Balancing the Budget and the Trade Deficit is Easy: Return to Gold Standard

Courtesy of Mish.

The Daily Ticker's Lauren Lyster conducted an interesting interview today with British Member of Parliament Kwasi Kwarteng on gold and balancing the budget.

To play the video, click here.

Kwarteng is author of War and Gold, a Five-Hundred-Year History of Empires, Adventures, and Debt.

Kwarteng notes the historic stability under gold standards, specifically citing the 2008 financial crisis and national debt level as problems related to the Fed and printing paper money.

"The credit crunch, the credit bubble that preceded it, and the huge amounts of debt and deficits that we have are related to paper money," says Kwarteng.

Laruen asked "After the Fed has printed trillions of dollars, just to look at the past several years of expanding the money supply, how do you put the genie back in the bottle?"

"If the Chinese unilaterally declared that the renminbi would be pegged to gold it would essentially recreate the gold standard," responds Kwarteng.

Yet, Kwarteng admits that China's export policy likely precludes that from happening.

Missing the Boat on Trade

My one disagreement in an otherwise excellent discussion is that Kwarteng misses the boat on trade in a major way. He maintains that the UK cannot go back to the gold standard because of trade deficits. His take is governments need to balance budgets and increase exports first.

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