Okay, so the world is off the Gold standard because we decided...

mrpaseo

What's stopping other countries from going back on the gold standard?

derryb

<< <i>What's stopping other countries from going back on the gold standard? >>


loss of their ability to devalue the currency by creating new currency from thin air. A gold backed currency keeps them honest by making them acquire more gold to back newly created currency.

mrpaseo

<< <i>

<< <i>What's stopping other countries from going back on the gold standard? >>


loss of their ability to devalue the currency by creating new currency from thin air. A gold backed currency keeps them honest by making them acquire more gold to back newly created currency. >>




Good for the people, not for the government... Why do these countries want their gold back?

mrpaseo

Wait, why can't they just produce more fiat currency and use it to purchase more gold?

derryb

<< <i>

<< <i>

<< <i>What's stopping other countries from going back on the gold standard? >>


loss of their ability to devalue the currency by creating new currency from thin air. A gold backed currency keeps them honest by making them acquire more gold to back newly created currency. >>




Good for the people, not for the government... Why do these countries want their gold back? >>


For the same reason you don't want someone else storing your gold - it might not be there when you are ready to take possession of of it. Referred to as counterparty risk and appears to be a valid concern since the FED told Germany it would take seven years to return all of the 300 tons Germany wants back.

derryb

<< <i>Wait, why can't they just produce more fiat currency and use it to purchase more gold? >>


Maybe they are. In a true market gold price would increase in tandem with money creation thus cancelling out any benefit to purchase gold with new money. However, true market is history.

johnny9434

<< <i>

<< <i>What's stopping other countries from going back on the gold standard? >>


loss of their ability to devalue the currency by creating new currency from thin air. A gold backed currency keeps them honest by making them acquire more gold to back newly created currency. >>

omg, we cant have that, can we?

mrpaseo

<< <i>

<< <i>Wait, why can't they just produce more fiat currency and use it to purchase more gold? >>


Maybe they are. In a true market gold price would increase in tandem with money creation thus cancelling out any benefit to purchase gold with new money. However, true market is history. >>




That's what I find odd... Thanks.

jmski52

<< Wait, why can't they just produce more fiat currency and use it to purchase more gold? >>

If that's ever proven to be the case, it might be the end of fiat currencies, at least for awhile.

s4ny

There just isn't enough gold in the world for major countries to have a gold backed
currency.

derryb

<< <i>There just isn't enough gold in the world for major countries to have a gold backed
currency. >>


Maybe it's not a problem with the gold supply. Maybe there's too much currency. $3 Trillion on the FED's balance sheet alone.

derryb

<< <i><< Wait, why can't they just produce more fiat currency and use it to purchase more gold? >>

If that's ever proven to be the case, it might be the end of fiat currencies, at least for awhile. >>


Depends on how bad central banks need gold (reparation needs?) or how much they value it (most are buyers). I see it as a very probable scenario - when the money created to buy gold dies, the gold lives on. Maybe central banks see a soverign SHTF scenario in the cards.

We know that central banks are creating money and we know they are buying gold. We also know that 1 + 1 still equals 2.

jmski52

<< There just isn't enough gold in the world for major countries to have a gold backed currency. >>

There just isn't enough integrity left in the world political & banking systems for major countries to have fiat currencies and fractional reserve banking.

jmski52

We know that central banks are creating money and we know they are buying gold. We also know that 1 + 1 still equals 2.

The eventual fallout seems pretty obvious

mrpaseo

So, during the quiet before the storm... wouldn't it be smart for our government to be stashing gold with the impending fall of their fiat money? Maybe this is what Germany is doing. Securing their future.

bronco2078

<< <i>There just isn't enough gold in the world for major countries to have a gold backed
currency. >>





Dollars can and will be destroyed . There will be pain but a price can be found. Those that worked for their dollars will hurt the most when they are destroyed.

mrpaseo

<< <i>There just isn't enough gold in the world for major countries to have a gold backed currency. >>



Of course, but add in Silver and Platinum and where are we? I'm sure we are still short but at least some country could jump back on the standard, we can call it the Precious Metals Standard or the "PMS". Sure there would be a lot of pain and suffering, maybe even some blood shed, but after a short time that should subside and things would go back to normal... no?

roadrunner

<< <i>Wait, why can't they just produce more fiat currency and use it to purchase more gold? >>



In a roundabout way I think most of the larger nations are doing just that while they can. Most of the money creation though is via digi-fiat, not printed currency. This way
the average guy doesn't see it and can't use it. The big money people use this digi-fiat to buy whatever things around the world they can get their hands on....including precious
metals.

derryb

Good primer on the history of money and gold standard

Disclaimer: The Austrian point of view. Not for the Paul Krugman fan.

DeepCoin

One of the main problems with the gold standard is that you limit the growth of the money supply by the amount of metal you can dig out of the ground each year. The world's economies are just too large for that. It also penalizes countries that have no gold in the ground. If we want GDP to expand by x each year, demonstrating a thriving economy, you need to be able to expand the money supply as well. There are just too many structural factors to ever go back on a metal standard.

When we took the silver out of our coinage for the most part in 1965 it was all 90 percent. Now if we put silver back in coinage, every time there would be a big move in silver prices there would be a huge round of melting, either legal or illegal. Not to mention the fact that all the coins would have to be a mix of silver and something or given the fact that it is trading at somewhere in the 15x range, coins would all become quite small.

There are just way too many impediments to a metal based monetary system. That ship sailed a long time ago.

jmski52

One of the main problems with the gold standard is that you limit the growth of the money supply by the amount of metal you can dig out of the ground each year. The world's economies are just too large for that.

Limiting the growth of the money supply wouldn't limit economies, but it would fix a value on each currency based on the value of their economies. Governments would have to be accountable, and if they overspent relative to their ability to generate real products & services, their currencies would command less and less on the open market, so the less productive countries would have incentives to become more productive.

As a corollary, governments who overspent would have to face the wrath of their own populace if they were forced to raise tax rates directly and out in the open instead of sneaking new money into the system via their crony-based banking system with no apparent consequences for mismanagement.

It also penalizes countries that have no gold in the ground. If we want GDP to expand by x each year, demonstrating a thriving economy, you need to be able to expand the money supply as well. There are just too many structural factors to ever go back on a metal standard.

There are indeed a lot of structural factors built into the system now, so by no means would it be easy to go back on a metal standard, but I don't think that it would penalize countries who have no gold in the ground as much as you might think. Every country has exports worth just so much, and trade would establish the relative values of every countries' exports, including the value of gold.

As far as limiting GDP expansion and having a thriving economy, the ability to extend credit doesn't have to be based on money expansion or money creation. Read Antal Feteke's works on real bills.

I believe that the root of many of our problems is due to the lack of accountability in the endless feedback loop between the Fed, our politicians and a limitless supply of fiat based on nothing, but which benefits primarily it's first and second recipients at the expense of working people who pay the taxes.

link

TwoSides2aCoin

The coffee bean standard would destroy us.

bronco2078

The amount of physical gold on hand never limited the money supply. Those against the gold standard have just felt if they repeated that endlessly folks would start to believe it.