Monday, November 17, 2008

Detroit bailout may fail, but we're still on the wrong course

The AP has a writeup on the increasinly unlikely bailout for Detroit:

Bailout fatigue has set in at the White House and on Capitol Hill, where many in both parties have spent the past few weeks being berated by constituents for agreeing to the $700 billion Wall Street rescue. (By JULIE HIRSCHFELD DAVIS)

That's fantastic news, if true. Unfortunately, just because they correctly avoid making a bad monetary policy decision doesn't mean they will make a good monetary policy decision. A return to sound money would be far too painful for most Beltway Insiders.

But America needs sound money - a gold standard or something similar.

As Alan Greenspan wrote in 1966:

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. If there were, the government would have to make its holding illegal, as was done in the case of gold. If everyone decided, for example, to convert all his bank deposits to silver or copper or any other good, and thereafter declined to accept checks as payment for goods, bank deposits would lose their purchasing power and government-created bank credit would be worthless as a claim on goods. The financial policy of the welfare state requires that there be no way for the owners of wealth to protect themselves.

This is the shabby secret of the welfare statists' tirades against gold. Deficit spending is simply a scheme for the 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.

"Confiscation through inflation... gold stands in the way of this insidious process."

What I find most sad about the insidious inflation tax is that the ones hardest hit are those most in need. America needs to stop the bailouts of these mismanaged companies, instead using the little political capital that exists in Washington to begin the painful process of a return to sound money.

Tim White

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