Radical Left

Tom Frank Driven Mad by Gold

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We've seen it in any number of movies–seemingly sane men driven stark staring mad by the lure of gold. Wall Street Journal columnist and the smartiest smarty pants among the progressive journalist intelligentsia Tom Frank joined them last week.

Take a ginger tiptoe around his breakdown, in which he floats the idea that it would be pretty neat if the government fucked up all those right-wing wackos who don't trust the government to manage the currency properly by willy-nilly selling off–or even just hinting that it might sell off–lots of its gold in order to make the price drop, just to cause everyone who is unpatriotic enough to think they want to protect their assets by connecting them to something other than government paper to get it and get it good.

Of course, after rubbing his fingers together with unalloyed delight at how wonderful and apt this would be, how it is exactly what anyone who doesn't trust the government deserves, he lets you know:

Of course, it is an article of my corny liberal faith that government should never craft policy merely in order to damage its partisan opponents.

He then goes on to backtrack and talk about how cool and appropriate and rough-justice it would be if the government really did it. Psych! He's kidding. Really. But…come on, they deserve it, right? But naaah, that would be wrong. But wouldn't it be cool! Nah, that's all right, goldbug brothers, I'm just messin' with ya.

A whole bunch of Reason magazine stories and blog posts on the continuing crisis of Thomas Frank in our public life.

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  1. The Continuing Crisis of Thomas Frank would be a good name for a band.

  2. Of course, it is an article of my corny liberal faith that government should never craft policy merely in order to damage its partisan opponents.

    I believe you, Tom.

    1. I am curious. If the govt decided to unload that 261 million ounces of gold on the market, wouldn’t it actually drive prices higher as folks scrambled to get all they could? What percentage of the world’s gold does the U.S. govt possess?

      The price of gold is over $1,100 per ounce, near its all-time high in nominal dollars. At that price, the Treasury’s 261 million of ounces of gold would be worth nearly $300 billion.

      Should that figure make me depressed?

      1. dmn. that wasn’t sposed to be a reply. sorry

      2. Since we’re already treading, I think it would drive the price down temporarily, screwing people actively trading commodities, but people holding it for a hyperinflation/goverment collapse/zombie apocalypse scenario are holding it for the long term, so it would just be an oportunity to stock up on the cheap for them.

  3. I say go for it!
    For the lulz, my friends, for the lulz!

  4. So, his idea is that the government should take arbitrary and punitive action to screw over the people who don’t trust the government?

    Riiight.

    1. Rather reminiscent of the DHS plan to infiltrate conspiracy-minded groups to destroy them from the inside, isn’t it?

      1. I thought it was the “regulation czar” Sunstein that dreamed up that bit.

        1. Erm, maybe it was Sunstein. I lose track of all the jerk-asses in DC sometimes.

    2. The leftists have replaced their need for a god-myth with the state. Expressing distrust or a lack of faith in government to a leftist is the same as expressing your love for Satan.

    3. “Bowling! BLAM!! Bowling here! BLAM! BLAM!”

  5. True, Thomas Frank was suggesting something that would be unethical. One more reason not to like him (I never did, anyway).

    But he’s got a point, no? The belief that holding gold gives you some protection from government monetary folly overlooks the fact that the govt is a huge holder of gold.

    There’s a related point Frank doesn’t make, which is that if the govt did try to re-link the dollar to gold, it would have an enormous credibility problem–what’s to stop them from just abandoning a gold standard again, now that they’ve shown it can be done?

    The stock answer to that is we need a market of competing private currencies, of which the most viable presumably would be those backed by gold or some other commodity. But it’s not clear (to say the least) that a private issuer of commodity-backed money would have greater credibility. The basic problem is handing coins or bullion over in every transaction is impossibly inefficient; and trading paper or electronic claims that are “backed” by the hard commodity works only insofar as you trust the monetary authority not to, well, screw you the way Thomas Frank suggests it should.

    1. The basic problem is handing coins or bullion over in every transaction is impossibly inefficient; and trading paper or electronic claims that are “backed” by the hard commodity works only insofar as you trust the monetary authority not to, well, screw you the way Thomas Frank suggests it should it has for the last one hundred years or so.

      There. That’s a tad more accurate.

    2. You could always use bills with small amounts of gold threaded inside, if it came down to the inconvenience of coins.

      Personally, the pirate in me would deal with the inconvenience and keep the coins.

    3. From the figure quoted up-thread ($300 billion) the U.S. government doesn’t sound like a huge holder of gold. (Yes, $300 billion is a lot of money to you or me, but I mean relative to our nation’s debts.)

      1. Yes, it’s not a lot relative to the money supply. So to back the dollar with gold, govt would have to either (a) set a very high price for convertibility and/or buy lots more gold or (b) shrink the money supply drastically and destroy the economy.

  6. that wasn’t sposed to be a reply. sorry

    I forgive you, Ben.

    Now say, “Threaded comments suck” fifty times.

    1. He must make an act of contrition.

      1. Was it an act of contrition? or some awful premonition?
        As if she saw into the heart of her final blood-soaked night
        Those lunatic eyes, that hungry kitchen knife
        I see sir, that I have your attention

        1. Your mind’s diseased with perverted justice
          I am on my last limb, I’m on my last limb
          Nameless horror we call love
          I was only laughing, hah I was laughing

          1. Oden! Guide our ships
            Our axes, spears and swords
            Guide us through storms that whip
            And in brutal war

  7. I say do it. The resulting brief dip will provide a great opportunity to buy more gold! But I don’t think they can actually do more than threaten, as I don’t believe the government is in physical possession of anything near 8 tons.

  8. How do you know the government owns any gold?

    1. I saw a shitload of gold in the basement of the Federal Reserve building in NYC during a 5th grade field trip in the 1970s.

      And didn’t that classical actor (Olivier? Stewart?) steal a bunch of gold from there in one of the Die Hard movies?

  9. Warren, wouldn’t it be about 8 thousand tons?

    1. 8,158.25 tons.

      I say that we should mint it all into $1 coins. Tiny dollar coins.

  10. Now say, “Threaded comments suck” fifty times.

    Done. now what?

  11. We’ve seen it in any number of movies–seemingly sane men driven stark staring mad by the lure of gold.

    Some men’s pursuit of gold causes insanity in others.

  12. now what?

    Go forth, and thread no more.

  13. Historically, this is reminiscent of the Bank of England dumping its gold reserves not too long ago.

    I believe it was followed shortly by a run-up in the price of gold.

    The World Bank recently sold a couple hundred tons of gold. Followed shortly by a run-up in the price of gold.

    Gold prices rise as people lose faith in paper currency. Having the US dump its gold reserves isn’t going to increase anyone’s faith in the soundness of the dollar, ergo . . . .

    1. Yeah Frank should leave the financial speculation to somebody else and stick to what he knows – which, come to think of it, isn’t actually much of anything.

    2. There was a letter in the WSJ today (in response to TF) that made much the same point.

  14. One more thought:

    I believe the Chinese would be delighted to convert as much of their dollar holdings to gold as possible. They are doing so now. The opportunity to convert a big pile of their depreciating dollars to gold would be irresistible. That gold would most likely never see the retail market.

    1. Another (similar) point raised in a letter in the WSJ today. Did you write that under a pseudonym?

      1. Nah, I’ve just been studying the gold market and its history for about a year now.

  15. Do people actually listen to this guy?

    I mean, anyone besides the inner circle of the BHO administration?

  16. Given that the govt couldn’t sell it all in one transaction, wouldn’t any falling price also seriously impact how much IT made off selling the gold?

    1. Given that the govt couldn’t sell it all in one transaction, wouldn’t any falling price also seriously impact how much IT made off selling the gold?

      Hopefully yes – but that would merely be poetic justice. The government got that gold cheap when it forced people to turn in their gold in 1933 at $20 per ounce. Because too many paper dollars had been created, the true, free market price would have been much higher – therefore the government subsequently raised the “official” price to $35 an ounce, nicely ripping off the previous owners.

  17. Mr. Longtorso, I don’t think that matters as much to the author as the prosoect of screwing over the small government types that are hoarding all that gold.

    1. Hey, ya got to screw every last victim or you’re just an amateur.

  18. He must make an act of contrition.

    Sometimes you just make me nervous Suge.

  19. Is anyone else a Mark Helprin fan? Thomas Frank’s column, idiotic wordshittery that it is, has the saving grace of reminding me of the elaborate gold heist in Memoir From Antproof Case.

    1. The difference is that Mark Helprin is a writer. Frank is a collection of monkeys pounding on keyboards.

  20. Oh wow, this actually sounds really good to me dude.

    Jess
    http://www.online-privacy.int.tc

  21. Hey, the guy has a column to write. Leave him alone! If the WSJ were handing you a big fat check to come up with 800 words a week, you wouldn’t want some no-name dick pissing on you, would you?

    1. depends on what you’re into, I s’pose.

  22. Gold dollars

    13mm-15mm. Smaller than a dime. So easy to lose.

    1. But you wouldn’t be able to tuck them into a g-string.

      1. I’ve been told the lack of dollar bills in Canada has led to the girls taking the coin and depositing into a tip cup. Without using their hands.

        1. Brings new meaning the term “Make it rain.”

          1. As well as “tinkle.”

            1. Gotta see/hear that “tinkle”. Crossing the line to Vancouver asap!

  23. I’ll agree with Frank in so much that he sees the drive to operate government like a business as pure folly.

    Government is not like a business, nor will it ever be. Part of the reason that people think government is the solution is we try to make government like a business. Americans use government for economies of scale in road-building, ports, etc…., completely forgetting that the all the money must be raised by force, instead of letting private industry handle it, where the underwriters are voluntary (usually).

  24. rubbing his fingers together with unalloyed delight

    nice pun for a Monday morning!

  25. Simple math:

    The US government holds 261.5 million ounces of gold reserves.

    The total amount of US currency in circulation is $919.3 billion (not seasonally adjusted).

    Dividing US currency in circulation by US gold reserves yields a quotient of $3,515.45 per ounce. This basically implies that if the US were to re-adopt a policy of gold convertability for its currency, it would have to set this ratio as the price. Historically, the ratio was $20.67 until FDR reset it to $35.00, and remained there until Nixon ended convertability.

    Frank’s idea would reduce the denominator and drive the exchange ratio higher still.

    Factors limiting the usefulness of this admittedly simplistic analysis:

    – The US government holds other assets among its reserves (foreign currencies, SDRs, silver, strategic commodities, etc.). If these were exchanged for gold, they would reduce the $/oz ratio.

    – The US government owns other non-reserve assets (most notably property, but plenty of other tangible and marketable assets). If these were exchanged for gold, they would reduce the $/oz ratio.

    – The Federal Reserve has other liabilities in addition to currency in circulation (mostly deposits by member banks at Federal Reserve Branches). These could be converted into currency on request, which would increase the $/oz ratio.

    – The Federal Reserve also has other assets to offset these liabilities (e.g. Treasury securities, Agency securities, assorted ‘toxic waste’). If these were sold, they would reduce the $/oz ratio by taking currency out of circulation, however, what some of these assets are worth is anyone’s guess.

  26. “Gold dollars
    13mm-15mm. Smaller than a dime. So easy to lose.”

    And at today’s price of gold, worth more than $50 each in bullion value alone.

    1. I have two from the 3 series, one is fine, but the other has a deep gash in the verso. And I have 1901 $10.

      All inherited from various sides of the family. I never could get into collecting coins.

  27. I remain fascinated by the possibility of requiring that I be paid in the legal tender coins issued by the US government, and paying taxes based on the face value of those coins.

    The downside, I believe, would be that whoever pays me would only be able to deduct on their tax returns the face value of what they pay me. I’m not sure what the deductibility would be of the much larger sum that they spent to acquire my specie.

    1. This hack was already tried decades ago, with junk silver. The IRS taxes you according to the bullion value, and the courts let them.

  28. We’ve seen it in any number of movies–seemingly sane men driven stark staring mad by the lure of gold

    Like this one? The song by itself is here.

  29. What a hack that guy is. Did he stop to think that there would be no net change in gold holdings world wide? What if China steps in and says they’ll take it all? Or any other range of large players.

    And of course there is the small consideration (for him) of what the effect on the USD would be.

  30. Leftwinger wants to use the power of the state to screw political opponents. It must be a day ending in “y”.

  31. China may demand the gold as a debt payment.

  32. Yeah, you started out with “seemingly sane”. Tom Frank hasn’t appeared sane since the people of Kansas confounded his expectations. The shock drove him around the bend.

  33. Hell, go for it! Maybe then I can start buying gold instead of silver. Would be a windfall for all the gold bugs 12 months later.

  34. For whom the Gods want to destroy they first lull his eyes to stare into the Abyss at his imagined monsters staring back and from thus wince and surrendered gaze forward he is rendered mad.

  35. The longer I live the more I think that we have no way to be rational about gold. One Indian tribe (I forget which one) called gold “the yellow metal that makes white men crazy.”

    Maybe Robert Service said it best in “The Shooting of Dan McGrew”

    “Were you ever out in the Great Alone, when the moon was awful clear,
    And the icy mountains hemmed you in with a silence you most could hear;
    With only the howl of a timber wolf, and you camped there in the cold,
    A half-dead thing in a stark, dead world, clean mad for the muck called gold”

  36. One Indian tribe (I forget which one) called gold “the yellow metal that makes white men crazy.”

    Gold is forged in the heart of novas. Those indigenous people were deaf to the chime of a higher nature.

  37. What’s that line from the time when FDR was taking hold of the gold? “Gold is a barbaric relic and has no part in a modern economy. Now hand it over.”

  38. I ran into this quote earlier today from Bernanke when he was a wee little member f the board of governors.

    the U.S. government has a technology, called a printing press (or, today, its electronic equivalent), that allows it to produce as many U.S. dollars as it wishes at essentially no cost. By increasing the number of U.S. dollars in circulation, or even by credibly threatening to do so, the U.S. government can also reduce the value of a dollar in terms of goods and services, which is equivalent to raising the prices in dollars of those goods and services. We conclude that, under a paper-money system, a determined government can always generate higher spending and hence positive inflation.

    So Tommy boy thinks the Feds should jerk the stock of gold around like they have for all of the other monies? Brilliant idea, putz.

  39. WTF.

    So the Fed sells off its reserves (about 5-6% of the world’s gold) en masse. That would cause the price of gold to fall, what, 10-15% tops? Meanwhile, it dramatically undermines the credibility of the dollar, the Fed, and the administration. My best guess is the signaling causes the dollar to tank more than gold and holders of gold, while hurt, would still probably come out on top of holders of cash, especially in the medium-term. No one (in America) wins because unwinding a $300bn position is stupid.

    Hell, it’s even stupid to the extent that it works in “punishing” political opponents. The more your trading lowers the price (i.e. the supply shock outstrips natural demand), the less profitable the trade is.

    And for the most obvious point: regardless of whether the government books its gold holdings at a gain, any economic analysis recognizes one. Selling gold is only “profit-maximizing” if you’re taking the position that the price of gold will fall, at least in relation to potential substitute investments. If not, the market would recognize this as an accounting gimmick anyway (e.g. some LIFO liquidations) and react negatively to the signaling.

    I mean, damn. That’s a whole lot of ignorant in one place.

  40. No one (in America) wins because unwinding a $300bn position is stupid.

    Well, no one who isn’t long gold, anyway.

  41. GRRRRRRRAAHHHHHHH!!! Why didn’t I think of this when I originally read the post?!

    Take a ginger tiptoe around his breakdown, in which he floats the idea that it would be pretty neat if the Chinese government fucked up all those right-wing wackos who don’t trust the government to manage the currency properly Americans by willy-nilly selling off–or even just hinting that it might sell off–lots of its gold reserve holdings in order to make the price drop, just to cause everyone who is unpatriotic enough to think they want to protect their assets by connecting them to something other than government paper not groveling before their power to get it and get it good.

    Not so funny now, eh Franky?

  42. As a person who is very much concern about my gold investments, it is always important to seek updates about world’s economic and gold conditions. So, thank you for letting us know about this.

  43. What we need is stability. Stability will not be forthcoming until we realize that our Creator is in charge, not Wall Street, Congress, Masons, Illuminati or any other entity. When we come to realize and accept this Truth we will be back on the road to prosperity and fiscal sanity. Why? Because the Good Lord controls the world believe it or not.

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