Gold

The advantage to the gold standard isn’t that control of the money supply lies with miners. It’s that there is a limit on the Federal Reserve’s power over the money supply.

The problems with the gold standard are all various renumerations of two points: A) that power will lie with miners and B) the Fed won’t have it.

I’m not terribly impressed with the Fed. They’re far more culpable in the GFC than they admit. Autocratic regimes across the globe often fail to respond to tragedies, deny responsibility after causing problems, and that’s it. Neither is answerable to voters. Neither wants to admit a problem, because if they admit a problem and don’t fix it, they lose face. And that’s what leads to catastrophic outcomes in single-party municipalities, collapsing states (nation- and United), and cults. The Fed is an unanswerable technocracy effectively immune to the court system. I suppose Powell can’t be considered an autocrat, but oligarch seems to fit the bill.

I would like to see some kind of check and balance on the Fed, and CBs as a whole, and I don’t think the current system of governors and directors who can only be fired for cause is sufficient. Which leads back to the gold standard.

The basic issue about being honestly wrong is that without some form of competition, being wrong doesn’t carry a sting. It’s an issue with fraud, and that very often it is impossible to prove someone acted with malice instead of incorrectness. If you have a vote or vote surrogate, like choosing to root for another team or taking your money elsewhere, someone who is consistently wrong can’t win. But I don’t think we should legally punish people for being wrong, or at least not without other factors. One of the advantages to democracy is if you don’t like someone, Alice, you can vote for the other one, Bob. But you don’t elect Fed governors, and the process by which they’re picked is so obscure as to insulate them from public consequences of their actions. They’re all rich to begin with.

Between 2004 and 2006, a little over two years, the Fed took the interest rate from about 1% to 5.25%, a relative increase of about 425%. They did that in just over two years, and the typical turn around for property loans is at least three. Often it’s five. That’s like a sports car break-checking a semi. Yeah, the semi shouldn’t follow so closely the semi can’t stop in time, but the sports car driver is culpable too.

I’m not for the gold standard, but I understand.

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