I’ve just been listening to an interview, conducted by recently acquired Samizdatista Patrick Crozier. His inteviewee is John Butler, and they talk about the contents of Butler’s new book, The Golden Revolution. Access this interview at the Cobden Centre blog. It lasts just over forty five minutes, but to me it felt less.
I have not read Butler’s book, but judging by this interview, my immediate impression is that Butler’s strength as an economic commentator is his combination of an unswervingly market based understanding of economic reality with a far more detailed grasp of the recent history of the twentieth century’s big economic events and big economic policy decisions, more detailed than is usual among your typical unswerving market based understander of economic reality. Butler understands why the great policy mistakes of the twentieth century were indeed mistakes. But he also knows the detail of the circumstances that made these mistakes so attractive to the people who made them.
I won’t try to retell the story Butler tells. Suffice it to say that, like many of us here, he attaches great importance to the decision, by President Nixon, to abandon the gold convertibility of the dollar.
As for the resulting mess and what to do about it, Butler considers that a return by the world to gold as the basis of its currency arrangements is not only desirable, but possible and even likely, and he reflects on the various ways in which this change back to monetary sanity might soon be accomplished and by whom.
A strongly recommended listen, to anyone who has three quarters of an hour to spare and a desire to understand the state of the world somewhat better.
Brian, many thanks for the plug. 45mins felt short to me, too, but on the other hand I am terrified of boring the pants off people.
I can’t see a return to the gold standard, I really can’t. There isn’t enough gold in the world to provide a viable currency, and if it is a bimetalic standard, then fluctuations between the two will rip the currencies apart.
A shortage of gold, equaling a shortage of money, would be an economic disaster.
How is this problem to be avoided?
I don’t think anyone is suggesting that day-to-day transactions be made in gold.
“I don’t think anyone is suggesting that day-to-day transactions be made in gold.”
Forgive me for not watching the video first, but does that mean that there would be fractional reserve currencies backed by gold?
Unrelated to the above question: the problem I see with a gold standard is that governments have gone off it before and could do so again. If banks offered the option of holding bank accounts denominated in gold, that might be safer. Or do they do so already?
“There isn’t enough gold in the world to provide a viable currency.”
“Does that mean that there would be fractional reserve currencies backed by gold?”
The quantity of extant gold is totally irrelevant. Prices of goods would simply be expressed in terms of ounces (or fractions of an ounce) of gold. They would simply adjust if, as is likely, the economy were to grow faster than the rate of new gold extraction (which is what Detlev Schlichter referrs to as “secular deflation”). It’s natural, gradual, and not at all harmful. It’s what the world did for centuries when gold was the monetary unit of all countries (regardless of who minted the coins).
As to “fractional reserve currencies” (by which I presume is meant fractional reserve lending), its use far predates the widespread issuance of fiat money. Goldsmiths (the precusors to bankers) began the practice, and bankers (long before there were central banks) have continued it. Whether FRB is a good or bad thing is another discussion entirely, but we could still have it if we were to return to a gold standard.
Far better than gold: Bitcoins
Create an account at Mt Gox, for example, and convert your fiat monopoly money into a tangible asset today!
The euro clusterfuck is driving up the value of Bitcoins daily. Just look at the charts!
Beat me to it Laird. “There is not enough gold” is just wrong.
As for using silver as money – fine if buyers and sellers prefer that. But, of course, the exchange rate between gold adn sliver must NOT be rigged.
Britcoins….
I am not qualified to comment upon the idea