
Trump is meeting with an ex-bank CEO who wants to return to the gold standard - MollyR
http://www.businessinsider.com/trump-meeting-john-allison-bank-ceo-abolish-the-fed-gold-standard-2016-11
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WheelsAtLarge
No, the FED is not going away. Unfortunately it's human nature to do anything
it can to create a financial panic. We like to buy when all are buying and
sell when all are selling. When everyone is selling and no one wants to buy
prices tend to collapse at a faster rate. The only way to stop it is to have a
buyer of last resort, that's one of the most important functions of the FED.
If the FED goes away we'll see some very nasty crashes. Congress knows that
and won't let any one administration change its role.

One of the reasons people want to get rid of the FED is that they encourage
markets to act recklessly because the FED is there to save the day when the
panics start. But the problem is that there will always be panics and finding
a buyer of last resort every time makes for a very unstable market and it
limits its growth since the general risk is perceive as higher.

Thrump wants lots of changes but going back to the gold standard or getting
rid of the FED will not happen during his administration.

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adam419
Since I know many here are much more inclined towards rigorous arguments, I
highly highly recommend you read George Gilder's free book supporting
something like a gold standard told through the lens of an information theory
of money:

[https://americanprinciplesproject.org/economics/new-
george-g...](https://americanprinciplesproject.org/economics/new-george-
gilder-book-the-21st-century-case-for-gold-a-new-information-theory-of-money/)

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ender89
Holy crap, the ceo wants to get rid of the fdic, which is like the best
protection against the sort of mass market crash (and runs on the bank) that
caused the great depression.

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adam419
And our current status quo of rampant and reckless monetarism is what causes
such severe crashes and volatility.

(Not necessarily advocating getting rid of fdic)

It's also far less preposterous when you read the next sentence where he
advocates banks have a 20% capital reserve requirement.

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ArkyBeagle
"Reckless monetarism"? Meaning what, precisely?

We're in essence in stagnation because of low interest rates - assuming that's
the cause and not the effect.

So now we're gonna go back to a demonstrably deflationary regime ( the gold
standard ) _and_ raise reserve requirements to 20%?

How is that not even more deflationary?

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adam419
Lol, it is objectively the "effect".

The feds fund rate has been set to near zero for almost 8 years. This is acts
as the baseline cost of credit in our country and given our global financial
stature, the world.

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ArkyBeagle
Bear with me - how does that tie back to monetarism ( which, according to my
dim lights , we simply don't do ).

I presume you mean QE{I,II,II...} ? Those have been zero velocity efforts;
buried in the back yards of big banks without a trace. Increased reserves with
interest being paid on them.

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adam419
See my above reply to dragonwriter.

You're right, of MV = PT they have only manipulated the M (Money supply) so
far.

But unless this destructive dogma and school of thought is put to an end they
will begin to institute velocity efforts during the next crash since rates are
essentially zero and it's all they'd have left: wealth tax or applied negative
interest rate on deposits, helicopter money, etc.

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ArkyBeagle
Agreed. For lack of a better choice, I tend to line up with Sumner and the
Market Monetarists, which is a different flavor of monetarism yet ( and I'd
think more in line with trying to get V up ). So the pallitative for
monetarism may well be monetarism :)

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MollyR
Does anyone know what this means to vc funding in the valley ?

~~~
dragonwriter
Ending independent central banking in the US would probably destroy the
credibility of US Government securities as an investment vehicle, which might
in the short term make more money available in private markets. OTOHnot it's
probably bad for any kind of investment in firms actually substantively tied
to the U.S., and probably best for firms in the kitchen design of it distress
expected to do well in a period of international political instability, not
most tech startups (though some might do well.)

Then again, this kind-of talk doesn't mean he'll be appointed, or confirmed,
or that his past stated policy preferences will make it into law.

