Blogs: Ralph J. Benko
Herr Jens Weidmann, president of the German central bank, gave an erudite and subtle speech on September 18, 2012 citing Goethe's Faust, Part II. Faust II is a long, learned, parable of the disorders created by moving from gold-defined to paper money.
Goethe, courtesy of Wikipedia
Her Weidmann's 2012 speech was commented upon by this blogger in a column in Forbes.com. Weidmann:
“Concrete objects have served as money for most of human history; we may therefore speak of commodity money. A great deal of trust was placed in particular in precious and rare metals – gold first and foremost – due to their assumed intrinsic value. In its function as a medium of exchange, medium of payment and store of value, gold is thus, in a sense, a timeless classic.”
As previously noted here, "In his Speech in the Committee for Action and Economic Expansion, March 27, 1952, Jacques Rueff, the great monetary statesman, anticipated the recent speech by Bundesbank president Jens Weidmann by 60 years. ... "[I]t was Germany which gave the world its greatest money theorist—Goethe. He was, to be sure, no economist, yet it was he who in Faust (Part II) clearly demonstrated that inflation was and could only be an invention of the devil."
This blogger also had reflected, on September 9, 2012, upon the monetary genius of Goethe as demonstrated in Faust II, in a column entitled, Money, Twisted; Caught in the Devil's Bargain, in The American Thinker.
The perversity? Monetary shenanigans represent a short-term fix but the long-term cause of economic, social, and political woe. Thus do Neo-Keynesian economists such as Krugman enlist in the Devil's Party. "Easy money" advocates propound QEs and Twists and other weird devices to generate a brief relief for the economy. They ignore the seeds of destruction thereby sown.
The story of Faust is a secular, not a religious story. It is a play, not Scripture. Barack Obama is a secular Protestant, not a Satanist. But Goethe, notwithstanding his invocation of sacred symbols, wasn't propounding theology. He was an empiricist. Weatherford: "As a scientist and statesman as well as a poet and playwright, [Goethe] foresaw the great accomplishments and the shortcomings of the emerging industrial world that would be financed on the newly emerging monetary system of paper money."
Herr Weidmann now has returned, briefly, to referencing Faust again.
As reported by the London FT, responding to recent questions about relocating Germany's international gold holdings to Frankfurt the Bundesbank president again quoted Goethe’s Faust: “The lure of gold has power over all.”
Compliments to a leading central banker for excellent public servant graced with erudition. May Herr Weidmann find, and enjoy, the works of Prof. Rueff.
TheGoldStandardNow.org recently was nominated by the largest association of policy bloggers in America (and likely the world), the National Bloggers Club, for recognition as nonprofit "Blogger of the Year."
Image courtesy of National Bloggers Club
It was a great and an unexpected honor for The Lehrman Institute's TheGoldStandardNow.org to have had its name placed in nomination with four other, nationally recognized, contenders. (The final award this year instead went to very impressive social commentator, Jeffery Dunetz, who blogs as the Yid With A Lid.)
Today, and almost every day, a Google search for "the gold standard" returns this site, on page one, as the top autonomous (not part of an encyclopedia), non-metaphorical (using "gold standard" as a metaphor rather than a technical descriptor) website on this important topic. TheGoldStandardNow.org returns ahead of 148,999,996 other page references on the Web to the gold standard.
With appreciation to the nominations committee of the National Bloggers Club, TheGoldStandardNow.org aspires to be the most authoritative, informative, and interesting resource on the World Wide Web for all things pertaining to the gold standard.
TheGoldStandardNow.org first and foremost, in addition to other materials, presents the work of the Lehrman Institute's founder and chairman, Lewis E. Lehrman, as a readily accessible resource for policy makers and the public.
TheGoldStandardNow.org aspires to be "the gold standard" of repositories of accurate, timely information about the classical gold standard and thanks you for being one of its readers.
As matters in Ukraine created tension between the West and Russia, a figure on Vladimir Putin's periphery suggested that Russia might retaliate, so to speak, against American pressure by abandoning the dollar as a reserve currency.
Flag of Ukraine over the Lviv Theater,
creative commons image by Andrew J.Kurbiko
The preposterous nature of such a threat promptly was pointed out by the UK Telegraph's Jeremy Warner:
I've written before about the inevitability of decline for the dollar as the world's major reserve currency, but this process is on a very long fuse and basically depends on China eventually displacing the US as the world's largest economy.
That's not going to happen any time soon. In the meantime, the dollar remains overwhelmingly the currency of choice for international transactions, and is the middle currency in virtually all transactions. For instance, if you were looking to buy Singapore dollars with Russian roubles, you would typically first buy US dollars with your roubles and then swap them into Singapore dollars. The US dollar is also the pricing currency for virtually all commodity transactions, including crucially, oil. Repeated attempts to set up alternative pricing arrangements have all come to nothing.
Then finally, more than 60 per cent of the world's central bank foreign currency reserves are held in dollars. The euro, the next biggest reserve currency, comes nowhere close. This is not about to change. In other words, Russian threats are as vacuous as Western ones. Hey ho.
Russia, from time to time fairly recently, has protested the sustained mismanagement of the dollar by the United States. Yet the dollar remains the dominant reserve currency in the world and the United States retains its monetary hegemony.
How much better, though, for benefit of the United States, Europe, Russia, China, and all nations, to retire the "exorbitant privilege" (as once termed by France's then Finance Minister Valery Giscard d'Estaing) of reserve currency status of the dollar and, instead, use an entirely neutral transnational reserve asset, gold, by which all currencies would be defined and made convertible.
How to do so meticulously is set forth in the Lehrman Institute's founder and chairman Lewis E. Lehrman's definitive The True Gold Standard. The classical gold standard would pave the road to equitable prosperity.
About a year ago (and eventually noticed here), Harvey Gold, a blogger at Liberal Beef, indulged himself in a long ridicule of the gold standard and of former Congressman Ron Paul: "Panic Must Be Rampant Among Gold Worshiping Paulites."
Gold likens advocates of the gold standard to those benighted souls who believe the manned moon landing to have been a hoax.
While witty, although often sophomoric, Mr. Gold, demonstrates no comprehension of the gold standard, thereby succeeding only in making himself, rather than the gold standard, ridiculous.
For example, Mr. Gold writes:
Much of the fascination with gold is a simplistic longing for a bygone time of imaginary certainty when currencies were backed by ample gold reserves. But this romantic reminiscence is more fantasy than reality.
Michael Bordo, a distinguished professor of economics at Rutgers, who has made a study of the comparative strengths and weaknesses of the three most recent currency regimes – 1)the gold standard, 2)the system of fixed currencies established by Keynes at Bretton Woods and 3) the modern regime of floating currencies- ‑ concludes that Bretton Woods performed “by far the best on virtually all criteria.”
I’m sorry Paulites, The Gold Standard will never be revived. Moreover, those who continue to hoard gold, or simply believe that it is some sort of magical economy-savior, will be tragically deprived of their vociferously predicted Judgment Day.
Mr. Gold obviously fails to understand that the Bretton Woods system was a version of the gold standard in which international governments had a legal right to convert their dollars into gold at a fixed rate. By citing Bordo (who scored that version of the gold standard as superior to "floating currencies") Gold undermines not only his argument but his credibility.
While the Lehrman Institute, following the thinking of Prof. Jacques Rueff, believes the gold-exchange standard to have critical inherent defects, such defects clearly argue for a restoration of the classical gold standard. They do not present as an endorsement of "the modern regime of floating currencies" in which, it would appear, Mr. Gold reposes his trust.
Moreover, as Lehrman Institute founder and chairman Lewis E. Lehrman, the most prominent and one of the most respected modern proponents of the classical gold standard, has repeatedly stated, the empirical record demonstrates that gold is the "least imperfect" of all monetary standards tried to date. Gold's real proponents do not consider or present it as "some sort of magical economy-savior."
Moreover, as Lehrman assiduously points out, the gold standard has always proved, and remains, perfectly antithetical to gold hoarding. Defining the dollar as a fixed weight of, and convertible into, gold dramatically diminishes desire to hold gold (one of several favored hedges against dollar depreciation). Investors, once freed of a need to hedge, prefer to invest in economically productive assets such as stocks and bonds.
A system with a long track record of investing with integrity the national economic unit of account is to be preferred over one -- the fiduciary dollar -- with a poor track record for integrity or for generating a climate of equitable prosperity. Fluctuations in the price of gold -- such as its dramatic price decline last year -- are an artifact of its commoditization rather than its monetization. Once gold is, as currently, demonetized it becomes, and displays all the qualities of, a speculative commodity in a relatively thinly traded market. Fluctuations in the market price of gold, as a commodity, are a complete irrelevancy to the gold standard.
The classical gold standard is not an instrument of "Chicken-Little, survivalist-obsessed, Hannity-admiring brainiacs." Nor is the version of the gold standard preferred by Dr. Paul -- which also is unreflected by Mr. Gold's critiqued -- in any way flimsy.
Dr. Paul, out of a deep-rooted Jeffersonian skepticism about the benevolence of a powerful central government, embraces a model propounded by Hayek for the denationalization of currencies. While distinct from the classical gold standard adhered to, with some variations, for almost 200 years by the United States this is an elegant and entirely respectable proposition. It has nothing whatsoever to do with survivalist obsessives.
Given the level of ignorant abandon displayed by Mr. Gold, this writer feels it wise to point out, to facilitate Mr. Gold's researches on this subject, should he ever undertake any, that the Hayek herein referred to is Frederich -- who won the Nobel Prize in Economics.
Not Selma (with whose work it seems likely that Harvey Gold is considerably more familiar).
It is well known fact that every leprechaun is possessed of a pot of gold.
Courtesy of Wikipedia
From Irish Wonders by D. R. McAnally, Jr. (1888):
"Mind ye," said a Kerry peasant, "the onliest time ye can ketch the little vagabone is whin he's settin' down, an' he niver sets down axceptin' whin his brogues want mendin'. He runs about so much he wears thim out, an' whin he feels his feet on the ground, down he sets undher a hidge or behind a wall, or in the grass, an' takes thim aff an' mends thim. Thin comes you by, as quiet as a cat an' sees him there, that ye can aisily, be his red coat, an' you shlippin' up on him, catches him in yer arrums.
"'Give up yer goold,' says you.
"'Begob, I've no goold,' says he.
"'Then outs wid yer magic purse,' says you.
"But it's like pullin' a hat full av taith to get aither purse or goold av him. He's got goold be the ton, an' can tell ye where ye can put yer finger on it, but he wont, till ye make him, an' that ye must do be no aisey manes. Some cuts aff his wind be chokin' him, an' some bates him, but don't for the life o' ye take yer eyes aff him, fur if ye do, he's aff like a flash an' the same man niver sees him agin, an' that's how it was wid Michael O'Dougherty.
"He was afther lookin' for wan nigh a year, fur he wanted to get married an' hadn't anny money, so he thought the aisiest was to ketch a Luricawne. So he was lookin' an' watchin' an' the fellys makin' fun av him all the time. Wan night he was comin' back afore day from a wake he'd been at, an' on the way home he laid undher the hidge an' shlept awhile, thin riz an' walked on. So as he was walkin', he seen a Luricawne in the grass be the road a-mendin' his brogues. So he shlipped up an' got him fast enough, an' thin made him tell him where was his goold. The Luricawne tuk him to nigh the place in the break o' the hills an' was goin' fur to show him, when all at wanst Mike heard the most outprobrious scraich over the head av him that 'ud make the hairs av ye shtand up like a mad cat's tail.
"'The saints defind me,' says he, 'phat's that?' an' he looked up from the Luricawne that he was carryin' in his arrums. That minnit the little attomy wint out av his sight, fur he looked away from it an' it was gone, but he heard it laugh when it wint an' he niver got the goold but died poor, as me father knows, an' he a boy when it happened."
Perhaps the presence of sly leprechauns deep in the catacombs of 33 Liberty Street, New York City, explains the slow pace of repatriation of Germany's national gold there stored?
Happy Saint Patrick's Day to all.
BY RALPH J. BENKO: