On the Gold Standard

During my state senatorial campaign last year I had the privilege of meeting some really great people from all around the political spectrum.

imageOne of the most interesting is Wayne Richard who ran for the Texas House from Plano. While he did not get his party’s nomination he has parlayed his run into a successful radio show, Stand with Wayne, which is broadcast Saturday mornings at 10am on KVCE 1160 AM here in Dallas.

Earlier this week Wayne posted what he called an editorial on Fiat Currency. Wayne calls himself a conservative not a Libertarian, so it is interesting in that this is one issue where I part ways with most Libertarians and, in this case Wayne.

While I am all in favor of auditing the Fed, I do not think we need to a) end the Fed and b) go back to a gold standard. What we need is to reduce regulations that would allow more competition for the Fed, i.e., private money. Some of this can be based on gold, but not necessarily.

The problem is that the gold standard (or any other metal based currency) is based on some false premises.

First, that the metal itself has intrinsic value. It does not. Many astronomists believe that most gold on the planet resulted from impacts of meteors, either as a delivery system or a result of the violent impact. Ask yourself this, if a giant all-gold meteor where to impact the Earth, would we suddenly become wealthier? No, those of us that might survive would not care about gold anymore. Gold has value because we mutually agree it has value, in other words for the same reason fiat money has value. Milton Friedman spoke eloquently about this in his series Free to Choose.


Second, metal monetary standards promote the idea of wealth being a zero-sum game because there is only so much gold we have discovered. This is wrong, but it is also dangerous. Wealth is a human construct. Wealth and money, for that matter, are spiritual goods. Note, not religious, but spiritual, they are based on a belief system. For more on this idea, I highly recommend Rabbi Daniel Lapin’s book – Thou Shall Prosper.

In all, I agree with Wayne’s distrust and diagnosis of the poorly run government run monetary policy, but I disagree with his implied prescription of returning the United States to the gold standard.

Wealth vs. Poverty

Political mentor of mine, David Hall, recently turned me on to a new Google labs web service – Books Ngram Viewer. It allows you to search for the percentage of occurrence of words or phrases in book published from 1800 until today.

While playing with it, I typed in the terms wealth and poverty. From 1800 until 1960 wealth doubled poverty consistently. In 1960, poverty is mentioned with increasing frequency.

I am not sure if it means anything, but I do find it intriguing that while actual poverty is in the decline, mentions of it are increasing. Could it be that bringing poverty to the public eye has influenced the decline? Could it be that people are writing about this decline more often?

“Not for the Sake of Ambition” – Oh, Please!

One parenthetical phrase from President Barack Obama’s eulogy for Ted Kennedy made me cringe – “Not for the sake of ambition or vanity; not for wealth or power; but only for the people and the country that he loved.”

I write this not as a criticism of the President or the deceased Senator, but of the attitude it conveys. First, it is blatantly false. No one without any ambition runs for the Senate or Presidency. Second, it raises an idea that I find disturbing, namely that political or governmental service is somehow more noble than economic service.

This idea is a derivative of zero-sum thinking about wealth. It encapsulates the idea that those in business are somehow stealing wealth from others and that those in government are there to prevent any massive accumulation of wealth by one person or a small group of people. What they miss is that while governments do not create wealth, businesses and individual do. Governments are instituted to allow for wealth to be created by protecting those that create it from the masses who would try to take it from them.

In short, they have hopelessly and irrevocable confused cause and effect.

Really? This is all it takes to stop global warming?

OK, this headline from MSNBC really set me off – G-8 agrees to cap on global temperatures.

The article begins, “The Group of Eight industrialized nations joined with developing countries in agreeing Wednesday that average global temperatures shouldn’t increase by more than 2 degrees Celsius in a significant new acknowledgement in the fight against global warming.” Really!

The hubris of people to think that all they have to do is vote and it shall be so is incredible. Do they really think that is all they have to do?

Global warming (or climate change as it is now known – in an obvious attempt to hedge against the globe cooling) comes down to four questions.

  1. Is the temperature of the earth rising?
  2. If it is rising, is that bad?
  3. If it is rising and it is bad, is human activity the cause?
  4. If it is rising, and it is bad, and human activity is the cause, can we do anything to stop it and at what cost?

The answers are: Probably, maybe, no one really knows, and a lot.

I would say that there is some consensus among scientists that the mean temperature of the Earth is rising, but and this is a big but, is that bad? It might be, but it might not be. Far more people, about ten times, die of exposure to cold than to heat. Warming a little would reduce the death tolls.

Despite what you hear in the media, while there in consensus on warming, there is very little to no consensus that it is attributable to human activity. It is all conjecture, there is no scientific proof.

What there is proof is that the costs would be astronomical both in terms of real dollars and in terms of keeping developing countries from emerging out of poverty.

If you are really interesting in reading the Inconvenient Truth spend some time at the Cato Institute’s page devoted to the topic.