Ed,
At 16:31 15/10/2011, you wrote:
Keith, there are two problems here. One is inflation and the value
of currencies, the other is the state of the economy.
I agree.
I see the latter as the far larger problem now, particularly in the
US but throughout the western world as well. It has to be dealt with.
The economy is the more obviously visible problem -- what with
growing unemployment and the present riots in many major cities --
but we can't begin to solve this until we have a stable currency, and
governments which not only discipline themselves but also exercise
due diligence over the banks on our behalf.
Fixing the value of a currency to a commodity, e.g. gold but
perhaps silver as well, would greatly hamper the ability to infuse
money into key economic sectors in order to combat unemployment and
generally depressed conditions.
It's no use infusing money into the economy if nothing actually
happens -- which is what Bernanke has been doing for the past two and
a half years to no avail. Being on a gold standard doesn't impede the
creation of new money for economic change. The greatest economic (and
social) change ever in the history of man took place in England
during the 18th and 19th centuries when the gold standard operated. A
whole society from top to bottom moved upwards and for the first time
ever an avalanche of talent was released from the working classes.
I simply don't see any sense in moving backward into history to a
gold standard at this time of growing global crisis.
As already said, a gold standard doesn't imply moving "backwards". It
simply allows us to adapt to change in a safer way.
Once the economic crisis is dealt with, moving money back into some
kind of commodity backed system might be considered, though I see it
as unnecessary. What is important is that real incomes continue to
rise or are at least maintained, whatever the number we attach to
them to describe their value.
But incomes in real terms haven't been rising for 20-30 years in
Europe and America. Despite the fatter tail at the rich end, median
income has been declining. They've only been hidden by increasingly
cheap mass consumer goods, a vast extension of credit and a false
sense of wealth as house prices have risen several fold in that period.
Keith
Ed
----- Original Message -----
From: <mailto:[email protected]>Keith Hudson
To: <mailto:[email protected]>RE-DESIGNING WORK, INCOME
DISTRIBUTION, ,EDUCATION
Sent: Saturday, October 15, 2011 4:54 AM
Subject: [Futurework] This week-end's G20 impasse
America, the UK and China, not members of the Eurozone, and other
countries will be asked at the G20 this week-end to generously chip
into a new mammoth fund to save Greece, Portugal, Spain, Italy and,
if the truth is to be told, France also. The reason is that Germany,
Finland, Slovakia and Netherlands, which manage to control their
budgets like any good housekeeper, will not be able to save the
Eurozone by themselves.
China, which has already invested a quarter of its reserves in the
Eurozone, says it won't subsidize it any further until it shows
evidence of serious budget control. The UK, whose government debt is
already quite as bad as Portugal's proportionately, is only
sustained at present by its past reputation and the grace and favour
of its AAA credit rating given (reluctantly) by Fitch, Moody and
S&P. Even now its debt is getting worse and it can only help the
Eurozone by going further into debt at a faster rate. America,
already downgraded one notch by S&P (and due for other downgrades
quite soon) is, if anything, in an even worse state than Portugal
proportionately. But, maybe, America will help. It's already the
world's most prolific printer of money and Bernard Bernanke is a
stuck-needle Keynesian.
At least, Bernanke says he is. He's also a highly intelligent
economist. Despite telling a Congressional Committee some three
months ago that he knows little about the history of gold currency,
he will be thoroughly acquainted with the agonies of President Nixon
and his advisors in 1971 when deciding to go off the gold standard
because Fort Knox was losing too much bullion to European exporting
countries. Like scores of central bankers all round the world,
particularly China, he is probably now quietly buying gold -- of
that I am becoming increasingly convinced.
If the Eurozone doesn't repair itself one way or another in the next
few weeks it threatens to collapse and initiate a new world-wide
depression far worse than the '30s. America will revert to a gold
standard at the midnight hour. China, Russia, Brazil and other
countries have been calling for this for years. Robert Zoellick,
President of the World Bank, suggested this last November. One of
Bernanke's present central bank Governors and a past economic
advisor to President Bush, Larry Lindsey, is calling for it. Two of
the Republican contenders for presidential candidacy are calling for
it. Several US State governments are already drafting legislation
for this. Eminent voices are now rising even as the price of gold
continues to rise.
America is still such a lynch pin of the world economy that once
America decides to go back onto the gold standard, the rest will
have to follow (in the same way that all their currencies inflate
when the dollar inflates). It could be done quite as simply and
rapidly (that is, overnight) as when President Nixon took the US
dollar off the gold standard. Announced with a fancy flow of words
by Obama and Bernanke the American public will accept a
gold-standard dollar in just the same way as they accepted Nixon's
decision to go off it -- that is, in a totally non-plussed state of
mind. Although the idea (and practice) of a gold standard currency
is simple enough, it has certainly foxed the minds of politicians so
far, hitherto preferring to take the easy way out of difficulties by
printing money.
If the Eurozone gets out of its impasse in the coming weeks by
causing China, America and the UK to print even more money (and thus
invite the danger of hyperinflation), then going back onto the
pre-1914 gold standard might have to be left to the next President
in 2013 and maybe his appointment of a new US central banker when
the next extreme crisis occurs. Whatever, and whenever, the present
mayhem cannot go on for much longer.
Keith Hudson, Saltford, England http://allisstatus.wordpress.com/2011/10/
----------
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Keith Hudson, Saltford, England http://allisstatus.wordpress.com/2011/10/
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