A Reisman Must-Read
Professor of economics George Reisman has penned a must-read article
about the credit crunch. It is long but absolutely worth
your time. Plus, he once again makes the case for gold:
Despite the certainty that a proposal of this kind will be almost completely ignored and has virtually no chance of being enacted in the foreseeable future, it still must be made. This is because the most fundamental and important consideration is not what people are willing to accept or reject at the moment but what would in fact accomplish the objectives that need to be accomplished. Using gold as a major asset of the banking system, in the way set forth below, would in fact safeguard the banking system from possible deflationary collapse, prevent the recurrence of any such threat, and do so in a way that substantially advanced the cause of economic freedom. Making the proposal is necessary in order to uphold the philosophy of economic freedom, by providing a demonstration that that philosophy offers the solution to the growing monetary problems we face and is not their cause.
Go. Read it. Now.
The article is more valuable for its explanation of how we got into the current
mess than for its short call for a gold standard. You can find a much more
detailed elaboration of that in Reisman's book, Capitalism.
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Comments: 3
That is a really long article. But interesting. So how do you see the economy successfully getting "fixed" this time around?
I agree the article is a good qualitative description of the credit goings on, although the author plays fast and loose with the numbers... (wasn't there gold convertability into the 70's?, the fed is demanding a 15% discount on distressed assets...etc...)
he gets carried away with the gold thing though and kind of does it a dis-service... I can't help but think of some silly bond villian drooling over his stash of kruger-rands...
#1, I am pessimistic about the domestic economy for at least the next year or two. I think we fundamentally need this adjustment, and if the Fed prevents it from happening we may see a return of stagflation.
There are two powerful trends pulling in opposite directions, which makes it very hard to predict how things will turn out: the dollar is weakening as a consequence of the enormous monetary growth of the past few years, yet the deleveraging of the financial system should restore some strength in the currency. I find it difficult to direct my investments with confidence in this environment.
#2, gold convertability for U.S. citizens ended in 1933 at the stroke of F.D.R.'s pen. Foreign governments could take advantage of gold convertability until the '70s. Oh, and the villain you're thinking of is Goldmember.
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