Category Archives: inflation

Donald & the Dollar

donald-dollar

John Connally, President Nixon’s Secretary of the Treasury, once remarked to the consternation of Europe’s financial elites over America’s inflationary monetary policy, that the dollar “is our currency, but your problem.”  Times have certainly changed and it now appears that the dollar has become an American problem.

In a recent interview with the Wall Street Journal, the soon to be 45th President of the United States believes that the greenback’s strength – up some 25% against a broad basket of currencies since 2014 – is now “too strong,” “killing us,” and has hurt companies trying to compete overseas.* A top Trump economics advisor, Anthony Scaramucci, reinforced his boss’ sentiment adding that “we must be careful of a rising dollar.”

Apparently, making America great again does not include the nation’s monetary standard.  Trump’s belief that the dollar is too strong also shows a distinct lack of historical understanding.  Every great nation and empire (which Trump promises to restore America to) had a sound monetary system.  It is no coincidence that the pound sterling was the world’s “reserve currency” at the time when the British Empire was at its height.  Debasement of it to finance Britain’s insane decision to enter World War I led, in large part, to the eventual loss of its empire.  If Trump truly seeks to restore American greatness at home and its prestige throughout the world, devaluating the currency is not the way to go.

Nor does a weakened dollar benefit the middle class whom the president elect throughout the campaign has pledged to help.  In fact, it has been the fall in the purchasing power of the dollar due to the inflationary policies of the Federal Reserve which have decimated the living standard of the middle class.  And, while the proposed Trumpian middle class tax cuts will help, just as important is a sound monetary system if Middle America is to become a creditor class once again.

Pensioners and retirees, another group that Trump has promised to help, would continue to see their financial condition decline under a policy to weaken the dollar. A fall in the purchasing power of money would devastate the income stream of pensions and social security payments.

While a weaker dollar policy would hurt the middle class, retirees, and savers, it would benefit the most responsible for the continued economic doldrums of America – banksters and the government.  A weaker dollar would allow the government to continue to borrow and maintain its profligate spending.  Financial houses and the banksters would receive credit at nearly zero cost which would allow them to continue to blow bubbles in the asset markets.  Export firms, too, would benefit at least for a while, but would more than likely face retribution from foreign governments and central banks which would retaliate with their own devaluations sparking potential currency wars.

Talk of “currency manipulation,” “weakening the dollar,” “trade deals,” and the like do not address what lies at the heart of not only America, but the Western world’s economic problem – too much debt.  The reason why the West has been able to incur its current gargantuan level of debt is not because of a “weak” or a “strong” dollar, but because the dollar is a fiat currency not backed by any commodity.  A true gold standard, where each currency unit represents either gold or silver, provides monetary discipline which prevents politicians and banksters from incurring ruinous levels of debt.

Since money is the lifeblood of an economy, any hope that one can be turned around without a stable monetary order is, to say the least, delusional.  If president-elect Trump and his policy makers do not realize this, they will be severely disappointed in the years to come.  Sound money allows for the accumulation of savings and capital formation, the essential elements of the market economy and the only basis upon which real economic growth can occur.  More savings and capital are needed to boost production and create employment, not supposedly wiser and more competent international trade negotiators.

Talk of currency devaluation is what is typically heard from banana republics, it should not be advocated by those who have aspirations of making their country great again.

*Tyler Durden, “Dollar Tumbles After Trump Calls Currency ‘Too Strong,’ Slams Border-Adjustment Tax.”  Zero Hedge.  17 January 2017.

Antonius Aquinas@AntoniusAquinas

https://antoniusaquinas.com/

Donald and the “Maestro”

trump-ii            greenspan-ii

Former Federal Reserve Chairman Alan Greenspan, who was once laudably referred to as “Maestro” for his supposed astute stewardship of U.S. monetary policy, commented last week on the nation’s current political and economic climate:

We’re not in a stable equilibrium.  I hope

we can all find a way out because this too

great a country to be undermined, by how should

I say it, crazies.*

Well, if there is anyone who knows how to “undermine” an economy, it is the Maestro, since it was his “crazed” policies that brought about the 2008 financial crisis which ushered in the Great Recession that continues to this very day.

In a demonstration of how truly clueless Greenspan is about economic conditions, he cautioned that the U.S. is “headed toward stagflation – a combination of weak demand and elevated inflation.” Memo to the Maestro: stagflation is already here and has been for quite a while, especially when real economic gauges are used instead of the phony baloney numbers routinely lied about by the BLS and other corrupt state agencies.

The “crazies” that Greenspan refers to are, of course, the “deplorable” Trump supporters and The Donald himself, who the Maestro contends is responsible for “the worst economic and political environment that I’ve ever been remotely related to.” Oh, poor Alan has to suffer through an election where one of the candidates has not been approved by the ruling class.  Too bad.

Instead of carping about the current state of political affairs which, at least financially, he and his successor, Helicopter Ben Bernanke, largely contributed to, Greenspan should be grateful that he has had no reprisals for the financial crimes, chaos, and misery that he has afflicted upon the world.  Instead of significant jail time or worse, Greenspan is free to pontificate on current events, receiving hefty financial remuneration, and just as important for top members of the governing elite, ego-enhancing hosannas!

While Ben Bernanke has been a lifelong committed Keynesian and inflationist, Alan Greenspan, at least in his younger days as a member of Ayn Rand’s circle, was a free marketer who spoke positively about the efficacy and moral soundness of a gold standard.  That he abandoned these beliefs to go over to the Dark Side is further cause for retributive justice.

Greenspan’s betrayal was similar to those economists of the 1930s (Lionel Robbins most notable) who were followers of the teachings of Mises and Hayek, yet were swept away by the fanciful Keynesian deluge of the day and abandoned their economic senses and conscious for similar allurements which seduced the Maestro.  Had these economists as well as Greenspan stuck to their original principles, the world may not be in its current financial mess.

While Greenspan was lamenting the state of political affairs, the head “crazy,” Donald Trump, commented on the Maestro’s former place of employment.  Unlike the Maestro, the financial media, and just about every other politician, Trump had some perceptive things to say about the nation’s central bank, showing again that the billionaire businessman’s political acumen is quite good:

The Fed is being totally controlled politically because

Obama wants to go out with no stock market disruptions.**

The Republican Presidential hopeful could have easily added that the Fed’s policy is being deliberately carried out to ensure his Democratic opponent’s victory this fall.  A booming stock market is perceived by most as an indication of a vibrant economy.

Trump does not buy the supposed “independence” of the Fed from political influence and the conduct of monetary policy solely for the well being of the economy:

If it was a choice between the right decision and a political

decision… The Fed would choose the political decision.

Throughout the campaign, Trump’s instincts on political and economic matters have been quite good and hopefully if he does become chief executive those instincts will translate into positive change.

A Clinton Presidency would assuredly mean a continuation of the ruinous policies of Greenspan and his successors.  The election of Donald Trump could not only mean a new direction in monetary policy, but the public demotion of the likes of Alan Greenspan who will hopefully fade into the sunset never to be heard or seen from again.

*Rich Miller, “Greenspan Worries That ‘Crazies’ Will Undermine the U.S. System.”  Bloomberg.  14 September 2016.  http://www.bloomberg.com/news/articles/2016-09-14/greenspan-worries-that-crazies-will-undermine-the-u-s-system

**Tyler Durden, “Trump Slams ‘Totally Politically Controlled’ Fed, Sees No Rate Hike Until Obama Has Left.”  Zero Hedge. 15 September 2016.  http://www.zerohedge.com/news/2016-09-15/trumps-slams-totally-politically-controlled-fed-sees-no-rate-hike-until-obama-has-le

Antonius Aquinas@AntoniusAquinas

https://antoniusaquinas.com/

 

 

 

 

“A Date Which Will Live in Infamy:” President Nixon’s Decision to Abandon the Gold Standard

Nixon-Gold

Franklin Delano Roosevelt called the Japanese “surprise” attack on the U.S. occupied territory of Hawaii and its naval base Pearl Harbor, “A Date Which Will Live in Infamy.”  Similar words should be used for President Nixon’s draconian decision 45 years ago this month that removed America from the last vestiges of the gold standard.

On August 15, 1971 in a televised address to the nation outlining a new economic policy entitled, “The Challenge of Peace,” Nixon instructed the Treasury Department “to take the action necessary to defend the dollar against the speculators.”*

Nixon continued:

I have directed Secretary Connally to suspend temporarily the convertibility of the dollar into gold or other reserve assets, except in amounts and conditions determined to be in the interests of monetary stability and in the best interests of the United States.**

Of course, any objective student of history knows that this was a lie and that it was not “speculators” which were causing monetary instability, but the U.S.’s own crazed inflationary policy which attempted to fund its imperialistic endeavor in Vietnam while expanding the welfare state at home.  This resulted in the Treasury losing an alarmingly amount of gold reserves to other central banks who rightly sought real value in exchange for depreciated American greenbacks.

In essence, Nixon’s decision ended gold redemption and placed the U.S. and the rest of the world on a purely fiat paper standard for the first time in recorded time.  By doing so, the U.S., in effect, became a deadbeat nation which no longer honored its obligations and was set on the road to its current banana republic status.

Instead of impeachment proceedings and his ultimate resignation for the juvenile break in at the headquarters of the nation’s other ruling crime syndicate, Nixon should have been imprisoned for this deliberate and destructive act which has led, in large measure, to the nation’s crushing and insurmountable debt burden, reoccurring booms and busts, and now economic stagnation.

Nixon’s disastrous decision had precedent.  FDR had his own day of monetary infamy in 1933 when, by Executive Order 6102, he outlawed the private ownership of the precious metal while eliminating  gold redemption by banks for dollars.  Ostensibly, the order was instituted as an emergency measure to combat the Depression, but in reality, it was done to allow the Federal Reserve greater “flexibility” in inflating the money supply.

While Roosevelt and Nixon’s decisions would backfire economically, their actions highlighted the totalitarian direction that the federal government and its executive branch were heading throughout the 20th century.  Moreover, the lack of opposition or protest to blatant executive dictatorial decrees by either the legislative or judicial wings of the federal government demonstrates again the flawed and frankly naive argument put forth by Constitutionalists of every ideological persuasion on how the celebrated “separation of powers” theory checks tyranny.

Nixon’s final abandonment of the gold standard had far greater ramifications than simply bad economics.  Without the discipline of hard money, central banks could, and did, create massive quantities of paper money and credit, which enriched the politically connected financial elites and the governments which they were aligned.  Such power was used, in time, to control, spy on, and regulate the subject populations to a degree never seen before.  The power of the state has swelled mostly through bank credit expansion without worry of gold redemption.

Despite what is taught in social science courses, a true gold standard is a greater protector of individuals’ economic well being and, ultimately, their political liberty than any legislation or “rights” document ever penned.  Hard money limits state power!

While it is painful to quote from an ardent opponent of sound money, the international bankster Baron Rothschild said it best when he described the relationship of money and power: “Permit me to issue and control the money of a nation, and I care not who makes its laws.”

Richard Nixon’s elimination of the last remnant of the gold standard over four decades ago combined with FDR’s earlier decree has fulfilled to the detriment of the American and world economies Baron Rothschild’s adage to a tee.  The return of prosperity and individual liberty will only come about when these two heinous acts are eradicated.

*Richard M. Nixon.  “Address to the Nation Outlining a New Economic Policy: ‘The Challenge of Peace.’”  The American Presidency Project.  15 August 1971. http://www.presidency.ucsb.edu/ws/?pid=3115

**Ibid.

Antonius Aquinas@AntoniusAquinas

https://antoniusaquinas.com/

 

Don’t Expect a Return to a Gold Standard Any Time Soon

goldstandard

Despite trillions of paper currency units poured into the world economies since the start of the financial crisis, there has been no recovery, in fact, all legitimate indicators have shown worsening conditions except, of course, for the pocketbooks of the politically -connected financial elites.  Yet, despite the utter failure of the current money and banking paradigm to resolve the situation, the chance of a return to a commodity based monetary order is highly unlikely especially when one looks at the anti-gold bias found in typical college economics textbooks.

Macroeconomics: Principles, Problems and Policies by McConnell, Brue and Flynn is a leading introductory level college text which has been through, to date, some 20 editions.  Until the financial crisis of 2008, the subject of a commodity- backed money was not discussed, however, after the crisis and the popularity of gold standard enthusiasts like former Congressman and Presidential candidate Ron Paul, the authors of Macroeconomics obviously felt the need to address the resurgence in the interest of metallic money.

McConnell and company’s critique of the gold standard is full of fallacious reasoning that monetary cranks have employed for generations, all of which have been easily refuted by eminent economists.  Yet, the lies and distortions about commodity money continues in academia.

The authors admit that:

To many people, the fact that the government does

not back the currency with anything tangible seems

implausible and insecure.

This logical sentiment and realization of the fraudulent nature of unbacked currency by those outside the economics profession is brushed aside by the esteemed trio:

But the decision not to back the currency with anything tangible was made for a very good reason.

Yes, and we know what that reason was: so that the state and central banksters could have a ready and unlimited access to the creation of money to solidify and expand their power.  The gold standard was always an impediment to this cherished dream of the political elites – the establishment of an irredeemable, paper monetary order.

The authors, not surprisingly, see things differently:

If the government backed the currency with something

tangible like gold, then the supply of money would

vary with how much gold was available.  By not backing

the currency, the government avoids this constraint and

indeed receives a key freedom – the ability to provide

as much or as little money as needed to maintain the

value of money and to best suit the economic needs of

the country.

By all means, the state and central banksters should be given as much “freedom” as possible for we all know that governments would never abuse such license and would always act in the best interests of their citizens.  Certainly, the authors are not aware of any cases in history where such “freedom” was ever abused.

    Nearly all today’s economists agree that managing the

money supply is more sensible than linking it to gold or

to some other commodity whose supply might change

arbitrary and capriciously. . . .  if we used gold to back the

money supply so that gold was redeemable for money . . .

then a large increase in the nation’s gold stock as the

result of a new gold discovery might increase the money

supply too rapidly and thereby trigger rapid inflation.  Or

a long-lasting decline in gold production might reduce the

money supply to the point where recession and

unemployment resulted.

Volumes have been written debunking such stupidity.  The point, however, is that millions of minds have been exposed to such thinking and while most will not become economists (thank goodness!), what is taught in college and university classrooms about the gold standard is negative, to say the least.  Moreover, those who continue in a career in finance or economics will unlikely ever be presented with an accurate assessment of the gold standard.

A return to a sound and just monetary order will only take place after the ideological groundwork has been first laid, just as fiat money and central banking came about after years of proselytizing by inflationists.  It is also not enough to show the economic efficacy and moral soundness of commodity money, the ideas of crackpots like McConnell, Brue and Flynn need to be exposed for what they are.

Under the current academic environment, as generations have been misinformed, deceived, and lied to, it is unlikely that a return to a gold standard will take place.  Until the intellectual battle is won, paper money and the central banksters that manage it will continue their reign of financial terror.

Antonius Aquinas@AntoniusAquinas

https://antoniusaquinas.com/