[LINK] We live in interesting times.... Or - is the goldstandard really extinct.

Kim Holburn kim at holburn.net
Mon Oct 20 21:39:53 EST 2008


We still had recessions, depressions and market panics before currency  
left the gold standard.

I thought this was an interesting take on the current "crisis":

http://chronicle.com/temp/reprint.php?id=477k3d8mh2wmtpc4b6h07p4hy9z83x18
http://tinyurl.com/3el9oz

Quote:

>> The Real Great Depression
>>
>> The depression of 1929 is the wrong model for the current economic  
>> crisis
>> Article tools
>>
>> By SCOTT REYNOLDS NELSON
>>
>> As a historian who works on the 19th century, I have been reading  
>> my newspaper with a considerable sense of dread. While many  
>> commentators on the recent mortgage and banking crisis have drawn  
>> parallels to the Great Depression of 1929, that comparison is not  
>> particularly apt. Two years ago, I began research on the Panic of  
>> 1873, an event of some interest to my colleagues in American  
>> business and labor history but probably unknown to everyone else.  
>> But as I turn the crank on the microfilm reader, I have been  
>> hearing weird echoes of recent events.



On 2008/Oct/20, at 7:13 AM, Tom Koltai wrote:

> Jim et al,
>
> Regulation is fine thing, if we want to build a more top-heavy govt
> infrustructure. My own slightly cynical experience is that  
> Regulation is
> written by lawyers with deliberate loopholes so that other lawyers can
> find the loopholes.
>
> If we were operating on the gold standard, you could gamble with other
> peoples money, but it would be an iou (call warrant) drawn against an
> actual gold deposit certificate.
> And unlike derivatives which allow for the accumulation (read
> securitisation) of the forward interest (eg [Ex]Lehman Brothers Modus
> Operandi) there is only one gold certificate, so if you lose your
> gamble, eventually the winner will call on the iou.
>
> In 1976, when the US departed from the Gold Standard, derivatives were
> born by the simple method of you going to your bank and applying for a
> mortgage.
> Until 1976, the bank could only issue mortgages against the gold it  
> had
> in reserve or failing that - the gold the reserve bank had in reserve.
>
> A consequence of the departure from the gold standard is that the  
> price
> of gold is trading approxiuately 1600(USD) per ounce under its real
> value.
>
> These days, each and every mortgage instrument (avge mortgage  
> 2004-2007
> = 178,000) equals .00083 % inflation on the cpi. In other words, every
> 50,000 mortgages = 4% CPI.
> Therefore, whilst I am not against mortgages per se, I am against the
> concept of securitising the (future value)or basically the cause of  
> the
> cpi index rise and calling it capital to justify higher lending.
>
> The sub-prime mortgage crisis was caused by calculating the forward
> property values too far into the future. Basically a Derivative on top
> of a derivative.
> Realth wealth can only be made by manufacture/construction. Any system
> that allows for the markets to calculate security based on a probable
> future value is bound to lose.
> Australia is a resource rich country, We can afford to reinvest in the
> gold standard to protect the Australian Dollar.
> It wouldn't be that hard to do - e.g. 30% of all gold mined in the
> country to be lodged with the reserve bank in lieu of taxes. The
> Australian dollar would be balanced within two years - never again to
> crash because of derivatives.
>
> Just for the record, I am also against the "trickledown or trickle up
> effect ala Clarke and Dawe ;-)
>
> Tom
>
>
>
> -----Original Message-----
> From: link-bounces at mailman1.anu.edu.au
> [mailto:link-bounces at mailman1.anu.edu.au] On Behalf Of Birch Jim
> Sent: Monday, 20 October 2008 2:03 PM
> To: link at anu.edu.au
> Subject: Re: [LINK] We live in interesting times.... Or - is the
> goldstandard really extinct.
>
>
> Tom
>
> I don't see how reverting to the gold standard would prevent greedy
> people from gambling with other people's money.
>
> Regulation might slow them down.
>
> Jim
>
>
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--
Kim Holburn
IT Network & Security Consultant
Ph: +39 06 855 4294  M: +39 3494957443
mailto:kim at holburn.net  aim://kimholburn
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