Why we need the Gold Standard
Published in Business Line on Feb 28, 2007
The article shows that the only cause of Inflation is Government printing of excess Money. Yet, there has never been an instance when Central Banks have acknowledged... but as Peter Schiff puts it, "Expecting Governments to accept their role in creating inflation is like asking the Mafia to give an honest report on crime".
Our RBI goes a step further and states that a 4-4.5% inflation is actually good for the Indian economy -- almost as if they are doing us all a favour by debasing our currency. On top of it, they claim that this wisdom comes from their experience..... how would they ever know what 0% or 1% inflation would be like -- they have never experienced it. Anyway, we can only hope that sanity prevails sooner or later and they move towards a Gold standard.
posted by Shanmuganathan N @ 8:49 PM
3 comments
3 Comments:
Sir,
I opened http://financial-musings.blogspot.com in the internet and read your article "Why we need the Gold Standard", but it is a summary of your article "Why money must be gold-plated". Is it not difficult for anybody to comment on "Why we need the Gold Standard" without reading the original article "Why money must be gold-plated"?. So, I request you to place the original articles, but not the summary.
Sir,
I am very sorry for trouble given to you. I came to know that by clicking "published in Business Line on Feb 28,2007" I can read the original article.
Sir,
The management of any system, may it be the “Gold Standard” or “Paper Money System” depends on the wisdom of our RBI. In the “Gold Standard System”, there may not be any inflation, but what about the factors - a) Increase in population of India and b) Decrease in “time” to do any work. As a result of the above two factors, unemployment would be more and people would be ready to work even for less salaries. In the long run, the salaries would decrease and as a result, the standards of living of the people also decrease. The effect is same as inflation. So, there may not be any use of reverting to Gold standard.
The new system is like a knife. You can cut the vegetables as well as your hand with it, but how wise is it to refuse the knife fearing that there is a possibility of cutting the hand? In fact, the “Paper Money System” offers tremendous flexibility in increasing the standards of people, but it is our curse that we do not have experts on how to utilize it to our advantage.
As far as fear of fall of capitalism is concerned, we are not lucky to have left-leaning capitalism as happened in Latin Americas. It may still take about 15 years for worsening of the situation in India.
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