by Ralph J. Benko
(Editor’s Note: I will add comments throughout this article in italics to give examples.)
The classical gold standard — the ability of people to exchange the currency for gold coins, or gold coins for their currency — was the monetary system of choice for centuries, and, in its precursor, millennia. Since 1971, the world has been on a World Dollar Standard.
That means, as savant Jim Grant wittily observed on the Charlie Rose Show, that for the first time in history we rely upon “faith-based” money — money based on nothing but “the full faith and credit of the United States.”
This world dollar standard brings with it many infirmities. These infirmities, and their consequences, are social, political, and economic.
Social infirmities of the world dollar standard are:
* it invisibly but powerfully erodes other social standards; (destroys and distorts the free market, and allows nations to go heavily into debt they cannot pay back.)
* it breaks the social compact of equality of opportunity; (inflation caused the minimum wage)
* it creates a toxic sense of entitlement in the culture. (food riots around the world)
Political infirmities of the world dollar standard are:
* it violates the constitutional order as defined by the Founders; (criminal acts)
* it leads to a loss of legitimacy and lack of respect for the Congress and President (criminal political class and apathetic populace)
* it creates international animus toward the holder of the “exorbitant privilege” of providing the international reserve asset. with privilege comes the responsibility of maintaining the value of the dollar. Washington has stolen from the entire world.
Economic infirmities of the world dollar standard are:
* it causes a persistent trade deficit, hollowing out our industrial base;
* it enables a persistent and alarmingly high federal budget deficit; (no gold means unlimited printing of currency to monetize spending and debt.)
* it destabilizes the value of the dollar, fomenting euphorias — “irrational exuberance”— and panics, stagnation, and protracted recessions. (The World’s Greatest Ponzi Scheme- “the house” and the first ones in benefit most…the last ones in take the biggest losses.)
© 2011 The Lehrman Institute