Roubini: Gold Standard Fans Are ‘Lunatics and Hacks’

Moneynews ^ | 28 Nov 2011 | Forrest Jones

[Comparative Advantage]

Those making public calls for a return to the gold standard are a bunch of lunatics and hacks who are doing nothing but calling for a repeat of the Great Depression, says New York University Nouriel Roubini.

Loose monetary policies have done little to lower unemployment rates and have many saying the U.S. should return to the gold standard, which pegs the value of the dollar to gold.

Supporters say a gold standard, abandoned in the 20th Century, would force the government to live within its means and end inflationary pressures that come with expansive monetary policy.

"That's total nonsense." Roubini tells Yahoo's The Daily Ticker, calling the gold bugs who support a return to the gold standard a "bunch of lunatics and hacks."

A gold standard prevents authorities from stimulating the economy when needed.

[Silver Sabre]

I have found this website to be a very useful source of information on the economy, gold, and silver.

http://goldismoney.info/forums/

[iopscusa]

Roubini is a Marxist hack and yet the NBC-Wallstreet-cramer crooked millennials & leftist all think he’s some type of genius. I’d almost like to see Ron Paul in office just so these pricks heads explode and buffoon Bernake/Paulson/Geitner get their just rewards.

[Travis McGee]

bttt

[bert]

Last week I was wondering what is going to happen? I drug up the Kittco chart above and with my dividers, drew some new Y axis lines to the right extending the X axis in to 2012. I wanted to predict when gold will reach $2,000.

It looks like the 5 year trend line extended into next year will cross the mark about July 2012. The trend line can be easily drawn with a straight edge and ignores the recent hump that is apparent anomaly.

So, there you have it Gold $2,000 per ounce the end of July

Further if you make a rough calculation of the trend line curve, the slope is increasing at roughly the rate of about 22% per year. Some one can check me out. that seems high

[bert]

.....there isn’t enough of the stuff......

You look at the valuation backward. There is always enough. Gold is not valued in $$’s, $$’s are valued in gold.

[Toddsterpatriot]

Yeah,, give.

A swap means give?

The Fed created it out of thin air

Yes.

and is “loaning” it at negative real rates.

A swap means no interest at all.

And they will tell us soon it was all paid back. It’s a joke.

Why is it a joke? The swaps during the crisis were all paid back.

If the Euro is in trouble, and fiat money can be created without cansequences by US. Then why are we not seeing the EU central bankers just print up all they need for all the “liquidity” they need?

I don't think anyone said no consequences. And the EU central bankers can't print all they need, because they need dollar liquidity.

For bonus points, explain why counterfeiting is still a crime.

For bonus points, explain why you think the Fed counterfeits.

[PGR88]

The massive, long term deficits we have now would be impossible on a gold standard and with no Federal Reserve. There would be real interest rates and immediate discipline on the Government when it’s spending became too large..

[SunkenCiv]

The price of oil is due to cartel control, and the price of oil drives the price of everything, except for goldmania.

[B Knotts]

Yeah...because fiat money has worked out so well.

[SunkenCiv]

:’)

[SunkenCiv]

Bingo, there’s not enough of the stuff, and the supply doesn’t increase to match wealth creation because gold isn’t wealth (or wealth creation), it’s just a commodity. To have a so-called hard money that does, we should use pork bellies — more come along all the time, and the ones which are around have an expiration date. :’)

http://www.galmarley.com/framesets/fs_commodity_essentials_faqs.htm

Gold : prices, facts, figures & research

Commodity Numbers FAQs

[snip] How much gold is there?

In the world there are currently somewhere between 120,000 and 140,000 tonnes of gold ‘above ground’. To visualise this imagine a single solid gold cube with edges of about 19 metres (about three metres short of the length of a tennis court). That’s all that has ever been produced.

Divided amongst the population of the world there are about 23 grams per person, about 1.2 cubic centimetres each. [/snip]

[ctdonath2]

Awright, so brief late night postings carry inadequate detail. Let me expand on my points.

There isn’t enough of the stuff.

The shift from fiat to gold would skyrocket the value of gold overnight, to something like $10,000/oz. Great if you have it, awful if you don’t. Being on a gold standard would be great; getting there would cause wars.

One of the compelling historical reasons for gold as currency is the convenient value-to-volume ratio: a lot of value in a small package, but not too much value. Platinum has better value density, but platinum coinage is avoided ‘cuz it’s too valuable per volume. Going onto a gold standard with the limited supply we have would do similar, putting too much value in too little space.

Supply growth vs. GDP

The gold supply doesn’t grow on par with wealth creation growth rate. Ergo, we’d be subject to perpetual deflation. As more people produce more wealth, the ratio of gold-to-value decreases, prices drop, and familiar results ensue. Much can be said in favor of a currency which maintains prices; shifting prices introduce an annoying (if not damaging) complexity.

Gold is, of course a physical limited commodity. I’m not sure pinning a nation’s currency on a particular commodity is as much an improvement over fiat currency as we’d want, given the complex interplay of commodities and other goods/services. I keep toying with the idea of how to quantify value outright, some unitless number not subject to political declarations (fiat currency) nor artificial linkages (gold standard). With the ability to mine world data for prices, there should be a way to identify total relative values of all things to all things - akin to the old line that a good handgun is always worth an ounce of gold, but on a grand holistic scale.

Pondering this, I’m better understanding an underlying point: those who have gold would benefit from a transition to gold, those who don’t would suffer. Being more of the latter than the former, don’t see it happening.

[PGR88]

Ergo, we’d be subject to perpetual deflation.

And what's wrong with that? Imagine your salary was $1000/month. If prices were declining - which reflected general productivity increases in the economy as more goods became available for the same money stock, then you would have RISING REAL WAGES.

Now imagine the opposite. Your salary is $1000/month, but inflation is running 3% p.a. (in reality, probably higher). This is what the FED has given us over the last 40 years. With fiat money, your wages will always lag behind inflation. Why do you think real working wages have stagnated since 1971?

Fiat money and printing is a stealth tax. It steals productivity increases in the economy and it steals your wages, and it steals your savings - all to support Gov't deficits.

[Toddsterpatriot]

Ergo, we’d be subject to perpetual deflation.

And what's wrong with that?

You're joking, right?

Imagine your salary was $1000/month. If prices were declining - which reflected general productivity increases in the economy as more goods became available for the same money stock, then you would have RISING REAL WAGES.

Imagine your employer had to cut prices year after year after year. They need to sell more product to pay your wages. They have an incentive to reduce head count. Now your real wages are zero.

At least you have lots of equity in your house. Ooops, not so much.

[ctdonath2]

what's wrong with [perpetual deflation]? Imagine your salary was $1000/month.

Next year it would be $900/month.

The problem should be obvious. It's not the numbers, it's the perception.

[DannyTN]

So you think the market isn’t smart enough to figure out inflation and charge real interest rates? The market is smart enough.

You think interest rates discipline Congress? Forces them to reign in deficits? No. It doesn’t. They can still borrow they can still commit your kids to unreasonable burdens. They can still bankrupt the country.

The problem is congressional spending, and a gold standard does absolutely nothing to reign that in.

Only electing fiscally responsible leaders of good character is going to protect us. Gold standard just leaves our currency open to manipulation by Soros and China. China by the way is currently the largest gold producer in the world.

[PGR88]

Imagine your employer had to cut prices year after year after year. They need to sell more product to pay your wages. They have an incentive to reduce head count. Now your real wages are zero.

In the early 1800's, the Luddites were a social movement that hated and sabotaged textile machinery, because they saw that this new equipment and technology reduced the need for the traditional textile weavers. You are looking at this through this, and the narrow prism of today's debt-delevering deflation of speculative assets, particularly housing. Companies are going bust and prices are dropping because of Bankruptcy. Why did this happen? Because Keynesian's beloved Gov't Programs and Central Bank played with interest rates and money supply to create bubbles in Tech Stocks, then Real Estate, all within 8-10 years

A non fiat currency avoids all this.

[Toddsterpatriot]

You are looking at this through this, and the narrow prism of today's debt-delevering deflation of speculative assets, particularly housing.

I'm looking at this through the prism of, why is your salary the only price exempt from the system wide deflation you imagine would be a good thing?

Because Keynesian's beloved Gov't Programs and Central Bank played with interest rates and money supply to create bubbles in Tech Stocks, then Real Estate, all within 8-10 years

A non fiat currency avoids all this.

You're right, there were no bubbles while we were on a gold/silver standard. No panics. No crashes. No depressions.

[PGR88]

So you think the market isn’t smart enough to figure out inflation and charge real interest rates? The market is smart enough.

Yes - that's my whole point. The Market should set interest rates. Do you think the market is setting them now???? Right now, you have the FEDERAL RESERVE setting interest rates by massively pumping printed money into Gov't bonds and its Primary Dealer Banks. They have called it their ZIRP (Zero Interest Rate Policy).

You think interest rates discipline Congress? Forces them to reign in deficits? No. It doesn’t. They can still borrow they can still commit your kids to unreasonable burdens. They can still bankrupt the country.

Sorry, but this statement is incorrect. As mentioned, The FED is keeping interest rates at near zero. They are trying to stimulate private borrowing, while at the same time allowing the US Gov't to run a $1.3 Trillion deficit on the cheap.

Now imagine there is no FED buying up cheap Treasury bonds with money they create out of thin air, and imagine that the US Dollar is linked to precious metals with interest rates set by the Market. Could the Gov't run a $1.3 Trillion deficit? No way! Who would buy all those bonds that the FED is buying now? Wouldn't buyers also demand a much higher return?

That is the best discipline on Big Gov't that could exist.

[Varsity Flight]

Don’t buy into the old mantra. Euro-negative watch today. It’s demand.