Friday, August 24, 2012

Government Gold

Apparently the Republicans intend to introduce as part of their platform a call to examine the idea of a gold-backed dollar.

The Republican Party is considering setting up a commission to examine the pros and cons of going back to the gold standard, according to draft documents of the party platform.

How many attempts at trying to fool Ron Paul supporters are the Republicans going to make?  Romney supports auditing the Fed (ha ha ha ha ha), he claims he would not re-nominate Bernanke, and now: trust us! We are going to look to gold.

The commission harkens back to the early 1980s, when President Ronald Reagan set up a Gold Commission with the same intention.

It strikes me that a new commission, if it ever gets established, will have about as much influence as the one mentioned from 30 years ago.  (According to Lew Rockwell, it was Carter who signed this commission into law.)

Only two members of the 17-member commission endorsed a return to the gold standard. One of them was Rep. Ron Paul, who remains an avid gold supporter.

Is it a surprise to see Ron Paul’s name associated with this story?  When he was actively running for office, the media would rarely mention him in connection with such stories. 

It's highly unlikely the United States would actually return to the gold standard….few mainstream economists support its reinstatement.

Certainly, mainstream economists would not – an honest gold standard (one developed in the free market) would put most of them out of work.

But this discussion is certainly not even about an honest gold standard.  Not that it is going to happen anytime soon, but the only discussion that would be considered is a government managed gold standard – you know, like the one Roosevelt killed in 1933, or the one Nixon killed in 1971.  The kind of gold standard that is a standard until it becomes inconvenient. 

…there's not enough gold in the world to support such a system, as Bernanke noted in a lecture earlier this year.

That this passes for wisdom says enough about both the economics profession and the mainstream media.  There is always enough of any good…at a price.

"To have a gold standard, you have to go to South Africa or someplace and dig up tons of gold and move it to New York and put it in the basement of the Federal Reserve Bank of New York and that's a lot of effort and work," he said.

Why does gold have to be delivered to the Federal Reserve? Why in New York?  To have an honest gold standard, Bernanke doesn’t have to do anything besides shut off the lights on his way out the door – that is not a lot of effort and work, it would seem.

It's an "awful big waste of resources," he added.

To describe an honest gold standard as a waste of resources again reflects on the poor state of the economics profession.  Why not say the production of consumer electronics is a waste of resources?  Or the production of automobiles?  How is it a waste of resources to produce something demanded by the market?

The Federal Reserve has turned over more than $70 billion per year over to the Treasury for the last two years.  This on top of the more than $3 billion of operating expenses reported by the Fed.  These funds were gleaned by the Federal Reserve from the market – resources that otherwise would have remained with market participants.

Which is the bigger waste of resources – miners digging out gold in a free market, or the manipulator of interest rates turning over the interest income gained as fruits of the manipulation for the government to spend?  To say nothing about the trillions in wasted resources due to the central bank induced boom preceding the bust.

Please don't study gold.  Just eliminate the monopoly in money and banking.  This will suffice.

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