Gold News

The Gold Standard Cure

Bloomberg says a Gold Standard would offer no cure for the credit crunch or ailing Dollar. Which is true...

INFORMATION CLEARING HOUSE started off a recent issue with quote from Kenneth Gerbino, writes the Mogambo Guru for The Daily Reckoning – a man referred to as "former chairman of the American Economic Council".

"Historically," Gerbino notes, "the United States has been a hard money country. Only [since 1913] has the United States operated on a fiat money system. During this period, paper money has depreciated over 87%."

In contrast, when the Dollar was gold and gold was the Dollar, "During the preceding 140 year period, the hard currency of the United States had actually maintained its value. Wholesale prices in 1913 were the same as in 1787."

I thought this pretty much ended the discussion, and thus our work was done and we go out for pizza and beer and maybe hit a few strip clubs. But suddenly at Bloomberg I read that "Gold Standard Is Wrong Salve for Global Ills".

I agree 100%, simply because there IS no soothing salve for the globe's economic ills with which to effect a cure, which means that there is no economic "solution" to over-indebtedness and governmental stupidity which will not involve incredible pain, herein defined as incredible inflation in the necessities of life and the incredible deflation of everything that is not.

I am pretty smug about this because I already know that every other government in the Whole Freaking History Of The World (WFHOTW) wanted to spend more money than it could take in through taxes and plunder, and so the ones that tried to use a fake, fatuous, foolhardy fiat currency made only of paper and promises ended up destroying themselves and ruining their people by creating so much money and credit.

That is why the Founding Fathers, who knew this first-hand, wrote into the US Constitution that the Dollar shall only be of silver and Gold, which is the only thing that can prevent the government from destroying the United States of America by the over-creation of money and credit!

And now the Fed and the Treasury are doing that very thing right now, creating money at rates that are completely unprecedented in American history and, probably, the history of the world!

Tragically, all of this money-supply inflation will – as it must – result in consumer price inflation, which is the bane of all economies, although you would not know it from the deplorable Fredric Mishkin, whom the Bloomberg article refers to as "an economics professor at Columbia University's Graduate School of Business and a former Federal Reserve governor."

He says that with the Gold Price fluctuating from $253 to $1,034 an ounce during the past nine years, this automatically means that pegging currencies to Gold Bullion "would probably not produce the price stability that the advocates of the gold standard seek."

Hahahaha! The Dollar goes to El Grande Squatto Mundo (to use the original Spanish) because Mishkin and his brain-dead econometric cronies at the Fed and most of the nation's universities keep encouraging interest rates to be constantly lower than the rate of inflation, which increases borrowing, which further inflates the money supply, which makes the prices of assets go up a lot – including homes – and the price of everything else to drift upward, too, in response to all of this new money and credit. But when Gold goes up in response to the Fed's irresponsible creation of money and credit creating inflation by reducing the buying power of the Dollar, Mishkin says that this means that gold is not stable!

Hahaha! Too much! Hahahaha!

In fact, "hahaha" does not even BEGIN to cover it, and I will amend that last paragraph to end with "Hahahahahahahaha!" to indicate something really rude and disrespectful. Because the Bloomberg article goes on to claim that the Gold Standard is not necessary, although "no doubt, the abundant liquidity created by asset- securitization, derivatives and Asian countries amassing huge reserves while pegging their currencies to the Dollar fed both bubbles and greed.

"Yet these excesses could – and should – have been harnessed by alert central banks acting in concert."

Hahahaha! Like that's going to happen! "Trust us!" Hahaha! This reminds me of Oscar Wilde saying, "I can resist everything except temptation", and who also famously said, "The only way to get rid of a temptation is to yield to it."

The angriest guy in economics, the Mogambo Guru is Richard Daughty, general partner and COO for Smith Consultant Group, serving the financial and medical communities. The Mogambo Guru economic newsletter – an avocational exercise to heap disrespect on those who desperately deserve it – has been quoted frequently in Barron's, The Daily Reckoning and other fine publications.

See the full archive of Mogambo Guru articles.


Please Note: All articles published here are to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it. Please review our Terms & Conditions for accessing Gold News.

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