Skirting The Bernank?

Here's an excellent history lesson for you:

Forbes.com - Magazine Article: "The gold standard is also blamed for 'deflation' during any recession. For as long as there have been gold standard systems, which is a very long time, there have been other people who have wanted to try to solve their economic problems with a currency devaluation or some sort of 'easy money' policy.

'But as this Addition to the Money, will employ the People are now Idle, and these now employ'd to more Advantage: So the Product will be encreas'd, and Manufacture advanc'd. If the Consumption of the Nation continue as now, the Export will be greater, and a Ballance due to us …'

See? Just add more money, and all your problems are solved. Does that sound like QE2 today? This quote comes from a book called Money and Trade Considered: With a Proposal for Supplying the Nation with Money. It was published in 1705. The author was John Law.

Law continued: 'Indeed, if lowness of Interest were the Consequence of a greater Quantity of Money, the Stock applied to Trade would be greater, and Merchants would Trade Cheaper, from the easiness of borrowing and the lower Interest of Money, without any Inconveniencies attending it.'

How could anyone refuse such a sensible proposal, especially one without any "inconveniencies" attending it?

Law must have been convincing, because by 1720 he was the Finance Minister of France. His inflationary "Mississippi Bubble" bankrupted most of the aristocracy of France, an Inconvenience that made Law rather unpopular there. Before the end of the year 1720, he fled the country dressed as a woman.

A gold standard prevents this sort of currency fiddling. Thus, the gold standard is called "deflationary" (recessionary) because it prevents the currency manipulators from supposedly solving the unemployment problem through the magic of the printing press.

I wonder how Ben Bernanke and his Keynesian pals would look in a dress? Maybe we will find out."

Thinking about what he would look like gives me the shivers -- and not in a good way I assure you. But we need to see him flee at least, that's for certain. The Bernank: the modern John Law! Ironically, it's not even clear the French would take him!

RTWT.