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Page added on May 17, 2013
David Stockman: “The American Empire And The End Of Sound Money”
In Chapter 12 of David Stockman’s new book The Great Deformation, the outspoken truth-sayer discusses the realities of the end of the gold standard – from the the Bank of England’s ‘default’ in 1931 to the 1960 London Gold panic (a shot across the Keynesian bow) and on to Nixon and Bretton Woods, Stockman explains how we are constantly deferring the day of reckoning…
“Richard Nixon soon found that meeting the nation’s obligation to pay its debts in gold and to uphold the Bretton Woods system were distinctly inconvenient to his own reason of state: reelection in 1972.
Moreover, he had found a polyglot of economic advisors who persuaded him to discard the essence of the old-time Republican financial doctrine.. and embrace the prosperity management model, turning fiscal policy into a hapless stepchild of the jobs count and the GDP measurements, and giving a public policy rationalization to endless raids on the Treasury by special interest groups and crony capitalists….
Worse still, severing the link to gold paved the way for the T-bill standard and a vast multi-decade spree of central bank debt monetization and money printing. Since a régime of floating-rate paper money had never been tried before on a global basis, the Keynesian professors and their Friedmanite collaborators can perhaps be excused for not foreseeing its destructive consequence.
The record of the next several decades, however, eliminated all doubt.
The combination of free markets and freely printed money gave rise to a toxic financial deformation; namely, the vast financialization of the world economy and the rise of endless carry trades, massive arrangements of speculative hedging, and monumental daisy chains of debts, owned by debts, owned by still more debts.”
2 Comments on "David Stockman: “The American Empire And The End Of Sound Money”"
J-Gav on Fri, 17th May 2013 10:27 am
Putting off the day of reckoning won’t keep it from coming but will only make it worse when those $100s of Trillions in speculative notional/virtual trash come home to roost. The sword of Damoclès over the entire world economy. The next crash will be worse than 2008.
BillT on Sat, 18th May 2013 3:44 am
J-Gav, I read that article in full previously. We are F—ed! Nixon’s reelection needs were more important than the fiscal sanity of the US. Greed took over and has been rampant ever since. The West will fall, and will take down the rest of the world … unless the BRICCS can get their currency in place first. It will likely be gold based, and may keep the rest of the world from the plunge to the bottom.