Gold Standard flawed, but best alternative to USD manipulation

The present US monetary system is an abysmal failure and the value of the USD has been manipulated, according to a former US Federal Reserve official.

For the last 40 yrs in Washington, regulate meant manipulate, with the Federal Reserve raising and lowering interest rates and buying and selling assets at its own discretion, Herman Cain, the former chairman of the Federal Reserve Bank of Kansas City, said in an article published Monday in the The WS-J.

All of this manipulates the value of the dollar, he noted.

Mr. Cain argues that however imperfect a Gold standard may be, it remains the best among all alternatives. During the time of the classical Gold standard and the flawed Gold Exchange standard, the US economic growth was stronger, unemployment rates lower, the price level more stable, and recessions less frequent and less severe than under the present monetary system.

In his view, a Dollar should be defined, as it was prior to Y 1971 under the postwar Bretton Woods system, as a fixed quantity of Gold.

However, Cain added, the Washington establishment goes ballistic at this suggestion because Gold is Kryptonite to big-spending politicians. It is to the moochers and looters in government what Sunlight and Garlic are to Vampires, he explained.

The US central bank has kept the interest rate at exceptionally low level since late Y 2008 and conducted 2 rounds of assets buying since Y 2009 (QE).

It reaffirmed after its latest policy-making meeting that it would keep current ultra-loose monetary policy at least through late Y 2014 to support economic recovery.

The Fed's unfettered asset-buying has provoked criticism even from its top officials who said the Fed should have clear limits on how much and in what way it can expand it balance sheet. It should not blur the lines between its monetary policy and the US government's fiscal policy.

Economist Shayne Heffernan of www.livetradingnews.com has said he feels the USD is under long term threat from both government and Federal Reserves Policies and has issued cautionary notes to investors warning them to hedge there equity positions that are USD denominated.

Paul A. Ebeling, Jnr.

Paul A. Ebeling, Jnr. writes and publishes The Red Roadmaster's Technical Report on the US Major Market Indices, a weekly, highly-regarded financial market letter, read by opinion makers, business leaders and organizations around the world.

Paul A. Ebeling, Jnr has studied the global financial and stock markets since 1984, following a successful business career that included investment banking, and market and business analysis. He is a specialist in equities/commodities, and an accomplished chart reader who advises technicians with regard to Major Indices Resistance/Support Levels.