Tuesday, June 12, 2012

Rick Santelli tells the EZ to go to gold


Everyone's a critic when it comes to the crisis in Europe. Even CNBC personality Rick Santelli!
Yep, the same man that some credit with the on-air rant that inspired the Tea Party movement said on Tuesday that the eurozone's solution is right in front of it, if only the troubled countries would open their eyes. How? Go gold! A return to the gold standard could solve their problems, Santelli said, never mind that the gold standard helped contribute to the suffering of millions of people during the Great Depression standard (h/t Joe Weisenthal).
Read it at The Huffington Post | Business
CNBC's Rick Santelli Has A Solution To Europe's Crisis: Go Gold
by  Bonnie Kavoussi

This person is an embarrasment to CNBC.

19 comments:

Ken said...

Euro is already kind of like a gold standard, from the POV of member nations, right?

Bob Roddis said...

never mind that the gold standard helped contribute to the suffering of millions of people during the Great Depression standard

Of course, we did not have a “gold standard” during the Great Depression. We had a screwy bankster-induced Federal Reserve gold exchange system that allowed for the lending of plenty of fractional reserve funny money that could and did artificially bid up and distort prices leading to the inevitable painful correction.

But the truth wouldn’t fit the MMT inflationist funny-money narrative, would it?

JK said...

Hey Bob,

Can you share with us a time period from any part of history when "funny-money" was not used? i.e. direct us to a time period that demonstrates the superiority of a "real" Gold Standard? Or is your perspective just fantasy?

Please share. I'm honestly interested in reading about it

Matt Franko said...

At least HuffPo is now on to this guy too.

Matt Franko said...

I would also point out that it should not be surprising that someone from the Tea Party would advocate for gold.

Ron Paul who is popular with Tea Party (they seek not to be subject to anything) advocates for gold too.

Bob Roddis said...

JK:

Can you share with us a time period from any part of history when murder was not present? I.e. direct us to a time period that demonstrates the superiority of forbidding murder? Or is your perspective just fantasy?

Why don’t you wear a sandwich board and march up and down the street announcing that you cannot and will not understand the essential concept of economic calculation or how artificial changes in unbacked currency will invariably induce an unsustainable price structure. I just listened to the entire Martenson interview of Steve Keen. While Keen also resolutely refuses to familiarize himself with the concept of economic calculation, his empirical research literally SCREAMS the conclusion that fiat funny-money creation out of thin air (a point rejected by Krugman) induces massive amounts of unpayable debt. A similar analysis would and did predict massive debt leading to the great depression, a period of fractional reserve gold exchange “standard”.

John Carney has written:

MMTers do not seem to fully appreciate the problems of ignorance and calculation that inform Austrian economics. They seem to recoil at even thinking about them because of the implications for the limits of political action. This also needs to be corrected.

That’ll be the day. MMTers don’t even partially “appreciate” those concepts due to their ever-present “recoiling”.

http://tinyurl.com/7sycbey

That MMTers have an apparently psychological aversion to even engaging the main point of their primary intellectual opponent is quite telling.

Matt Franko said...

Bob,

I think this gets back to what Tom has called 'norms'.

To me (personally) Carney's " because of the implications for the limits of political action" is frightening.

I guess to Carney it is not frightening to think of a world where political action is limited, the thought of such a world frightens me personally...

rsp

Leverage said...

A gold standard also produces unpayable debts.

You still live in fantasy coconut land, wake up! Leverage is the nature of the system since earlier civilizations, leverage always produces 'unpayable debts' unless more NFA are created in a perpetual nominal growth machine. This happened under gold standard too hence debt-deflation collapses and depressions.

People always will find ways to create pseudo-money and leverage the system when the economy goes well, how a gold standard prevents this? In fact it exacerbates it creating faster cycles of localized expansion and depression.

Economy does not function by bartering and Say law is WRONG!

Gold does not change nothing, it just concentrates power even more (see how England preferred an international gold standard when the Empire was strong).

Gold standard = Third World War = end of humanity.

Anonymous said...

Bob, I think most MMT people would agree with you that banks' ability to create unsustainable levels of debt should be seriously curtailed.

You're really barking up the wrong tree if you think that MMTers are somehow pro-banks in their current form.

You seem to think that a gold-"backed" money system would solve all our problems. History says otherwise.



Please stop banging your little "economic calculation" drum. We've heard it before. You have a particular view of what "economic calculation" entails. MMTers have a slightly different view.

You think that proper economic calculation can only occur within a purely privatised system with zero government involvement. MMTers argue that such a system delivers sub-optimal outcomes, hence government involvement is necessary to achieve optimal outcomes.

MMTers also argue that a purely privatised system without government involvement is actually a nightmarish fantasy world ruled by plutocratic elites, rather than the utopian voluntarist paradise you imagine.

y said...

Bob, do you believe government should tax to pay for military defence, police, the courts, etc?

Tom Hickey said...

What Bob seems to be saying is to avoid the calculation problem go to specie, i.e., use physical metal — gold, silver, copper — and give up paper altogether. I take it that he means paper by "funny money."

That is one solution, and it has advantages and disadvantages, like all solutions.

One of the disadvantages is practical. the world is not going to go to specie anytime soon. Most people in economics and finance regard that a giant step backward and there is no possibility that it could gain traction with TPTB.

Would it be a good idea overall, do I think? Do I think that barter is a good idea? In the overall scheme of things the invention of credit was a giant step forward, so going to spot exchange would be a step backward. Once credit is introduced, then "funny money" is created, in that debtors can always get in over their heads.

So the way forward in my view is to design institutions that minimize the downside of credit without sacrificing too much of its advantage as a driver of growth.

In addition, with specie, governments would have almost much less policy space, which is what libertarians left and right would like to see. But this would give some countries a huge advantage over others and would create empires rather than eliminate wars. Moreover, the race would be on for PM's and that would also be socially, politically, and economically disruptive, as history shows.

It's not like PM's have not be the focus before. They have. Armies were paid in specie and wars were fought for it. Moreover, international trade become purely mercantile as all countries try to become net exports to accumulate specie.

So I see specie as a Pandora's box rather than a panacea.

Anonymous said...

"government involvement is necessary to achieve optimal outcomes"

- Not that government involvement necessarily achieves this of course.

MMT is about analysing what government can and should do, and getting rid of the mainstream smoke and mirrors which leads to poor policy choices and institutional design.

Tom Hickey said...

I think that where there is some agreement is in the recognition that larger policy space results in more opportunity for crony capitalism and corruption and that it is very difficult to address this in a representative democracy, which designed to be plutonomous and oligarchical, i.e., ruled by wealthy elites that conflict with each other over their narrow interests while the rest of the people are largely left to fend for themselves as best they can, at least by comparison.

One solution proposed is to shrink government and limit credit extension through adoption of monetary and fiscal austerity. The other solution is to address the institutional arrangements that result in perverse incentives and opportunities for capture.

The former solution actually favors elites, since it preserves and cements privilege, so some of them are are all for it. The latter favors none of them, so most of them oppose it.

Anonymous said...

The job of the mainstream economics profession seems to be to keep the populace in the dark about what they and the government are actually capable of. People have been brainwashed into believeing that governments are impotent in the face of "the markets", and so they accept the status quo and consider cronyism to be inevitable - just a "natural" part of life when private money rules.

Mainstream economics is all about describing the constructed reality in which we live as "natural" (they back this up with a fallacious rewriting of history, including the history of money).

This engenders a passivity in the populace which reduces their will to question monied elites, and to realise their full potential.

The government dysfuction that this ideological assault has created simply feeds more ammunition to the anti-government, pro-plutocracy brigades, in a vicious downward spiral.

The only good thing about what's been happening since 2007 is that people have begun to realise what is actually going on behind the curtain.

JK said...

Bob,

You didn't answer my question. Instead you criticized me and repeated your normal POV.


Please answer ONE VERY SIMPLE QUESTION: can you direct us to a time/place in history that used a "real" Gold Standard? I want to read about how fair, and productive, and not war prone (etc), this time period was.

Or again, is this true free market world you speak of a fantasy? … much like true communism? :) i.e. interesting "in theory" but highy impractical.

Tom Hickey said...

Anonymous: "People have been brainwashed into believeing that governments are impotent in the face of "the markets", and so they accept the status quo and consider cronyism to be inevitable - just a "natural" part of life when private money rules."

Right. This was amply demonstrated in the rescue of the financial sector and the auto industry by government.If the market had been allowed to take its course, there would have been a lot of creative destruction that would have gone viral as asset values fell, debt became unpayable, and CDS were set off. Many of the rent-seekers and parasites would have been wiped out, but others would have cashed in on their bets. The downside was that the global economy would have tanked, resulting in social and political instability that could have toppled elites. Can't have that, can we. Must preserve order an any cost, even of market fundamentalism.

It's no longer possible to doubt or question the power of governments to intervene when they choose to, and it showed too that when they intervene, in whose benefit it is for. The "little guys" were left hanging out to dry. Their consolation prize is that the global economy didn't collapse, so they didn't starve to death.

Anonymous said...

Bob,

You believe that government intervention in the economy inevitably creates "distortions" which make it impossible for people to engage in proper economic calculation. These distortions are the root cause of bubbles, crashes, depressions etc.

Thus, if the government would just stop interfering in the economy everything would work in the best way possible, given that only free individuals engaging in volutary exchange are capable of organising themselves in the way that best suits everyone's needs, desires and abilities.


The problem with this theory is that it has very little to do with the real world.

It's simply an ideological assertion - a fantasy - nothing more.


You can keep on shouting that MMTers don't understand economic calculation if you want, but basically all you're saying is that MMTers don't understand the little dream world that exists inside Bob Roddis' brain.

Big deal.

Dan Kervick said...

It really doesn't matter what substance people use as the most fundamental medium of exchange. As long as they are willing and able to create and accept IOUs, then the the potential for debt inflation and financial instability will exist. There is no sharp line to be drawn between money and other liquid credit instruments.

Bob is right to worry about the instability of of finance and the distortions caused by excessively easy credit. But he makes a mistake in thinking this has something to do with the materials that are used as money. The potential for instability and distortion are built right into the foundations of the human institutions of credit and debt. The only way to prevent that instability is to regulate

Suppose we were on a gold standard, or even lived in a system in which we actually used gold as our most basic medium of exchange. But suppose people were in the habit of walking into stores and issuing transferable IOUs as payment for goods, and stores were in the habit of accepting these. Then we can have all the same problems of excessive debt, inflation, distortion, instability and crash.

The free market can't regulate this. It has already proven it can't time after time. The natural tendency in free market finance is the expansion of credit and the greater leveraging of debt. It just seems to be a basic phenomenon of human nature that left to their own devices, people are overly-eager to issue debt and overly-willing to extend credit. If you want to stabilize this phenomenon and prevent debt bubbles, then you need to regulate credit via the force of law.

I think Bob would actually get a great deal out of reading Minsky.

Matt Franko said...

"But he makes a mistake in thinking this has something to do with the materials that are used as money."

Right Dan... good point simply put.

and I also see that perhaps these Rothbard people have no confidence in the morons who are running things so they advocate to turn it over to the random chance ability of humans being able to find adequate quantitiies of a rare metallic rock in the ground that came from outer space rather than turn it over to these morons.

I can see where they are coming from but cannot agree with it.

Resp,