Posted on 02/06/2002 4:39:25 PM PST by agitator
This week on The Agitator Hour, heard Wednesdays at 9pm Eastern/6pm Pacific the guest is Mr. Bernard von NotHaus Chief Economist of the National Organization for the Repeal of the FEDeral Reserve Act and the Internal Revenue Code.
NORFED, the National Organization for the Repeal of the FEDeral Reserve Act and the Internal Revenue Code, is a supporter-based nonprofit organization dedicated to using all its revenue to restore a honest monetary system for all Americans, as required by our Constitution. It is governed by a Board of Directors and a Supporters Advisory Council. NORFED solicits your support to effect a change to our nation's monetary standards.
| Guest: | Mr. Mr. Bernard von NotHaus |
| Date: | Feb. 6, 2002 |
| Showtime: | 9pm EST / 6pm PST |
| Where: | The Agitator Hour - Click here to Listen Live at 9pm |
The toll-free call-in line is 1-800-478-7780
Man, you gold-standard guys are long on the insults and short on the useful information. No one here has yet even offered to explain why, if the gold standard is such a cure-all, gold standard countries have been just as subject to inflation and deflation and other financial problems as non-gold standard countries.
Anyone care to explain the financial troubles that Mexico experienced in 1994-1995 while on the gold standard or do you just want to tell me that I need to take more economics classes? Why did the US have periods of inflation and deflaiton while on the the gold standard? If I need to take classes, then teach me instead of parroting the usual we're-all-going-to-die-very-soon scenarios that we've heard since 1971?
Here are the links to play tonight's show.
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I'm well-versed in the Federal Reserve System. So are you saying that you're not in favor of the gold standard (or silver, platinum, whatever)?
By the time the bill came due, all of the politicians involved in that fiasco were long since out of office enjoying their 100% pension. I was standing there like one of the Three Stooges when Moe slaps Larry, Larry slaps Curly, and Curly is wondering who he's going to slap. That disconnect between what government does and when the bill has to be paid means that we have no effective control over what politicians do.
A free economy is not a guarnatee everyone will be rich and there will no be periods of inflation of certain things used as money, but a regulated economy, especially regulation of the monetary system, does guarantee the periodic and often permanent impovrishment of most of its citizens, especially those who trust their economic well-being to the government.
Show me a country without a government regulated economy, where people have freely chosen to use gold, silver or, as in the early years of this country, tobacco, or any other material as the basis of their money that has had depressions. When was the first depression in this country, by the way, and what do you think cause it?
Hank
Mike, obviously you're not a student of History.
All you have to do is look at what happened in the Soviet Union after Gorby got booted, or better yet, look at NAZI Germany and Mussolini's Italy. - Wheel barrels full of their 'contract' (as you called fiat money/currency) could not buy a sandwich. - All because it was backed by nothing.
If you believe that Mexico was really on any standard at all, then I would love to have you on my realestate 'seminar' list!
Mexico was theoretically on the 'dollar' standard (Argentina too) but it is all talk, and everybody that has money to invest knows it; that's why it didn't work, it wasn't real.
OK let's try.
In the first place, inflation and deflation are determined by this simple formula: MV = PT in which M= the money supply; V = the number of transactions each unit of money supports at the relevant point in time (T); P is the price of all goods and services at the time point of measurement (T). Inflation occurs when MV exceeds the goods and services for which it is expended; deflation occurs when MV is less than the goods and services. Inflation and deflation are monetary events--they are only about the purchaseing power value of money.
Even in a specie money system, you can have inflation and deflation. If more gold is dug up than goods and services are produced to support the value of the gold, there will be inflation (loss of purchasing power of the money--ie gold will go down in value). That happened during the 18th century in Europe when silver which was the primary monetary base increased in supply as a result of the New World discoveries. Not a common event in a specie money system but it can happen.
Can also have deflation. The argument for fiat money was that a specie money system would have built in deflation--we would not have enough money supply to support the economic system. We can't dig the gold fast enough.
The answer is both cases is "so what". The inflation event was tiny (comparable to our stated inflation now) and of very short term impact. I don't think anyone can point to an example where the kind of deflation that is built in to the gold monetary system was a problem. Interest rates would be low or non existent because the gold the creditor gets paid back is likely to be worth more than the gold he lent.
But the manufacturer is hurt by having to sell his goods for less than the cost of production? No. He may get less gold for his goods but it is worth more--he still gets market value for his production.
Now none of this has much to do with any of your examples of inflation-deflation in what you call a gold standard economy because none of those examples come from a real gold standard money system.
Those systems were all systems where the government got to fix the value of the trading paper. They were gold reserve systems--we have 200 tons of gold; we will have a 25% reserve system and print paper for 800 tons of gold value. Then the government tweaks the reserve system to permit it to create more paper--that gets you inflation.
Or the government has to fix inflation it caused so it devalues the paper gold against the real gold and presto you get deflation.
The government calls the money system a gold standard because it has to have that lable to create confidence but it then keeps the legal power to put in the fix to keep control of what the real spendable value is. Like Governor Davis of California labled his power system a free marketplace but fixed prices, all these prior "gold standards" were gold standards in lable only but not reality.
None of these historical problems happens in a real gold money system--the gold is the money--it works for everybody and everybody is better off. The fiat money system is an absolute fraud on the citizens of America which works only because the people are incapable of understanding how and why they are getting screwed.
We simply are not going to get an economy that isn't government-regulated. There were economic recessions and depressions even in ancient times, and their economies were much less regulated than ours is today.
When was the first depression in this country, by the way, and what do you think cause it?
There was a depression immediately after the Revolutionary War (around 1784 if my my memory serves me correctly) that was due to, well, the ending of the war. That is often the case, by the way, when the economy switches from producing primarily one type of good (guns) and switching to the production of other types of goods (butter). There was a depression around 1807 that was due to protectionism, another around 1819, and the infamous Panic of 1837, the cause of which has been attributed to everything from the collapse of the real estate market in the north to a clamping down on the opium trade in China to the closing of the Second Bank of the United States. Another possible cause, and certainly a contributor, was the Specie Circular of 1836, which required the payment of gold to the federal government when public lands were purchased. It certainly is not a good argument for going to a gold standard.
Reality sucks when it destroys your pet theory at one puff of fiat toilet paper. The fact is that inconvertible paper has no more to do with your clothes, computer, or house than the man in the moon. It is entirely and only a creation of central banks. Nothing more.
If as you imply, paper money = wealth/goods, then the country with the greatest money supply would be the wealthiest in the world. The money supply in the US is at all time highs--but people have less net worth than they did ten years ago.
There have been long, multi-decade periods of full currency stablity--but only when backed by gold /silver.
There has never been a long period of stability of currency without backing. Not in the US, not anywhere. Look it up.
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