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Re: The G20 and Gold... and how it could really unravel
With all due respect to Mr. Price, but this is typical gold bug propaganda.
Some key examples:
1)
The stock market bubble in 1929 was during the gold standard era of the US.
Similarly the various panics in the 1800s were also obvious examples of credit over-expansion.
Thus the premise that gold itself would someone how credit over-expansion is false; it is successful government regulation which does that.
Redeemability of currency for gold will not limit credit expansion any more than it will limit Ponzi schemes - simply because in either case only a 'run on the bank' will reveal the inadequacy of the backing.
2)
Again, sounds nice but China actually has the WORST money supply to gold ratio. China must increase its gold reserves by 3x to match the US' ratio - and we already agree the US is f***ed. So how much gold much China buy to be 'good'?
3)
Yes, they worked for nothing. And in return, they received the most of the industrial base of the United States, Europe, and the former USSR.
So did they really receive nothing?
4)
Uh, ok. Peak Cheap Oil could be based on a thesis of PEMEX. There is open armed fighting between drug lords and government troops. But somehow Mexico is BETTER placed to survive the crisis?
More like less far to fall. Methinks Mr. Price is talking his plata book here.
5)
I do find it amusing that the gold standard is lumped with demagogy and Socialism. The latter 2 are political - does being in the same group mean the gold standard is political as well?
6)
This is the best possible example of 'magical' economic thinking. Why would a gold standard necessarily cause industries and new jbs to spring up like mushrooms?
The most cogent criticism of a 'hard' currency standard is that a 'hard' currency restricts credit such that economic growth is also restricted.
What we have today is too much 'growth' - specifically so much credit growth that FIRE dominates as opposed to actual PC economic development.
It is not clear at all to me that going the other extreme - starving the economy of cash - is necessarily a better solution.
The corruption of the US economy is not so much fiat currency per se as it is the deployment of too much credit growth via the fiat mechanism towards unproductive activities (FIRE).
No one disputes that getting credit to create a new manufacturing process, or a new farming product, or new IT service is generally positive.
The problem as I see it today is that so much credit flew around that it became much easier to borrow money to buy existing processes, or outsource already owned processes, or suppress competitors as opposed to actual creation.
Originally posted by gnk
Some key examples:
1)
These evils appeared because gold was eliminated as a) a constraint on the expansion of credit and the creation of money, and b) the only form of payment of international debt.
Similarly the various panics in the 1800s were also obvious examples of credit over-expansion.
Thus the premise that gold itself would someone how credit over-expansion is false; it is successful government regulation which does that.
Redeemability of currency for gold will not limit credit expansion any more than it will limit Ponzi schemes - simply because in either case only a 'run on the bank' will reveal the inadequacy of the backing.
2)
For this reason, the Chinese and Asians in general are buying gold, and will continue to buy it indefinitely: computers cannot erase gold reserves.
3)
The awful truth about China is that the Chinese acquired their formidable industrial power in the short span of thirty years at a tremendous cost: for thirty years they worked for nothing.
So did they really receive nothing?
4)
The Mexican economy, as we see it, is like a broad, low pyramid. It is more stable than the American “skyscraper” economy, a highly complex economy. Mexico is better equipped to survive the present crisis than the USA.
More like less far to fall. Methinks Mr. Price is talking his plata book here.
5)
If Mexico aspires to anything more, we shall have to wait for the restoration of the gold standard worldwide. In the meantime, neither demagogy nor Socialism will solve our problems. Only the gold standard can do that.
6)
Industries and new jobs will spring up like mushrooms immediately, to satisfy American demand. International balance will be restored, unemployment will disappear.
The most cogent criticism of a 'hard' currency standard is that a 'hard' currency restricts credit such that economic growth is also restricted.
What we have today is too much 'growth' - specifically so much credit growth that FIRE dominates as opposed to actual PC economic development.
It is not clear at all to me that going the other extreme - starving the economy of cash - is necessarily a better solution.
The corruption of the US economy is not so much fiat currency per se as it is the deployment of too much credit growth via the fiat mechanism towards unproductive activities (FIRE).
No one disputes that getting credit to create a new manufacturing process, or a new farming product, or new IT service is generally positive.
The problem as I see it today is that so much credit flew around that it became much easier to borrow money to buy existing processes, or outsource already owned processes, or suppress competitors as opposed to actual creation.
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