Reply to Paul Krugman

By Howard S. Katz, GoldSeek

“Selection of gold as our state mineral is acknowledgement of the intimate part it has played in the history of our people and of the fact that mining is a major California economic activity.”

Governor Edmund G. Brown, Apr. 23, 1965 (signing legislation designating gold as California’s official state mineral.

On Oct. 12, 2009, Paul Krugman, columnist for the New York Times (Op-Ed Page) did his column attacking the gold standard and defending the bankers privilege to create money.  This was such a perfect exposition of the lies of our age that it bares closer examination.  Because the more one digs into this issue the more things are not as they seem.  Indeed, this is part of the existing system whereby the government robs wealth from you and gives to the ultra-rich.  Let us start the examination with a number of facts.

First, Krugman asserts: “Peter Temin has argued that a key cause of the Depression was what he calls the ‘gold-standard mentality.”

The United States went on the gold standard in 1788 with the adoption of the Constitution.  Britain followed at the end of the Napoleonic Wars (circa 1815).  These two countries then became the number one and number two wealthiest countries in human history.  The phenomenon which is called the Depression did not occur until 140 years later.  Anyone with the slightest acquaintance with the science of economics has a sense of the time span between cause and effect.  For example, when there is a large increase in the money supply, the consumer price index goes up by a corresponding amount two years later.  The lag between cause and effect is 2 years.

Then what sense does it make to say that the gold standard, adopted in 1788, caused the Great Depression, which started in 1929?  It’s like saying that a person who sneezed in 1776 caused the great flu epidemic of 1918.  A person who would make such an assertion does not have even an elementary understanding of his subject.  If he did, he would be ashamed to make himself look so stupid.

Second, the great defense of the gold standard was made by the Democratic Party, which was founded in 1828 by Andrew Jackson and Martin van Buren.  These men abolished the second central bank (similar to the current Federal Reserve System).  They attacked Wall Street and the bankers, and central bankers became persona-non-grata from 1832 to the early 20^thcentury.

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