Daily Archives: July 28, 2012

Comments on Gold for Currency Purposes

In a private communication with our friend JR we wrote

Again we go back to people with an agenda or bias – they don’t think. The article [http://www.theburningplatform.com/?p=37942] identifies the single advantage fiat currency has over a fixed base currency – the ability to create more on demand. Fiat currencies collapse when the multiplication gets out of control. Until that point they are fine. Gold-backed currencies collapse when the sovereign has a sudden need for more money and the fixed-base doesn’t have the flexibility to allow this. Look at the last hundred or so years of the so-called gold standard. Countries were forced off it when they needed a sudden expansion of the money supply to fight a war. Both the US and Europe have this in their past.

As we have observed before, every PM-based [precious metals] currency has collapsed because the sovereign has always found a way to expand the supply (debase it). This should give the advocates looking for a golden nirvana pause – but it doesn’t. They don’t think. The empirical evidence is that ALL currencies collapse. Some survive longer than others but they all go to that currency graveyard in the sky.

In this post we answer some of his subsequent questions and then move onto some current thoughts on PM-backed currencies.

What’s the Future for Jobs?

There are a number of trends in the labour market that do not bode well for a prosperous future for North America and its citizens. We began to collect these from various sources to create a larger picture. Then came Chairman Bernanke’s Jackson Hole speech followed by the September FOMC meeting. Both had a focus on restoring employment and introduced QE3 which will continue until the unemployment rate is down, probably under 6%. The Fed’s premise is that unemployment is cyclical and their QE or LSAP policies are benefiting the economy.

We believe that the Fed’s premises are we wrong and were recently encouraged to advance this topic in the essay: Signs of a Structural Change in the US Economy. The latter followed in turn from other recent posts including our commentaries on the Jackson Hole speech and recent Fed policy announced in the September FOMC meeting. Altogether, we will show that the unemployment situation is structural and the Fed’s policy of QE will fail to restore employment to expected levels.

In this essay Click on any image to open in a new window to enlarge it. Our own research is courtesy of FRED® from the St. Louis Fed.

Powered by WordPress | Designed by: photography charlottesville va | Thanks to ppc software, penny auction and larry goins