Re: Information requested: US finance capital? which fraction ofthe bou

Roslyn Bologh wrote:
> 
> Could you elucidate the German critique of the gold standard and
> internatinal financial practices (and Keynes similar position if you know
> it)?  The proponents of the gold standard are still with us today and 
>ready
> to jump in with their "solution" any time there is a financial or economic
> crisis.  Greenspan was a "gold bug" and may still be partial to the gold
> standard.

<<SNIP>>

I can't offer you any comment on other's [German, Keynes's,
Greenspan's] perspective of a gold standard ut I can suggest
that much of the foolishness that surrounds the issue.

First is the oft made confusion between "backing" and
"standard." The "gold bugs" stance always argues for a
standard but simultaneously demands backing. A little
examination of the differences of the two will dispel this
error. By insisting that money must be backed by gold [or
any other commodity] the proponents destroy the ability of
the selected commodity to be a standard. That is, because
the price of the selected commodity for backing of money can
be established by the monetary authority at any value
between that which would result in all the commodity being
held by the monetary agent [i.e. -- A price higher than that
of all others desiring the commodity.] and a price that
would result in all the commodity being held by the public.
[i.e. -- A price sufficiently low that the entire supply of
the commodity is desired by the public.] Therefore, the
actual value of the currency in terms of relevant goods and
services people actually want ultimately has nothing to do
with the "standard" so manipulated. This is, of course, the
same problem that governments now have with diminishing the
stocks of gold held idle in government vaults. Try to sell
it and the price will fall to some intolerably low price and
the gold mining industry will collapse.

Second comes the simple fact that only one ultimate purpose
is required to give value to government issue and since
governments require that they be paid in their own issue,
any further "backing" becomes redundant to that purpose. 

Third is the problem of giving meaning to the standard of
value. While it would be possible to use a single commodity
as the standard of value [And such a choice would have the
advantage of immediacy and continuity of measurement.] the
only way such a choice would continue to be meaningful would
be if the monetary authority and all other government
agencies were forbidden from buying any of the commodity
thereby leaving control of the supply of money as the only
available mechanism for maintaining the value of the
currency in terms of the standard. A better choice of
standard, even with its difficulty of frequent measurement,
is an index based on a meaningful basket of goods and
services such as that used for the CPI. 

-- 
                        -- jbod

                Tax Privilege, Not People
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