Wednesday, July 18, 2012
Reading List: The True Gold Standard
- Lehrman, Lewis E. The True Gold Standard. Greenwich, CT: Lehrman Institute, 2011. ISBN 978-0-9840178-0-5.
Nothing is more obvious than that the global financial
system is headed for an inevitable crack-up of epic proportions.
Fiat (paper) money systems usually last about forty years
before imploding in the collapse of the credit expansion
bubbles they predictably create. We are now 41 years
after the United States broke the link between the world's
reserve currency, the U.S. dollar, and gold. Since then,
every currency in the world has been “floating”—decoupled
from any physical backing, and valued only by comparison with
the others. Uniquely in human history, all of the world now uses
paper money, and they are all interlinked in a global market where
shifts in sentiment or confidence can cause trillion dollar excursions
in the wealth of nations in milliseconds. The risk of “contagion”,
where loss of confidence in one paper currency causes a rush to the
next, followed by attempts to limit its appreciation by its issuer, and
a cascading race to the bottom has never been greater. The great
currency and societal collapses of the past, while seeming
apocalyptic to those living through them, were local; the next
one is likely to be all-encompassing, with consequences which are
difficult to imagine without venturing into speculative fiction.
I believe the only way to avoid this cataclysm is to get rid of
all of the debt which can never be repaid and promises which can
never be met, pop the credit bubble, and replace the funny money
upon which the entire delusional system is based with the one
standard which has stood the test of millennia: gold. If you were
designing a simulation for people to live in and wanted to provide
an ideal form of money, it would be hard to come up with something
better than element 79. It doesn't corrode or degrade absent exposure
to substances so foul as to make even thrill-seeking chemists recoil;
it's easily divisible into quantities as small as one wishes,
easy to certify as genuine; and has few applications which consume
it, which means that the above-ground supply is essentially
constant. It is also very difficult and costly to mine, which
means that the supply grows almost precisely in synchronism with that
of the world's population and their wealth—consequently, as
a monetary standard it supports a stable price level, incapable of
manipulation by politicians, bankers, or other criminal classes,
and is freely exchangeable by free people everywhere without the
constraints imposed by the slavers upon users of their currencies.
Now, when one discusses the gold standard, there is a standard litany
of objections from those bought in to the status quo.
- It's a step back into the past.
- There isn't enough gold to go around.
- It's inflexible and unable to cope with today's dynamic economy.
- There's no way to get from here to there.
Posted at July 18, 2012 22:15