Putin's gonna peg the Ruble to gold, and knock off the dollar! Eleventy!! ZOMG!!!
Last year's Russian budget was $233,000,000,000. (Way more than that - 16 TRILLION - in Rubles, which are worth about a penny, and less now that two months ago.) Russia's gold on hand, per some commenter, which we'll stipulate for humor purposes, is 2200 tons. At current rates of gold/dollar exchange, that means that the Russians printed 33% of the government spending out of Putin's ass-gas from borscht and caviar. And that's only LAST year. That means everything they printed every year prior and every year from now on is ass-gas too. Times, what...32 years, just since the birth of the current Russian Federation?!? And forward in perpetuity??
(Bonus: Anyone remember why the Soviet Union collapsed? Anyone? Beuller?? Ferris Beuller...???)
And the Russian government budget is only 20% of their national GDP.
IOW, in order to meaningfully peg the ruble to gold, they'd need 7-8 times more gold than they have, which would be 50% of the total known gold reserves of the entire world, which they ain't got, ain't gonna get, and never will have.
And the Russian economy is only about 7% the size of the US economy. We have double their gold reserves, and we couldn't do what they're announcing in a thousand years, short of worldwide ironclad agreements, and massive deflation, which would also halt all government money printing virtually forever. NTTAWWT.
This is like Texas trying to take over the world by printing Confederate money, and requiring it (or gold) to buy Stetsons, Pace Picante Sauce, and Igloo Coolers.
Sh'yeah, when monkeys fly outta my butt.
And in any event, neither Putin, nor Russia, nor anyone sane, is ever going to swap rubles for gold. That ship sailed for good in 1971. Which means this is all Russian bullshit, and the ruble is, and will continue to be, finely-engraved toilet paper, just like all fiat currencies. (Including the dollar, as we've told you, and told you, and told you.)
It would take a simultaneous agreement for 5300% worldwide deflation, from everyone, and a permanent exchange rate, to back the world by stable currencies, using all gold reserves in existence, divided by the current planetary GDP.
Your $10K in savings would be worth about $189.
Your $50K annual salary would shrink to about $18/wk.
That's 46¢/hr. $3.68 for an 8-hour day.
Minimum wage (from $15/hr) would be 28¢/hr. $2.08 for 8 hours.
And that's pre-tax income. Uncle Gimme and his state and local minions would still have their hands out for 10-50% of what you make.
Gasoline (from $6/gal) would be selling for 11.9¢/gal.
8¢/gal in the free states.
And so on.
Get 200 nations to sign on to that, and we can back everything with gold, forever.
Until then, as neither Russia nor any sane nation will ever again trade their fiatbux for physical specie (gold or silver), this is all smoke and mirrors. Fairytales. Vaporware.
To be crudely blunt, but precise, the only way Putin's pegging the ruble with gold is like this:
There may come a point where the dollar isn't the international reserve currency*.
But this news ain't it. It would take a helluva lot more than just Russia to do that.
Stop swallowing the doom porn. Pay your bills, and go deep on the preps you can.
That is all.
*UPDATE: Want to see how it's far more likely to come about?
Capitalist Eric: RTWT h/t WRSA
[Pro Tip: You've heard about this from Peter at BRM. You've heard it from CA at WRSA. You've heard it from me. You've heard it from Phil at Bustednuckles. And from John Wilder. You've probably heard it from Deninger and Tyler Durden a time or twelve too. Now Eric is piling on, in splendiferous detail. Bracken. Ferfal. Selco. Michael Yon. ,Rawles, since ever. And on and on. Maybe, just maybe, at some point, the penny will drop for you, if it hasn't already. And you'll start to think in terms of a world where those green pieces of paper in your wallet and bank account are worthless. And you'll decide to prepare for "Then what?", hopefully while there's still some brief period of time to do so.
Nota bene: NOBODY is telling you to run around like a headless chicken, or a person whose head is on fire. They're telling you that the financial system you take for granted, and have your whole life, is a house of cards, and a windy day is coming. Make prudent preparations for that. If you can figure this out for yourself without being a spaz now, you'll never have to be one later. I'm guessing the Fukushima Tsunami was a lot more fun to watch from over here, than it was on the coast of Japan in real time. I'd venture a guess that financial collapse will be a lot like that too, and high ground for that looks a lot like arable land with available potable water, a garden and some barnyard animals, friends and neighbors to ride the river with, clear fields of fire, and being pretty self-sufficient for most to all normal needs. Just like for 37 other possible problems.
Worst case? You're early, or it never happens, and you're still ready for a buttload of other grief from any number of scenarios.
Don't care? No problem. Suture self.]
I agree with the last sentence of your rant.ReplyDelete
As for the rest, Time will tell
I'm prepared to see my retirement check, 401K and other US dollar denominated funds drop by 50% in the next two years.
And for none of the rant content you've posted. It's irrelevant that the USA has SO MUCH MORE MONEY than Russia IF the Rest of the World decides that all those dollars are worthless.
I'd like to be wrong and keep a decent value for all those pretty bits of green paper with dead presidents buying everything my little heart desires. After all I worked many decades and lived well below my means to have a lot of them.
But I built up my Camp Snoopy because our government over many decades spent like drunken sailors and in the past decade MISUSED the Dollar as a weapon against anybody that failed to kiss our Pinky Ring.
Karma is a cast iron bitch, and we are about due.
"Minimum wage would be 28¢/hr.
Gasoline would be selling for 11.9¢/gal."
So you mean a person making minimum wage would be better off.
Currently min wage is $7.25. The US national average for gas is $4.25.
A person making min wage today working for one hour cannot afford to buy two gallons of gas, 1.7 gallons to be precise.
Under your numbers the same person would be able to buy 2.35 gallons of gas.
I wasn't ranting. I was doing math, not meth. Keep up.
I said nothing whatsoever about whether or how much more money the US has.
I said out economy is 15 times the size of Russia. They couldn't take that down if they tried. they just got their asses kicked militarily by a country 1/3rd their size and 1/10th their strength, and now anybody thinks they're going to take on an economy 15 times their size? Srsly? This is Godzilla vs. Bambi, and Bambi's out of matches.
Your 401K and retirement check have already shrunk by 20% since last year, and another 30% now. So your already at two years out, in March, and it's only going to get worse.
If the rest of the world decides their dollars are worthless, they cut their own throat: they're holding them. Wipe them out to zero, and the big loser is China, far more than us.
people here still have to take those dollars, and we simply start manufacturing things on this side of the pond again. the people it kills? Everybody trying to sell us their shit. China. Japan, Korea, Singapore. Etc. You don't want to sell us your shit for dollars? Okay, pound it up your own ass. WalMart goes under, and so does China. Zimbabwe doesn't get any richer, neither does Mexico. In fact, with dollars worthless, mexicans go home, because there's no point coming here, because those suddenly-worthless dollars don't buy anything in peso-land. Boo frickin hoo, Julio. DLTDHYITAOYWO.
And Toyota is fucked, and Toshiba, and Samsung, etc.
It hurts us a little, for a short while, but we still have the economy to stop hemorrhaging wealth to the Turd World, and we'll have to hire American, and buy American, and pretty soon, we can jack our dollar's value, but they can't work any cheaper.
We're absolutely due for the karmic bitch-slap for printing fiatbux like drunken sailors, but Russia will have no influence on that day, though it most certainly will come, as it must. The big losers, exactly as in the Soviet Union, will be the apparatchiks who voted for a living, rather than working for one.
A guy who can make shoes, raise food, weld auto body frames, or fix a toilet, will always have a decent living, but it will be made from someone willing to trade or pay for that, not from someone printing imaginary money out of thin air.
That's a feature, not a bug.
It is what it is. Stable currencies benefit everyone except the people inflating them.
The dotGov has already stolen 98.8¢ out of every dollar in your pocket right now since 1934, and then they want to stick their hands in your pocket for another 1/3rd of what's left to you.
With a solid currency, they couldn't do that, ever.
But I was using $15/hr min wage (which is what Mickey Ds is paying hereabouts) and $6/gallon, which it is here, not the national average.
Nothing is cheaper, but everything is 5300% less, which allows you to use gold for a standard of currency, and sets prices back to about 200 years ago (for things that existed back then).
Decoupled, not so much.
Stable currency is how citizens make money: A penny saved is a penny earned, and always will be.
Inflation (created by governments printing fiatbux out of their nether parts) is how governments make money. Literally.
We will be a poorer country post Biden, whether it is !970s Carter or Zimbabwe/Weimar I do not know.ReplyDelete
I have prepped for my immediate family. Y'all on your own.
US says it has around 150 million ounces of gold reserves. That's only around 5,000 tons. Doesn't your math also prove the US $ is not a reserve currency?ReplyDelete
BTW, since Russia pegged the ruble to gold at around US$ 1500 per ounce, people can get a bargain on gold, but only if they pay in rubles. Which they would have to get from selling goods to Russia. Basically, he's running a 25% off fire sale.
And Germany is getting around the sanctions is by paying Gazprom in Euros and letting them do the money laundering, which they are not going to do for free. Depending on how big a cut Gazprom wants, Germany might find itself preferring to pay in gold.
It's a safe bet Biden didn't run this past the Federal Reserve before flapping his gums about what he and Corn Pop are going to do to Putin.
The dollar is a reserve currency because countries choose to use it as one.
While Russia may peg the ruble to around US$1500/oz., the world market sets the price of gold, not Putin.
And as I said, since he's not exchanging rubles for gold, "pegging" it is simply bullshitting. If he isn't trading them 1:1, he's not pegging it to anything, no matter what he claims. If you can find someone to sell you gold for R125K, instead of R160,083 (which is the $1921/oz actual price right this minute) by all means, take the deal.
Since Putin's not selling gold at any price, there's no such fire sale.
As to Germany "getting past the sanctions", through whose territory(ies) does the gas line run?
It'd be a shame if there was an accident, wouldn't it?
I'm pretty sure Biden is watching cartoons, and eating pudding, around 14 hours/day, and sleeping for 8 or 9.
Gold backing a currency at current, massively supressed rates do not work out mathematically. However, if you allow the price of gold to float, and only partially back the currency with gold, it can work fine. See James Rickard's books and interviews about how the US dollar could be gold backed. In our case the price of gold would have to rise to $10k or $20k dollars per oz even under partial backing.ReplyDelete
He also explained how Great Britain failed when they returned to the gold standard after WWI, but at the same rate. It collapsed the British economy in 1926 and put them into depression four years before the rest of the world. He states this would have worked if they had only revalued the pound vs gold at a different, post inflated rate.
Ultimately, gold backing prevents massive dilution of the currency and prevents govt printing pressed going wild. Without the gold to back expansion they cannot print like they have done. It's simply a brake on govt misbehavior.
Sociopaths jawboning economics, imagine my surprise.ReplyDelete
Yes there is no actual exchange peg to gold. It looks to me like Putin is offering a discount if you buy oil in gold rather than rubles. That is how I interpreted that report.
Remember Gadaffi was dethtroned and murdered for trying to issue his "Gold Dinar" currency.
It would only "work" for some values of that word. If you could survive 500%-1000% INflation on your current salary, you'd do fine. I suspect gas at $30-60/gallon and ground beef at $30-60/# might give folks pause. Right after they gathered their torches, pitchforks, and a stout rope. Nice try though.
The caveats about the purpose of sound money are correct.
And the only way to make this "work" are to start narrowing the money supply, and pinching off government drastically. When the price of gold drops to about $20/oz., and government is about the size it was in 1870, you're homing in on the target.
"While Russia may peg the ruble to around US$1500/oz., the world market sets the price of gold, not Putin. And as I said, since he's not exchanging rubles for gold, "pegging" it is simply bullshitting."ReplyDelete
Sort of. What he's saying is, "If you want $1500 worth of oil/gas/refined petroleum, you will pay me an ounce of gold or what I say a ruble is worth. Take it or leave it." And it's not like anyone but Russia has a ruble mine. In order to get rubles, you have to break sanctions and sell things to Russians. What he's done is tell those who will defy Poopypants, "Have I got a deal for you."
There is no stopping the worldwide financial, ecconomic, and tech meltdown. No country escapes, some may be a bit better but at the level we're facing it's game over for at least three quarters of the worlds population everywhere. There will be no massive make it here recovery as the tools, skills, and knowledge are too rare and scattered. Small-town, maybe, unlikely but maybe, if social cohesion holds and a sufficient resource base (human AND material) can be preserved from destruction/looting. Gonna be interesting.ReplyDelete
$1500 worth of oil for $1921 worth of gold is only a bargain for Putin.
And he holds no monopoly on oil and gas.
When McDonald's will only take platinum for Big Macs, people without platinum will simply buy burgers at Burger King and Carl's Jr.
McDonald's goes out of business the next week.
For the geniuses thinking countries simply drop the dollar overnight: they'd cut their own throats, since they're holding dollars.
Dollars are worthless?
Welcome to the poorhouse.
In late 1941 we had eight aircraft carriers.
By mid-1945 we had ninety.
We went from 394 ships in September 1939, to 6,084 by VJ Day.
And we feed the world.
Things will get bad here when (not if) the dollar's problems come home to roost, but all life on the planet isn't going to end.
Things will be far worse everywhere else.
We have the people, tech, and resources to do pretty much anything we want.
Most other countries? Not so much.
What we'll lose, in haste, is much of the PC bullshit that's hamstrung this country for a generation and more, and life is going to get hard and short for people who exist by sucking on Uncle's teat instead of producing something of value. The 80/20 Rule applies, and for those on the short end of the stick, life will be downright cruel, mean, and nasty, and death will be no stranger.
Ita mundis vadit
@Aesop With respect do a cold hard look at actual manufacturing and "repair/maintenence" as currently practiced. 5000 plus mile supply chains, engineered repair/mod resistance, almost no business holds a domestic reserve supply of consumables or raw materials due to tax laws (thank just in time delivery). As for 1941 we had the largest most advanced steel, mining, energy production industrial Juggernaut ready to make some serious cash... Everything now gets slaved by chip, press assembled, injection molded in as much a supply chain dependent manner as possible to prevent any chance of divorce from globo-corp, toss it buy a new one. Find and check out the backorder times for almost all heavy industrial equipment, parts and consumables made here. The actual skilled workers who can keep things going or work out or around a problem... As for feeding the world you need transport,fertilizer, fuel, skilled labor, electric grid, and more all dependent on some level to foreign supply lines and finance sourcing of increasingly questionable trust. A feather palace for the eloi built on house of cards.ReplyDelete
Clawing back capabilities isn't turn-key, but it's not as hard as all that. We built everything we outsourced, and we only have a couple of thousands of schools of engineering. FFS, Mush and Bezos have built a space program largely from scratch, mainly with post-pubescent geeks. Most of the NASA guys with the BTDT t-shirts are dead, or on life support. It's not as if we can't do this. And a financial crash would provide the impetus, via tightened bellies.ReplyDelete
There won't be a bounce back from this meltdown. There may be a tad too much rah rah America optimism here. The largest problem between what we have done and what we could do now is the American people themselves. A descent into violence and chaos is what's left as the tsunami of hyperinflated dollars start washing ashore. 2 eeeks ago stainless steel was 100k a ton. It fell to around 30k a ton which is still 8 times its price 2 years ago. The production control manager I know says they cannot sell their agricultural equipment at a price to cover their cost as the market won't bare it. Same with lumber. Another friend safety manager for a portable building manufacturer. Estimates are that close to 40 percent of normally planted acreage isn't getting planted do to water restrictions from drought and the explosion in cost of agricultural inputs. Fertilizer is up 600 percent, herbicide is up 2-300 percent etc etc. I know quite a few farmers in Idaho and they tell of similar numbers.ReplyDelete
If it was just any 1 of a number of the events sure we could weather the storm. But this is a clusterfuck of biblica proportions. And to top it all off tptb think they want and can control the coming collapse. So I respectfully must disagree. Best be tribing up. Get busy ramping up food production. Your own power grid. Arable land. Best be resurrecting old skills. A new dark age is inbound. There will be pockets of light here and there. But that won't be the norm. Read the Fate of Empires and the search for survival by John Bagget Glubb. Luck and God speed to us all.
"$1500 worth of oil for $1921 worth of gold is only a bargain for Putin."ReplyDelete
Which is why he need not worry about an exchange standard, even if that's what some of the writeups out there say was his intent. The only reason one would pay in gold is if the money laundering in getting rubles were too expensive.
Look, it's the reason cartels never work long term -- there's always someone willing to undercut the cartel for personal (national) gain. Anyone willing to bring in $1500 worth of something Russia wants has $1500 in rubles that he can exchange for (currently) $1921 worth of Russian goods. Even your woke MNCs are going to be cashing in on that.
"You want Russian wheat or uranium or nickel or oil or whatever, fine, pay in rubles. If you don't want the wheat, fine, we'll put it over here in our warehouses until you get hungry enough."
"For the geniuses thinking countries simply drop the dollar overnight: they'd cut their own throats, since they're holding dollars.ReplyDelete
Dollars are worthless?
Welcome to the poorhouse."
Forgot about this one before I hit "publish".
You don't think there's a reason that China has been trading so many of those dollars for gold and real estate in the States? Granted, there's always the option to go full retard and seize land in the States, but does anyone but the global elites want that?
Just for the giggles. My first statement is, Aesop you could be right. There are a multitude of ways this fish carp economy could go and nobody, and especially the Fed, have a clue which way. Having laid down my mea culpa some things to consider:ReplyDelete
* The constant drumbeat that gold cannot be used as the global economy exchange is only correct if one assumes that gold remains at ~$2000/oz. Quantity of gold expands at appromiately 3% per year from mining. That is roughly the constant. What is not a given constant is the price. So what if gold went to $90000/oz? Well now that is a different story altogether.
* Your point about pegging to gold is spot on. The money changers do not want to lose their ability to funny money the economy. It would take China, India, UK to follow RU to make all the other 140 so countries do the same. China will not as their economy is already on shaky ground.
* Texas won't print CSA notes. They are building a precious metals depository. Already legal to pay your taxes in PM. They got tired of paying the storage fees to NY.
* We might get the worldwide deflation if we don't watch it. But never matter. I am old enough to remember when gas was .25c, I made $1.05/hr, loaf of bread was .10c, a cheeseburger, fries and coke was .45c and the milkman delivered not amazon. Its all relative to some degree.
* As to USD reserve currency status. Well there is some very stringent requirements to have that status. Currency that floats, a viable bond market, large CASH reserves, viable acceptance worldwide, etc. Charles Hugh Smith lays it out in n'th detail. Bottom line is the USD is currently the only vehicle that earns all the checkmarks.
* As to the follow on PS. The USD worthless. It already is, if you measure the USD against itself over time -- https://s1.qwant.com/thumbr/0x380/0/c/bb2924877b4e1eb270cfbc691848a77925410725b8bfc45c09aa7d4fa64479/Chart-Purchasing-Power-US-Dollar-Inflation.png?u=https%3A%2F%2Fi1.wp.com%2Fwww.libertyclick.org%2Fwp-content%2Fuploads%2FChart-Purchasing-Power-US-Dollar-Inflation.png&q=0&b=1&p=0&a=0 -- compared to the 1913 dollar it is now worth less than 5c. The difference is the USD is in better shape than every other currency on the planet.
That is all.
Against gold a month ago, the dollar is worth 1.2¢, compared to its value in 1933.ReplyDelete
Now, probably 1¢ even.
There's a limit to how much gold you can get, and land too.
The recockulous amount of dollar-valued assets held by China make crushing the dollar a death sentence for their economy, and owning land here just means they have the right to pay taxes on it in perpetuity. To us.
The Japanese found this out about 20 years ago.
Explain this to me like I'm an idiot. From everything I'm able to understand, ALL currency is fiat currency. Sure, peg the economy to gold. How does the economy grow? You've just put an upper limit on the total of all things that can be bought and sold, no?ReplyDelete
Am I really that dumb, or is there really no such thing as "sound money"?
As to your plan to return the government to the size it was in 1870 or any other date you want to pick - what do you do with the millions of useless eaters that will suddenly find themselves unemployed, unemployable, and due to the government no longer creating money out of thin air, starving?
Again, maybe I'm just stupid, but I don't think that's the case.
You're no idiot, you're spot on.
Grow the economy?
In what way?
The gold supply theoretically grows by the amount mined annually, which other commenters have suggested is about 3%/yr.
What you can't increase is the money supply out of thin air, which silently steals from everyone (which is the whole point of the exercise from the government's point of view).
This is why a dollar from 1933 is worth 1.2¢: Uncle has stolen 98.8% of the value of that money, and used toilet paper to buy real goods and services, as well as paying off loans in the future, borrowed from when money was more sound, and paid it back with inflated styrofoam money. Which is why real earnings have dropped. Wages always lag behind prices, so the last one to get anything consistently loses.
That would be anyone working for a living.
As to useless eaters:
how many unemployed buggy whip makers have you heard of?
How many unemployed telegraphers?
How many unemployed telephone operators?
How many unemployed elevator operators?
Jobs come, and jobs go.
People adapt, or they starve.
What they choose to do is, to me, a matter of complete indifference.
If they can't latch on to FedGov's nipple, it's always a net win.
Either way, we're talking about overpaid bureaucrats, and welfare queens. My default is to not only let them starve, but to staple their mouths shut to hasten it; but I'm willing to let those who put in the effort to learn actual trades to take a whack at becoming productive members of society, even after the debilitation of sucking on government's teat their entire lives.
Government has reached the size where, exactly as Lincoln noted with homespun perspicacity, "there's not enough tits for the pigs". We've tried doing this the other way, and I can't speak for anyone else, but my back is sore from carrying all that deadweight my entire working life. It's time they learned to fend for themselves, or curl up and die. Dealer's choice.
>>This is why a dollar from 1933 is worth 1.2¢: Uncle has stolen 98.8% of the value<<
This is the part I don't get. Money is not value, it's a measurement. And it's a measure of the only thing that actually HAS value - human time.
So leaving aside the things that didn't exist in 1933, how much does, say, a pound of potatoes cost in human time today versus in 1933? How much can you buy with one hour's labor today versus how much you could buy with one hour's labor in 1972, 1952, 1932?
My opinion is that part of the problem with the conversation is this idea that somehow five cents is the proper price for a cigar, and that should never have changed. I don't buy that. As more things became possible, and the economy became more consumer-focused, would we have instead wound up with the problem of too little money chasing too many goods. What would that even look like?
Besides being a medium of exchange and a means of payment, money is something currency is not.
Money is a store of value.
Currency is a measurement.
Money ≠ Currency.
The two are not interchangeable terms.
Silver and gold are money.
Fiatbux are currency.
If money measures the value of time, why did a ditchdigger in 1930 get 15¢/hr, and one now gets $15/hr, for the same work?
There are more workers, not less, so why has the price gone up 10,000%?
Because the worker is paid in currency, not money.
Currently, what you call a dollar is what a guy in 1933 called 1.2¢.
Your dollar has been pumped full of air, because it's backed by love and kisses and pixie dust, since it's backed by nothing but Uncle Sugar's I.O.U.: NOTHING.
When he backed it with hard specie, it was worth $1. Just like in 1833. And 1733.
The price for a cigar measured by money hasn't changed. But what was a nickel in 1933 is $3.50 now. In currency. (US Fiatbux, in this case.)
The problem you have now is way too much money chasing too few goods, and that chicken is coming home to roost. The endpoint is Weimar. Or Zimbabwe. Or Venezuela.
A place where your fiatbux currency is only good for kindling, or wiping your butt.
In 1934, government said to everyone "Give us your gold, and for every ounce, we'll give you $20.67."
Then they started printing more dollars, backed by nothing.
By 1969, they had doubled the dollar supply, for the same amount of gold.
By late 1972, they'd doubled it again. A dollar was now worth a quarter: 25¢.
By 1973, in was now worth 12.5¢, with 8 dollars for every dollar out there in 1933.
By 2020, there are 85.6 dollars running around for every 1 dollar in 1933. Your "dollar" is now worth 1.2¢.
Your "dollar" buys what 1.2¢ bought in 1933.
But your salary isn't 85.6 times higher.
And the difference is how much earning power you've had stolen from you, for your time, and government, who prints the currency (and refuses to exchange it for money 1:1), keeps the difference.
Inflation and fiatbux are a way for government to steal from you openly, while you watch them do it, and yet you think it's a good thing.
Take a spin down memory lane: Gold was $20.67 from 1933 back to 1839, except for a hiccup due to inflation from over-printing during the Civil War. From 1791-1833, almost non-stop, it was $19.39/oz.
With sound currency, a penny saved is a penny earned.
With fiatbux, a penny saved is worthless in 20 years.
And they take full value dollars out of your paycheck at today's value, but when you retire, they'll pay you back in fiatbux so inflated, if represented actual size, a dollar bill would be a sail 43'9" long by 14'10" wide.
If you shrunk it to actual value, it would measure less than the size of the nail on your pinkie finger.
That benefits no one but the ones running the printing press.
brian,, Zman's article today over at Takis is a very approachable explanation.ReplyDelete
Part of the problem is that not that many people understand the difference between a peg, a gold standard and an exchange standard. Ignore anyone who says pegs can't work because they have been working pretty well since Bretton Woods, where several countries pegged their currency to the dollar, which was in turn pegged to gold, at least officially. Bretton Woods was kind of a hybrid between a peg and an exchange, where foreign countries were allowed to exchange dollars for gold, but everyone else had to live with a peg -- if you want to exchange your $1 bill, you get back another 1$ bill. But the point is that anyone who thinks a peg limits growth has to explain how the world economy grew so much since 1944, vastly faster than gold mining.
Another part of the problem is that no one really knows what it is that Russia is implementing, but most of the geniuses in the media and on the internet are sure they know. My guess is it's just a peg, because $1500 an ounce does not make sense otherwise, but most of the coverage is assuming it's either a gold standard or an exchange standard, and a lot of those arguments are spot on -- if Russia is stupid enough to jump to a full gold standard pegged at $1500, they have slit their own throats. But so far, Germany and Russia seem to be just treating it as a simple peg, not the full-retard standard.
"As more things became possible, and the economy became more consumer-focused, would we have instead wound up with the problem of too little money chasing too many goods. What would that even look like?"
That's the deflationary spiral that mainstream economics fears above all else. Historically, though, deflation has not been the bogeyman it's portrayed to be. But you are correct -- as productivity increases, cet. par., we would expect goods to become less dear over time (greater production at lesser cost) so saving for retirement would be no more difficult than setting aside a silver dollar every once in a while, because by the time you retire, that will appreciate enough relative to goods to buy a week's worth of groceries. Fortunately, the Fed has saved us from such prosperity.
The amount of currency makes no difference. Search for "Rothbard angel" and follow the Mises link. The first one in the list on Presearch at the moment.
I had not yet had a chance to check out ZMan's blog page, but it extends on the Taki piece, specifically how petrodollars figure into it.ReplyDelete