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Posts Tagged ‘Gold Standard’

Official Corruption

If it isn’t obvious from open borders and lunatic wars in Libya, it should be obvious that our leaders do not work for us but instead work for a vaguely defined transnational ideology insofar as the Federal Reserve apparently loaned billions–and risked the wealth of Americans–in using its “discount window” to lend cash to cash-strapped foreign banks.  Not only this, the Federal Reserve concealed this fact on the theory that to reveal who is using its lifeline might endanger the solvency of its users.  Of course, if a private business concealed its borrowing it would run afoul of securities laws and such would be considered fraud on the market, but banks–and apparently foreign banks too–are a special case, given special treatment reserved only for royalty. Indeed, their special treatment is a betrayal of the transparency and rule of law that were the main strength of the American economy until recent times.

It may be argued that these foreign banks are major creditors of the US entitled to special treatment, but no such revelation is forthcoming in the Bloomberg article with respect to the discount window users.  Indeed, these banks have been given special treatment many times over inasmuch as the Federal Reserve has rescued investors in mortgage-backed-securities at the expense of the American taxpayer and the American currency. We now have $3.50 a gallon gas and a continuing freefall in housing, and all of this stems from the idea that we can have an economy built on subterfuge and accounting gimmicks rather than real wealth creation.

Let’s never forget the Federal Reserve was introduced to avoid the evils of the business cycle.  But as evidenced from the Great Depression forward, its inflationary monetary policies and blatant picking of winners and losers have done more to harm the economy than the old gold standard ever did.  Indeed, the chief value of a gold standard is to decentralize and depoliticize the role of government in monetary policy by creating a neutral, market driven money supply the value of which (i.e., inflation and deflation) rise and fall with the demand for money and the needs of the real economy.   It may mean slower economic growth, but it also means less wealth-destroying inflation and destabilizing bubbles.  Since gold and the dollar were de-linked in the 1970s, gold went from the fixed $35/ounce to about $1,420 today.  This suggests, quite plainly, that inflation is a huge force over time that masks the lack of real wealth creation and the lack of real productivity in the economy.

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