Home / Culture and Society / Romney is Focusing on the Wrong Mechanism

Romney is Focusing on the Wrong Mechanism

Please Share...Print this pageTweet about this on TwitterShare on Facebook0Share on Google+0Pin on Pinterest0Share on Tumblr0Share on StumbleUpon0Share on Reddit0Email this to someone

Coming off derogatory remarks he recently made about the underclass in America, Republican presidential hopeful Mitt Romney apparently felt the need to throw them a bone. Last week, he reaffirmed his support for linking regular increases in the minimum wage to the rate of inflation. Given that Romney has held this position since he ran for governor of Massachusetts in 2002, one could assume that he really believes the proposal would go a long way to helping the working poor. But, what he is really doing is focusing on the wrong mechanism to help them.

On the surface, Romney’s proposal seems reasonable. As prices increase, so should wages. After all, aren’t Social Security benefits indexed for price inflation? However, the first realization that must be acknowledged is that government economic policy causes the price increases that allegedly make the minimum wage necessary for some to live a minimal existence. In other words, if the federal government would simply live within its means and cease using the Federal Reserve to monetize huge amounts of debt and maintain artificially low interest rates, there would be little or no need for a minimum wage.

As the late Austrian economist Murray Rothbard pointed out in his book, The Mystery of Banking, from the mid-eighteenth century until 1940, prices in the United States actually fell on average from year to year,except during war years. Since 1940, the Federal Reserve, which became responsible for maintaining price stability and the value of the dollar through monetary policy, oversaw a decline in the dollar’s value of more than 93 percent. That calculates to a 1506 percent annual rate of inflation change! It’s no wonder we have become a society with a low savings rate and two partners working to make ends meet.

What was the difference between these two economic epochs in our nation’s history? The first had a gold standard and the second was based on a fiat dollar standard.

The bottom line is that minimum wage laws are a reaction by politicians to their own historical bungling of the economy. If Mitt Romney and his ilk really wanted to help the working poor in America they would endorse a sound money policy instead. In particular, a gold backed currency that would alleviate the ability of politicians and central bankers to devalue the dollar and cause price inflation by printing money and running deficits. In short, a return to the gold standard would stabilize and eliminate the need for a minimum wage.

Powered by

About Kenn Jacobine

  • Igor

    65-Kenn: you are simply wrong when you state: “Capitalism is not inherently instable in relation to other economic systems.”

    No. Capitalism IS inherently unstable. And it has nothing to do with other systems: it’s not relative, it is absolute.

    The old time economists, Hume, Smith, Ricardo, etc., realized this as a unique characteristic of capitalism: capitalist instability comes from WITHIN the system. It is inherent. Hundreds of Econ grad school theses have been written about this since then (maybe thousands, maybe millions!) describing what those forces are and even how to rein them in (you won’t like this, but one of the best ways is to impose taxes that greatly reduce reaction time by increasing costs).

  • Glenn Contrarian

    Kenn –

    Obama is out of options – if he stops spending the economy (the previous bubble that was not allowed to burst) will finally burst. If he continues spending it will result in the collapse of the dollar because no one besides the Fed will want to buy our debt which means they will have to print even more causing at that point Weimar style hyperinflation.

    So what will you say when that said gloom-and-doom doesn’t happen? You won’t change your mind – you’ll continue waiting for Godot, saying that it’s “just around the corner”, that it’s “going to happen eventually”…and when we eventually do have a financial crisis – as there always is sooner or later – you’ll pat yourself on the back and claim it as proof of the failure of Keynesian economics.

    Kenn, we could both go on for weeks on this with neither of us giving an inch. I know this may come as a surprise, but I do have a healthy respect for you, for you do strive to back up your beliefs with educated discourse…and, since you are the more educated and more experienced, it’s only proper that you have the last word.

  • Kenn Jacobine


    Capitalism is not inherently instable in relation to other economic systems. If you look at the economic history of the U.S. In those times of wild swings (inflation) they were generally times of national banks, central banks, and times when those institutions allowed banks to suspend payment of specie. That is the primary cause of booms and busts and wild fluctuations in inflation. It is central banking, which is no better than the old central planners at the Soviet Politboro, that is responsible for instabilities.

  • Kenn Jacobine

    The point is that the French and potentially the Chinese can manipulate our currency because of our actions – massive inflating of the dollar. It wasn’t the Gold Standard that caused it but Keynesian politicians in Washington. These are the policies you, Glenn, advocate. Nixon got around it by defaulting (closing the gold window). Obama is out of options – if he stops spending the economy (the previous bubble that was not allowed to burst) will finally burst. If he continues spending it will result in the collapse of the dollar because no one besides the Fed will want to buy our debt which means they will have to print even more causing at that point Weimar style hyperinflation.

    All this because we are intent on perpetuating the failed welfare/warfare state. Or we don’t have the courage to do what is needed.

  • Glenn Contrarian

    Kenn –

    The Chinese and others can manipulate our economy precisely because our dollar is backed by nothing which has allowed Washington to borrow trillions from them

    Um, didn’t I just show you earlier how the French DID manipulate the strength of our currency when we were on the gold standard? Yet you’re now implying that the gold standard would somehow protect the strength of our currency?

  • Why does Kenn fall for the bait, that’s what I like to know. It’s as though he’s so intent on proving his point he can’t even think straight.

  • Roger, that’s the most clarity you’ve shown on these threads for a long time, and you’re absolutely right.

  • The entire premise is wrongheaded, as though we had nothing to do with “our economy,” that the straits we’re in are none of our doing.

  • The Chinese and others can manipulate our economy precisely because our dollar is backed by nothing which has allowed Washington to borrow trillions from them

    And the Chinese yuan is backed by…?

  • Igor

    #55-Kenn illustrates the problem that economists discovered 200 years ago in the capitalist system: the boom/bust cycle in capitalism is not triggered by outside influences like drought, war, flood, etc., but by systemic forces within capitalism. Now we know that capitalism has inherent instability.

    That’s the big problem with a market economy: it is inherently unstable, it swings wildly between highs and lows until it explodes.

    So it reduces everything to gambling. Forget hard work, forget ingenious innovation, forget planning. Just put your money on red at the casino.

    The smart thing to do is to introduce the stabilizing influences that every Sytems Engineer is familiar with: friction, energy storage, amplitude control, etc.

    In an economy, taxes take the place of friction (by imposing a cost on artificial sales), federal fiscal policy creates storage (by saving resources during booms and spending them during busts), etc., progressive taxes work against excessive allocations of financial resources (soft limits).

    But just standing around doing nothing, as so-called free marketers seem to advocate is a recipe for violent overthrow. There’s a limit to how far and how often you can screw the 99%.

  • Kenn Jacobine


    The Chinese and others can manipulate our economy precisely because our dollar is backed by nothing which has allowed Washington to borrow trillions from them Actually, I’d like to see the government get out of the money business altogether. Money, when backed by a commodity, is a good like rice, chickens, or cars. It is a medium of exchange that relieves us from carrying around cumbersome items like desktop computers and wheelbarrows. It is also divisible allowing us to make change. If money were private like other goods, it would be free from political manipulation. In fact other money would enter the market like different brands of cereal. There would be competition which would improve the quality of money and produce a stable environment for economic growth.

  • Glenn Contrarian

    Again, Hayek spoke out against deflation as well as inflation (and the fact that the quote came from Wikipedia doesn’t mean the quote isn’t accurate – check the referenced used in Wiki).

    I agree with you about what happened to the housing market (though you and I would probably disagree on the root cause thereof).

    But back to the gold standard, I still want to hear how we’re supposed to protect our monetary system from manipulation by other nations, especially given that transactions now take place in minutes or even seconds whereas they would have taken days or weeks before.

  • Kenn Jacobine

    I don’t have a problem with deflation if that is what the market calls for. The price of housing got totally out of control during the 2001-2007 housing boom. Apparently the enormous price increases were artificial and unwarrented. We are currently in a deflationary spiral in terms of housing costs. This is necessary given the glut of housing that was built and the unrealistic price levels achieved.

    I don’t pretend to know how much money should be in circulation or what the interest rate should be. That would be what Hayak called the “Fatal Conceit”. Ben Bernanke doesn’t know what it should be either. That is why I believe, unless he gets lucky, with all the new money he has created we are heading for a period of high price inflation. Prices are on the rise already as the money supply has begun to enter the market. As consumers realize their money will not buy as much they will seek to spend it thus speeding up the velocity of money causing even higher prices.

  • troll

    personally I value honesty as much as truth

  • Since I appear to have joined this conversation, watch all the resident liberals come out of the woodwork in defense of Glenn.

    I’d tickle me to death if I was proven wrong.

  • Why should that be of any concern?

    It’s the truth that matters.

  • troll

    Glenn Contrarian –


    I see that you have no interest in addressing your penchant for putting words in others’ mouths

  • Glenn Contrarian

    troll –


    Okay, so you’re apparently not concerning yourself over which position is correct in the light of history, but are simply of the opinion that I’m either an idiot or dishonest because I (in your eyes) am simply making up strawmen.

    You didn’t mention anything about Kenn’s claim – which he doubled-down upon – that we’ve had a 1506% annual rate of change of inflation for the past 70-odd years. I guess I’m an idiot or a liar for pointing out the problem with that.

    You didn’t detect that while Kenn tried to explain away (with some success) the periods of inflation that came with war, he didn’t even attempt to explain the periods of deflation – for the two obviously combined for wild economic swings. Go back and read #39…because I have a real problem with someone advocating a return to the gold standard when ALL our periods of deflation occurred while we were on the gold standard…and even more so when that particular someone presents his argument without even addressing the periods of deflation. I guess I’m either an idiot or a liar for pointing out this problem, too.

    Troll, I am neither an idiot (except for when I say that I am) nor am I dishonest (for that would make me a hypocrite, and that is something I won’t abide). If you want to accuse me of something, go with Jordan’s quite accurate accusation of habitual sanctimony on my part. Add a shot of hubris for good measure, since li’l ol’ me thinks I have a better understanding (not knowledge, but understanding (there’s a difference)) of history than do our resident historians Kenn Jacobine and Dave Nalle. How someone can claim to understand the grand sweep of history and remain a libertarian, I just don’t know.

    So…troll, if you’ve just got to accuse me of something unsavory, at least be accurate when you do so, okay? At least then I’ll agree with you as I did with Jordan – and as I have with Roger with a few of his not-always-so-constructive-criticisms of me in the past. Think deeper, troll…and do so without the assumptions that someone’s either an idiot or a liar – they might simply be approaching the matter from directions that just don’t make sense to you.

  • troll

    ok – I’ll play a bit

    having read Kenn’s #42 you are quite aware that he never said that Vietnam was “in and of itself” the cause of Nixon’s actions and that he had already pointed to Europe’s raid on Ft. Knox

    further – you are quite aware that Kenn associated wars with periods of inflation and had not claimed anything about the periods of deflation following

    therefore I conclude that you are either an idiot completely absorbed in your own argument or intellectually dishonest and I don’t think that you’re an idiot…though I could be wrong

    further – you are perfectly aware that I haven’t advocated a return to the gold standard nor claimed that there is wisdom of opening our monetary system to direct manipulation by, say, China. so your #48 is just more of the same crap

    it is simply fucking rude to turn people who you’re arguing with into straw men by putting words in their mouths

  • Glenn Contrarian

    troll –

    “lack of honesty” That would imply that I am willfully and knowingly being deceitful. Show me where I’m doing so.

    And while you’re at it, describe to me the wisdom of opening our monetary system to direct manipulation by, say, China.

  • troll

    disgusting lack of honesty there Glenn Contrarian


    both inflation and deflation (and disinflation as well) can contribute to ‘malinvestment’ by leading expectation astray…this dynamic isn’t linear

  • Glenn Contrarian

    troll –

    If you’d kept up with the thread, you’d have seen that Kenn was contending that war was one of the big reasons behind the inflationary/deflationary cycle we had from the mid-1600’s until the mid-1950’s. I pointed out that we had no such fluctuation during the Vietnam war – we had inflation only , but NOT deflation (and I’d pointed out earlier that we’ve had significantly more such fluctuations than we’ve had wars). The context of Kenn’s argument to that point was that war was a major reason in behind the fluctuations. Kenn then pointed out that there was inflation during Vietnam, which was why he implemented price controls…and I pointed out that there was more to it than that – specifically, de Gaulle’s attack on our international influence through our dependence on the gold standard…and we’ve have the same vulnerability to China if we went back on the gold standard.

    If you’ve something constructive to add to the argument, feel free to do so.

  • t

    (drop the ‘the’ or add ‘war’ as you prefer)

  • troll

    …where did Kenn say the Vietnam was in and of itself the reason for Nixon’s actions?

    is an acknowledgment of error in order? hhhmmm?

    I find GC’s inability to resit putting words in others’ mouths unforgettable and unforgivable

  • Glenn Contrarian

    Kenn –

    No, Vietnam was NOT in and of itself the reason why price controls were imposed – if that were the case, then price controls would have been imposed long before 1971.

    Why? First:

    … the gold standard may be susceptible to speculative attacks when a government’s financial position appears weak.

    And has this happened before? See for yourself:

    Under the administration of the French President Charles de Gaulle up to 1970, France reduced its dollar reserves, trading them for gold from the U.S. government, thereby reducing U.S. economic influence abroad. This, along with the fiscal strain of federal expenditures for the Vietnam War and persistent balance of payments deficits, led President Richard Nixon to end the direct convertibility of the dollar to gold on August 15, 1971, resulting in the system’s breakdown (the “Nixon Shock”).

    Yes, the gold standard enables the old saw that “he who has the gold, makes the rules”…which means that a nation with a lot of dollars on hand (read: China) could essentially dictate our monetary policy because all they would have to do is follow de Gaulle’s example.

    You say I don’t know what I’m talking about – and I’ll give you essentially the same reply I gave Dave Nalle: you might have an absolutely perfect knowledge of history, but such a wealth of knowledge benefits you not at all if you do not have a real grasp, a real understanding of the ebb and flow of history. Just because one is an historian doesn’t mean one understands history – Newt Gingrich is proof enough of that!

    And by your refusal to own up to a simple mistake (which everyone (including myself) would have forgiven and forgotten if you’d owned up to it) – “1506% ANNUAL rate of change of inflation” – you have shown me that you believe yourself incapable of admitting error in front of students…and that’s why you are trying so hard to make historical facts fit your opinions, rather then demanding that your opinions fit historical facts.

  • Kenn Jacobine

    Glenn, There was inflation during Vietnam – that is why Nixon imposed price controls and he closed the gold window to foreign redemption. The Europeans were redeeming devalued dollars for gold per Bretton Woods. Nixon closed the gold window to secure our gold reserves. You just don’t know what you are talking about.

  • Glenn Contrarian

    Kenn –

    1 – There were at least forty-odd inflation/deflation swings in the second reference I gave – and probably more…and considering that we were spending FAR more during the Cold War than in most of the other wars – AND the fact that we had no such fluctuations during the Vietnam War…

    …that all means that war didn’t have nearly the impact that you think it did.

    2 – And what makes you think that constant price inflation of just 2-5 percent is bad? And how much of the present “inflation” is merely comparing apples and oranges? For instance, televisions cost a bit more now than they did twenty years ago…but you may have noticed that there’s been a few changes in television technology since then.

    The same would go for automobiles and phones and even houses…and for that matter, tires and shock absorbers and calculators and…

    …you do get my point. How about instead comparing apples to apples, and THEN look to see how much the prices of those apples have gone up since way back when. And I suspect you’ll find it ain’t as bad as you think it is.

    But I forget – this is KENN we’re talking with, the guy who says we’ve had a 1506% ANNUAL rate of change of inflation for the past seventy years! And THEN when I pointed it out to him, he had to double-down on his incredibly obvious error just so he wouldn’t have to admit he made a simple mistake that everyone would have simply forgiven and forgotten.

    No, Kenn, you’re digging so deep trying to find anything, absolutely anything, to support the obvious errors in your interpretation of history.

  • Kenn Jacobine

    Glenn, do you realize that in a lot of those instances when price inflation went wild on the chart the U.S. was at war? Consequently, the redeemability to gold of the currency was lifted so the government could finance the conflict. This includes the War of 1812, the War Between the State, WW I and WW II. Secondly, as I said in my article, Rothbard pointed out and your graph shows that prices actually decreased from the mid 1800s to 1940 with the exception of the War Between the States time period. That was a time for the most part when the U.S. dollar was linked to gold.

    Let me ask you this: even if price inflation is just 2-5 percent per year, why don’t you accept this as bad? Prices are still gong up. If you gained 2 to 5 pounds every year I bet your doctor would think that is bad.

    And BTW you used Wikipedia to Quote Hayak????

  • Glenn Contrarian

    troll (and Kenn)

    Troll’s reference (#32) to support Kenn’s contentions was titled “Choice in Currency: A Way to Stop Inflation”. So I decided to see how America’s inflation cycles have been over the years…and this is what I found. And that’s not all – here’s another chart showing our wild inflation/deflation cycles going all the way back to the late 1600’s!

    Our rate of inflation was really nice during the 1960’s, went higher during the 70’s and early 80’s, but has been pretty nice ever since. But the chart clearly shows that before the mid 1950’s, our inflation/deflation cycle was wildly worse than anything we’ve experienced even during the Reaganomics we’ve suffered under for the past 30 years.

    So if – as Kenn claims – our inflation has been SO bad since 1940 (remember that he says we’ve had a 1506% ANNUAL rate of inflation since then), exactly how is it that our inflationary cycle’s quiescence since we went of the gold standard is unprecedented in how we’ve had zero significant cycles of deflation ever since? And ALL of our periods of deflation happened while we were on the gold standard!

    Even Hayek – the author of troll’s reference and whose economic theories Kenn seems to champion – agrees that deflation is a bad thing.

    So while in the big picture we’ve had more total inflation since the mid-1950’s, it’s been relatively steady and has not gone on the wild swings that our economy faced just about every single decade since before we were even a nation!

    So no, remaining off the gold standard doesn’t look like creeping Weimar Republicanism to me!

  • Glenn Contrarian

    Kenn –

    Was the Weimar Republic on the gold standard?

  • Igor

    35-Kenn: Bah! The Weimar republic was fucked because the Europeans wanted to fuck them good! And they did!

    “The inflationism of the currency systems of Europe has proceeded to extraordinary lengths. The various belligerent Governments, unable, or too timid or too short-sighted to secure from loans or taxes the resources they required, have printed notes for the balance.”

    John Maynard Keynes

  • Kenn, as Jordan pointed out, you just keep restating the same argument over and over. The point is that switching to a gold standard isn’t some kind of economic panacea. I didn’t address what got Germany (Zimbabwe, Cambodia) into their crises in the first place, but the responses of the people once they had happened.

  • Kenn Jacobine

    Why was there hyperinflation in the Weimar Republic? Because the mark was not backed by anything but the credit of the government. In fact, the German government attempted to devalue its currency because it had to pay reparations to the Allies. They devalued for political reasons while at the same time destroying their economy.

    I fear Bernanke and Obama are doing the same thing.

  • Chris is quite right that in a hyperinflation situation people turn to a barter system (as in Weimar Germany) or to the black market (as in Zimbabwe) or to a foreign, more stable currency (as in, for example, Cambodia, where they use the US dollar for everything except small change). Gold and other precious metals are the last thing on their minds at times like that.

    There is, in theory, nothing to prevent hyperinflation happening to any sort of currency, whether it be paper banknotes, gold, or llama poo.

    Kenn: gold is NEVER going to be worth little. It’s GOLD. Look at its history, for goodness’ sake.

  • Igor

    It looks like the GM bailout is going to work out well, the loan will be paid back and the jobs were saved. For the record, I was against the bailout based on tracking GM for twenty years and watching as crooked executives paraded through the offices looting the assets.

    But it looks like government action did what private ownership could not and would not do: save GM and it’s many jobs. This should serve as a successful refutation of the old claim that private companies would ALWAYS be better than government control.

    Everyone should take notice: we have successfully refuted the notion that “government is the problem, and privatization is the solution”. All gone.

  • troll

    for those interested in doing some reading on Kenn’s pov here’s this historical piece by Hayak (PDF) written shortly after Nixon’s dramatic move away from the gold standard which makes the salient points

  • Glenn Contrarian

    Kenn –

    And it’s obvious by your comments #28 and #29 that you either don’t know the meaning of “annual rate of inflation change”, or your simply refusing to admit error. I’m fairly certain it’s the latter.

    You see, Kenn, that’s what separates you and me: I’m not afraid to be wrong – I’m only afraid of choosing to remain wrong when someone shows me that I am undeniably wrong. You, on the other hand, are choosing to remain wrong even though I showed you your quite obvious error.

    And were I a betting man, I’d bet quite heavily that you will still continue to double-down on your error, since the idea that you might be wrong about something is simply incomprehensible and unacceptable to your mindset. And I must wonder how you react if a student is so bold as to show you a strong reference that contradicts what you’re teaching. I swore to myself a long time ago that if I ever taught, I would publicly compliment any student who proved me wrong on a matter. I suspect you would see things differently on that matter.

    Prove me wrong about something, and I’ll publicly thank you…yet if someone proves you wrong about a matter, well, I suspect we all see the choice you made.

  • Glenn Contrarian

    Kenn #28 –

    No, you’re quite wrong. You said a 1506% annual rate of inflation. If you had said “cumulative” or “total” or some such, then I could have let that go…but you said annual:

    That calculates to a 1506 percent annual rate of inflation change! (boldface mine)

    …which means precisely what I said, that something that cost $1 in one year would cost more than $50,000 five years later…whereas you’re claiming we’ve had that annual rate for the past seventy-odd years.

    Yes, that’s a simple grammatical oversight on your part…but the scale of the literal error is quite frankly enormous by anyone’s measure.

  • Kenn Jacobine

    Sorry, actually to be mathematically correct it would cost $16.06 in 2011

  • Kenn Jacobine

    Glenn, that is 1506 annual rate of inflation change. In other words cumulative or compound inflation (like compound interest). So something that cost $1 in 1940 costs $15.06 in 2011. So no I don’t care to reconsider the language or the claim.

  • Glenn, I’m well aware of what happened in the past but I don’t think what worked then will work now.

    AS to the rest of your remark, I don’t see what it had to do with what I said, so I have no response to that.

  • Glenn Contrarian

    And Kenn –

    It looks like someone removed my comment where I pointed out the ludicrousness of your claim that we’ve had a 1506% rate of inflation since 1940…which means that according to you, our prices have increased 15 times each and every year since 1940. That means that if a bottle of Coke cost $1, then five years later the same bottle would cost over $50,000.

    So, um, care to rethink the language of your claim? Or are you going to double-down as has been your wont?

  • Glenn Contrarian

    Chris –

    When everything goes straight down the toilet (like in the Weimar Republic), gold (and precious stones and jewelry and such) suddenly become incredibly valuable. What the world did by getting off the gold standard was to essentially level the playing field – otherwise major gold-producers like South Africa would be much stronger economically speaking, perhaps even becoming gold’s equivalent of the Middle East. That, and getting off the gold standard enabled electronics to be made much more cheaply than before, because when gold was the standard, it behooved every nation to hoard as much of it as possible to protect their own economic viability.

    But Kenn – and most other libertarians – can’t see past their own idealism to accept the pragmatism (and the sheer good sense) of getting off the gold standard.

  • I’m puzzled as to why people who are worried about fiat currency always turn to gold.

    The theory seems to be that if the shit hits the fan, gold will be an effective store of value. What I don’t get is, in that awful scenario, who would accept gold as payment for anything?

    The last thing I’d want in a crisis is to be carrying around large lumps of a heavy metal. Surely a system of barter is what would replace a currency collapse?

  • Glenn Contrarian

    Kenn –

    First of all, it doesn’t matter if it is a loan or grant money – GM was bailed out. The government only bought time for GM. When the next crisis comes GM will be back for more money.

    And since it was a loan, it effectively cost the taxpayer close to ZERO dollars…and in between now and the next supply-side crisis, hundreds of thousands of people have jobs that they wouldn’t have had otherwise, and the government receives tax revenue that it wouldn’t have received otherwise – all for the price of making a sizable loan that has been mostly paid back.

    But I see what you’re saying – better to let hundreds of thousands of people lose their jobs, better to allow tens of thousands of families fall below the poverty line and depend on welfare, than to LOAN the company one freakin’ dollar in order to get it through a particularly rough patch.

    Kenn, you’re relying totally upon idealism rather than pragmatism – and as an historian, you should know better than that.

    The free market is unrivaled for producing prosperity and alleviating poverty. That’s a historical fact.

    Unrivaled, hm? Last I recall, ALL the oh-so-socialist first-world nations (outside the oil-rich Middle East) have a pretty low poverty rate (even considering the current economic problems) when compared to nations where the mostly-unregulated free market reigns supreme – such as China and India.

    You claim you’d turn in your gold for paper if we went to the gold standard…and you’re assuming that most other people would do the same. You’re assuming that the world market wouldn’t panic when the U.S. and not the rest of the world shifted to the gold standard…and you’re assuming that the economic turmoil in the rest of the world wouldn’t hurt the American economy at all – despite how in the past few years our markets here were roiled by events in nations as small as Greece and Iceland.

    Kenn, you don’t have facts on your side. You’ve got assumptions based on ideology, but not facts…and you’re willing to bet the world’s economy that you’re right and most everyone else is wrong.

  • zingzing

    kenn, so in 1964 there was a 14% poverty rate and later there was a 14% poverty rate. if your numbers are correct, what are you trying to suggest?

    “poverty” is a moving line, and probably should be adjusted to the bottom portion of economic reality, but i’m wondering what it is you’re trying to say.

    beyond that, returning to the gold standard, like returning to the 19th century, probably wouldn’t have the effect you’re looking for in the 21st century. i dunno, it may. but i kinda doubt that you apply it with impunity.

  • Kenn Jacobine


    First of all, it doesn’t matter if it is a loan or grant money – GM was bailed out. The government only bought time for GM. When the next crisis comes GM will be back for more money. BTW – the price of its stock has to go to $56 a share for Uncle Scam to get His money back. I checked this morning – GM stock is at $27 a share! So investors don’t have the same confidence that you and Uncle Scam have in GM.

    I am stoned?? You don’t realize that gold has skyrocketed because the dollar is not linked to it. I have bought gold to get rid of what will become worthless paper. If that paper is backed by gold and the Fed stops inflating the money supply I would sell my gold because I would know that I could redeem my paper for gold at any time. But I probably would not have to because the value of the dollar would stabilize. That is the whole point. You statists think you are helping the poor by inflating the currency to pay for all of your schemes but what you are doing is hurting the poor through price inflation. the Gold Standard corrects that.

    In 1964 there was about 14 percent poverty in America. After over 4 decades of spending and inflating trillions we still have poverty at about 14 percent of the population. Your programs and monetary system do not work. The free market is unrivaled for producing prosperity and alleviating poverty. That’s a historical fact.

  • Glenn Contrarian

    Kenn –

    Are you stoned? I mean, seriously, are you stoned? What would happen if the world’s largest economy went back on the gold standard? Let me ask in a different way – what happens to the price of a thing when the demand of of that thing skyrockets? Hm?

    Ah, but I forgot – you also think it would have been better to let GM die and be sold off at fire sale prices rather than to use a taxpayer-financed LOAN – not a bailout, but a LOAN which has since been mostly paid off on GM’s path to the profitability she now has (not to mention the hundreds of thousands of jobs that were preserved as a direct result).

    No, Kenn – if we went back on the gold standard, every idiot and his brother would start exchanging dollars for gold. The demand for gold bullion would skyrocket, and so would the prices of all electronics wherein gold is an essential component.

    But of course you can’t believe that. Go on and keep drinking that Kool-Aid, y’hear?

  • Jordan Richardson

    Yep. All you do is state and restate your opinion, regardless of facts to the contrary, so what’s the point in trying to muster up something “intelligent?” You’ve set the bar mighty low, IMO.

    Also, who’s “we?”

  • Kenn Jacobine

    Jordan, can’t provide anything intelligent so we have to revert to personal attack?

  • Kenn Jacobine


    The price of gold is high right now because the dollar is so weak against it (because of Keynesian spending and Fed polices). What you fail to realize is if the dollar is backed by gold its value will increase and inversely the price of gold will come down for things like jewelry and electroncs. Your argument is precisely why the dollar should be backed by gold because it is valuable in industrial uses. It would give stability to the dollar infinitely more than the backing of Uncle Scam.

  • Jordan Richardson

    Kenn, you have been indoctrinated to the point that it’s impossible to take you seriously. The stuff you’ve tried to sell in this thread is beyond belief, yet you have the audacity to claim you’ve got anything to do with “knowledgeable people.” You couldn’t even get your elementary history right, yet you’re an “international educator currently teaching history?” Ouch.

  • Glenn Contrarian

    Kenn –

    What you’re missing – and what you’ll refuse to accept to the very same extent that you’re accusing Igor of defending Keynesianism – is that reverting to the gold standard would destroy – repeat, destroy – our economy.

    Why? Because it would force the prices of electronics – almost ALL electronics – to skyrocket. From geology.com:

    Uses of Gold in Electronics

    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.

    Use of Gold in Computers

    Gold is used in many places in the standard desktop or laptop computer. The rapid and accurate transmission of digital information through the computer and from one component to another requires an efficient and reliable conductor. Gold meets these requirements better than any other metal. The importance of high quality and reliable performance justifies the high cost.

    Edge connectors used to mount microprocessor and memory chips onto the motherboard and the plug-and-socket connectors used to attach cables all contain gold. The gold in these components is generally electroplated onto other metals and alloyed with small amounts of nickel or cobalt to increase durability.

    Now what’s the likelihood that you’ll realize your error and stop drinking the gold-standard Kool-Aid? I’m guessing it’s zero, because as far as I’ve seen – to paraphrase your words to Igor – you will defend libertarianism and gold-standard idiocy right to the end despite the wealth of evidence showing that austerity NEVER brings growth, and that every business for which computers and other electronics is crucial would face a hideous – and entirely unnecessary – financial burden just so you can have your precious gold standard back.

  • Kenn Jacobine


    Igor or you have not proven that the Gold Standard would incite violent revolution in America. He was hypothesizing about what the future could hold with a Gold Standard based on no historical experience or any facts. It was merely his opinion. You will defend Keynesianism right to the end because its ultimate demise is shattering your entire world. Give it up and stop defending ridiculous, non-sensical anti-free market posts. It is an insult to a knowledgable person when you attempt to pass such dribble.

  • Dr Dreadful

    The original point was that Igor said a return to the Gold Standard would make the U.S. “inclined to violent revolt”.

    Yes, and he explained the reasons why he thinks it would. You, on the other hand, gave us absolutely nothing to support your claim that it wouldn’t.

    The fact is that the U.S. was on the Gold Standard for a large portion of our history and we experienced no violent revolts on account of it.

    Still feeble. The conditions in 21st century America are not the same as those in 19th century America.

    One might as well argue that because the climate warmed in the past without industrial activity, the same thing is happening now.

    Oh wait…

  • Dr Dreadful

    South Carolina was “negotiating” the return of Fort Sumter by threatening to open fire on it if the US garrison didn’t leave.

    Anderson’s occupation of Sumter was at worst provocation and it certainly wasn’t violent.

  • Igor

    IMO, Lincoln should have forcefully kicked the Southern slave states out of the union. Later, they would have been begging back in. The net benefit would be that we wouldn’t have the last 150 years of vengeance exacted on the US by those !@#^ southern slave states.

  • Kenn Jacobine

    South Carolina had left the union peaceably and was attempting to negotiate the return of its territory – Fort Sumter from the federal government. In the meantime, the Union resupplied it and Washington issued an order to effectively blockade Charleston Harbor. That is why the Star of the West was fired upon – in self defense of South Carolina’ sovereignty. Funny how our government is doing the same thing to Iran today, but I digress.

    The original point was that Igor said a return to the Gold Standard would make the U.S. “inclined to violent revolt”. The fact is that the U.S. was on the Gold Standard for a large portion of our history and we experienced no violent revolts on account of it.

  • Igor

    5-Kenn: OMG!

    “The War Between the States was not a violent revolution.”

  • Cannonshop

    #5 Kenn, hate to contradict you, but the late unpleasantness between states (1860-1865) was interesting, in part, BECAUSE THE CONFEDERATES ATTACKED BEFORE THEY WERE READY FOR WAR.

    (at least, before preparing for a war of more than a few months, fought in the summer, between disinterested gentlemen).

    Up until the shore batteries opened fire in the Sumter incident, there was no strong cassus belli for the Union to pursue an aggressive campaign, and had they not done so, the political winds of the time would likely have seen the Confederate States a great deal MORE time before the remnant of the Union was ready (as in ‘willing’) to fight them.

    The Sumter seige changed the dynamic-it provided legal reason for Lincoln to act, where, prior to that, all he could really do was send strongly worded notes.

  • Dr Dreadful

    I, of course, am talking about the United States not Latin America.

    Then your argument is even more feeble. You claim causation, yet exclude any possible test.

  • Dr Dreadful

    Kenn… Come back to your home universe, Kenn, we forgive you!

    1. The first shots fired in the Civil War were by the Confederacy, at the merchant ship Star of the West which was attempting to resupply the garrison at Fort Sumter.

    2. Lincoln was not President at the time: Buchanan was.

  • Kenn Jacobine

    I, of course, am talking about the United States not Latin America.

    The War Between the States was not a violent revolution. The Confederate States broke away peacefully. It was Lincoln who started the violence.

  • “Look at 19th Century America, we had a Gold Standard and no violent revolutions.”

    The U.S. Civil War wasn’t a violent revolution?

  • Dr Dreadful

    Look at 19th Century America, we had a Gold Standard and no violent revolutions.

    Really, Kenn? Really?

    Numerous Latin American countries were on the gold standard during the 19th century as well, and they had no shortage of violent revolutions.

    Add to that the historical truth that the English-speaking peoples aren’t all that strongly inclined to revolt violently anyway.

    What is it that they say about correlation and causation?

  • Kenn Jacobine

    Look at 19th Century America, we had a Gold Standard and no violent revolutions.

    The Market would dictate the supply of gold and thus money. I trust the Market infinitely more than the price fixers at the Fed.

  • Igor

    A return to the gold standard would impoverish Americans. It would mean that the same quantity of money would have to be used by a larger number of people, and so each would have less to work with. Almost certainly the bulk of money would collect in the hands of a small number of rich and powerful people. That’s what happens in a country with money tied to a commodity. With less money among the masses they will become more desperate and inclined to violent revolution.

    And what’s so good about a “sound money policy”? And how would you recognize such a thing?

    Moderate inflation is a good thing. It tends to drive money out of mattresses and into the economy, where it can work and pay wages. But inflation is hated by the very rich because it devalues their assets. On the other hand, ordinary mortals benefit from inflation because it diminishes their liabilities. Just ask any homeowner.

    The problem is that our money system is schizophrenic: we have a fiscal policy that spends too much and taxes too little, so our balance sheet shows a deficit to be covered by borrowing. We try to control that by controlling interest rates at the Federal Reserve (monetary policy). But that can only work shortterm, not longterm. It’s just a bandaid to buy a little time. Also, Fed policy has been perverted for many years by the rich (who control the bankers who sit on the Feds board, exclusively) to control inflation, which is not in it’s charter. Nevertheless, everyone will tell you that the Feds holy purpose is to control inflation.

    So what happens is that the inflation forces pumped into the fiscal system, by having too few taxes to cover spending, we attempt to subdue with fed interest rates, which can only work shortterm. Then the dam bursts.

    The perfect example of the wrong way is the Bush administration which cut taxes while increasing spending (two trillion dollar wars) thus increasing the debt, for no good reason. So they crankes in big inflationary forces, which we are starting to feel now.