Bring back the Gold Standard?

[loosecannon]

Gold standard - Wikipedia, the free encyclopedia

These fools who insist on a return to the gold standard dont read up on it enough

That didn't sound bad at all compared to the present reality.

Don't you have any horror stories to share? Like a wiemar republic collapse caused by the gold standard? Or a world wide depression caused by the gold standard?

 

[Truthmatters]

Did you read the negatives too?



Disadvantages

Gold prices (US$ per ounce) since 1968, in nominal US$ and inflation adjusted US$.A gold standard leads to deflation whenever an economy using the gold standard grows faster than the gold supply. When an economy grows faster than its money supply, the same money must be used to execute a larger volume of transactions. The only ways of achieving this are for the money to circulate faster or to lower the cost of the transactions. If deflation drives costs down, the real value of each unit of money goes up. This increases the value of cash, and decreases the monetary value of real assets, since the same asset can be purchased with less money. This in turn tends to increase the ratio of debts to assets . For example, assuming interest rates remain unchanged, the monthly cost of a fixed-rate home mortgage stays the same, but the value of the house goes down, and the value of the money required to pay the mortgage goes up. Thus deflation rewards cash savings.[citation needed]
Deflation rewards savers[24][25] and punishes debtors.[26][27] Real debt burdens therefore rise, causing borrowers to cut spending to service their debts or to default. Lenders become wealthier, but may choose to save some of their additional wealth rather than spending it all. The overall amount of expenditure is therefore likely to fall.[28] Deflation also robs a central bank of its ability to stimulate spending.[28] Deflation is considered to be difficult to control, and to be a serious economic risk. However in practice it has always been possible for governments to control deflation by leaving the gold standard or by artificial expenditure.[28][29][30]
The total amount of gold that has ever been mined has been estimated at around 142,000 metric tons.[31] Assuming a gold price of US$1,000 per ounce, or $32,500 per kilogram, the total value of all the gold ever mined would be around $4.5 trillion. This is less than the value of circulating money in the U.S. alone, where more than $8.3 trillion is in circulation or in deposit (M2).[32] Therefore, a return to the gold standard, if also combined with a mandated end to fractional reserve banking, would result in a significant increase in the current value of gold, which may limit its use in current applications.[33] For example, instead of using the ratio of $1,000 per ounce, the ratio can be defined as $2,000 per ounce effectively raising the value of gold to $9 trillion. However, this is specifically a disadvantage of return to the gold standard and not the efficacy of the gold standard itself. Some gold standard advocates consider this to be both acceptable and necessary[34] whilst others who are not opposed to fractional reserve banking argue that only base currency and not deposits would need to be replaced.[citation needed] The amount of such base currency (M0) is only about one tenth as much as the figure (M2) listed above.[35]
Many economists believe that economic recessions can be largely mitigated by increasing money supply during economic downturns.[36] Following a gold standard would mean that the amount of money would be determined by the supply of gold, and hence monetary policy could no longer be used to stabilize the economy in times of economic recession.[37] Such reason is often employed to partially blame the gold standard for the Great Depression, citing that the Federal Reserve couldn't expand credit enough to offset the deflationary forces at work in the market. Opponents of this viewpoint have argued that gold stocks were available to the Federal Reserve for credit expansion in the early 1930s, but Fed operatives failed to utilize them.[38]
Monetary policy would essentially be determined by the rate of gold production. Fluctuations in the amount of gold that is mined could cause inflation if there is an increase, or deflation if there is a decrease.[39][40] Some hold the view that this contributed to the severity and length of the Great Depression as the gold standard forced the central banks to keep monetary policy too tight, creating deflation.[33][41] Milton Friedman however argued that the main cause of the severity of the Great Depression in the United States was the Federal Reserve, and not the gold standard, as they willfully kept monetary policy tighter than was required by the gold standard.[42] Additionally three increases by the Federal Reserve in bank reserve requirements in 1936 and 1937, which doubled bank reserve requirements [43] lead to yet another contraction of the money supply.
Although the gold standard gives long term price stability, it does in the short term bring high price volatility. In the United States from 1879 to 1913 the coefficient of variation of the annual change in price levels was 17.0, whereas from 1943 to 1990 it was only 0.88.[40] It has been argued by among others Anna Schwartz that this kind of instability in short term price levels can lead to financial instability as lenders and borrowers become uncertain about the value of debt.[44]
Some have contended that the gold standard may be susceptible to speculative attacks when a government's financial position appears weak, although others contend that this very threat discourages governments' engaging in risky policy (see Moral Hazard). For example, some believe the United States was forced to raise its interest rates in the middle of the Great Depression to defend the credibility of its currency after unusually easy credit policies in the 1920s.[41] This disadvantage however is shared by all fixed exchange rate regimes and not just limited to gold money. All fixed currencies that appear weak are subject to speculative attack.[45]
If a country wanted to devalue its currency it would generally produce sharper changes than the smooth declines seen in fiat currencies, depending on the method of devaluation

 

[Paulie]

Kinda disastrous I would think since we only have enough gold to cover a very small fraction of our currency in circulation.

Gold would go to about $100,000/ounce

And / or the value of the dollar would drop to .01?

And can of pop would cost $75? Probably $150 in NYC ?
why do you think we dropped the gold standard. It was limiting our "growth"

This is a myth.

What would happen is the gold supply would be audited and the amount of gold held would be public information. When redemption of notes for gold started, the price of gold would be market cleared after all the gold was sent into circulation from the notes that were redeemed.

It really isn't relevant how MUCH gold there is, only the price of the gold itself.

If gold actually went to $100,000/oz, then so be it. The market would respond by using the requisite weight in gold to create lower denominations in value for the purpose of spending.

Gold certificates would be printed on the supply of the actual gold as well, so people wouldn't actually have to carry around 1/100,000th of an ounce of gold around with them to spend $1.

If it's done in an orderly fashion, the threat of serious inflation or deflation can be avoided.

 

[ScreamingEagle]

Maybe Zeollick's suggestion going to a gold standard was just his way of saying the USD is toast.....

...next step... a new world currency....?

 

[loosecannon]

Did you read the negatives too?

Yeah, they all seemed mild and easily manageble compared to the present alternatives. Our current system is a minefield.

 

[Truthmatters]

Gold would go to about $100,000/ounce

And / or the value of the dollar would drop to .01?

And can of pop would cost $75? Probably $150 in NYC ?
why do you think we dropped the gold standard. It was limiting our "growth"

This is a myth.

What would happen is the gold supply would be audited and the amount of gold held would be public information. When redemption of notes for gold started, the price of gold would be market cleared after all the gold was sent into circulation from the notes that were redeemed.

It really isn't relevant how MUCH gold there is, only the price of the gold itself.

If gold actually went to $100,000/oz, then so be it. The market would respond by using the requisite weight in gold to create lower denominations in value for the purpose of spending.

Gold certificates would be printed on the supply of the actual gold as well, so people wouldn't actually have to carry around 1/100,000th of an ounce of gold around with them to spend $1.

If it's done in an orderly fashion, the threat of serious inflation or deflation can be avoided.

How much gold there is IS what makes the price fluctuate you fool.

It would (like uscitizen said) be like handing the economy to the Mining cos.

 

[Intense]

Did you read the negatives too?



Disadvantages

Gold prices (US$ per ounce) since 1968, in nominal US$ and inflation adjusted US$.A gold standard leads to deflation whenever an economy using the gold standard grows faster than the gold supply. When an economy grows faster than its money supply, the same money must be used to execute a larger volume of transactions. The only ways of achieving this are for the money to circulate faster or to lower the cost of the transactions. If deflation drives costs down, the real value of each unit of money goes up. This increases the value of cash, and decreases the monetary value of real assets, since the same asset can be purchased with less money. This in turn tends to increase the ratio of debts to assets . For example, assuming interest rates remain unchanged, the monthly cost of a fixed-rate home mortgage stays the same, but the value of the house goes down, and the value of the money required to pay the mortgage goes up. Thus deflation rewards cash savings.[citation needed]
Deflation rewards savers[24][25] and punishes debtors.[26][27] Real debt burdens therefore rise, causing borrowers to cut spending to service their debts or to default. Lenders become wealthier, but may choose to save some of their additional wealth rather than spending it all. The overall amount of expenditure is therefore likely to fall.[28] Deflation also robs a central bank of its ability to stimulate spending.[28] Deflation is considered to be difficult to control, and to be a serious economic risk. However in practice it has always been possible for governments to control deflation by leaving the gold standard or by artificial expenditure.[28][29][30]
The total amount of gold that has ever been mined has been estimated at around 142,000 metric tons.[31] Assuming a gold price of US$1,000 per ounce, or $32,500 per kilogram, the total value of all the gold ever mined would be around $4.5 trillion. This is less than the value of circulating money in the U.S. alone, where more than $8.3 trillion is in circulation or in deposit (M2).[32] Therefore, a return to the gold standard, if also combined with a mandated end to fractional reserve banking, would result in a significant increase in the current value of gold, which may limit its use in current applications.[33] For example, instead of using the ratio of $1,000 per ounce, the ratio can be defined as $2,000 per ounce effectively raising the value of gold to $9 trillion. However, this is specifically a disadvantage of return to the gold standard and not the efficacy of the gold standard itself. Some gold standard advocates consider this to be both acceptable and necessary[34] whilst others who are not opposed to fractional reserve banking argue that only base currency and not deposits would need to be replaced.[citation needed] The amount of such base currency (M0) is only about one tenth as much as the figure (M2) listed above.[35]
Many economists believe that economic recessions can be largely mitigated by increasing money supply during economic downturns.[36] Following a gold standard would mean that the amount of money would be determined by the supply of gold, and hence monetary policy could no longer be used to stabilize the economy in times of economic recession.[37] Such reason is often employed to partially blame the gold standard for the Great Depression, citing that the Federal Reserve couldn't expand credit enough to offset the deflationary forces at work in the market. Opponents of this viewpoint have argued that gold stocks were available to the Federal Reserve for credit expansion in the early 1930s, but Fed operatives failed to utilize them.[38]
Monetary policy would essentially be determined by the rate of gold production. Fluctuations in the amount of gold that is mined could cause inflation if there is an increase, or deflation if there is a decrease.[39][40] Some hold the view that this contributed to the severity and length of the Great Depression as the gold standard forced the central banks to keep monetary policy too tight, creating deflation.[33][41] Milton Friedman however argued that the main cause of the severity of the Great Depression in the United States was the Federal Reserve, and not the gold standard, as they willfully kept monetary policy tighter than was required by the gold standard.[42] Additionally three increases by the Federal Reserve in bank reserve requirements in 1936 and 1937, which doubled bank reserve requirements [43] lead to yet another contraction of the money supply.
Although the gold standard gives long term price stability, it does in the short term bring high price volatility. In the United States from 1879 to 1913 the coefficient of variation of the annual change in price levels was 17.0, whereas from 1943 to 1990 it was only 0.88.[40] It has been argued by among others Anna Schwartz that this kind of instability in short term price levels can lead to financial instability as lenders and borrowers become uncertain about the value of debt.[44]
Some have contended that the gold standard may be susceptible to speculative attacks when a government's financial position appears weak, although others contend that this very threat discourages governments' engaging in risky policy (see Moral Hazard). For example, some believe the United States was forced to raise its interest rates in the middle of the Great Depression to defend the credibility of its currency after unusually easy credit policies in the 1920s.[41] This disadvantage however is shared by all fixed exchange rate regimes and not just limited to gold money. All fixed currencies that appear weak are subject to speculative attack.[45]
If a country wanted to devalue its currency it would generally produce sharper changes than the smooth declines seen in fiat currencies, depending on the method of devaluation

It's not that the value of Gold has gone up. It's that the value of he Dollar has gone that far down.

 

[loosecannon]

Gold would go to about $100,000/ounce

And / or the value of the dollar would drop to .01?

And can of pop would cost $75? Probably $150 in NYC ?
why do you think we dropped the gold standard. It was limiting our "growth"

This is a myth.

What would happen is the gold supply would be audited and the amount of gold held would be public information. When redemption of notes for gold started, the price of gold would be market cleared after all the gold was sent into circulation from the notes that were redeemed.

It really isn't relevant how MUCH gold there is, only the price of the gold itself.

If gold actually went to $100,000/oz, then so be it. The market would respond by using the requisite weight in gold to create lower denominations in value for the purpose of spending.

Gold certificates would be printed on the supply of the actual gold as well, so people wouldn't actually have to carry around 1/100,000th of an ounce of gold around with them to spend $1.

If it's done in an orderly fashion, the threat of serious inflation or deflation can be avoided.

It can be via a fractional reserve gold based currency like the Dollar in 1970.

But if you read your post recognizing that if gold soared from $1400 to $100,000 there would be dramatic deflation.

But I agree this is far more manageable than our modern currency model.

 

[konradv]

Gold certificates would be printed on the supply of the actual gold as well, so people wouldn't actually have to carry around 1/100,000th of an ounce of gold around with them to spend $1.

If certificates are on the actual supply of gold, wouldn't that severely constrain the amount of money in circulation? Even when we were on the gold standard there was a multiple of the actual gold value printed as notes. Wasn't that also "fiat money", since the majority wasn't covered by actual gold?

 

[Paulie]

And / or the value of the dollar would drop to .01?

And can of pop would cost $75? Probably $150 in NYC ?
why do you think we dropped the gold standard. It was limiting our "growth"

This is a myth.

What would happen is the gold supply would be audited and the amount of gold held would be public information. When redemption of notes for gold started, the price of gold would be market cleared after all the gold was sent into circulation from the notes that were redeemed.

It really isn't relevant how MUCH gold there is, only the price of the gold itself.

If gold actually went to $100,000/oz, then so be it. The market would respond by using the requisite weight in gold to create lower denominations in value for the purpose of spending.

Gold certificates would be printed on the supply of the actual gold as well, so people wouldn't actually have to carry around 1/100,000th of an ounce of gold around with them to spend $1.

If it's done in an orderly fashion, the threat of serious inflation or deflation can be avoided.

How much gold there is IS what makes the price fluctuate you fool.

It would (like uscitizen said) be like handing the economy to the Mining cos.

You're the fucking fool.

The price of gold would market clear based on the actual amount of gold held by the government, which we have no fucking idea of right now because they won't audit and SHOW US.

Whatever the price of gold becomes, is what it becomes. That now becomes the money. If 1oz of gold is $100,000, then a 1oz gold coin is $100,000 to spend. Obviously people aren't going to carry around $100,000 with them in one coin, so gold certificates are created to denominate lower values for the purpose of everyday spending.

I don't know why that's hard for you to understand, other than you're a fucking retard and don't know jack shit about any of this beyond some wiki article you just read, where you looked for the "criticisms" section and it told you what you wanted to hear.

Seriously, go to another thread. This one is SOOOO above your pay grade.

 

[Paulie]

Gold certificates would be printed on the supply of the actual gold as well, so people wouldn't actually have to carry around 1/100,000th of an ounce of gold around with them to spend $1.

If certificates are on the actual supply of gold, wouldn't that severely constrain the amount of money in circulation? Even when we were on the gold standard there was a multiple of the actual gold value printed as notes. Wasn't that also "fiat money", since the majority wasn't covered by actual gold?

No.

Because if an ounce of gold today is $1400, and then becomes $100,000 in the event of switching to a gold standard, then that much dollar value was increased.

This is part of the argument for why even $1400 today is much too low compared to what it should actually be.

There is plenty of gold in the world, and supplies increase by about 2% per year, which is enough to maintain stable prices and prevent deflation.

 

[Truthmatters]

The US does NOT and never will control the worlds entire gold supply you fucking fool

 

[loosecannon]

Gold certificates would be printed on the supply of the actual gold as well, so people wouldn't actually have to carry around 1/100,000th of an ounce of gold around with them to spend $1.

If certificates are on the actual supply of gold, wouldn't that severely constrain the amount of money in circulation? Even when we were on the gold standard there was a multiple of the actual gold value printed as notes. Wasn't that also "fiat money", since the majority wasn't covered by actual gold?

It is called fractional reserve not fiat, fiat money has no backing except the authority and credit of the state.

Fractional reserve gold currency is the historic standard. It allows multiplication of the money supply usually 10 times the value of the volume of gold in existence, or about $54 trillion today for the whole world.

If you needed to you could slide that reserve ratio around within limits to dampen inflationary and deflationary trends.

It would be far easier than out Fed interest rate targeting.

 

[Paulie]

The US does NOT and never will control the worlds entire gold supply you fucking fool

Who the fuck said the US government controls the world's gold supplies?

I said an audit of US GOVERNMENT HOLDINGS.

That building in Fort Knox where they claim all the gold is.

Why the fuck are you getting involved in this thread? You're the dumbest fucking poster on this entire board.

 

[loosecannon]

The US does NOT and never will control the worlds entire gold supply you fucking fool

That doesn't matter, Zoellick was proposing a GLOBAL gold back currency system. China and Russia have been advocating the same for several years and the IMF has toyed with launching one.

 

[Toro]

Maybe Zeollick's suggestion going to a gold standard was just his way of saying the USD is toast.....

...next step... a new world currency....?

That won't happen.

It may be that reserve currency managers increase the amount of gold and silver they own as well as other currencies while still having the dollar as the main reserve currency. There is nothing out there that can replace the dollar, at least at the moment.

 

[Paulie]

The US does NOT and never will control the worlds entire gold supply you fucking fool

That doesn't matter, Zoellick was proposing a GLOBAL gold back currency system. China and Russia have been advocating the same for several years and the IMF has toyed with launching one.

I don't advocate that. I advocate each sovereign nation maintain its own currency standards.

No more globalized currency system.

 

[Truthmatters]

This is a myth.

What would happen is the gold supply would be audited and the amount of gold held would be public information. When redemption of notes for gold started, the price of gold would be market cleared after all the gold was sent into circulation from the notes that were redeemed.

It really isn't relevant how MUCH gold there is, only the price of the gold itself.

If gold actually went to $100,000/oz, then so be it. The market would respond by using the requisite weight in gold to create lower denominations in value for the purpose of spending.

Gold certificates would be printed on the supply of the actual gold as well, so people wouldn't actually have to carry around 1/100,000th of an ounce of gold around with them to spend $1.

If it's done in an orderly fashion, the threat of serious inflation or deflation can be avoided.

How much gold there is IS what makes the price fluctuate you fool.

It would (like uscitizen said) be like handing the economy to the Mining cos.

You're the fucking fool.

The price of gold would market clear based on the actual amount of gold held by the government, which we have no fucking idea of right now because they won't audit and SHOW US.

Whatever the price of gold becomes, is what it becomes. That now becomes the money. If 1oz of gold is $100,000, then a 1oz gold coin is $100,000 to spend. Obviously people aren't going to carry around $100,000 with them in one coin, so gold certificates are created to denominate lower values for the purpose of everyday spending.

I don't know why that's hard for you to understand, other than you're a fucking retard and don't know jack shit about any of this beyond some wiki article you just read, where you looked for the "criticisms" section and it told you what you wanted to hear.

Seriously, go to another thread. This one is SOOOO above your pay grade.

What you keep refusing to take into consideration is the manipulation of the worlds gold market after the fact.

Why do you keep doing that?

 

[Paulie]

How much gold there is IS what makes the price fluctuate you fool.

It would (like uscitizen said) be like handing the economy to the Mining cos.

You're the fucking fool.

The price of gold would market clear based on the actual amount of gold held by the government, which we have no fucking idea of right now because they won't audit and SHOW US.

Whatever the price of gold becomes, is what it becomes. That now becomes the money. If 1oz of gold is $100,000, then a 1oz gold coin is $100,000 to spend. Obviously people aren't going to carry around $100,000 with them in one coin, so gold certificates are created to denominate lower values for the purpose of everyday spending.

I don't know why that's hard for you to understand, other than you're a fucking retard and don't know jack shit about any of this beyond some wiki article you just read, where you looked for the "criticisms" section and it told you what you wanted to hear.

Seriously, go to another thread. This one is SOOOO above your pay grade.

What you keep refusing to take into consideration is the manipulation of the worlds gold market after the fact.

Why do you keep doing that?

Manipulation of the world's gold market?

That's your argument?

Wake the fuck up honey, EVERYTHING is manipulated in this world. Nothing is sacred.

Least of all, fiat currency MANIPULATED by the Federal Reserve.

 

[Toro]

If gold went to $100,000, and silver follow concurrently, I'd be worth $82,000,000! w00t!