eFlourishing Masthead Outlined

 Published Weekly by Family Wealth Management, LLC 
          December 3, 2010                                                                                     Issue 39

Ours is not a philosophy for getting by.  We believe in living with purpose.  We believe in values, in goals, in achievement, and in the joy of living.

 Did a friend send you this email?
Join Our Mailing List
  • Reality
  • Rationality
  • Independence
  • Teamwork
  • Integrity
  • Productiveness 
  • Justice
  • Empathy
  • Courtesy
  • Professionalism 
  • Pride
  • Honesty

FWM Logo 

Family Wealth Mangement, LLC
108 W 9th Ave
PO Box 728



In the December issue of Flourishing  (our print newsletter) you'll find an article entitled A Gold-Backed Dollar and the Law of the Excluded Middle.  In that article I tried to make the briefest possible case for a return to the "gold-standard".

I was subsequently encouraged to find an op-ed in the NY Times by the brilliant James Grant*, following a similar theme. I encourage you to follow this link to read the entire article.

Today, the Fed's hundreds of Ph.D.'s conduct research at the frontiers of economic science.  "The Two-Period Rational Inattention Model: Accelerations and Analyses" is the title of one of the treatises the monetary scholars have recently produced. "Continuous Time Extraction of a Nonstationary Signal with Illustrations in Continuous Low-pass and Band-pass Filtering" is another.  You can't blame the learned authors for preferring the life they lead to the careers they would have under a true-blue gold standard.  Rather than writing monographs for each other, they would be standing behind a counter exchanging paper for gold and vice versa.

If only they gave it some thought, though, the economists - nothing if not smart - would fairly jump at the chance for counter duty.  For a convertible currency is a sophisticated, self-contained information system.  By choosing to hold it, or instead the gold that stands behind it, the people tell the central bank if it has issued too much money or too little.  It's democracy in money, rather than mandarin rule.

...To reinstitute a modern gold standard today would take time, too.  The United States would first have to call an international monetary conference.  A chastened Ben Bernanke would have to announce that, in fact, he cannot see into the future and needs the information that the convertibility feature of a gold dollar would impart.

That humbling chore completed, the delegates could get down to the technical work of proposing a rate of exchange between gold and the dollar....

Other countries, thunderstruck, would then have to follow suit.  The main thing, Mr. Bernanke would emphasize, would be to create a monetary system that synchronizes national economies rather than driving them apart.

If the classical gold standard in its every Edwardian feature could not, after all, be teleported into the 21st century, there would be plenty of scope for adaptation and, perhaps, improvement.  Let the author of "The Two-Period Rational Inattention Model: Accelerations and Analyses" have a crack at it.

My long-distance economics professor, George Reisman, PhD., has offered several ideas for returning to a gold standard over the many years that I've followed his work. In his book, Capitalism: A Treatise on Economics, Dr. Reisman makes hundreds of references to the gold standard, and in fact, a return to a gold standard is a recurring theme. You can access a searchable PDF of Capitalism here: http://www.capitalism.net/ Capitalism /CAPITALISM_Internet.pdf.

In case you're wondering, I'm making a big deal of this, because I expect to see more proposals for a return to a gold standard emanating from Washington, D.C. and elsewhere in coming months. You are now forewarned. Until next week,



*   How to Make the Dollar Sound Again, The New York Times, Nov 13, 2010.   James Grant, the editor of Grant's Interest Rate Observer, is the author of Money of the Mind.

Quick Links
Learn more about: 
For Clients  
The opinions voiced in this newsletter are for general information only and are not intended to provide specific advice or recommendations for any individual.  To determine the investment(s) that may be appropriate for you, contact your financial advisor prior to investing.  All performance referenced is historical and is no guarantee of future results.
All indices are unmanaged and can not be invested into directly.  Securities and financial planning services offered through LPL Financial Member FINRA/SIPC. 
Securities and Insurance Products and Financial Planning offered through LPL Financial and its affiliates.  Member FINRA/SIPC.
Not FDIC Insured.  No bank guarantee.  Not a deposit.  May lose value.  Not insured by any government agency.