Monday, April 24, 2006

Get Out Your Crystal Ball

The waste caused by uncertainty concerning the economy and the dollar, which uncertainty I attribute to the lack of a gold standard, is breathtaking. For example, after the recent G7 meetings, people like the economists of the Deutsche Bank -- no amateurs -- are wondering:

"Does [the recent G7 decision to request help from the IMF concerning enforcement of exchange rate floating agreements] mean a coordinated policy of dollar weakness is imminent?" ("'Est-ce à dire qu'une politique coordonnée de dollar faible est imminente?', s'interrogaient ainsi les économistes de la Deutsche Bank." See boursorama article.)

Or look at this from the Wall Street Journal, no less:

"Five Indicators Give Early Clues To the Direction of the Economy" (Source)

So, we now have five clues to guess at what the Fed will do next. How can anyone have confidence in the future? Does this mean that the whole world of business, including industrialists, small business owners, governments and economists, must now wait for indicators of clues of unpredictable reactions to uncertain statistics?

Why not bring in the fortunetellers to plan for the next twenty years? Do we really have to sit here on pins and needles waiting for someone in the Fed to give us a hint of which indicator will give us a clue to the potential direction they might go next? And then do we have to believe that what they do will actually affect the direction of the economy in a predictable way? -- because we don't even know that, you see.


[Thanks to northgirlshideaway.homestead.com for the image.]

No wonder the smart money has taken their marbles out of true capitalism and is now spending all their time at the equivalent of Las Vegas poker tables. Who would want to be putting serious money into anything heavy these days, given that (1) you can't predict the value and cost of money tomorrow, (2) the economy could take off or tank at any minute, and (3) you can bide your time speculating on derivatives, exchange rates, interest rates and asset bubbles -- which work no matter which way the economy goes if you play your cards right -- and your chances of success aren't much worse.

If we had a gold standard, the trade deficit wouldn't be what it is. If we had a gold standard, the Fed couldn't create empty credit at the drop of a CPI index. If we had a gold standard, we'd have no inflating of the money supply and the dollar would not be on the brink of revealing its true weakness to the world. If we had a gold standard, foreigners wouldn't be gobbling up our assets -- treasuries, stock market shares, American companies or real estate -- and in the process destroying our savings interest rates, because they wouldn't be holding the results of our bubble-based-equity and future-earnings spending spree. If we had a gold standard, the government might think twice before committing trillions of dollars to assist foreign countries with their timid democratic instincts.

If we had a gold standard, there wouldn't be all of this uncertainty. What does the Fed think it's doing? What was the government thinking when they created this monster? I don't believe in its brand of economics voodoo, whatever it's called.

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