Saturday, May 05, 2012

why your overlords hate the gold standard...,

whiskey&gunpowder | Ben Bernanke journeyed across town to give a 4-part seminar to 30 undergraduates at George Washington University.

This was clearly a public relations stunt. Why would the head of the world’s most powerful central bank lecture to 30 undergraduates? This was not quite the equivalent of George W. Bush reading “My Pet Goat” to third graders, but it was close. Think of it as “My Pet Peeve.” His first speech was an overview of central banking. He used PowerPoint to create slides. The presentation had 49 slides.

Any experienced lecture listener, had he known of this in advance, would have headed toward the exit. Here is the man whose verbal skills produce narcolepsy in normal people who have slept at least 10 hours. To this he added 49 slides. This violated Guy Kawasaki’s 10-20-30 rule: 10 slides, 20 minutes, 30-point font. The slides are here.

UNDERGROUND GOLD

In his speech, he introduced some of the classic arguments of the fiat money advocates. Warren Buffett has invoked it:

Gold gets dug out of the ground in Africa, or someplace. “Then we melt it down, dig another hole, bury it again and pay people to stand around guarding it. It has no utility. Anyone watching from Mars would be scratching their head.”

This was Buffett’s reply to his father’s policy of defending the gold standard in Congress in the late 1940s. His father had far greater understanding of the gold standard than he does.

The thought of all those itching Martian heads apparently bothers Bernanke, too. So, he repeated the argument.

“Now, unfortunately, gold standards are far from perfect monetary systems. One small problem which is not on the slides but I’ll just mention is that there’s an awful big waste of resources. I mean, what you have to do to have a gold standard is you have to go to South Africa or some place and dig up tons of gold and move it to New York and put it in the basement of the Federal Reserve Bank in New York, and, that’s a lot of effort and work and it’s a, you know, it’s a – Milton Friedman used to emphasize that that was a very serious cost of a gold standard that all this gold was being dug up and then put back into another hole. So there is some cost to having a gold standard.”

There is “some cost” to having a gold standard. This means that we must pay for services rendered. Will wonders never cease! There are costs in this life! I’m telling you, this fellow Bernanke is on the cutting edge of economic science.

It’s a shame that he did not have a slide for this, even though that would have meant 50 slides.
Back in 1969, I dealt with this argument. Bernanke was 15 at the time. He must have missed it.

I begin with his first statement: “Now, unfortunately, gold standards are far from perfect monetary systems.” So, let me assure you, is central banking.

16 comments:

Ed Dunn said...

The argument for gold can be can made for cash.

Is the gold standard in currency exchange nothing more than a fancy version of cavemen using sticks as currency? Gold was considered a prized metal resource during the age of steel that took work to create and was equally prized by nations engaged in trading who can resell to each other. 

Right now, printed paper cash has the same effect where the US Dollar is valued worldwide because they believe they can resell it back for the value they received it. However, the physical movement of cash is also a cost which is why it cost more than a penny to manufacture a penny and logistically move a penny around in the currency system.

The future is what Canada already decided to do - phase out the penny and focus on encrypted values such as MintChip. With this scheme and similar to BitCoins, currency can be digitally authenticated and standardized can now be the tool to exchange without the physical costs involved.

http://mintchipchallenge.com/

Big Don said...

You can have your zeroes and ones, Paper and Gold are  immune to EMP......

Dale Asberry said...

Bzzzzzzzzzt. Gold will become highly radioactive, as EMPs of adequate strength will need to be powered by nukes.

CNu said...

lol, and they taste so good, burn so efficiently, and are so nutritious...,

Very obviously gold is the equivalent of caveman sticks and not even remotely close to sheep in value. Unless you believe in the annunaki, it is merely a symbol for power and scarcity that only the magical-thinking nimrod is inclined to believe in. Sadly...., 

CNu said...

The very first matters Belsidus saw to in Black Empire was super-efficient solar power generation, hydroponic gardening, electronics and mechanical engineering, an entirely new religion which included providing for peoples' basic needs http://books.google.com/books/about/Black_Empire.html?id=elpg_ZFkeg8C - everything else is idle conversation...,

Big Don said...

EMP from Bikini tests damaged electronics in Hawaii -- EMP effects can extend far beyond the other nuclear weapon damage, depends on height of the burst among other things.  If you are sufficiently close to get your gold radioactive, you probably won't survive to cash it in anyway.... 

Ed Dunn said...

 Ok...

So how will the distribution of produce from that hydroponic garden occur? Is it based on timebanking? If it is based on timebanking, what work counts more than others in relativity?

So some standard unit for value system have to be there everybody can trust as a standard, right? Even autonomous robots will have to need a value standard to determine which one should consume and entitled to consumer at a given level. 

Ed Dunn said...

At some point in time, someone was showed a pile of gold, their pupils dilated to the maximum width and they offered something they considered of value in exchange for it. It is likely when that person brought it home, other humans probably killed that person for it and that's how we ended up with the gold standard.

But this current standard based on innovation....that is the real fraud driven by padded statistics and numbers on a ticker tape every Monday through Friday... 

CNu said...

Given the antiquity and universality of its valuation, it may once have had some greater applied significance, alchemical legend and artifact would so indicate. But whatever that was, it's now lost on the mass of these humans who covet, hoard, and believe in its distinctive properties.

As for that innovation piece, I can't wait for google glasses..., the rest of this Interweb stuff is mostly hokum.

CNu said...

 Now THAT's a $64K kwestin. I'ma have to ponder on that one very deeply, come up with some kind of a practical and achievable answer, and get back at you. My knee jerks in the direction of using calories as the fundamental unit of measure.

Ed Dunn said...

I believe the is based on human primal instinct. If you look at chimps and one of them have a shiny object and having fun with it, the other chimps will gang up on that one and try to take it away. The bottom line is we value what other have and it boils down to desire of having it as a form of control.

So the buying gold thing today is speculation based thinking the rest of us want that shiny mineral and we still value and desire gold. That is primal human nature to want what others have and that is how the value system is created and I believe gold buyers are basing their rationale on this.

But I would think in this day and age, we are smart enough to recognize the rare earth minerals China has and getting mineral rights to in Africa would have more value than gold as those other minerals drive our electronic machinery and technology, in turn drive GDP and economics.  



 

CNu said...

Lol, my stacks, stores, and caches of 7.62x39 have a brassy golden sheen to them and have steadily increased in value and utility...,

Dale Asberry said...

Money is only necessary for exchange between people who don't trust one another.

DD said...

 It's not fraud. Money is a crude proxy for power. Gold is an even cruder proxy, which is why it was discarded by the powerful. Paper money is next.

Money as a concept is the crime. Best post here ever was the "Fairy Tale" one by Hakim Bey, completely clarified my thoughts on money.

You (and I) are basically the stable boys for a king, who happens to control the reserve currency which he pays out for actual goods. Since our little team (Team Kingdom) is a debtor nation, a debased currency is good for us, in a rough justice kind of way.

The entire concept of savings is evil anyway when you drill all the way down. Future consumption can only be banked by force. Or magic.

Nationalism, Protectionism, Mercantilism, straight ahead.

Ed Dunn said...

So from what I'm hearing so far, the new standard will be a crypto algorithm that both parties will trust is secure. It will be secured by a third party similar to what Canada is doing with MintChip to replace their penny system. 

One of the discussions I was having with other developers (I'm participating in the contest) was the ability to charge .003242 for a prayer electronically....think about that.

Anonymous said...

Manу thanks

My web blоg low back pain treatment with pilates