NO WAY OUT
By John Williams
Faced with the Great Depression, and unable to stimulate the economy due largely to the monetary discipline imposed by the gold standard, President Franklin Roosevelt used that circumstance as an excuse to abandon the domestic gold standard. He adopted close to a fully-fiat currency, under the auspices of what could be called the “debt standard,” where the government effectively could print and spend whatever money it wanted to create.
Where President Roosevelt had the option of changing the system to address his crises, abandoning the gold standard and embracing the open creation of new money with the expansion of Federal debt, there is no place for the current administration to go. There are no alternatives to the current system that would enable the government and the Federal Reserve to continue pushing their problems into the future. There is no gold standard to abandon.
For decades, going no further than the shortsighted political self-interests of those running the system, the government and the Fed borrowed excessive economic growth and prosperity from the future, knowing that eventually there would a time for payback. That day-of-reckoning is at hand.
Accordingly, it would be the Obama administration that will have to deal with the hyperinflation, a forced abandonment of the debt standard, and the creation of a new domestic- and global-currency system. Yet, no existing or rejiggered financial system would work for long – including one backed by gold – unless the long-term fiscal circumstances of the United States are addressed and brought into balance. Continued uncontainable and uncontrollable U.S. fiscal imbalances simply would continue to disrupt, and lead to continual devaluation and inflation, for any new U.S. currency.