Obama says: "Drill Baby Drill!"

"Socialist" maybe not, however he does subscribe to Black Liberation Theology as stated in his book Dreams From my Father. Some say that BLT is the same thing as socialism - I don't know because I haven't researched it myself.

 

um . . . . you missed it by one Prez ... if it matters :

[ame="http://en.wikipedia.org/wiki/History_of_the_United_States_dollar"]History of the United States dollar - Wikipedia, the free encyclopedia[/ame]

. . . . . Feds had to print a lot of fake paper money to pay for Viet Nam ... oh wait ... actually ... WE had to pay for it, because when paper floods in, your own personal pile sitting in the bank becomes worth less and less.
And YES ... both sides are equally culpable. Blame simply gets used to shift focus off our preferred side ... though both sides are doing the same thing ... so keep on fight'n

.

 

I'm sure most everyone here realizes this, but just in case, it's important to realize that the amount of paper money in circulation makes little difference in the modern world. Most "money" today is nothing more than digits stored in a computer file. We have largely replaced cash with accounts, and supplemented that with credit. I can borrow money and spend it without any real cash being involved.

The real value of our money isn't determined by printing money, it is set by our federal interest rates and the world market.

Tom

 

[ame=http://en.wikipedia.org/wiki/Money_supply]Money supply - Wikipedia, the free encyclopedia[/ame]

 

I know it is easy to forget, but you missed it by one as well,, Rembember Jerry Ford?

Icarus

 

The united states left the gold standard in 1971 under Nixon. I would argue that the gold standard is a bad thing, not a good thing. Countries that abandoned the gold standard earlier recovered from the great depression faster. IMHO problem comes in monetary policy that generates a currency that is too weak or too strong. A gold standard gets rid of this option but the federal reserve has the power to do this well. Monetary policy under Carter was particularly damaging. Monetary policy under W. and Obama did raise the cost of oil by weakening the dollar but has not been inflationary because of china's monetary policy. We don't need to go back to the archaic gold standard, but need to slowly tighten monetary policy to strengthen the dollar and address possible chinese moves. IMHO under Reagan, Bush 41, and Clinton monetary policy freedom probably helped the economy versus using a fixed gold standard.

But what does this have to do with drilling? Drilling more in the united states really won't move the price of oil much at all. It will slightly reduce the trade deficit for oil in the short term, but may do harm in the long term by reducing the US potential reserves when oil becomes more scarce. Providing financial incentives and lease extensions is just a crazy give away to the oil companies as they will drill without any incentive at today's $100/bbl oil. Reducing environmental regulation is also crazy as future technology may make drilling safer, so why drill now when the oil this country owns will only go up in value and getting to it will only get less dangerous as we develop safer drilling methods in other countries.

 

I thought we left the gold standard under FDR.

 

Gold is ugly. I think we should go back to seashells.

 

Beads, go back to beads.

Just heard that the current conservative economist belief is to cut down on the debt by selling the gold in Ft. Knox, I guess that is one way to never go back to the gold standard. Of course, like most conservative thinking, its reactionary, never intelligent, thus when all the gold is gone, the deficit will be lower, but not by enough to make as much of a difference as they think, and there will be no backup.

 

Not exactly. FDR first outlawed the private ownership of gold in 1933, but kept the fixed exchange rate. Later he devalued the dollar by making the gold/dollar exchange rate $35/ounce from about $21/ounce. It was Nixon who made the final disconnect between gold prices and dollar value.

 

President Ford only signed legislation that permitted Americans again to own gold bullion, that legislation did not put the United States back on the gold standard. That minor event was in '74.

Back in the day - under the gold standard, Fed's were limited – both legally and practically – as to how much paper money it can print. As recently as the Lyndon Johnson administration, the U.S. could print paper dollars equal only to four times the value of the nation’s gold reserves. Not any more. Is that good or bad?

395 tons of the UK's gold were sold off between 1999 and 2002. It bought down a lot of debt ... and with the market flooded, the per ounce cost tumbled ... at least for a little while.

 

Not going to get into the details as it is OT and FHOPol, but the above is, of course, wholly false.

 

Hill,
Having a fractional gold standard under Johnson did not prevent the government from issuing bonds to pay for the war. Fractional gold reserves of 25% are subject to speculative attacks. Keeping inflation in a range is a good thing, but if you don't trust the fed to do that without a gold standard, how can you trust it to do its other activities.

Here is a take on how the fed caused and intensified the depression under the gold standard.

FRB: Speech, Bernanke--Money, Gold, and the Great Depression --March 2, 2004

 

Very good article to read. Bernanke makes are good case for the gold standard causing the US problems, but he does little to separate cause from correlation. While there is good correlation between when a country left the gold standard, he provides little description as to why this was a cause, not a correlation. He also totally leaves out all the dramatic changes FDR and Congress were inflicting on the country (e.g. Price controls, Large Government spending programs) that surely had an effect.

 

I am not quite understanding the criticism. Bernanke's theory, which is the one proposed by Friedman and Schwartz, is that the fed monetary policies caused the great depression. The indirect problem with the gold standard was the fed raising interest rates to defend its partial gold reserve. This coupled with bank failures caused a large contraction of the money supply. Since other gold standard countries were tied to the dollar through the gold standard those countries also had to raise interest rates, then experienced contraction in the money supplies and deflation. Other research in those non gold standard countries like England and China show they did not experience the same deflation and unemployment. You can read this on your own, the short paper is in no way long enough to explain all of these things. The fed could have devalued the dollar on the gold standard earlier, in 1931 when the attacks took place, instead of raising interest rates. In any case the dollar was going to need to be devalued to account for the realities of the situation whether with a gold standard or with out one.

 

May criticism is not that the analysis is faulty, it's that it puts all the depression (and it's long duration) causes into one bucket.....the gold standard. I have no doubt that it was a very key factor in the initiation, but Bernanke's point is that it was the more or less complete cause. He leaves out the dramatic changes issued by FDR administration going on at the same time, and many other financial manipulations having little to do with the gold standard. That's why cause and correlation separation are important.....and very hard to untangle. As a theory, it's a good start. As a proven answer, a lot of real world modeling/simulation, local testing, and experimentation to competing theories would go a long way to show it's valid.

 

Then you have misunderstood. His point is Fed monetary policy was the cause of the long length and severity of the depression. This is opposed to the view that over capacity was the primary cause. If the fed had dropped real interest rates and rescued small banks from bank runs there would not have been the shrinkage in M2 and deflation. This could have been done while keeping the gold standard, with only a temporary suspension in 1931.

The high unemployment and deflation occurred before Roosevelt so these influences do not need to be analyzed to as great of an extent. He does address the other manipulations of the federal reserve.

 

I certainly misstated my first sentence. It should have made the one bucket "fed policy" instead of "gold standard". My mistake. Other than that, I understood his speech and still think that think that the depression causes had a vast number of moving parts all interacting rather than just one organization, the fed, that created and resolved it all. That is not to be taken as his points are invalid, it's just that in the field of economics, most all theories result from back looking analysis and true controlled experiments are rarely done to validate various theories.

 

The freidman/schwartz thesis is that the fed through their activities intensified and prolonged the depression as well initiated the stock market crash. Bernanke has added additional research to support this theory. None of them concluded in their research that the fed by itself ended the depression. There are some key points here. Instead of raising all interest rates to reduce stock speculation, a higher margin requirement has been instituted. To stop bank runs federal insurance was instituted. There are no hard and fast rules for the fed on interest rates, but volker/greenspan/beranke have targeted m2 and cpi and this can do a better job to control inflation than a gold standard but requires discipline. If you will note with the gold standard Roosevelt confiscated the gold and inflated the currency. A gold standard does not stop bad government actions. In 1971 Nixon chose to simply end the gold standard instead of revaluing the dollar to a different level.

You are of course entitled to your own opinions, but by studying the effects in multiple economies we can get an idea of what some truely bad ideas are, and the fed in the 1920s and 1930s had some very bad policies.

This has no bearing on whether QE or QE2 are a good thing. IMHO they are again the government being over active in the economy. Buying bad mortgages though may have helped reduce the chances of the US going into another depression, the government just paid too much for them. FNMA and FreddieMAC were government programs that helped us get into the financial crisis.

 

Your points are good. I am reading them. Indeed it's clear that fed policy is a really big factor. Both in the past and in the present.

It's the other parts that get left out with these theories that I keep in mind. For example, the tax rate especially on the upper brackets skyrocketed in 1932 (e.g. Top Rates went from 25% to 63%. The lowest rates went up from 1% to 4%). This was not something the fed controlled, but this was a significant factor in amplifying the length and intensity of the depression. How significant a factor? I don't know. FDR's price controls are another factor that could be significant.

Unfortunately, when asking various economic types how much a factor these are, we get qualitative answers (e.g. "significant") and then rate it by the speakers influence. What would be nice would be a qualitative answer (tax rate rise of 4% causes 10% inflation) and showing solid experimental evidence.

Presently the Fed is doing QE and QE2 based less on the fed's desire to control the interest rates and based more on responding to the out of control spending being created by congress. (e.g. If we have a big inflation surge, I'm not going to blame the feds first.)