In a piece at LewRockwell.com, George F. Smith quotes Murray Rothbard, Milton Friedman, and Nouriel Roubini to lay bare fractional reserve banking as what Rothbard calls “legalized counterfeiting.” Smith writes:
This will be brief, appropriate to the topic at hand. It consists of a quote from Milton Friedman, found in Joseph Salerno’s outstanding book, Money, Sound and Unsound, p. 366:
If a domestic money consists of a commodity, [such as] a pure gold standard or cowrie bead standard, the principles of monetary policy are very simple. There aren’t any. The commodity money takes care of itself. [emphasis added]
Imagine that. If we have sound money we don’t need the Fed. Or Congress. We just need sound money.
End of essay.
Postscript:
Economist Nouriel Roubini once attacked the gold standard:
Roubini raises the following question: If you are on a gold standard, or modified gold standard, what do you do in the event of a bank run—if you don’t have enough gold to fully back the currency?
Translated: What happens if the banks have created bogus IOUs for their depositors’ gold? Suggestion: Have them indicted for fraud. Gold doesn’t “back” anything. It is the money. The banks issue IOUs for the money. When they issue more IOUs than they have gold on hand, they’re cheating.
Murray Rothbard:
In my view, issuing promises to pay on demand in excess of the amount of the goods on hand is simply fraud, and should be so considered by the legal system. . . .
This is legalized counterfeiting; this is the creation of money without the necessity of production, to compete for resources against those who have produced.
In short, I believe that fractional-reserve banking is disastrous both for the morality and for the fundamental bases and institutions of the market economy.… [quoted in Monetary Central Planning and the State, Richard Ebeling]
Roubini also says that a “gold standard limits the flexibility and range of actions that central banks can take.” That alone should recommend it. He thinks it’s a shortcoming.
At the start of World War I the belligerent governments went off the gold standard so they could fight one of the bloodiest wars in human history. Gold, since it can’t be created on demand, would have severely limited the “flexibility and range of actions” governments could take.
Sound money “does not emerge from central-bank policy decisions.” But who cares about sound money when you want to engage in massive human slaughter?
And of course it’s only the gold-less monetary standard that allows the corrupt regime to shore up the ongoing butchery overseas.
More recently, Roubini said, “the world is on a slow-motion train wreck.”
The unmolested gold coin standard avoids train wrecks, “Dr. Doom,” by staying on track.
A gold standard doesn’t need Roubini. It doesn’t need Jerome Powell and his merry band of inflationists. It doesn’t need Congress. It doesn’t need the World Bank or the International Monetary Fund. It doesn’t need the WEF, the FOMC, or AOC. It doesn’t need the numerous insults of various economists who damned it as a barbarous relic.
It just needs to be left alone.
Read more here.
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