Why conservatives spin fairytales about the gold standard

September 17, 2013


The Federal Reserve is celebrating its 100th birthday trapped in a political bunker.

At few points since the Fed’s founding in 1913 has it taken such sustained fire. It’s taking fire from the left, because its policies favor Goldman Sachs, Bank of America and the other financial corporations that are most responsible for the 2008 financial meltdown and the Great Recession. But it is also taking fire from the right.

Conservative or Tea Party Republicans have a different kind of criticism. They reject the notion that the Fed should even have the power to regulate the money supply and “debase” the dollar. They believe in hard money and a return to the gold standard.

These Republicans have taken a page from the book of conservative orthodoxies of the late 19th century. Conservatives are again fervently pushing gold as a means to protect the wealth and power of Wall Street financiers and the corporate elite. Conservatives are demanding hard money as part of the policy mix that enriches the top 1 percent. Now, as in the Gilded Age, the United States is a nation of savage inequality.

Hard money has often been linked to the conservative cause. But it has been more than 100 years since gold fever has so afflicted American politics.

The Federal Reserve Act of 1913 loosened the strings that bound U.S. currency to gold. Other ties were cut under President Franklin D. Roosevelt in 1933 and 1944. In 1971, President Richard M. Nixon severed the last tie between the dollar and the precious metal.

In the years after 1913, the need for a flexible and regulated money supply was widely accepted across the political spectrum. By mid-century, only a small band of right-wing ideologues clung firmly to the gold standard. In a 1990 paper, Milton Friedman, the 20th century’s most influential conservative economist, aptly described such holdouts as “monetary monomaniacs.”

But that was then. Today gold is king of conservative economic thinking.

Radio and TV personality Glenn Beck hawks gold coins as a business, and sells the gold standard as America’s salvation. President Ronald Reagan’s budget director, David Stockman, has written a 700-page jeremiad lamenting the departure from gold as the root of America’s “great deformation.” Financial magnate Steve Forbes has turned Forbes magazine into a tool of gold advocacy. And the conservative pundit William Kristol has now joined the chorus.

Meanwhile, Representatives Paul Broun (R-Ga.), Michele Bachmann (R-Minn.) and the congressional Tea Party Caucus are pushing to “audit the Fed” as the first step toward repeal of the Federal Reserve Act and restoring the gold standard. In the Senate, Senator Rand Paul (R-Ky.) is gaining support for a commission to study a return to a gold-backed currency. Republicans have also passed state laws in South Carolina and Utah, endorsing the use of gold as currency.

What explains this gold mania? The argument for gold is a tortured one. Supposedly it will save the country from the ravages of inflation. But inflation remains at historic lows, leaving many observers to note the dangers of a Japan-style deflation.

Supposedly, gold will provide an anchor of stability in a rough economic sea. But, like any other commodity, gold is subject to speculative bubbles. Over the last five years gold prices have been tossed high and low, more like froth in the wind than a sturdy anchor.

Supposedly, “ending the Fed” will return us to the firm ground of prosperity of the last gold standard era from 1873 to 1914. But claims that the old gold standard made for a more stable economy have no basis in the historical record. Those years witnessed the terrible depressions of the 1870s and 1890s, and some of the most severe financials busts and economic storms in U.S. history.

What the historical record does show is that the politics of gold and hard money bitterly divided the country and contributed to unprecedented levels of economic inequality. This experience helps make sense of the gold fever gripping conservatives today. Then, as now, hard money was the preferred policy of the corporate 1 percent.

Before the Civil War, state-chartered private banks issued paper bank notes. But these notes were notoriously unreliable. They were easy to counterfeit and often worth less than their face value. When issuing banks went belly-up, the holders of their notes were stuck with useless paper. Small wonder that working people favored hard coin.

During the Civil War the Union government printed paper dollars. They were known as “greenbacks” — for the color of the ink printed on the reverse side. The Treasury Department issued this paper or fiat money to pay soldiers and purchase supplies. Greenbacks would gain a wide acceptance — at least in the North — as the patriotic money that helped save the Union.

In the following years Congress took steps to put the U.S. currency on the gold standard. To replace greenbacks, silver coin and other currency, Congress favored gold-backed bank notes. These notes were issued by federally chartered private banks — most of which were clustered in the Northeast.

This move toward gold-based currency provoked a “battle of the standards.” Gold had strong support among the wealthy, including banking executives and conservative Republicans and Democrats mainly from Northeastern districts.

But many workers and farmers equated hard money with hard times. This perception grew stronger the further one lived from the financial centers of New York and Philadelphia.

By the 1870s and ‘80s, anti-monopolist leagues, the farmers’ Grange and the Knights of Labor fought back against the gold standard. Many of their members supported the Greenback Labor Party that stood for labor rights and greenback dollars.

This “battle of the standards” came to a head during the depression of the 1890s. A coalition of farm and labor groups had formed the Populist Party. Among other reforms, the Populists demanded an expansion of the money supply by minting silver and printing greenbacks.

William Jennings Bryan, a young former congressman from Nebraska, took up the cause of soft money at the 1896 Democratic National Convention in Chicago. Bryan, a powerful orator, was never a Populist — but he favored many of their reforms. He captured his party’s presidential nomination after he had convention delegates leaping on to their chairs with a speech decrying the crucifixion of humanity “on a cross of gold.”

Millions of hard-pressed farmers and workers passionately supported Bryan. Their experience with the gold standard helps explain why.

Hard money meant a general deflation of prices in relation to the dollar. Each year from 1875 to 1896, farm prices fell 3 percent. Georgia farmers saw the price of a pound of cotton fall from 10 cents to 5 cents. The price of Illinois wheat dropped even further. Corn prices fell so low that Nebraska farmers decided to burn it for fuel rather than spend money and time shipping it to market to sell it.

At the same time crop prices fell, the cost of mortgages and loans soared. Farmers needed credit for machinery and other supplies. But an unregulated credit market meant that in some regions loans were either sky high or not available.

If farmers could get a loan or a mortgage, hard money made it more expensive to pay off. When the real value of the dollar rose, the real value of their debts rose with it. Farmers had to sell a lot more wheat or corn to meet those debts.

Scarce credit combined with scarce dollars. Because the Eastern banks had a monopoly on issuing bank notes, farmers in the West and South often lacked access to currency. The lack of dollars in rural America became particularly acute after the growing season, when there was insufficient currency to move the harvest to market.

Farmers were not alone when it came to the burdens of hard money. During the long economic depressions of the 1870s and 1890s, workers and manufacturers felt the weight of the same deflationary price cycle. They asked why anyone would invest in an iron mill, for example, when the price per ton of iron stagnated or fell.

The gold standard alone could not explain the extent of farm poverty, or the depth of industrial crises. But many Americans understood that gold produced winners and losers.

Gold made losers of farmers and other working people selling goods at deflated prices. It made losers of people who paid mortgages and owed debts. And it made losers of those who lacked access to credit and currency.

But gold was good for those who controlled the currency, held gold or issued loans. It was good for the banking corporations, Wall Street financiers and other creditors. As a result, the gold standard shifted resources from the poor to the rich, and from the Midwest, West and South to the financial centers of the Northeast.

For millions of Americans, gold symbolized the power of wealth over the rest of the country. Along with corporate subsidies, regressive taxes and suppression of labor rights, the gold standard tilted the economy in favor of the top 1 percent, and opened a chasm between the rich and poor the likes of which the United States had never seen.

In the 1870s, anti-monopolists described the gold standard as a “relic of barbarism.” This was 50 years before the economist John Maynard Keynes said the same thing. What they meant was that the corporate elites who made such a fetish of gold relied on superstition and myth.

For the anti-monopolists, the gold standard was relic of a pre-modern age, unsuitable for a dynamic and expanding economy. Gold supplies, they noted, were limited by the random luck of the mining industry — and the even more random schemes of hoarders and speculators.

A modern economy, the anti-monopolists argued, required a more reliable currency. It also needed a more flexible money supply aligned to the growing needs of industry, agriculture and trade. This reliability and flexibility could only be assured by the powerful backing of the national government.

During the depression of the 1890s, the Populists were able to push their arguments into the center of national politics. They demanded a more flexible and reliable national currency — whether paper or silver, or a combination of the two — as a means to aid distressed farmers, stimulate commerce and create a more equitable and prosperous country. This demand for soft money found a voice in Bryan’s 1896 presidential campaign.

Conservatives from business, politics and academia rallied to the gold standard. They were known as gold bugs because of the militant faith that they placed on this precious metal as the key to preserve their wealth, power and way of life.

For Republican industrialist Mark Hanna, the political kingmaker behind President William McKinley, the danger lay in the “communistic spirit” of soft money. For Harvard economist Francis A. Walker, paper money would lead to “effeminacy” — weakening the control fathers and husbands had over their wives and children. For the journalist William Allen White, Bryan’s attack on the gold standard amounted to “riot, destruction and carnage.”

Bryan lost the 1896 election to McKinley. The Klondike gold strike that same year temporarily relieved the pressure of deflation. But the financial panic of 1907 unleashed renewed demands for monetary reform. Under President Woodrow Wilson, this led to the Federal Reserve Act of 1913 providing for financial regulation and a more flexible money supply.

Today, all modern economies have paper or fiat money backed by the power of government. And the possibility that the U.S. will revert to a gold-backed currency is little to none. The gold standard is a relic of history.

Yet, the cries of the “monetary monomaniacs” grow louder. Paul, Bachmann, Forbes, Beck and other conservatives now warn that it is either gold or the abyss.

They do so because today’s gold bugs share the same goals as their conservative ancestors. They, too, understand that hard money serves power and wealth.

Conservatives have put the Fed in their crosshairs. They are demanding hard money because it tilts the economic table in the direction of the haves and away from the have-nots. It favors banking corporations and Wall Street financiers. It squeezes homeowners paying mortgages and students with loans. And hard money is used as a justification for cuts in education, healthcare and other needs.

The Federal Reserve will be celebrating its 100th birthday with few friends and many enemies. It gained many of these enemies with its deregulatory policies that fueled speculation, enriched banking corporations and contributed to the financial meltdown. And it continues to make enemies with policies that favor Wall Street over Main Street.

But gold will not fix what is wrong with the Fed. Quite the opposite. Hard money is part of the conservative policy mix that has opened a chasm between the rich and poor the likes of which has not been seen since soon after the passage of the Federal Reserve Act a hundred years ago.



PHOTO (Insert 1): Glenn Beck speaks during the National Rifle Association’s 139th annual meeting in Charlotte, North Carolina, May 15, 2010. REUTERS/Chris Keane

PHOTO (Insert 2): Senator Rand Paul (R-Ky.) speaking to the Faith & Freedom Coalition Road to Majority Conference Kickoff Luncheon in Washington, June 13, 2013. REUTERS/Gary Cameron

PHOTO (Insert 3): William Jennings Bryan, Democratic Party presidential candidate, October 3, 1896. Courtesy of LIBRARY OF CONGRESS

PHOTO (Insert 4): Mark Hanna. Courtesy of LIBRARY OF CONGRESS


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It’s amazing how Reuters eagerly publishes communistic screeds against the gold standard. They want to have their cake and eat it too – they want to say that the gold standard caused “wealth inequality” that 100 years of the Fed abolished, yet they complain that today we have wealth inequality. They say that the gold standard made debts harder to pay off, yet they complain today that there is so much debt that no one will be able to pay it off.

The reality is the exact opposite of what this article is trying to espouse. Actually, gold is the discipline necessary so that governments don’t rack up too much debt, nor individuals. Is anyone today arguing that the banks are too small?

Posted by fazsha1 | Report as abusive

“Scarce credit combined with scarce dollars.”
Why, it almost sounds like we have a virtual gold standard right now.Why are dollars scarce when the Fed is pumping money out? Well, the money’s going to the banks and it’s sitting… where, exactly?
It’s not circulating among the majority of the public, only between the hands of rich businesses and the wealthy. There’s a lot of reason the richest 95% have gotten literally ALL the gains since the recovery and don’t plan on sharing any of it.

Without a mechanism for the money to dribble down to the depths of the sullied plebs from the majestic Olympian scales of wealth, we may as well have a gold standard again.

Make it official.

Posted by Anonymous | Report as abusive

So, the author nailed it right on the head. Going back to a gold standard would benefit the 1%, the Banksters, and very wealthy. Having a fiat currency with the fed controlling it keeps their influence to almost nothing. If they could convince Joe and Jose six-pack to go back to the gold standard they would have unlimited power back. Failing that, if they could convince them to eliminate the fed, then control would fall back into their hands via their subsidiary, the government and its politicians. So the power would still be theirs. Best to leave things just as they are and ensure the fed is not corrupted.

Posted by tmc | Report as abusive

I trust that the author does not buy groceries, as his comment “inflation is at historic lows” is an issue more of how inflation is measured and what the reality on the street is for the consumer. 50% of the inflation calculation is related to housing–where we have seen housing prices decline dramatically since 2008. When one considers all the other things consumers purchase, including basics such as groceries and fuel, the cost increases over the past few years have been significant.

The old argument of the enhancing the wealth of the 1% is only part of the issue, as the Fed has served to diminish the wealth of retirees and any working person with a savings account. But let’s not allow that or the fact savers are earning less than 1% on their passbooks be part of the conversation. Notwithstanding the fact that purchasing power has decreased dramatically for families.

Posted by COindependent | Report as abusive

no, no, no! Mr. Postel lays blame for the financial meltdown on “Goldman Sachs, Bank of America and the other financial corporations”. No. The actions of these companies was predictable, given the lack of Governmant regulation. If there were no speed limit in Montana, not even “reasonable and prudent”, you would see more drivers testing the limits of fast cars. Corporations, on the other hand, mostly act as they feel is necessary in order to remain viable in a competitive marketplace. When Bill Clinton signed the bill that repealed Glass-Steagall, he wiped away speed limits that helped to protect our financial system from chaos. Blame the corporations if you like, but our Government let us down, in my opinion.

Posted by Hairry | Report as abusive

How can one be expected to take Mr. Postal seriously? (see my prior post). And referring to Tea Party fanatics as “conservatives”? Please! Those people do not represent middle-America, mainstream, more moderate conservatives. Sure, there are people who will latch onto the notion that gold provides security. This represents a failure in our education system. That Mr. Postal is an academic is troubling, but not surprising. Our schools are turning out graduates who lack judgement and critical thinking. Mr. Postal is part of the machine that trains dogmatic drones.

Posted by Hairry | Report as abusive

Mr. Postal,

This is not a “fairy tale” about the advantages and disadvantages of a gold standard. It is about the reasonable concern of citizens for their financial future and reasonable restraint on government’s ability to thwart prudent and careful planning by systematic and progressive theft of the purchasing power of that which one “puts aside” to see them through old age when they can work no more.

Congress admits to the blood on it’s hands when it “indexes to inflation” Social Security payments. Then it diddles with resulting adjustments to make THEM a “fairy tale” compared to the real increases in the cost of living of things bought every day like food, fuel, cars and rent.

The “Fed” has today created a “financial system” that denies the proiductive who would save the fruits of their “extra effort” a fair rate of return on THEIR assets. These assets largely constitute the liquidity of the country, yet again and again the manipulators of the “management and distribution” of those assets around and through our economy are assured reliable and excessive compensation without meaningful risk of failure and without sweat or tangible contribution to gross national product for both competent and incompetent management of electrons and paper representing hard and soft assets in bank vaults and balance sheets.

THIS is the “wrong” that must be “righted”. A good start would be for Congress to quit debasing the dollar and passing out all the “extra” to those who choose to remain uneducated, without ability, without skill, without purpose, without motivation, without any redeeming quality of any sort that is of actual value to society.

“We, the people” watch in awe as our government rewards the incompetent, the unwilling and the lazy to sit home and watch TV and more more and more of themselves. They are an anchor forever holding our economy hostage from any progress towards a better life for all through honest and productive SWEAT!

If we go out and earn a dollar in good faith and choose to “put it back” for a “rainy day” or an old age without need and want, why is is heresy to expect OUR government to protect the purchasing power of that which was given us for our efforts? When citizens CAN NOT PLAN a future with reasonable financial certainty and security they DO NOT HAVE a future worthy of preparation.

When there is no certain reward for industry and effort beyond just that which allows the exploited to survive in most backward cultures the United States will no longer be “exceptional” in either deed or fact.

Posted by OneOfTheSheep | Report as abusive

@hairry I think it can be better positioned that linking the value of the currency to gold would provide some degree of “stability” (as opposed to “security”) is reasonable. Especially when compared to the fiat currency we have today that place few, if any, constraints on government spending and borrowing.

Posted by COindependent | Report as abusive

Are you referring to your family or friends and neighbors? Are they the ones who are “incompetent, the unwilling [to work] and the lazy to sit home and watch TV”? (And, “more more and more of themselves”, whatever that means?)
Is it possible that you have entirely made up this distopian world and hold your fellow citizens in suc disregard and disfavor? No Constitution of the people, by the people and for the people that intends to “promote the general welfare” of its citizens for you. Just the One Percenters who compose the Plutocracy and are the only real “job creators”. Or, is that profiteers from their investments by eliminating jobs?

“Let them [the Pee-Ons] eat cake!”

Posted by ptiffany | Report as abusive

Gold is an internationally traded mineral. How would tying our economy to it create stability? India alone could jerk us around with just a bit of what they’ve hoarded away. They have quite a fetish for it and they will readily admit to that. We can’t control the price of gold can we?
@OOTS, Goldman Sachs already runs the government, it’s just a joint venture of the 1%. The Fed is not part of the government now, and obviously GS and it’s buddies have more sway over it that the government does anyway. So how again does the gold standard help we the people? We all ready melted down our gold chains when it hit 1k an oz. It wouldn’t make a bankster give you 3% on your savings now will it? Why would he? Those days are just as gone as the jobs, and they won’t come back…ever.

Posted by tmc | Report as abusive


The comment was supposed to be “…make more and more of themselves”. Not something spell check catches when you’re trying to respond to the flood of nonsense unleashed on Reuters today.

Those “citizens” of the “distopian world” you believe exists only in my mind…they are who they are. They richly deserve “distain and disfavor”. Are they my “friends and neighbors? In general, nope.

No one that actively supporting their family and paying a mortgage can afford to sit home like an oyster and watch the “world” float by sucking up sustenance without effort. The latter are an ever-growing anchor holding back these United States from sailing the seas of commerce seeking and achieving incredible progress the great majority (not 1%) of Americans in standard of living and quality of life has enjoyed from the end of WW II into the “Great Recession”.

For generational ingrates, nothing is ever “enough”.

Posted by OneOfTheSheep | Report as abusive

It’s going to take time to transition to the “Star Trek” economy that does away with money. But we better start planning on moving in that direction. We have seven billion people and 3 billion jobs and in just another generation we’ll have 9 billon people and 2 billion jobs. What’s @OOTS going to do then? Ok so hell be dead by then but his way of thinking won’t be.

Posted by tmc | Report as abusive

@ptiffany You fail to address OOTS issue of how the debasing of the currency and diminishing the purchasing power of the common citizen “promote the general welfare” of the population.

The federal reserve and Congress has repeatedly failed the citizens of this country for the past 70 years–starting with Roosevelt by diminishing our individual liberties, promoting income redistribution, and (literally) rewarding irresponsibility.

We had deployed billions upon billions of dollars in special programs to address the issues of the “disenfranchised” with limited results as evidenced by the increase of out-of-wedlock birth rates and little change in high school drop out rates. To OOTS point, do you think that at some point government might be exacerbating the problems–much as they did when the POTUS selected the unions as the key beneficiary of the Chrysler/GM bailout at the expense of bondholders (in direct violation of our bankruptcy statutes)?

You can condemn GS, BAC or any other financial player, but to ignore the endorsements of multiple Presidents and Congress is a bit narrow. They are the plutocracy, the political aristocracy, that are most deserving your criticism, as they often represent interests in direct conflict of the citizens they were elected to represent.

Posted by COindependent | Report as abusive

Who is debasing our currency? For the past few years, the US dollar has been stronger than ever in history. I suppose you think that Standard & Poor’s political decision to lower the rating of US debt had an actual effect on the value of the dollar as some of the lame-brained media have done. Anyone with a few billion dollars to invest will tell you that the safest investment in the world is the US dollar.

Gold bugs are idiots with zero understanding of the value of money. We all laugh at the idea of a collapsed US economy where the gold bugs are the only ones who can buy spinach in the grocery store with their gold bullion and coins and gold certificates. The traders in precious metals are profiting handsomely from these ignorant gold bugs. They’re laughing all the way to the banks and the brokerages that constitute the Wall Street Casinos.

Shall we get back to arguing about abortions and gun control?

Posted by ptiffany | Report as abusive

Yikes….close but no cigar. We have rightly left the Gold Standard behind as it could not be the medium by which we buy and sell. The global economy is far too big.

Gold is a commodity and the dollar bill is not.

Huh? The dollar not a commodity? (Wait, what about the Quantity Theory of money) Nope…it is a time/effort value. How much time are you willing to give up in exchange for the product or service. The worker who makes $10.00 an hour wants a product costing $10. They must work a hour for the product.

Therefore money growth is not a factor in inflation. It isn’t part of the sales price. Where in the sales price is money growth considered? It’s not.

The only time growth in our modern money supply would cause inflation is our inability to meet the aggregate demand of the addition money growth. Russia for instance, people had money but no products to buy pushing up the prices. Other countries have tried as well but only caused hyper inflation. Because they could not meet the demand for the increase in money supply.

Then it becomes Supply and demand. And that causes prices to increase.

We need more debt free cash in our pockets to spend. The government needs more debt free cash to spend. So in closing, stimulate my pocket by lowering my tax burden and I will spend some for Christmas.

Posted by WasntMee | Report as abusive


The printing presses of the Fed are debasing our currency, pumping out more and more dollars with absolutely nothing of increased value behind them. The present reality that most of these dollars then wind up in the vaults of foreign governments as “insurance” against the values of their own currencies (which are worth less) keeps a majority out of active circulation.

At such time (and there WILL come such a time) as another currency becomes the “least worst” fiat currency to hold, these bogus dollars will fly from those vaults in less than a New York minute and the plunge in value of the dollar will be truly breathtaking. THEN people like you will say “I didn’t know” as if such were credible excuse.

Reality has a way of existing without regard to the success or failure of an individual’s efforts or success in prediction. Others like you, who live in denial of obvious facts, still believe that the basic nature of the human animal is benevolent and the earth is flat. My condolences.

Posted by OneOfTheSheep | Report as abusive

Mr. Postel, since we have not been on the gold standard since the Nixon administration, 40 years ago, and since you say somehow that the gold standard contributed to the income inequity of the top 1%, should not your theories of economic justice and fairness have been proved out by a narrowing of the income gap and more social justice for our country? Most people today think the income gap has gotten worse. Who are the poor? The poor in this country are the elderly the physically or mentally disabled on fixed incomes who did not save enough for retirement, the single mothers who did not complete their education and now have entry level jobs, and those who have substance abuse or personality problems. None of these groups are helped by the ever decreasing purchasing power of the dollar. In 1970, you could buy a respectable, brand new car for less than 2000.00, gasoline was less than $1.00 per gallon. The average American earned less than 16,000.00 per year, and yet somehow I remember this as a very good time compared to now.

Posted by zotdoc | Report as abusive

This is the same stuff that is being taught in the schools too. No wonder we are so screwed up. Why are many central banks buying gold if it is such a relic and we will never go back to a gold standard?

Posted by pikespeak | Report as abusive

@COindependent – pegging the dollar to gold for “stability” is, in my opinion, unwise. The price of gold is pushed and pulled by fear and speculation. The gold chart from 1979 through 1982 is the picture of instability. If the dollar were pegged to gold, a spike in gold prices would freeze US exports. That would be a disaster now, in that the average large US domciled company sees 20% of revenue from outside the US (for Coca Cola, that figure is closer to 70%). Gold prices are anything but stable. I agree with Warren Buffett’s assessment, that “gold is a useless metal”.

Posted by Hairry | Report as abusive

Thank you first of all, for not regurgitating the lie that greedy home buyers and home loans were the major cause of the Great Recession. I tired of the hacks on Reuters that push Bircher crap such as W. was a ‘great’ president.

Only goes to show how truly vile the fight for mindshare has become and how low the quality of propaganda has sunk.

Salam and Wapshott are particularly egregious and I reiterate here that they are paid to push crapola.

I applaud the informative delineation of yet another example of Tea region rubbish spewed by ADD boy and the like.

Posted by Mac20nine | Report as abusive

@fazsha1: the author did not state that the gold standard caused wealth inequality, nor that the Fed era
abolished it. I’d love to get into a discussion about your ‘communistic screeds’ re: today’s debt levels and the inability to ever pay them back but you seem to also think that we have enough gold to back every dollar bill in circulation.

@COindependent: busy as usual I see. All good points
but how inflation is factored is tangentical to the
article’s subject.

@Hairry: You seem to imply that corporations are guilt free. Except corporations run Congress, who write laws in exchange for bribes. The prez is just the last hurdle in the legislative ‘process’. Exactly who pressed Congress to 86 regulation, so they could follow ‘predictable actions’, in your opinion? You don’t really believe that business ‘interests’ and the federal government can be separated at this point?

You also won’t acknowledge that Tea baggers are in the conservative realm of the spectrum. Agreed, they are fanatics but they certainly don’t fall under left/liberal or middle/moderate. Where do you propose to put them?

‘People’ latching onto the gold standard notion or
not isn’t colored by the educational system. A simple analogy using gun control should illustrate. Someone who finds Mr. Postal’s sound article troubling because he is an academic is mere finger pointing. What’s most troubling is your negativity given that you couldn’t even get a relevant survey of collegiate opinions on the gold standard. Well, I suppose ….

I’m mystified as to how you can extrapolate between the general populace and the college crowd. Or do you simply dislike academia in general and blame all academics and students for not agreeing with you out of hand? This is the only example I see of drone thinking.

Posted by Mac20nine | Report as abusive

@OneOfTheSheep: I’d suggest the Fed re: debasing the dollar, not Congress. I’d also relate you open up your eyes to the many having trouble finding work, not the ones cheating the system. They do exist, they are trying, they are not all watching television all day. You have read of the jobless recovery, outsourcing, age discrimination and weakness in manufacturing I take it?

I think you’re getting warm with your comment about not being able to plan for a future. If you can view the Recession as impacting those on the lowest rungs most harshly you might also be able to envision inserting ‘working class’ or for some, ‘unemployed’ wherever you see a ‘*’.

‘When * citizens CAN NOT PLAN a future with reasonable financial certainty and security they DO NOT HAVE a future worthy of preparation.’ Now think about the 50 year old machinist tossed on the street, as well as at least some of the urban poor re: ‘Nor the purpose or motivation to better themselves’. It’s hard to pick yourself up and re-train after a lifetime of honest work when your 401k’s tanked, your home is worth less or your pension gobbled up by “investors”. Or to go work a McJob while you figure out how to pivot and maybe your wife left you.

It’s hard for some that never got a decent education to better themselves when all most of them can reasonably hope for is working class jobs and what they’re becoming. When they can’t afford good education or training. Doesn’t excuse the cheaters but how many or the 8+% do you think are in desperate straits right now? If you think you’ve got it bad think about those hit even harder. How many kids whose parents REALLY need those food stamps? Both working full time and trying to find a solution? Maybe Dad should relocate to Nebraska.

‘When there is no certain reward for industry and effort beyond just that which allows the * exploited to survive’, due to how government and business is hollowing out the remaining dollars from the plebs, how do you think some people are going to react?

Posted by Mac20nine | Report as abusive

@Zotdoc: again, the author never stated that the gold standard caused wealth inequality.

Posted by Mac20nine | Report as abusive

I can hardly believe that anyone who knows what money is can think the gold standard is an option. This ties to so many issues it almost takes your breath away. I guess I just wish someone had mentioned “The Wizard of Oz” for the fun of it or bitcoin just to cause trouble.

Posted by notnews | Report as abusive


When the Fed does precisely what it must to facilitate sustaining the “status quo” (i.e. runaway spending without appropriate priorities) what difference is there of substance whether it is the Fed or Congress stealing the purchasing power of “we, the people”? Without AGREED priorities, there is no limit to the size of government or the amount it can and will take from us in taxes.

When the Fed does precisely what it must to facilitate sustaining the “status quo” (i.e. runaway spending without appropriate priorities) what difference is there of substance whether it is the Fed or Congress stealing the purchasing power of “we, the people”? Without AGREED priorities, there is no limit to the size of government or the amount it can and will take from us in taxes.

Either way it’s “our” government, but one in which the average citizen’s voice and interests are ignored. We “citizens” are right back where we were in 1776, subject to taxation without [meaningful] representation, accountability or limit. Yes, there are many, ,many “out there” in increasing financial trouble.

Some have lost “jobs”; and yet there is no such thing as a “job. There exists only an employer’s “need”, and such “needs” come and go and change with “progress” and as society changes. So there has ceased to be a “market” for that which some have to offer…like makers of buggy whips when automobiles replaced horses. Good for society, hell on the individual. No “right” No “wrong”. It is what it is.

Of those “on the bottom” of our economy, more than a few that make some half-hearted inquiries AFTER their unemployment runs out (after TWO YEARS!) then find an Esquire (attorney) to “wiggle” them on Social Security Disability and Medicare until they are old enough to collect regular Social Security. Sorry, I don’t view that as a “good faith” effort to be a productive member of our society.

The clock ticks without pause. The consequences of denial and procrastination are dire, so suck it up and “deal with it” (or not). Food and shelter are more easily available than through most of history. Everything else is optional. Make sure that sense of entitlement is the first thing tossed out the door. No one hungry and cold is “special”. Life gives those on the bottom few trophies.

Homes are lost when mortgages fall behind. Credit is lost if one blows it without prioritizing cash flow. Those who saved for a “rainy day” have more time and options than those who lived paycheck to paycheck. Those who act quickly and correctly suffer less in adversity than those who are overwhelmed.

All are NOT created equal in originality, flexibility or even risk assessment and mitigation. In the end we must each do what we can, where we are, with what we have. With little practice, few Americans are “good” at handling hard times. Who, precisely, promised life would be easy? It can be a real bitch at times.

Anyone who opens their eyes can see that our society needs fewer and fewer people to do what must be done. I have no idea what many younger people will do “for a living”. Businesses as we speak are revising their “needs” (positions) such that anyone warm and breathing that can read, write and do basic math at Junior High level can be contributing “100%” after a week or two of “on the job training”.

Hire only part time and employers pay no sick leave, overtime, continuing education, medical insurance and pensions. Such workers are as light bulbs. One fails, pop another in. No difference between them. No learning of skills, no advancement. Welcome to the future.

How do I think some people are going to react? With frustration and hostility towards anyone not suffering as they are. For those in the wrong place, things can and likely will get real nasty real quick. As the Boy Scouts say, be prepared (as best one can). Have a nice day, and please don’t kill the messenger.

Posted by OneOfTheSheep | Report as abusive

@Mac Do you think inflation reflects the purchasing power and value of the dollar over time? My position is that by allowing our government to continually pump dollars into the economy it debases the value of the dollar. And, by linking the dollar to gold (at some fixed rate–pick one say $800 ounce) would inhibit the expansion of the money supply without the associated economic growth, and thus underwriting the longer term purchasing power of a dollar.

Posted by COindependent | Report as abusive

@one of the sheep:

Generally I think you are correct about this.

I do think, however, that either people are a part of a certain community or they are not. If you exclude obligations to people from your community, you also exclude their obligations to you. If that is not so, then they are as much property as a cow. You take by right but do not give by obligation. That simply only happens with human property.

Also, people have the right to association, meaning they can be part of a community if they are welcome and so choose, or not. But obligations come with “rights”. You cannot have one when it is convenient and not have the other when it is inconvenient.

Actually, “toilet paper” money has been manipulated to benefit the rich, not the poor. The problem is that it is very difficult to trust any kind of banker, central or otherwise. Finding an honest politician with integrity is likewise hard to do.

Posted by usagadfly | Report as abusive


I’m greatly encouraged by your willingness to consider the truths all of us would change if we could. Some are truly cruel and unjust.

Being “part of a community” means accepting and conforming to the core beliefs of that community. The “community” is able to function because of MUTUAL commitment.

It seems to me the “debate” you advance is much like that of “which comes first, the chicken or the egg”. Fascinating, but of little practical significance. Let’s remove emotion from it.

If you are cold and have an empty wood stove, you can present infinite arguments to that stove why it should heat you before your blood flows sufficiently to go out in the cold and chop fuel to feed it. None will get you “heat in advance”. It is simple fact that you must get off your butt and go chop wood, bring it in and feed it to the stove before it can or will offer the warmth you desire.

In the same, sense, people must make individual decisions as to whether or not they will labor for the “common good”, because only AFTER they have done so and offered up the fruits of their labor does the “community comprised solely of such contributing individuals” have “community resources” to dispense. To such extent as they CHOOSE to distribute to those who have not contributed, they increasingly risk their ability to “take care of themselves” in “worse times”.

Some of those receiving unearned benefits will, instead of contributing back to the community that helped them, decide that they were entitled to the help received merely because they exist. Those will NEVER become “contributing members of the benevolent society.

Quite the contrary. If the benevolent society is democratic, it’s very benevolence creates a “counter-society” that, once a majority, can and will destroy it. Any presumptions as to the basic “good” of human nature sufficiently in conflict with Darwin’s “survival of the fittest” evidence place the long term survival of both you D your society at increasing risk.

So I think you have it backwards. Obligation (commitment) must precede “rights”. I do agree that “You cannot have one when it is convenient and not have the other when it is inconvenient.” But most of us also understand that we cannot give away that which we have not earned. Why can’t “our” government comprehend that simple immutable reality?

Posted by OneOfTheSheep | Report as abusive

The above analysis totally fails because it doesn’t recognize that the tea party rural and small town populists are angry because they(like working Democrats in the cities) have been ripped off by the financial sharks who control both the Republican party power structure and the current administration. Sure they lash out at liberals and socialists(does anyone actually know any?) and the usual targets in their brainwashed minds. But at heart this is a revolution against a Wall Street controlled dysfunctional government.

Anyone who believes that inflation is at a historic low hasn’t been buying his own necessities. We know from history that governments have for a variety of reasons become insolvent and debased metal and paper(or electronic) currencies. Gold has endured for use in currencies for many thousands of years because it is not easily duplicated. Of course governments have mixed cheaper metals in coins, and the latest innovation of the Wall Streeters is manipulating the nominal price of gold.

We are going through a doorway in history to a new future with a different power structure. The old powers are dysfunctional and not meeting our needs as a national community. Funny how the demand for physical gold endures no matter what the Wall Street paper price, whether you’re a tea party rancher or liberal school teacher, a Chinese father or an Indian mother.

Posted by rhess595 | Report as abusive

The article is simply twaddle. The purpose of the Federal Reserve System was, and still is, to centralize control over the economic activities of the United States and exert indirect control over the World economy through the agent of the U.S. dollar, and to ensure that that currency would be “elastic”, i.e., inflationary and made available to Wall Street and the Money-Center Banks in NY and Chicago whenever a run on the banks threatened.

The author is correct in stating that borrowers are disadvantaged by a hard currency which is resistant to money-inflation, and that a hard currency favours those who save and lend over those who borrow and spend, but absent the savers where would the borrowers obtain the funds to spend? It is also incorrect to state that a rate of inflation of 2% to 3% is low “historically”. Inflation at that level is low relative to the inflation rate experienced in the 1970s and 1980s, but it is high relative to the rate of inflation experienced in the 1960s and the 1990s and the early years of the present Century.

The author is incorrect in stating that following the establishment of the Federal Reserve System in 1913 that the gold was no longer in circulation. Until Nixon disavowed the ‘gold standard’, in order to prevent France from draining the gold reserves of the United States by redeeming inflated U.S. dollars for gold at the Treasury as required by law, the dollar was pegged to a fixed rate of exchange ($35 per oz.-Troy). Nixon’s move collapsed the Bretton Woods currency exchange arrangement and led directly to the inflationary period of the 1970s and 1980s. Volker’s move to quash inflation in the early 1980s through high interest rates crushed the economy and led to recession. The subsequent boom and bust economic fluctuations in the U.S. and World economies is directly tied to the alternating bouts of money-inflation and interest rate hikes that the Federal Reserve has imposed on the U.S., and through integration of the U.S. financial system with foreign financial centres, on the World economy at large.

Krugman’s hypotheses are largely bunkum. Inflation is a scourge in hand-maiden’s clothing. It led to the 2007-2008 financial system crash; and it will lead to an even deeper financial system correction when the latest Fed originated bout of inflationary money expansion terminates.

The FOMC’s recent statements give an inkling of just how poor the current U.S. economy is. But the FOMC is pushing on a string. Its QE-3 is of doubtful value. A proposal purportedly floated by Dr. Janet Yellen calling for the implementation of Fed policies of negative nominal interest rates will only drive the economy further into the ground. Fiscal and regulatory policies of Congress and the Whitehouse are having a strongly negative impact on the economy and employment. Under the combination of Federal Reserve inflationary money actions and politically dysfunctional fiscal and regulatory policies, the U.S., and indirectly the World, is facing a prolonged period of economic stagnation inflation — our old friend from the 1970s “stagflation”.

Posted by highlandlad | Report as abusive

Gold fluctuates in value. It is also easily manipulated since large holders can dump it on the market, wait for the ensuing panic, buy more after it tanks. Dump again. That’s how the price crank works.

So Why would gold be any more solid now than any other commodity? The whole notion of returning to the Gold standard is borne in ignorance and intellectual laziness.

Posted by AlkalineState | Report as abusive

[…] LINK HERE to the Reuters essay […]

Posted by The Küle Library | Report as abusive