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Re: Keynesian Chickens Coming Home
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sczech
monetary systems
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Jan 30 08 11:20 AM
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No question, it is difficult not to like the above article by Hultberg. Nevertheless, he and many other goldbugs (Fekete comes to mind) make one fundamental mistake in their analysis of the fiat money system. Monetary policies are not the result of "monetary science" (Fekete) but of practical social politics. More than 50% of the federal budget represents social spending (welfare, food stamps, social security, medicare, education etc). Monetary and fiscal policies (taxes) can only be understood if viewed within the context of maintaining a social balance within society. There are no free markets in the world. All markets are highly regulated in order to make sure that the disparity between the rich and the poor does not grow too large. Fiat money was introduced one hundred years ago in order to speed up economic growth. At that time poverty and hunger was widely spread and lifting the living standards of the masses without first digging up thousands of tons of gold was the motivation for abandoning the gold standard and introducing fiat money which is really credit money. All the people on the internet who constantly complain about the coming collapse of the financial system are motivated by personal greed. They want to make sure that the purchasing power of their financial assets be preserved while the rest of society sinks into poverty.
Keynes was right with his statement "In the long run, we are all dead". Not only does this hold true for everybody alive today, it also holds true for the present human civilization: Our way of life has no future. Keynes decided therefore, if we are going to die anyway, at least we all (poor and rich together) should have a good time during the remaining few years. The way to accomplish this according to Keynes, is to redistribute assets via the tool of moderate inflation. Moderate inflation nourishes the money illusion which makes the greedy happy because they grow richer every year in nominal terms (the most popular word in finance is "return").
To sum up: everybody contemplating the virtues of the gold standard should answer the following question: how are you going to feed to poor, the disabled, the old, in short the huge part of society at the bottom of the economic scale? Not answering that question means you advocate riots and violance. I personally value a civilized society more than the purchasing power of my savings. When reading Hultberg and Fekete, please pay attention to how skillfully these writers avoid this important question.
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