X Day – Return To A Gold Standard Is Possible

Mandeville, LA – Exclusive Transcript – The German people are one of the better practitioners of free market economics in Europe.  This is all traced back to Austrian School thought and Wilhelm Roepke.  I didn’t know any of this.  It is therefore a story that can be used as part of the historical record for those that say, [mocking] “We can’t go back to a gold standard.  Everything would be devalued.”  The Germans did it.  They did it in an orderly fashion and that currency remained sound for decades.  Then the rebuilding and rebirth of the German economy happened.  Check out today’s transcript for the rest…

Begin Mike Church Show Transcript

Mike:  Yesterday I began my economic exploration of an enigma of sorts.  How is it that the Federal Reserve and the Obama administration, following the Bush administration’s lead, could continue printing trillions of dollars of funny money, continue running up deficits in numbers so large that no human being can actually fathom the amount of money that comprises said deficit, or can even fathom the amount of money that is spent in the order of $3.7 trillions of dollars.  How is it that that has not engendered or brought about inflation?  In reading the Austrian economist Wilhelm Roepke, I stumbled upon — I’m surprised I haven’t read this from other Austrians out there — what may be keeping the State’s inflation at bay.

It is that the state has incurred and absorbed so much, nearly a third now, between a quarter and a third of the national income and basically redistributed it through various programs and grants and other social and corporate welfare programs, and by doing so is also attaching to it some manner of price control.  That helps explain to me, in my logical mind — I’m not an economist and I have not run the numbers, so please don’t send me hate mail and call me an idiot and tell me to stick to politics.  I’m thinking out loud here for all of our benefit.  Logically reasoning through this, using a simple abacus math, it would seem to me that when I was reading Roepke, Roepke was saying this is how the Nazis kept inflation in check.  They controlled the distribution of Reichsmarks.  Because they were able to control the distribution of Reichsmarks through price and wage controls, they were able to tamp down inflation.  As soon as Hitler was dead and the war was over, real rationing then began and inflation set in, just as Roepke and von Mises predicted would happen.

There was another thing that I learned.  I don’t know, AG, because you are of German descent, at the end of the war, the allies were basically running Germany.  I think there were five provinces and one was run by the Russkies.  That’s where the Iron Curtain and the divider between East and West Germany came in.  I didn’t know any of this history.  I’m reading it with great interest.  I’m just briefly sharing this.  Have you ever heard of Day X?

AG:  I don’t think so, no.

Mike:  It was Wilhelm Roepke and this cat named Erhard.  Roepke was just a writer who was writing: Look, we’ve got to get back to a sound currency, some manner of ethical people, and a free market or we’re all doomed.  It was the allies, the British and French and Americans going: No, you’ve got to stay with your socialism.  That’s what you had before; you’ve got to go back to that. This Erhard fellow was able to convince once general: We’ve got to get rid of the Reichsmark.  It’s not going to work.  We have to have a new, stable currency, and we must control the supply of it.  This is going to have to be a radical change.

There was a day in June, I believe, in 1948, X Day.  For those of you that say we cannot return to the gold standard, you are the ones that are full of it and don’t know what you’re talking about.  Andrew, this is where you’ll find this interesting.  Mr. Lewis Lehrman, the author of The True Gold Standard, a man that has been trying to get the gold standard back in the United States since it was abolished by Richard Nixon on 18 August 1971.  Mr. Lehrman, when he’s been on the show, has argued that the change from the funny money back to a currency backed by gold will be very orderly and will not bankrupt people.  There will not be massive devaluations.

Andrew, I don’t know if you knew this, but the Germans did this.  They were only able to do it in three of the five provinces.  The French would not go along with it in their province and Stalin would not go along with it.  The Americans and British said okay.  This Erhard guy, on X Day in 1948, abolished the Reichsmark.  This is where your Deutsche Mark comes from.  They had already printed Deutsche Marks and they began the distribution.  You could take your Reichsmark — just as Mr. Lewis Lehrman says you can take your funny money federal reserve notes — go to a bank, and they would do a 1:1 exchange up to 60 Reichsmarks.  Within a day, one day, goods and services that were not available in post-war Germany were available.  They were available on the black market but nobody wanted to sell them for Reichsmarks because the Reichsmark was an inflated currency that was worthless.  Within one day, there were breads, baked goods, milk, eggs, all manner of goods that began appearing instantly in the shop makers’ windows in Germany in those three provinces.  This is what began the German recovery.

Andrew, you know that Germany still, the Deutsche Mark is one of the better currencies in Germany.  The German people are one of the better practitioners of free market economics in Europe.  This is all traced back to Austrian School thought and Wilhelm Roepke.  I didn’t know any of this.  It is therefore a story that can be used as part of the historical record for those that say, [mocking] “We can’t go back to a gold standard.  Everything would be devalued.”  The Germans did it.  They did it in an orderly fashion and that currency remained sound for decades.  Then the rebuilding and rebirth of the German economy happened.  I just find that story fascinating.  I didn’t know if you knew any of that.  If you’re interested, get the book by John Zmirak called Wilhelm Ropke: Swiss Localist, Global Economist.  It’s a really interesting read.

End Mike Church Show Transcript

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