Gold, Central Banks, and the Decline of the Dollar

Back in 1995, Robert Batemarco of the Foundation for Economic Education wrote an excellent article about the inflationary, boom/bust nature of our monetary policy. Thirteen years later, and it still is right on the mark – sound economic understanding possibly?

Here’s an excerpt:

In all likelihood, the biggest problem gold proponents face is that people simply aren’t ready to go back to gold. Most people aren’t aware of the extent of our monetary disarray and many of those who are don’t understand its source. Two generations of Americans have known nothing but unbacked paper as money; few realize that there is an alternative. In contrast, when the United States restored gold convertibility in 1879 and when Britain did so in 1821 and 1926, gold money was still seen as the norm. That is no longer the case.

It might take a hyperinflationary disaster to shake people’s faith in fiat money. Let’s hope not. In addition to the horrendous costs of such a “learning experience,” it’s not even a sure thing that it would lead us back to gold. Recent hyperinflations in places as disparate as Russia and Bolivia have not done so.

The desire to get something for nothing dies hard. Governments use central banks with the unlimited power to issue fiat money as their way to get something for nothing. By “sharing” some of that loot with us, those governments have convinced us that we too are getting something for nothing. Until we either wise up to the fact that governments can’t give us something for nothing or, better yet, when we realize the moral folly of taking government handouts when offered, we will continue to get money as base as our desires.

via Central Banks, Gold, and the Decline of the Dollar| The Foundation for Economic Education: The Freeman, Ideas on Liberty.

With the printing presses running wild at the Fed these days, I fear that a hyperinflationary disaster is not that far-fetched.