Fool's Gold, Standard(s)
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).
