The monetary Maginot of the Gold Standard

The Telegraph ^ | 8/29/2012 | Ambrose Evans-Pritchard

[bruinbirdman]

Some gold bugs – though not ones with historical memory – seem to have greeted Republican talk of a renewed Gold Standard with near ecstatic delight.

They need their heads examined. Gold must be free if it is to police the political class

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The beauty of gold is that it is a store of value beyond political or state control, or largely so.

It is a coldly disassociated asset based on atavistic attachment dating back thousands of years. It is common to mankind, and therefore nigh impossible to suppress. It is, to boot, a safe haven from tyranny, the portable wealth of persecuted peoples over the ages.

Once governments link their policies and fortunes to gold through a fixed system, the metal – or its owner – becomes prisoner of abuse.

The reason why Franklin Roosevelt confiscated private gold in 1933 is because the Gold Standard blocked his economic strategy.

The linkage to gold in the dysfunctional fixed-exchange dollar system of the interwar years is precisely what made owners of gold a particular target. It is why their wealth was "stolen".

Quite why gold bugs think that the Gold Standard prevents asset bubbles and excess debt is beyond me. The 1920s saw US debt levels surge to around 300pc to 350pc of GDP. It is very similar to what occurred in our own Noughties up to 2008.

This credit creation happened under the post-WWI Gold Standard. The massive build-up in Germany’s external debt in the late 1920s – so like the Spanish build-up under the D-mark Standard (ie euro) in our own era – was directly caused by the perverse mechanisms of the interwar gold system.

France and the US (both undervalued on 1920s gold) had to flood the deficit countries with loans to offset their trade

[SunkenCiv]

Thanks bruinbirdman.

[BfloGuy]

This is exactly what I'd expect from Pritchard about the gold standard.

Quite why gold bugs think that the Gold Standard prevents asset bubbles and excess debt is beyond me. The 1920s saw US debt levels surge to around 300pc to 350pc of GDP. It is very similar to what occurred in our own Noughties up to 2008

A gold standard cannot succeed if the politicians subvert it. That is what happened after 1913. The gold standard is not magic -- it's just better than the paper money trap we've fallen into.