Fiat Money Fairytales
By Gold Money
The full article can be downloaded as PDF here.
Introduction
The financial media are beginning to entertain the viewpoint that the recent policies of the Federal Reserve, ranging from zero-rates to quantitative easing to bank bailouts, are an important cause of rising inequality not only in the US but around the world. This past week, multiple media sources published an op-ed by eminent scholar George Gilder to this effect. Yet articles such as these are the exceptions that prove the rule that the financial media remains strongly biased against the monetary discipline that could be restored by returning to a gold standard. By way of example, in a typically biased article previously published by Reuters back in 2013, Professor Charles Postel misreads history, misapplies economic theory, and employs not only rhetorical but also logical tricks to argue that a return to a gold standard would favor the wealthy, when in fact the opposite is demonstrably true. As this article is so typical of what we seek to rebut, we publish it here, and now.
Frequently one can tell by the title of an opinion piece whether it is going to consist of quality arguments or just meretricious mudslinging. Professor Charles Postel of San Francisco State University boldly announces the latter in choosing to title his recent tirade against sound money, Why Conservatives Spin Fairytales About the Gold Standard.
Indeed, right from the start, the reader is presented with the following rhetorical feint:
At few points since the Fed’s founding in 1913 has it taken such sustained fire. It’s taking fire from the left, because its policies favor Goldman Sachs, Bank of America and the other financial corporations that are most responsible for the 2008 financial meltdown and the Great Recession. But it is also taking fire from the right.
While acknowledging that the Fed is under attack from the left, he then proceeds to focus exclusively on debunking hard-money Fed criticism from the right, which is supposedly based on ‘fairytales’. While politics is largely if not entirely about fairytales, history shouldn’t be. As a historian, Mr Postel should know the difference. But as one reads further into the article it becomes clear either that he doesn’t, or that his anti-gold-standard agenda is best advanced by spinning fairytales of his own. For a start, he completely ignores the fact that elastic, fiat money is both what facilitated the bubble that caused the 2008 meltdown and what enabled the subsequent bank bailouts, neither of which would or could have occurred had the Fed been constrained by a fixed money supply.
REWRITING THE HISTORY OF THE FEDERAL RESERVE ACT
Moving farther back into history, Mr Postel writes the following fairytale about how the American public felt about the creation and early years of the Federal Reserve System:
In the years after 1913, the need for a flexible and regulated money supply was widely accepted across the political spectrum.
This is complete poppycock. First of all, the Federal Reserve Act was initially drafted in secrecy by a small group …read more
Source: Fiat Money Fairytales
