While it wasn’t on the front page of their financial section, it was still breaking with ranks for a mainstream media outlet to publish a piece on the merits of the gold standard. The op-ed article by James Grant, author of “Money of the Mind” discusses how to make the dollar sound again and includes the following:
On Nov. 3, a general uproar ensued, with the dollar exchange rate weakening and the price of gold surging. And when, last Monday, the president of the World Bank suggested, almost diffidently, that there might be a place for gold in today’s international monetary arrangements, you could hear a pin drop.
Let the economists gasp: The classical gold standard, the one that was in place from 1880 to 1914, is what the world needs now. In its utility, economy and elegance, there has never been a monetary system like it.
It was simplicity itself. National currencies were backed by gold. If you didn’t like the currency you could exchange it for shiny coins (money was “sound” if it rang when dropped on a counter). Borders were open and money was footloose. It went where it was treated well. In gold-standard countries, government budgets were mainly balanced. Central banks had the single public function of exchanging gold for paper or paper for gold. The public decided which it wanted.
Such commentary on the pages of America’s leading paper is sure to raise the ire of the Keynesian lynch mob. Who inside the NY Times dares to approve this blasphemy and bring this debate to the forefront?
If the people begin to question the fiat monetary system and bankster bailouts, it could seriously threaten the power structure of the elite and their Ponzi financial system. The comes just a week after Bernanke and his bankster cronies found out that Ron Paul is to become one of their overseers as chairman of the House Subcommittee on Domestic Monetary Policy. This was one of the best things to come from the recent elections that gave the Republicans control of the House. Paul would like to abolish the Federal Reserve and the nation’s current monetary system in favor of exactly what this NY Times article is proposing – a gold-backed currency.
The article went on to state…
If only they gave it some thought, though, the economists – nothing if not smart – would fairly jump at the chance for counter duty. For a convertible currency is a sophisticated, self-contained information system. By choosing to hold it, or instead the gold that stands behind it, the people tell the central bank if it has issued too much money or too little. It’s democracy in money, rather than mandarin rule.
Today, it’s the mandarins at the Federal Reserve who decide what interest rate to impose, and what volume of currency to conjure.
The first time the United States abandoned the gold standard — to fight the Civil War — it took until 1879, 14 years after Appomattox, to again link the dollar to gold.
To reinstitute a modern gold standard today would take time, too. The United States would first have to call an international monetary conference. A chastened Ben Bernanke would have to announce that, in fact, he cannot see into the future and needs the information that the convertibility feature of a gold dollar would impart.
That humbling chore completed, the delegates could get down to the technical work of proposing a rate of exchange between gold and the dollar (probably it would be even higher than the current price of gold, the better to encourage new exploration and production).
Other countries, thunderstruck, would then have to follow suit. The main thing, Mr. Bernanke would emphasize, would be to create a monetary system that synchronizes national economies rather than driving them apart.
While calling to end the Fed and return to the gold standard used to be the turf of the fringe conspiracy theorists, it is now entering the mainstream debate. Gold bugs may feel vindicated that leading economists around the world are now favoring some type of commodity-backed currency in order to bring stability to the markets. It should also serve to restrain out-of-control government spending, bailouts for the banks and wars of choice designed primarily to make the rich richer at the expense of the rest of society.
With Ron Paul’s authority and power now elevated, the CFTC going after naked short manipulators and leaders around the globe questioning the merits of endless quantitative easing, we finally have a glimmer of hope for some real reforms to the broken monetary and financial systems. Although I am not naive enough to expect the banking elite to go down without a fight. For the time being, they still have the majority of the political establishment on their side, desperate for more campaign contributions to stay in power. Nevertheless, the publishing of this op-ed piece by the New York Times is certainly a step in the right direction and is sure to ignite debate and open eyes to the value of precious metals and merits of sound money.
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