This cartoon cleverly presents the tension between the proponents of the classical gold standard and the prairie populists demanding "the free coinage of silver."
In the mouth of the "silver dog with the golden tail" is a bone, labeled Election.
The 1896 election, which the gold standard champion, McKinley, won, was colorful. It has been the subject of previous, and will be the subject of future, writings here.
That said, the key takeaway is that monetary policy has a long and rich history as a political issue, including very specifically a highly charged presidential campaign issue. Monetary policy then was, as it were, privatized out of politics and turned into an hermetic issue left to specialists and experts.
The results of fiduciary management of monetary policy by highly credentialed experts, however, has proven, in practice, far inferior to the results obtained by a classical gold standard. And there is popular ferment being felt in Washington for popularly elected officials to reassert authority over appointed, insular, officials.
It is not unlikely, then, that next issues of monetary policy will reenter the electoral process itself, first in the presidential primaries and then in the general election of 2016. With the bone, once again, being contested by "good money" vs. "easy money" proponents for the prize of Election.
Lehrman Institute founder and chairman Lewis E. Lehrman has an article in the current issue of The American Spectator entitled Bubbles for the Rich, Welfare for the Poor.
Lewis E. Lehrman Giving Closing Address at Cato Institute's 31st Monetary Conference
When government economists, academics, and the talking heads on bubblevision speak of “modest price inflation,” they know
Shortly after the publication of this article Reuters made several identical points in an article entitled What's behind the spike in art sales: vanity, fear, and easy money. Reuters:
Emerging market billionaires, driven by vanity, easy money from the world's central banks and a quest for safe investments, are taking the contemporary art market to new heights.
The previous day, hedge fund managers, oil princes and oligarchs were bidding by telephone at Christie's when the auction house sold Francis Bacon's "Three Studies of Lucian Freud" for a record $142.4 million, in what was seen as a test of the global art market's health.
For the world's wealthiest, art is one of the more elegant in a small pool of safe haven investment options: It is tangible, transportable and resistant to inflation and conventional market turmoil.
Who is hurt by this? Apologists for "faith-based money" -- Federal Reserve Notes founded merely on "the full faith and credit of the United States" -- maintain a pretense that fiduciary management by elite civil servants is for the benefit of workers and the middle class. The data falsify this sanctimonious proposition, and decisively so.
Like workers, businessmen, and consumers,
A charming story on the discovery of tiny amounts of gold in the leaves of the Eucalyptus tree recently received worldwide attention.
Seeds of the Eucalyptus Tree, photo by S. Hurst courtesy of Wikipedia
As summarized in the National Geographic's Daily News:
Eucalyptus tree roots can delve more than 130 feet (40 meters) deep underground in a thirsty search for water. (See "Koalas Climb a Eucalyptus Tree.")
The Nature Communications journal results, reported by a team led by Melvyn Lintern of Australia's CSIRO Earth Science and Resource Evaluation science agency, settle a long-running dispute. Researchers had disagreed over whether gold particles seen in eucalyptus leaves were merely wind-blown or truly represented ore traces transported by roots.
With gold costing more than $1,300 an ounce, miners might want to look hard at these eucalyptus tree findings, the team suggests. Gold discoveries have declined roughly 45 percent over the last decade. (Related: "Will Deep-sea Mining Yield an Underwater Gold Rush?")
Don't start stuffing eucalyptus leaves in your wallet, however. The average concentration of gold in the leaves was only about 46 parts per billion, less than 0.000005 percent of each leaf by weight.
The Koala need not, it appears, fear humans competing unduly for its staple food.
A report on this find by AFP states:
According to the World Gold Council, more than 174,000 tons of gold have been extracted from Earth since the dawn of civilization.
In 2011, the US Geological Survey estimated there were 51,000 tonnes of gold left in reserve in the world.
The reference to the 2011 USGS estimate appears to reference known reserves. That report estimates 51,000 tons of known gold reserves based on various governmental estimates. 3,000 of these reportedly are in the United States. A footnote to the report states: "An assessment of U.S. gold resources indicated 33,000 tons of gold in identified (15,000 tons) and undiscovered (18,000 tons) resources" -- an order of magnitude higher than "reserves."
If the same ratio applies worldwide it would imply that 510,000 tonnes of gold not yet extracted from the Earth. That is about three times the amount of refined gold extant in the world, as reported by the BBC: 171,300 tonnes.
For monetary purposes, the quantity of available gold, refined and awaiting extraction or even discovery, can only be characterized as ample. As previously noted here, Erste Bank states that "gold is money not because it is scarce but because it is abundant."
Those who claim that there "isn't enough gold" to support a gold standard, however, are collapsing a critical distinction. Under the classical gold standard gold acts as the calibrator by which currency is either injected into or withdrawn from the marketplace based on market demand.
Thus gold, under the classical gold standard, is akin to the thermostat rather than the furnace. It adjusts the liquidity to the precise balances desired by the marketplace -- rather than relying on convoluted equations by central planners.
Wild estimates of a $50,000/oz gold price under a gold standard are simply, and completely, unfounded. Such estimates -- and claims that there is not enough gold to support a gold standard -- betray a lack of understanding of the simple, elegant, and effective mechanism by which the classical gold standard organically regulates the supply of money.
Gold has proven an ideal instrumentality by which to define the dollar. This may be due, in part, to the demonstrated stability of its "stock to flow ratio" -- an argument elegantly outlined by the Gold Standard Institute's estimable president Philip Barton. Because little gold is consumed industrially, this, too, makes gold optimal as the operational factor in conducting monetary policy.
The Department of the Interior's U.S. Geological Survey offers a free booklet on gold, entitled Gold, by Harold Kirkemo, William L. Newman, and Roger P. Ashley. It's slightly dated but a fascinating trove of ... nuggets ... of art, science and history.
Gold was among the first metals to be mined
Nations of the world today use gold as a medium of
Gold in the Depository consists of bars about the
Gold is called a “noble” metal (an alchemistic term)
The basic unit of weight used in dealing with gold
Lode deposits are the targets for the “hardrock”
Gold: "beautiful and imperishable, and because exquisite objects can be made from it." When people ask why currency should be defined in gold as opposed to through the use of some abstract algorithm, a "basked of commodities," or some other concoction ... do not underestimate the value of these "elemental" qualities. As Jerry Bowyer recently observed, in Forbes.com,
I’m beginning to wonder if one could ever really have the moral force in the political arena around an equation like the Taylor Rule, which is an admirable equation, that one could have over something that’s got basically over 4000 years of recorded history behind it, which is a reliance on gold. I’ve come to see the gold standard as maybe the only real hope we’d have of getting some kind of price stability, given the fact that it’s so easy to manipulate theories and to manipulate equations, but it’s not easy to manipulate the supply of gold.
Or as Keynes wrote, in 1922:
[O]ne of the most subtle temptations to improvident national finance would be removed; for if a national currency had once been stabilized on gold basis, it would be harder (because so much more openly disgraceful) for a Finance Minister so to act as to destroy this gold basis.
And as Lewis E. Lehrman, founder and chairman of the Lehrman Institute, wrote in Bubbles for the Rich, Welfare for the Poor in the November 2013 issue of The American Spectator:
Such a system of hard currency—or of paper
The gold standard has been validated in "the reliable laboratory of economic research available to us: namely, the evidence of economic history."
Why, indeed, not?
The burden of proof lies with the opponents of the tried and true gold standard.
This blogger thought his $100 trillion Zimbabwe bank note was extreme.
Turns out, not.
Try 100 quintillion on for size.
It was worth -- in 1946 -- about 20 (American) cents.
Courtesy of Tom Chao's Paper Money Gallery
From The Smithsonian's Past Imperfect:
The great German hyperinflation of 1923 is passing out of living memory now, but it has not been entirely forgotten. Indeed, you don’t have to go too far to hear it cited as a terrible example of what can happen when a government lets the economy spin out of control. At its peak in the autumn of that year, inflation in the Weimar Republic hit 325,000,000 percent, while the exchange rate plummeted from 9 marks to 4.2 billion marks to the dollar; when thieves robbed one worker who had used a wheelbarrow to cart off the billions of marks that were his week’s wages, they stole the wheelbarrow but left the useless wads of cash piled on the curb. A famous photo taken in this period shows a German housewife firing her boiler with an imposing pile of worthless notes.
Easy though it is to think of 1923 as a uniquely terrible episode, though, the truth is that it was not. It was not even the worst of the 20th century; during its Hungarian equivalent, in 1945-46, prices doubled every 15 hours, and at the peak of this crisis, the Hungarian government was forced to announce the latest inflation rate via radio each morning–so workers could negotiate a new pay scale with their bosses—and issue the largest-denomination bank note ever to be legal tender: the 100 quintillion (1020) pengo note.
Although the pengo's time ran out before the next denomination could be issued, the Hungarian monetary authorities had a 100 sextillion note printed, on hand, and ready to go:
To paraphrase the late, great, Senator Dirkson:
"A quintillion here. A sextillion there.
"Pretty soon you are talking about real money."
(Except, of course, you're not.)