Gold standard?

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ehl@internet.is's picture
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Gold standard?

Greetings from Iceland,

I just want to float two questions/agruments regarding the the gold standard. Many argue that when Nixon took the dollar off the gold standard, uninhibited printing of fiat money began. My believe is that the dollar was taken off one commodity standard and put on another, namely oil. Since 1971 the dollar has actually been on an "oil  standard".

Second, many also advocate a return to the gold standard (like the Mieses institute) as if that will somehow bring order back and everything will be much better. What those same people fail to mention is the problem of hoarding. What happens when someone (a person, group, cartel or even a nation) manages to hoard all the gold that is available. Steven Zarlenga's excellent book about money tells the story of the struggle between nation governments and religious sects in ancient times, who had managed to hoard huge amounts of gold and also how the Byzantine empire had the economic well being of Europe in it hands through gold hoarding. Later this control got taken over by the banking cartel. The gold standard is not a solution, it is a mirage that would cause economic stagnation. Any thoughts?

 

sjdavis's picture
sjdavis
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Re: Gold standard?

One thought that comes to mind is it's a good idea to have silver on hand.  If living in a world with a gold standard and hoarding of gold then an alternative currency for trade will be required.

Crash's picture
Crash
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Re: Gold standard?

silver doesn't guard against the hoarding problem. If we have the time and energy to invent a new system, we should use one which isn't subject to hoarding. LETS or mutual credit systems are a better idea than either gold or silver.

Thomas Hedin's picture
Thomas Hedin
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Re: Gold standard?

The Gold Stanard in America was ended in 1933/34.

The gold standard is not a solution, it is a mirage that would cause economic stagnation.

Truth be known America was never on a gold standard.  The "Gold Standard" was only an act of deception by the banks. 

[email protected]

Try to focus less on what is used for money, because that really doesn't matter.  What matters is how money is moved into circulation and who receives the benifit of the new money.

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silvervarg
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Re: Gold standard?

Sorry for reviving an old thread, but still better than starting a new on a similar subject.

Having gold as a modern currency of trade is problematic, especially since almost all money exist only in digital form today.
A fiat currency strictly connected to gold would make it possible to trade in digital form rather easy. It does have its drawbacks, so lets compare it a bit to other currencies.

Fiat money that is not hard connected to a limited physical resourse has nearly always failed miserably and gone out of existance.
This is not entierly true, but at least around 3000 kinds of fiat money has gone down the drain, and we have less than 300 going today, so lets say at least 90% of fiat currencies fail totally within a rather short timeframe (a few hundred years).

 LETS and similar local trade currency systems does work great in theory, but most attempts have failed really quick (often within 3 years).
In some areas they have been working longer and is growing. Just the fact that the vaste majority of them has failed quickly is a good indication that the system has major weaknessess.
Perhaps it is just because a small currency is more sensitive?
If this is the case, then these systems that has grown and survived for a while should start to thrive.
Do we have any example of such a currency is in use by lots of people (at least 10.000) and has survived for at least 10 years?

Personally I don't know of any. The requirements (size of a very small city and surviving the initial period) are actually very small demands for a viable currency.

New systems can be tested in small scale and if they work fine we can increase the scale.
We can not change the major enconomies in the world to a new system that isn't well tested.
Any precious metal based system connected to a fiat currency is a well tried system, so we do know that it does work, but we also know its problems. If we can find something better it would be great, but I will stay sceptical for now.

One thing is certain, our current fiat money system is not holding up well.
Mathemtical models shows that it is likely to fail big time within 70 years, starting when it was completely disconnected from gold in Aug 15, 1971. So, we have made it almost 40 years, and see some serious problems.

Carl Veritas's picture
Carl Veritas
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Re: Gold standard?

SilverArg,

I just covered this very thing in another thread.     There is a notion floating around that if gold was again used as money, those who control the gold will control us all.    Meaning the banks.     And that to keep the banks from plundering us, we must never return to using gold as money.  Do you believe this?    But this is is precisely what the banks wanted and got.  Gold gets in the way of fractional reserve banking(the real prize) so switching from gold coins to paper money plays right into their hands.   By 1935 the Secretary of the Treasury and the Comptroller of the Currency were removed from the Federal  Reserve Board which they used to be able to occupy when the Federal Reserve Act was passed in 1913.   This left the politicians out of direct control of the nations monetary system.   But how did we get here from there?   In 1933,  Executive Order 6102 confiscated all private gold holdings and surrendered to the Federal Reserve. The next year in 1934 the Gold Reserve Act decreed that all gold and gold certificates held by the Federal Reserve be surrendered and vested in the sole title of the United States Department Of The Treasury.   Unless that act was amended since, it means the owner of the gold is actually the US government.  But what compelled them to do such a thing?     The answer is actually simpler than you would imagine.   The interest and principal on US Treasury debt (Bonds) are payable in US dollars which in turn were redeemable in gold.  By removing gold coins from circulating with bank notes as well as Federal Reserve notes, the government can float as much debt as it wishes.     This is the real reason why gold had to be removed and  demonized,  and it didn't hurt that popular intellectual figures of the day like Keynes gave the proceedings a patina of respectability.    The only group who wanted to use gold coins as money were the American people, but they didn't stand a chance.      The smokescreen is thick.  That debt free money people are screaming  about is the very thing that cannot be allowed to resurface by the same group who owns and benefit from it. 

Welcome to America, where freedom was born.

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karinabartram
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Gold standard is a

Gold standard is a commitment by participating countries to fix the prices of their domestic currencies in terms of a specified amount of gold. National money and other forms of money were freely converted into gold at the fixed price.

red baron's picture
red baron
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weakness of the goldsystem?

The exponential money creation system is clear to me, including its build in flawa.

But what if we woud have a gold based money system? Imagine we have 1 ounce of gold as a couple. Now we get two children (population growth). All of a sudden we have to share this one ounce with four people. This seems a perfect example of deflation.

 

In other words: how do we enable the money supply to be in line wth the growth of populations in case we have no money expansion?

Thomas Hedin's picture
Thomas Hedin
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Red Baron

This is the exact reason Gold simply cannot work for money.  There isn't enough of it to support an economy / population our size. 

red baron's picture
red baron
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I am doubtful if there is

I am doubtful if there is enough or not enough. This is a relative thing. Together we could agree that 1 gram of gold is the equivalent of a years pay. And all of a sudden there would be enough gold. But what I am trying to get my thought around to is the fact that we have a growing population and a less rapid growth of the available gold. . The same you could say in case of fiat money.

In the carshcourse it is argumented that 1 dollar had the same purchasing power for more than 200 years. But the population of the US did grow. So how was the moneysupply balanced? Print too few dollars and you deflate the money; print too much and you have inflation.

In short: if you fix the amount of money in the system (either physically through gold or a restrained monaypress)  how do you balance this against an exponentially growing population?

 

Thomas Hedin's picture
Thomas Hedin
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Fix it.

You have to fix the money to production, and then use money that there is enough of to satisfy the economic needs.

Basically there isn't enough gold to work.  That's a known fact for anyone who is willing to do the math, so it makes no sense to try to go to something that can't possibly work.

So now lets look at other Things that could work.

We could have the federal gov. 'print' up paper money, truck it around and pay for certain types of production. 

Problem....nobody really used paper money anymore.  Its to inconvenient.

 

Better solution.

 

Just use exactly what we use for money today (simple numbers) and spend then into circulation as a payment, instead of having all of these numbers 'loaned' into circulation for the strict benifit of the banking system.

Here is some reading.

http://www.wealthmoney.org/enough-gold-money-system/

And some viewing.

 

 

 

 

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