September 11, 2012

Things We Read Today, 8

Justin Katz

Today: September 11, global change, evolution, economics, 17th amendment, gold standard, and a boughten electorate... all to a purpose.

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I had never heard of "Dollo's Law" before, which was unusual because I have long had an interest in zoology and evolution, and the "law" sounded silly to me from a scientific standpoint. Now I have discovered why - it's apparently some quack theory from the late 1800's that has never been supported by mainstream science, and there are so many counterexamples that the "law" cannot be thought of as such in the first place. The obvious counterexample that immediately came to my mind was snakes, which lost their arms and legs and ears through the evolutionary process and have thrived near the top of the food chain ever since despite their "de-evolution."

Posted by: Dan at September 11, 2012 9:03 PM

As for Howard's arguments against the gold standard, after I somehow managed to read past several paragraphs of chain logical fallacies such as, "The gold standard is clearly stupid. Lots of smart people have commented that it's stupid. We would be doing it now if it wasn't stupid." etc.., it turned out that his whole argument was founded upon the Keynesian principle that government needs to be able to manipulate its currency to respond to a financial crisis. But that is precisely what the gold standard is intended to prevent in the first place and cuts against the entire premise of Austrian economics, which is that government can create bubbles and subsequent recessions by manipulating currency. So if you don't accept the Keynesian premise, his argument carries no further weight. He also points out that government can manipulate currency even on the gold standard by ignoring the purpose of the gold standard and rewriting the relationship between notes and the gold that backs them. The Austrian response to this objection is: yes, don't do that.

Posted by: Dan at September 11, 2012 9:11 PM

There seems to be some current blief that the "Gold Standard" is a sort of panacea. The "panic of 1873 (or was it '78?) and the "Panic of 1896" seem contrary to that notion. They gave rise to Bryan's "Cross of Gold Speech".

If two forms of curency were available, it seems likely that Gresham's Law would come into operation. It did whenwe had gold coins and paper money.

Perhaps someone else here can explain why the government outlawed the private ownership of gold in, I think, 1933. I still recall people hiding their Krugerands under their beds. I also knew people in the jewelry manufacturing business (they were allowed to own gold). They "got the word" and began hoarding gold at the government controlled price of $40.00 per ounce. When the lid came off in the 70's, it zoomed to $700 an ounce. They left the jewelry business.
Also forgotten is that we were on redeemable paper currency into the 70's. I remember one of my business professors explaining how DeGaulle attempted to the break the U.S. bank by attempting to redeem all of the U.S. currency in France for gold (1957, if I recall correctly). Apparently, while U.S. currency was "redeemable in gold", they never expected a "run on the bank". There was only enough gold to actually redeem about 5-10% of the currency. Not sure how much France held. Not mentioned in that lecture was that we were pressuring DeGaulle about the "pied noirs" in Algeria.

Posted by: Warrington Faust at September 11, 2012 11:07 PM
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