Second Vermont Republic endorses the gold standard
http://www.vermontrepublic.org/its_t..._gold_standard
By Thomas H. Naylor - Second Vermont Republic
During the thirty years which I taught economics at Duke University I never gave a single lecture on the gold standard. Gold was considered to be strictly taboo. Keynesian economists, monetarist followers of University of Chicago economist Milton Friedman, and Democratic and Republican political leaders committed to statism had thoroughly demonized gold. Gold was a convenient scapegoat for the Great Depression. It was said to have been the cause of slow growth, deflation, high rates of unemployment, and low wages. Nothing could have been further from the truth.
What has, in fact, been going on since the 1930s is a never-ending ideological feud between academic and political centralists, on the one hand, and free-market, libertarian Gold Bugs, on the other. The issue is fiat money created by the Federal Reserve Bank as an alternative to the gold standard which President Franklin D. Roosevelt effectively abandoned in 1933.
Keynesians and left-wing Democrats are drawn to fiat money because of the flexibility it affords them in bypassing the usual Congressional approval process for financing deficits thus avoiding accountability. Not unlike Gold Bugs, monetarists are also free market zealots, but with one exception. When it comes to monetary policy, monetarists behave as though they were superstatists wedded to the idea that the Federal Reserve Bank should be the nation’s only money manager. What galls Gold Bugs is the lack of discipline and accountability associated with wholesale money-printing. They believe that this encourages free spending by the social welfare state which they abhor.
Since President Richard Nixon closed the gold window to the rest of the world in 1971, the statists have been firmly in control of the Fed’s money-making machine. Not even foreign governments can exchange their dollars for gold any longer. But there are signs that this could change.
In a recent article in The Christian Science Monitor, monetary policy expert Walker Todd argued that “too much credit and easy money” were the “biggest culprits” behind the financial meltdown in America. And the government’s strategy for solving the problem seems to be based on more of the same – “more credit and even easier money.” To Todd’s analysis we would add that there also appears to be a complete lack of trust of most of the world’s major financial institutions.
Todd believes that the Fed’s policy of printing dollars in unlimited quantities will lead to the same type of hyperinflation experienced by Germany in 1922 and 1923. So complex is the international network of investment banks, hedge-funds, derivative contracts, credit default swaps, exchange-traded portfolios, and subprime mortgages that literally no one knows how to fix it, least of all the Fed, the Treasury, mainstream academic economists, or the Obama administration.
Maybe it’s high time we bring back the gold standard and return to a more disciplined, stable financial system based on accountability, integrity, and trust rather than wishful thinking and pie-in-the-sky. A return to the gold standard would make it more difficult for our government to inflate the money supply and spend itself into oblivion. It could constrain runaway inflation before it even starts.
Politically speaking, a gold-backed currency would help rein in American imperialism. It would become much more difficult to finance a foreign policy based on full spectrum dominance and imperial overstretch. Nasty little wars in places like Iraq and Afghanistan would be subjected to much closer financial scrutiny, if our monetary system were tied to gold rather than government printing presses. Who knows, maybe we would conclude that we couldn’t afford a war on terrorism after all? A gold-backed currency might also restrain our unconditional support for the terrorist state of Israel.
Unfortunately, things may have to get a lot worse before our political leaders will have the stomach to once again consider a gold-backed currency.
In the meantime individual states such as Vermont may want to think about how they might protect themselves from the collapse of the dollar and Weimar-like inflation. First, they might begin exchanging soon-to-be-worthless paper assets for gold. Second, they might consider alternative gold-backed state currencies pushing these currencies to their constitutional limits and beyond. In a world where there is serious doubt about the constitutionality of Federal Reserve notes, nullification of the U.S. Constitution to avoid financial disaster is not totally unreasonable. Third, if all else fails, there is always secession. Then there would be no doubt about the constitutionality of a gold-backed currency for an independent republic such as Vermont.
Rebél
Thomas H. Naylor
January 7, 2009
