Fifty years after Nixon closed the gold window, prices are heading toward 1970s-era increases. Yet the Fed cannot increase interest rates as long as the politicians keep creating billions of new debts.
Even at a "mere" two-percent level, cumulative price increases over time are nothing to scoff at. Even worse, if we look at what people really spend money on, price inflation doesn't much reflect the conclusions of "official" stats.
In 1971, David Rockefeller favored a “new international monetary system with greater flexibility” and “less reliance on gold.” Seeing an opportunity to expand his own power, Richard Nixon enthusiastically embraced the scheme.
“We crossed the Rubicon in 2008. We crossed a different Rubicon in 2020. And we're never going back. And so, recessions are not allowed." The money mandarins will do everything they can to prop up asset values. Forever.
On Friday, Twitter CEO Jack Dorsey tweeted a link to Rothbard's essay "Anatomy of the State."
Modern economies produce a seemingly endless supply of goods. But without the "subsistence fund," built on saving and investment, the mountain of goods we take for granted would be impossible.
In 1971, Nixon used a fiscal crisis to justify severing the dollar's last connection to gold. It was the same old story: "we must vastly expand government power because of a 'crisis.'" The government never gives up these new powers.
The collapse of the monetary order in 1971 reflected the massive dislocations and malinvestment of resources that ultimately turned the decade into one crisis after another. Keynesians are doing something similar today.
The real world should always be regarded as the best foundation for an economic theory. Yet many mainstream economists think it's fine to ground economic theory in unrealistic assumptions about human behavior.
