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Not necessarily a US Coin question but...... what would happen if governments went back onto the Gol
SanctionII
Posts: 11,736 ✭✭✭✭✭
Economists and other monetary experts, please enlighten us as 2009 winds to a close.
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SanctionII
Posts: 11,736 ✭✭✭✭✭
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<< <i>Meaning a single monetary standard for all countries, where each country cedes its financial independence to some international organization, and where monetary values change hour to hour? >>
Yeah, that one!
The name is LEE!
Bob
Lordmarcovan, WTCG, YogiBerraFan, Phoenin21, LindeDad, Coll3ctor, blue594, robkoll, Mike Dixon, BloodMan, Flakthat and others.
I doubt that the above is feasible, but as a "what if" discussion point it is interesting.
As far as RWB's points go, rule out ceding financial independence to an international organization; and with respect to daily fluctuation in the value of gold, that would be an issue to grapple with if a gold standard was resurrected. If I recall, the value of gold, before 1933 was artificially set at a little over $20.00 per ounce.
The subject is far above my head, but still good grist for a discussion.
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WTB: Barber Quarters XF
If all paper financial instruments, including derivatives had to be 100% convertible into gold, and if governments had to finance their operations under a strict gold standard - there would have to be much better accountability in every governmental program. That doesn't mean that governments wouldn't spend as much, because they would, or at least they would try to.
Governments couldn't inflate the currency, so all taxation would be physical, instead of through inflation. That doesn't mean they wouldn't tax as much, because they would or at least they would try to. Taxation would become a much bigger issue, both pro and con.
One can only hope that the end result would be that people would have to actually work in order to get money. One can only hope that governments would only spend what they could collect in taxes, and that they would only tax for worthy issues.
The use of paper money allows things to happen without causing the people direct pain. The stock market can rise without creating more value. Salaries can rise without requiring more work. Paper money allows banks huge profits without actually having much skin in the game.
When you have a huge shell game going on, nobody knows who wins or loses until all of the lottery tickets float back to the ground and people can start picking them up to see if they won.
With a physical gold standard, all of the accounting is done in the "here and now".
I knew it would happen.
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All that means is that the price is too low.
I knew it would happen.
<< <i>If this actually happened, then would gold be illegal to own? >>
....with our recent government----------WHO KNOWS!
WELL DONE
Bob
Lordmarcovan, WTCG, YogiBerraFan, Phoenin21, LindeDad, Coll3ctor, blue594, robkoll, Mike Dixon, BloodMan, Flakthat and others.
Oh, there's enough gold if the price is right. The problem is that there aren't enough jail cells to handle the paper fraudsters.
how does one stop a gov't from telling another gov't that they have adequate gold reserves to back their monetary supply/policy, come on that is fraught with smoke and mirrors too.
All accounting would be done on a physical transfer basis, and all of the accounting would be done "here and now". There would be no smoke and mirrors because if it ain't stilling in front of you in the form of a physical gold bar (and I don't mean tungsten) or a gold coin, the deal's off. See how simple it gets?
An added employment benefit: high demand for assayers.
I knew it would happen.
Additionally if the economy were to be about to grow under these conditions, the ratio of gold to dollars would have to be raised to maintain a workable money supply. The result would be to make the so-called gold standard as useless as the exercise Congress goes through to raise the debt ceiling every time they spend too much.
William Jennings Bryan was on to something when argued against “crucifying men on a cross of gold.” Limiting the money supply to the quantity of one commodity that a nation has is short sighted and silly. The trouble with Bryan’s ideas was that he put no limits on how much the money supply could grow.
Money is a lubricant to an economy. It is the oil and grease that keeps goods and services flowing efficiently. Like oil and grease if you put too much in, the seals on the an economy like an engine will leak and perhaps give way, leading to inflation. If you don’t lubricate enough and don’t increase the money supply with the size the economy, the parts will rub together and not operate as well. If you cut the money supply too much, the system will break down.
The gold standard is a 19th century anachronism that didn’t work well even when people thought it was working. The Panics (depressions or recessions) of 1837, 1857, 1873 and 1893 were all started at least in part when there was a shortage of gold in the economy. If government offices had been about to exercise monetary policy WISELY (and that is very important) outside the gold standard, there would have been a lot less human misery during those periods.
Additionally if the economy were to be about to grow under these conditions, the ratio of gold to dollars would have to be raised to maintain a workable money supply. The result would be to make the so-called gold standard as useless as the exercise Congress goes through to raise the debt ceiling every time they spend too much.
William Jennings Bryan was on to something when argued against “crucifying men on a cross of gold.” Limiting the money supply to the quantity of one commodity that a nation has is short sighted and silly. The trouble with Bryan’s ideas was that he put no limits on how much the money supply could grow.
Money is a lubricant to an economy. It is the oil and grease that keeps goods and services flowing efficiently. Like oil and grease if you put too much in, the seals on the an economy like an engine will leak and perhaps give way, leading to inflation. If you don’t lubricate enough and don’t increase the money supply with the size the economy, the parts will rub together and not operate as well. If you cut the money supply too much, the system will break down.
The gold standard is a 19th century anachronism that didn’t work well even when people thought it was working. The Panics (depressions or recessions) of 1837, 1857, 1873 and 1893 were all started at least in part when there was a shortage of gold in the economy. If government offices had been about to exercise monetary policy WISELY (and that is very important) outside the gold standard, there would have been a lot less human misery during those periods.
One question for you - is your last name Bernake?
I knew it would happen.
Remember, when we had Silver Cirtificates, Banks HAD to carry a supply of Silver Dollars so that folks could "demand" their silver instead of that piece of paper silver cirtificate. Gold was pretty much the same way and as has been stated, there just is not enough gold to go around. The location of the Worlds Gold would quickly be uncovered by which country rose to power (Remember the golden rule: He who has the Gold, makes the Rules!)
Truth be told, the current world ONLY exists because of the Credit System which enabled it. To change that System would require changing the World and we all know what happens when you try to change the World.
Everybody gets together and beats you up!
Talking about a "gold and silver standard" on a forum with a bunch of folks that have a bunch of gold and silver in reserve is kinda like the folks at Keeblers trying to set a "cookie standard"!
The gold standard may have worked in the past when there were only a billion or so folks in the world but at 7 billion and climbing, there just isn't enough to go around no matter how you value it or how fast you cvan dig it out of the ground!
The name is LEE!
If you repeat something often enough, that doesn't necessarily make it so. Why do so many people miss the point that BECAUSE there is a finite amount of gold and BECAUSE it can't be created out of thin air, it isn't subject to manipulation and the hidden tax of inflation? That would seem to me to be a major benefit to everyone who is honest enough to work for their money.
People lose faith in paper currencies when they can't depend on paper to keep the contract that it implies - that in working to obtain it, it will maintain it's value. The paper currencies lose purchasing power BECAUSE governments ALWAYS spend more than they are authorized to spend, and often because they are corrupt, some more than others.
Credit can exist whether you are on a gold standard or not. The difference is between honest credit and dishonest credit. Honest credit is extended honestly to honest people who do what they promise to do. Dishonest credit is extended dishonestly to dishonest people who don't do what they promise to do. The question is between who pays and who gets the benefits.
The idea that there isn't enough gold to accomplish a world economy is as false as the idea that gold isn't a good thing to buy because "it doesn't pay interest or dividends", or because "the price is too high". The supply of gold is stable, the supply of dollars and credit is not - that is the main problem, not price. The problem is that "someone" decides the supply of dollars, but "the market" decides the price of gold. I'd rather trust the market decision (and my own instincts) than "someone's" decision who may not have my best interests in mind.
FDR virtually doubled the price of gold after issuing the confiscation order. Nixon closed the gold window because the world price was going up and because everyone wanted it (mostly France) instead of dollars.
If gold were placed in circulation as coinage denominated as fractions of an ounce, it would be quite fungible as a currency. In fact, it already is.
It's one thing to be pushing for a gold standard because you have a vested interest in a gold position; it's quite another to be driven into a gold position because you see what the governments of the world are doing to savers and retirees in order to fund their own agendas.
Fiat currencies are a tool of governmental manipulation. It's governmental manipulation that we need less of, not more.
I knew it would happen.
Exactly. And I've posted the same before. Imagine suffering through a period like last year every 15 or 20 years. It was brutal to try to build wealth in the 1800's. There was no such thing as retirement. You worked until you died, which was usually before age 60. Extended families living under one roof was the norm. Hey but at least the dollar bought the same amount of goods as it did in 1820.
Im saying this fiat currency experiment is any better, but a return to a gold standard is not the answer.
Knowledge is the enemy of fear
I would need to research this, but are you sure that the problem wasn't fractional reserve banking? If there wasn't enough gold, weren't the runs on banks caused by the fact that the bankers had promised to keep gold in reserve and then started to increase their leverage by loaning out more money than they had gold to back it up? That isn't a case of "not enough gold", it's a case of dishonest bankers.
Please tell me that I'm mistaken.
I knew it would happen.
This is the typical argument. But what it doesn't mention is that a gold standard doesn't have to be $1 of gold for every $1 of assets. The ratio could be a small fraction such as 2-10%. And there is no need to have circulating gold or silver coins, the currency or plastic can stay. But what must happen is that the govt must be able to be monitored. If paper is printed, gold has to be purchased or acquired. If paper is destroyed, gold can be sold off. The bottom line is that there is some linkage of the paper to an asset. Even if no one is willing to admit it the 8100 tons of registered gold in US storage does act as a sort of gold backing. If it weren't there would the dollar be weaker? One could say that 10% of the FRN's in circulation are effectively backed by gold. In reality the 19th century was never a pure gold standard where only coin was real money. Paper money issued by smaller banks constituted much of the circulating "money" along with a money multiplier. This was a mixed gold standard.
The nation experienced probably the greatest age of technological & industrial growth from 1866 to 1896. And it was done under a hard metal standard. During those 30 yrs real working wages rose dramatically and consumer prices declined. During this period greenbacks were slowly removed and silver was eventually demonetized. While deflationary it still resulted in an industrial boom.
The gold standard is a 19th century anachronism that didn’t work well even when people thought it was working. The Panics (depressions or recessions) of 1837, 1857, 1873 and 1893 were all started at least in part when there was a shortage of gold in the economy. If government offices had been about to exercise monetary policy WISELY (and that is very important) outside the gold standard, there would have been a lot less human misery during those periods.
I guess credit cards would have solved all the human misery of the 19th century.
What broke down in the 19th century was not the gold standard, but the bankers behind it who either sold off too much of their gold and couldn't redeem it when asked, or they printed too much paper because they got greedy or careless. That is the cause of most of the panics in the 19th century. The first one was following the War of 1812 when the southern states printed paper money like crazy. Then the FED govt came in and made in worse by printing more money. The northern states saw little inflation during this period because their banks held the line with paper printing. A recession from 1819-1822 finally ended the problem. During the Civil War the nation came off a mixed gold standard and printed money to fund the war. A formal return to a both legal and effective gold standard (with silver demonetized) didn't come until 1879. Many of the problems that fermented into the 1870s' to 1890's were borne by the lack of monetary integrity during the Civil War (1861-1879 greenback era). It's usually never about a shortage of gold, but a plethora of paper. Did a shortage of gold in the US in 1929 cause the great depression? I believe the US owned several times the quantity of gold then as it does today...well over 20,000 tons.
A return to a gold standard? I don't know. But the problem for 3 centuries has been the bankers and those that regulate them. Having a gold standard will not keep them from finding ways around the system. It didn't in the 19th century, or 20th century, or 21st century. Even a gold standard would not have prevented the creation of otc derivatives and the mess we currently have. The bankers just went out and created their own money substitutes. They therefore no longer had to worry about Congress, the Treasury of the FED. If derivatives are ever fully regulated and tamed the bankers will find another work around to stuff their pockets as well as those of their backers. It boils down to accountability and integrity. Such things don't mix when it comes to paper money and credit.
The gold standard was originally instituted because govts don't act wisely when it comes to monetary policies. The Founding Fathers knew this. Yes, if our benevolent govt's always acted wisely, we could still get around with wampum for our currency. So when they don't act wisely (which is usually always) what should we use?
roadrunner
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The Federal Reserve works just fine. AAMF, it works great! Look around you at the wealth that has been created in the nearly 100 years of the Fed's existence. Much of that wealth creation was greased with Fed monetary policy. I'll happily accept the 1% inflation per year the Fed would dish out in maintaining a monetary policy that promotes economic growth that would far exceed the growth in money supply.
The Fed does what is does in response to its governance by our elected representatives. They are not inherently evil.
We could peg the dollar to a basket of commodities, to the vast land holdings of the govt, or to yearly govt public works expenditures. Guess what? It doesn't really matter if those that are elected don't or won't represent your best interests.
What doesn't work is an electorate that fails to hold its representatives to meaningful standards. (That's what we have now)
The Fed does what is does in response to its governance by our elected representatives. They are not inherently evil.
The Fed responds to the commands of those institutions or individuals than own the shares in the federal reserve banking system. I don't know if the owners are inherently evil, but an entity that assists in devaluing the currency by 96% during its existence is certainly not benevolent. Remember, it's primary objectives are maintaining stable prices and creating full employment. If you gave me the task of maintaining the value of the US dollar for 100 years, and after 96 yrs only 4% of that dollar was left, what grade would you give me?....I guess that depends whether one was on the giving or receiving end of that 96%/4%.
roadrunner
trader, I take issue with your idea that wealth creation was facilitated by the Fed. Wealth creation is caused by people who go to work, save money, invest it in production and produce goods & services that are valued by other people. The Fed's printing money is no more helpful to business than another tax would be, because that's what it is.
Credit creation can happen without printing dollars. Credit creation can happen as long as there are people with capital. Leave the government and quasi-governmental entities out of the equation and more gets done faster, better and cheaper.
I knew it would happen.
So hide those silver and gold rounds. The Fed needs to come clean and open it's books. Everything is regulated but them! Wonder why?
I've lived in the depression of the 70's, then we had fantastic growth in the 80's (remember reaganonmics), then we had the depression in the 90's, then we had Bush's tax cuts and another growth period, now here we are approaching a new decade with everything coming full circle and the end of prosperity here again. Round and round we go.
What most don't see to realize is that a working gold standard must have a real bills system to cover liabilities on critical consumer items on a 90 day basis. You don't pay every vendor with gold on every transaction. The real bills essentially are money (backed by gold) and are passed by merchant to merchant until expunged by a gold transfer. One could conceivably do dozens of transactions on the same real bill in that 90 days. Before there were govt's this was how business was conducted as economic systems were created, with real bills or chits. Fekete notes that after WW1 TPTB decided to return to a gold backed system, but without real bills behind it. Hence there was no effective gold standard from 1920-1933.
I also note that the US stores of gold (8100 tons) directly backs 44% of the FRN's that are in circulation. For those that are so down on a gold system with real bills, you have almost exactly the same system with FRN's...except nothing but "faith" is backing them. The $800 BILL or so of FRN's that circulate around the world don't even come close to covering all the trading, purchasing, etc. that occurs in the USEconomy. If everyone demanded to be paid in FRN's tomorrow, the system would collapse since today most everything is done via keystrokes. I'm not advocating a return to a gold standard, but pointing out the fallacies in those who say such a system is unworkable today. The FRN is a "bill" just not a "real" one and there aren't enough to go around if everyone wanted to cash out at the same time. Would gold be any more unworkable than the current fiat system by backing 100% of the FRN's at $3,000/oz?
roadrunner
<< <i>Nobody in this PM forum seems to have made reference to a very recent article on this subject in Numismaster, which I'm providing a link to, without endorsement pro or con: article >>
i think someone did, however i don't remember so... thanks...
mostly the search funtions here are not to my liking either
If bankers weren't allowed to jack around with the leverage inherent in fractional reserve banking, then maybe savers could simply save and then go about being productive, instead of casting about incessantly for the next hot investment that might save their bacon when it comes time to retire.
Talk to someone who is further from their retirement goals now than they were 10 years ago and see if they think a stable currency would be nice to have.
I knew it would happen.
roadrunner
<< <i>Nobody in this PM forum seems to have made reference to a very recent article on this subject in Numismaster >>
Nobody seems to have done much research on the author as well.
<< <i>Read part of that article and that guy is about as far off base as one can be. Inflation is a goal of every economy? Well I guess it is if you are a central banker or are the power behind the bank. We can't grow an economy without inflation? Tell that to those who grew the country from 1800 to 1906 when in fact a slight deflation occured over that period (ie lower prices). That was probably the greatest boom period seen in modern industrialized civilization and done mostly on a gold standard. Booms and busts were not caused by a gold standard or shortages of gold. It's invariably caused by bankers reigning in the punchbowl after bouts of overindulgence.
What most don't see to realize is that a working gold standard must have a real bills system to cover liabilities on critical consumer items on a 90 day basis. You don't pay every vendor with gold on every transaction. The real bills essentially are money (backed by gold) and are passed by merchant to merchant until expunged by a gold transfer. One could conceivably do dozens of transactions on the same real bill in that 90 days. Before there were govt's this was how business was conducted as economic systems were created, with real bills or chits. Fekete notes that after WW1 TPTB decided to return to a gold backed system, but without real bills behind it. Hence there was no effective gold standard from 1920-1933.
I also note that the US stores of gold (8100 tons) directly backs 44% of the FRN's that are in circulation. For those that are so down on a gold system with real bills, you have almost exactly the same system with FRN's...except nothing but "faith" is backing them. The $800 BILL or so of FRN's that circulate around the world don't even come close to covering all the trading, purchasing, etc. that occurs in the USEconomy. If everyone demanded to be paid in FRN's tomorrow, the system would collapse since today most everything is done via keystrokes. I'm not advocating a return to a gold standard, but pointing out the fallacies in those who say such a system is unworkable today. The FRN is a "bill" just not a "real" one and there aren't enough to go around if everyone wanted to cash out at the same time. Would gold be any more unworkable than the current fiat system by backing 100% of the FRN's at $3,000/oz?
roadrunner >>
Thanks Roadrunner for your usual expert analysis! I hope someone who knows the author of that piece will forward it on to him.