Lawrence Summers, candidate for US Treasury Secretary, is well known in certain financial circles for his work in the late 80's with Barsky, a colleague, on Gibson's Paradox. This paradox was well established and operated as a given during the long days of the gold standard.

To overly simply it, as I understand it, during this very long time frame, Gibson's Paradox simply showed that when interest rates went down, gold went up, and vice-versa. When gold went up, inflation, and the resulting trouble it signaled, was not far behind. And when the inflation stuff started, steps were taken to contain it. That's the way it always was.

Barsky and Summers work, I believe, concluded, therefore, that by simply containing the price of gold, keeping it low, interest rates could then also be kept low and with low gold there would be no corresponding inflation signal that always followed gold's increase. With gold and interest rates low, there was nothing to signal alarm when the unlimited fiat spigot was turned on, which it was, starting around 1995. And the good times started to roll.

That is what happened starting in 1995 when Rubin became Treasury Secretary, with Summers backing him up, and apparently continues to this day. Summers succeeded Rubin and became Treasury Secretary from 1999 to 2001, I believe. There's a great chart at the link below that shows the dramatic change in the gold/interest rate correlation starting in 1995.

"The historical evidence adduced by Barsky and Summers leaves but one explanation for this breakdown (in 1995) in the operation of Gibson's paradox: what they call "government pegging operations" working on the price of gold. What is more, this same evidence also demonstrates that absent this governmental interference in the free market for gold, falling real rates would have led to rising gold prices which, in today's world of unlimited fiat money, would have been taken as a warning of future inflation and likely triggered an early reversal of the decline in real long-term rates."

Though I'm just guessing at all this, my belief is that Summers was probably one of the early architechs of the gold price containing scheme based on his work with Gibson' Paradox. I thought I would raise it, since Summers is being considered for Secretary of the Treasury. And I don't think I like that.

If you're interested in this sort of thing, there's a long, well-detailed article by Reg Howe written in July 2001 on Summers and Gibson's Paradox over on Gold Eagle at the site below. Also the chart.

http://www.gold-eagle.com/editorials...