"There are countless horrible things happening all over the world and horrible people prospering, but we must never allow them to disturb our equanimity or deflect us from our sacred duty to sabotage and annoy them whenever possible." -Auberon Waugh
Indeed. I'm all for having a poultry-based economy, but it would get a little messy tryin' to shove a chick into one of those lil' machines that dispenses gumballs.
Some people argue that we can't go back to the gold standard because there's not enough gold in the world to back what has been printed.To which I say: devalue (by some factor) what we've printed or magically created by computer. This adjusts for the inflation while returning to the gold standard. Yes, there will be pain, which must be endured, not unlike having a bad tooth pulled without a pain killer. But that pain stops, eventually, and the body heals. Our current course is equally painful, with possible terminal effects at the end. I'll take the pliers over a cup of hemlock, thankyouverymuch.
I think this is a bit drastic. If we just return to pre-Keynes Classical economics we will manage these problems better. The symbolic form of money does not greatly matter, most of it is numbers on screens. (Mostly in the form of loans, and I think most of those are home mortgages in the West too. So in effect we may have swapped a gold standard for a 'land standard' - our currencies are then based on land ownership, which makes sense in an overpopulated world). Gold suffers massive inflation too, as the Spanish found when they dug great quantities. Unlike modern currency it was always mostly hoarded rather than traded, especially in the East: It's the stuff of kings and peasants (both fast disappearing). Imperial China demanded gold for its products in the first 'globalisation' era of one-way trade, motivating the Spanish to search America for the stuff. Now the Chinese love dollars! So anyway it's not just a choice between gold and Keynes, there's a third option - a return to Classical econ.
Classical economics includes supply-side economics, known as Reaganomics.But note this perceptive update on it.
You make a good point, Bruce, but the Spanish problem came about because they couldn't spend all that money. There wasn't enough production in Europe (according to the prices of the time) to match the (initial) value of the gold they brought back from the Americas. When you have too much of something, the value goes down. The Spaniards had too much gold; we have too much fiat money.
Let me clarify: Fiat money is not always and everywhere a bad idea; however, its value and utility are only as good as the fiscal and budgetary discipline of the government that issues it.
JeffS,The Spanish did indeed spend all that income (and more) from the New World (actually mostly silver from Mexico and Peru). That influx of silver, plus the silver coming from new mines in Germany and Bohemia, fueled an inflation in Western Europe, the likes of which was not seen again until the 20th Century.The Spanish monarchy spent that income mainly on warfare. Under Charles V and Philip II (his son) the Spanish financed wars all over the place, for the Turks were coming against the Mediterranean countries and against Central Europe (first siege of Vienna 1529), they felt they had to put down the Protestants, and there were continual wars with the French monarchy, from before Charles' time (1519-1556( through the early years of Philip's reign 1556-1598). The wars with the French monarchy had started in 1494 and lasted, with short breaks, until 1559.Much of this spending was enabled through debt, which was then supposed to be paid off with tax revenues later. But, of course, the tax revenues were never enough. During Philip's reign the Spanish monarchy went bankrupt four times. The pattern was that the King would stop paying interest on his debts as well as not paying the principle. Then the bankers would be offered a deal in which high-interest-rate, short term debt was converted to low-interest rate, very long term. Sometimes the deal was sweetened by ennobling the bankers, an option not available to Obama. These acts destroyed many of the biggest banks in Europe of the time.While these bankruptcies were going on, the wars did not cease. In 1576 such a bankruptcy cut off funds to the Spanish troops in the Netherlands, whose pay was always in arrears anyway. They mutinied (a habit in the Army of Flanders) and hideously sacked the great entrepot and banking center of Antwerp. The city never really recovered from that experience.Spain went bankrupt from her wars. We are going bankrupt from welfare, which has been a larger item of Federal spending than Defense since Dick Nixon's time. I expect we shall carry out something similar to what old Philip did, repudiating or inflating away (or both) our massive debts. I was always amazed at the ignorance of bankers who assured us that "sovereign countries don't go bankrupt." Riiiight.
They're bringing up that trillion dollar coin idiocy, Michael, so, yeah, our debts will magically disappear....and everyone will suffer for it.
I was always amazed at the ignorance of bankers who assured us that "sovereign countries don't go bankrupt."perhaps they mean that they don't go into an orderly receivership but instead implode, collapse or fragment. That anyone other than a glazed eye college student who says dude a lot would suggest that trillion dollar coin idiocy scares the hell out of me.
I'll gladly pay you in 2014 for a trillion dollar coin today.
Keep in mind that, when Newton mentioned 'standing on the shoulders of giants', he was writing to Robert Hook, who was under 5' tall.Cheers
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