>   (email exchange)
>   Two quotes from a compilation of Einstein’s writings and speeches
>   that I thought you’d enjoy:

1) “The gold standard has, in my opinion, the serious disadvantage that a shortage in the supply of gold automatically leads to a contraction of credit and also of the amount of currency in circulation, to which contraction prices and wages cannot adjust themselves sufficiently quickly.” (1934)

2) “If we could somehow manage to prevent the purchasing-power of the masses, measured in terms of goods, from sinking below a certain minimum, stoppages in the industrial cycle such as we are experiencing today would be rendered impossible.” (1934)

6 Responses

  1. I may have to disagree a bit with Albert Einstein. The reduction of gold in the central bank doesn’t *automatically* lead to a contraction of credit or currency in circulation. In one of the wars – I guess between France and Germany (1800s ?), France had to ship a lot of gold for losing the war. Instead of going into a recession, it ended up growing 🙂

    This happened because the losses in gold were compensated by the either the increase of government bonds or the claims on banks or both in the central bank balance sheets.

    Of course long term gold standard is no solution so that qualm is minor.

  2. Yes, gold only becomes a problem when the payments system breaks down. But that happens often enough to make it a problem.

    The U.S. was on the gold standard for a very long time while we simultaneously engaged in massive fiscal spending. For example, we were able to fight a world war and incur enormous government debts, all on the gold standard. Same for the great depression, even though we devalued (but nevertheless remained on the standard). Britain had enormous debts on the gold standard as well, with no funding problems. And of course, Holland.

    But eventually there is a payment crisis and then the gold standard constrains the response. In either case, the gold standard has only a downside and leaving it has inherent value, if only to shatter the world-view of gold bugs.

  3. Nationalism is an infantile disease. It is the measles of mankind. Albert Einstein …

    I like this one, that einstein was way ahead of the curve. He was for a one world gov too but the current Corporate Crony Capitalistic power grab is not what we need.

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