Date registered: Dec 2005
Location: United States
Mentioned: 3 Post(s)
Quoted: 397 Post(s)
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The 90-day freeze turned into nearly 1,000 days of measures known as Phases One, Two, Three, and Four. The initial attempt to dampen inflation by calming inflationary expectations was a monumental failure.Nixon Imposes Wage and Price Controls
...The wage and price controls were mostly dismantled by April, 1974. By that time, the U.S. inflation rate had reached double digits.
"To throw the adjustment mechanism squarely on the value (or the purchasing power) of gold and silver is....an invitation to disaster. Rothbard is forgetting completely about speculation. How would speculators act when anticipating a rise in the value of gold, for example, after the adoption of a new technological procedure that would lengthen the production of computer chips from fourteen to forty stages along the pipeline? Such a development, in the 'roundabout' nature of production (to use B√∂hm-Bawerk terminology), would cause a near-revolution in the division of labor, requiring massive new investments in production facilities, which would have to be financed. That part is the job of savers, which is all right. But once the new production line is in place, the actual movement from the producers to the consumers of chips will have to be financed by short-term credit. That part creates a problem that must not be ignored. Since the job of moving the maturing computer chip from the producer to the consumer calls for the invasion of the pool of circulating gold coins forty times (instead of fourteen times, as previously) speculators would correctly anticipate a rise in the value of gold and they would start hoarding gold coins. This would make the rise in the value of gold much greater than need be, and speculators would be rewarded for their greed where they did not perform any useful service to society. A vicious anti-gold agitation would result, and it may wreck the fledgling gold standard."And so he proposes self-liquidating bills of exchange that mature in 91 days or less -- short-term money -- as an elastic but non-inflationary adjunct to a gold standard.
"The new gold coin standard can succeed only if it is implemented in conjunction with real bill (bills of exchange) circulation. Only in this way can we ensure the needed elasticity of purchasing media to follow the seasonal and secular fluctuations in the demand for it. It is unrealistic to expect that the gold coin standard, unaided by real bills circulation, can meet these fluctuations. Indeed, the payments system would seize up during every Christmas shopping season, or whenever division of labor is refined by implementing new inventions, for reasons of dearth in the supply of purchasing media. We should remember that the supply of gold is highly inelastic (which is, paradoxically, the main reason for gold to have become the monetary metal par excellence). So the choice is between (1) retaining the banking system which is liable to issue unsound credit thereby undermining the monetary system as it has done in the past, or (2) replacing the banking system by real bills circulation, which will not only provide the needed purchasing media, but will do it with transparency, satisfying the requirement of full disclosure.""One's savings will not be worth 25% less ten years down the road, and then 50% less ten years later."
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