CAN THE U.S. RETURN TO A GOLD STANDARD?

Wall Street Journal ^ | September 1, 1981 | Alan Greenspan

[raloxk]

it is sort of disconcerting to see so many here not understand economics. It seems there is a lot of dogma.

the US trade deficit is caused by a simple fact: It isnt unfair trade practices, or NAFTA or even low wage competition. It is this: THE UNITED STATED IVESTS MORE THAN IT SAVES. THE NATIONAL POOL OF DOMESTIC SAVINGS IS TOO SMALL TO PAY FOR ALL PRIVATE AND PUBLIC INVESTMENT I > S.
So we must import capital. That causes the dollar to appreciate hurting exports and making imports cheaper.

Fact is today trade is more "fair" than it was in the 1950s, wages between the US and third world countries like India today are closer than they were in the 1950s. But today US savings is much lower than it was in the 1950s and investment as a % of GDP today is lower in Europe and Japan today than it was in the 1950s.

If the US wants to have a trade surplus, it needs to increase S or reduce I or a combination. But it will cause a recession in the short term.

In 1992, year when GHW Bush lost the election cuz it was the economy stupid, the Merchandise Trade Deficit fell to about $65b from $150b in 1989. I dont recall the country being better off because of it.

[Xthe17th]

Section. 10. 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; pass any Bill of Attainder, ex post facto Law, or Law impairing the Obligation of Contracts, or grant any Title of Nobility.

Hey, thanks for pointing this out, Jim. Something I had overlooked. And, off topic, but AHA - here is where the South was explicitly forbidden from seceding from the Union: No State shall enter into any ...Confederation; ...emit Bills of Credit (click here to see Confederate notes), all, ironically, totally against the same Constitution that the South was so upset that it claimed the North wasn't following. Berry interesting!

[Xthe17th]

You will be interested in above post #62.

[.cnI redruM]

My only difficulty with that is that there is a differential between what the government will pay you for land and what you could get for land on the private market. Also, there have been instances where the government will assess land at one value to maximize there ability to collect revenue, while they will then turn around and eminently domain the land for a lower price.

Resolving this difficulty could lead to a movement to abolish private real property, in order to stabilize the currency baseline.

[Paul C. Jesup]

Resolving this difficulty could lead to a movement to abolish private real property, in order to stabilize the currency baseline.

Which would lead to a armed revolution, in which case the house of cards still falls to the ground.

[.cnI redruM]

I notice that economic cycles were vastly more prevalent and steeper during eras where the US economy was on a Specie-Backed Currency. I wonder if a commodity-backed currency endangers the economic wellbeing of the country by tying the currency to a commodity whose value can widely fluctuate.

[Mulder]

The Constitution gives the Congress the power to coin money. They have to refine the ore themselves, right there in the Capitol. Even their aides cannot participate

Works for me.

At least if they are out working manual labor, they won't be passing laws to subvert the document that they took an oath to protect.

[.cnI redruM]

Why does the house of cards necessarily have to collapse?

I think our economy was more prone to bipolarity, meaning it
s depressions were worse, when our currency was specie-backed. There may or may not be a connection between the cycles and the currency valuation method, but I'm not convinced that the gold in Fort Knox should be anything other than an emergency measure.

However, if I were POTUS for a month, or so, I'd want to be fully briefed and prepared to reintroduce a currency based on that gold in the event of one of the proverbial 'Doomsday' scenarios occurring.

[patriot_wes]

It ain't ever gonna happen! You should read J.Edward Griffins - "Creature From Jekyyl Island" to find out why.

[Mulder]

It was a speech given by William Jennings Bryan on July 9, 1896 at the Democratic National Convention in Chicago. Read it here.

Thanks. I read the speech. It appears to be based more on rhetoric instead of facts. He also mentions his support of an income tax. Based on those facts, I have to question his economic credentials.

[Paul C. Jesup]

Why does the house of cards necessarily have to collapse

Even if the revolt is supressed, by nationalizing even a small factions of property, you cause a default on the debt owed to banks on that land (through morgages and other types of debt) causing those banks to default, causing those banks debts to be defaulted and so on in a domino effect which causes the ecomony to crash in on itself, thus no money for taxes, thus the government collapses in on itself.

[Mulder]

We have fiat currency today and yet we are worried about deflation not inflation

How can you have deflation with a massively increasing money supply?

It's seem to me that the "deflation" really isn't that at all.

Instead, we are actually seeing inflation (the value of the dollar is decreasing).

The reason prices haven't risen is that moderately expensive American labor has been replaced by cheap third world labor.

Both (sending jobs overseas and a cheap dollar) are very bad things.

[joyful1]

If you've got time to worry about this, you've got too much time on your hands.

[raloxk]

youre right that there is commodity inflation that hasnt yet come thru to the consumer. Sending jobs overseas is a bad thing especially for those who lose their jobs.

But a weak dollar counteracts the off-shoring of jobs by making it more expensive to send jobs to other countries. I would bet that most companies that planned large off shoring of jobs did so before the dollar began to fall.

I read a study by a consulting form, cant remember which one, that showed many firms expecting to save over 50% on their costs by offshoring have realised saving of only about 15% due in part to a weaken US Dollar but also due to the fact that the offshore workers need a lot of supervision, more so than american workers

[M-cubed]

interesting read here.. http://www.whatreallyhappened.com/ARTICLE2/doodoo.html

[nopardons]

It isn't a book...it's a VERY famous speech. You mean to tell me that you've never heard about it ?

[Mulder]

It isn't a book...it's a VERY famous speech. You mean to tell me that you've never heard about it ?

I've never heard of the speech, until you mentioned it.

I was aware of William Jennings Bryant to some extent, however. IIRC, he was left of center, but an honest man who resigned from Wilson's cabinet over the lies surrouding the Lusitania and how America was sucked into WWI.

I read the speech and really don't see why it's so famous.

[Mulder]

But a weak dollar counteracts the off-shoring of jobs by making it more expensive to send jobs to other countries. I would bet that most companies that planned large off shoring of jobs did so before the dollar began to fall.

That makes sense. But what is the 'end game' here? Are they going to continue devaluing the dollar to the point where it is truly worthless?

It seems to me that, at best, the 'weak dollar' policy is nothing more than a short-sighted and short term attempt at a fix to a long term problem.

[winker]

First things first to see if this is where we need to go! Start off with a audit of the Federal Gold Reserves at Ft. Knox and all the other repositories and open the accounting to Public review and scruitany. Is it here or there? Only an audit will tell! Then we will know what the Gold fix is or has it been as many have speculated "Smoke & Mirrors"!

[nopardons]

You NEVER heard of the speech until I mentioned it?

You don't know anything about William Jesnnings Bryant?

You've read the speech and don't understand WHY it's so famous, or why it's pertinent to this discourse?

Then there's no point in trying to debate or discuss anything with anyone as obtuse and ill educated as you are.