Wonders never cease as the Wall Street Journal interviews James Grant as they discuss a new American gold standard despite Wall Street’s stake in monetary chaos and Rothbard is cited approvingly.
The U.S. government was empowered to borrow seemingly unlimited funds from foreigners and repay with a currency that the U.S. government itself could print. “Dollars pile up in Asia. Merchandise piles up here,” says Mr. Grant, as America, in possession of the printing press, has tried to achieve the “ancient hope of mankind, to live without working.”
The “fiat” dollar, he adds ruefully, “is one of the world’s astounding monetary creations. That a currency of no intrinsic value is accepted as money the world over is an achievement that no monetary economist up until not so many decades ago could have imagined. It’ll be 40 years next month that the dollar has been purely faith-based. I don’t believe for a moment it’s destined to go on much longer. I think the existing monetary arrangements are so precarious, so ill-founded and so destructive of the economic activity they are supposed to support and nurture, that they will be replaced by something better.”
How exactly the transition to a new gold standard might take place is a puzzle, but Mr. Grant says he’s seen many “impossible” things come to pass in his career. A certain “social spontaneity” might take a hand. He points to GLD—the ticker symbol for an exchange-traded fund whose gold holdings now make it equivalent to the world’s 10th largest central bank. “At the margin,” he says, “people are registering dissent from the judgment of our central bankers by bidding up the price of gold.”
Earlier this year Mr. Grant put his mouth where his mouth is, testifying before Rep. Ron Paul’s House monetary affairs subcommittee on the virtues of the gold standard. No Democrats and few Republicans showed up. Asked to predict exactly when the dollar will blow up, Mr. Grant jokes, “I’d say 1978.”
But his point is an earnest one and brings us back to the modern character of Wall Street. The gold standard, he says, citing the “late, great” libertarian economist Murray Rothbard, was the “people’s system. If you didn’t like the currency, you could exchange your paper for gold and that sent a message.”
In our age of “wiki everything,” Mr. Grant finds it anomalous that we sacrifice freedom of monetary choice for the diktats of central planners acting out of the Fed’s faux-colonnaded headquarters in D.C. The fiat dollar is an “elite” system, he says, and Wall Street is its supporting “interest group”—those nimble, market-savvy, plugged-in folks know how to shuffle assets and exploit cheap funding from the Fed to leverage up their profits and soften the downside.
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That link requires a subscription, but if you simply search in Google News with the title you can get access to the article in it’s entirety. Here is a link to help out.
http://bit.ly/qbgaPY (I had posted the full link, but it was about a mile long)
Something hilarious from the comment section:
“Since this “mother of all pyramid schemes” [He's talking about fractional reserve banking, he also thinks the Fed is a private institution] is of historical tradition, nobody seems to care when it creates $trillions out of thin air. But when the fed does this, conservatives of Ludwig von Mises wing of Austrian economics get unduly excited”
I believe I’ve misinterpreted this comment, as I thought he was saying people who follow Mises advocate the fed’s creation of money. I think he is actually saying fractional-reserve banking began in private enterprise, therefore Misesians should be against free banking as well. But wouldn’t there be checks to money creation in a fully private bank operating on fractional reserves such as the fear of bank runs? (Given there’s no government there to bail them out!)
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