I recently finished Judy Shelton’s book Good as Gold. Today I ran across this article about her: Trump’s former pick to join the Federal Reserve has proposed a radical solution to solve inflation (msn.com).
I have never even taken an economics class, but I found her book ideas interesting. Among other things it outlined a way for the U.S. and the entire world to ease into a gold standard. Since gold reached a new all-time high today.* The idea of returning to a gold standard has more than a little bit of attraction.
As the article points out she is also an advocate for a target of zero inflation. The article is more than a bit down on that idea. But if I were President Trump, I would set up a debate. The debate would be between Shelton and a couple opponents of her zero-inflation suggestion. A compromise of a target of 1% inflation would still be beneficial. It would provide useful data about the utility of zero or near zero inflation.
* Or, the dollar hit a new all-time low.
It’s been decades, but there was once a graph showing that college tuition at some ivy league school had remained flat since the beginning of the industrial age when priced in gold.
I also had an economics professor that managed to get through my thick skull that money is just an agreed upon delusion. It has no value. I really wish politicians in the this country would figure that out. The dollar is only useful protection from hyper inflation because the world thinks we will pay our bills. The longer we go without balancing our spending and taxes, the greater the likelihood that some other currency will become the global reserve and we will fade into obscurity.
Ludwig von Mises is a great resource for this. I don’t remember if he said it in so many words, but one conclusion I reached reading his work (in particular, his “Theory of Money and Credit”) is that money is a psychological construct. That matches what your economics professor said somewhat less politely.
Another thing that von Mises made clear is that the natural behavior of prices is slow deflation, because productivity increases over time, on average across the whole economy. In some areas prices drop rapidly (computers and electronics are an example). So while aiming for zero inflation is reasonable, that still involves politicians attempting to tweak the money supply to track the productivity increase, which in general is a fool’s errand.
A zero target is certainly better than the current alleged 2% target. As far as I can tell, the only actual reason for that target is that it’s the highest inflation that politicians can get away with for a long time.
+1 on zero inflation if we can’t get to a negative number. But there is not enough gold and silver in the world to fuel the economy without heavy deflation which is a destabilizing as heavy inflation. Better to have a redeemable currency based on a market basket of real stuff which would include gold and silver but also oil, wheat, rice, coffee etc. I keep hoping that BRICS will get their act together to do this but no joy.
Well, the problem is how do you grow with no inflation?
If one set the economy at one trillion dollars. Then everyone is fighting over who has a buck in their pocket. (Kind of like we do today anyway.)
And we all know the golden rule. “He who has the gold, rules.”
The real problem is human nature, and honesty.
Anyone truly believe the fed has kept inflation at 2%? So, why was the fed created in 1913. To stop market crashes. And we got a market crash 16 years later that lasted almost another 16 years?
The problem isn’t money, or gold. It’s what the bible said it is.
That being, “The PURSUIT of money is the root of all evil.”
And the fact that evil always runs our money systems.
Any other system of measurement would be abandoned if it lost 3% confidence year over year.
Imagine you’re going though your parent’s personal effects and you discover a 12-inch ruler the size of a yardstick. Your then find stashed an old steel pull-tab coke can and it holds a galloon. Your mom’s sewing machine is threaded with a stringy fiber the girth of paracord.