The Current Fed Mandate Doesn’t Allow For Prosperity

What we need is not necessarily a gold standard, but rather a “de facto” gold standard where the fed keeps the price of gold within a tight range. That way there’s plenty of liquidity for growth, and excess liquidity during recessions is “sopped up” so that it can’t cause inflation. What’s interesting is that the Fed’s policy now doesn’t allow for growth. Because even during growth surges, such as the first internet boom, they cut off the liquidity supply. They crash boom cycles, and prolong downturns as well as adding inflation on top of them.

I wrote the above as a comment to a Facebook post by Steve Forbes. Here is his FB post:

“Reading book on the gold standard by the noted economist, Mark Skousen. Skousen is also the founder of Freedom Fest, a great gathering of libertarian and conservative thinkers.”

It got me to thinking of how destructive the Fed is, and how it’s philosophy or mandate, simply will not allow for economic growth. Also, it got me to thinking again about how it’s ideas, such as adding liquidity to an economy somehow stimulates growth, or that growth itself somehow creates inflation, are the economic equivalent of Science still saying that the Sun orbits the Earth. I don’t know how they get away with it, nor how the media and politicians get away with espousing as fact, ideas that are not only not true, but the exact opposite of what they state.

The end result is suffering. Suffering for most of us, and a huge amount of unearned, unworked for, or risked for wealth, for the few of the establishment, those who hold positions or are friends with those who hold power.

The Unnatural Phenomenon of Inflation

Today on CNBC they said one could make a pile of money if one could guess when they would raise rates again. This highlights one of the biggest atrocities in the World’s economic system. Trillions of dollars are tied up in the currency futures, hedging the wild swings in the value of currency, trillions that could be invested in productive activities, if only the world had a stable unit of account. The price of commodities didn’t budge an inch from 1920-1971, 51 years of the greatest economic growth in world history. Then in 1971, at the urging of the monetarists, Nixon closed the London Gold window. Gold was $35 an ounce then, and oil was $3.50 a barrel. Inflation is not a natural occurring phenomenon, and especially not due to growth and prosperity. The only thing that causes inflation and deflation is an imbalance in the amount of liquidity in the system, a balance that is the single and only charter of the Federal Reserve. It is a failure of epic proportions.