulate the value thereof…” And a month before the Constitutional Convention adjourned, Congress did just that by making the silver dollar with three hundred and seventy-five grains and sixty-four hundredths of a grain of fine silver the monetary unit of the country.

Thus Ron Paul is correct when he says the Constitution calls for the federal government to use gold and silver money. It was implied in Article 1 Section 8 Clause 5 because that is what existed at the time of the writing of the Constitution. Article 1, Section 10, Clause 1 was a reaffirmation of that fact and a prohibition for states to use anything but gold and silver in payment of debts. After all, what’s good for the goose is good for the gander. Why would the states be prohibited from using non-gold and non-silver coins when the federal government isn’t? That would make no sense.

So now that we have ascertained that the current fiat currency system in the U.S. is unconstitutional, so what? The question is, how would a gold and/or silver backed dollar protect our currency from the Fed’s reckless lending overseas? With a gold standard, the Fed would be prevented from doing this because every Tom, Dick, and Harry who holds dollars could redeem them for gold. If enough money printing took place, U.S. gold reserves would run dry and the dollar would be backed by nothing, making it worthless. No responsible leader would let this happen. In fact, this system worked well at preventing high inflation and huge debt accumulation until 1971. However, increased spending on the Vietnam War and Lyndon Johnson’s so-called Great Society caused the dollar to lose value. Instead of cutting federal spending to remedy foreigners redeeming their dollars at an alarming rate for our gold, President Nixon ended dollar to gold convertibility altogether. You be the judge: since that fateful event in 1971 our national debt has soared and general prices in the U.S. have skyrocketed by 435 percent! It’s no wonder the poor are getting poorer and the rich are getting richer.

About Kenn Jacobine

  • Glenn Contrarian

    Worse yet, besides Ron Paul, no member of Congress or the Obama administration has expressed any outrage over the foreign bailouts.

    Perhaps that’s because everyone in Congress and the Obama administration realize that isolationism is just about as smart as Jim Crow…and just about as good for America. Hey – come to think of it, Ron Paul doesn’t have too big a problem with Jim Crow laws either, since he thinks that any business should have a RIGHT to discriminate on grounds of gender, race, creed, color, religion, and even disability.

    Yep! That’s a Real Great American you’re holding up as an example there, Kenn.

    But on a more serious note, one of the really big problems with going back to the gold standard, Kenn, is that the price of gold would – would! – skyrocket. I don’t think you’d argue with that point. And what would happen when the price of gold skyrockets?

    So would the prices of all these items as well, including:

    The most important industrial use of gold is in the manufacture of electronics. Solid state electronic devices use very low voltages and currents which are easily interrupted by corrosion or tarnish at the contact points. Gold is the highly efficient conductor that can carry these tiny currents and remain free of corrosion. Electronic components made with gold are highly reliable. Gold is used in connectors, switch and relay contacts, soldered joints, connecting wires and connection strips.

    A small amount of gold is used in almost every sophisticated electronic device. This includes: cell phones, calculators, personal digital assistants, global positioning system units and other small electronic devices. Most large electronic appliances such as television sets also contain gold.

    One challenge with the use of gold in very small quantities in very small devices is loss of the metal from society. Nearly one billion cell phones are produced each year and most of them contain about fifty cents worth of gold. Their average lifetime is under two years and very few are currently recycled. Although the amount of gold is small in each device, their enormous numbers translate into a lot of unrecycled gold.

    So what would happen to the prices of nearly all our advanced electronics? Oh, wait – let me guess – you think we’d have such grand prosperity the gold standard would render its enforced inflation null and void, right? Riiiiiight.

  • http://blogcritics.org/writers/dr-dreadful/ Dr Dreadful

    “Why would the states be prohibited from using non-gold and non-silver coins when the federal government isn’t? That would make no sense.”

    It does if you read the bit of the clause you conveniently skipped over with an ellipsis on page 1:

    “No State shall enter into any Treaty, Alliance, or Confederation; grant Letters of Marque and Reprisal; coin Money; emit Bills of Credit; make any Thing but gold and silver Coin a Tender in Payment of Debts”. [my emphasis]

    So, as we can now see, the States are prohibited from minting money AT ALL, never mind non-silver and non-gold money. There’s no contradiction there.

    And as far as the usage of the expression “gold and silver Coin” is concerned, since it doesn’t appear in Section 8, which simply authorizes Congress to “coin Money” and “regulate the Value thereof”: I think it needs to be regarded as a convenient archaism, in much the same way that we still speak of “green cards” even though most immigration documents nowadays come in white, beige and a variety of other interesting yet non-green hues.

  • Kenn Jacobine

    Doc,

    If the states can’t coin money then they have to use the money of the federal government. Therefore, the federal government has to use gold and silver in order for the states to use gold and silver as payment for debts. Where is the archaism?

    Glenn, i haven’t the time now to refute your response – i’ll be back later today.

  • http://blogcritics.org/writers/dr-dreadful/ Dr Dreadful

    Where is the archaism?

    I mean that “gold and silver” doesn’t have to actually be gold and silver, any more than the British Pound has to be a real pound of salt or than you really are recording onto film when you film a birthday party on your digital camera.

    The Constitution was ratified in 1788 and the US didn’t officially adopt the Dollar until 1792. Therefore, the former refers to “gold and silver” as a generic term for the as yet unnamed currency to be used by the fledgling nation.

  • Jordan Richardson

    I should add that we aren’t really slinging birds (or mental patients) around when we spend Loonies up here in the Great White North.

  • http://takeitorleaveit.typepad.com/ roger nowosielski

    … the integrity of the dollar …

    That’s a good one, and I should say rather fifty years too late.

    It’d be like trying to save Titanic once the water hit the upper deck and everyone’s scrambling for the lifeboats.

  • Kenn Jacobine

    Doc,

    Dollar officially adopted in 1792? It was mentioned twice in the Constitution written in 1787.

  • Kenn Jacobine

    Glenn,

    Supply of and demand for an item determines the cost of the item. If a gold standard were adopted it couldn’t be brought online immediarely. There would have to be time for more gold to be mined and for the government to get its house in order in terms of acquiring gold and fix the rate to the dollar.

    Gold is skyrocketing now because the fiat dollar is being devalued at an alarming rate. To put it simply demand for the dollar is down and for gold up. The incentive is for mining companies to increase production to meet the increasing demand for gold. They are doing that as we speak. Under a gold standard in the past the price of gold did not skyrocket unless government did something to hinder supply. In the future the price of gold will stabilize as long as the market is allowed to let buyers, sellers, and miners operate. If the government gets involved with price controls then there will be shortages. If the government gets involved in limiting production then the price will skyrocket.

  • Jordan Richardson

    It was mentioned twice in the Constitution written in 1787.

    That’s a reference to the Spanish milled dollar, as in the coin on which United States currency was based when the Mint Act was passed in 1792.

  • http://www.thefreemanonline.org/columns/what-is-a-dollar/ Kenn Jacobine

    This from my article:

    “On August 8, 1787, Congress resolved that the new American dollar would contain three hundred and seventy-five grains and sixty-four hundredths of a grain of fine silver. This measure of silver made the new American dollar equal in value to the Spanish dollar.

    This was one month before the Constitutional Convention adjourned.

    Click my name for the source.

  • http://www.thefreemanonline.org/columns/what-is-a-dollar/ Kenn Jacobine

    In July of 1785, Congress voted unanimously to make the dollar the monetary unit of the United States to emulate the Spanish milled (silver) dollar. On August 8, 1787, Congress resolved that the new American dollar would contain three hundred and seventy-five grains and sixty-four hundredths of a grain of fine silver. This measure of silver made the new American dollar equal in value to the Spanish dollar.

    For the source click on my name.

  • http://www.thefreemanonline.org/columns/what-is-a-dollar/ Kenn Jacobine

    According to constitutional scholar Edwin Vieira Jr. in Aug. of 1787 just one month before the adjournment of the Constitutional Convention Congress adopted the dollar as the monetary unit for the country

  • http://blogcritics.org/writers/irene-athena/ Irene Athena

    In spite of their disagreements on some other issues, Rep. Barney Frank (Dem.) and Sen. Bernie Sanders (Ind.) have, along with Ron Paul, demanded that the Fed make public the nature of its loans of the real wealth that is SUPPOSED to be backing our currency.

    Bernie Sanders’ Letter to Bernanke: Why did the Fed Bail Out the Central Bank of Libya?

    Here’s a video of Sen. Sander, clearly disgusted, trying to evince from Mr. Bernanke answers to similar questions in a Senate Budget Committee Hearing.

    Rep. Barney Frank (Dem.), who has been very vocal lately in decrying the Fed’s foreign loans and the lack of oversight of its activities in general, is being criticized this week…no surprise here…by the neoconservative voice of the Wall Street Journal.

    While it’s true that Ron Paul has been expressing concern about the Fed for years, his detractors are off the mark when they treat the Fed with kid gloves because (or rather, as if) Ron Paul is some lone crack-pot speaking out against it.

    So kudos to you, Kenn, for taking on the Fed in the hostile environment of BC, but your readers should be reminded that Ron Paul has been forging successful alliances with others on the Hill in countering the secret dealings of the Fed, exposing the motivations for the continuation of the Drug War, and taking a long, critical look at the military budget and foreign policy.

  • Kenn Jacobine

    I agree Irene. Ironically, Obama could take a few lessons from Paul, Sanders, Kucinich, and Nader when it comes to reaching across the aisle to work together on a common goal.

    I believe that a major reason among others for the disappearance of the middle class has to do with Fed policy. The wealthy are the ones that use the newly printed dollars first before they have had a chance to circulate and bid prices upward. The poor are the last so consequently they feel the brunt of the price inflation. The middle class is squeezed because of job losses overseas and price inflation caused by devalued dollars. This has been going on since 1971 and yet no other policymakers other than those mentioned above says anythng about it?

  • http://blogcritics.org/writers/dr-dreadful/ Dr Dreadful

    That’s a reference to the Spanish milled dollar, as in the coin on which United States currency was based when the Mint Act was passed in 1792.

    Exactly, and as the Supreme Court in Knox v. Lee pointed out, there’s nothing to stop Congress arbitrarily fixing the value of gold and silver any more than that of printed money.

    So “let’s all agree to pretend that this piece of green paper is a gold dollar coin (whatever that’s worth)” doesn’t, for any practical purpose, mean anything any different than “let’s all agree that this piece of green paper is one dollar (whatever that’s worth)”.

    I don’t know about you, Kenn, but I’m somewhat more likely to feel inclined to go shopping with a wallet full of bills than with a wheelbarrow full of metal. How’s that for economic stimulus?

  • The Visitor

    if this is a hostile environment, methinks you have limited experience with the Internet.

    so declares The Visitor

  • jamminsue

    I remember that just before Nixon turned us into a fiat currency that no one in the US could buy gold. One depression (according to a history class I took) (in the 1800’s) was triggered when we went from gold or silver based currency to just gold.

  • http://blogcritics.org/writers/dr-dreadful/ Dr Dreadful

    Was it the depression that took place in the 1800s, or your history class?

    [dives behind nearest piece of heavy furniture]

  • jamminsue

    It was soon after the civil war

  • http://blogcritics.org/writers/irene-athena/ Irene Athena

    You may be using a wheelbarrow instead of a wallet to cart around sufficient paper money to cover your weekly grocery shopping trip, if inflation continues. This happened in the early part of the 20th century in Germany, and in Zimbabwe just a few years back.

    Paper money that actually REPRESENTS a certain amount of a valuable metal is a perfectly honest and convenient way of doing business. You used to be able to exchange your paper legal tender for the amount of precious metal it represented. Not anymore.

    All the gold was called in by FDR in 1933 with Executive Order 6102. Citizens had to turn in all their gold, all of it except for a few coins and the small amount in jewelry or dental fillings. The citizens were given play monopoly money, fiat money, and we were told to believe it was worth something, even though it couldn’t be traded in for anything, because the Federal Reserve Board SAID it was worth something.

  • http://blogcritics.org/writers/irene-athena/ Irene Athena

    Declarative Visitor: The biggest threat the Internet poses to me at the moment is as a waste of time. I can almost sense it: someone is scouring the internet for a chart, some math-y, statisticall-y looking thing that he will claim depicts “a bell curve, clearly showing an exponential decline in inflation since January 2009.”

    Math is hard, or so the rumor goes. Most people will just keep their heads down and assume he knows what he’s talking about, and a few will even, confident in this delusion, join in the mockery of people like Kenn who post articles like this.

    Kenn, let’s hope to see more of the cooperation you describe in #14. It’s a bright spot in a bleak picture.

  • http://blogcritics.org/writers/irene-athena/ Irene Athena

    (What I’m saying Visitor, is that I can be just as hostile as the next person, but I can usually avoid such nastiness if I make my exit early enough.)

  • Clavos

    Sometimes, Irene, hostility is the only response which is heeded.

    Just sayin’

  • t roll

    Kenn – here are Delong’s Talking Points on the Likely Consequences of Re-Establishment of a Gold Standard and here’s a summary of Roubini’s pro central banks view

    questions of constitutionality aside what are your arguments re these points?

  • http://blogcritics.org/writers/dr-dreadful/ Dr Dreadful

    Irene, when inflation gets that bad, money ceases to have any real meaning at all. Germans in the 1920s largely stopped bothering with it and turned to barter instead.

    There’s no real reason why gold or silver should be any more stable than a fiat currency. They’re only valuable because we say they are. A government could in theory contemplate a table of 1000 gold bars and decree that they possessed the value of a cat turd.

    Incidentally, the old story about people carting their money about in wheelbarrows in Weimar Germany is a myth: one which seems to have come about as a result of attempts to convey hyperinflation in meaningful terms – i.e. what sort of receptacle you would have needed in order to carry enough one mark notes to buy a loaf of bread. But in the real world, as I said, most people didn’t bother.

    As for Zimbabwe, I suspect that much the same thing was going on there: the difference being that as most Zimbabweans were already poor anyway, the impact of the collapsed dollar on the average Joe was not as pancakey.

    Generally that’s what happens when a country has a crappy currency: the people just turn to something that does work. For example, I have a 500 Cambodian Riel note at home somewhere: it’s worth about 12 cents. Cambodians only use Riels as small change; for all meaningful purchases, they use the US Dollar. If that goes down the pipes, they’ll simply find some other medium of exchange that hasn’t.

  • Glenn Contrarian

    Kenn –

    Supply of and demand for an item determines the cost of the item. If a gold standard were adopted it couldn’t be brought online immediarely. There would have to be time for more gold to be mined and for the government to get its house in order in terms of acquiring gold and fix the rate to the dollar.

    But what you’re forgetting, Kenn, is that speculation wouldn’t wait from the decision to switch to the gold standard and the actual switch itself. Anyone with even a rudimentary knowledge of investing knows that the speculation would start even before the final vote took place, and if the vote passed, the speculation would go wild…

    …and so would the prices of everything that requires gold in its manufacture, which includes the great majority of ALL advanced electronics. In other words, you’re forgetting that the law of supply and demand often begins with the speculators…or didn’t you notice a particular spike in oil prices a few years ago?

  • John Lake

    That ScribeD site is as reliable as the papers sold at grocery store checkouts. I am not aware of foreign bank bailouts. Or are you are talking about U.S. banks with partial foreign ownership?
    The Dodd-Frank sought to increase transparency and accountability, and it makes sense that it increased the feds willingness to loan to banks. The money is paid back with interest, and we all are able to have safe and secure banks to work with.
    Tent cities do exist. Dumpster diving may occur, but most areas have shelters that feed the hungry. At least in the present system, even those who find themselves unable to survive, can. Remember, Ron Paul is all theory; we may get some ideas from the ageing constitutionalist, but he doesn’t actually have aspirations to the White House. Any aid by agencies to Greek banks is multi-national, and unrelated to “the bailout.”
    Gold is a subjective commodity, with no real value. Glenn Contrarian makes valid points; Gold and silicon are essential, but probably not at $1800/oz. A better standard for the dollar might be currency based on the GNP, or with some ties to the stock market. These are fluctuating values, but the problem is resolvable.
    Here is an interesting note on the value of gold. We can hardly watch a television broadcast without some group somewhere asking us to place our unwanted and broken jewelry in an envelope, and send it for cash. I suspect they are paying “broken jewelry” prices. Even pawn shops vary in the price they pay for gold. In any case, the reserves of gold from all these sources, and from new mining, must be staggering.

  • John Lake

    In comment #27, Glenn Contrarian suggests that in fact, electronic usage dictates the price of gold. With gold so pricey, it is surprising that digital developers don’t mine their own gold, or purchase it independently from, say, Afghanistan. They could easily halt gold use, and leverage lower prices. If such usage is the basis for gold prices, imagine the catastrophe if an artificial gold, or a substitute were developed. That may be in fact Glenn’s suggestion.

  • Glenn Contrarian

    No offense, but I did not say that electronic usage dictates the price of gold. I said that the price of gold would dictate the price of electronics. Furthermore, according to my reference, the use of gold is greatest not in electronics, but in jewelry – which makes a lot of sense.

    But in any case, the moment we even looked like we’d seriously consider going back to the gold standard, the speculators would drive the price of gold through the roof…and the cost would be passed on to our electronics.

  • John Lake

    In microcircuitry, the amount of gold in most products wouldn’t come to more than a few dollars. Right?

  • http://blogcritics.org/writers/irene-athena/ Irene Athena

    Dr. Dreadful, this statement is simply not true:
    There’s no real reason why gold or silver should be any more stable than a fiat currency. They’re only valuable because we say they are. A government could in theory contemplate a table of 1000 gold bars and decree that they possessed the value of a cat turd.

    No alchemist ever chased the vision of turning anything into cat turds. A government MIGHT make the announcement that 1000 bars was equal to exactly one cat turd, but they’d FIRST quickly collect all the gold (as FDR did in 1933) distribute cat turds to the trusting populace who would gladly give up their gold in exchange, and THEN the folks with their hands on all that “worthless” gold would find someone in this world…a LOT of someones…who held it in the same high esteem it’s been held for millenia.

  • http://blogcritics.org/writers/irene-athena/ Irene Athena

    Clavos #23 — Ain’t THAT the truth. On some days when I come to visit, and watch for awhile, I remember, “Oh yeah, Brad Pitt was in this movie called Fight Club… Bye for now.

  • zingzing

    “Dr. Dreadful, this statement is simply not true”

    well, if you miss the point, it’s not… there’s no reason why gold is worth anything. anymore than there’s a reason why benzoylmethylecgonine is worth more than gold. although at least benzoylmethylecgonine is highly useful.

  • http://blogcritics.org/writers/irene-athena/ Irene Athena

    Get that tawdry benzoylmethylecgonine necklace out of my sight, and busy yourself establishing the Photo-shopped origins of these images of wheelbarrows of money being pushed by disconcerted Germans.

  • http://blogcritics.org/writers/dr-dreadful/ Dr Dreadful

    Irene, there are precisely two distinct images of people pushing wheelbarrows in your collection, and at least one of those doesn’t feature Germans, unless the First National Bank had a Berlin branch. (Judging by the clothes, I’d hazard a guess that it’s actually Depression-era America.)

    The other photograph is clearly posed, probably as a propaganda stunt to make precisely the sort of point I was explaining earlier.

    There’s also an interesting image of children playing with what appear to be stacks of banknotes (though no barrow), which also reinforces my point that in a hyperinflatory climate money ceases to have any real meaning.

  • pablo

    Nice article. Thanks

  • http://blogcritics.org/writers/irene-athena/ Irene Athena

    No, Dr. Dreadful, you can’t brand as “mythical” accounts of wheelbarrows being used to cart worthless money to stores in the Weimar Republic, not unless you have proof that statements like these (page 4 of “Culture and Inflation in Weimar Germany,” Bernd Widdig, University of California Press, 2001) are false:

    “In the summer of 1923,” [my grandfather] told me, “money was worth so little that we had to fill up a whole wheelbarrow with banknotes when we went to town to try to buy groceries.”

    No one was contesting your claim that hyperinflation existed in the Weimar republic, in fact, the wheelbarrow account is completely consistent with that fact. True, people quickly transitioned to more convenient bartering, but the wheelbarrows did come into play.

    What I was contesting was your statement that you’d rather go shopping with a wallet full of bills than a wheelbarrow of metal. No, there’d be no need for wheelbarrows if the bills were backed by, could actually be traded in for, something of universally recognized value: gold. You’d countered that the government could equate gold with cat turd. I countered that it couldn’t. Good night.

  • Jordan Richardson

    Irene, what gives gold its intrinsic value? What exactly makes it more valuable than, say, rice?

  • tr oll

    …and here’s a recent piece by Eichengreen and Temin’s on the topic Fetters of Gold and Paper pdf

    quoting Longfellow they say of the gold standard – the Euro – and other fixed exchange rate systems:

    And when she was good, she was very, very good
    But when she was bad she was horrid.

  • Kenn Jacobine

    Gold is what the market says it is. That is why it is close to $2000.00 an ounce. Glenn, argued it best – it is in all sorts of electronic items and jewelry. What are fiat dollars in? The banksters portfolio to make the rest of us poor.

  • Kenn Jacobine

    Troll # 24

    I see the Fed as the cause of business cycles and want to eliminate it altogether. I don’t want them fixing the price of money for the same reason government shouldn’t fix wages and prices. Nixon tried that too and it was a disaster.

  • http://blogcritics.org/writers/irene-athena/ Irene Athena

    Jordan, that’s a question for the sages of the ages, not for me! Here are a few ideas, though. Unlike other metals, it is subject to neither rust nor tarnish. If you have a stash for a rainy day, when that rainy day comes, your supply will not have diminished. It’s also scarce, so a significant amount of wealth is easily portable, (ie, handful-for-handful, it’s worth more to a trader than something he could grab out of his own rice paddy would be.)

    Gold alone isn’t the answer, though. Gold (or any other substance) as a foundation for a nation’s economy, and for the globe’s, is only as sound as the fairness and honesty of the people managing it’s translation into currency for use in trade within and among nations. Tying the value of printed currency to something of value, for “honest money,” is only aspect of that sound system, but it is a part.

  • Jordan Richardson

    Thanks for the answer, Irene.

  • pablo

    In gold we trust!

  • zingzing

    kenn: “Gold is what the market says it is.”

    doesn’t that frighten you a bit?

    “I see the Fed as the cause of business cycles and want to eliminate it altogether.”

    you should read some history. what “caused” business cycles before the fed? if you want to get rid of business cycles, you’ll have to get rid of business.

  • http://blogcritics.org/writers/dr-dreadful/ Dr Dreadful

    “In the summer of 1923,” [my grandfather] told me, “money was worth so little that we had to fill up a whole wheelbarrow with banknotes when we went to town to try to buy groceries.”

    Irene, your quote is hearsay, which is more or less the same thing as myth.

    Anyway, the wheelbarrows are a sidebar. Just one of those little psychosocial phenomena I find fascinating.

  • http://blogcritics.org/writers/dr-dreadful/ Dr Dreadful

    And as another sidebar, it’s been estimated that if all the gold ever mined were gathered together (are you listening, Mr Roosevelt?), it would fit under the Eiffel Tower.

    Partly explains why we humans prize it so much (that, and it’s also alluringly shiny), but also puts its overall practical value into perspective… in the event that, say, the earth underneath the Eiffel Tower were to open up and swallow the lot.

  • http://blogcritics.org/writers/dr-dreadful/ Dr Dreadful

    And platinum apparently is even rarer. I’m wearing a significant portion of the world’s platinum reserves on my finger right now, in fact.

  • http://blogcritics.org/writers/irene-athena/ Irene Athena

    That wasn’t my quote, Dr. Dreadful. It was a quote from a book on life in the Weimar Republic, published by the University of California Press.

    Just one of those little psychosocial phenomena I find fascinating. A fascination bordering on the obsessive. So…I’m going to back away slowly…and tell you it’s okay…we won’t talk about wheelbarrows any more.

  • Kenn Jacobine

    Zing,

    In the 1800s the business cycle was primarily caused by government monetary policy. Their was a national bank for a while and it inflated the currency for the War of 1812. When loans were called in the result was the panic of 1819. There were times when government policy was to allow banks to suspend payments in specie. Banks inflated the currency and when the suspension ended so did the boom and on came the bust. And then there is the whole government sanctioned practice of fractional reserve banking. So, the Fed didn’t exist but government policy was doing the same kinds of things.

    The Fed was born on an Island off the coast of Georgia. Only bankers and a few influential senators were there. The Fed was developed for the good of the banks. Anybody who doesn’t realize that given its track record for close to one hundred years is not paying attention.

    Again, price controls by government do not work. To assume that mortal men/women can determine what the rice of money is is what Hayek called the “Fatal Conceit”. The market is the best mechanism available to determine prices.

  • zingzing

    my point, kenn, is that business cycles exist with or without the fed…

  • Clavos

    The Fed was born on an Island off the coast of Georgia.

    Jekyll Island

  • http://takeitorleaveit.typepad.com/ roger nowosielski

    Georgia, and (Dr) Jekyll to boot.

    It spells “sinister” from the very beginning.

  • troll

    …certainly sinister of Daddy W to air plans for his scheme only in the most obscure trade rag and its financial supplement where this secret proposal appeared

  • http://takeitorleaveit.typepad.com/ roger nowosielski

    That is a hell of a find.

    I suppose the Bank of England has a longer history as a central bank.

  • http://blogcritics.org/writers/irene-athena Irene Athena

    2/9/1935 Saturday Evening Post “…I was as secretive – indeed, as furtive – as any conspirator….I do not feel it is any exaggeration to speak of our secret expedition to Jekyll Island as the occasion of the actual conception of what eventually became the Federal Reserve System….We were told to leave our last names behind us. We were told, further, that we should avoid dining together on the night of our departure. We were instructed to come one at a time and as unobtrusively as possible to the railroad terminal on the New Jersey littoral of the Hudson, where Senator Aldrich’s private car would be in readiness, attached to the rear end of a train for the South…If it were to be exposed publicly that our particular group* had gotten together and written a banking bill, that bill would have no chance whatever of passage by Congress.”

    *Those attending
    National City Bank president Frank A. Vanderlip, author of this article.
    Senator Nelson Aldrich and his personal secretary Arthur Shelton.
    former Harvard University professor of economics Dr. A. Piatt Andrew.
    J.P. Morgan & Co. partner Henry P. Davison.
    Kuhn, Loeb, and Co. partner Paul M. Warburg.

    “The purpose of the meeting was to come to an agreement on the structure and operation of a banking cartel. The goal of the cartel, as is true of all of them, was to maximize profits by minimizing competition between members, to make it difficult for new competitors to enter the field, and to utilize the police power of government to enforce the cartel agreement.” G. Edward Griffin, author of “The Creature from Jekyll Island”

    I agree, Kenn. While troll posted links that predate the 1910 meeting by a few years where Warburg tries to make the case to the public for need for a new banking arrangement, the plans made on Jekyll Island for the Federal Reserve and a government-protected banking cartel were made in the utmost secrecy, because, by the admission of one of the participants, they knew that Congress would not approve.

    The Federal Reserve’s secrecy is finally coming to light to a broader segment of the population. I’ll post it again: Note the dogged refusal by Bernanke to reveal to Bernie Sanders the names of the recipients of $2.2 TRILLION in loans of money of OUR money.

  • troll

    that does sound pretty damned conspiratorial now don’t it…

  • http://blogcritics.org/writers/irene-athena Irene Athena

    *shrugs* To me it does.

  • http://blogcritics.org/writers/irene-athena Irene Athena

    I can’t imagine that DEFENDING the secrecy of the Federal Reserve would be part of the Occupy Wall Street’s agenda, but if it ever becomes that, count me out.

  • troll

    commercial announcement

    there’s a sizable end the Fed group in the occupy movement Irene…make your voice heard there

    we’ve had teaparty members address the assembly in albq making points on which all can agree and work from constructively

    when they get around to ‘god bless america’ I’ve noticed the general enthusiasm level drops off but the general rule is to show respect for all voices

    /commercial announcement

  • troll

    didn’t see #59 before #60…was agreeing w/ your #56 in my #57

  • http://blogcritics.org/writers/irene-athena Irene Athena

    It was hard for me to see a difference in the tone of #54 and that of #57. I’ll take your word for it that there was one.

  • troll

    hmmm – consider the possibility that based on the quote you posted I decided that what I posted didn’t preclude conspiracy at the time actual decisions were made

    does that help you distinguish the doubt in my 54 from agreement in 57?

  • http://blogcritics.org/writers/irene-athena Irene Athena

    I have new-found confidence in my power of persuasion. :) Peace to you.

  • troll

    :-)

  • Igor

    There will be no Gold Standard allowed by the industrial and financial interests that control the USA because then the economy will be out of their control and they can´t play the games they play to seize peoples money.

  • http://takeitorleaveit.typepad.com/ roger nowosielski

    @64

    Atta girl, but how could you ever doubt it?

    By the hordes of disbelievers?

  • Kenn Jacobine

    And I would add the inflation the banking cartel has caused all to profit themselves is precisely what destroys the lower and middle class. Our jobs are shipped overseas, prices rise making ends hard to meet, and savings and pensions lose value.