About This Blog

Ludwig von Mises (1881-1973) was the greatest economist of my time. His greatest works can be accessed here at no charge.

Mises believed that property, freedom and peace are and should be the hallmarks of a satisfying and prosperous society. I agree. Mises proved beyond a shadow of a doubt that the prospect for general and individual prosperity is maximized, indeed, is only possible, if the principle of private property reigns supreme. What's yours is yours. What's mine is mine. When the line between yours and mine is smudged, the door to conflict opens. Without freedom (individual liberty of action) the principle of private property is neutered and the free market, which is the child of property and freedom and the mother of prosperity and satisfaction, cannot exist. Peace is the goal of a prosperous and satisfying society of free individuals, not peace which is purchased by submission to the enemies of property and freedom, but peace which results from the unyielding defense of these principles against all who challenge them.

In this blog I measure American society against the metrics of property, freedom and peace.

Friday, August 24, 2012

Does This Make A Difference?

Because of circumstances beyond my control, I anticipated being away from keyboard for a few days. However, today I found this item on the Drudge Report and I made time for a short comment: Republicans eye return to gold standard...

The link connects to an article at CNBC.com that says:
The gold standard has returned to mainstream U.S. politics for the first time in 30 years, with a “gold commission” set to become part of official Republican party policy.
If this is true and not merely a hollow sop to Ron Paul and company, is it enough to make a difference to libertarian voters who detest the Republican Party and refuse to vote for Mitt Romney?

I know party platforms are notoriously worthless and non-binding documents. On the other hand, they do reflect the opinions of party regulars who take platforms seriously. When I was a big "L" libertarian, we debated the party platform in earnest. The debates often became heated.

Therefore, the fact that such a plank (supporting a "gold commission") is included in the Republican Party platform is huge to me.

I don't subscribe to the theory that the Republican Party is corrupt and unchangeable as an institution. Institutions and organizations do not have an existence separate from the individuals that comprise them. When the hearts and minds of individual Republicans change, the Party can change. The "gold commission" plank may be the first sign of change.

Is it enough to change the vote of hard-core libertarians in November? We must wait and see.

As an added aside, it's curious the way the authors of the subject article report on the effects of a change to the gold standard:

Any commission on a return to the gold standard would have to address a host of theoretical, empirical and practical issues.

Inflation has remained under control in recent years, despite claims that expansion of the Fed’s balance sheet would lead to runaway price rises, while gold has been highly volatile. The price of the metal is up by more than 500 per cent in dollar terms over the past decade.
These comments and their implications, of course, are total nonsense and reflect complete ignorance of Austrian monetary theory. Gold is up in terms of the dollar, which is the very currency the Fed controls and has been printing as if there were no tomorrow. And to assert that inflation "has remained under control in recent years" is to rely on government measures of inflation which we all know are manipulated. Anyone who gets a paycheck and buys food, shelter, clothing and virtually any other good or service knows prices are rising with abandon.

The article also states:

A return to a fixed money supply would also remove the central bank’s ability to offset demand shocks by varying interest rates. That could mean a more volatile economy and higher average unemployment over time.
This comment is so bizarre, one barely knows where to begin. In Austrian monetary theory with regard to a gold standard, monetary authorities would not fiddle with the printing press in a vain attempt to "offset" "demand shocks." The demand for gold and the supply of gold -- both as money to hold and for commercial purposes -- would be determined by individuals trading in the market. Interest rates would also be determined by the market, not as a reaction to the demand and supply of printing-press dollars, but as a reaction to the time preference of individuals in the market, i.e., their demand for future goods as opposed to present goods.

Moreover, the net effect over time of a gold standard would be less volatility in the marketplace and a tendency toward full employment.

Be back with regular posts soon...


Jim said...

Outstanding post, my friend. I am tempted to write a very long comment, but I will try to control myself.

First, to answer your question, I do not think staunch Libertarians will change their vote because of this.

"Inflation has remained under control in recent years, despite claims that expansion of the Fed’s balance sheet would lead to runaway price rises, while gold has been highly volatile."

Hogwash! There are trillions of dollars due to QE that are sitting in excess reserves at the Fed that have never entered the real economy because of all the uncertainty and that is the only reason we haven't seen horrible inflation.

I very much would like to see the US return to backing the gollar with real wealth. Personally, I prefer a basket of commodities like gold, silver, and maybe other commodities like copper. That might keep foreign countries rrom wanting to echange their dollars for gold.

I fing this subject interesting in the extreme. I spent my entire career in mining and the last 19 of those years in gold mining at the corporate level. That is what brought me to Venezuela in the first place. In the early eighties, the markets treated gold very much as the one true store of wealth. Then, for over fifteen years, markets stopped treating gold with respect because there were several strong currencies into which they could move as world events happened. Now, once again, gold is seen as a storw of wealth because all currencies of importance are suspect.

I don't expect the Republicans to do anything serious; but it sure is a pleasant thought.

Sherman_Broder said...

Thanks for the lengthy comment. You're welcome anytime. You make sense. Did you see the article today in the Drudge Report where Boehner says he never reads the Party platform because it's worthless?

Jim said...

Boehner! I hate the senority sytem used in the House and the Senate. Boehner is a sorry excuse for a leader, in my opinion.