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Wednesday, April 13, 2011

floating the kilogram

floating the kilogram(serious satire)

mr. lipsky's views  are generally far more  conservative than my own, but in this case i agree with him.

notes from a recent  talk by  sol lipsky:

mr. lipsky gave a clear analysis of the historical roll of the value of currency in all our lives.
a recent news dispatch disclosed that the kilogram that is kept in a locked vault (for 100 years) in france as a standard for the world kilogram has been losing mass.
mr. lipsky satirically suggested that we float the kilogram.
we float the dollar.
the dollar traditionally was a set amount of grains of silver.
now we let the dollar float; why not the kilogram?
carrying this logic to its conclusion examines the absurdity of a floating dollar.
if you owned some weight of gold and a kilogram was 2.2 pounds and  if the pound standard changed, say to 2.0 pounds, your gold would be worth less.
the dollar now isn't  pegged to anything.
"china, you have a lot o our debt.  guess what? 
we are going to print a whole bunch more of it and it's going to be worth less, not worthless.
when the founders wrote the constitution, they gave congress the power to coin money and regulate its value.
in the same sentence, they gave congress the power to establish weights and measures.
messing with the value of the dollar at one time was punishable by DEATH by the coinage act of 1792.
the value was set as 371 and 1/4 grains of silver.
that amount of silver is the same as the spanish milled dollar.
the dollar was in existence before the constitution.
they just adopted it as the standard of measure for our system.
very few people know that.

one of the reasons we seceded from england was judges pay.
we wrote in to the constitution that federal judges' pay can never be cut.
 a judges pay that in 2000 was in dollars that were 1/180th of an ounce of gold.
todays judges (and you) are paid with dollars worth 1/1500th ounce of gold.
we have effectively reduced judges pay to roughly 1/4 of what it was just a few years ago.
federal judges now have a lawsuit before the supreme court saying that the congress is illegally withholding a pay raise they were promised.
if that principle holds up for judges,  it would be a good thing for the rest of us.



devaluing currency is something out of the 1600s.
it didn't work then.
do we think the people in china don't understand economics?
there will have to be a reckoning.

in the late 1970s, the dollar had collapsed from 1/35 ounce of gold to 1/800th ounce of gold.
then we brought in paul volcker to head the federal reserve.
he raised interest rates and value began flowing back in to the our dollars.
in those days when interest rates went to 10 percent, your saving got you 10%, or more.
money in banks today is making virtually nothing.
there is a massive wealth shift.

these issues have an incredible effect on our lives.
the instability of our dollar is one of the reasons we aren't pulling out of the recession as we normally do.

in germany after world war 2, they had a terrible currency that wasn't convertible.
for several years after the war, their economy was dead.
no one was lending; no one was borrowing.
the people were fighting in the streets for individual potatoes.
along came economics minister ludwig erhar, and he sends a plan to gen. lucius clay to withdraw the old currency overnight and replace it with a sound german mark.

"herr minister, my advisors tell me this wont work."
"herr general, my advisors tell me the same thing."
they had a good laugh and clay said, "go ahead and do it."

overnight, the economy came alive.
right then, the cold war was won.
at some point in this country, a courageous leader will step forward with a similar plan with respect to our currency.
the late milton friedman said that the problem with the gold standard is that you can go off it.

the bernanke school is so sure that spending is the answer to most economic problems.
he is certainly a world class economic scholar and is more aware of the risks than you and ."
he seems painted into a corner he cant escape








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