Issues with a gold standard
ranshdow
Posts: 1,441 ✭✭✭✭
I can think of two:
I haven't thought this through, but I wonder if the nature of a fiat currency being created in the form of debt is a way of neutralizing the latter somehow. Technically fiat currencies should be balance-sheet neutral.
I haven't thought this through, but I wonder if the nature of a fiat currency being created in the form of debt is a way of neutralizing the latter somehow. Technically fiat currencies should be balance-sheet neutral.
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And really, aren't the economic distortions created by the Fed alot worse, being that there is a 100% infusion of cash vs. no offsetting increase in productivity or wealth every time the Fed intervenes in the bond market?
I knew it would happen.
We were on the gold standard then yes?
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Tom Pilitowski
US Rare Coin Investments
800-624-1870
However, all bets are off if the USD completely collapses. I'll give it 1 in 5 odds that it will completely collapse under it's own weight...............MJ
edited for spelling
Fellas, leave the tight pants to the ladies. If I can count the coins in your pockets you better use them to call a tailor. Stay thirsty my friends......
Ok - trick question, my point being we're a silly lot, we debate if the dollar will collapse when history screams that it's inevitable, really more a matter of when.
I'm sure there will be dozens of contributing factors to its eventual demise but human nature and greed alone could eventually get the job done.
...
then generally, it no longer is.
Camelot
<< <i>In the first 100 years of this country, America became the most free country in what was at the time 5,000+ years of history and because of that freedom, America also became the richest most powerful country on earth. They didn't get that way from borrowing and spending, bombing 3rd world countries, positioning some form of military in over 100 countries or ripping off it's own citizens.
We were on the gold standard then yes? >>
It's not the Gold Standard that made this country rich, but an abundance of Natural Resources along with lots of "real estate" and not to many unfriendly neighbors. Having a couple of big ponds of water separating the rest of the world helped.
Most are little more then a big mouth , big hands and big
pockets.
Camelot
Groucho Marx
<< <i>Brazil also has great natural resources as well as decent neighbours and big oceans ....they did not become America. >>
There's a Bingo from my neighbor to my South.
Coin's for sale/trade.
Tom Pilitowski
US Rare Coin Investments
800-624-1870
The growth in the gold supply has averaged about 1.5-2% per year and decreasing over the past decade. That's hardly enough to cause significant distortions. Having a hard money standard certainly attracted plenty of business in the 19th century. Both England and the USA prospered mightily from it.
There's probably not one person on this forum (even EagleEye) who believes the dollar won't disappear or become defunct at some time in the future....like all currencies before it. I just think the time table has been sped up a lot. If you read this forum back in 2004-2005 the guesses ranged as far out as 2035 or 2050 or longer before the dollar evaporated. I wonder if people think it will still last that long.
roadrunner
<< <i>
<< <i>In the first 100 years of this country, America became the most free country in what was at the time 5,000+ years of history and because of that freedom, America also became the richest most powerful country on earth. They didn't get that way from borrowing and spending, bombing 3rd world countries, positioning some form of military in over 100 countries or ripping off it's own citizens.
We were on the gold standard then yes? >>
It's not the Gold Standard that made this country rich, but an abundance of Natural Resources along with lots of "real estate" and not to many unfriendly neighbors. Having a couple of big ponds of water separating the rest of the world helped. >>
Yes, but the Gold Standard kept things together so the resources could be exploited.
As we've all seen and many here have experienced the creation of free and endless money only leads to vast corruption of those in office. They become insane with power and start creating personal empires. More and endless government that curtails individual liberty and freedom. The Gold Standard will return, must return in fact, there is no other alternative, really.
Free Trial
<< <i>
<< <i>Brazil also has great natural resources as well as decent neighbours and big oceans ....they did not become America. >>
There's a Bingo from my neighbor to my South. >>
Not yet...but give them time..and guess what, they are not on the Gold Standard.
Brazil is a giant in all senses. It is the largest Latin American country with a population of 188 million. It is by far the continent's largest economy, producing 40% of Gross Domestic Product (GDP) and its purchasing power is the 9th largest in the world. It is predicted to become one of the 4 most dominant economies by the year 2050.
Their economies wilted because they over-extended their empires, or mismanaged the ones they had. Certainly America is likely on a decline from world dominance (thanks to the world's anger at starting a preemptive war) but the expansion of debt, (which is the same as debasing PM-backed currency in the past) is not the cause but the result. By not paying for wars, tax cuts and services, insisting on having a defense budget that is huge by any standard, we are making it happen ourselves. We can fix the problem by reigning in debt, paying for things we do (yes, with taxes) and being the economic engine of the world, like we should be.
Going on a gold standard does not fit the equation at all. It is more like putting shackles on a runner and expecting him to be competitive.
<< <i>I can think of two:
Growth in the money supply would be strictly limited to the growth in the gold supply. I understand the latter (new mine production annually worldwide) is in the single digits. Therefore, if your economy grew any faster than the money supply, you'd have de facto price deflation. If you grew slower, the reverse would be true, and would result in inflation.
Any value gold has beyond it's cost of production to the producers would function like pure "seignorage", with that portion of the new wealth generated by the economy accruing to the producers or suppliers of gold. This is an economic distortion.
I haven't thought this through, but I wonder if the nature of a fiat currency being created in the form of debt is a way of neutralizing the latter somehow. Technically fiat currencies should be balance-sheet neutral. >>
You've touched on two of the reasons that a gold standard is passé.
Gresham's law would put an end to circulating gold or a gold backed currency in short order.
Even RP came to recognize the fallacy of a strict gold standard and had to amend his Utopian economy currency.
You don't think the fall of those empires began when they started slowly debasing their currencies and then eventually accelerated it? Rome didn't debase her currency in one year or even one century. They did that methodically over hundreds of years before the sacking of Rome finally occurred. The US has only been debasing for about 100 yrs so we are well ahead of the pace set by the Romans. The only ways to overextend one's empire is through either a debasing of the currency/money supply or going out and finding/earning money. Most eventually reverted to the easy method and are no longer empires today because of it. All the great empires did it. The US monetary decline began just before the start of the Vietnam war if that is the preemptive war you are referring to. It basically began in the late 1950's as we looked into space and then geared up the guns and butter Great Society. We debased the dollar throughout the 60's and 70's, and then kept it up. Exporting our inflation overseas and using cheap foreign labor to make our goods for 2 decades kept prices in check stateside. This allowed J6P to believe that our economic policies were sound and good for the long term. The expansion of debt/liabilities is precisely the cause for our problems. There is no other major cause. And most of that debt/liability has been tacked on over the past 10 yrs. The Romans were able to hang on for another 200 yrs after serious inflation hit. I don't think we'll have that luxury.
roadruner
The republicans increase the money supply by 50%, change the spending priorities to reduce marginal tax rates and call it a tax cut.
When in doubt, issue free money to your friends and call it an emergency bailout, without which, "the world will collapse".
A currency that remains rock solid in value is the bane of all politicians because it would more easily show where the spending priorities are from year to year and it would allow a much cleaner analysis of governmental performance in terms of GDP and cost control. The winners and losers in terms of spending would be much clearer to see and to debate on their merits.
With the lack of accounting standards and sleight-of-hand finance methodology - by having the Fed swapping T-bills back & forth with the Treasury, the whole process is shall we say - not very transparent, or understandable, or believable - take your pick.
One thing for sure, it would be harder to manipulate the facts on a gold standard. And I don't think a gold standard is impossible - that's just the propaganda talking.
I knew it would happen.
If there is a historical link between debasing money and failure of empires caused by it, it would be when Rome began paying its soldiers with debased money. Then, yes that would cause a problem. England under Henry VIII, Spain under Phillip II, France under Napoleon I
In the US case, The Vietnam war and Great Society were eventually paid - by taxes and the inflation from 1975-1990. The post 9/11 wars and tax cuts have yet to be paid.
Check this link out. Look at Wages for the Roman soldiers wages vs. inflation. Also look at the general model for deficit spending, like we are doing.
link
Rome plundered the known world and brought the riches home.
When we go to war, instead of plunder, we spend trillions of dollars.
I say back to the good old plunder and pillage.
alone, we could take all of their rocks, sand, deceit, opium, corruption ,
murderous attitude ,as well as sodomy and all sorts of human rights violations.
Why, we would be rich in no time.
Camelot
<< <i>The problem of the ASA vrs The Roman Empire is this:
Rome plundered the known world and brought the riches home.
When we go to war, instead of plunder, we spend trillions of dollars.
I say back to the good old plunder and pillage.
alone, we could take all of their rocks, sand, deceit, opium, corruption ,
murderous attitude ,as well as sodomy and all sorts of human rights violations.
Why, we would be rich in no time. >>
Never mind, I'm outta this
Coin's for sale/trade.
Tom Pilitowski
US Rare Coin Investments
800-624-1870