The True Gold Standard (Second Edition)
The willingness to work for the sake of future prosperity is a universal human quality, but people must believe there is a link between effort and reward.
The euro is beset with fiscal calamities that threaten its downfall, and markets in the U.S. are roiled by uncertainty over the government’s financial regulatory legislation. But don’t worry. Treasury Secretary Timothy Geithner meets with European finance officials today to discuss the economic situation. According to a Treasury Department statement, they will focus on “measures being taken to restore global confidence and financial stability.” So everything is under control.
What government policy makers in the U.S. and Europe fail to realize is that far from being seen as capable of delivering economic salvation, they are increasingly perceived as primary contributors to global financial ruin. Whether it’s the fiscal recklessness of spendthrift politicians or the refusal of government officials to acknowledge failings—distorting mortgage markets through Fannie Mae and Freddie Mac, skewing assessments of credit risk through loose monetary policy—the influence of government over the real economy is proving disastrous.
No wonder people are flocking to gold as they flee government-supplied money. Neither the dollar nor the euro inspires much global confidence; despite the dollar’s relative safe-haven status, neither currency holds out the promise of financial stability.
How can the real economy, i.e., the private sector, where genuine wealth is actually produced, continue to function in the absence of reliable money? Europeans will be wary of the euro from now on, given that the European Central Bank has relaxed its standards for safeguarding monetary integrity by absorbing Greek debt. Meanwhile, the perilous fiscal condition of the U.S. has convinced many that our government will resort to future inflation to reduce its own untenable debt burden.
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...
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Key Monetary Writings
The second part of the “Golden Fetters” indictment, to quote a recent statement of it (Bordo 2010, p. 40), is...
Why the Gold Standard?