Is it time to return to the gold standard?
- Thread starter Nowhere Man
- Start date
Given that the economy has been expanding (2.5% 3Q 2010) as opposed to a "severe contraction", we are not in a depression.
Additonally, other expansions include:
http://www.tradingeconomics.com/economics/gdp-growth.aspx?Symbol=USD
So, we are not in either a recession or a depression.
And, no, the gold standard would not be helpful.
Mr Awe
I agree with this. People forget that nothing has intrinsic value, only value that people give to it. So, a shiny metal is not intrinsically more valuable than printed paper. Both have value given to it by people. Might as well go with the more flexible option.
Mr Awe
Nowhere Man
Commodore
^ We have 10% unemployment, if we're not in a depression, it sure does feel like it. This is just the beginning. This all started in 2007 and for other states like California it was erlier
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Other than unemployment going up as a result of a recession, the two ideas are not connected. Employment is almost always a lagging indicator, hence the term "jobless recovery."
During the Great Depression, unemployment was over 30%. We are nowhere near that number, and have much more in the way of social services in place than we did back then.
The current employment situation sucks, no doubt about it, but it is nowhere near the scale of the Great Depression.
Neat, I got a shout-out. I feel honored.
You'll notice I specifically talked about control of the money supply, because hyperinflation absolutely is a real concern if you don't have a good monetary policy. But by the same token you ignore what would happen if the commodity that backs a currency experienced a sudden explosion in supply. There you go, your gold-backed currency is now hyperinflated.
You've also not bothered to address the fact that commodity-backed currencies limit wealth generation. You've just called it "false wealth" out of hand without any justification for such a statement. Say you took all your "fake money" and bought land, houses, etc. with it. Are you going to tell me those things aren't "real" wealth, that they have no real value? And if you bought them with fiat currency, then it stands to reason that it, too, has value--value enough to purchase such things.
Is the value of fiat money variable? Absolutely. That is one of its strengths as well as a weakness. No one has claimed otherwise. But its variability is useful as a strength because you can control the money supply to adjust the value of your currency. Gold-backed currency does not afford this luxury--at least not very easily. You consider this a strength, but I consider it a flaw since it reduces macroeconomic liquidity.
I'm not arguing that gold has no advantages over fiat currency, just that the combination of its advantages and disadvantages do not overpower the benefits of fiat currency.
A more interesting idea brought up in this thread was using a basket of tangible assets to determine currency value. Since it is not tied to the availability of a single commodity (such as gold), it would evade many of the drawbacks of using gold alone. A major point against it would be its complexity--you'd have to decide what items to include, how to gauge their value in objective terms, etc. But if you want currency backed by something tangible, I think that would be a better way to go.
That you admit we've long since passed "peak gold" is essentially an admission that a return to a gold standard would result in economic stagnation almost instantly. We just got out of a recession and you are talking about plunging us into an even worse one.
Hang on you folks are accusing me of not telling you how a gold backed standard works or that i don't know how an economy works.
IF YOU OWN AN ASSET YOU ARE NO LONGER USING FIAT! Ever heard the saying cash is trash? Why do citizens in a hyperinflationary envronment throw their fiat away at any price to obtain any tangible items? Because fiat currency is paper with a few nice numbers printed on it worth zilch. Once you get your land or cars, you have obtained a tangible asset and passed on th fiat to someone else. Why do think the Chinese are quickly buying mines and agricultural land? Because they know the US dollar is trash and devaluing and are obtaining hard assets. And regards to wealth, its amazing that the values of houses in America have dropped and continue to drop, because all the excess fiat had pushed up the value of these homes beyond their true value.
Now, lets think how a gold backed economy works. How does one instantly devalue a gold back currency? As I have said, where would all this instant gold come from? The Ferengi? At most only 1000 tonnes is processed annually, so how the entire worlds supply (158,000 tonnes) will be suddenly devalued by finding this equivalent amount is absurd.
What happens is all the debts of the world are allocated to the initial set value of gold. If we took all of the worlds current debts we would have to assign a value of $50K (US) to every ounce of gold on the planet (don't forget the 1 quadrillion dollars in CDS that have to be accounted for). Then we let the game begin where everyones currency at $1 US=$1 Everyone else as we have all backed the currencies by gold.
Let the game begin. America begins spending beyond its means and wants to double it supply. Ok, fine the US then values their gold holdings at $100k/ounce while everyone else remains at $50k, so the exchange rate is now 2:1. If America produced goods and obtained more gold, then they can throttle their currency back to 1:1 exchange rate. You want to expand your money supply? Go ahead, but expect a reduction in the value of your dollars per ounce of gold unless this expansion is used to create goods that can be sold. You'll notice that gold standards are dropped during times of war, because reckless spending becomes the norm and the value of the currency is rapidly devalued per ounce of gold. Thats why Nixon dropped the GS, Vietnam War costs were draining the US gold supply so the US had to 'default' and say no more gold for US dollars.
This is a simplistic explanation on a GS backed currency, but volumes have been written on this.
Nowhere Man
Commodore
I could be mistaken, but if there is a huge deposit of gold doesn't the government decide how much of it to coin and when to coin it? Also, haven't we found most of the gold that exists on earth? I mean, we may continue to find more, but in in such mass ad before. Like you said, where does all of this gold come from, the Feriengi? What I think you are saying and I believe is that large deposits of gold would have to be found on a planet that is not this one? Well Darh I know we are on the same page and I think we are saying the same thing. You are better at articulating it than me. Anyway, thanks for coming to my aide. By the way I changed my name, but you can still call me Hunter, it's my real name. I've been wanting to change it for a while, but couldn't settle on a good one, till now.
Just remember the term 'peak gold'. Even if the entire core of the Earth was pure gold, it would be prohibitively expensive to mine it, so it could be mined but at a slow rate, so in essence most of the easy gold has been obtained. To add pain we have reached 'peak oil' which means the easy energy to extract gold, or other metals, will become more rare and make things that much harder.
Just keep reading to learn more, these things don't come easy. I enjoyed reading "MAN, ECONOMY, AND STATE
A TREATISE ON ECONOMIC PRINCIPLES WITH POWER AND MARKET GOVERNMENT AND THE ECONOMY" by MURRAY N. ROTHBARD however this is the "Austrian" economics bible and will be rebutted by Keynesian economists. Another good one is "Dying of Money-Lessons of the Great German and American Inflations" by Jens O Parsson.
Nowhere Man
Commodore
QUOTE=Darth Picardous;4578248]
Just remember the term 'peak gold'. Even if the entire core of the Earth was pure gold, it would be prohibitively expensive to mine it, so it could be mined but at a slow rate, so in essence most of the easy gold has been obtained. To add pain we have reached 'peak oil' which means the easy energy to extract gold, or other metals, will become more rare and make things that much harder.
Just keep reading to learn more, these things don't come easy. I enjoyed reading "MAN, ECONOMY, AND STATE
A TREATISE ON ECONOMIC PRINCIPLES WITH POWER AND MARKET GOVERNMENT AND THE ECONOMY" by MURRAY N. ROTHBARD however this is the "Austrian" economics bible and will be rebutted by Keynesian economists. Another good one is "Dying of Money-Lessons of the Great German and American Inflations" by Jens O Parsson.[/QUOTE]
I have Rothbard's "Case Against the Fed." I have yet to read it though. All of my ideas come from Mises and Rothbard and my professor was from this school of thought. This school of thought is "making a come back" so to speak, hence Greenspan. It's the reason I started the threat, to see where everybody stood. It's all a matter of time before the good money drives out the bad. This has all happened before, it will all happen again.
No country has gone past 40 years off the gold standard.
You know one more argument I just remembered. Other countries hold our debt and therefore have us by the balls economicly. It's in their best intrest to drive down the dollar, which is what China and Japan is doing. People are afraid of China, but Japan holds the most debt. Luckily Japan likes us, China does not. Other countries holding our debt and owning our companies and land is a severe National Security problem.
Just remember the term 'peak gold'. Even if the entire core of the Earth was pure gold, it would be prohibitively expensive to mine it, so it could be mined but at a slow rate, so in essence most of the easy gold has been obtained. To add pain we have reached 'peak oil' which means the easy energy to extract gold, or other metals, will become more rare and make things that much harder.
Just keep reading to learn more, these things don't come easy. I enjoyed reading "MAN, ECONOMY, AND STATE
A TREATISE ON ECONOMIC PRINCIPLES WITH POWER AND MARKET GOVERNMENT AND THE ECONOMY" by MURRAY N. ROTHBARD however this is the "Austrian" economics bible and will be rebutted by Keynesian economists. Another good one is "Dying of Money-Lessons of the Great German and American Inflations" by Jens O Parsson.[/QUOTE]
I have Rothbard's "Case Against the Fed." I have yet to read it though. All of my ideas come from Mises and Rothbard and my professor was from this school of thought. This school of thought is "making a come back" so to speak, hence Greenspan. It's the reason I started the threat, to see where everybody stood. It's all a matter of time before the good money drives out the bad. This has all happened before, it will all happen again.
No country has gone past 40 years off the gold standard.You know one more argument I just remembered. Other countries hold our debt and therefore have us by the balls economicly. It's in their best intrest to drive down the dollar, which is what China and Japan is doing. People are afraid of China, but Japan holds the most debt. Luckily Japan likes us, China does not. Other countries holding our debt and owning our companies and land is a severe National Security problem.
Well actually of 2 weeks ago the owner of the most US debt was the Fed Reserve. China's plan is to keep the Yuan as cheap as possible and hence its pegging to the US dollar. As the US dollar declines, the Yuan also declines, producing inflation in both countries with a zero sum achieved. As the US ability to buy Chinese crap diminishes, the Chinese endgame will then to buy Eu debt and plough their crap into their economies and then discard the US as a hollowed out shell.
However it will be interesting to see if the US allies with strong currencies relative to the US dollar (Canada, Australia and Japan) then begin to buy devalued Chinese assets. Hence the circle jerk continues.
Nowhere Man
Commodore
I heard Andrew Sullivan say that the Euro will be gone in 5 years and it will be linked to Germany or something. Tom Freeman made a statement that we are addicted to credit. Both of these are the problem. The Euro has already surpassed the U.S. Dollarl. With all that change, I don't see how anyone can truly keep up with it.
What you may have heard is Merkels call for Germany to leave the Euro and re-establish the Deustche mark. Other economists think the Euro may split into the Northern Euro encompassing the strong economies of Germany, France and the Benelaux. while a Southern Euro would encompass the weaker countries like Greece and Spain.
With regards to the US vs Euro , the people who designed the Euro were smart people, and is in fact, partially backed by gold.
An interesting website on todays economic climate can be found here:
http://www.zerohedge.com
Nowhere Man
Commodore
The latest from Reuters, on the late news that Obama will both extend Unemployment Insurance for 13 months, and extend the Bush tax cuts for 2 years:
They should just get rid of the payroll tax completely.
- Obama: has reached a framework for compromise with Republicans to extend all Bush tax cuts for two years
- Obama: compromise also calls for extending jobless benefits for 13 months, and calls for 2% payroll tax cuts next year, and for extension of estate tax
- Obama: says compromise is an essential step on the road to economic recovery
- Obama: he is confident that Congress will ultimately ‘do the right thing’
They should just get rid of the payroll tax completely.
Nowhere Man
Commodore
Here's something fresh off the presses. http://www.citizen.org/pressroom/pressroomredirect.cfm?ID=3226
Wouldn't it be in debt holders interest to drive the dollar up?
They hold debt in dollars, so if the dollar goes up the value of there debt would go up.
They hold debt in dollars, so if the dollar goes up the value of there debt would go up.
Nowhere Man
Commodore
It's like milking a cow, they want to milk it till it's dry. Then go onto another cow(Europe). They don't want the dollar to be too high because they buy our bonds and later on cash in for a profit. If it's too high, they wont want too buy the bond because when they cash it in, they don't get as much. It's like getting intrest on the bonds.
The problem that Darth was pointing out is that China's dollar is interwined with ours, so the value goes down. I think what China is doing though is waiting for the cash cow(U.S.) to go dry, then they introduce their dollar as the superior dollar. They are catching on that we will never pay them back and they won't go to war unless they ally with N. Korea. That could cause a problem.
Also, unintended consequences contribute to our dollar failing
In all this nonsense, another reminder that money, interest and profit are inextricably intertwined phenomena seems to be in order. The obsession with hard money exposed is another way of demanding that finance be freely suck the lifeblood out of every economy. The US proponents of gold tend to imagine that because they've lost out in the economic struggle that the US as a whole has. Whereas in fact the victors in US finance have profited enormously from deindustrializing the US. The gold bugs are, at best, fools.
