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Gold standard not the answer
on December 29, 2011
The Creature from Jekyll Island presents the idea that the Fed is a product of the banking cartel working in cahoots with internationalist politicians. The author suggests that we should return to the gold standard.
Well, we've been off the gold standard since the 1930s, and the results are mixed, although I'd say the post-WWII era went pretty well in retrospect. However, I think the recent mortgage melt down was triggered by the Fed keeping interest rates too low in the years 2001-2004, which created a housing bubble.
But even the gold standard is not perfect, as evidenced by Winston Churchill's actions as Chancellor of the Exchequer in the 1920's, when England went back on the gold standard and Churchill overpriced the pound relative to gold, causing English goods to become overpriced. This stifled English exports and contributed to the Great Depression ([...]). Griffin discusses Churchill in the book, but he left out this detail, probably because it goes against his main thesis.
The author presents many interesting facts (e.g. John Maynard Keynes, the founder the the stimulus school of economic thought, was a Fabian socialist, and the Fabian socialists emblem was a wolf in sheep's' clothing), and I love the way the book puts summaries at the back of each chapter. You can read the summaries and then refer to the chapter for details. At 600 pages, this is a merciful way to organize the material. Even at that, I only made it halfway through.
In summary, I'm not a cheerleader for the Fed, crony capitalism, nor massive bailouts, and neither is the author. But going back to the gold standard is not the answer either. My favorite economist, Milton Friedman, did not advocate for the gold standard. But in 1992 when asked about pressing economic issues of the day Friedman replied, "One unsolved economic problem of the day is how to get rid of the Federal Reserve" ([...]).
Again, in the words of Milton Friedman, "Any system which gives so much power and so much discretion to a few men, [so] that mistakes -- excusable or not -- can have such far reaching effects, is a bad system." ([...])
The problem is that the Fed is a necessary evil, because we don't have anything better to replace it with. But recent events have made it clear that the Fed needs to have some controls put on its massive power if we are to prevent future bubbles and meltdowns.
I felt like this book brings out some interesting facts, even though I disagree with its conclusions, and it had a touch of nut-case extremism to it. For example, the author devotes a chapter to the Rothschild banking family in Europe. What does this have to do with the Fed? The author claims that he includes it to make the case that bankers and money have a history of influencing politics. Duh. I think the real goal of this chapter was to connect the alleged Jewish banking conspiracy to the Federal Reserve. But the majority of Fed chairpeople have been non-Jews, as are Henry Paulson and Tim Geitner, and all of our Presidents. In the interest of full disclosure, I am a recovering CPA, MBA, and CFP; the only banker I know personally is a Catholic; and I'm half Jewish -- but you'll have to guess which half ;)