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The answer is simple get away from fractional reserve banking and return to
a full gold standard (not the brenton-woods semi gold standard). The
problem is that it is to late for the US because you can not run deficits on
a gold standard. They wanted powerful money overseas so they allowed
foreigners to exchange their money for gold bullion, but wanted inflationary
money at home. This infationary money cheats the people. Why? because when
you first print the money at the top it has a set value that is greater than
when it trickels down through the economy (a lag time effect). Also they
can take this money that they just printed and buy real assests such as land
and buildings. This is why they wanted to dual standard money.
Nixon took us off the Semi-gold standard (Brenton-Woods) because foreigners
became scared about the US economy and decided to exchange their dollars for
the gold. The government got worried when the gold reserves became low.
Why was the government worried? Because we were using a fractional reserve
system (a fraction of the dollars out there have gold backing them). If we
had money fully backed by gold whether paper, coin, or digital credit you
would experience new parallels or prosperity.
Why is this gold backed money better? When you print a bill backed by gold
you have to spend time/energy to get the gold. This time/energy/gold has
greater value. Slapping a bill on a legalized counterfeiting machine does
not create value.
-----Original Message-----
From: Timothy Morge <tmorge@xxxxxxxxxxxxxxx>
To: bruceb@xxxxxxxxxxxxx <bruceb@xxxxxxxxxxxxx>
Cc: Omega List <omega-list@xxxxxxxxxx>
Date: Tuesday, August 11, 1998 9:43 AM
Subject: Re: DEFLATION CRISIS... myth exposed
>bruceb@xxxxxxxxxxxxx wrote:
>>Why, because of all the potential threats to the US economy, this is by
far the easiest >problemto fix.
>
>> What got us into the deflationary cycle of the 1930's? The government
>> contracted the money supply at the very time they should have been
expanding
>> it. What got us out of it? A massive expansion of the money supply to
pay
>> for World War II (some things you learn by trial and error...).
>>
>> Bruce
>
>
>Bruce:
>
>Personally, I'm not particularly interested in forecasting where the
markets are
>going--I'll trade them if they go up or if they go down. And until now,
I've
>read your personal opinions of how the world works and found them
interesting. I
>don't agree with all of what you've written, but that's what makes the
world go
>round.
>
>Now, your statement about deflation being simple to end...I was trained as
an
>economist at the University of Chicago. In fact, while there in their joint
>degree program in the late 1970's, I paid for my schooling by doing
research for
>the BLS. In theory, deflation can indeed be cured simply by printing lots
of
>extra money. But you speak about it as if the economy will react and turn
on a
>dime. It isn't that simple and it doesn't work that way. No matter what you
>read.
>
>I gave a speech at a dinner in Princeton, NJ about seven years ago, and Dr
Paul
>Samuelson was also speaking. And during his speech, he described the great
>difficulty they had trying to get the economy to respond to ANY type of
fiscal
>stimulus, as well as the printing of huge amounts of 'dollars.' His
statements
>boil down to one phrase: At some point, deflation is almost impossible to
>turn--It's like pushing on a piece of limp string. The economy just doesn't
>respond. He was on the shadow open market committee during the 1930's...
>
>I've had my stint as an economist and I'll leave that job to someone else.
But I
>hope people that are reading your series take the time to think for
themselves.
>You've presented some interesting views, but unfortunately, you've
presented
>them as if they are fact and written in stone. They may be your views. They
may
>be right or wrong. But in many of the things you have written about here,
the
>way things unfold will not be dictated by anyone's opinion. And that's why
there
>is a market place.
>
>Best,
>
>Tim Morge
>
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