Gold Standard Challenges

Scattered recent analysis has centered upon the Gold Standard and its viability within the global financial system. The topic is certainly very blurred and at times confusing. Consider a recent article by a competent analyst Charles Hugh Smith of the site OfTwoMinds on the practicality of gold used as a standard. The article is entitled ‘The Problem With Gold-Backed Currencies’ (which is found HERE and also on Lew Rockwell site HERE). He makes several points, many good ones. In the Jackass opinion, his analysis avoids many potential solution features, is premature on focus of the currency (and not trade), and is unfortunately backwards in the logic. The main criticism to put on the work is that he confuses the extreme difficulties created from decades of fiat currencies, with the supposed problems of installation of gold-backed currency. The entire article is not well developed, seems sketchy, and misses numerous very important features which are being considered. He does put many critical issues on the table, valuable for discussion. He offers no solution to his stated problems. In modern parlance, the logic put forth would indicate that since a heroin addict has so much difficulty with kicking the deadly habit, ravaged by delirious tremens, beset by extreme health problems, that one should conclude movement toward a clean sober life would have problems and simply would not work. Thus the backwards logic. Unfortunately, CHSmith produces straw dogs in the face of absent solutions. Let us examine the points made.
The Gold Standard is near perfect, provides sound money, and requires modern tweaking to make it work. The transition period will not be six months, but more like six years. The transition is possible, is workable, but with tremendous disruption and arduous adjustment. The victim nations would be many, but they hold much of the banking and military power. The Global Currency RESET is essentially referred to, which will render deadbeat economic nations as extremely vulnerable to systemic breakdown. The definition of deadbeat is tied to huge trade deficits and oversized current account deficits, coupled by extremely unmanageable national debt. They tend to have bloated welfare states and diminished industry. The United States qualifies as the most at risk, the most out of balance, and the worst from a debt and an industrial standpoint.

This post was published at GoldSeek on Friday, 7 April 2017.