11/11/10 Tampa, Florida – There is a lot of wailing and gnashing of teeth from Moron Keynesian Trash (MKT) about the brave Robert Zoellick, president of the World Bank, saying that what the world needs is a modified gold standard for currencies, which it does, in spades.
The Financial Times, long a champion for Keynesian stupidity despite constant inflation in prices, had an editorial from one of these MKT, who opines, “Could a gold standard help international currency co-ordination? In theory it could, if the state were willing to accept the restrictions on national monetary policy and the currency account adjustments that a gold standard entails.”
Did they say, “Willing to accept restrictions on national monetary policy”? Hahaha! What kind of crack is that? Is this guy actually saying that the only reasons that a gold standard would not work is because governments want no restrictions on creating and spending a lot of money, consequences be damned? Hahaha! Who knew?
Not content with that, the editorial goes on, “But if such political will can be found, there are better anchors than gold; until then, gold will not work.” That’s it! No explanation, no rationale, theory, no examples of “better anchors than gold,” no nothing! Just some preening know-nothing stating, “gold will not work”! Hahaha!
Jon Nadler at Kitco.com writes that “A case was made for a new anchor or ‘basket’ of currencies plus gold, and it was contained in a Financial Times piece written by World Bank President Robert Zoellick. His ideas were met with skepticism by gold market experts such as UBS analyst Edel Tully, who correctly stated that ‘Any reserve currency needs a supply that can grow as rapidly as global trade. Gold supply falls significantly short of that basic requirement.’“
Did he say, “correctly stated”? Wrong! Well, my first instinct is to laugh at such arrogance, since I never heard or read such a thing in my life, which I do thusly: Hahaha!
For one thing, any amount of gold will work perfectly, and for another thing, the world is awash in dollars and other countries printing their own money to absorb all those dollars flowing out into the world, an irresponsible and stupid result of not having a gold standard, and which has caused a lot of inflation, bubbles and economic misery.
And as for a “gold market expert” knowing anything about economics, which he obviously doesn’t, I will just dismiss him with a casual wave of my hand.
On the other hand (the one that is not waving) Charles Kadlec of the Economic Advisory Board of the American Principles Project, writing in The Wall Street Journal, correctly says that “guaranteeing a stable value for the dollar by restoring dollar-gold convertibility would be the surest way for the Federal Reserve to achieve its dual mandate of maximum employment and price stability.”
In fact, he goes on that “From 1947 through 1967, the year before the US began to weasel out of its commitment to dollar-gold convertibility, unemployment averaged only 4.7% and never rose above 7%,” which happily produced not only low unemployment, but that “low unemployment and high growth coincided with low inflation” along with low interest rates, as exemplified by AAA-rated corporate bonds averaging less than 4%, and which “never rose above 6%.”
And speaking of debt, I was intrigued with the title of the essay by James West, at midasletter.com, which was, “Buying $600 Billion in Debt with Debt,” which I had hoped was an instruction manual on how to make a lot of money, fast, using no money of my own, and (hopefully) without doing any work or taking any risk.
It was, alas, not a guidebook to instant and undeserved riches, but a criticism of the idiocy of the Federal Reserve and another stupid Quantitative Easing (QE2) plan of theirs to create a couple of trillion dollars or so in the next year, to buy a couple of trillion dollars or so of Treasury debt in the next year, so that the despicable Obama administration can deficit-spend a couple trillion dollars or so in the next year.
James West, writes, “Here is the glaring hole in the United States Federal Reserve’s approach to what it calls stimulus, and what history will one day categorize as fraud: You can’t use your own debt to purchase more debt when you can’t repay the original debt. The crime is compounded when you know you’re never going to repay the debt. It amounts to treason to intentionally destroy the integrity of the nation’s money.”
And how do they intend to get away with it? Easy! He explains, “The Federal Reserve’s ability to ‘purchase’ US Treasury Bills is completely dependent on the fact that there is no overseer above the Board of Governors of the US Federal Reserve to call an end to such self-destructive, immoral, and just plain criminal behavior.”
In short, Congress can stop them, but doesn’t!
In The Financial Times, Martin Feldstein writes, “The Federal Reserve’s proposed policy of quantitative easing is a dangerous gamble with only a small potential upside benefit and substantial risks of creating asset bubbles that could destabilise the global economy. Although the US economy is weak and the outlook uncertain, QE is not the right remedy.”
The reason is that “Under the label of QE, the Fed will buy long-term government bonds, perhaps one trillion dollars or more, adding an equal amount of cash to the economy and to banks’ excess reserves. Expectation of this has lowered long-term interest rates, depressed the dollar’s international value, bid up the price of commodities and farm land and raised share prices.” Inflation! There it is!
Even worse, The Wall Street Journal reports their “Number of the Week” is $10.2 trillion, which is, “How much the governments of the economically advanced nations will need to borrow in 2011.”
As for just us idiotic Americans who have elected the guys who allowed the Federal Reserve to destroy the dollar by monstrous over-issuance, the International Monetary Fund estimates that “The US will need to find about $4.2 trillion, 9% more than 2010 and equal to 28% of the country’s projected economic output in 2011.”
The good news is that buying gold, silver and oil now to fabulously capitalize on the horrific inflation in consumer prices that all of this quantitative easing madness will cause makes buying them such a no-brainer that “Whee! This investing stuff is easy!”
The Mogambo Guru
for The Daily Reckoning
The Mogambo Guru
Richard Daughty (Mogambo Guru) is general partner and COO for Smith Consultant Group, serving the financial and medical communities, and the writer/publisher of the Mogambo Guru economic newsletter, an avocational exercise to better heap disrespect on those who desperately deserve it. The Mogambo Guru is quoted frequently in Barron's, The Daily Reckoning , and other fine publications. For podcasts featuring the Mogambo, click here.
The Daily Reckoning is your premier source for making sense of the news Washington and Wall Street generate. Each business day, The Daily Reckoning calls on its stable of world-class writers and thinkers to show you how to get ahead.
Start your 100% FREE subscription to The Daily Reckoning today and you’ll get a free research report, “How to Survive the Fall of Social Security.” Simply enter your email address below to get your free report and join over 495,000 worldwide Daily Reckoning subscribers!
We Respect Your Privacy and We will
Never Share or Sell Your Email Address
Keynesian stupidity is the correct term.
A Gold standard can’t be useful? It worked quite well when nations of the world issued gold coins for circulation- over a period of roughly two thousand years!
For centuries, nations produced gold and silver coins and prices remained relatively stable most of the time. War or famine caused prices to go up, but when the crisis was over so was the inflation. The only time gold and silver coins failed is when governments began to debase their gold and silver coins, increasing base metals and decreasing precious metals in the coins (i. e. early inflation.)
It is NOT gold that is the problem, it is speculation and over issuance of money that are the problems, but these problems are never considered by clod hopper Keynesians.
All Hail Mogambo!
Hail Mogu!
Nardfart properly waved off. The guy is a major sh ill for the federal reserve bank. For years he has praised their ability to manage monetary crises.
The irony for people like Nardy is they fail to see that the monetary problems the Fed purports to resolve are problems they created in the first place.
Let’s see if Nard’s predictions of 740 gold will come true. Of course, he doesn’t make predictions, he just profusely quotes “reliable” sources like the Aardvark Bank of Podunk and the analysts from the 1st Nationalist Bank of Helen and Troy… you know, people “in the know”. Furthermore, why quote people like Bonner and Russell when everyone reads those guys anyhow?
p.s. Sadly, Nadler sees no moral issue with quoting obscure resources b/c he represents “a free press” and why should be have to be a gold bull just b/c he works for Kitco? Nevermind that his posts are always the ones IN BOLD at the TOP OF THE PAGE.
Try an email exchange with the man. He’s either in terrifying denial or he’s the main character from Carlo Collodi’s classic tale copied by Disney.
Without some sort of control monetary system definitely goes wild. It invites anyone to abuse. Historically, gold has been deserted and it has also been back in vogue just the time when it was needed most. Isn’t the only monetary saviour?
Unrestricted, paper system promotes monetary growth by leaps and bounds and henceforth begets economic miracle, breaking records after records of the economic train. Well, anything beyond control or vulnerable to abuse is destined a final showdown – the ultimate crash. Fast but ends up in ashes. Slow and steady ultimately win the race.
Uh huh, agree with most of the gold stuff but blaming only your current president for the US’s bankrupcy is plain stupid.
Suggest you rethink whether greed is good…. and maybe learn Chinese.
quoting jon nadler is akin to quoting micky mouse on anything.
you should know better.
World Bank chief Zoellick has mooted the idea of a Gold standard.In the late 40s, as per Brenton Woods agreement, the value of the US Dollar was pegged to 35 per ounce of gold and the $ became the world’s reserve currency. Most countries pegged their exchange rates relative to the $.This arrangement went haywire post Vietnam war in the 70s.
The new arrangement envisaged by Zoellick involves a basket of currencies that includes the USD, Euro, Pound ,Yen and Yuan. One fervently hopes that in one’s lifetime the INR will figure on this podium.
As much as the new order recognises a basket of currencies, in keeping with global realities, it would make similar sense to peg this against a basket of commodities: Gold, Oil, Silver, Copper, Lithium and probably Uranium.
But how many Americans would accept an effective 10% contraction in real gdp, lower living standards and much higher interest rates? That would be the consequences of fixing the dollar to gold again. How is the government going to reign in the deficits to acheive a gold backed currency? At least with the policy of dollar debasement the average misinforned voter will feel a little richer even though reality is a little different. I bet the later is more palatable for the average joe than the former.
I find the quote by James West, “your own debt to purchase more debt when you can’t repay the original debt”, to be fairly incomprehensible.
The Fed isn’t going to borrow money to purchase more debt, they are going to print (without having borrowed or earned or gotten through taxation), out of thin air, dollars with which to cancel (yes, “buy”) debt.
So they are not using debt to buy debt. The only problem with what they are doing is that the supply of dollars is increased, hence the prospects for inflation.
Watched “Britain’s Trillion Pound Horror Story” , featuring our very own Mr. Bonner, and even the current proposed cuts are like bailing out a sinking tanker with a teacup.
And a very good instruction on how not to run a monetary system.
Two monetary systems have now been tried, gold and fiat.
Gold lasted longer.
I say, try every living Fed member for treason. And try every living legislator who ever voted for deficit spending, except in time of war, in which we are not, for treason. And try every living President and ex-President who ever signed a deficit budget, except in time of war, in which we are not, for treason.
After we hang the first few, our new civil servants will be much more cautious about borrowing and spending.
P.S. Let’s not bother trying the not-living, because that would just be a waste of our worthless FRN’s and would just be for show. We can just publicly debase and ridicule them for free, and they can not sue us for slander.
You refer to Moron Keynesian Trash (MKT). Actually it should be Moronic Keynesian Trash, as the noun in this case is Trash.
Of course this is all a moot point as “Moronic Keynesian Trash” is redundant; Many already understand Keynesian to be Moronic and Trash.
Wait until they launch the smelly New World Odour Funny Paper Money Thing and start inflating planetary bubbles in everything, and then investing will be no more so easy. In the meanwhile: Wheeee!