The Gold Standard

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EconomicsHelp's picture
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The Gold Standard

THE GOLD STANDARD: WHERE IS THE STANDARD NOW?

gyrogearloose's picture
gyrogearloose
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Re: The Gold Standard

No country is on a gold standard..... 

USA dropped off it domestically in 1933 having being caught printing more money than they had gold to back it,

and internationally in 1971  ? , caught yet again printing more money than they had gold.

Untill it becomes a capital offence to print more money than the gold in the vault, those who control the presses will print and print and print...........

Cheers Hamish

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Re: The Gold Standard

If we still had the gold standard, we would have had one system crash already 2 decades ago.

Ressource based money is even worse than fiat money when there exists interest.

It will collapse more often than a fiat money system. Cause compounding demands growth no matter wether you deal with coins or paper.

I think thats why the gold standard has been removed finally, cause compounding gold/ a limited ressource is just nonsense.

Though to compound book money (debt based money) = a claim on money -> claim on future labor is nonsense aswell but way more dureable.

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Carl Veritas
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Re: The Gold Standard

The gold standard ended after World War 1   

US Treasury bonds were payable in US currency which were in turn redeemable in gold (Federal Reserve notes had 40% gold backing then).

This link to gold limited the amount of debt the federal government could issue and continuosly exposed banks to bank runs.  By 1933 the final solution was to remove gold from circulating as money (Executive Order 6102) and surrendered to the Federal Reserve.  The following year, all gold holdings of the Federal Reserve was then titled to the US Treasury Department (Gold Reserve Act)

FDR wanted to fund his New Deal and the banks wanted to continue their lucrative fractional reserve banking while limiting their exposure to bank runs.      Gold stood in the way.

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40 years is up

EconomicsHelp wrote:

THE GOLD STANDARD: WHERE IS THE STANDARD NOW?

President Nixon took us off the gold standard altogether in spring 1971. The economy today is the aftermath of 40 years of fiat monetary money. Some economist say that the life span of a fiat monetary system is on average around 40 years.

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Memo proofs Gold Price Manipulation by Federal Reserve

Fed officials actually have a close eye on gold:

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A gold standard stands in the

A gold standard stands in the way of a global capitalist system, especially given the lack of gold and the point that one can have one's dollars redeemed.

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gyrogearloose
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Standing in the way ???

Redeemed for what ?

And a lack of gold ?   How much gold per person is enough, a gram, a kilogram,

or does every one have a tonn of gold ...!!!

Cheers Hamish

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gyrogearloose wrote: Redeemed

gyrogearloose wrote:

Redeemed for what ?

And a lack of gold ?   How much gold per person is enough, a gram, a kilogram,

or does every one have a tonn of gold ...!!!

Cheers Hamish

There are only around 150,000 metric tons of gold worldwide, or equivalent to less than one troy oz per capita. Even if we double that number, we will end up with less than two troy oz per person.

A gold standard means that any paper currency used is backed by gold. That's your assurance that your paper currency stands for something. That also means that you can have your paper currency exchanged for gold if you want.

The second was one of the reasons why the U.S. dropped the gold standard, as some countries were slowly having their dollars exchanged for gold.

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gyrogearloose
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Paper currency stands for something ?

A govenerments assurance that a paper currency is backed by gold has been shown repetadly to be a hollow one.

This is a fairly good paper on gold standards.

You said "you can have your paper currency exchanged for gold if you want" ..... Histroy has shown that this only holds untill enough people work out that the govenrment is debasing the currency and want to swap their soon to be worthless slips of paper for something that has retained value for all of recorded history.

Goverernments hate being fiscally responsable and so hate a "pure 100% gold and silver standard" ( as defined in the above paper )

from wiki "John Maynard Keynes, who had argued against such a gold standard, proposed to put the power to print money in the hands of the privately owned Bank of England. Keynes, in warning about the menaces of inflation, said, "By a continuous process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens. By this method, they not only confiscate, but they confiscate arbitrarily; and while the process impoverishes many, it actually enriches some""   

(P.S. re wiki on gold  standards. I object to much of what wiki says, an example being  in its explanation of  the 100% reserve gold standard under disadvantages it says "Deflation punishes debtors.....Lenders become wealthier".... I consider that an advantage not  disadvantage ! )

As to there not being enough gold at only 1 oz per capita how many dollars per capita is the right amount.....  1  or  $1000 or   or $10000000000000000000000000000000000 smiley

And according to you "A gold standard stands in the way of a global capitalist system"

But fait money systems give the government the power to create inflation at will.

So you are in favour of giving the government the power to do as Keynes warned ????????!!!!!!!!

Sorry. Can't agree. I want to keep my hard earned wealth.

Cheers Hamish

P.S. Essentially the only difference between gold as money and fait money is it is hard to print more gold.......

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Government? Most of total

Government? Most of total money supply isn't created by government or central banks but by commercial banks, and much of it consists of numbers in accounts.

The rest of your post is utter nonsense, especially equating 1 oz to trillions of dollars. Yeah, let's hope that no one wants to have a dollar exchanged for gold! *-)

Fiat money systems creating inflation at will? More nonsense! Only around 3 pct of total money supply in the U.S. consists of FRNs, bills, and coins.

Giving the government the power to take over? You've got to be kidding me. Don't you know? Washington works for Wall Street. Why do you think we got into trouble in the first place? Government intervention? He he, yeah, right!

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Missed some points...

You suggested there is not enough gold, at  say 1 oz per person.

I queried that if you want to use dolars instead of gold, how many dolars per person is needed.

So again how many dolars per person is the "right" amount per person $1,    $10,000 or $ 10000000000000

.

Opps  suddenely have to go... will be a while before I get another time slot for this

Cheers Hamish

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gyrogearloose wrote: You

gyrogearloose wrote:

You suggested there is not enough gold, at  say 1 oz per person.

I queried that if you want to use dolars instead of gold, how many dolars per person is needed.

So again how many dolars per person is the "right" amount per person $1,    $10,000 or $ 10000000000000

Opps  suddenely have to go... will be a while before I get another time slot for this

Cheers Hamish

The catch with a gold standard is that it works both ways, i.e., you can have your currency redeemed. From what I remember, that was taking place before 1971, which is probably one reason why the U.S. moved away from it. Like you, the U.S. was probably assuming that the dollar was solid and that no one would want to have their dollars redeemed.

That's right: how many dollars do you think a person needs? And that's for a lifetime, right? That will be price of one ounce of gold?

And what happens when population or consumption goes up, such that more dollars will be needed?

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gyrogearloose
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Deflation is good

ralfy wrote:
Like you, the U.S. was probably assuming that the dollar was solid and that no one would want to have their dollars redeemed.

Actually I assume the opposite, that dollars are not solid, and want to hold as few dollar demoniated assests as practically possible. This is in line with Chris Martensons thinking.....

ralfy wrote:
That's right: how many dollars do you think a person needs? And that's for a lifetime, right? That will be price of one ounce of gold?

(snip some lines)

And what happens when population or consumption goes up, such that more dollars will be needed?

No. I always assumed the discussion was about the total money supply, expressed in units per person.

People keep on saying the price of gold.... Try and think of it this way, how many USD will an oz of gold buy. In 1920 the answer was 20 USD

Today the answer is 1720 USD.

And here in lies a hint of the answer  your last line I quoted of you. As the economy grows, things priced in dollard will fall.

"people will argue that there is not enough gold. They are wrong: it is a matter of price because gold is infinitely divisible. They will argue not being able to expand the quantity of gold faster than current rates of extraction is deflationary. It is true that in the long run prices expressed in gold will fall; but it is an error to assume that falling prices are a deterrent to consumption, as anyone in the consumer electronics industry will tell you. The origin of this mistake comes I believe from a reductio ad absurdum of the economic effects of a sharp reduction in the money quantity."

Central banks, Governments and economists fear deflation.

I like deflation. Reason is I am a saver by nature, do not buy unless I have savings. In a deflationary environment, my savings are able to buy more of any given item. People who borrow to live beyond their means are crushed by deflation, and are often forced to sell assets to repay debt at 'fire sale' prices.

In times like these cash is king.

Cheers Hamish

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ralfy
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gyrogearloose wrote:Actually

gyrogearloose wrote:

Actually I assume the opposite, that dollars are not solid, and want to hold as few dollar demoniated assests as practically possible. This is in line with Chris Martensons thinking.....

That is why a gold standard will not work.

Quote:

No. I always assumed the discussion was about the total money supply, expressed in units per person.

It has always been so, and my argument about population and increasing demand stands. Those are two more reasons why a gold standard won't work.

Quote:

People keep on saying the price of gold.... Try and think of it this way, how many USD will an oz of gold buy. In 1920 the answer was 20 USD

Today the answer is 1720 USD.

It will not be enough to maintain the global ecoomy. That is why a gold standard won't work.

Quote:

And here in lies a hint of the answer  your last line I quoted of you. As the economy grows, things priced in dollard will fall.

It's the other way round due to increasing population and resource demand.

Quote:

"people will argue that there is not enough gold. They are wrong: it is a matter of price because gold is infinitely divisible. They will argue not being able to expand the quantity of gold faster than current rates of extraction is deflationary. It is true that in the long run prices expressed in gold will fall; but it is an error to assume that falling prices are a deterrent to consumption, as anyone in the consumer electronics industry will tell you. The origin of this mistake comes I believe from a reductio ad absurdum of the economic effects of a sharp reduction in the money quantity."

Gold is not infinitely divisible for painfully obvious reasons. Try redeeming a dollar when an ounce of gold reaches tens of thousands of dollars.

Quote:

Central banks, Governments and economists fear deflation.

Most of total money supply isn't created by central banks.

Quote:

I like deflation. Reason is I am a saver by nature, do not buy unless I have savings. In a deflationary environment, my savings are able to buy more of any given item. People who borrow to live beyond their means are crushed by deflation, and are often forced to sell assets to repay debt at 'fire sale' prices.

Until you run out of savings. In which case, you rely on your income to replenish depleting savings, but income level goes down during deflation. The returns on your savings also goes down. At some point, unemployment may also take place. Meanwhile, production goes down, and for some industries, it will be very difficult to bring that back online quickly.

Thus, it's not only "people who borrow to live beyond their means" that are "crushed by deflation." The economy itself is affected by such.

Quote:

In times like these cash is king.

Cheers Hamish

Cash is always king in such times, but that's not the point. What you want is the eventually return to long-term production with slight inflation. That's the only way for your savings to grow, but that requires avoidance of peak oil. That, of course, won't happen.

That's why a gold standard won't work.

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gyrogearloose
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an oops in thereby me

Quote:

Quote:

And here in lies a hint of the answer  your last line I quoted of you. As the economy grows, things priced in dollard will fall.

It's the other way round due to increasing population and resource demand.

Opps by me there   meant to say 'things priced in gold will fall in price'.

ralfy wrote:

gyrogearloose wrote:

Actually I assume the opposite, that dollars are not solid, and want to hold as few dollar demoniated assests as practically possible. This is in line with Chris Martensons thinking.....

That is why a gold standard will not work.

Gold standard where tokens representing an amount of gold have historically failed as more tokens are produced than gold exists.....

ralfy wrote:
Gold is not infinitely divisible for painfully obvious reasons. Try redeeming a dollar when an ounce of gold reaches tens of thousands of dollars.

Well OK  gold is not infinitly divisible, can't cut an atom in half..... but today I could buy a cheap cellphone for 0.5 of a gram of gold, and I have some pockect scales that measure in1/00 of a g. In past history, small change was handeled by silver, so that same cell phone would be brought for about 50g of silver ( might be out on those numbers, but they hold well enough for illustrative purposes ), then if you want to buy a single sweat, copper coins have served well too......

The amount of currency in the economy could be considered a means of 'measuring' relative share of the economy at your disposal. How much currency there is is "irrelavent"

As a child I could buy the chapest iceblock got 5 cents, today it is $2 and  1,2 and 5 cent coins are no longer legal tender. so roughly there is 40 time as much money floating around today as in my childhood. How has this helped the economy ?

Opps  have to go, dont get much time on net

Thought for you, who should decide how much money the economy need to function ?

Cheers Hamish

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ralfy
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The money needed will

The money needed will obviously be more than the amount of gold available globally, i.e., at 150,000 metric tons.

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