Ralph Benko
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NYU’s Nouriel Roubini is a very elite public intellectual. Together with Princeton’s Prof. Paul Krugman Prof. Roubini is one of the most acidly eloquent critics of gold. Earlier this month he published an essay titled After the Gold Rush. (Its title suggests homage to Neil Young’s song, based on a never-produced movie, of the same name. This reader found the words “I was thinking about what a friend had said. I was hoping it was a lie.” echoing in his mind while reading.)

Since Roubini teaches at NYU, and Krugman at Princeton, it is worth noting that Albert Gallatin, founder of NYU, and John Witherspoon, sixth president of what would become Princeton, both were sophisticated proponents of the gold standard. Both were passionate critics of fiduciary paper currency. Witherspoon called paper money “absurd and contemptible.” Gallatin wrote “Gold and silver are the only substances, which have been, and continue to be, the universal currency of civilized nations.” Both great statesmen would cringe at the subversion of the institutions they built to the cause of fiduciary monetarism.

Roubini:

"At the peak, gold bugs – a combination of paranoid investors and others with a fear-based political agenda – were happily predicting gold prices going to $2,000, $3,000, and even to $5,000 in a matter of years. …

"There are many reasons why the bubble has burst, and why gold prices are likely to move much lower, toward $1,000 by 2015."

This writer has no quibble with Roubini’s skepticism of gold as an investment. Gold’s price doesn’t move as much as the price of the dollar moves, so an investment in the yellow metal is a presumption that one knows which way the Treasury and Fed will move in terms of protecting the dollar, or letting it slide in a form of ‘benign neglect.’

But Roubini’s critique goes beyond an indictment of gold as speculative portfolio material. He goes on gratuitously (and with surprising ignorance for one of his intellect and stature) to indict the proponents (presumably including this columnist) of the gold standard. On this point his argument falls apart.

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Ralph Benko

Ralph Benko, author of The Websters’ Dictionary: How to use the Web to transform the world and an advisor to the American Principles Project.
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