Don’t Expect a Return to a Gold Standard Any Time Soon

Lies and Distortions

Despite trillions of paper currency units poured into the world economies since the start of the financial crisis, there has been no recovery, in fact, all legitimate indicators have shown worsening conditions except, of course, for the pocketbooks of the politically – connected financial elites.

Despite trillions of paper currency units poured into the world economies since the start of the financial crisis, there has been no recovery, in fact, all legitimate indicators have shown worsening conditions except, of course, for the pocketbooks of the politically – connected financial elites. - Click to enlarge

A comparison of average annual GDP growth in different time periods since 1949. The last bar shows Q2 2016, the one before it the time period 2009 – 2016. In this time period, the by far biggest fiscal and monetary stimulus of the entire post WW2 era was applied. Obviously, it hasn’t worked as advertised. Growth wasn’t so weak in spite of, but because of these policies (keep in mind that “measuring” aggregate growth in an inflationary system is even more flawed than it would otherwise be).

Macroeconomics: Principles, Problems and Policies by McConnell, Brue and Flynn is a leading introductory level college text which has been through, to date, some 20 editions.

Until the financial crisis of 2008, the subject of a commodity- backed money was not discussed, however, after the crisis and the popularity of gold standard enthusiasts like former Congressman and Presidential candidate Ron Paul, the authors of Macroeconomics obviously felt the need to address the resurgence in the interest of metallic money.

McConnell and company’s critique of the gold standard is full of fallacious reasoning that monetary cranks have employed for generations, all of which has been easily refuted by eminent economists.  Yet, the lies and distortions about commodity money continue in academia.

The authors admit that:

“To many people, the fact that the government does not back the currency with anything tangible seems implausible and insecure.”

This logical sentiment and realization of the fraudulent nature of unbacked currency by those outside the economics profession is brushed aside by the esteemed trio:

“But the decision not to back the currency with anything tangible was made for a very good reason.”

Yes, and we know what that reason was: so that the state and central banksters could have ready and unlimited access to the creation of money to solidify and expand their power.  The gold standard was always an impediment to this cherished dream of the political elites – the establishment of an irredeemable, paper monetary order.

The authors, not surprisingly, see things differently:

“If the government backed the currency with something tangible like gold, then the supply of money would vary with how much gold was available.  By not backing the currency, the government avoids this constraint and indeed receives a key freedom – the ability to provide as much or as little money as needed to maintain the value of money and to best suit the economic needs of the country.”

By all means, the state and central banksters should be given as much “freedom” as possible for we all know that governments would never abuse such license and would always act in the best interests of their citizens.  Certainly, the authors are not aware of any cases in history where such “freedom” was ever abused.

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The McConnell, Brue and Flynn text book with the not very imaginative title. Not surprisingly, “standard” economics textbooks are brimfull with the most vicious statist propaganda nowadays.

“Nearly all Economists Agree” (that They Won’t Bite the Hand that Feeds Them)

“Nearly all today’s economists agree that managing the money supply is more sensible than linking it to gold or to some other commodity whose supply might change arbitrarily and capriciously… if we used gold to back the money supply so that gold was redeemable for money… then a large increase in the nation’s gold stock as the result of a new gold discovery might increase the money supply too rapidly and thereby trigger rapid inflation.  Or a long-lasting decline in gold production might reduce the money supply to the point where recession and unemployment resulted.”

Volumes have been written debunking such stupidity.  The point, however, is that millions of minds have been exposed to such thinking and while most will not become economists (thank goodness!), what is taught in college and university classrooms about the gold standard is negative, to say the least.

Moreover, those who continue in a career in finance or economics will unlikely ever be presented with an accurate assessment of the gold standard.

A return to a sound and just monetary order will only take place after the ideological groundwork has been first laid, just as fiat money and central banking came about after years of proselytizing by inflationists.

It is also not enough to show the economic efficacy and moral soundness of commodity money, the ideas of crackpots like McConnell, Brue and Flynn need to be exposed for what they are.

Under the current academic environment, as generations have been misinformed, deceived, and lied to, it is unlikely that a return to a gold standard will take place.  Until the intellectual battle is won, paper money and the central banksters that manage it will continue their reign of financial terror.

Once upon a time, dollar notes were money substitutes, redeemable for gold on demand by the bearer. Then the government took all the gold, but promised it would keep it safe so as to continue to “back” its money substitutes with it (only, private citizens could no longer redeem their notes). And one day it simply declared that the money substitutes themselves would henceforth be money. Here’s a bit of super-secret information: this actually didn’t happen on account of advances in monetary theory. 🙂

Image via coinzilla.com