#GOLD: A return to the Wizard of OZ?

Once upon a time the Gold Standard

«Public debt and deficit-spending are a growing and intolerable burden on the society and economy, because they divert resources from the productive (private sector) to the parasitic, counterproductive public sector.»
— Murray N. Rothbard



On the15th of August, the United States «celebrated» the forty-second anniversary of their exit from the gold standard. What does this mean? Two things: the central regulators have removed their actions from the possibility of encountering negative sanctions; the electorate was sold the story that the U.S. had found the philosopher’s stone towards infinite growth. No more disastrous economic cycles, no more depression, no more miserable lives. The American dream had become a reality. But «dreams», that at first seem

harmless, can always turn into nightmares. And that’s what happened since that 15th of August in 1971, the day when the American dream was permanently lost (it was already on this path since 1933) to a nightmare marked by the stinging words of Richard Nixon.

How have things gone since then? From bad to worse. The presumptuous central regulators believed that they could control market forces at will, that said forces could be addressed according to their wishes – towards prosperity for them and a slice of paradise for others. Despite gold served as a barrier for their reckless actions, another parameter has replaced gold: the interest rates of the US Treasury bonds.

ALTERNATIONS

The main goal of Nixon’s decision in 1971 was to prevent a rush to the US Treasury counters. Given the scarcity of gold, whenever there was the perception that a debtor government had engaged in a morally hazardous and unrestrained behaviour, the creditor government could ask the Treasury of the debtor government the return of their gold. This is what happened in 1965 when De Gaulle told the Bank of France to begin the procedure of returning the dollars to Uncle Sam in exchange to gold.


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History ... Follow the yellow brick road?

  Comments

Should we return to the gold standard. Why? It will do very little to cure what ails the real economy, starting with the growing imbalance between resources and population. It is just  a distraction.

 

Time to get real and stop returning to Oz for fictional answers.

 

Or, click your heals...

Platinum Wealth Partners

April 24, 2014

 

Dangerous TIMES - Fed All Quiet On Rates

Why the Federal Reserve is vague about interest rates

Federal Reserve Chair Janet Yellen can expect questions about interest rates and unemployment when the Fed wraps up its two-day meeting later today.

The Fed had promised to keep interest rates near zero, at least until unemployment hit 6.5 percent. Unemployment is currently at 6.7 percent and dropping (and the Fed has said it will likely look at other factors, too). Yellen is known as a proponent of transparency – but she’s expected to say as little as possible  about what those other factors might be. 

Here's why:

1. Players in the stock and bond markets always want to know exactly what the Fed will do next.  Even when the Fed can’t say for sure.  

"They’re trying to figure out 'What is the Fed telling me about, what are interest rates going to do?'” says Ann Owens, a Hamilton College economics professor and former Fed economist. "There’s a real incentive to figure that out before everybody else does. Because if you can do that, then you can make a profit."  

2. The Fed wants to give some guidance about what it’s thinking, without boxing itself in. Williams College economics professor Kenneth  Kuttner, who also worked for the Fed, says the Fed is like a college professor—with market players as grade-grubbing students.

"You hand out the grading rubric, and some kid says, 'Oh, look, I did X that’s on your grading rubric. Why didn’t I get an A?'" he says.  "You need to be specific enough that they know what to do in the paper, but vague enough that you can say, 'There are these other things I’m taking into account as well.'"

Because if those students get too unruly, it can cause trouble for the whole class.

One day, within the next five years, interest rates will rise in response, most likely, to a sudden surge in oil prices that will create an unprecedented spike in inflation. The US risks losing its status as the "global reserve currency." Hence by not doing so, it could place that status in peril. Major shortages in energy and material elements loom on the horizon that fuels this argument. 

Moreover, rates have been too low for too long. You can only defer the economic implications of limits to growth on a finite planet with crafty money ploys and tricks for so long. Reality bats last  And thus a reversion to the historical mean is in order on all fronts. Asset values are thus exposed to a historic correction - reality remains a cruel mistress! 

Platinum Wealth Partners
April 3, 2014

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