Posted on 08/24/2020 6:44:58 AM PDT by SJackson
I am well aware of The Triffin Dilemma, and have read a lot of books about the International Finance System. I am a retired Finance person and most of the rest of your post is simply history that I lived through and am well aware of.
I agree that the Dilemma is not good for the USA.
As I said, I think DJT will not agree to anything that is bad for the USA, and I’m sure that he knows more about what can be done and negotiated than the rest of us.
Eisenhower warned of it...or at least one part of it. I think many of them saw clearly the demons created and set loose by Wilson and FDR.
George Washington might be the only president to rival Andrew Jackson in toughness. But Washington was a Virginia gentleman and confined his toughness to military combat. Probably few dared to insult or challenge him anyway.
Andrew Jackson was an archetypal Scots-Irish Southerner with a temper. And if you chose to challenge him he’d call your bluff. IIRC he even threatened to hang his own Vice President over the Nullification controversy. Fun times. My own ancestor was a Tennessee neighbor and an elector for Jackson and I assume he was on Jackson’s good side, always a wise choice.
lol!
I’ve never met anyone who has ever heard about the Triffin Dilemma before so this is definitely a first. I’m usually just talking to myself when I bring it up.
Do you share my impression that making the bancor/SDR the reserve currency would have been the best option at Bretton Woods? That it would have preserved the gold-dollar link and prevented the inflation that sucked the life out of the pre-1971 dollar? I haven’t run across any discussions of this what-if question so all I have to go on is my vivid imagination.
Even though I’ve read a lot about it, I can’t say that I feel any confidence one way or the other. To a certain extent, the SDR’s have been a rather unofficial peg to gold and have been used more than once to assist during financial crisis. And eventually the country of the reserve currency goes bankrupt, unless they change one of the other variables which has it’s own downside.
But I don’t know what unintended consequences that might bring. It would seem that it sure would reduce our ability to use economic clout to force some countries in line. I think the current International system is a bit long in the tooth. Maybe they have even already decided and agreed on the new plan—and we just don’t know it yet.
Regarding the past, there seems to be a lot of consensus that the deficits, fed actions, oil spike, excess money printing etc. all contributed to the double digit inflation. I never want to go through that again—and it was small potatoes compared to what other countries have endured.
Time will tell-for sure there is at present no other currency that could upset the dollar yet and not really likely any time soon-so the SDR and IMF may be it.
“Eisenhower warned of it...or at least one part of it”
When Eisenhower made his military-industrial complex speech, military spending was by far the largest portion of the federal budget. It was 50% of the budget. All other federal programs and agencies competed for that other 50%.
Ike was the last of a dying breed, a Main Street Republican. One who worried about the size of government spending and the influence of big business in getting Congress to pass programs that would enrich big business, primarily via military spending since it was the biggest pot of money. His warning was aimed at protecting the taxpayer.
Within 5 years Lyndon Johnson became president and domestic spending exploded in size, something Eisenhower couldn’t have foreseen.
“Regarding the past, there seems to be a lot of consensus that the deficits, fed actions, oil spike, excess money printing etc. all contributed to the double digit inflation.”
The dollar’s link to gold used to discipline Congressional spending. Fed and Treasury officials would traipse up to Capitol Hill and give Congressmen a short lesson what deficit spending would do to all that gold stored in Ft Knox. Our trade partners would start draining it as fast as they could. With Nixon killing that link there were no more lectures and Congress treated deficit spending like it was done on a stolen credit card.
Nixon’s Fed Chairman Arthur Burns was... a dope. IIRC he had the Fed directly purchasing all of the new debt that Congress was authorizing.
That’s a classic recipe for devaluing the dollar. All of those Saudis who had acquired impressive western educations weren’t about to be played for suckers, so via OPEC they pushed back, driving up oil prices. They were acting rationally in response to what we were doing.
“Excess money printing” is just another name for what the Arthur Burns Fed was doing. Or what they were helping Congress do. As Congress increased the debt limit, the Fed would monetize that additional debt by directly purchasing the new bonds (the effect would be different if the Fed only bought bonds on the secondary market).
What Congress and the Fed were doing made the quantity of money in the banking system grow. When it’s growing faster than demand you can get a general price inflation and we did. Bond buyers, “bond vigilantes”, began going on strike and demanding an ever increasing inflation premium. Interest rates soared. Hard goods prices soared. About the only thing that didn’t soar was my income.
About the only thing that didn’t soar was my income.
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I hear that. I actually changed jobs twice just to get a big enough bump to stay even.
The actual decoupling from the gold standard as I understand it happened before Nixon. He just closed the window on being able to choose Gold rather than dollars.
We have certainly had our share of Central Bank woes and incompetents. Could be why so many people hate the Fed. Ha.
I think that “decoupling” and “closing of the gold window” mean the same thing.
The French were redeeming dollars for gold until Nixon suspended (it was officially “suspended”) Bretton Woods, which broke the link, ended convertibility.
I know a book that you might enjoy;
“When Washington Shut Down Wall Street: The Great Financial Crisis of 1914 and the Origins of America’s Monetary Supremacy”
What I like about it is learning the mechanism by which the pre-1933 classical gold standard operated. The automatic (well sorta automatic) way that trade was balanced by gold flows between nations. I need to read it again to see what I missed. It’s very different than the Bretton Woods system.
That sounds like an interesting book. I’ll have to get it—I only have about 30 various books I’m trying to find time to read. FR is too addicting.
Regarding Gold Standard and International Monetary Systems:
The system has collapsed 3 times in 100 years.
1914-Classical International Gold Standard was abandoned.
1939-Gold Exchange Standard Abandoned.
1971-Convertibility of dollars into Gold abandoned. Commonly referred to as Nixon closing the gold window.
I consider 2008 as a warning signal but not a total collapse-more like a slow death and who knows where we are going now—above my pay grade.
I am comforted by the fact that none was the end of the world. The major financial players get together and decide the new rules of the game. And DJT is the best one to do that for the USA- best for us all — I truly believe that.
So I watch with interest. He has appointed some people that seem to like the idea of a gold standard of some sort. Never having lived under a real gold standard, I think that book would be awfully interesting reading.
“I consider 2008 as a warning signal but not a total collapse-more like a slow death and who knows where we are going now—above my pay grade.”
The recipe for the Fed’s response to 2008 can be found in Milton Friedman and Anna Schwarz’s “A Monetary History of the United States”.
Or more precisely their long chapter “The Great Contraction”
It’s a discussion of the 1930 Fed’s failure to respond to the deflationary spiral hitting the banking system, and what they should have done.
Bernanke is a student of Friedman and Schwarz and he applied their lessons to stave off a similar deflationary collapse. It’s probably the closest that we have come to a repeat of the Great Depression.
The response to this Covid recession is being treated in a similar fashion. Without the stimulus payments the spiraling collapse of demand would be unbelievable.
The response to this Covid recession is being treated in a similar fashion. Without the stimulus payments the spiraling collapse of demand would be unbelievable.
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I get that. But I don’t see what they are going to do about all the huge debt. And stocks with a PE of 83? Hard for a value investor like me to see any fundamentals that make sense these days.
CODI
CTL
XOM
BTI
IBM
check their yields
BkMk for tomorrow.
Jackson was involved in 100 duels
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Dueling was quite common in the early 1800’s and could be sparked by nearly anything considered to be an insult, slight or disagreement. Disputes were often fomented by personal issues and/or matters involving friends and relatives.
The Dickinson duel had its origins in a dispute over payments related to a horse race. The incident with Benton was NOT really a duel; more like a brawl and shootout that occurred in a hotel in Nashville.
Both of those incidents occurred BEFORE Jackson became president so you have to put his life and times in proper context.
In terms of sheer numbers Trump has a lot more political enemies than Jackson ever did.
I consider 2008 as a warning signal
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The wheels damn near came off. We were staring a catastrophic meltdown in the face. It was about as real as it can get.
My biggest fear however is that we are no longer the country we once were. It has been fundamentally changed in terms of our culture, demographics, institutionalized corruption and the intense politicization of everything.
We are facing serious economic challenges right now but even bigger existential problems lie beneath. I don’t know where we are going either but the pressures for centralized government and socialism are significant and very real threats to the country and culture we cherished.
I agree. 2008 was a severe wound and maybe even a slow death blow, but it gave us about 12 years to get ready for SHTF.
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