Here's something new: some good
reading ("Ron Paul's money plan is far from golden") at CNN (sic!):
this time about nostalgic folly of returning to the "gold standard". It
is surprising that someone whose intellectual aspirations are bit above
those of his supporters (ok, granted, that's a low bar), one would be so
mistaken about realities of tying national currency into amount of
precious metal(s) central bank physically has. Maybe this is why central
banks are generally lead by people with economic education and
experience, and not physicians.
I mean, yes, from laymanperspective, it would seem nice if that green
paper that gets printed on would actually have collateral. But
impracticality of full collateralization should be obvious: you don't
need much of a thought-exercise to see how and why it would fail; and
from that point on, to backtrack and see why this realization (when
shared by people who control flow of money) means that attempt would be
a self-fulfilling failure. And if we were unlucky, slowly cooking but
colossal-cluster-magnitude failure.
In addition to the great depression that is obviusly mentioned in the
articles, proponents of "strong currency" managed to starve millions of
people to death during late 1800s. I am most familiar with a somewhat
starvations in Finland (there were 2 instances): globally speaking these
were just blimps on radar (sice the whole country population was barely
in millions), but death rate from starvation actually exceeded that of
world wars... and all that so that central bank could protect value of
currency, by not loaning money (or subsidize seeds), managing to keep
central bank in black, and peasants hungry or dead. Famine was orginally
triggered by weather, of course, but the catastrophe could have been
averted by government action. And in similar vain, in more recent
memory, depression of early 90s (in Finland) was also deepened by later
crop of strong currency proponents, who tried (ultimately in vain) to
keep the currency strong by trying to avoid devaluation. In the end they
had to let it float anyway (causing run-off devaluation by something
like 30% in a week), but so late that much of damage was already done.
Fortunately no one starved to death on account of this failure, although
unemployment rate tripled closer to 20%.
I am sure there are many more examples; and some EU countries are
currently experiencing related challenges (now that they are forced to
exercise certain discipline after screwing up their finances before
realizing it must be done).
These examples are closely related to "gold standard" part, in that
there is simplistic view of nations having to balance their check books
on very short term. This is neither practical nor beneficial. And trying
to force it to be done does not make it any more practical, beneficial
or wise.
And yet -- it seems that principled fools never let facts get in a way
of intuitive theories. So I am just waiting for a grand unified theory
that binds together ideas of tax-cut for riches, return to the gold
standard, and the idea that poor people caused depression (due to
welfare costs allegedly being a major contributor to this whole meltdown
-- don't ask me how the mechanism is supposed to play; apparently this
claim is getting some consideration in tea bagger circles).
