A Gold Standard Today Would be Idiotic
I have talked to some Ron Paul supporters and some left-wing Democrats lately who seem to think that a commodity based currency is preferable to our current state of free-floating exchange rates. The argument against the most popular plan, a Gold Standard (or a Silver Standard) is simple enough to be a bumper-sticker; America's wealth comes from the minds of Americans, not from the ground of America. That is not completely true, we certainly sell base commodities across the globe. Yet most of our wealth has been and will continue to be derived from further processing commodities at all levels and from the amorphous intellectual properties that spring from the minds of so many Americans.
The Gold Standard was a real bonus for America during the decade following the 1848 discovery of gold at Sutter's Mill in Coloma, Ca. The more gold that was dug out of the ground the wealthier America was in comparison to other nations. This episode ended with the Panic of 1857 that was exacerbated by the sinking of the "Gold Ship", the SS Central America, a ship sinking that cost America 30,000 lbs. of gold worth of wealth. In all fairness concerning the 1857 Panic, the end of the Crimean War and the end of the concurrent speculative excesses set off the economic turmoil. The collapse in grain prices spread the pain throughout our then rural economy.
As a local aside the Crimean War and the American Civil War were very important factors in turning the Chicago Board of Trade from largely a local business organization to a local business organization that also featured grain trading (later to exclusively feature grain trading and then, over a century later, financial futures). The need for grain during those two wars combined with Chicago's location as the terminus of the growing railroads that reached out onto the plains and it's home on the edge of the Great Lakes turned the Chicago River in what is now downtown Chicago into the world's grocery store.
This post only touches on the problems of a commodity based currency but it does feature a central argument, that we no longer dig our wealth from the ground.
The Gold Standard was a real bonus for America during the decade following the 1848 discovery of gold at Sutter's Mill in Coloma, Ca. The more gold that was dug out of the ground the wealthier America was in comparison to other nations. This episode ended with the Panic of 1857 that was exacerbated by the sinking of the "Gold Ship", the SS Central America, a ship sinking that cost America 30,000 lbs. of gold worth of wealth. In all fairness concerning the 1857 Panic, the end of the Crimean War and the end of the concurrent speculative excesses set off the economic turmoil. The collapse in grain prices spread the pain throughout our then rural economy.
As a local aside the Crimean War and the American Civil War were very important factors in turning the Chicago Board of Trade from largely a local business organization to a local business organization that also featured grain trading (later to exclusively feature grain trading and then, over a century later, financial futures). The need for grain during those two wars combined with Chicago's location as the terminus of the growing railroads that reached out onto the plains and it's home on the edge of the Great Lakes turned the Chicago River in what is now downtown Chicago into the world's grocery store.
This post only touches on the problems of a commodity based currency but it does feature a central argument, that we no longer dig our wealth from the ground.
Labels: California Gold Rush, Gold Standard, Panic of 1857, Ron Paul
posted by El Rider at 10:50 AM
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