Gary North on current economic affairs and investment marketsGary North -- Specific Answers
HomeContact MeTell a FriendText SizeSearchMember Area
Gain immediate access to all of our current articles, the question-and-answer forums, dozens of free books, and article archives. Click here for details on how to join.

About This Site
Academic Gaps
Articles
Capitalism and the Bible
Clichés of Protectionism
College Finances
Debt Management
Ellen Brown: Critique
Federal Reserve Charts
Gary North's Free Books
Get Published Here!
Gold Price & My Report
Keynes Project
Price Index (U.S.A.)
Questions for Jim Wallis
Remnant Review
Social Security/Medicare
Sustained Revival
Tea Party Economist
U.S. Debt Clock
Yield Curve
Your YouTube Channel
Gary North's Miscellany
Advertising
Blogging
Budgeting for Wealth
Business Start-Up
Career Advancement
Digital Tools
Education That Works
Evernote: Free Notes
Federal Reserve Policy
Fireproof Your Job
Goal-Setting for Success
Great Default
Inheritance Strategies
Insurance
International Investing
Investment Basics
Job and Calling
Keynesian Economics
Leadership
Marketing Case Studies
Obamanomics
Precious Metals
Real Estate
Retirement
Safe Places
State of the Economy
Stocks and Bonds
Study Habits
Video Channel Profits
Members' Free Manuals
Our Products
Contact Me
Help
Tell a Friend
Text Size
Your Account
My 100% Guarantee
Privacy Policy
Terms of Use


This site powered by MemberGate

Economic Error #20: Gold's Price Fluctuates Wildly. So, It cannot Serve as a Base for Money.

Gary North
Printer-Friendly Format

Ellen Brown opposes the gold standard. So do all Keynesians. So do all Chicago school economists. So does virtually every central banker on earth. They all oppose it for the same reason: it restrains governments in the expansion of money. Ellen Brown writes the following:

The Bretton Woods gold standard worked to prevent devaluations and huge trade deficits like the United States now has with China, but gold ultimately failed as a currency peg. The U.S. government the global banker had insufficient gold reserves for clearing international trade balances, and it eventually ran out of gold. Gold alone has also proved to be an unstable measure of value, since its own value fluctuates wildly. Some new system is needed that returns the virtues of the gold standard while overcoming its limitations. [Web of Debt, p. 438]

First, the Bretton Woods gold standard was not a gold coin standard. It was a dollar standard. The central banks of the world agreed to hold United States Treasury debt instead of gold. They got paid interest by the government on the U.S. debt that they held. Gold pays no interest.

Second, the international banking community had not used gold to settle accounts since August 1914, with the outbreak of World War I. The world was on a paper money standard, supported only by two currencies: the British pound and the United States dollar. After World War II, it became obvious that only the United States government was large enough to guarantee the interest required to persuade the whole world to buy Treasury debt and hold it instead of gold. The whole world had abandoned gold anyway, so it figured it was safe to hold Treasury debt.

The reason why the Bretton Woods agreement broke down is simple: the United States kept creating digital money, year after year. So, on August 15, 1971, President Nixon reneged on the promise, closed the gold window, and destroyed the Bretton Woods agreement. The agreement had rested on the assumption: the United States government is trustworthy. That was a foolish assumption, and so the Bretton Woods agreement collapsed in 1971.

Third, the reason why a nation adopts a gold coin standard is because the voters understand that they are at risk if the national government has the right to create paper money. A gold coin standard is a system that restricts the issuing of money to IOUs to gold, which means that paper money or digital money is legally exchangeable for specific quantities and fineness of gold coins. If the government inflates, people can take go to a bank and exchange the money in their bank accounts for a predictable quantity and fineness of gold coins. When the government begins to run out of gold, is forced to restrict the expansion of money. So, the purpose of the gold standard is to make certain that gold reserves are sufficient to meet the public's demand for gold. It puts government in a golden straitjacket.

Fourth, it is this aspect of the gold standard that Ellen Brown hates. She wants the government to have no restrictions, other than those imposed by the government, to expand the money supply in order to build the modern welfare state. She sees gold, correctly, as the most important single restraining factor on government. The government cannot create a modern welfare state if it is restricted by a gold coin standard. Ellen Brown therefore wants to get rid of the gold coin standard.

Gold's price fluctuates wildly because the value of paper money fluctuates wildly. If you look at how much a suit of clothes or automobile costs in ounces of gold today, and you compare that with what an inferior automobile but possibly a superior suit would have cost 80 years ago, you will find that the gold price of those items has been remarkably constant. The wholesale price level of Europe in 1815 was approximately the same as it was in August 1914. This stability lasted for a century.

Ellen Brown does not like the gold coin standard because it restrains spending of government. This is why conservatives have always liked the gold coin standard. Conclusion: Ellen Brown is not a conservative.

For a detailed critique of Ellen Brown's economics, go here:

http://www.garynorth.com/public/department141.cfm


Printer-Friendly Format
 Tip of the Week
Sign up for my free
Tip of the Week
Verification Characters:    Type     H  W  J  7  G     here   


Tip of the week archives
On what this icon
means, and how it
can help you,
click here
 Q & A Forums
General Q&A Forum
Advertising and Resumés
Affiliates
American History Topics
Backyard Food Gardening
Banking and Politics
Blog Sites and Web Sites
Books Worth Reading
Bumper Sticker Slogans
Business Forum
Buying Smart
Christian Service Forum
College -- The Cheap Way
Copywriting
Education Alternatives
Food Storage
For Women Only
Fukushima
GNC Benefits
GNC Testimonials
Gold and Silver
Great Default Forum
Health and Diet
Health Insurance
Homeschooling
Investments Forum
Iran War
Job, Calling, and Career
Leadership Development
Legacy Building
Less Dependent Living
Local Political Action
Non-Retirement Forum
One Good Idea
Police State
Privacy
Public Speaking
Real Estate Forum
Remnant Review Forum
Safe Places Forum
Taxation Policy
Typographical Errors
Video Production Basics

 Archives
Reality Check
 Discussion Forum
Search Discussion


Recent Forum Posts
• Structured Settlement Annuity Investing
• How can governments default ?
• Buying Oil
• Roth IRA's & the big Default
• Treasury Bond Prices Have Soared
• Lending Club... What gives?
• Kasasa Accounts... What gives?
• What to do with the savings
• Survival Investment Portfolio Before Recession
• Planning Ahead for the Next Recession
• Buy term and invest the difference
• In Search of Recession … Real Estate, Precious Met
• Mobile home parks: any experience?
• Am I missing something?
• 401k match guidelines
• Real Estate Investing
• Sell McMansion?
• Screening prospective tenants
• Single Family vs. Duplexs-small apartment complex
• Farm Property: Alzheimers Parent:Sell or Keep
• Problems With OCWEN
• Why will someone rent instead of buy?
• "Property Manager" duties and payment?
• Buying my grandfather's property
• Buying commercial RE in India for biz + cashflow
• Potential rental property backing to a mini mall
• Buying a former grow-op house
• Using No nail picture hangers
• The Hidden Money Buying Up NYC real estate
• Real Estate - Planning Ahead for the Next Recessio
• Impact Fees for New Florida Residents
• New Hampshire and Florida
• Ecuador and PR
• Survivor library
• Missle Silo converted to Condos
• Does the South suck?
• Moving TO the US?
• No City for Old People
• Will you die getting to your bug out location?
• teaching English overseas - some questions
• The state with the most Liberty
• Switzerland and Firearms
• On "Zip Code Searching On The Web"
• Crash Course in becoming an Expat
• Anyone tried Puerto Rico?
• Forced retirement - lump sum - legal work
• Moving Retirement Funds
• Sudden Wealth Advice
• Sudden Wealth Advice
• Question on Traditional Pensions
• advice on how do I interact with my older parents?
• Do You Sincerely Want to Be Rich? Why?
• Req. For No 401(k)/Other Pensions via Relocatio
• Cashing out 401K to pay student debt?
• SS @ 62 and still working
• Desolation or Prosperity?
• I take it Retirement Armageddon is not available
• Post Retirement Career
• Social Security - when to start collecting
• 401K Risk
• Stephen Hawking proves existence of God probable.
• When I Can Invest in Real Estate
• Youcaring.com
• Todays cartel article
• Raising Rates
• Best practices for Evernote organization
• Check out Michael Hyatt's new USP & website
• Sanctuary Cities movement becomes Welcoming Cities
• Mexican immigrant to Goldman Sachs star
• Obamanet arrives
• ISIL or ISIS
• Earning More Income in New Ways
• Income Tax Fraud
• The disappeared...
• Community college going more and more online
• Video Mailer
• anyone heard of a restaurant affiliate program?
• Miniature Jersey Cows - $5000 a piece!
• Rent list of Construction businesses
• Consultant Time?
• Selling Business
• Daycare Based HomeSchooling
• Food Truck start up
• Italy's richest man has died
• Selling Domains
• How much time to dedicate to reading per week?
• Customer "No Service"
• Price to Build a Web Page?
• Best book on Economics
• Family Fortunes...