Learning from Europe while it is , in effect, on a gold standard

Discussion in 'Economy' started by EdwardBaiamonte, Dec 5, 2011.

  1. EdwardBaiamonte
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    EdwardBaiamonte Gold Member

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    Watching the current European crisis is a great way to learn about the gold standard. The gold standard is similar to the Euro standard Europe is on.

    Greece, for example, cant print Euros to pay its debts so it must spend less and earn more to get the money it needs to pay its debt. This is very healthy and realistic for a country or person or family.

    On a gold standard you cant print money either because only the amount of gold, not politicians, determines the amount of money

    America is not on a gold standard or a Euro standard. We can and do print paper money at will. But, printing at will cause 4 problems

    1) it rips off our creditors, who then won't trust us, since they are getting paid with devalued dollars.

    2) it rips of the American people since prices go up by the exact amount of the liberal money printed

    3) it makes the economy less efficient since prices rise erratically as the new money works its way through the economy. Prices then don't reflect real costs, and thus make comparison shopping and economic efficiency impossible

    4) Most importantly, there is little obvious pain so there is little incentive to discontinue the irresponsible 3rd world behavior that got us into debt in the first place.
     
    Last edited: Dec 6, 2011
  2. expat_panama
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    expat_panama Silver Member

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    Lots of people believe that. Lots of poeple also believe that hot water freezes faster than cold water too. Let's look at how things really are. This is what US currency looked like when money used a gold standard:
    [​IMG]
    The US government just printed it, and the money supply was not limited by the amount of gold. The year after it was printed the inflation rate peaked over 15% one month and the next month deflation was -7%. Wildly unstable prices was typical with the gold standard. In fact, 1920 had 16% inflation for the year and 1921 had -11% deflation.

    The more we look at it the more we see that the gold standard was crazy and stupid.
     
  3. Mad Scientist
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    Mad Scientist Deplorable Gold Supporting Member Supporting Member

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    Oh really? How's that "Printing Press Standard" working out?

    Gold prices were stable until the Fed took over money printing (yes, I know they tell the Treasury to print) Gold was about 18.90 an oz before the Fed took over, what is it now?

    And that's not because Gold is worth more, it's that the dollar is worth less.

    Let's revue:

    Pre-Federal Reserve: Stable Gold Prices, Low/Non-Existant Inflation.
    Post Federal Reserve: Gold Skyrockets, Massive Inflation.
     
  4. expat_panama
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    expat_panama Silver Member

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    Saying stuff like that is so much easier than actually looking at numbers. That's fine for little kids but adults have to have hard numbers in the bank, so let's talk adult numbers with the Fed. The fed was put into law around 1913, although the US still backed dollars with gold into the '70's. First say what year you understand the Fed's presses kicked in, and then we'll look at what the affect was on gold prices.


    Or not.
     
  5. likeabird03
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    likeabird03 Active Member

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    While you have some points, especially in regards to the printing of money. Using Europe as an example of what a better economic system is a little foolish.
     
  6. likeabird03
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    likeabird03 Active Member

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    Also, let's not forget that Europe too has been reliant on the feds printing presses to keep their financial system from collapsing too.
     
  7. EdwardBaiamonte
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    EdwardBaiamonte Gold Member

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    I think the point is that if its really a gold standard the amount of money printed is really in direct proportion to the amount of gold.
     
  8. Sundial
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    Not that I think a real debate will emerge out of this, but -

    I would have thought the comparison between Europe and America would have been that America is not in a debt crisis, and that America's economy is improving.
     
  9. Flopper
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    Flopper Gold Member

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    I was listening to a good discussing today about the European financial situation. It appears Europe will drift into a recession because they have chosen to do so.
     
  10. likeabird03
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    likeabird03 Active Member

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    Chosen because they want to go into recession to try and sort out imbalances or just as a side effect to the fact they haven't addressed so many of their issues? Just interested in knowing what the discussion said about it.
     

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