mamboni
17th September 2011, 08:56 PM
Once Upon a Time
by F.O.F.O.A.
The story I am about to relate to you was first told in a lecture hall at the School of Political Sciences in Paris (L'École des Sciences Politiques (http://en.wikipedia.org/wiki/%C3%89cole_Libre_des_Sciences_Politiques)) on March 17, 1932, from the depths of the Great Depression. It is, perhaps, more relevant today than it was on the day Jacques Rueff (http://en.wikipedia.org/wiki/Jacques_Rueff) delivered it. Rueff began with this:
"The story I am going to relate covers a long period. It is the life story of the gold standard, now afflicted with so grave an ailment that only time will tell if the victim will succumb or be left, at the very least, in a state of virtual paralysis." [1]
He said “only time will tell”… well, some time has passed, and it did "tell".
So what grave ailment was he talking about in 1932? What did time reveal since then? And how has this important story been misread over the years? I will try to answer these questions and to retell Rueff's story the way I think it should be told today. And my hope is that this will, in your mind, bring together many dissonant concepts, as it did in mine, into a grand, unified, long-line view of Freegold.
Jacques Rueff told the story of two different monetary conferences, two "committees of experts" that both met in Genoa, and changed the course of monetary history. The first committee gathered in October, 1445, and the second one (http://en.wikipedia.org/wiki/Genoa_Conference_(1922)) began in April, 1922, so Rueff's lecture had ten years on this second conference. The two committees gathered under similar circumstances, to respond to monetary disorder in the aftermath of a protracted war, yet they came to opposite conclusions.
The first committee declared gold the new, sole monetary reserve, unleashing its 500-year reign as the governor of supply and demand that would act as the natural counter-balance to international trade for the next half a millennium. The second committee, under the guise of improving this system, destroyed it, laying the groundwork for the unchecked growth of global imbalance, perpetual malinvestment and the series of periodic monetary crises we have experienced for the last 90 years.
http://4.bp.blogspot.com/-xOMlDsWcZxc/Tmwrxmn70OI/AAAAAAAAB3Y/6VbjxQoYhSc/s400/Genoa_conference_1922.jpg (http://4.bp.blogspot.com/-xOMlDsWcZxc/Tmwrxmn70OI/AAAAAAAAB3Y/6VbjxQoYhSc/s1600/Genoa_conference_1922.jpg)
The 1922 Genoa Conference. The British Prime Minister Lloyd George on front row, left.
Prior to 1922, gold was a vibrant, fertile member of the global economic ecosystem — what I like to call the Superorganism (http://fofoa.blogspot.com/2010/04/life-in-ant-farm.html) that governs naturally, far above the ability of mere mortals. Rueff put it this way:
"Gold… governs all the components of our international transactions with faultless effectiveness… it is a forceful but unobtrusive master, who governs unseen and yet is never disobeyed. Nevertheless, it is too wise to oppose the inclinations of men. It never, for example, prohibits the purchase of foreign securities; taking all their actions into account, it guides the conduct of men in order to prevent the upsetting of the balance it is supposed to maintain. We should also point out that while guiding men's actions it respects their freedom of choice. They are always at liberty to buy according to their preferences, but the monetary mechanism, in its omnipotence, will raise the price of those items whose purchase is contrary to the general interest, until such time as consumers decide of their own free will to stop buying them. The gold standard thus resembles an absolute but enlightened monarch; he does not destroy man's freedom, but employs it for his own ends."
The sustainability (and, indeed, the very survival) of the global economic ecosystem is predicated not on balance in the monetary realm, but on the delicate balance between real production and real consumption. It is the flow of actual physical gold that, at least prior to 1922, moderates and regulates this complex balance because gold, like real production and consumption, exists in the physical realm and is therefore not subject to the politics of easy money. But following the economic destruction of Europe in WWI (1914-1918), the US experienced high inflation accompanied by a dramatic inflow of gold. So in the early 20s, along with raising interest rates and federal budget cuts, the US began a policy of gold "sterilization" to resist the natural price mechanism—inflation—that would have otherwise acted not only as a brake on the inflow of gold all through the 20s, but also as a spur on the struggling European economy:
more at: http://fofoa.blogspot.com/2011/09/once-upon-time.html
1087
by F.O.F.O.A.
The story I am about to relate to you was first told in a lecture hall at the School of Political Sciences in Paris (L'École des Sciences Politiques (http://en.wikipedia.org/wiki/%C3%89cole_Libre_des_Sciences_Politiques)) on March 17, 1932, from the depths of the Great Depression. It is, perhaps, more relevant today than it was on the day Jacques Rueff (http://en.wikipedia.org/wiki/Jacques_Rueff) delivered it. Rueff began with this:
"The story I am going to relate covers a long period. It is the life story of the gold standard, now afflicted with so grave an ailment that only time will tell if the victim will succumb or be left, at the very least, in a state of virtual paralysis." [1]
He said “only time will tell”… well, some time has passed, and it did "tell".
So what grave ailment was he talking about in 1932? What did time reveal since then? And how has this important story been misread over the years? I will try to answer these questions and to retell Rueff's story the way I think it should be told today. And my hope is that this will, in your mind, bring together many dissonant concepts, as it did in mine, into a grand, unified, long-line view of Freegold.
Jacques Rueff told the story of two different monetary conferences, two "committees of experts" that both met in Genoa, and changed the course of monetary history. The first committee gathered in October, 1445, and the second one (http://en.wikipedia.org/wiki/Genoa_Conference_(1922)) began in April, 1922, so Rueff's lecture had ten years on this second conference. The two committees gathered under similar circumstances, to respond to monetary disorder in the aftermath of a protracted war, yet they came to opposite conclusions.
The first committee declared gold the new, sole monetary reserve, unleashing its 500-year reign as the governor of supply and demand that would act as the natural counter-balance to international trade for the next half a millennium. The second committee, under the guise of improving this system, destroyed it, laying the groundwork for the unchecked growth of global imbalance, perpetual malinvestment and the series of periodic monetary crises we have experienced for the last 90 years.
http://4.bp.blogspot.com/-xOMlDsWcZxc/Tmwrxmn70OI/AAAAAAAAB3Y/6VbjxQoYhSc/s400/Genoa_conference_1922.jpg (http://4.bp.blogspot.com/-xOMlDsWcZxc/Tmwrxmn70OI/AAAAAAAAB3Y/6VbjxQoYhSc/s1600/Genoa_conference_1922.jpg)
The 1922 Genoa Conference. The British Prime Minister Lloyd George on front row, left.
Prior to 1922, gold was a vibrant, fertile member of the global economic ecosystem — what I like to call the Superorganism (http://fofoa.blogspot.com/2010/04/life-in-ant-farm.html) that governs naturally, far above the ability of mere mortals. Rueff put it this way:
"Gold… governs all the components of our international transactions with faultless effectiveness… it is a forceful but unobtrusive master, who governs unseen and yet is never disobeyed. Nevertheless, it is too wise to oppose the inclinations of men. It never, for example, prohibits the purchase of foreign securities; taking all their actions into account, it guides the conduct of men in order to prevent the upsetting of the balance it is supposed to maintain. We should also point out that while guiding men's actions it respects their freedom of choice. They are always at liberty to buy according to their preferences, but the monetary mechanism, in its omnipotence, will raise the price of those items whose purchase is contrary to the general interest, until such time as consumers decide of their own free will to stop buying them. The gold standard thus resembles an absolute but enlightened monarch; he does not destroy man's freedom, but employs it for his own ends."
The sustainability (and, indeed, the very survival) of the global economic ecosystem is predicated not on balance in the monetary realm, but on the delicate balance between real production and real consumption. It is the flow of actual physical gold that, at least prior to 1922, moderates and regulates this complex balance because gold, like real production and consumption, exists in the physical realm and is therefore not subject to the politics of easy money. But following the economic destruction of Europe in WWI (1914-1918), the US experienced high inflation accompanied by a dramatic inflow of gold. So in the early 20s, along with raising interest rates and federal budget cuts, the US began a policy of gold "sterilization" to resist the natural price mechanism—inflation—that would have otherwise acted not only as a brake on the inflow of gold all through the 20s, but also as a spur on the struggling European economy:
more at: http://fofoa.blogspot.com/2011/09/once-upon-time.html
1087