It has been almost three decades since the movie Risky Business starring Tom Cruise came out in 1983. In the movie, the Cruise character, Joel Goodson, says “Porsche. There is no substitute.” Goodson, he had standards.
A decade later, Tom Hanks starred as Jimmy Dugan, the coach of a women’s baseball team. In one scene, Dottie Hinson, played by Geena Davis, tells her coach that she is quitting to return to Oregon. In explanation, she says of baseball: "It just got to be too hard." The Hanks character replied: "It's supposed to be hard. That's what makes it great! If it were easy, everyone would do it.” Dugan, he understood discipline.
Banker apparently didn’t and don’t. It's been a bad summer for bankers. JPMorgan Chase had a little risky business that may cost it close to $6 billion. Wells Fargo had to pay large fines for misbehavior with mortgage policies. Barclays' revelations set off a LIBOR scandal. HSBC admitted it wasn't properly handling money laundering. And of course, the German Bundestag had to hold its nose and vote to approve the bailout of Spain's problem banks.
Governments have cooperated in the bad behavior. University of Chicago Professor Raghuam Rajan argued in Foreign Affairs that “today’s economic troubles are not simply the result of inadequate demand but the result, equally, of a distorted supply side. For decades before the financial crisis in 2008, advanced economies were losing their ability to grow by making useful things. But they needed to somehow replace the jobs that had been lost to technology foreign competition and to pay for the pensions and health care of their aging populations. So in an effort to pump up growth, governments spent more than they could afford and promoted easy credit to get households to do the same. The growth that these countries engineered, with its dependence on borrowing, proved unsustainable.”
“Bankers obviously deserve a large share of the blame for the crisis,” noted Rajan. “Some of the financial sector’s activities were clearly predatory, if not outright criminal. But the role that the politically induced expansion of credit played cannot be ignored; it is the main reason the usual checks and balances on financial risk taking broke down.”
Governments and banks needs checks if their books are going to be balance. Working people need a stable currency to retain the value of their work and their savings.
In his book, The New Gold Standard: Rediscovering the Power of Gold to Protect and Growth Wealth, Paul Nathan writes: “The purchasing power of money under the gold standard, and the silver standard before it, remained fairly constant for over 200 years. Gold’s price was fixed at $22.67 per ounce between the years 1792 to 933, and the value of the dollar during that time was the same as an ounce of gold. During the years 1880 to 1914, the inflation rate was .01 percent. This 34-year period is known as the years of ‘the classical gold standard,’ when a dollar remained a dollar, and gave rise to the term ‘as good as gold.’ Since we have abandoned the gold standard the value of the dollar has fallen by 97 percent. The case for the gold standard and against the fiat standard is that simple and that strong.”