Next we turn our attention to the economic infirmities of the world dollar system, which:
Cause a persistent trade deficit, hollowing out our industrial base.
Enable a persistent and alarmingly high federal budget deficit.
Destabilize the value of the dollar, fomenting euphorias and panics.
The first of the world dollar standard's economic disorders:
1. The world dollar standard causes a persistent trade deficit, hollowing out our industrial base.
The U.S. trade deficit grew to $497.8 billion in 2010, from $374.9 billion in 2009. This means that Americans bought almost half a trillion dollars of goods and services from abroad more than what we sold. Many people sense that it is wrong to spend more than you earn, particularly at this scale. They are right.
The abandonment of the gold standard in 1971 is closely tied to the massive unemployment the industrialized world has suffered in recent years … Free Trade is unquestionably beneficial for humanity at large. It is good to be able to buy goods where they are cheapest; some countries enjoy conditions that favor them in production of certain things; each country should produce those things in which it has an advantage over other countries. Thus, the whole world can benefit from the good things each country has to offer. It is an appealing and sound doctrine, but... there is a crucial catch: the doctrine of Free Trade was conceived for a world where the sole means of payment was gold.
Under the world dollar standard the excess half a trillion dollars we spend a year gets recycled. And not to the entrepreneurs of America. That money gets sent right back to Washington, by way of Wall Street, by purchase of T-bills by international central banks. America loses jobs. America consumes more than it produces. Other countries produce more than they consume. The rest of the world gains jobs yet ends up in a form of forced labor, producing without consuming. The economy becomes a Sisyphean labor for all.
George Gilder, whose new book publishes today, is one of the original pillars of Supply Side economics. As stated by Discovery Institute, which he co-founded, “Mr. Gilder pioneered the formulation of supply-side economics when he served as Chairman of the Lehrman Institute’s Economic Roundtable, as Program Director for the Manhattan Institute….”
He was the living writer most quoted by President Reagan. And he is back with his most brilliant work yet — one of potentially explosive importance if taken to heart by our political and policy thought leaders. It is a radical guide, with surprising insights on almost every page, to the creation of a new era of vibrant prosperity.
As reviewer Paul Brodsky, a professional investor in New York City, perceptively notes,
"Lewis Lehrman is one of a very small group of contemporary gold advocates able to successfully bridge the gap separating practical conservative intellectualism from fleeting, half-baked idealism. His CV lists great success across many fields including education (degrees and teaching fellowships from Yale and Harvard); industry (past president of Rite Aid); politics (narrow loser to Mario Cuomo in the 1982 New York governor’s race); finance, (past Morgan Stanley managing director); private sector entrepreneur (founder, L. E. Lehrman & Company); public sector advocate (founder, Lehrman Institute); historian (author, Lincoln at Peoria: The Turning Point); and recognized philanthropist (awarded the National Humanities Medal by George W. Bush in an Oval Office ceremony). ... Only someone erudite and elegant in demeanor could hope to pull it off . In an irreconcilably over-leveraged world where irritated bond vigilantes question economic sustainability and angry Tea Partiers protest the immorality of it all, Lehrman’s views are considered and his convictions carry weight. He brings gravitas to his cause, and he does so from within as a member of the club."
Before the Fed: JP Morgan Summons the Bank Presidents
"Finally, on the night of Sunday, November 2, Morgan summoned the presidents of the major New York banks to his new library, at the corner of Madison Avenue and Thirty-sixth Street, an Italian Renaissance-style palace he had built next door to his house to showcase his collection of rare books, manuscripts, and other artwork. Its marble floors, frescoed ceilings, walls lined with tapestries and triple-tiered bookcases of Circasian walnut, crammed full of rare Bibles and illuminated medieval manuscripts, made it an incongruous setting for a meeting of the banking establishment. Once the moneymen had gathered, Morgan had the great ornamental bronze doors to the library locked and refused to let anyone leave until all had collectively agreed to commit a further $25 million to the rescue fund."
— Liaquat Ahamed, Lords of Finance (Penguin Books, 2009, p. 54)
Lately we have been engulfed by headlines reporting financial turmoil on every continent, in almost every nation, large and small. The commissars of central planning who so marred the history of the 20th century have been replaced by central banks in the 21st. In Cyprus, the new leadership now dares to confiscate citizens’ wealth with a one-time tax of up to 60 percent on bank deposits above 100,000 euros. Self-interested prime ministers blame continental monetary policies for instigating the currency wars that they themselves surreptitiously carry on.
Constitution.org provides an extensive and thoughtful Memorandum of Law by Larry Becraft, Esq., of Huntsville, Alabama, on Article I, Section 10, clause 1 of the US Constitution.
Sir William Blackstone courtesy of Wikipedia
One of many interesting matters the Memorandum treats is Blackstone's Commentaries, a book that was a fixture in the...
The value of the yuan has been slowly rising. The value of the Japanese yen has been sharply falling. Abenomics is attempting to reflate the Japanese economic – slowly, slowly. “Japan is back!” Prime Minister Shinzo Abe tells the Japanese.
Coming back isn’t easy. The Financial Times’ Jonathan Soble has noted...