[lbo-talk] What if the USG sold it's gold?

Shane Mage shmage at pipeline.com
Wed Jan 20 12:57:17 PST 2010


On Jan 20, 2010, at 3:22 PM, Sean Andrews wrote:


> [Thomas Frank speculates on the ironies it would create amongst the
> loony lib/right.-s]
>
> http://online.wsj.com/article/SB10001424052748703837004575013373812096744.html?#printMode
>
> One Cross of Gold, Coming Up
>
> How the government could get even with right-wing cranks.

T. Frank's analysis is precisely wrong. The price of gold would not fall--it would rise. He worships at the fetish of supply and demand, imagining that demand would be unchanged even if the government revolutionized its basic policy of financing itself through zero-interest loans from the Fed and negative (real) interest loans from China. But what would really happen? In an instant the Chinese Central Bank would buy up the whole mess in "exchange" for less than 20% of its embarrassingly large holdings of US Treasury securities, and would move (the Chinese still retaining enough Confucius-compatible parts of Marxism to believe firmly that "God and Silver are by their nature Money") toward making the renminbi fully convertible into gold. Since the gold renminbi would very quickly become the world's reserve currency the price of gold would soar (because of the increased demand for monetary gold). And the dollar? Its catastrophic depreciation would be the wet dream of every hyperinflation-mongering goldbug!

Shane Mage


> This cosmos did none of gods or men make, but it
> always was and is and shall be: an everlasting fire,
> kindling in measures and going out in measures."
>
> Herakleitos of Ephesos



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