muses of the moment

December 17, 2010

MSM gets it wrong again

Filed under: Fiat Currency, Financial Talking Heads, Odds 'n ends, Precious metals — totallygroovygirlfriday @ 12:59 pm

Groovygirl was listening to NPR this morning. Sometimes their guests make these blanket statements that are not challenged.

So, groovygirl got her panties in a bundle about this one.

They were discussing Ron Paul’s new appointment and his views on the Fed and going back to a gold standard for money. In the course of this interview with an author, not Ron Paul, the author stated that we shouldn’t go back to a gold standard because being on the gold standard is what caused the last Great Depression.

No, no, no, no, no…….it is this kind of stuff that drives gg batty.

Although groovygirl is not sure going back on the gold standard is a good idea right now, people still believe the fiat money system. She gets really upset when people flat-out propagate wrong information, especially in the media.

It takes possible solutions off the table without discussion by that deadly and quick viper…bad information.

The United States went off the gold standard because it was the quick option to the global currency crisis that was putting extreme pressure on the US Dollar. This global currency crisis was caused by unsustainable DEBT, mainly stemming from WWI, not the gold standard.

Going off the gold standard, which happened in 1934, six years in to the Great Depression, helped to continue that Great Depression until after WWII. Going off the gold standard was a reaction, a perceived solution, to the debt collapse and currency crisis.

The gold standard was putting in check the massive global debt (as any good monetary system should do). The gold standard told the world, you have too much debt, you can not repay it, you need to change the way you do things right now and default and start over.

Going off the gold standard was a political solution that fooled no one. It simply took away the gauge of how bad things really were. It is like someone looking at the thermostat and complaining that it is too hot in the house, so they take down the thermostat. Now they can’t adjust the temp (rein in debt) and they can’t tell how hot it really is (how bad things really are).

Today, there is a perceived notion by Mr. Ben (and others) that devaluing the USDollar (today’s version of going off the gold standard, since we are already off it) will help (along with other policies) elevate the debt deflation crisis. It will only extend the time of the pain, nothing else, just like it did during the 1930’s.

Take a look at this post via zerohedge. Headline reads that the US has incurred $4.4 trillion dollars in new debt since the financial crisis began. Creating more debt, doesn’t solve a debt sustainability or debt saturation crisis. Halting new debt and resetting old debt to within the limits that the current production economy can service it, that solves debt deflation problems. We are quickly moving in the wrong direction, this will not end well.

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