Nowhere Man
Commodore
I've heard of that, we'll see.
Is it time to return to the gold standard?
- Thread starter Nowhere Man
- Start date
I've heard of that, we'll see.
The biggest issue I think people who want to go back on the gold standard is they don't like the idea of just printing money, so i think it would probably be easier to just gain more control and transparency to the federal reserve. It wouldn't stop the printing of money, but it may curtail it somewhat.
Nonsense? I think it is you speaking nonsense! Money, interest and profit are not inextricably linked. You do realise some societies function where usury (the charging of interest) is forbidden. They seem to do ok.
So are you saying that during America's great industrialisation of the 19th century when the bimetallic standard was in use it was freely sicking the lifeblood out that country? The fact that the US has been de-industrialised is the direct result of an uncontrolled money printing regime where the price of labour and commodities in Western countries is so high that companies prefer to move to cheaper labor pools.
Sheesh, talk about nonsense.
Best of luck controlling that printing. The two forces acting against you are:
1) The Federal Reserve is not part of the US Government and answers to bankers in Europe, not the US Government. Ever seen some question time in the US Senate and the Fed Reserve chairman refuses to answer their questions?
2) Money printing is being conducted by The Fed Reserve to produce a false economy where it appears there has been no drop in asset, share market or commodity prices since 2008. Once the money pumping stops, deflation begins which is what Mr Bernanke, the Fed reserve chairman has vowed will not to occur under his watch. Preserve the confidence and false economy at all costs!
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Getting through macroeconomics 100 does not mean you know how the world works. I mean, I've heard a lot of horrible ideas in this recession, but some of this stuff takes the cake. An oil-backed dollar? Great, you just combined the disinflation of now, with $140 oil from 2 years ago.
1) Backing a currency with a largely useless resource like gold is still essentially fiat money. The value of gold is based solely on the demand for gold, and that demand is ultimately based on golds aesthetic qualities. As such, if it ever gets ridiculously valuable (and it's about at that point now in real life) that bubble will pop like the infamous tulip bulbs brought up in every entry level econ class in America.
2) Backing a currency with a useful commodity will drive up prices as people take that commodity off the market in speculative hoarding.
Beyond that, 90% of the material from 3 specific people in this thread is absolute garbage. I'd be ashamed if I were you for leaping so far out of my depth and then drowning in my own excrement in a very public way.
1) Backing a currency with a largely useless resource like gold is still essentially fiat money. The value of gold is based solely on the demand for gold, and that demand is ultimately based on golds aesthetic qualities. As such, if it ever gets ridiculously valuable (and it's about at that point now in real life) that bubble will pop like the infamous tulip bulbs brought up in every entry level econ class in America.
2) Backing a currency with a useful commodity will drive up prices as people take that commodity off the market in speculative hoarding.
Beyond that, 90% of the material from 3 specific people in this thread is absolute garbage. I'd be ashamed if I were you for leaping so far out of my depth and then drowning in my own excrement in a very public way.
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And thats the beauty of gold, the more useless and less consumed it is, the more stable a currency is backed. A currency backed by a tangible asset is by definition, not fiat.
Thanks, your just proving my point why it makes an excellent material to use as a standard. So its not possible then that the price rise in gold is a reflection of the devaluing US dollar? You use the term gold bug, every hear the term paper bug?
Hello stupid, a gold backed dollar does not mean you purchase things with gold coins. The paper produced by the government used for exchange in the community is backed by gold holdings in reserve banks.
Its good to see the real fools showing themselves.
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First paragrah states that forbid interest don't forbid "profit." Money is still loaned out with expectation of return. The primary difference is that the debt holder is not privileged when the investment fails. Whereas a bank loan here can and does claim interest regardless of whether the investment fails to be profitable. A gold standard puts the quantity of money available (whether it's a reserve is logically irrelevant though in practice many gold bugs seem to really be opponents of fractional reserve banking) outside human control. This is not an argument but a diversion.
The second paragraph misrepresents the facts regarding bimetallism in the US. It was distinctly limited, with the value of silver set at a 16:1 ratio with gold. Bimetallism proper was meant as a soft money policy designed to save farmers from the banks. Hard money men, which in the nineteenth century meant the gold standard, did suck money out of the farmers, driving millions off the land into the cities. The high cost of money was instrumental in this process.
The deindustrialization of the US parallels the deindustrialization of England (and for that matter the Dutch before them.) Financial interests in an imperial power can profit while the native country's industry begins to decline. In England the process began in the late nineteenth century and speeded up remarkably in the early twentieth century. England was on a gold standard for most of this period. The claim that paper money caused deindustrialization is witless propaganda. It's not even a coherent argument. For instance the price of "commodities" is determined on the world market, given that "commodities" means such vital things as oil and copper and koltan. It's all a vicious pack of lies.
Like I said, you have no idea what you're talking about. Probably because I didn't talk myself down to your level of comprehension. So let me put it this way:
I'm selling an object:
I say it's worth $1,000.
I say it's worth an ounce of gold.
What's the difference (ignoring the precise exchange rate at the moment)? None. It doesn't matter what I say the object is worth, the object is worth whatever someone else is willing to pay for it.
The same with currency. I can TELL you the dollar is worth x ounces of gold (which by extension is it's value in your currency, because the pound is also pegged to gold). If we both generally agree, that's what it's pegged at. Suddenly, I want/need to print more money to cover an issue I couldn't finance. No one can stop me from printing money, I'm a sovereign state. I can do what I want. I cannot, however, force you to accept that my currency is still worth what we agreed to previously. It has to either be repegged, or no one will trade with me. The currency can still float. Nothing has changed.
Except for one thing, people and firms now have to keep large sums of gold (which could be better used in jewelry or electronics) off the market for use as a medium of exchange, but in the end, nobody really wants that much gold. They want pounds and dollars, because those are far easier to trade for goods and services. That's why we use a floated currency.
Conversely, if I try to stick to my original peg, and keep my fractional reserve constant, I'll face deflation every time the economy grows, unless I keep buying more gold, which would give me the privilege of printing more money to meet the higher reserve. So I'm either stuck with a huge drain on resources as I keep buying gold, or I do nothing and face deflation. Why is deflation bad? Because if I can get a 5% return just sitting on my money, I have that much less incentive to go out an invest in a new business. Low level inflation encourages investment and discourages idle cash, as a dollar bill does no one any good if it's just sitting in my mattress until I die.
Not everyone will sit idle, however. Unless you're going to ban the private ownership of gold and oil, you can't stop people from trying to profit from speculation. If you think my money is going to get re-pegged, people will buy or sell their gold and flip it back once the currency is re-pegged. Indeed, the whole point of a gold standard is that a dollar would be exchangeable (on demand) for gold. Which means in addition to having bank runs, you'd get gold runs, causing price shocks as bubbles grow and burst depending on local demand.
Ultimately, what you fail to realize is that everything in this world is fiat, all resources including oil,gold, euros, human labor, Boeing 747's, and nuclear submarines. Everything; because society individually and collectively agrees on the value of the respective objects and services. It doesn't matter whatever stupid system you tack on to try and hide that. Only problem is that society is never consistent, what you though was worth Y, turns out is now worth Z just minutes later.
THAT, in as simple language as I am capable of, is why fixed-rate exchange, like the gold standard, did not and will not ever work. This isn't some cutting edge debate, this was realized forty years ago with the death of Bretton Woods. This doesn't even get into the advantages of being able to manage the money supply.
The FED is not part of the federal government but it was made by congress and can be unmade by congress. I think it would be easier and less disruptive to try to assuage some of the worries with limitless creation of money by reigning in the FED than it would be to go to a gold standard.
And that is why in one of my previous posts I explained the gold standard will not be fixed but float depending on the actions of each country.
Well,we will see in 10 years who is laughing. The game is afoot.
http://www.businessinsider.com/robert-zoellick-gold-standard-2010-11
Nowhere Man
Commodore
How it would work:
http://www.thefreemanonline.org/featured/how-to-return-to-the-gold-standard/
http://www.thefreemanonline.org/featured/how-to-return-to-the-gold-standard/
If you can just do step 6, getting on the gold standard would mostly be a moot point.
And I don't see how you can allow citizens to continue to buy, trade and sale gold once we get on a gold standard, because there very action would constantly adjust the price of gold.
And there is not enough gold held in reserve, the United States doesn't even have enough gold in reserve to cover the M0, let alone m1,m2 or m3. So the US would have to enter the market to buy gold and would have to buy it below the value it would eventually decide to set it, otherwise it would need to print more money to buy it which of course means they need to buy even more gold.
So the Congress passes a law forcing citizens to sale there gold to the US government for say $500 an ounce, then once this done, the Congress then sets the price of gold at say $2000.00 an ounce.
So now we have a limited supply of money directly tied to the price of gold...All is good, but what if Congress wants to spend more money than they have, well, either they go off the gold standard again, or simply decide that gold is now worth $4000.00 an once, doubling the amount of money available.
Going to the gold standard does not limit the amount of money the government can spend, so I don't think we should waste any time thinking about going on it. Because the amount of discipline required to get to the gold standard in itself would solve the issue of "printing" money.
It would be better to set spending limits on Congress:
Only spend what is taken in.
Only take in up to 19% of GDP (should really be much less), if we take in more than 19% reduce taxes and increase spending on the dept.
Nowhere Man
Commodore
"Wealth must be produced before it can be consumed. Just as you cannot create food by eating, you cannot create wealth by spending. Using gold as the standard grounds economics in objective reality. Gold stands as a physical protector of its own value."
Return to the gold standard would stabilize US economy. By: McAllister, Kevin, Christian Science Monitor, 08827729, 11/21/2008, Vol. 100, Issue 251
"So what about gold? A revived gold standard is out of the question. In the nineteenth century, governments spent less than ten percent of national income in a given year. Today, they routinely spend half or more, and so they would never subordinate spending to the stringent requirements of sustaining a commodity-based monetary system. But private gold banks already exist, allowing account holders to make international payments in the form of shares in actual gold bars. Although clearly a niche business at present, gold banking has grown dramatically in recent years, in tandem with the dollar's decline. A new gold-based international monetary system surely sounds farfetched. But so, in 1900, did a monetary system without gold. Modern technology makes a revival of gold money, through private gold banks, possible even without government support."
Steil, Benn; May/Jun2007, Vol. 86 Issue 3, p83-96, 14p
"It must be stressed that a well-managed fiat money system has considerable advantages over a commodity-based one, not least of which that it does not waste valuable resources. There is little to commend in digging up gold in South Africa just to bury it again in Fort Knox. The question is how long such a well-managed fiat system can endure in the United States. The historical record of national monies, going back over 2,500 years, is by and large awful."
Steil, Benn, Foreign Affairs; May/Jun2007, Vol. 86 Issue 3, p83-96, 14p
Return to the gold standard would stabilize US economy. By: McAllister, Kevin, Christian Science Monitor, 08827729, 11/21/2008, Vol. 100, Issue 251
"So what about gold? A revived gold standard is out of the question. In the nineteenth century, governments spent less than ten percent of national income in a given year. Today, they routinely spend half or more, and so they would never subordinate spending to the stringent requirements of sustaining a commodity-based monetary system. But private gold banks already exist, allowing account holders to make international payments in the form of shares in actual gold bars. Although clearly a niche business at present, gold banking has grown dramatically in recent years, in tandem with the dollar's decline. A new gold-based international monetary system surely sounds farfetched. But so, in 1900, did a monetary system without gold. Modern technology makes a revival of gold money, through private gold banks, possible even without government support."
Steil, Benn; May/Jun2007, Vol. 86 Issue 3, p83-96, 14p
"It must be stressed that a well-managed fiat money system has considerable advantages over a commodity-based one, not least of which that it does not waste valuable resources. There is little to commend in digging up gold in South Africa just to bury it again in Fort Knox. The question is how long such a well-managed fiat system can endure in the United States. The historical record of national monies, going back over 2,500 years, is by and large awful."
Steil, Benn, Foreign Affairs; May/Jun2007, Vol. 86 Issue 3, p83-96, 14p
I've read many of these articles about getting back on the gold standard and I don't see anyway it could actually happen. It is true there is enough gold in the world, but how is the United States supposed to acquire enough gold to cover everything that is currently backed by the full faith and credit of the United States. I simply don't see how this could ever happen with out the government just taking it away from private owners.
Lets see the US has about 8133 tonnes of gold, now m3 is what 14trillion dollars, so I guess the government could just set the price at $53,000 and not have to get anymore gold. But then all those people who invested in gold will start to turn it in to get 53k per ounce.
You don't have to get on the gold standard to eliminate fractional reserve banking.
Lets see the US has about 8133 tonnes of gold, now m3 is what 14trillion dollars, so I guess the government could just set the price at $53,000 and not have to get anymore gold. But then all those people who invested in gold will start to turn it in to get 53k per ounce.
You don't have to get on the gold standard to eliminate fractional reserve banking.
Close, but not quite. We aren't looking at just 'value', we are looking at money which encompasses 'value'.
What are the three things that define money?
1) A medium of exchange, our TRANSACTIONAL currency, 2) a unit of account, a "number" used for comparing relative values, held in each person's memory AND on paper for bookkeeping and 3) a store of value, or wealth.
Gold passes all three of these requirements, a fiat note with no backing fails number 3, as I have explained in earlier posts in a fiat system I can reduce your store of wealth to virtually zero overnight, hence it is not true money. Hence my saying in an earlier post, money = gold.
Thats right, gold holders would become re-capitalised and become the new sources of capital to drive new projects in the community. Hence the savers in your community would be rewarded, unlike the fiat system where spending is rewarded and savers are devastated.
Nowhere Man
Commodore
^ Exactly, running up dept and pushing credit beyond it's natural limits is what the gold standard eliminates, along with inflation. This has been my point this whole time. They gold will go back into circulation when the ones who have saved decide to spend that savings. The price will fall and others can have skin in the game. It will buffer it's self and the price will not fall too low or jump too high. It's the initial birth pains that people fear, but those pains are nothing compared to the shut we are experiencing and will continue to experience.
No, I'm *exactly* right. I was talking about how gold is not better than fiat currency even though it seems more solid. I never said that gold could not be used.
Mr Awe
Given that "value" is a completely subjective concept (and so are measurements of it), anything can be considered a "store of value." Saying gold is a store of value but fiat currency isn't is flat-out wrong.
