"There is no means of avoiding a final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as a result of a voluntary abandonment of further credit expansion or later as a final and total catastrophe of the currency system involved."
- Ludwig von Mises

Thursday, January 6, 2011

Federal Reserve Governor Hoenig on the Gold Standard

It looks like World Bank President Robert Zoellick is no longer the lone official voice in musing about a gold standard.  Kansas City Federal Reserve President Thomas Hoenig spoke yesterday about a gold standard.  This is very unusual for a sitting Fed Official.

From Reuters:
A gold standard that forces countries to back their currency reserves with bullion is a "legitimate" monetary system, though it would not prevent financial crises, Kansas City Federal Reserve President Thomas Hoenig said on Wednesday.
"The gold standard is a very legitimate monetary system," Hoenig said, adding: "We're not going to have fewer crises necessarily. You will have a longer of period of price stability or price level stability, but I don't know that you'll have lower unemployment, I don't know that you'll have fewer bank failures."
This is an interesting development.  In my view, it represents an increasingly, albeit incremental, questioning of the current monetary system.  Trial balloon, or random conjecture?   I think we'll find out in a few years.  I have some commitments today, and will be posting responses in the comment section on the previous post on MMT and wealth distribution.

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