Jim Grant Opinion piece in NYT: Save the Dollar by Backing it with Gold

[bobbyw24]

How to Make the Dollar Sound Again
By JAMES GRANT

http://graphics8.nytimes.com/images/2010/11/14/opinion/14grantimg/14grantimg-articleLarge.jpg

BY disclosing a plan to conjure $600 billion to support the sagging economy, the Federal Reserve affirmed the interesting fact that dollars can be conjured. In the digital age, you don’t even need a printing press.

This was on Nov. 3. A general uproar ensued, with the dollar exchange rate weakening and the price of gold surging. And when, last Monday, the president of the World Bank suggested, almost diffidently, that there might be a place for gold in today’s international monetary arrangements, you could hear a pin drop.

Let the economists gasp: The classical gold standard, the one that was in place from 1880 to 1914, is what the world needs now. In its utility, economy and elegance, there has never been a monetary system like it.

It was simplicity itself. National currencies were backed by gold. If you didn’t like the currency you could exchange it for shiny coins (money was “sound” if it rang when dropped on a counter). Borders were open and money was footloose. It went where it was treated well. In gold-standard countries, government budgets were mainly balanced. Central banks had the single public function of exchanging gold for paper or paper for gold. The public decided which it wanted.

http://www.nytimes.com/2010/11/14/opinion/14grant.html?_r=2

[Cowlesy]

Great read. James Grant is one of the sharpest minds I've run into on Wall Street.

[bobbyw24]

Great read. James Grant is one of the sharpest minds I've run into on Wall Street.

Yep-each time I post something by him, you come to mind

[cubical]

peg the dollar to gold? about $10,000 an ounce would work I suppose.

[jon_perez]

Great read. James Grant is one of the sharpest minds I've run into on Wall Street.Just in case you didn't notice however, you should note that Jim Grant believes that the original Fed had a function to fulfill. He is anti-Fed today, but not anti-Fed as of 1913.

[Travlyr]

"The classical gold standard, the one that was in place from 1880 to 1914, is what the world needs now. In its utility, economy and elegance, there has never been a monetary system like it."

People were quite industrious, innovative and prosperous prior to the Federal Reserve Act of 1913. Now, the elite are prosperous, controlling, and hostile with many families unemployed, homes foreclosed, cars repossessed, and on the streets.


It was simplicity itself. National currencies were backed by gold. If you didn’t like the currency you could exchange it for shiny coins (money was “sound” if it rang when dropped on a counter). Borders were open and money was footloose. It went where it was treated well. In gold-standard countries, government budgets were mainly balanced. Central banks had the single public function of exchanging gold for paper or paper for gold. The public decided which it wanted.
"Sound Money" rings when dropped on a counter.


"Today, the Fed’s hundreds of Ph.D.’s conduct research at the frontiers of economic science. “The Two-Period Rational Inattention Model: Accelerations and Analyses” is the title of one of the treatises the monetary scholars have recently produced. “Continuous Time Extraction of a Nonstationary Signal with Illustrations in Continuous Low-pass and Band-pass Filtering” is another. You can’t blame the learned authors for preferring the life they lead to the careers they would have under a true-blue gold standard. Rather than writing monographs for each other, they would be standing behind a counter exchanging paper for gold and vice versa."

Who can blame them? Why should a banker stand at a counter exchanging metal for paper at $7.25/hour when "high finance theft" permits them to spend their time sitting in comfy chairs writing bullshit research economics papers for $500,000/year?

[Bern]

Grant co-signed an Open Letter to Ben Bernanke in the WSJ today:

http://www.ronpaulforums.com/showthread.php?t=268891

[Cowlesy]

He had a great table in his most recent newsletter where they calculated the revaluing of Gold on a classical gold standard. The range was enormous, from $185/oz to $9,000/oz depending on the percentage of reserves required (5% to 25%).