Drain the Swamp

Recently, U.S. Government officials have been battling financial alligators mightily. Why then, has there been so little discussion of draining the swamp? The swamp I refer to is the ridiculous monetary system that we have allowed to become sacrosanct. Take a simple test: Do you believe that the marketplace or the government is better at setting prices in order to deliver economic efficiency? Most Americans, and nearly all business people, will conclude that the marketplace does a superior job of allocating scarce resources. The economic failure of the USSR is a perfect example.

Well okay, then why as a people do we believe that the U.S. Government can effectively set interest rates? Interest rates are a price: the price of money. In classic economic theory (before the Keynesian deception), interest rates (the price of money) should vary to balance the supply of savings with the demand for investment capital. The fatal conceit that we have been sold by bankers, and our government, is that by controlling interest rates, the Federal Government can smooth out the economy and create fewer and less severe economic swings. My response to that is another question: How is that working out?

I submit that the entire economic crisis that we now face is at its core a crisis in confidence, honesty and the measure of our money. What is a dollar? No one knows. Especially when they can be printed with the stroke of a computer key by the Federal Reserve, acting on behalf of our government.

Without a stable measure of value, all economic activity becomes difficult and perilous. In extremis, the cyclical swings in the dollar’s value make all economic activity impossible. Is oil worth $145 per bbl. or $40 per bbl.? It depends upon which day you ask. It is the same barrel of oil--what happened to the dollar? How can oil producers plan what to produce? It is like flying in a plane and all of the instruments are going berserk. This is a very dangerous condition.

Yet, there is a simple solution. We must return to the original Bretton Woods monetary system and make our currency exchangeable into gold. Yes, a gold standard. I recognize that mentioning the gold standard in polite company is like saying you support David Duke. But, why? Have Americans really lost their capacity to think for themselves? Has the propaganda against gold, or honest money, really done its job?

I would only ask that in evaluating the problems we are facing, people ask themselves a few simple questions. First, is it likely that the people who got us into this mess will be able to get us out of it? My answer is no. Greenspan, Paulson, Bernanke, Geitner, Cox--they should all be fired and disgraced. Second, there are people who predicted this crisis and who understand its root cause as being loose money and too much credit creation. They include: Ron Paul, Jim Rogers, Peter Schiff, Nouriel Roubini, Antal Fekete, David Walker, James Grant, and many others. Why don’t we give them a chance to be heard?

In 1923, Weimar Germany faced problems that were very similar to those which we face: crushing debts, failing businesses and an economic downturn. Their solution was to run the printing presses. Hyperinflation was the result. I do not necessarily believe we are headed there, but I do know that once the German government re-established a gold standard to back its currency, the economic recovery was swift and sure. We should skip the hyperinflation step and establish a gold standard now. Doing so is the only sure way to return fairness to our monetary system, and to prevent the theft which bankers and the government have perpetrated on the American taxpayer.