On Fri, 7 Mar 2008 15:21:38 -0800 (PST), orangatang1@[EMAIL PROTECTED]
>> > Phil scott
>>
>> http://econ161.berkeley.edu/Politics/whynotthegoldstandard.html
>>
>> Why Not the Gold Standard?
>> Talking Points on the Likely Consequences of Re-Establishment of a
>> Gold Standard:
>> Brad DeLong
>> U.C. Berkeley
>>
>> Consequences for the Magnitude of Business Cycles:
>> Loss of control over economic policy. If the U.S. and a substantial
>> number of other industrial economies adopted a gold standard, the U.S.
>> would lose the ability to tune its economic policies to fit domestic
>> conditions.
>> * For example, in the spring of 1995 the dollar weakened
against the
>> yen. Under a gold standard, such a decline in the dollar would not
>> have been allowed: instead the Federal Reserve would have raised
>> interest rates considerably in order to keep the value of the dollar
>> fixed at its gold parity, and a recession would probably have
>> followed.
>> Recessionary bias. Under a gold standard, the burden of adjustment is
>> always placed on the "weak currency" country.
>> * Countries seeing downward market pressure on the values
of their
>> currencies are forced to contract their economies and raise
>> unemployment.
>> * The gold standard imposes no equivalent adjustment
burden on
>> countries seeing upward market pressure on currency values.
>> * Hence a deflationary bias which makes it likely that a
gold
>> standard regime will see a higher average unemployment rate than an
>> alternative managed regime.
>> The gold standard and the Great Depression. The current judgment of
>> economic historians (see, for example, Barry J. Eichengreen, Golden
>> Fetters) is that attachment to the gold standard played a major part
>> in keeping governments from fighting the Great Depression, and was a
>> major factor turning the recession of 1929-1931 into the Great
>> Depression of 1931-1941.
>> * Countries that were not on the gold standard in
1929--or that
>> quickly abandoned the gold standard--by and large escaped the Great
>> Depression
>> * Countries that abandoned the gold standard in 1930 and
1931
>> suffered from the Great Depression, but escaped its worst ravages.
>> * Countries that held to the gold standard through 1933
(like the
>> United States) or 1936 (like France) suffered the worst from the Great
>> Depression
>> * Commitment to the gold standard prevented Federal
Reserve action to
>> expand the money supply in 1930 and 1931--and forced President Hoover
>> into destructive attempts at budget-balancing in order to avoid a gold
>> standard-generated run on the dollar.
>> * Commitment to the gold standard left countries
vulnerable to "runs"
>> on their currencies--Mexico in January of 1995 writ very, very large.
>> Such a run, and even the fear that there might be a future run,
>> boosted unemployment and amplified business cycles during the gold
>> standard era.
>> * The standard interpretation of the Depression, dating
back to
>> Milton Friedman and Anna Schwartz's Monetary History of the United
>> States, is that the Federal Reserve could have but for some mysterious
>> reason did not boost the money supply to cure the Depression; but
>> Friedman and Schwartz do not stress the role played by the gold
>> standard in tieing the Federal Reserve's hands--the "golden fetters"
>> of Eichengreen.
>> * Friedman was and is aware of the role played by the
gold standard--
>> hence his long time advocacy of floating exchange rates, the
>> antithesis of the gold standard.
>>
>> Consequences for the Long-Run Average Rate of Inflation:
>> Average inflation determined by gold mining. Under a gold standard,
>> the long-run trajectory of the price level is determined by the pace
>> at which gold is mined in South Africa and Russia.
>> * For example, the discovery and exploitation of large
gold reserves
>> near present-day Johannesburg at the end of the nineteenth century was
>> responsible for a four percentage point per year ****ft in the
>> worldwide rate of inflation--from a deflation of roughly two percent
>> per year before 1896 to an inflation of roughly two percent per year
>> after 1896.
>> * In the election of 1896, William Jennings Bryan's
Democrats called
>> for free coinage of silver as a way to end the then-current deflation
>> and stop the transfer of wealth away from indebted farmers. The
>> concurrent gold discoveries in South Africa changed the rate of drift
>> of the price level, and accomplished more than the writers of the
>> Democratic platform could have dreamed, without any change in the U.S.
>> coinage.
>> * Thus any political factors that interrupted the pace of
gold mining
>> would have major effects on the long-run trend of the price level--
>> send us into an era of slow deflation, with high unemployment.
>> Conversely, significant advances in gold mining technology could
>> provide a significant boost to the average rate of inflation over
>> decades.
>> * Under the gold standard, the average rate of inflation
or deflation
>> over decades ceases to be under the control of the government or the
>> central bank, and becomes the result of the balance between growing
>> world production and the pace of gold mining.
>>
>> Why Do Some Still Advocate a Gold Standard?
>> * A belief that governments and central banks should not
control the
>> average rate of inflation over decades, and that the world will be
>> better off if the long-run drift of the price level is determined
>> "automatically."
>> * A belief that bondholders and investors will be
reassured by a
>> government committed to a gold standard, will be confident that
>> inflation rates will be low, and so will bid down nominal interest
>> rates.
>> * Of course, if you do not trust a central bank to keep
inflation
>> low, why should you trust it to remain on the gold standard for
>> generations? This large hole in the supposed case for a gold standard
>> is not addressed.
>> * Failure to recognize the role played by the gold
standard in
>> amplifying and propagating the Great Depression.
>> * Failure to recognize that the international monetary
system
>> functions best when the burden-of-adjustment is spread between balance-
>> of-payments "surplus" and "deficit" countries, rather than being
>> loaded exclusively onto "deficit" countries.
>> * Failure to recognize how gold convertibility increases
the
>> likelihood of a run on the currency, and thus amplifies recessions.-
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>>
>> - Show quoted text -
>
>
>with a commodity standard it is possible to save without having your
>money eroded by inflation. bank runs could be avoided by enforcing a
>100 percent reserve requirement.
>
>brad delong works for the privatly owned federal reserve.
Not really. But this spares you actually having to address the
numerous hard hitting points he made against your foolish position.
>thus he
>sup****ts their ability to counterfeit money and enslave the people of
>the us.
And he was on the grassy knoll! Sheesh you keep maxing out my kook
meter with all that nonsense.
>
>http://en.wikipedia.org/wiki/J._Bradford_DeLong
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