did the gold standard cause the great depressi

Part 1

I think it is important to have a grasp on this subject, history is a great teacher, it is foolish to think of past evens as inconsequential, however to think this modern generation would not make the same mistakes is common, i.e. "we have laptop computers and far more access to data, we will not make the same mistakes", while history tells a different story, a repeating one.

Modern "Central banker types" seem naturally inclined to think the gold standard caused the Great Depression, gold is their enemy. Seriously gold is their nemesis as it puts power in the hands of "the people" rather than theirs. Without a gold standard they have the power to print money along with a complicated swath of activities to go with it, making them feel important "the wizards of finance" remember "the maestro" Alan Greenspan?

Without his monetary policy America might not have got where it is today... But maybe not all readers here will realize that Alan Greenspan is a closet Gold bug, below is a quote from Alan Greenspan from a 1967 article entitled Gold and Economic Freedo:

"The abandonment of the gold standard made it possible for the welfare statists to use the banking system as a means to an unlimited expansion of credit. In the absence of the gold standard, there is no way to protect savings from confiscation through inflation. There is no safe store of value. Deficit spending is simply a scheme for the 'hidden' confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights. If one grasps this, one has no difficulty in understanding the statists' antagonism toward the gold standard."

This was a wise and telling statement, but why did Alan not talk like this while running the FED? Unfortunately I think he corrupted his logic to be in the position he was, as Chairman of the federal reserve, pushing the gold standard would have made him very unpopular with politicians, who want to give people social benefits without taxing for them, in other words to get voted in, also Alan's ego was massaged, he was held up as a genius. But really it does take a genius to hold together money based on nothing, to give them there due, it is not easy to hold up a piece of paper and declare it has real value or worth, and even that it's worth is what ever they say it is, they are clever illusionists no doubt. (Alan was not the only old school central banker who recognized the discipline and benefits of the gold standard, see John Exter.

The new Fed Chairman does not have even a hint of gold bug about him, there are no pro gold speeches in his past to drag out, no just the opposite, Ben Bernanke considers himself a scholar of the great depression and what caused it, yes he thinks a lack of liquidity was at the root of it, and the gold standard was the restricting factor.

Referring to his speech in 2002 "Deflation: Making Sure "It" Doesn't Happen Here" I quote:

"the U.S. government has a technology, called a printing press (or, today, its electronic equivalent), that allows it to produce as many U.S. dollars as it wishes at essentially no cost. By increasing the number of U.S. dollars in circulation, or even by credibly threatening to do so, the U.S. government can also reduce the value of a dollar in terms of goods and services, which is equivalent to raising the prices in dollars of those goods and services. We conclude that, under a paper-money system, a determined government can always generate higher spending and hence positive inflation."

So we can be quite clear that Ben Bernanke will inflate or bust, but to what end?

It is far beneath the modern central banker to have a gold standard, it is too simple, it does not require a series of degrees to work out gold backed money, it does not take a genius to work out you can't spend more than you earn, so they don't like it, they like a system that does take a genius.

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I made this article as reference material that could be useful to friends & family / those getting started in PM investing. As always I'm interested to here comments.