Talk:Gold standard (economics)/Archive1

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greenback-gold ratio[edit]

Wouldn't that be possible though by just setting a really high greenback:gold ratio? Researcher 11:22, 18 November 2007 (EST)

Mmmmmm. I don't think so. Perhaps if the US were the only country in the world. The first thing you would need to do would be to buy all the world's gold - presumably with dollars. The total value of dollars in the world is already greater than the total value of the world's gold, but this would certainly put more dollars out there.
Then what? You arbitrarily state that that the total value of the gold you hold is equivalent to the value of the dollars which presently exist? As the quantity of dollars presently held is vastly greater than the value of the gold this (in your view) increases the dollar value of each bar of gold.
But this won't work - because the price of gold is set by the international market, not by what the US says it's worth. If it did work it would mean mean that the people you bought the gold off internationally have made a handsome dollar profit.--Bobbing up 11:40, 18 November 2007 (EST)
What happens is that one is "tied" one to the other. If you go back to the gold standard, say, a troy oz of gold would run oh, $600. If demand for gold went up, the result is inflation since more dollars would be necessary to obtain the same oz of gold than previously. If one "fixes" the price of gold @ $600/oz then the government so doing risks being at the mercy of market forces; if the free market price for gold drops to $500/oz then that govt's funds are being wasted since $100 more is being "used" to fix the price @$600. Conversely, if gold went to $1000 the ounce, that govt would lose money as people would buy it's gold @600 to sell it @ the higher price. (The way they sought to deal with that was to restrict the ownership of gold to the government ONLY and then refuse to sell it if it went out of strict bounds pre-set for it.)
What is done now, with the Federal Reserve System, is to underwrite the nation's economy with guarantees. This amounts to "trust us, we're good for it." So far it has worked simply because no-one wants the US to go into default. (Which is another topic altogether.)
If all this sounds complicated and convoluted, you've been paying attention.
I do not actually know if this is correct but it is my view of the matter and I am
CЯacke® 11:57, 18 November 2007 (EST)
I more-or-less agree with you, if you are dealing with one currently in one nation. But as so many dollars are now held outside the US the situation is vastly more complicated. Apart from the practical or economic problems I mentioned earlier, attempting to "fix" a currency against an internationally traded commodity would - in an international market - be absurd.--Bobbing up 12:11, 18 November 2007 (EST)
I only ask because a few countries (like China) have been able to set their money as equal to a fixed amount of a different commodity (notably, US dollars). I thought something similar might be possible with gold. Researcher 17:55, 18 November 2007 (EST)

Split[edit]

This should probably be split into Gold standard (economics) and Gold standard (science) or (analysis) or similar. Gold standard is definitely mentioned in one or two articles referring to statistical rigour so it's best to have them separated rather than conflated together. Scarlet A.pngmoral 20:01, 13 January 2011 (UTC)

A thought[edit]

If gold suffers from inflation, why is it at a high? Because Obama is printing money faster. I will say that the gold standard is stupid, there isn't enough gold. We should use silver. Talsley (talk) 16:23, 20 September 2011 (UTC)

What? TyTy 16:26, 20 September 2011 (UTC)
What? o_______o--Dumpling (talk) 16:26, 20 September 2011 (UTC)
Silver's value is rising faster than gold. Talsley (talk) 16:27, 20 September 2011 (UTC)
coughtransparentparodistcough ADK...I'll shake your electric toothbrush! 16:29, 20 September 2011 (UTC)
Proof http://zachstocks.com/2009/11/the-silver-trade-is-better-than-gold/ see! Talsley (talk) 16:38, 20 September 2011 (UTC)
Gold prices have risen because of the volatility in the markets since 2007, not because of government spending. Since 2009, over $16-trillion has been added to the global economy through such programs as quantitative easing, yet the inflation rate is actually lower than before 2009. Moral of the story: Austrian economics is a fraud. 24.199.34.245 (talk) 21:46, 20 November 2012 (UTC)

How do gold obsessives explain the Price Revolution?[edit]

Gold apparently about five-sixths of its purchasing power in Europe over a few generations starting in the mid 15th Century or so, and this happened well before central banking, fiat currency and fractional reserve lending.

This phenomenon pretty much blows up the claim that gold has some mystical ability to hold its purchasing power over the centuries. — Unsigned, by: Advancedatheist / talk / contribs

I don't remember when it was, but there came a point after the discovery of the Americas where so much gold was being brought back to Europe that it depressed the price of gold there.
Any commodity that is used as money will have price fluctuations, as supply and demand for that commodity, or money in general, shifts. For example, if people decide they want to keep a bunch of cash on hand, that would tend to increase the demand for money, and the price of money would go up. Tisane (talk) 22:47, 3 August 2012 (UTC)
It also happened with silver where large discoveries in Mexico depressed the price in Spain. However, that was probably a one off occurrence. It's unlikely that someone will find a new major source of precious metals that would dislocate the current market unless it's done with a philosopher's stone or cold fusion.  Lily Inspirate me. 22:19, 7 August 2012 (UTC)
I wouldn't say yes, I wouldn't say no. Just because the central Asian mineral deposits are unlikely to be significant in our lifetimes (or any time in the foreseeable future, given the state in Afghanistan alone) doesn't mean there isn't more to find. EVDebs (talk) 05:30, 8 August 2012 (UTC)
The "discovery" of the Americas was an enormous dislocation for European economics. The amount of new metal that instantaneously became available - either by appropriation from the indigenes, or literally just scooping it out of rivers - was a black swan event. Unless your Afghan resource is already nicely refined into 5 kg bars sitting in a cave in Tora Bora then finding a new resource in central Asia will have virtually no discernible impact on the price of gold, it will be assimilated into the general stockpile just like current gold production is.  Lily Inspirate me. 07:23, 8 August 2012 (UTC)
Anything used as money will drop in value if the supply of money increases faster then the supply of goods and services. Overall the inflation caused by gold and silver from the Americas is miniscule compared to the inflation from fiat paper, most of which is printed to nothing in under 50 years. The dollar, which stands head and shoulder above most other fiats (Swiss Franc being one exception) has lost 96% of its value in the last 100 years (1913 was the year ther Fed was founded). In terms of gold the dollar went from about $20 and change per ounce to todays $1300-1400. Spain was ruined and went from being a Great Power to a second stringer as the Spanish concentrated on looting the Americas instead of building up domestic industry. The moral of the story is that printing money does not guarantee a good standard of living. Only "producing" the goods and services required for a good standard of living will give you that standard of living.198.105.0.4 (talk) 21:46, 21 May 2013 (UTC)

Reversion[edit]

Okay, consider it brought to the talk page. If no one responds within the next several days, I'll consider the matter uncontroverted and restore the edit. This edit pertained to the following subjects:

  • indirect exchange and its usefulness
  • how gold came to be a common unit of exchange in the first place
  • dubiousness of the assertion that cornering the market on gold is a type of "scam"
  • gold's being a commodity like any other, subject to the law of demand, and tending to reach an equilibrium price that will eliminate shortages
  • criticism of the Keynesian theory that a gold standard takes away one of government's tools for stimulating the economy and ending recessions
  • susceptibility of paper money to counterfeiting and to devaluation by central banks.

Tisane (talk) 09:26, 8 August 2012 (UTC)

Does a gold standard even do what the advocates want?[edit]

You, or rather, the government can still do all of the nasty things that gold bugs whine about doing with fiat currency, like fractional reserve banking and regulating the money supply (for example, requiring that certain taxes be paid strictly in gold). I'm not even seeing what this is supposed to do aside from creating inconvenience. Dr. Swordopolis (talk) 20:54, 4 August 2012 (UTC)

Is there any evidence that when we had the gold standard, it caused much inconvenience? Not all of the pro-gold movement sees the gold standard as a panacea to government invasions on the rights of the people. A lot of them also object to other issues pertaining to taxation and regulation (e.g. the broad interpretation of Article I, Section 8 of the U.S. Constitution) which they are trying to address through other means. Hence the fact that a lot of the legislation sponsored by Ron Paul pertains to other topics besides gold. Tisane (talk) 09:30, 8 August 2012 (UTC)
First off, the fact that Ron Paul introduced other legislation that didn't have to do with the Gold Standard is no evidence that gold bugs do not believe that a gold standard ends inflation, ends fractional reserve lending, and ends currency regulation. Certainly if one were to listen to Ron Paul's reasons for a gold standard (or as he calls it, "sound currency" with a "basket of commodities), you would know that he believes a fixed rate currency removes the government's control of the money supply, and cures the "problems" of inflation. Just because a gold bug also cares about other issues doesn't at all relate to the claims of what a gold standard would accomplish.
Secondly, gold as a currency was definitely an inconvenience in its time, which is why banks were invented, and bank notes became the de facto currency. (It's also where fractional reserve lending got its start; not with fiat currency but with gold.) And certainly the massive inflationary and deflationary cycles which caused dozens of depressions in the 19th century would have been considered an inconvenience to anyone living through them. 24.199.34.245 (talk) 21:54, 20 November 2012 (UTC)
The inconveniences of gold you hint at don't relate with its function as money. The banks fixed issues of user friendliness (custody, portability) at the cost of monetary malfunctions (inflation, reserve lending). Banks started as confidence trap set up by opportunists and the scheme ended as expected, with banks unilaterally abrogating their obligation to return the gold in custody and depositors left holding irredeemable vouchers. Now it all depends on the "good will" of banksters and congressmen, so any expectation of a rational management of fiat money is wishful thinking.--Putin2.jpg Brasov 15:52, 13 December 2012 (UTC)

Large personal deposits of gold[edit]

"many individuals advocating for a return to the gold standard have large personal deposits of gold, and are not noble crusaders for our currency, rather just trying to make a quick buck through government regulation." How do you know what their motive is? You could be confusing cause and effect — i.e., it could be that their owning gold is the effect of their distrust in the fiat currency and, perhaps, desire to weaken said currency by opting out of it. Also, any reasonably politically astute person knows that the switch to a gold standard is a long-term political objective that will take some time to persuade the public to support (as evidenced, for example, by Ron Paul's difficulties in getting nominated for President); therefore it's unlikely that they're trying to make a "quick" buck. Tisane (talk) 11:01, 7 August 2012 (UTC)

The quick buck that the people who are using you are making is attempting to dupe ignorant true-believers like you into trying to institute a gold standard. If it were ever even debated the price of gold would skyrocket so quickly your head would spin. Hipocrite (talk) 16:52, 7 August 2012 (UTC)
Who are these individuals advocating for a return to the gold standard who have large personal deposits of gold? Where's the evidence, "skeptic"? Some of the same people, e.g. Ron Paul, who favor a return to the gold standard, also favor having the government sell off its gold, which would tend to push the price of gold down. Tisane (talk) 21:40, 7 August 2012 (UTC)
Yeah, big time [citation needed] here. If this were the true intent of the goldbugs, they're pretty poor scammers. Everyone knows the real money is in selling gold. Nebuchadnezzar (talk) 06:42, 8 August 2012 (UTC)

"investors hoard the new money rather than spending it"[edit]

this makes no sense. There is a big difference between spending and investing. Spending is consumption, or relinquishing claims to an asset; investment retains title to an asset. nobsCorporations are people, too 21:04, 24 August 2012 (UTC)

Not always. You can lose some of your money in an investment, in which case it is not much different than having spent it, except that you didn't get a product in return. From a macroeconomic standpoint, spending can be equivalent to investing, in that it stimulates business (and, therefore, employment). If everyone is investing 100% of their money, rather than spending any of it, business gets stimulated just as much as if they had spent 100% of it. Tisane (talk) 20:49, 25 August 2012 (UTC)
A business loss could produce a civil claim and certainly a tax offset against future income (in the U.S.). The difference is primarily the difference between wise King Midas who everything he touched turned into an asset, and the Prodigal son who pissed away every dime on drinking and whores. nobsCorporations are people, too 03:07, 27 August 2012 (UTC)
I'm having trouble figuring out what you're saying. Investing money means trading it for another asset. And I don't see what this has to do with what you quoted.Fdof (talk) 04:55, 28 August 2012 (UTC)
Ok, so investors do not spend, they invest. To spend is literally to consume the asset in its entirely, or a possess it with a liquidity value below its original purchase price. To invest is to anticipate gain above cost. That's why a sentence that reads "investors spending their money" is an oxymoron. nobsCorporations are people, too 06:04, 28 August 2012 (UTC)
You're leaving out key words in that phrase. "NEW MONEY." This phrase is also talking about the investor class, who earns more money than they spend, those hoarding the new money.24.199.34.245 (talk) 21:59, 20 November 2012 (UTC)

Silver standard (rating)[edit]

Perhaps we can bump this up to silver? ТyBored 01:57, 27 August 2012 (UTC)

Why not? I'm still not done yet though. Nebuchadnezzar (talk) 03:03, 27 August 2012 (UTC)
Well when you're done... ТyBored 03:29, 27 August 2012 (UTC)

No nutritional value[edit]

This is a stupid argument. You can't eat dollar bills or computer bits either. Redchuck.gif ГенгисIs the Pope a Catholic?Moderator 18:34, 27 August 2012 (UTC)

Should probably be titled "Lack of practical value" ТyCurmudgeon 18:36, 27 August 2012 (UTC)
Geez, it's snark. Nebuchadnezzar (talk) 05:38, 28 August 2012 (UTC)
Right, but advocates of fiat money and electronic currencies aren't arguing that their currency holds its value when the global government and banking systems collapse. Gold bugs argue that in a massive disaster gold holds its value. 24.199.34.245 (talk) 22:01, 20 November 2012 (UTC)
I've heard a variation on this claim. During the actual hard times that no, gold would not be useful, but once things settle down and rebuilding happens, that's when gold comes into play. I dunno how well that theory stands, but it does seem on face, more solid. --Revolverman (talk) 22:56, 20 November 2012 (UTC)

Constitution quote[edit]

" "The Congress shall have Power To coin Money, regulate the Value thereof, and of foreign Coin, and fix the Standard of Weights and Measures; No State shall make any Thing but gold and silver Coin a Tender in Payment of debts. ” This would seem to be a smoking gun, except no such passage exists." 1. How is this a smoking gun? This clearly says that Congress can coin money. And while this there is some editing, this is a rather faithful rendering of the meaning of the constitution.Fdof (talk) 04:58, 28 August 2012 (UTC)

You can't just glue together a couple of quotes out of context and say that represents the plain meaning of the document. Furthermore, the two don't really have anything to do with each other anyway -- one is a power granted to Congress, the other is a limitation on the states. EVDebs (talk) 05:33, 28 August 2012 (UTC)
It's commonly passed around by goldbugs to imply that paper money and the Fed are illegal. Nebuchadnezzar (talk) 05:38, 28 August 2012 (UTC)
No. Some goldbugs may think the Fed is illegal; advocating a return to the system between 1916 and 1933, where the Fed oversaw a Gold Standard, is a perfectly legitimate position. You are putting too much partisan crap into some of the articles, particularly in this unresearched and unscholarly anti-Austrian School crusade you're on. nobsCorporations are people, too 06:10, 28 August 2012 (UTC)
The Austrian school has issues with evidence -- it thinks that somehow out of all social sciences that evidence is not useful. We tend to take a dim view of such thinking. EVDebs (talk) 03:29, 30 August 2012 (UTC)
Here's a good article from two days ago on CNBC website (not endorsing it one way or the other). nobsCorporations are people, too 19:42, 30 August 2012 (UTC)

Most people are clueless as to what happened historically. During the Constitutional Convention a vote was taken to strip language allowing the proposed Federal government to "issue paper money" and thereby deny the Federal government that power. The vote passed and the language was stripped from the draft of the US Constitution. A question by James Madison during the vote as to whether it would be sufficient to just deny the federal governemtn the power to make paper money legal tender was responded to negativelly i.e IT WOULD NOT BE ENOUGH. Paper bugs distort this question and the answer to show that the power to make paper legal tender was not denied the Feds and is therefore allowed to the Feds. The power to make gold and silver coin a legal tender is a power "reserved to" and belonging only to the states and not the Federal government. It is not a jointly held power. Read the 10the Amendment. "The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people." All powers not prohibited to the states are reserved to the states, and one of those powers is making gold and silver coin legal tender inside their borders. As to why paper money was banned - look up "not worth a Continental"

Rationally speaking the Federal governemtn has no right to make paper money legal tender because even the power to issue non-legal tender paper money was denied to it. Also rationally speaking the Federal government has no right to make gold and silver coin a legal tender because per the 10th Amendment that power is reserved to the states. Jefferson rightfully said "I now deny [the Federal Government's] power of making paper money or anything else a legal tender”.

Now lets see how many people here are actually rational or just pretending while they worship on the altar of paper money. Those who forget history will force even those that haven't forgotten down the road of pain and tribulation. That would be the paper bugs forcing the gold bugs down the road of confiscation (and destruction) of wealth through inflation and hyperinflation198.105.0.4 (talk) 21:52, 21 May 2013 (UTC)

digression on silver-crude oil ratio[edit]

The Gold Standard needs to be viewed from two perspectives: (1) that of a domestic economy using a pegged currency for everyday transactions, and (2) its role in international balance of payments. The first has largely been decided, and not likely to return soon anywhere. The second, I would argue, is to a certain extent still active. All pricing, of any commodity, must be understood as a ratio. For example, one hamburger from McDonald's dollar menu exchanges for one dollar. Or one gal. of gas in the US exchanges for roughly 3.65 dollars at today's exchange rate. The whole planet, whether it likes it or not, is more less on a silver-crude oil exchange rate system. Oil exporters have roughly pegged crude oil sales at 4:1 ratio, or 4 oz. of silver exchange for one barrel of crude over the past 40 years. This is not a "fixed exchange rate" system, however. Prices have varied at time, between 3:1 and 5:1 (yesterday the ratio was 3:1, and has been in the area under 4:1 since the 2008 crash). This means oil producers feel they are getting screwed right now, but are willing to help the planet limp toward recovery by taking a hit in the price. Eventually prices will get back to 4 and 5 oz. per barrel, so it averages out. But oil producers are doing more to "stimulate" the global economy by lowering the ratio than the US Congress or the Fed have done, or could do. Then one must factor the historic Gold-Silver ratio (see table). I have much more argument & evidence to cite, but suffice to say, I believe the international trading system has never really left a bi-metallic system, but has made adjustments to allow for floating exchange rates and market variablity. Only the idea of "fixed exchange" has been abandoned. nobsCorporations are people, too 19:39, 30 August 2012 (UTC)

Then you would argue incorrectly. The prices of commodities might relate to each other in many ways, but they are in no way evidence that the two commodities are pegged to one another. Oil, for example, is a commodity upon which all of our modern markets rests. When the production of oil goes down (as happened recently in California), or demand rises, the price of oil goes up. When the price of oil goes up, so does any manufacturing or production which relies on oil (as as it happens, silver production requires oil). Oil is used in bringing raw materials out of the ground, and in converting them into goods. It's then used to transport goods to market, and then to purchase them from market. Oil is even used to keep the markets on and open.
Another example is the drought in the US which has caused the production of corn to drop and the price to rise. The US government also mandates a certain level of gasoline production must use ethanol (a corn byproduct), so the demand level for corn went up while corn production went down. The price changes affected the price of gasoline, the price of feed, and on through the system to the homes of every American. But we're not going to say that America is using a corn-oil ratio to peg our currency.24.199.34.245 (talk) 22:10, 20 November 2012 (UTC)
Using YTD spot prices (remember, spot prices do not reflect the yearly average based on volume), the closing ratio on December 31, 2011 was 4.03 ozs. of silver per barrel of crude. On December 31, 2012 it was only 3.09 ozs., meaning crude oil was 25% cheaper at the end of 2012. This likewise is a reflection of global slack demand, a harbinger of falling global output and possibly global recession. Burnum (talk) 03:05, 2 January 2013 (UTC)

"Not enough gold"[edit]

The article says: "there is simply not enough gold in the world to cover the quantity of currency presently in existence". This argument assumes that the price of gold won't go up to match the new demand, so it ignores the basic economic law of Supply and Demand. Rather, if a gold standard were to be adopted, the new need to back up the existing money would push the demand to levels never seen before. Gold's price would increase until its owners accept releasing their hoards of yellow metal in exchange for fiat currencies. The hoarding is just a signal that the current price doesn't cover currency risks, making it not worth for owners to sell it. --Putin2.jpg Brasov 14:15, 10 December 2012 (UTC)

That would take years of spirally inflation, during which time people hoarding their money would crash the economy. And even if the economy managed to survive this, there is no actual guarantee that once the market value of gold matched the paper currency in circulation, people would even be willing to make any exchanges. Animal Spirits, and all.--Just relax, and stay funny (talk) 18:31, 10 December 2012 (UTC)
Yours is an Argumentum ad consequentiam. But instead of inflation, those privileged holders of gold would see astronomical deflation. The move is equivalent to transfering ownership of all debt rights (fiat money is debt) to gold holders. There's no reason why a higher gold price would spill onto most goods and services or result in higher prices for everything else. --Putin2.jpg Brasov 01:01, 11 December 2012 (UTC)
Argument from the consequences is pretty much the defining aspect of discussion in social policy and social sciences. This is not fallacious. Saying that it is fallacious, is it self a fallacy.--Just relax, and stay funny (talk) 01:23, 11 December 2012 (UTC)
Yes, that's a false application of the fallacy. The argumentum ad consequentiam fallacy is when you base judgements about whether a statement is true on logical consequences of accepting it (e.g. "there must be an afterlife because it's something that gives us hope and comfort when our relatives die, and otherwise death would be final, which is depressing"). When making judgements about whether a course of action is wise, basing them on probable consequences of the action is entirely logical. WéáśéĺóíďWeaselly.jpgMethinks it is a Weasel 19:28, 11 December 2012 (UTC)
This link attempts some calculations on quantity of gold and money supply. Though the question "What is money?" could complicate the issue. --Bob"I thought this was supposed to be "Rational" Wiki?." 08:07, 11 December 2012 (UTC)
As it stands, money today is medium of exchange of forceful acceptance backed by taxation rights. Every dollar issued costs us real wealth (taxes), permanently, until returned to the issuer. Every bill issued above the taxing capacity of the country also costs us real wealth (confiscation by inflation). Gold gets you out of this vicious confiscation circle.--Putin2.jpg Brasov 10:44, 11 December 2012 (UTC)
You give no reasons why the bad scenario wouldn't materialize other than being a bad scenario, and that's the definition of the fallacy.--Putin2.jpg Brasov 10:44, 11 December 2012 (UTC)
Why would I bother? If you want to understand economics, try taking an economics course? There's a reason no economist really suggests the gold or silver standard, and why no on has for the better part of a hundred years. It's a joke.--Just relax, and stay funny (talk) 17:11, 11 December 2012 (UTC)
Instead of wasting your Ad hominems on me, tell that to the author of the "Not enough gold" for being totally oblivious of the basic law of Supply and Demand. Now, those anonymous economists you resort to and assume so capable for not proposing a gold standard are the ones that proclaimed "the end of economic cycles" and pushed us head on to the largest economic crisis ever known to man. Brilliant guys indeed. --Putin2.jpg Brasov 18:14, 11 December 2012 (UTC)
You're making several pretty entertaining assumptions--Just relax, and stay funny (talk) 18:30, 11 December 2012 (UTC)
The idea of a "gold back currency" is meaningless if the holders of gold have a negative balance sheet, i.e., their debt obligations exceed the liquidating value, or collateral value, of their gold holdings. In order for a "gold backed currency" to have value, the collateral asset (gold in this case), must be held free and clear of any and all other debt obligations. U.S. gold reserve assets, for example, are but a fraction of total U.S. National debt ($16 trillion). In fact, Wikipedia states the total value of all gold ever mined is only $10 trillion[1], 5/8 of total US debt and equivalent to only about seven months total US annual output (GDP). So gold, both as a medium of exchange for everyday transactions or fixed asset for US collateralize debt (i.e. issuance of a fiat currency), is impractical. It's only intrinsic value is its relative stability in relation to price fluctuations of other commodities. Burnum (talk) 05:14, 2 January 2013 (UTC)
"the total value of all gold ever mined is only $10 trillion". Certain economic actors still consider it "as good as gold", so this valuation reflects the current confidence in the dollar as a monetary reserve. But as confidence in the ability of the US to honour (or enforce) its debt wanes, the value of that gold will get closer and closer to the nominal US debt in dollars. As a side note, the beauty of the gold standard is that every individual is free switch to it today and put it into practice as a personal level, regardless of whether "authorities" declare a gold standard or not. --Putin2.jpg Brasov 13:46, 29 January 2013 (UTC)
I'm a bit confused by your objective. Are you suggesting that only the US need to go onto the gold standard or that the whole world should? If only the US, then is the idea that the US should acquire the world supply of gold? If not only the US, are you suggting that the present gold reserves of the US are sufficient to manage this change back to the gold standard? If the US is to acquire the world's supply of gold with what would it pay for this gold? Wouldn't it need to print a quantity of dollars equivalent to the worlds supply of gold in order to purchase it? And wouldn't this create the very dollar inflation which the the gold standard is supposed to eliminate? --Bob"I thought this was supposed to be "Rational" Wiki?." 15:43, 29 January 2013 (UTC)
- 'Are you suggesting that only the US need to go onto the gold standard?'. I'm suggesting any individual can return to the gold standard, regardless of what governments so, by simply saving in gold. Being the most liquid asset anywhere in the world, you don't need a declaration of a gold standard to start using gold as money in practice as a personal strategy.
- 'If the US is to acquire the world's supply of gold with what would it pay for this gold?' Good question. Unless the US uses military threats no one would deliver gold in exchange for fresh bills (fake money) printed for the purpose. The US would have to deliver value, products and services, just like the whole world has always done in order to get their dollars. Obviously this is not a desirable situation for a country used to ride on the back of the world's economy by using the military to enforce acceptance of its endless supply of printed paper. Therefore the US is actively suppressing gold via the gold-carry trade and a de facto control of the futures markets. The same ounce of gold is being sold multiple times in irredeemable paper contract form (redeemable only in $$). This, together with the lack of transparency regarding the actual reserves, has the price-depressing effect of misrepresenting the supply of gold, making it appear much more available than it actually is. -Putin2.jpg Brasov 21:21, 29 January 2013 (UTC)
So if it's impractical for the US Government to return to the gold standard but people can - your argument really boils down to "gold is good personal investment"? --Bob"I thought this was supposed to be "Rational" Wiki?." 12:06, 30 January 2013 (UTC)
That would appear to be it. A 6-10% personal investment in gold & silver (the key is holding the two in proper ratios) is more than sufficient as an inflation hedge. nobsSay hello to my leetle friend 12:24, 30 January 2013 (UTC)
-"your argument really boils down to "gold is good personal investment". Investment is accepting a counterparty's risk in exchange betting on a profit. Gold has no counterparty risk, so rather than an investment gold is a universally recognized currency. You can move to a gold standard by pricing everything in gold units (grams, ounces, gold francs, gold ducats...) and saving in physical gold units. By doing this you decouple your personal economy from the bankster's floating currency manipulations and clear picture of the value of things emerges. --Putin2.jpg Brasov 12:27, 1 February 2013 (UTC)
Except of course for the horrific deflation which would result, the upward redistribution of wealth, and the dis-seigniorage, any one of which would wreck your economy by itself, and would together completely destroy your economy beyond repair.--Token Conservative (talk) 23:34, 1 February 2013 (UTC)
I see you use the appeal to vividness trick to paint a fallacious horror picture. Economic cycles are a consequence of monetary interventionism. Fractional banking needs permanent inflation to survive as it thrives on interest, but the economy doesn't. Monetary inflation is a mechanism to redistribute wealth upward towards the issuers of money and their friends, the same way a counterfeiter of currency does.
Gold, in contrast, is a self-regulating negative feedback loop - it has been for centuries - that maintaints prices stable. It works by encouraging consumption during deflation (money buys more -> consumption rises -> prices rise back) and discouraging it during inflation (money buys less -> consumption falls -> prices fall back). It always finds the equilibrium point. What's destroying the economy as we speak is the human regulator. The human mind can't grasp all the variables and their mutual dependencies as a feedback mechanism can, so intervention always doomed to wreak havoc and fail. --Putin2.jpg Brasov 128.117.43.92 (talk) 00:01, 2 February 2013 (UTC)
Gold is self regulatory maintaining stable prices if and only if the population is stable relative to population level. It is axiomatic (since as a Gold Bugger, I imagine that you are an Austrian) that a stable amount of currency with an increasing population would create deflation. The fact that there can be no introduction of new currency at the same level as the increase of population will create a permanent deflationary cycle. This deflationary spiral will do several things, among which is completely and totally discourage anyone anywhere from ever spending their money, since it will be worth more in the future (basically, this is shoe leather cost without the involvement of a bank since the money gains value all by itself).
Also, its agreed by pretty much everyone, including Austrians, that deflation redistributes wealth upwards during any kind of loan arraignment, since the money I pay back today is worth more then if I had paid it back yesterday (compare this to under inflation, where a loan arraignment benefits the borrower more then the lender, depending on interest rate). And since you'll have to put money into the coining process, it will end up being an overall cost in minting the coin, whereas now countries make money by printing currency (it costs the US something like 7cents to make a dollar, which means they make 93cents for every dollar printed).
Nothing I have said is really a fallacy, since its all accepted fact by economists working in basically any school of thought. The only difference between Orthodox economists and Austrians in this is the degree to which an economy would be hurt by changing over to a gold standard
Finally, it is quite alright that the human mind cannot comprehend all of the variables that go into an economy, because what economists use when making policy suggestions/evaluations is this thing called a "computer program"--Token Conservative (talk) 00:21, 2 February 2013 (UTC)
"Gold is self regulatory maintaining stable prices if and only if the population is stable relative to population level". Population changes only affect prices if the ratio "products and services" per "ounce of gold" changes. We saw how gold is self-regulatory: a larger ratio (cost pull) encourages spending (wealth-effect: people are richer), this in turn causes inflation (higher velocity of money) reducing the wealth effect. The system tends automatically towards an optimal equilibrium. Perpetual inflation, the current interventionist system, is a positive-feedback loop that tends to runaway. --Putin2.jpg Brasov 17:49, 4 February 2013 (UTC)
"deflation redistributes wealth upwards during any kind of loan arraignment". Loans are for people who want to spend wealth they haven't yet produced, therefore you can't redistibute a "wealth" that doesn't exist. Inflation allows this kind of people to give back less than what they took, so inflation redistributes wealth towards parasites. Loans crate inflation, which means poverty and the need for more loans to afford the basic necessities (especially a roof), and society tends towards generalized indebtment until there's no more credit-worthy population to sustain the pyramid, as we see today. --Putin2.jpg Brasov 17:49, 4 February 2013 (UTC)
You assume economic policy makers work for the common good. The worse flaw of interventionism is not the lack of capacity to accurately model the economy (bad model => bad program), but a society placing its fate in the hands of a few men and hoping they'll behave. Wherever you look at the present banking system you find moral hazards. Self-regulating gold is also protection against corruption. Give me the Periodic Table and take your best of men. --Putin2.jpg Brasov 17:49, 4 February 2013 (UTC)
You try that shit again and we're going to play a very fun game I like to call "lets see how close to infinity I can block this motherfucker for". My current record is 9 years. Fucking test me.--Token Conservative (talk) 23:56, 4 February 2013 (UTC)
WooHooo! --Putin.jpg Brasov 01:16, 5 February 2013 (UTC)
Cool Story, Bro! --Revolverman (talk) 01:20, 5 February 2013 (UTC)

On gold and cash[edit]

Section added by me to avoid people messing with the old discussion.--ZooGuard (talk) 15:07, 16 May 2013 (UTC)

There is actually enough gold to replace physical world currency. The various M's MZM, M1, M2, M3 and variations include amounts that are no cash. Gold coin would represent cash, and not bank entries on how much cash has been loaned. Loans are not cash.— Unsigned, by: 71.174.140.32 / talk / contribs

Bull. There is a total of $1.18 trillion dollars of cash in circulation,and that's just USD. How much physical gold can I convert one physical dollar into in your world? Hipocrite (talk) 13:40, 16 May 2013 (UTC)
That would not accomplish anything useful except to make cash more expensive to produce. EVDebs (talk) 15:39, 16 May 2013 (UTC)
Bull right back at you. The worlds economy is about 5 times the US economy, and there is more then enough gold to produce 5 times as much cash as there are actual US dollars. 170,000 tons of gold can be turned into about $8 trillion at golds current price. Assuming you mint a bunch of silver to go with the gold, as has been done historically, the price of gold might actually drop from current levels if we went back to a physical gold standard. Going back to the partially backed standards that showed up after 1913 is useless. The abuse of that partial backing by the Fed ended up making the bank panics of the 1930's much worse. Besides the threat of the bank failure themselves, there was the threat that you would be one of the unlucky 60%. Federal Reserve notes were only 40% backed by gold. Roosevelt had to make holding gold a crime in order to save the Fed from the unlucky 60%.71.174.140.32 (talk) 03:02, 20 May 2013 (UTC)
Easy fucking question for you - "How much physical gold can I convert one physical dollar into in your world?" Hipocrite (talk) 21:43, 21 May 2013 (UTC)
In my world, the current ratio is about 1400 to the ounce or one paper dollar will get you about 1/1400 ounces of gold. If you are asking what would happen if gold was the actual legal tender money and the fiat dollar was not, then a paper dollar would be worthless and of interest only to collectors of failed paper currencies. If the new gold dollar was designated as a certain amount of gold to the gold dollar then you would not have to convert your gold dollar into gold because it is already gold. If you think about it, your question runs somewhere around stupid. After all WHY would you want to convert your gold, into gold, when it is ALREADY gold.71.174.140.32 (talk) 16:02, 23 May 2013 (UTC)
How do you imagine we're going to turn my current dollars into gold, exactly? Hipocrite (talk) 16:11, 23 May 2013 (UTC)
Last I checked your turn in paper dollars and get gold. Happens all the time with coin shops, gold dealers and "heavens to Betsy" with the US Mint as well.71.174.140.32 (talk) 16:15, 23 May 2013 (UTC)
Most of the countries in Europe converted to the euro and had no problem with the transition. Countries convert one currency into another as they lop of a few zeros here and there. They don't seem to have much of a problem either. Why do you think that converting from a paper dollar to a gold dollar will be any more difficult then converting from the French franc or German Deutchmark to the euro?
When you get right down to it, cash isn't the problem here, and no one wants to make change with a razor blade anyway. The real problem here is all the times during the 20th century when governments responded to liquidity crises by going off the gold standard. Hyperinflation by incompetent central bankers aside (and ours are nowhere near that stupid and have much more historical experience to draw on), they went around that track enough times to finally decided that cutting gold out of the loop was a good idea. The problems that gold standard fans are afraid of usually only come up when someone either doesn't know what they're doing or is attempting to pay off debts by outracing inflation (which seems to never work). In the end, cutting government out of the loop as libertarians and anarchists want to is going to bring back the old problems and likely make them worse, since there would be no one to rein in market confusion. (There's also the separate question of gold as an industrial commodity. Gold wasn't nearly as useful before solid state electronics.)EVDebs (talk) 21:16, 23 May 2013 (UTC)
Wrong! The reason why the US left the gold standard was because the Fed had printed too many Federal Reserve demand notes, had only 40% backing for those notes and when people came in during the 1930's "demanding" gold for their paper the Fed was in danger of running out of gold and defaulting on its obligations. "Rationally speaking" thetre is no way you can pay out 100% when you only have 40% backing. The same thing happened in the 60's for silver. Too many Federal Reserve silver "demand" certificates had been printed for the amount of physical silver available and the Fed was again in danger of defaulting on its obligations. In the 70's the ever expanding supply of fiat dollars ended up causing Nixon to drop the last ties to gold as he abandoned Bretton Woods. US government gold at that point had dropped to about 8,000 tons from about 30,000. So every major reduction in the use of gold was caused by too much paper against the available supply of gold which would have resulted in a "default on obligations" by either the Fed or the US government. "Default on obligations" is just a pretty phrase for bankruptcy.
I dare anyone here to compare the economic performance of the US under the 100% gold standard before 1913, the partially backed gold standard after 1913, the "ties to gold" system under Bretton Woods and today's totally "without any tie" fiat system. You will find that the "sounder the money" the better the economic performance. If you look at the 4 decades since Nixon cut the last weak ties to gold, the US has had 2 decades ( the 1970's and the 2000's) with suck ass growth, and 2 decades with OK growth. The two decades with growth were under anti inflationist Volker and under the "early Greenspan". The "early Greenspan" who said that he keeps an eye on the price of gold and who looked to that price to see if too much money was being printed. The later Greenspan was called by many "Easy Al" because he could not conceive of any problem that could not be helped by printing more money. BTW: It looks like this current decade (the 2010's) will be the 3rd lost decade out of 5.71.174.140.32 (talk) 15:18, 24 May 2013 (UTC)

Explaining why people used Gold as currency[edit]

NPR's "Planet Money" asks how Gold became the preferred form of exchange. --TheLateGatsby (The end of the dock ) 21:23, 9 October 2013 (UTC)