The True Gold Standard (Second Edition)
Next we turn our attention to the economic infirmities of the world dollar system, which:
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.
Hugo Salinas Price, one of the most successful and astute citizens of Mexico, writes, in an exceptionally important paper, The gold standard: generator and protector of jobs:
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.
Oct 20, 2014
Lawrence H. White is an economics professor at George Mason University who teaches graduate level monetary theory and policy. Lawrence White As described by the Wikipedia, "White earned his BA at Harvard University (1977) and PhD at the University of California at Los Angeles (1982). Before his current role at George Mason...
The Federal Reserve System's James Narron and David Skeie, career officials with the Federal Reserve System, are two eminent historically erudite figures. Writing in the New York Federal Reserve Bank's online publication, Liberty Street Economics, they recently provided a continuation of their valuable historical "revue," Crisis Chronicles: The Collapse of the...
Jul 23, 2014
An article headline in Saturday’s Wall Street Journalread “Rate Talk Heats Up Within The Fed.” As Journalreporters Jon Hilsenrath and Michael Derby...
May 01, 1981
Key Monetary Writings
A free people can have a nominal paper dollar; or they can have a real dollar, defined by its...
Why the Gold Standard?