Sound Money

[Manhattan]

Free trade turned capitalism into a joke with no way to regulate the rest of the world from slave wages that have monopolized and dominated the market

 

Considering that the previous wage of a Chinese peasant was literally nothing for toiling his entire life on a farm, earning 10 cents an hour to work in a factory where all food and housing is provided for and even have time off is a huge improvement. It isn't optimal, but they have not reached that point in economic development yet. The factory jobs are very competitive. More than a million Chinese peasants still don't even have fresh drinking water so they are forced to drink their own urine.

 

My problem with free trade these days is government interference in the market. Providing massive subsidies, for example, to US cotton growers makes it very difficult for developing countries to compete because the US growers are able to remove themselves from the competition of the open market, enabling them to turn out massive amounts of cheap cotton, which is below the cost of production in most countries.

[krill]

The gold standard was responsible for multiple economic panics in the 19th century and extending the misery of the great depression. In simple economic terms, it doesn't make any sense to tie the growth of a nations economy to its ability to mine gold (and produce more money). Production of gold doesn't in of itself reflect an actual increase or decrease in overall economic activity and actually distorts the value of money more than fiat currency. It also presents the very real chance of deflation which is absolutely destructive to an economy. When William Jennings Bryan gave his cross of gold speech that's exactly what was happening to America. Farmers and businesses were being ruined by deflation and the nation was in a crisis. Deflation today would be an absolute catastrophe for the mortgage market that would make the sub-prime debacle look like a bump in the road.

 

For all the screaming about the bailouts (as a result of the sub-prime crisis) the ultimate cost to taxpayers through the TARP program will be about $50 billion as of now. Most of that liability is tied up in GM and Chrysler, which seems increasingly likely to be paid back and was a small price to pay for saving an entire industry that would have been liquidated to China had we done nothing. The bailouts (the correct term is actually loan) to the major banks, aside from the insurer AIG were all paid back with interest. It also seems likely the government will eventually recover loans to AIG, leaving mostly regional and local banks that have failed as the major liabilities. I understand that a lot of people are still mad as hell about the whole thing but the alternative would have been far more miserable. Blaming it on the federal reserve and paper money is just ridiculous.