Posts Tagged ‘bank failures’

A gold-standard 1928 one-dollar bill.

Last week, I heard a prominent alternative financial analyst say the U.S. dollar should be replaced with a new currency backed 15 to 20% by gold, or it wouldn’t fly.

However, prior to the 1933 gold confiscation, the U.S. dollar was backed 35 to 40% by gold, and that didn’t prevent the Great Depression, nor the 5000+ bank failures or one-third contraction of the money supply from 1929 to 1932.

Previously, I wrote the articles, Support for a gold-backed currency crosses the political divide and The gold standard loses its perceived lustre, with major media exposure.

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On Tuesday, December 1, 2009, LewRockwell.com featured an article with the headline, “Famine or Gold Standard: Charles Goyette on the choice before us.”┬áThe article itself is entitled, “Parallel Universes,” and is a fictional account.

But wait. The U.S. was on a gold standard from 1929-1932. Did that prevent the Great Depression? No, it did not. It didn’t prevent the 20%+ unemployment, the 88% drop in the Dow Jones, nor the 5000+ bank/S&L failures during that period.

The Federal Reserve was to blame, you say? Yes, but only in part. The Federal Reserve existed while the U.S. was on a gold standard. Those two variables are conflated, and therefore, one can’t say with certainty that one was to blame and the other wasn’t, or that one factor was more to blame than the other, unless you measure the effect of each, independently of the other.

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The Federal Deposit Insurance Corporation (FDIC) reports the number and names of banks it insures or has insured that have failed since October 1, 2000.

from October 1, 2000 to December 31, 2007: 27
since January 1, 2008: 41 and counting


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