The Fatal Blindness of Unrealistic Expectations

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None of them are monopolies, true, which is why I included other terms in my original post. Are you familiar with the concepts of oligopolies and cartels, and how they distort market practices? Specifically, oligopolies create massive disincentives and barriers to market entry, often fix prices far above the level that supply and demand would naturally indicate, and more often than not collude far more than they compete. That is, they distort the freedom of the marketplace through their choke hold on that marketplace.
I'm glad to know it's all the fault of government, and never the corporations themselves. My reading of the robber-baron and tycoon era of European and U.S. history convinces me of the problems an unregulated capitalist system can bring to a free market, not to mention the vast majority of the working classes.

For my part, I'll stick with the notion that unregulated capitalism is a major problem, as is unregulated government interference and control.

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And what enabled that spending?  The FED and its money printing!

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And what enabled that spending?  The FED and its money printing!
I think it was a team effort between the Fed and the political class.  What was the mechanism?

To keep the amount of money in check (a requirement if you are to stay on the gold standard), Fed had to raise rates when things got too bubbly.   But every time they did that, they caused a recession.  And each time a recession happens, the incumbent political party gets blamed.

So - the fix was, don't have recessions.  Make sure you pump credit into the economy in time for the election.  Do this enough times, and the money creation gets out of control.

In addition, there was all the deficit spending too, which is highly inflationary.

So was it the Fed?  Sure.  Was it the politicians?  Yes.  I believe it was a team effort.

So do we imagine that going back on the gold standard would somehow force our current electorate to vote responsibly, for the politicians to act responsibly, and for everyone to just suffer through recessions when they happen because its a necessary part of the business cycle without trying to interfere?

Gold standard isn't magic pixie dust that will solve everything when sprinkled over our monetary system.  Its like our current set of laws - only as good as the people in government that enforces it.

Lastly - we have the highest level of debt ever.  Going on a gold standard now would benefit the creditors, not the debtors.  We borrowed fiat, but now we're repaying in little gold bars.  Do you really think that's such a good idea?

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Gold peg is the best of the alternatives like Republic government is for government types.   Debt cannot be repaid.  Re-education and acceptance of recession as a natural part of free market activity needs to be learned and understood (causes and effects). Unfortunately we have to collapse to wipe slate clean with probably a big war thrown in.  Clearly the operating principles of the last 70 years are a failure.  

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Pegs of any sort never last.  They can't last, simply because nothing in life is static.
Its like legislating one interest rate, forever.

Free market should set the exchange rate between gold and money.  Gold should be an alternate currency, acting as a check on government.  That's the best of both worlds, without trying to impose a particular rate.

When things blow up, as they always will because humans are involved and cycles happen, having a fixed peg will cause all sorts of trouble - just like we're seeing in Greece right now.

There are so many examples throughout history of bad things happening with artificial pegs - and just how often they fail - its surprising that people want to just keep trying them hoping they'll work "this time around."

"Those who don't understand history…are doomed to repeat it."

 

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I agree a gold peg will be fiddled with.   That's life.   I actually would like to see Free Banking and persons taking responsibility for their money.  Bank goes down then good, lesson learned.   Better banks survive.   Three massive bubbles in last 15 years and the biggest ever says something about no peg.

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Three massive bubbles in last 15 years and the biggest ever says something about no peg.
Criminal ponzi activity would be stopped by a gold peg?  Like it was back in 1929?
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This is an interesting discussion. Isn't what will happen/is already happening  a slow simplification to the type of future described by Greer in his Retropia postings? With or without violence, it's what will happen locally that will determine the future and it will vary substantially depending on where you are and what kind of social and physical infrastructure is left. I see younger people already adopting new habits of consumption. It will be like what is described by author of latest Club Orlov posting – what happened in the Soviet Union with greater or lesser success depending on how far from urban areas people are. Even in places like Chicago there is urban farming. It won't be enough probably in certain areas. There's little interest in the national clown carnival coming from DC. People are going to figure it all out. I don't believe it's hopeless.

This emptying of the rural landscape in Russia was one of the worst outcomes of the 20th century: collectivization and rapid industrialization following the Revolution drove people out of the villages and into the cities. The old, centuries-old patterns of local democratic self-governance and self-reliance were destroyed in a single generation. Old family farms were replaced by large communal farms and centrally planned agricultural production schemes. These turned out to be an unmitigated failure, forcing the USSR to resort to importing grain from the US and Canada on credit, and paving the way to its eventual destruction at the hands of its foreign creditors. Luckily, this effect was temporary; a quarter-century after the Soviet system fell apart, Russia is once again one the worlds main agricultural producers and exporters, taking first, second or third place in the production of most agricultural commodities.
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Don't see how you deduced that from my comment.   My point is I think a peg would lessen the amplitude and frequency of the inherent bubbles.

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One of Dave's talking points is that the Gold std. is no good.  It comes up over, and over, and over again.  Often it comes up out of context, when the point was not even really about the Gold peg.  My view is that it's a subtle way that Dave can still create negativity around the idea of Gold, and positivity around our current unbacked fiat money system, without seeming too out of touch with the general worldview here.  
DaveF talking points;

1)  Gold std no good… doesn't do any good

2)  FED can't do all these manipulative things people say it can. 

3)  Manipulation can't change the trend (therefore the trend is real).  Now that I think of it, I have never seen DaveF and Martin Armstrong together… maybe they are one in the same! 

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And furthermore, JimH, notice how almost no one ever argues the "free gold" standard: a gold standard without a set price for gold (it would trade freely and so the gold standard would be a moving target). Hugo Salinas Price has argued for a similar free silver monetary standard that everyone conspiratorially seems to ignore, but I think has great merit. I do, however, agree with this part of DaveF's reasoning: people can and will corrupt ANY system given enough time and the ignorance/passivity of the masses.

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JimH-
I want to thank you for enumerating my talking points.  I didn't realize I had any!  Outside perspective is always educational.  But since they are my talking points, I'd like to take this opportunity to clarify.

  1. Gold standard isn't magic pixie dust.  It won't turn corrupt politicians into honest stewards of the economy.  Its also a peg, and pegs always fail.  Why implement a system that we know will fail?  [THC - yes to free gold; its the most sensible alternative I've heard to date]

  2. Fed can clearly spike gold at specific times and places, but no, its not an all-powerful instrumentality that can set the price of gold to whatever it wants it to be.

  3. You got that 100% right.  Minus the part about me being Martin Armstrong.  :slight_smile:

Its amazing how you try to make everything I say sound really nefarious.  Yet you, yourself, have said the gold standard isn't a good idea.  Curious, eh?

 

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Let's delve in to #3, for which I tongue-in-cheek suggested you and Martin A are one in the same. 
DaveF said,

 3) You got that 100% right.  Minus the part about me being Martin Armstrong.  :-)

Its amazing how you try to make everything I say sound really nefarious.  Yet you, yourself, have said the gold standard isn't a good idea.  Curious, eh?

What was my version of Dave's talking point 3)?  It was this;
3)  Manipulation can't change the trend (therefore the trend is real).
So, just so the readers don't think I am just making up stuff to attack Dave.. let me take you through what another commentator said recently regarding this idea as espoused by Armstrong;
http://www.jsmineset.com/2015/11/03/ocean-front-property-in-arizona/

For years Martin Armstrong has denied market manipulation had any effect on markets. He has taken this stance while touting the ability of his “cycles and charts” to forecast future prices of various markets. In his latest writing he says “Throughout history, there has NEVER been a market manipulated TO ALTER its long-term trend – PERIOD.” Martin Armstrong, Oct 30, 2015 http://www.armstrongeconomics.com/archives/38757.

If you read the article he points out Bretton Woods would never have failed nor would the Swiss peg have broken. I would point out, the Bretton Woods agreement lasted in its original form for 27 years until it failed. During the 1960′s, the London Gold pool was formed to defend the dollar peg at $35 per ounce. The “pool” is officially admitted fact, it is admitted effort at “manipulation”. Maybe Mr. Armstrong does not believe 27 years is “the long term”? He went on to say “why invest in something that won’t be allowed to rise”? In the case of Bretton Woods it is obvious, the gold price was being artificially suppressed and would one day break free …which it did from $35 to over $800 in less than nine years! Wouldn’t this qualify as a reason to invest in something that would “never be allowed to go up”? Were they not trying to price gold against Mother Nature’s upward pull? I would ask, other than “severity” (the amount of zeros), is there anything different today than back in the late 1960′s?

It is already well documented markets far and wide are manipulated against the true trend of Mother Nature. The stock market in Japan for example has been supported by the Bank of Japan buying up over 50% of equity ETF’s. To this point it has worked, would Martin Armstrong counsel the purchase of Japanese equities because this “really isn’t” an instance of manipulation? Would he counsel not selling something which will never be allowed to go down? Actually, why is there such a thing as a “plunge protection team” in the U.S. in the first place? Or does this not exist either?

Another Armstrong fallacy and I quote “The amount of capital that will trade against anything that moves against its long-term trend is endless. If you really believe all this nonsense, then you better trade a different market. Why buy something that is manipulated and can never rally? It makes no sense.” Do you see the flaw here? He speaks about “endless capital”, what entity(s) theoretically have endless capital? Why the central banks of course …and who’s capital is the “most endless”? Yes, THE FED! Just one last question, “who” has the motive to keep the gold price thermometer from rising? Could it be the central bank who issues the reserve currency and who’s main competitor has ALWAYS been gold!? Yes, again THE FEDERAL RESERVE!

It is not rocket science and certainly not even speculation or conspiracy “theory” anymore, it is well documented that markets are in fact manipulated and done so in the directions central banks and sovereign treasuries wish. This is now FACT by admission of various central bankers, various sovereign treasury officials …and various admissions of guilt from financial firms who were doing the dirty work!

So Mr. Armstrong, please do not insult the intelligence of those of us who can still add 2+2 together. Tell “these people” https://www.youtube.com/watch?v=oKosd0xJadE there is no manipulation, they will believe this …or anything else for that matter. To run around and talk about the complete collapse of the Western financial world in one breath and scare people into selling their only crash insurance for protection in the next breath is dastardly indeed! I believe your opining the collapse of the Western fiat system is 100% correct, this however cannot happen without capital flooding and finding it’s way into a safe monetary haven. What “is” the safe haven?

A few years back while opining of a market/financial collapse from behind bars, Mr. Armstrong was adamant that gold would move to $5,000+ per ounce or higher as a result. He called them cause and effect at the time and gold would be the safe haven from a dysfunctional system, what has changed? This is a very important question in my opinion… what has changed and why did this change immediately take place after they sprung the prison doors open? Did sunlight give him a change of “heart” (and logic) or was the federal “company mantra” part of the key to his release? According to Martin Armstrong (and Ben Bernanke), gold is not money! As George Straight has sung many times before …I got some oceanfront property in Arizona …and if you buy that I’ll throw the Golden Gate in free! Enough said.

So, my distrust of Dave's worldview on Gold manipulation is exactly parallel to Bill Holter's distrust of Martin Armstrong's view.  Was Armstrong, "bought off" by the FED?  Holter is willing to ask the question.