gold standard

/ / , /

Go Texas!!

No. I really mean it: go Texas! As in please leave. Or, if not, please stop the nonsense. It just reminds the world why the US is so unreliable at times.

Paranoia runs rampant in Texas. Not content with monitoring a recent US Army training exercise in case it was really an undercover attempt at invading Texas and imposing Obamacare under martial law. And not content with passing a new gun law to allow those tough Texans to swagger about in public with guns strapped to their waists, just in case a terrorist or US army officer attacked them, we now have this:

The Texas Gold Depository

Yes. It’s true. Texas wants it gold back from New York. Those ‘Yankee Dollars’ which are about to be debased beyond recognition – well any day now – are foreign to those tough guys down there. So they want their gold back from the Feds. So when the hyperinflation hits they can presumably issue hard currency backed Texas Dollars. All you need to know is that the von Mises Institute loves the idea. That tells you where in the fringe firmament this all fits.

Read the article. It will give you so much insight into the insanity that pervades America. And it ought to caution you all: the US is never far from being deranged.

These are interesting times.

/ / , , , , , /

Silly Season Is Upon Us

Fresh from my rant about Ireland and its debt, I find myself confronted with another dumb idea. The World Bank chief, Bob Zoellick has made a speech arguing that we should consider a return to a gold standard or something like one.

No.

That’s dumb. Really, really dumb.

The US is in the midst of a steady slide in its price structure. Disinflation is slowly eliminating all semblance of inflation. We are perilously close to outright deflation and a Japanese lost decade. The only impact of a return to a gold standard like structure for the global economy would be to make this slide worse, faster, and more certain.

So that’s bad, worse, and awful.

We need the maximum wiggle room at the moment in order to get our monetary policy to have any impact. I have my doubts about QE2 not on any theoretical grounds, but on its size. Plus, I am skeptical because I think we need fiscal policy as well. Indeed from my perspective the current malaise pretty much shouts out loud that monetary policy will be ineffective without another big increase in government spending.

And before you all shrug and argue that the first stimulus didn’t seem to do the job, let me remind you – yet again – that it was weak and has been offset by state level austerity. People forget that the US is actually a group of small economies cobbled together. Budget cuts at the state level offset any burst of spending at the federal level. That’s just another reason why the luminaries who foisted the tepid stimulus got it wrong. They forgot where they live.

But back to Zoellick: his idea is ridiculous.

We should all pretend he didn’t say anything and thus save his embarrassment.