Central banks extend their reach as bureaucratization of markets continues

Bank of England

The twentieth century witnessed the shift from the classical order of free markets and hard, non-political money – epitomized by the gold standard – to fully elastic money and credit markets under the control of state central banks. This shift was completed in August 1971 with the termination of Bretton Woods, the gold standard’s last surviving, but limp and sickly cousin. Finally freed from the golden shackles that had always been the monetary anchor of capitalism, the global financial system produced, for the past 40-plus … [Read more...]

Roubini attacks the gold bugs

Nouriel Roubini

Earlier this month, in an article for “Project Syndicate” famous American economist Nouriel Roubini joined the chorus of those who declare that the multi-year run up in the gold price was just an almighty bubble, that that bubble has now popped and that it will continue to deflate. Gold is now in a bear market, a multi-year bear market, and Roubini gives six reasons (he himself helpfully counts them down for us) for why gold is a bad investment. Roubini does not quite go so far as to tell his readers that there is no role … [Read more...]

Book review: David A. Stockman – “The Great Deformation – The Corruption of Capitalism in America”

Cover of David A. Stockman's The Great Deformation

David Stockman’s new book “The Great Deformation” is a brilliant, penetrating analysis of the present state of the US economy and the US political system, and a detailed account of how the nation got into this mess. The book will upset Democrats and Republicans alike, and quite a few other constituencies as well, which can, in this case, be safely accepted as proof that Stockman’s narrative is spot on. Stockman is an angry man and he admits so himself early in his 719-page tome. That anger adds bite and verve to his writing … [Read more...]

Could Bitcoin be the money of the future?

A physical Bitcoin-coin

The crypto-currency Bitcoin is still merely a speck on the global monetary landscape. It is young, experimental, and for all we know, it may ultimately fail to break into the monetary mainstream. However, on a conceptual level I am willing to call it a work of genius and arguably the most exciting development in the field of money for more than 130 years. Let’s say since the start of the Classical Gold Standard in 1879. Does this sound like hyperbole? Well, let me explain. The Decline and Fall of Capitalist Money The 20th … [Read more...]

“Watching your money disappear” – Speech to senior representatives of the UK pension fund industry

money symbols getting sucked into a vortex

 Last week I spoke at the Open Forum Seminar organized by the European Pension Fund Investment Forum (EPFIF). The event was held at The Magic Circle, an organization for magicians that runs a theatre and a museum in London, both dedicated to the art of magic. Hence, the title of the seminar “Watching your money disappear.” Below is a transcript of my speech. Needless to say – but I say it anyway – the views expressed below are mine and not those of the EPFIF, any of the pension funds or any other speakers present at the … [Read more...]

All power to the state! – Money madness at the IMF

IMF headquarters

You cannot escape an all-pervasive sense of crisis these days. Impending doom does not only announce itself in actual events but also via the proliferation of ever more hair-raising schemes that claim to solve our problems. Maybe it should not surprise us if, at a time when the world’s most powerful central banks keep interest rates at zero for years on end and keep printing quantities of money that are simply outside the facilities of human imagination (trillions? quadrillions?), bravely hoping it will end differently this … [Read more...]

U.S. Republicans introduce gold standard debate – mainstream media go mental

1 kilo gold bar

I am not holding my breath over the Republicans' plans for another gold commission to investigate the possibility of returning the USA to a gold standard in the case of the Romney-Ryan ticket winning. Of course, I like the Classical Gold Standard, which existed from about 1880 to 1914, and I am convinced it was a humongous mistake to do away with it, a mistake that was further compounded by the abandonment of its weak successor, Bretton Woods, in 1971. And you know what I think of our present unconstrained fiat money … [Read more...]

The triumph of politics

Richard Nixon

On August 15, 1971, President Richard Nixon declared that the United States would no longer honour its promise to exchange US dollars held by foreign central banks for gold at a fixed price of $35 an ounce. The innocuous term 'Nixon closed the gold window' that is now widely used to describe this act does not quite convey its significance. (Was something to be stopped from going out or from coming in through the window? Can the window be reopened again?) What Nixon did was cut the last remaining official link between the … [Read more...]

Note to my readers

Picture of Detlev Schlichter

  First, I would like to draw your attention to two upcoming events. For those of you who are in or near Zurich next week, I will give a presentation in German about Paper Money Collapse - The Folly of Elastic Money and the Coming Monetary Breakdown on Tuesday, July 3, at an event that is sponsored by the Verein Goldfranken. If you are in the area please come by! On Monday, July 2, BBC Radio 4 will broadcast a program on the gold standard as part of their Analysis series. I am one of the interviewees. Please see … [Read more...]

The death of banks – and the future of money

Dodo

UK Chancellor George Osborne and Bank of England Governor Mervin King last week announced another round of fiscal and monetary stimulus measures, including steps to ease the funding for banks and allow them to extend more loans. If these measures were hoped to instil confidence they must be classified as a failure. We have lived through quite a few years of unprecedented and fairly persistent monetary accommodation and occasional rounds of QE by now, and I doubt that yet another dose of the same medicine will cause great … [Read more...]