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Back to the Gold Standard
Ed62
Posts: 857 ✭✭
If Sec. Geithner called to tell you the USA has decided to go back to a gold standard in order to correct for the government's past profligacies and wanted your advice as to at what price the US dollar should be convertible to an ounce of gold, what would you advise him:
1.) $20.67
2.) $35.00
3.) $1298.00
4.) Other $________
. . . . . . . . . and tell us why you recommend that price, and how the economy will react once that policy takes effect.
1.) $20.67
2.) $35.00
3.) $1298.00
4.) Other $________
. . . . . . . . . and tell us why you recommend that price, and how the economy will react once that policy takes effect.
Ed
0
Comments
"“Those who sacrifice liberty for security/safety deserve neither.“(Benjamin Franklin)
"I only golf on days that end in 'Y'" (DE59)
<< <i>It could never be done. >>
It SHOULD never be done.
Despite all of the right wing railing about the gold standard it was anything but the “golden bullet” that fixed everything back in the 19th century, and it would be the source of poverty and human misery if it were revived today. One need only look at the Panic of 1893 to see the folly of tying a nation’s money supply to the amount of ONE commodity that a nation owns.
Back then Senator John Sherman, who was the brother of the famed Civil War general, got the Sherman Silver Purchase Act through Congress. That bill required the government to buy silver and issue paper notes that the government would redeem in either gold or silver. Although many people talked about how great silver was, they were not fools. They took those notes and redeemed them for gold, which pulled the U.S. Government’s gold reserves that backed the U.S. dollar down to dangerous levels. The result was a liquidity crisis that resulted in a relatively short but severe economic recession cost many people their jobs.
The proper solution would have been a moderate increase in the money supply, which would have relieved the crisis. But under the gold standard that could only be done if the U.S. somehow came up with more gold. In the end President Grover Cleveland got through the crisis by borrowing from a syndicate of bankers led by J. P. Morgan, but it ruined Cleveland’s presidency and gave rise to the silver crusade of William Jennings Bryan.
The Federal Reserve System has its faults, but the problems, when they have occurred have been due to policy mistakes, not a fundamental flaw in the ability to central governments to regulate the money supply. The gold standard has been billed as a solution that would regulate the money supply naturally, but history has shown us that that perception is not supported by the facts.
“…A sea-captain avoids the rocks, not by controlling wind and wave, but by controlling his rudder alone. Gold control is comparable to rudder control.”
[Irving Fisher, “Are Booms and Depressions Transmitted Internationally Through Monetary Standards?” XXII Session de L’Institut International de Statistique, London, 1934.]
https://acoinshop.com/ —-> https://ebay.us/m/KxolR5
It cannot happen without anything short of a worldwide, major disaster, leaving most civilization(s) virtually in survival mode. It never was a good standard, and as BillJones (and others here and on the PM forum) have repeatedly pointed out, it cannot work. This repeated refrain about the gold standard is purely out of ignorance and desperation. Those who seek it are ignorant of what it really means and what it would do to the world economy. They are desperate because they do not understand economics or politics.
The ones that do not understand monetary theory think that gold was to blame for all the abuses of the 19th century and early 20th century. In fact even on a gold standard govts and bankers cheated on numerous occasions. The first one was during the war of 1812 when southern banks started to pump out excess currency thereby creating an economic mess from 1816-1821 when the spending was pulled back in (ie panic of 1819). This effect was not seen in the northern banks who did not print excess currency during this period. Their currencies maintained their value. The same effects are scattered across the 19th century and right up until 1929. The problem has never been with the standard, but merely with the people and entities that cheat it. I go agree that even with a gold standard still in effect since 1971, banks and govt's would have found additional ways to circumvent the standard, much as the US had done from 1944-1971. In fact bankers created their own monetary/credit system in 1999-2000 with the advent of unregulated otc derivatives and merging commercial and investment banks once again. This would have circumvented any monetary standard in force at the time. With a monetary system, it simply comes down to faith, confidence, and doing what's right...something Central Bankers and govt's just don't ever seem to get right. What's the historic life of fiat currencies considering that not one has survived the test of time? Even Keynes knew his system was a sham when he said that no more than 1 person out of a million could detect the insidious confiscation of wealth that was going on.
Don't blame gold for those who cheat.....it's only the messenger of currency distress and lack of confidence.....and it's message is rarely wrong.
What we've proven over the past 40 yrs is that a fiat money standard doesn't work at all. But this is the system that the ignorant are used to so by all means, let's continue.
Could a gold standard of some sorts work today? Well, could it be any worse than the mess we created over the past 10-15 yrs? It's pretty obvious that there is no entity today that can be trusted with the money supply....and certainly not the current trustrees. I think the last 40 yrs is a timeless example of what SHOULD never be done...that is to jeopardize our current and long term growth and prosperity for a 20 year frat party, only this time you can't pin it on gold....look elsewhere. The only real differences between the 19th and 20th centuries is that the bankers learned to better coordinate the boom and bust cycles and profit by them. You technically can't have massive boom and bust cycles if everyone is adhering to regulations and standards. When stock and housing prices were going parabolic during the "frat" party was that a result of "efficient" FED/Treasury regulatory and monetary policy...or the aftermath of going pure fiat in 1971...or both?
roadrunner
<< <i>
<< <i>It could never be done. >>
It SHOULD never be done.
Despite all of the right wing railing about the gold standard . >>
What are you trying to say there boss?
Gold is one of the few internationally recognized currencys
and it matters very little whos countrys name is embossed into the coinage you can easily redeem its value in exchange goods and services. So one could argue that the standered is already in place
and it doesn't matter much what wing you carry your gold under.
Coin's for sale/trade.
Tom Pilitowski
US Rare Coin Investments
800-624-1870
<< <i>I've heard that for all the gold in the world to equal all the money printed in the world, gold would have to be valued at $35,000 an ounce (and that's not a typo!!) >>
Coincidentally, I just had a serious discussion on this last night. $15,000 / oz was the number mentioned.
History's record shows the exact opposite...and it had nothing to do with "the gold standard."
Grinding poverty, child labor, exploitation of immigrants, rampant discrimination for race or religion, frequent asset-wiping financial panics, adulterated products, dirt-poor farmers earning $10 a year, public and private work-houses, routine sale of children for farm labor, human slavery, the "friendly" KKK, Hoovervilles, pervasive corruption.
Once you've opened a few history books and learned a little, then imagine yourself in that time, living by the societal norms of that time. You might discover that the greatest "freedom" was to hate, and "prosperity" was enjoyed by very few – and you weren’t one of them!
There are more presently opportunities for free expression of ideas, and for the creation of individual wealth than at any time in America's past.
<< <i>...under the gold standard we had unprecedented freedom and prosperity.
History's record shows the exact opposite...and it had nothing to do with "the gold standard."
Grinding poverty, child labor, exploitation of immigrants, rampant discrimination for race or religion, frequent asset-wiping financial panics, adulterated products, dirt-poor farmers earning $10 a year, public and private work-houses, routine sale of children for farm labor, human slavery, the "friendly" KKK, Hoovervilles, pervasive corruption.
Once you've opened a few history books and learned a little, then imagine yourself in that time, living by the societal norms of that time. You might discover that the greatest "freedom" was to hate, and "prosperity" was enjoyed by very few – and you weren’t one of them!
There are more presently opportunities for free expression of ideas, and for the creation of individual wealth than at any time in America's past. >>
Sound money had nothing to do with it?
So in the 1st 100+ years this country was a country, it endured child labor, exploitation of immigrants, descrimination and asset wiping financial panics? Good G-d, why didn't people just leave? What a horrible place early America must have been in the history books you are referring to and what a workers paradise it's turning out to be.
Oh I'm sorry, you're referring to the Civil War era which sported the most racist president in history, and then let me see, hoovervilles, that would be a time after the federal reserve act, a high progressive income tax was installed , .....yes, what a smart direction to turn.
Coin's for sale/trade.
Tom Pilitowski
US Rare Coin Investments
800-624-1870
Let's not also forget that history books are written by revisionists, and then usually the winning side. If you're looking for just the truth as to how things really were, that's probably not the place to look. And just because economists write economics textbooks doesn't make all the Keynesian claptrap correct. Under the revamped gold standard of 1944-1971 we certainly created unprecedented freedom and prosperity...but that was also the start of exploiting the world's reserve currency. And we really didn't learn any lasting lessons from the 1962-1982 period. Rather, we ramped up the prosperity presses once again to full bore. And when that wasn't enough, we created structured investment vehicles out of thin air. I think what Mr. Earlygold was trying to say was that we had long term prosperity in our hands and screwed it up for ourselves, for our kids and for our grandkids. The opportunities might still be same, but the number of them has drastically shrunk. One exception to this is in otc derivatives creation and trading where the bankers have only continued to increase their totals.
Considering that average "real" wages peaked back in 1972-73 (curiously just after we came off the gold standard
roadrunner
rwb is right when he points out that those who think the gold standard was a glorious time are sadly mistaken. The unemployment rate--as best as it can be measured--from 1890 to 1925 was lower than 5% for about 14 years--and that includes two years during WWI. Moroever, the United States was a much more agrarian nation at that time and it's tough to be unemployed if you are a farmer. In other words, anyone who was not a farmer faced frequent tough times due to unemployment.
Plus, as roadrunner so eloquently explains, people "cheat" on whatever system is in place. So it's no use comparing a perfect gold standard to other standards because a perfect gold standard will not exist. That said, I disagree with rr about his comment on real wages peaking just after we left what remained of the gold standard. Real median household income was about $40,000 in 1967. In 2009 it's just a touch more than $50,000.
I expect that rr will reply that the data I have used are all wrong. He and I have disgreed on that issue a lot more than once and will probably continue to disagree. That said, rr is still someone whose numismatic opinions I value and want to hear.
The tastycake pumpkin pie...that was 13 cents, now its $1.39
Gas, was 29 cents, now its $2.90
A man could make 1.30 an hour, now he makes $13.
Our dollar today is worth a dime in 1968 money.
Our penny today, is equal to a 1/10 cent piece...in 1968 money.
Now I dont know what any of that all means because it is all in constant motion.
PS Mark could you provide a reference to the median family income being 40,000$ in 1967? I find that unbelievable.
<< <i>
PS Mark could you provide a reference to the median family income being 40,000$ in 1967? I find that unbelievable. >>
I interpreted the statement about $40,000 in 1967 to mean $40,000 2009-dollars accounting for inflation.
In honor of the memory of Cpl. Michael E. Thompson
<< <i>a 1/10 cent piece >>
Called a mille in The Coinage Act of 1792 - just FYI.
The period of greatest overall prosperity – from farmer to shop keeper to mill worker and up the economic ladder – was from 1910-1919. Curiously, during most of this period the so-called gold standard was inoperable, and gold did not circulate in the United States. (Other periods enjoyed prosperity among certain economic groups – the 1920s being notorious for its uneven distribution of wealth.)
If anyone reading this wants to begin to understand social and economic conditions, there are a lot of books available from modern writers. If you want to go back to contemporary writers, a good one to start with is Irving Fisher, who was quoted in another post. There is much to learn if one reads with an open mind, and repetition of many mistakes can be avoided. (Including the current near-Depression.)
PS: Also, give a good read to Mark’s comments. He knows what he is talking about, in depth
<< <i>“At all events, what we have learned puts us in a position to consider whether booms and depressions and their spread from land to land are to be accepted in a spirit of fatalism, or resisted. Surely, they are to be resisted. They can be forestalled or, at any rate, greatly mitigated. For, since the price of gold is a chief determinant of the price level (where the monetary standard is gold) and since the price of gold in terms of the money of any given country is controllable, it follows that in gold countries we can, through the regulation of gold, largely regulate a chief cause of booms and depressions – the price level. This has been shown by Professors Warren and Pearson in Prices and has been exemplified in America by the gold policies of President Roosevelt, as well as in Australia under the influence of Professor Copland – not to mention New Zealand.
“…A sea-captain avoids the rocks, not by controlling wind and wave, but by controlling his rudder alone. Gold control is comparable to rudder control.”
[Irving Fisher, “Are Booms and Depressions Transmitted Internationally Through Monetary Standards?” XXII Session de L’Institut International de Statistique, London, 1934.] >>
With all respect to Irving Fisher, who was a very capable economist of his time, the most salient contributor to economic busts has been excessive debt, which the university business professors call, “excessive leverage.”
To me the greatest challenge we face from an economic perspective is the development of public policy that can control the amount of money that everyone borrows. Look at history. Too much debt has yielded economic downturns. The current recession, if you believe the pundits, was the result of too much borrowed money for housing which could be traced back to Wall Street derivatives AND Fannie Mea and Freddie Mac who helped to divorce the debt collection system from the debt selling function. In small cites and towns where the local banks lend money with the expectation that the borrowers could pay it back, there was no problem. The problem began where mortgages sellers could sell mortgages, get their commissions, and not have to worry about whether or not the debt could be paid.
The gold standard would not fix this. All it does is tie the money supply to the amount of a commodity at a fixed price is available to the government to support the money supply. That amount of gold could be conducive to economic growth, detrimental economic growth or promote inflation as it threatened to due during the California gold rush.
Rational monetary policy, which reflects money supply growth with the growth in the economy, is the answer. Milton Friedman presented that view, and if it were applied effectively, it would be the answer to our long term economic problems.
it would quickly have to be repegged at a higher price when Congress spends
money they don't have. We don't blame the gun when people get killed so why
blame the printing press when currencies get murdered.
The problem lies in education. Until we get a better electorate we won't have
a better Congress.
DoubleEagle59 - True, if I had to guess.
Ambro51 - again, as always, a voice of reason.
BillJones - Very well recounted history. Sherman said "I voted for the bill [Which bears his name] but the day it became law, I was ready to repeal it, if repeal could be had without substituting in its place absolute free coinage [of silver]"
Ricko - In a survival mode, only guns and canned goods will help you, not gold or gold-backed currency.
RWB - Nice quotes. I'd rather quote Charles MacKay, "Extraordinary Popular Delusions and the Madness of Crowd"
Roadrunner - I reread everything you wrote and find most of it crap.
MrEarlyGold - You ARE knowledgeable enough. You just don't want to show it. Unprecedented freedom? No weekends, child labor, no restraint on business' abuses? Yes, freedom, if that's what you want to call it.
Halfstrike - Hyperinflation happens when the people loose faith in the governments ability, not when government spends too much. So hyperinflation can only be brought on by the people.
MrEarlyGold - I take it back. Johnson was INDEED the most racist president ever!
Roadrunner - again with lots to say and nothing to say.
But I'm just trying to get this to 100.
<< <i>If Sec. Geithner called to tell you the USA has decided to go back to a gold standard in order to correct for the government's past profligacies and wanted your advice as to at what price the US dollar should be convertible to an ounce of gold, what would you advise him:
1.) $20.67
2.) $35.00
3.) $1298.00
4.) Other $________
. . . . . . . . . and tell us why you recommend that price, and how the economy will react once that policy takes effect. >>
I would wait a few weeks or so until his impending resignation and then ignore his BS.
That said, I disagree with rr about his comment on real wages peaking just after we left what remained of the gold standard. Real median household income was about $40,000 in 1967. In 2009 it's just a touch more than $50,000.
I've checked my facts more than once on this topic and median real wages have indeed dropped since 1973. But it's probably also true that median family wage has increased 25% in over 40 yrs as families put both parents to work. That's not much of a gain for 2 breadwinners. We can debate all day if that's social progress or not and what its real economic cost has been. I appreciate that you are offering up real facts to support your positions. We actually agree on this point.
The period of greatest overall prosperity – from farmer to shop keeper to mill worker and up the economic ladder – was from 1910-1919. Curiously, during most of this period the so-called gold standard was inoperable, and gold did not circulate in the United States. (Other periods enjoyed prosperity among certain economic groups – the 1920s being notorious for its uneven distribution of wealth.)
But what about the period of 1944-1971 which is a prime gold standard period and the one era that is mostly closely correlated to our current one? Isn't that the period we should be comparing to our current one? As our award winning EE has stated, the 1910-1920's is ancient history, you can't bring it back. One "could" call the era of 1910-1919 one of great prosperty but basically the FED doubled the money supply and doubled prices in the process to help finance WW1 (one of the reasons the FED was created in the first place). It only took them 6 yrs to get the hang of halving the dollar. So if I understand this concept of "prosperity," it only seems to appear when the dollar is getting halved, much like 2001-2008 when it fell 40%. So there must have been a lot of prosperity in the old south from 1819-1823 after the dollar was halved? It finally took a depression from 1920-1921 to restore prices close to pre-FED levels, though it wasn't fully accomplished until 1933. For one of the few times in the 20th century, the FED kept their hands off the financial levers and by 1922 that short depression was over. We could also call the period of 1982-2000 as one of great "prosperty" as well as money and credit ballooned to unfathomable highs. But great suffering usually follows great prosperity induced by ill-advised monetary expansion. Our technological advances of today may have eliminated what we once knew as bread lines. But we now have a large % of people on food stamps who hit Walmart at 11-12 midnight just as their food stamps become legal tender. Different eras, slightly different look, but same bread line. No matter how you slice it, there are still $1.14 QUAD in derivatives sitting out there. It only took $5-10 TRILL of them to take down the mortgage industry and about $20 TRILL to hammer those holding credit default swaps. No amount of austerity, monetary regulation, or new asset backed monetary system is going to change that. The problem cannot be fixed or wished away at this point without a complete accounting. It is different this time.
roadrunner
with perhaps 1% gold, it would still place a small measure of restraint on the printing press.
Camelot
Ill even polish my shoes.
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......
But what about the period of 1944-1971 which is a prime gold standard period and the one era that is mostly closely correlated to our current one? Isn't that the period we should be comparing to our current one?
It was an era of high taxes, high debt from WW2 and NOT a gold standard period, inasmuch as the currency was not backed by gold. The notes say Federal Reserve Note.
As our award winning EE has stated, the 1910-1920's is ancient history, you can't bring it back. One "could" call the era of 1910-1919 one of great prosperty but basically the FED doubled the money supply and doubled prices in the process to help finance WW1 (one of the reasons the FED was created in the first place).
Thanks for the compliment, although it sounds like envy to me. The FED was created because of the 1893 depression where we had to rely on J.P. Morgan to support the Government and the existing gold standard. There was no elasticity in the market under the gold standard. WW1, and the money needed to fight it, were finance by the FED. It was not created for a war we had no idea we would be involved in.
It only took them 6 yrs to get the hang of halving the dollar. So if I understand this concept of "prosperity," it only seems to appear when the dollar is getting halved, much like 2001-2008 when it fell 40%. So there must have been a lot of prosperity in the old south from 1819-1823 after the dollar was halved? It finally took a depression from 1920-1921 to restore prices close to pre-FED levels, though it wasn't fully accomplished until 1933.
The value of the money has a real relationship with wages and prices at the time. If wages and prices keep up with each other then there is little "perceived" problem. when you look at charts of the value of the dollar over time, you can't draw a clear correlation between that and prosperity. I think 1920-1921 was a deflation if it brought prices down.
For one of the few times in the 20th century, the FED kept their hands off the financial levers and by 1922 that short depression was over. We could also call the period of 1982-2000 as one of great "prosperity" as well as money and credit ballooned to unfathomable highs. But great suffering usually follows great prosperity induced by ill-advised monetary expansion. Our technological advances of today may have eliminated what we once knew as bread lines. But we now have a large % of people on food stamps who hit Walmart at 11-12 midnight just as their food stamps become legal tender. Different eras, slightly different look, but same bread line. No matter how you slice it, there are still $1.14 QUAD in derivatives sitting out there. It only took $5-10 TRILL of them to take down the mortgage industry and about $20 TRILL to hammer those holding credit default swaps. No amount of austerity, monetary regulation, or new asset backed monetary system is going to change that. The problem cannot be fixed or wished away at this point without a complete accounting. It is different this time.
Yes it is a different time. in October 2008 nearly half of the stores at the local mall were closed and shuttered. Today, that same mall is 100% full, open with lots of people there. I don't think we are in that bad of an economy. It's getting better, though not great, it's not that bad.
This tells me that the economic mess is manageable and if it were upset by trying something totally stupid, like abolishing the FED, then it would tank.
I have an interest in a commericial real estate consulting company. Malls are filling up a again because developers are pulling down their pants so not to go dark. This is true in all malls that are not blue chip. ( 95% of the malls) Trust me Tuscan does not have a blue chip mall.
Right on cue. Consumer Confidence just released today and it's abysmal (lowest since February) and gold shoots up $15 to a new all-time high. How apropo. Wonder what gold is signaling? My guess, not a healthy or stablizing economy or monetary environment. MJ
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......
I believe I misspoke about the origination of the FED - It was the 1907 depression where J.P. Morgan played "Central Banker" to forestall a bigger depression that began the process of developing the FED. This was during the 1900-1933 "official" gold standard period.
HalfStrike - Hyperinflation is not the same as inflation. It is caused by a complete lack of faith in the money. As a result the Governments like Wiemar Germany and Zimbabwe have to printed ever higher denominations to attempt to restore faith, which is the wrong approach to fixing the problem. The solution in those cases would be to use a gold backed or a stable currency. They use US dollars in Ecuador, for instance.
Consumer Confidence can be controlled by the media, I believe. If the media says things are getting better, people believe it. If they say things are getting worse, people believe that too. Oh, I forgot, it's election season.
It was an era of high taxes, high debt from WW2 and NOT a gold standard period, inasmuch as the currency was not backed by gold. The notes say Federal Reserve Note.>>
Until 1968, Federal Reserve Notes by law had to be backed 25% by gold.
Link
Another link
Until 1971, U.S. dollars were backed internationally by gold, redeemable by foreign entities at the official price of $35 per ounce.
In the U.S., where gold ownership was restricted, common date gold coins carried a premium, but not an excessive one, reflecting confidence in the partially gold-backed dollar. I have a 1950's era Redbook that prices some circulated St. Gaudens $20's at less than $50 each, and that's retail.
Internationally our currency was most certainly backed by gold as the French could attest to as they tried to empty our coffers in the 1960's. The fact that J6P couldn't own gold was irrelevant compared to the international gold market. You are right about the words "Federal Reserve Note" which are substitute words for "I Owe You." (IOU). The fact that gold flowed from US vaults to overseas to settle international debts from 1944-1971 was in fact a gold standard. The international gold window was closed on 8/15/71, at least that's what the history books tell us. But never let facts get in the way of a good story. As MJ has succintly stated, the messenger has been telling us for 9 yrs that something isn't right. I can think of 1,140,000,000,000,000 reasons off the top of my head. The "hits" to the mortgage and credit default swap markets were really just shots across the bow. The big guns (IR swaps) are still loaded and have yet to be fired.
Envy? Hardly. You've got to have batteries in your flashlights to let the light shine. The FED was created to get absolute control of the money supply which is then used to finance wars and create boom and bust cycles. If it were truly created to ensure stable prices and full employment, it would have to be judged as one of the biggest regulatory failures of the 20th century. Rothschild stated it quite simply: "Permit me to issue and control the money of a nation, and I care not who makes its laws." If you haven't noticed, the laws and regulations have been ignored for a long time. The Rothschilds were often on both sides of the battle, happily supplying twice the financing.
roadrunner
At this point what are the odds that the US doesn't have Hyperinflation in the 21st century? I say it is close to zero, if not already there. The question is when, not if. 1 more "war" or serious hit to our economy and a government body pushing "spending" to fix the problem like always could do it, also add it all the Social Security spending and other entitlements that people think they will actually receive.
Halfstrike - Is what you describe really bad inflation or hyperinflation? Lets make sure we have our definitions correct. Edited to add: I think your opinion about the economy is way out of whack with reality. But you can have your own opinion - I'll just shake my head. I can't help you.
If you didn't find a single thing in my posts to be worthy of your analysis, you have that right. But the way you stated it is hardly analysis or debate, and nothing more than an attempt to inflame. You might enjoy that, I personally don't. Maybe you're drumming up business as the next "Richard Nachbar" where you can trade Indian Cents for gold, I don't know. There are many others who have found my posts and research useful over the past 6 yrs. Until I find myself on the wrong side of the hard money fence with many others calling my efforts "crap" as well, I'll continue to post.
roadrunner
I am also amazed at how some say the gold standard was a terrible thing, but let's see how that paper money holds out for us. So far not so good though....
Thanks for backing away. I did say that a gold standard is a solution for a hyperinflation, didn't I?
Also, I notice that when people start losing debates they start name calling and attacking the debater, rather than countering with facts or arguing their opinion.
Real research is objective. Presenting half-truths, opinion and 3rd hand bias is not useful research, except as it can be used to mislead and inflame others; it is nothing but a blatent appeal to fear.
Claming that others accept what you say about economics is a bare ad populum.
I tend to agree with you that the postwar years, I'd say 1945-1960, were a period of unprecedented prosperity but they were not prosperous because of the gold standard. In the wake of WWII the United States was in possession of the only industrial base not destroyed by war AND in a geo-political situation to address glabo demand for manufactured goods. Moreover, the world was awash in dollars through reconstruction plans and US military deployments. We might want to include a bit about Bretton Woods in here as well... The world had dollars and wanted to buy. We accepted dollars and had the product to sell. Moreover, there was relative capital-labor harmony brought on by something of a social contract in which companies felt they could pay high wages in manufacturing because, in essence, there really was no competition in the global market and one could charge as one wished. Now, you may have an argument for why the postwar boom was fueled by the gold standard but I am not so sure one could really make that connection. What was the specific connnection between the gold standard and postwar prosperity? If the gold standard is the cause of prosperity, how do you explain the proviations of the Great Depression?
So much for Rule #6...
<< <i>
<< <i>
<< <i>It could never be done. >>
It SHOULD never be done.
Despite all of the right wing railing about the gold standard . >>
What are you trying to say there boss?
Gold is one of the few internationally recognized currencys
and it matters very little whos countrys name is embossed into the coinage you can easily redeem its value in exchange goods and services. So one could argue that the standered is already in place
and it doesn't matter much what wing you carry your gold under. >>
While it is true that gold is an "internaitonal currency" being on the gold standard cannot save a given nation's currency from going pot if that country's currency in going on the rocks. All people will do is sell that country's gold coinage at around the melt value; it won't save it from collapse. The commodity theory of money (the value of the metal in a nation's coins maintains the value of a nation's currency) is not valid. And that is one of the reasons why the gold standard does not and has not worked.
I presented 2 or 3 posts with a dozen or more easily verified facts about economic/monetary history, and then it was inferred that no such things actually happened. There was no panic of 1819, no depression in 1921, no $1.4Q in derivatives, no FED that did not successfully meet their stated primary goals, etc. Then EE comes out with one of the dumbest comments ever about FRN's not being gold backed whatsoever from 1944-1971 such that Overdate calls him on and then total silence on that topic. Facts trump opinions. Is there a double standard here that's not applicable to anyone else?
But you are right about calling people names when losing arguments....precisely what you did first above. It doesn't hurt my feelings, but it then changes the debate into something far different fwiw.
roadrunner
wise to discount the opinion of people who think for themselves.
Nobody has an inside track on truth anyway and this goes double
with economic issues. Personally it seems that prosperity is nor-
mally the result of structural and technological improvements more
than financial considerations but there's no doubt politics, currency,
and other factors can louse it up.
I always listen to all of the posters in this thread.
I read a very clear and concise article about why you can't "go back" to the gold standard. Unfortunately, I don't remember where I saw it, otherwise I'd post a link.
I really don't really buy the canceling out of these derivatives w/o leaving at least 5-10% of them alive to further crush the economy (5% hit on the "remodeled" value of derivatives would still be $30 TRILL). And with that number I think I'm being way too kind since when Lehman was broken up they paid off all the derivatives and their net value turned out to be 9% of what they were originally marked at (91% loss...fact). If the derivatives were so easily cancelable it doesn't explain how mbs derivatives caused a $5-8 TRILL hit (est). And then also CDS derivatives took a hit of from approx $62 TRILL to $38 TRILL notional (est). In both cases the actual loses were far closer to the change in notional value. That is, those derivative losses caused a $15-$20T hit that someone actually took. And during that same period that BIS report showed the 5 leading US banks gaining $7 TRILL (fact) in notional derivative's "paper" value (ie a trading profit while the world burned). That would account for almost half of the hits. And with around $600 TRILL left (approx 80-85% of those are interest rate contracts- (fact)) what's going to happen when other corporations, municipalities, states, govts, etc. go bankrupt much as Lehman did and 100% of notional value is placed on the table for payment? They didn't cancel all that much of the mbs and cds rounds, so why would we expect it to be different in round 3? The only way to technically to keep derivative's notional value at bay is for the govts of the world to prevent any other entities that carry otc derivatives from going bankrupt (ie supporting them with bailouts as they did with AIG). There's not enough money to bail out everyone, all the time. And certainly not enough to bail out our own 5 too-big-to-fail banks which carry $213 TRILL in bets. That's why probably a couple more of them that fail will be swallowed up by the biggest 2 or 3 so that the derivative's accounting is put further off. As long as bailout support remains in place, no problems.
roadrunner
Dammit...now I want to try and find a number somewhere that gives an estimate on the value of the world's assets...