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Let's assume, the gold/silver standard

coinnut86coinnut86 Posts: 1,592 ✭✭✭
in Precious Metals
Was brought back. Let's assume that tomorrow, the US government announced it was going back to the gold standard and that it had a top secret stock pile of gold and silver, enough to account for every dollar printed. Our debt to foreign countries was able to be paid in full, upon demand, in gold and silver. What would the stock market do? What would the PM market do? The Economy? The world economy?
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Comments

  • derrybderryb Posts: 36,772 ✭✭✭✭✭
    Too late, too many dollars. image

    One atom of gold per dollar just won't cut it.

    "Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey

  • Jinx86Jinx86 Posts: 3,709 ✭✭✭✭✭
    I think if anything there would be a temp freeze of the markets. But why would they do such a thing when they are so deeply vested in the markets?
  • s4nys4ny Posts: 1,568 ✭✭✭
    If it somehow happened, dollar would skyrocket, stock market would crash,
    the US would go into a deflationary depression. Prices on almost everything would
    fall. Economy would freeze up.

    Interest rates would plummet on longer dated Treasury Notes and Bonds.

    There is enough gold to back every Federal Reserve note at 25% of face value.

    If we look at M1, there is only enough gold to back less than 2.5%.

  • secondrepublicsecondrepublic Posts: 2,619 ✭✭✭


    << <i>One atom of gold per dollar just won't cut it. >>



    image
    "Men who had never shown any ability to make or increase fortunes for themselves abounded in brilliant plans for creating and increasing wealth for the country at large." Fiat Money Inflation in France, Andrew Dickson White (1912)
  • jmski52jmski52 Posts: 22,793 ✭✭✭✭✭
    It would become much harder to buy a Senator or a Representative, and the accounting for gold bullion would become lots tighter.
    Q: Are You Printing Money? Bernanke: Not Literally

    I knew it would happen.
  • OPAOPA Posts: 17,118 ✭✭✭✭✭


    << <i>Was brought back. Let's assume that tomorrow, the US government announced it was going back to the gold standard and that it had a top secret stock pile of gold and silver, enough to account for every dollar printed. Our debt to foreign countries was able to be paid in full, upon demand, in gold and silver. What would the stock market do? What would the PM market do? The Economy? The world economy? >>



    Most likely a similar scenario as the Moon leaving Earth's orbit. Total chaos.
    "Bongo drive 1984 Lincoln that looks like old coin dug from ground."
  • BaleyBaley Posts: 22,660 ✭✭✭✭✭
    Same thought experiment, except instead of gold and silver, all the money is "backed" copper and nickel. Same question, except the money is backed by aluminum and iron. Same question, except the money is backed by land and trees.

    Same answer: doesn't matter. what will Circulate will be pieces of paper for cash transactions and electronic blips and "sign the screen" for larger purchases.

    Liberty: Parent of Science & Industry

  • derrybderryb Posts: 36,772 ✭✭✭✭✭
    the dollar would be better served if it were backed by responsible management. It is the faith that it will be accepted in it's next transaction with little to no loss of trading value that keeps the dollar in use as a reliable form of barter. Dollars are currently and will always be backed by the promise that was made to obtain them (debt). When those promises lose value, the dollar loses value. The dollar needs to also be backed by economic stability. This is where our central planners have failed us.

    Promises are what keep a currency alive. Backing a currency with a physical asset is nothing but just another promise that can be easily made and easily broken. We've seen that once before with a gold backing. The value of money is determined by what it will pay for not what backs it. If it takes more dollars than it did before it is safe to say your dollar has been devalued.

    "Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey

  • rickoricko Posts: 98,724 ✭✭✭✭✭
    That would be a nightmare scenario - OK for discussion, but I cannot see it happening without a major planetary upheaval, the magnitude of which would be the end of civilization as we now enjoy.....Cheers, RickO
  • derrybderryb Posts: 36,772 ✭✭✭✭✭
    Why the value of the dollar is being destroyed

    A gold standard would be a major obstacle.

    "Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey

  • MGLICKERMGLICKER Posts: 7,995 ✭✭✭


    << <i>There is enough gold to back every Federal Reserve note at 25% of face value. >>



    Not quite. US gold reserves are in the 320 Billion Dollar range at current spot. About 8% of the $4 T US money supply.
  • derrybderryb Posts: 36,772 ✭✭✭✭✭
    The only way to successfully back money with gold (or silver) is to actually put the metal in the money. Anything else is a promise, including the promise that "we have the gold, but you can't audit what's in the vault."

    No question that a 1964 Washington quarter will hold value. A federal reserve note, even with "gold backing" would always be questionable.

    "Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey

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