Gold standard - Should we go back?

[kingkilburn]

I think we should. I don't like the way the FED messes with the economy. All they have done since their inception is cause a vicious cycle of bubbles and massive crashes.

I think we need to go back to a gold standard to have a concrete foundation for our currency and economy and stop messing with interest rates.

[jamanrr]

I think we should. I don't like the way the FED messes with the economy. All they have done since their inception is cause a vicious cycle of bubbles and massive crashes.

I think we need to go back to a gold standard to have a concrete foundation for our currency and economy and stop messing with interest rates.


and do what? It is too late for that. You go back to the gold standard now and a dollar would be worth 10 cents instead of the 50-60 cents it is worth now. Anyone ever seen the British pound it is like twice what the dollar is worth. We are screwed.

[mrmephistopheles]

Take a macroeconomics class to figure out why the gold standard isn't a viable alternative for modern times.

[kingkilburn]

We are screwed because that is where the FED put us. We can go back.

By going back to a gold standard we can see the real value of the dollar and build from there.

[aznpoopy]

dude, gold standard is NOT a magic bullet that solves all economic ails.

boom bust cycle will still happen under gold standard. root cause of boom bust cycle is not federal reserve or fiat currency. it's caused by people acting like a herd of cattle. when times are good everyone overspends or gets loans. bam rapid growth. when times are bad everyone saves, money circulation drops. bam recession.

real argument for gold standard is denying government ability to deficit spent (i.e. tax wealth via inflation) and deny gov control over the money supply.

second bit is also its downfall. control of money supply in gold standard is basically tied to the rate of gold production. no way to implement monetary policy.

there's nothing inherently wrong with a central bank or monetary policy... the problem is making sure the central bank uses that power responsibly. debate of fiat vs gold is really debate on how much power to allocate to central bank. fiat = alot; gold = very little.

[kingkilburn]

I'm not against a fiat currency in general just ours.

[aznpoopy]

uh okay. i'm not even sure what that means.

you don't need sweeping governmental changes to bet on your position.

solution: don't save in dollars. save all your money in gold (i.e. buy GLD or hold physical gold assets).

only keep enough cash on hand as needed for your normal expenses.

[kingkilburn]

It means a fiat currency CAN be done properly but ours clearly isn't in my opinion.

[aznpoopy]

it could be better, the degree to which varies from person to person

but if you want to see really fucked fiat currency run wild, there are better and far crazier examples

[ronmcdon]

Relatively speaking, the dollar has probably been one of the
more stable currencies in recent history.

Inflation has been rampant in the last 10 years or so.
But that has prob been more indicative of fed policies and spending from the govt.
Im inclined to think a change in policy is a more realistic alternative.

Think the economy is healthy enough for an increase in rates.

[kingkilburn]

aznpoopy

I know all about the Zimbabwean Dollar.

ronmcdon

We have seen sharp inflation since the Korean War and the price of gold in America has steadily increases since the inception of the FED. That steady increase is due to the inflation of the currency not a higher demand for gold.

[ronmcdon]

i think some degree of inflation is not unhealthy.
the economy grows and it's not unreasonable to expect there is a need for more currency to circulate as a result.
Imo, there should be a cap as to how much bills can be printed, as to discourage inflation.

About the gold standard,
I'm skeptical the very limited supply of gold, as a commodity, could sustain the size of any large economy.
Gold is around 1,200-1,300-ish/oz (very low supply relative to demand).
If this was enacted, I can see very high de-flation, and that isn't great either.
Maybe a more modest commodity like silver ($13/oz, higher supply relative to demand, essentially as stable) would be more practical.

Interestingly even the Euro isn't doing all that great these days.
It's just inevitable that paper currency is volatile to some degree.

[theicecreamdan]

Gold's "value" comes from the exact same place that the "value" of a dollar comes from.

[ranger240]

there have been some awesome posts so far... gold standard seems like a nice idea

but as other posters mentioned, it wont work. exchange rates and gold hoarding by countries (i.e. france during the interwar period) really mess with gold-blacked currency. as previously mentioned, increasing gold supply via mining is another issue.

the OP really just wants monetary policy to be less less inflationary. that can be accomplished via means other than the gold standard


my partisan opinion on excessive govt spending is that its politicians making their jobs easier... i.e. throwing money at the problem rather than fixing it the hard way.

[kingkilburn]

Gold has an intrinsic value. Fiat currency has no value in and of its self.

[S14DB]

Gold has an intrinsic value. Fiat currency has no value in and of its self.

Are we talking Numismatic or Financial Intrinsic values?

[kingkilburn]

Both. You can't argue against the fact that gold is valuable.

[S14DB]

Both. You can't argue against the fact that gold is valuable.
Same can be said for anything?

[codyace]

Both. You can't argue against the fact that gold is valuable.

so lets assume the dolllar tanks


what's to say gold will replace it? who's to say that SeaShells won't become the next popular thing?

[codyace]

Take a macroeconomics class to figure out why the gold standard isn't a viable alternative for modern times.

even an intro to macro class covers this


I find it funny that some of the biggest supporters of the gold system often have the least (if any at all) economics education

[kingkilburn]

Why would seashells be more valuable than gold?

Unless you find a magic formula to cheaply create gold it's value will not drop.

[S14DB]

Platinum is more valuable then gold. Should we go to that instead?

[kingkilburn]

If we have enough to backup the amount of currency in circulation. I don't think that is the case.


Why don't you actually make some kind of counter argument. Implying that I am uneducated and asking me loaded questions is getting old.

[mrmephistopheles]

Implying that I am uneducated

So you're saying you HAVE taken a macroeconomics class of some sort?

[Drift N Dragg]

WAIT .. seashells aren't worth more then Gold?

[kingkilburn]

I don't need to take a class to be educated.

[mrmephistopheles]

I don't need to take a class to be educated.

Well shit, in that case I'm Professor Emeritus of Horsemanship, seeing as how I've googled about horses and watched my wife take care of one.

I get that you don't need a professional education to be 'educated', but taking a class that covers all the details/upsides/downsides/pros/cons/causes/effects of a subject GENERALLY helps give a person a very good perspective on a subject.

On the other hand, reading websites that are skewed toward a certain perspective tend to NOT make a person 'educated' on a subject.

I would offer to illuminate your ignorance via a copy/paste from a macroeconomics textbook, but to be honest, this is kind of fun.
Kinda like watching a dog locked into a hot pursuit/fight with its tail.

[kingkilburn]

You have made A LOT of assumptions about how I got the knowledge I have, non of which are correct.

For all you know I am a published and well respected author on the subject.

I have spent many an hour researching many points of view on the subject. I have read a few of the books that are used for references in many text books. I know all about Keynes and Hoppe as well as how their views differ.


Just because I don't agree with you does not make me ignorant. If you don't wish to even have a semblance of a discussion here then please don't post.


EDIT:
Also formal education is just one of many ways to gain knowledge and in many respects isn't the best.

[imotion s14]

Gold's "value" comes from the exact same place that the "value" of a dollar comes from.

1 oz of gold = 1 oz of gold
10 oz of gold = 10 oz of gold
100 oz of gold = 100 oz of gold

What's the physical difference between 1 dollar and 100 dollars? Nothing.

The difference between 1 oz of gold and 100 oz is 99 oz a tangible different.

so lets assume the dolllar tanks


what's to say gold will replace it? who's to say that SeaShells won't become the next popular thing?

Because sea shells aren't rare and there aren't armies guarding them in reinforced concrete and steel vaults with 20 ton doors.

even an intro to macro class covers this


I find it funny that some of the biggest supporters of the gold system often have the least (if any at all) economics education

Most college economic professors are academic blowhards who spent their entire lives in academia. I know mines was.

[imotion s14]

On the other hand, reading websites that are skewed toward a certain perspective tend to NOT make a person 'educated' on a subject.

How is that any different than university professors skewed towards their own perspectives?

[ronmcdon]

value and volume/weight are totally different.
you can't compare commodities to currency with respect to value in the same manner.
I see (ecomonic) 'value' as defined by supply & demand.
That's how I look at it anyways, idk if that's what Dan meant.

[kingkilburn]

So what is the supply vs demand of gold?

Why not compare gold and fiat currency? You need some sort of base line and gold is the only thing applicable.

[imotion s14]

value and volume/weight are totally different.

100oz of gold is worth more than 1oz of gold. There is a PHYSICAL difference in their value that is derived from their differences in weight. Where as the difference in a 1 dollar bill and a 100 dollar bill is derived from nothing since you can print "1" or "100" on the exact same physical note.

you can't compare commodities to currency with respect to value in the same manner.
I see (ecomonic) 'value' as defined by supply & demand.
That's how I look at it anyways, idk if that's what Dan meant.

Up until 1971, gold was money.

[lawrenceyang]

Should We Bring Back the Gold Standard? -- Seeking Alpha (http://seekingalpha.com/article/184360-should-we-bring-back-the-gold-standard)

[mrmephistopheles]

OK let's say we tie our dollar to gold.

Let's say that 1oz of gold = $100 (for simplicity's sake).

Now, let's say that gold is traded on the open market (as it always has and will be, seeing as how it's a finite commodity).

Let's also assume that another major country (let's use China for this example) ties their currency to gold.

Finally that there is a trade equilibrium and that currency values are stable and equitable (say $100 for 1000 yuan).



Now what happens when China discovers a mountain filled with 10000tons of gold? Does it hold its value?

Will gold still trade on the open market of China (or of the world) for 1000yuan? Unlikely.

Gold is less valuable now, seeing as how more of it exists (as value is tied to scarcity), so thanks to a discovery of gold in another country (something which we have no control over), the US dollar is now worth LESS in countries without a gold-based currency. The open market will now value gold at lower levels due to the new surplus, and US real GDP will fall.

Way to go, gold standard!

Let's try another example, based on the previous assumptions (except for the gold mountain), and one more (that we trade with Germany, who does not have a gold-based currency.

The US wants to perform a currency exchange with Germany.

Let's say that on June 1, $100USD are worth 50 Marks (= 1oz of gold).

Now it's June 15th, time for another exchange.
This time $100 USD are worth only 45 Marks.

Exchange rates fluctuate constantly, and there is no 'precious metal basing' that can stop it. Unless international trade is abolished, currency exchanges will continue indefinitely.

So, now we're at 45Marks = 1oz of gold

Now let's say that the precious metals markets experience a fall, and 1oz of gold is now only worth 25Marks. Now, 25 Marks = $100.

So, pretend that I live in Germany and you live in the US. Now, thanks to exchange rate fluctuations (which, admittedly could go the other way), you're having to pay 2x as much for imported German stuff, and I have to pay half of what I previously paid to buy American stuff.

In a floating currency situation, the monetary value deficit would resolve itself, as US workers would increase GDP by making and selling more products to export, and as that demand grew, the value of the Mark would decline, as the trade deficit in Germany would reduce it's GDP, resulting in a general stabilization in currency values.

Wait a sec - the value of the dollar is still tied to GOLD.

That means that we have to hope that the precious metals market doesn't go haywire so that we can live our lives without having to pay $17/gal for gas.

I'm sure I'll hear the argument "gold is scarce, and they're not making any more of it, etc", and "gold will only increase in value".

HA.

Even if gold did only increase in value, it would be a mirage in economic context.
Say from our previous example that gold goes up, and now $100USD = 100 Marks.

Sweet! We now have twice the buying power in Germany!

That works for awhile, but seeing as how Germany's currency floats, it'll stabilize eventually too. Inflation (from all the GDP increases) will devalue the Mark, and in the end market equilibrium will be restored, albeit at a higher level.

In Barney terms - it will be super terrific, but only for a little bit!




Those are two more examples that spring to mind. Please listen to reason (I feel like I'm better off debating a roll of electrical tape in regards to progress being made). I really don't feel like having to dig thru a textbook to spell it all out for you.






Remembered a third.

Deflation.

Any value we attribute to a specified amount of gold is based absolutely and simply on what a deciding body SAY it's worth.

Let's assume that the US has 100 tons of gold and nothing other countries do (including trading in gold) affects the US.


Now, 1 ton is worth $3.2 million (this is based on $100/oz). Our national net worth is now 320,000,000.

Shit, well that doesn't work.

Let's assume that 1oz is worth $10000. Now 1 ton is worth $320,000,000 and the national net worth is 32 trillion bucks.
That's sounding better.

So we can print up to $32trillion (although most of it will be held in reserve, etc).

We're doing great and our economy is expanding, but shit - another snag. We're COULD BE doing $40 trillion in business, but we don't have 8 trillion worth of gold to back it up.

Solution? Make the dollar worth even less!

Now instead of 1/100th of an ounce, or 1/10000th of an ounce, the dollar will be worth EVEN LESS, just so the money supply doesn't run out.

Man it's a good thing we have a gold-backed currency. It sure makes for fun macroeconomics!

Fun like self-castration with a pair of rusty dikes (http://en.wikipedia.org/wiki/Diagonal_pliers), and a car cigarette lighter for post-castration cauterization.

[kingkilburn]

OK let's say we tie our dollar to gold.

Let's say that 1oz of gold = $100 (for simplicity's sake).

Now, let's say that gold is traded on the open market (as it always has and will be, seeing as how it's a finite commodity).

Let's also assume that another major country (let's use China for this example) ties their currency to gold.

Finally that there is a trade equilibrium and that currency values are stable and equitable (say $100 for 1000 yuan).



Now what happens when China discovers a mountain filled with 10000tons of gold? Does it hold its value?

Will gold still trade on the open market of China (or of the world) for 1000yuan? Unlikely.

The amount of gold a given Yuan represents will go up. That is a given.

Gold is less valuable now, seeing as how more of it exists (as value is tied to scarcity), so thanks to a discovery of gold in another country (something which we have no control over), the US dollar is now worth LESS in countries without a gold-based currency. The open market will now value gold at lower levels due to the new surplus, and US real GDP will fall.

Way to go, gold standard!

No the US dollar's value remains almost unchanged while the Yuan's has risen. The two separate actions are not the same.

Let's try another example, based on the previous assumptions (except for the gold mountain), and one more (that we trade with Germany, who does not have a gold-based currency.

The US wants to perform a currency exchange with Germany.

Let's say that on June 1, $100USD are worth 50 Marks (= 1oz of gold).

Now it's June 15th, time for another exchange.
This time $100 USD are worth only 45 Marks.

Exchange rates fluctuate constantly, and there is no 'precious metal basing' that can stop it. Unless international trade is abolished, currency exchanges will continue indefinitely.

So, now we're at 45Marks = 1oz of gold

Now let's say that the precious metals markets experience a fall, and 1oz of gold is now only worth 25Marks. Now, 25 Marks = $100.

So, pretend that I live in Germany and you live in the US. Now, thanks to exchange rate fluctuations (which, admittedly could go the other way), you're having to pay 2x as much for imported German stuff, and I have to pay half of what I previously paid to buy American stuff.

In a floating currency situation, the monetary value deficit would resolve itself, as US workers would increase GDP by making and selling more products to export, and as that demand grew, the value of the Mark would decline, as the trade deficit in Germany would reduce it's GDP, resulting in a general stabilization in currency values.

Currencies are in constant fluctuation, gold standard or not. This is no basis for an argument against it.

Wait a sec - the value of the dollar is still tied to GOLD.

That means that we have to hope that the precious metals market doesn't go haywire so that we can live our lives without having to pay $17/gal for gas.

The amount you get payed versus the value of the currency are not linked in the way you imply.


I'm sure I'll hear the argument "gold is scarce, and they're not making any more of it, etc", and "gold will only increase in value".

The demand out paces production.

HA.

Even if gold did only increase in value, it would be a mirage in economic context.
Say from our previous example that gold goes up, and now $100USD = 100 Marks.

Sweet! We now have twice the buying power in Germany!

That works for awhile, but seeing as how Germany's currency floats, it'll stabilize eventually too. Inflation (from all the GDP increases) will devalue the Mark, and in the end market equilibrium will be restored, albeit at a higher level.

In Barney terms - it will be super terrific, but only for a little bit!

Things don't just magically go to some pre market change equilibrium. If one is valued more than the other today it will take some kind of change in the market for it to lose that value.

EDIT:
Even if they did end up at a 1-1 exchange rate that does not mean that there wont be more of one currency than the other or that the people in the two countries earn the same amount.


(I feel like I'm better off debating a roll of electrical tape in regards to progress being made). I really don't feel like having to dig thru a textbook to spell it all out for you.

Then by all means don't post. I love your need to point out my obvious stupidity.

[Mikey213]

The only reason gold is valuable through my eyes is for it's thermodynamic properties. We can basically have a golden alchemical atmosphere that reflects the harsh sun rays and at the same time cool the earth. (If the sun decides to work out at the gym)

[Drift N Dragg]

Then by all means don't post. I love your need to point out my obvious stupidity.

Ok, I am growing quite Tired of this...

You are borderline Trolling .. You are now being WARNED .. People are giving you other solutions in a Discussion ..

Just because you, in the little painted world, do not understand nor want to hear there comment or discussion, and decide to throw everything away and break it down into " Stupidity " .. Is getting old ..

Either get you act together or end up not being able to post ...

You don't have to agree with anyone, but you are Disagreeing in a DISRESPECTFUL way ...

On top of that, I highly doubt you are even close to an author of any sorts, since I went through all your Previous posts, and 99% NEVER leave loud Noises, and I can Site a lot of points showing you are not even close to that point..

and I UNDERSTAND you said you COULD be one .. and I was making my Point ..

If you counter this with a Disrespectful or Malicious post ( Or telling the ADMIN or ANYONE ) not to post, you WILL forfeit your right to post...

I also know that a lot of people on here say that from time to time.. You use it in EVERY Thread ..

Take this how you want it .. but you are being Warned ..

[kingkilburn]

How am I to respond when for the most part the only argument against what I propose is that it has no merit on account of my intelligence?

I don't care if the person is a mod or admin if they can't respectfully disagree why are they posting. I am fully open to idea that I could be wrong but you have to disprove my statement not discredit me.

It is not my fault that some adults don't know how discuss and debate.


I'm sorry if it appeared I was trolling. That wasn't my intent.

[theicecreamdan]

Lets say our money is backed by gold. The only way that would continue to matter completely depends on whether people who are accepting money give a shit about gold.

If money needs to be backed by gold, then what backs the gold?

Supply is largely controlled by mining operations and a stable demand is in the hands of a few very small industries. Most of the demand is in the hands of people buying jewelry.

In tough times demand for gold should go down as people cut back on fancy stuff. Demand goes down and your dollar is worth less, so people buy less gold.

Basically it seems like it would just be a pain in the ass to regulate, and it wouldn't change a damn thing.

[ronmcdon]

^^^

As I understand it, demand for precious metals increase when there's inflation.
If anything, high inflation is indicative of a poor economy, as I understand it.
the value of precious metals does not generally fluctuate as much as floating currencies (or even other commodities for that matter).
think of it as a savings and/or investment approach, or that is my impression.
(if I had actuall money to save, I would do just that instead of saving in any currency)

Gold, as a traded commodity is just that.
It's not supposed to a luxury item.
Not like we buy gold coins/bullions and wear them as medallions.

As mentioned prior, I agree with your accessment of gold's value as simple 'supply & demand'.
Gold's value also fluctuates, albiet it's less volatile than floating currencies.

[theicecreamdan]

Well then I guess I just don't see a point in trading commodities. Because its just a big gamble, and the cost has nothing to do with utility or whether somebody wants gold, or pork bellies.

There is a limit, and I don't want to get screwed when somebody figures out that we're well past what ____ is worth.

[codyace]

1 oz of gold = 1 oz of gold
10 oz of gold = 10 oz of gold
100 oz of gold = 100 oz of gold

What's the physical difference between 1 dollar and 100 dollars? Nothing.

The difference between 1 oz of gold and 100 oz is 99 oz a tangible different.

Are you speaking in purchasing power, or in simple measurements.

If that's the case, wouldn't the demand for Corn (for example) be higher than the demand for gold? Based upon your thoughts, that would mean if I have a farm full of corn, I'd essentially win right?


Because sea shells aren't rare and there aren't armies guarding them in reinforced concrete and steel vaults with 20 ton doors.

At one point people died over such 'bullshit' as shells. Just because it's not valueable now, doesn't mean it won't forever. Again, if the dollar tanks (and the 'basic' fact that almost all world currency floats on the US Dollar, who is to say Gold will be worth anythign when it 'theoretically' all goes to hell?

What is gold going to buy you, when people are more concerned with eating/living/moving on? Funny how "gold's value" remains important in wealthy 'cultures' but is pitifully low in others. You need to look beyond 'the western box'.



Most college economic professors are academic blowhards who spent their entire lives in academia. I know mines was.

Sorry for you. A good econ professor (of any type) should base their focus on discribing many systems, and their pros and cons, with little bias.

How is that any different than university professors skewed towards their own perspectives?

One is accredited, and one could be a out of work slob behind a keyboard. Remember, not any dipshit can begin teaching college level classes, regardless of your personal 'bias' towards some of your's.

No the US dollar's value remains almost unchanged while the Yuan's has risen. The two separate actions are not the same.

HIs point is, where does the true 'gold standard' have more power? Where you have deflation or inflation? Who is to say either are the proper measure?



Currencies are in constant fluctuation, gold standard or not. This is no basis for an argument against it.

So explain to me how gold is not when its' based upon the dollar?

If the purchasing power of the dollar goes down, or inflation (or deflation on the opposite end) occurs, then the 'value' of gold most certainl changes. If an ounce of Gold is worth 1 US dollar, when 1 US dollar = 2 Euro, it's a win. When 1 ounce of Gold is worth 1000 US dollar, and 1 US dollar = 1 euro cent, it's a travesty. Basic stuff.


The demand out paces production.
This tpyically results in inflation of value. If you bought now, it will go down once everyhting stabilizes/equalizes. Again, poor gold.



Things don't just magically go to some pre market change equilibrium. If one is valued more than the other today it will take some kind of change in the market for it to lose that value.

So lets assume the 'value base' dimmishes overnight. What is gold going to do then?



Well then I guess I just don't see a point in trading commodities. Because its just a big gamble, and the cost has nothing to do with utility or whether somebody wants gold, or pork bellies.

That's the entire point - the value of gold is so 'stuck' on the US Economy, that in any event of failure, it won't matter how much you have. Why? because then Americans will want the next best currency instead, not gold.

Remember, when you are in the middle of BFE, an ounce of Gold won't get you junk, but a dollar will. Exchange rates only exist when both parties agree.

[kingkilburn]

You are measuring the price of a more or less fixed value commodity on a constantly changing currency. The value of gold has not changed much since we went of the gold standard but the value of the dollar has sharply declined. When you look at the value of gold with the dollar as the fixed value you are getting a VERY skewed result.

The demand for gold has only risen in all of recorded human history. Those with the technology to acquire gold have always wanted as much of it as they could possibly get.


An interesting little fact, the Japanese currency during it's isolationist period was based on the value of rice. So yes if you wanted you could have a corn backed currency. I don't think the currency would be worth much and it would be extremely volatile but it could be done.


EDIT: An ounce of gold will get you a lot when you go to the right place to trade it for currency. If gold was still used to back money you could go to your local bank and trade it for bank or money notes.

[mrmephistopheles]

:rofl:

Way to completely ignore some REALLY good arguments against the gold standard by simply spewing more argument in favor of it.

That really shows that you have solid footing in your argument. :bigok:

[codyace]

You are measuring the price of a more or less fixed value commodity on a constantly changing currency. The value of gold has not changed much since we went of the gold standard but the value of the dollar has sharply declined. When you look at the value of gold with the dollar as the fixed value you are getting a VERY skewed result.

Well what shoudl we base the value of gold upon then? If without a currency backing it, it's 'worth nothing' in the general sense. Why would I take gold for payment, if I knew I couldn't exchange it for money (of any type?).



The demand for gold has only risen in all of recorded human history. Those with the technology to acquire gold have always wanted as much of it as they could possibly get.

Has it really? You shoudl really re verify this. I know for a fact while it's higher now than ever, that it's not 'always gone up' in relation to modern scaling with USD as the comparable value.

Also (as said 100x), the value has increased through inflation. Gold pricing is much like Oil pricing...I wrote a term paper on their relation. It's almost scarey. With that said, I'd go as far as to say, whoever owns oil will be king when the dollar tanks, not the gold. What can gold do for your economy? I know what oil can...



An interesting little fact, the Japanese currency during it's isolationist period was based on the value of rice. So yes if you wanted you could have a corn backed currency. I don't think the currency would be worth much and it would be extremely volatile but it could be done.

Ancient civiliations didn't even have a base currency, and they survived. Again, the world will survive 'just fine' without gold. Sure we're arguign over extreme examples (which is why i'm testing you), but the fact remains that GOLD won't ever return to the main 'basis' of value, when modern currency is around.


EDIT: An ounce of gold will get you a lot when you go to the right place to trade it for currency. If gold was still used to back money you could go to your local bank and trade it for bank or money notes.

Trust me when I say, Iv'e been to shit holes in towns you can't even pinpoint on a map. And in those towns, my camel-pak of water was more valuable than even US dollars. Again, look outside the western box. Gold means shit when people need to eat.

[codyace]

:rofl:

Way to completely ignore some REALLY good arguments against the gold standard by simply spewing more argument in favor of it.

That really shows that you have solid footing in your argument. :bigok:

I'm trying to remain as simple as possible, and he still fails to get the basic concepts.

I hope the world ends I have the most bullets, oil, and food. I know the Zombies aren't after bullion! hahaha

[kingkilburn]

If this is such a joke to you then lock the thread.


You are using extreme theoretical examples that don't reflect reality. How am I to argue against what ifs? There will always be a counter what if.


You're saying I'm wrong with no proof to back you up. Just what ifs. Where are the numbers and statistics to prove how it wasn't working?

[mrmephistopheles]

If this is such a joke to you then lock the thread.


You are using extreme theoretical examples that don't reflect reality. How am I to argue against what ifs? There will always be a counter what if.


You're saying I'm wrong with no proof to back you up. Just what ifs. Where are the numbers and statistics to prove how it wasn't working?

It's more entertaining to watch you flounder.

What about the 'extreme theoretical example' of mine that you ignored - deflation?

What's your defense of that? How is it possible to expand GDP and not deflate the currency when it's tied to such a standard?

[kingkilburn]

I see no long term problem with deflation. There will be problems in the short term but as the market adapts the money people have will go much further.


I'm still waiting for the proof as to why it wasn't working. btw

[codyace]

You are using extreme theoretical examples that don't reflect reality. How am I to argue against what ifs? There will always be a counter what if.

The thing is, we've provided perfect world examples of what 'happens' not what 'if'. Sure you can deny these t hings, but the fact of the matter is, gold is no longer what it once was, simply do the onset of modern banking/loaning/currency/etc.

Think of this way: We don't have enough gold to back up our dollars. Lets say we all cash in at the same time in panic...golds value 'always remains the same' according to you'...what happens when the 'market' realizes it's value was unsustainable? Debacle.


I see no long term problem with deflation. There will be problems in the short term but as the market adapts the money people have will go much further.

No long term problem? Ask the Greek's how they feal about a 'long term' deflationary economy. Ya know, the country that just fell apart??

How about in the late 90's when we were booming, inflation rates were 'ok' and everyone was making money? Gold did poorly. On the other end (deflation), what about in Japan after their credit crush in the early 90's...once again Gold did very poorly, as the Yen wasn't worth anything.


And lastly, lets also remember that the value of gold is upon an American economy that is (for lack of better term) underwater - that is, our value is so connected to our outstanding business, that it's probably now more volitaile than ever. US ecnomy sinks - Gold is our anchor.

[g6civcx]

First, I would like to defend kingkillburn a little bit. Not that he wants or needs defending, but I would feel the same way if everyone jumped on me.

Second, kingkillburn needs to be a bit more respectful. It's okay for them to disagree with you. So far I haven't seen anyone disrespecting you much. Seems like you're more defensive than necessary.

Third, this is a good conversation. You each have at least some very valid points. Kudos to everyone for participating.

Please continue.

[drift freaq]

Ok first problem with trying to use Gold as standard is its a traded commodity. A traded commodity that rise's only when investors seek flight from investment in oil and oil futures which they uses as a hedge against there fear of the current dollar situation at that particular time.

Quite often investors seek oil to hedge against dollar devaluation. When the oil is down as well there next source out of fear is Gold.

On the flip side when the dollar is up and or oil is up investors quite often leave Gold thereby driving it down in Value. This does not make for a good standard as stability is the key.

Numerous posts in this thread have shown that Gold is a Volatile commodity and would not be wise to used as standard.

Its like the Europeans wanting the dollar to no longer be the standard of World currency. The dollar remains the stablest of World currencies, which why it is the standard. While it is down some the key to making it stronger is not in switching standards.

The key is to cut back on excess spending and trimming the national debt. The other key is to increase productivity in the U.S. , something the Unions have done a good job of destroying through their own policies and demands for workers.

Another issue is China's tying the Yuan to the dollar and not letting it float free as it should.
This artificially keeps it down and allows the Chinese to exploit the cheap labor in a unfair way on the world market. Which makes it hard for a lot of countries to manufacture on there own soil based on higher labor costs.
If the Chinese labor rates were to rise then it would be easier for America to do more manufacturing on American soil competitively thereby again increasing the value of the American dollar.




Now for someone to cry about the fed without ever having studied economics in depth ? Add to that to be speaking up now when they never did before. Perhaps they need to do more long term research.

Seriously, no one cried when Greenspan lowered interest rates and everyone ran rampant on credit because of it. No one cried foul when the Congress under then President Clinton pushed for lower interest rates to make housing more affordable and he signed off on it.

Now we are facing the facts of the situation like a junkie that wants his drugs but realizes it could be killing him.
America and the world became easy credit junkies and went to town with it. We have been paying for that and for someone to point the finger at Wall street or the fed ,as the sole cause? Is someone not willing to take responsibility for their own actions. We all participated in it in one form or another. Regardless of our realization, That low interest rate credit card, low interest rate house, easy to finance etc...

The current Fed reserve chairman Ben Bernanke did a phenomenal job of keeping this country from slipping into what could have been a major depression. Instead we had a deep recession.
This stuff does happen. Now were there problems with some of what Greenspan did that wound up deepening the crisis before Bernanke sought to avert the worst part? Yes indeed, stuff that he has on record said he did not foresee.
Not many of the experts foresaw what happened.

What makes you (OP ) expect to be able to so accurately suggest a move to a Gold standard when you have no background in this stuff by your own admittance?

What makes you think you that the dollar has become so unstable or that by going to a Gold standard that would eliminate the gyrations that go on already in commodities which would affect Gold as well.

I have already pointed out that the on a commodity basis Gold is more unstable than the dollar.
Others have already pointed out that Gold is a commodity that can be found thereby adding to its instability. Its also a commodity of possible limited resource.

Growth that goes to fast will cause inflation. Given the rapid rise of Gold in recent times if it was our standard we would be facing an inflationary situation as well.

[ranger240]

page one of this thread was pretty good, page two? not so much. too many ig'nant folk taking things personal and refusing to embrace anything but their own ignorance.

bottom line is, if a gold backed currency worked we'd still be on it. blame nixon, blame vietnam war-derived debt, blame your grandma for hoarding too many gold coins under her mattress, bottom line is

IT DIDNT WORK then and its too late to pull a U-turn and get back to it (for tons of the reasons already pointed out)

for people who think we should revert back to a gold standard checkout the notion of non-gov't based currencies (i.e. debt cards that work of a given fund of gold). its theoretical but somewhat interesting. also check out 'austrian trade theory' of economics, its somewhat of a heterodox but still provides an interesting perspective.


as far as defending your sinking ship of why a gold standard is better than fiat money, save your breath. no one is going to be won over to your perspective. Why? because as has been said, if everybody did it, then it would be great, but if one economy did it while the world was fiat then things would get straight weird yo..

imagine if a big economy like china was gold standard and the u.s./saudi arabia/whoever was fiat and wanted to pester those poor guys over in asia. said fiat country could start buying up gold reserves abroad inflating chinas currency and thus disrupting their trade via inflating their currency. worse they could buy up a ton of the worlds gold then dump it and really mess things up for said gold standard country.

Anyone defending the gold standard NEEDS to look up what happened in Europe during the interwar period. (if memory serves me well) it went something like this. France was hoarding gold which caused shortages in neighboring countries. france did this to provide some security as it was weary of another war (or whatever reason, probably just because theyre french and like pissing off england). bottom line is... gold standard only caused an unstable time to get more unstable. france did this via cashing out its foreign reserves for gold.

imagine if the U.S. was gold standard and suddenly everyone was sick of the u.s. and didnt trust them so major players started cashing out their currency (which is funny, bc the USD is a reserve currency and used worldwide) for gold, the u.s. would be straight faked worse than when

this guy

http://scrapetv.com/News/News%20Pages/Everyone%20Else/images-3/auric-goldfinger.jpg

tried to rob this

http://www.davidpride.com/Army/images/US_Ft_Knox_03.jpg

for all dis

http://www.solarnavigator.net/venture_capital/venture_capital_images/usa_america_fort_knox_gold_bars_bricks_bullion.jpg

i'm thinking of changing my sigature quote to this one I don't need to take a class to be educated. what do you guys think? Y o N?


p.s. the level of maturity expressed by a majority of people in this thread is impressive (when it comes to alot of Zilvia topics), its just that when threads are one person vs. every other poster they become a skewed back and forth of argument diffusion. its much better when things are more balanced. anyway, carry on and thanks for reading this post... it makes me feel closer to all of you :love::love::love::love::love::love::love:

[kingkilburn]

I have been into economics and politics as far back as I can remember I just haven't posted much about econ on here much before.

Just because I haven't taken a bunch of BS classes at the local community college doesn't mean I have no background in it.

The dollar is unstable and when you gauge other unstable commodities on it it makes them look even more unstable.



My problem with the FED is their constant tampering on the economy and dollar. How are people supposed to know when to save or invest when the interest rates are constantly changing artificially and the dollar is almost always inflating.

[drift freaq]

I have been into economics and politics as far back as I can remember I just haven't posted much about econ on here much before.

Just because I haven't taken a bunch of BS classes at the local community college doesn't mean I have no background in it.

The dollar is unstable and when you gauge other unstable commodities on it it makes them look even more unstable.



My problem with the FED is their constant tampering on the economy and dollar. How are people supposed to know when to save or invest when the interest rates are constantly changing artificially and the dollar is almost always inflating.

If you think what has happened with the dollar in the last twenty years is inflationary then you need to go back farther. Inflation rates have been quite reasonable for almost thirty years. In the 70's we had double digit inflation!

Again I will say if you think the dollar is that unstable it would not be able to be the world currency standard. If you think the FED is constantly tampering then you fail to realize the need for the FED. If a person does not have the ability to know when and when not to invest then they should not be investing.

Investing in stocks.bonds, commodities etc is not for every person. It takes knowledge,skill and ability to do this successfully.

Oh and the FED and economic policies for the most part should be free from Politics to begin with. Every time politicians get involved it winds up screwing the American public.

Oh and interest rates are not changing constantly. LOL we had extremely low interest rates for years on end. Like I said before, you nor anyone else was crying when Greenspan lowered them more.
Currently given the economic situation we have to raise interest rates to curb debt. Its a fact whether you like it or not. Again I send you back to the junkie statement.

Oh and actually, if you did not realize that for the last 9-10 months we have had a pretty bull market that regained 70% of what was lost in the drop of 2008 . Well then how are you ever going to know how to invest? Its only in the last month or so that we have seen a correction to the rise which is normal in a Bull market after a deep recession and market decline. We still have another year or more of growth ahead of us in the current Bull market.

You have not posted facts to show your argument of constant change of interest rates. Nor have you posted facts showing a constantly inflating dollar. All you have done is said its doing that.

[g6civcx]

Just because I haven't taken a bunch of BS classes at the local community college doesn't mean I have no background in it.


Step lightly here. If you want to know where people went to school and for how long, what they studied, etc., ask. Don't make assumptions.

There are more than a few people here who have attended top-rated universities in the country, if not the world.

Some of them are even posting in this thread.

How do I know what their background is? I asked them about it before.

Carry on.

[kingkilburn]

If you think what has happened with the dollar in the last twenty years is inflationary then you need to go back farther. Inflation rates have been quite reasonable for almost thirty years. In the 70's we had double digit inflation!

And what do you think happened in the 70's? We dropped the gold standard and left the FED to control the economy. They didn't do a very good job of it.

Again I will say if you think the dollar is that unstable it would not be able to be the world currency standard. If you think the FED is constantly tampering then you fail to realize the need for the FED.

It is the world standard due to our GDP and shear amount of consumption. The FED is constantly tampering with it. Any change in the interest rate or purposeful inflation is tampering. Bailing out failed banks is tampering.

If a person does not have the ability to know when and when not to invest then they should not be investing.

Investing in stocks.bonds, commodities etc is not for every person. It takes knowledge,skill and ability to do this successfully.

I was talking about average Joe on the street. When the interest rate changes so wildly and abruptly how can he know whether to put money into savings or invest.

Oh and the FED and economic policies for the most part should be free from Politics to begin with. Every time politicians get involved it winds up screwing the American public.

Oh and interest rates are not changing constantly. LOL we had extremely low interest rates for years on end. Like I said before, you nor anyone else was crying when Greenspan lowered them more.
Currently given the economic situation we have to raise interest rates to curb debt. Its a fact whether you like it or not. Again I send you back to the junkie statement.

Actually I didn't like it when they lowered the rates. There went all incentive for the banks to give loans and for me to save. So then the government pushes the banks to make bad loans even though it is very hard for them to make money on interest that low.

If they didn't drop the interest rate to nothing there wouldn't be this outrageous debt to curb.

Personally I would let the free market determine what the interest rates will be. They would be flexible but reasonable.

You have not posted facts to show your argument of constant change of interest rates. Nor have you posted facts showing a constantly inflating dollar. All you have done is said its doing that.

If you say I am wrong the burden of proof lies with you. When you show some kind of evidence I will make some sort of rebuttal.




g6civcx

To be totally honest I don't care where or how you or any one else acquired there knowledge as long as it is sound and you have the ability to think critically.

I know that looks aggressive or harsh but that is not the intended tone. Just speaking frankly.

[kingkilburn]

BAM

http://goldnews.bullionvault.com/files/WorldInflation3.png

http://sidoxia.files.wordpress.com/2010/02/fedfundsrate.jpg?w=454&h=285


EDIT:
Disregard first graph. It's meaningless.

[ranger240]

dude 'per units of industrial production'? are you kidding me? if that scale is based on what it appears to be, namely industrial production per GNP requirements then that scale is total garbage. does that scale only consider 'industrial production' as per NAICS coding?

if you can shed more light as to what that scale actually means please do.

the title alone shows how unprofessional that chart is "Money Grew More Than Production After The Removal of The Gold Standard"? IT ONLY SHOWS ONE VARIABLE!!!!!!!!!!!!!!! the title isnt supported by what 'quantitative' (using that term lightly) data is shown

thats like saying "My car is faster than a hot-rodded C5 Zo6" and then only showing my car's 0-60... IT INDICATES NOTHING... where is the source?


if i wanted to argue your point, i'd make charts showing tons of variables, including
CPI, GDP growth, world and domestic gold reserves, trade deficits, etc etc

not one stupid line that doesnt indicate ANYTHING

they dont even label the Y-Axis! who made this thing? a 7th grader using MS Paintbrush?

duder, for your own sake start researching better sources on your matter. Ron Paul maybe? Here I have a BOOK for you, it was one i was looking to buy:


http://mises.org/books/moneyproduction.pdf

edit: BAM

[kingkilburn]

Here is the source.

Inflation: Money & Prices | Gold News (http://goldnews.bullionvault.com/inflation_money_gold_prices_dollar_031820082)

The Y axis is millions of dollars.

EDIT:
After rereading that article that graph is meaningless but looks compelling at first glance. I guess I can leave it up though.

[kingkilburn]

Here is a better chart.

http://one-simple-idea.com/InflationRates1780-2007.jpg

Source:

Falling U.S. Dollar / Inflation (http://one-simple-idea.com/USD_Falling.htm)

It seems to be very hard to find a chart or graph showing inflation since before 80's or 90's.

[drift freaq]

And what do you think happened in the 70's? We dropped the gold standard and left the FED to control the economy. They didn't do a very good job of it.

Well this is a little obfuscating because gold money was removed from Circulation by law in 1993 a law signed by FDR. It was only allowed to be a standard for foreign currency transactions and that was finally eliminated in 1971. Though we were off the Gold standard for domestic currency by 1934.


It is the world standard due to our GDP and shear amount of consumption. The FED is constantly tampering with it. Any change in the interest rate or purposeful inflation is tampering. Bailing out failed banks is tampering.



You really have not studied the history of the FED that well or the value or importance of the American dollar. To just say its the world standard because of our GDP and amount of consumption is really not the complete picture. To say that the FED adjusting were needed is tampering shows your lack of understanding of macroeconomics which others have already tried to explain to you. Though I might not like bailing out of failed banks what you seem to have failed to realize is the bailout happened under TARP because if it did we would have gone into a depression because our banking system would have failed completely. Ben Bernanke was a student of the depression and understood the consequences and took appropriate action.


I was talking about average Joe on the street. When the interest rate changes so wildly and abruptly how can he know whether to put money into savings or invest.


Again interest rates have not changed wildly and I do not know were you getting the idea they have. They have remained relatively low even know.
Plus I will say this again the average Joe really does not have a understanding of the stock market enough to be investing in the first place. Sorry but that is the truth.


Actually I didn't like it when they lowered the rates. There went all incentive for the banks to give loans and for me to save. So then the government pushes the banks to make bad loans even though it is very hard for them to make money on interest that low.

If they didn't drop the interest rate to nothing there wouldn't be this outrageous debt to curb.

Personally I would let the free market determine what the interest rates will be. They would be flexible but reasonable.


Well it was actually Congress who pressed Fannie Mae and Freddie Mac to give out low interest loans. People like Nancy Pelosi and Barney Frank, Henry Waxman Etc... pushed for this. The banks followed after it especially Countrywide financial and Washington Mutual.

Fact is people went along with this, faking their income, taking loans they should not have. In turn this was part in parcel the creation of mortgage backed securities. Where loans were compiled good with bad and resold as a security. Problem arose in the fact that the actual value of the security was hard to pin. It also created a severely leveraged situation at some investment houses.

If we had not done TARP we would be in a depression right now and things would be a lot worse.

[drift freaq]

Here is a better chart.

http://one-simple-idea.com/InflationRates1780-2007.jpg

Source:

Falling U.S. Dollar / Inflation (http://one-simple-idea.com/USD_Falling.htm)

It seems to be very hard to find a chart or graph showing inflation since before 80's or 90's.

Ok lets discuss the said chart. First off nothing is relevant before the Great depression because bank rules and investing rules were significantly different.
Now in the late 70's up to the early 80's we had double digit inflation, partly due to the Oil embargo of 1973. Now move forward to the late 80's clear through 2005 the end of chart a period of 25 years and you see an inflation rate of 2-4% which is relatively low.



Plus interest rates for Houses are still currently at 5% which is extremely low.

so we are not in an inflationary period or have been in one for awhile.

I have a question, do you realize that the economy and value of the dollar is controlled more by the money supply?

[g6civcx]

To be totally honest I don't care where or how you or any one else acquired there knowledge as long as it is sound and you have the ability to think critically.

I know that looks aggressive or harsh but that is not the intended tone. Just speaking frankly.

If your statement is true, then a community college could be just as good as Harvard, and just as good as somebody reading textbooks in the basement.

That's very Thoreau and I have no issues with that.

The problem is that statistically, people who have not been classically trained do not fully understand the basic concepts and terminology, or they may understand but cannot communicate.

These people tend to have a big problem expressing themselves and interacting with classically trained people. Notice how I'm like the only person in your corner in most of these threads? "normal" people just don't know what you're talking about.

In a perfect world knowledge can come from anywhere. In reality self-taught people can and do have some really good insights, but oftentimes these people also really miss the boat on some very fundamental concepts.

For every Bill Gates, you have thousands if not millions of other unemployed college dropouts.

Not speculations. Just facts.

[kingkilburn]

Thank you for that.

I will admit one of my biggest problems in this thread and some similar threads is my lack of vocabulary and inability to communicate my thoughts.

People also seem to think I'm going all Hulk SMASH behind the keyboard. 99% of the time that is not the case.

[g6civcx]

Thank you for that.

I will admit one of my biggest problems in this thread and some similar threads is my lack of vocabulary and inability to communicate my thoughts.

People also seem to think I'm going all Hulk SMASH behind the keyboard. 99% of the time that is not the case.

I don't think it's a big deal. It just takes a bit more effort to really try to understand where you're coming from instead of just taking a conventional view on the topic like what they taught you in school.

On this particular topic, it's such a fundamental topic in macroeconomics, but yet we can spend infinity debating the merits of each side of the issue.

I didn't really participate because in theory any side can be true. It all depends on the actual implementation of the theory. Things change when people start going crazy.

[kingkilburn]

Very true.

[codyace]

Investing in stocks.bonds, commodities etc is not for every person. It takes knowledge,skill and ability to do this successfully.

SO true. The advent of of electronic trading was such a mixed blessing...


Oh and the FED and economic policies for the most part should be free from Politics to begin with. Every time politicians get involved it winds up screwing the American public.

On a local forum, I must have said this 1000 times to others who constantly berate our current system and how it's terrible...

I always remind them that political intervention is the largest single hindrence to economics there is.


And what do you think happened in the 70's? We dropped the gold standard and left the FED to control the economy. They didn't do a very good job of it.

They didn't? I mean the point is moot at this point, but it really seems like you're simply reading bias 'anti fed' stuff online, and then believing it at strue, without even really researching their claims (or the actual history of it). Being an expert with junk sources is a terrible fallacy.





I was talking about average Joe on the street. When the interest rate changes so wildly and abruptly how can he know whether to put money into savings or invest.

Average Joe should be using a trained financial advisor, or not investing at all.





To be totally honest I don't care where or how you or any one else acquired there knowledge as long as it is sound and you have the ability to think critically.

In order to truely think critically, you need to understand the opposing 'view' better than your own. Again, simply reading bias information will only set you up for failure




I didn't really participate because in theory any side can be true. It all depends on the actual implementation of the theory. Things change when people start going crazy.

That's another interesting topic...how fear/panic by the masses over something they really don't understand, often makes things 100% worse

[drift freaq]

If your statement is true, then a community college could be just as good as Harvard, and just as good as somebody reading textbooks in the basement.

That's very Thoreau and I have no issues with that.

The problem is that statistically, people who have not been classically trained do not fully understand the basic concepts and terminology, or they may understand but cannot communicate.

These people tend to have a big problem expressing themselves and interacting with classically trained people. Notice how I'm like the only person in your corner in most of these threads? "normal" people just don't know what you're talking about.

In a perfect world knowledge can come from anywhere. In reality self-taught people can and do have some really good insights, but oftentimes these people also really miss the boat on some very fundamental concepts.

For every Bill Gates, you have thousands if not millions of other unemployed college dropouts.

Not speculations. Just facts.

Wow, one could garner an I am smarter than though attitude, in the statement above, just how you have written it.

Perhaps that is not what you meant?


You are a lawyer, albeit probably a very good one at that. Though I am not aware of you having a background in economics.
Nor have I known many lawyers that do.

Though it is presumptuous on you part to assume the people responding in this thread are normal people. Do you know them personally?

I also think quite a few people in this thread understand his concept of going with a Gold standard, it does not mean they have to agree with it or accept it.

They have also present very good arguments for why it is not feasible.

Some of us take an active interest in the economy and financial situations due to our own place in the world. Something you may not know of with out knowing us personally.

[codyace]

I also think quite a few people in this thread understand his concept of going with a Gold standard, it does not mean they have to agree with it or accept it.

Great point - I can see the idea of the gold standard, but much like you and I both said, it won't EVER work if only the USA converted - in fact it would ultimately be history changing, and not in a good way. The idea is a sound one, but the application in today's world is unsound at best.

[g6civcx]

Wow, one could garner an I am smarter than though attitude, in the statement above, just how you have written it.

Perhaps that is not what you meant?

Compare your comments with this post:

Just because I haven't taken a bunch of BS classes at the local community college doesn't mean I have no background in it.


Step lightly here. If you want to know where people went to school and for how long, what they studied, etc., ask. Don't make assumptions.

There are more than a few people here who have attended top-rated universities in the country, if not the world.

Some of them are even posting in this thread.

How do I know what their background is? I asked them about it before.

Carry on.

Though I am not aware of you having a background in economics

I did 1st year econ. I chose business and finance instead because the difference between the business school and the econ department is about $200 million.

Though it is presumptuous on you part to assume the people responding in this thread are normal people. Do you know them personally?

Yes, I know about half of the people in this thread. We argue the same thing over and over and talk offline sometimes about the same thing.

You may not know me, but by "normal" I mean people who have classical training. This comment was not directed at any particular person because there is no such thing as being "normal".

It is well known that people who are self-taught tend to be a bit more eccentric and creative than classically trained people. This is not anything new.

If you're one or the other, or if you break the stereotype, it's no big deal. It just is.

I also think quite a few people in this thread understand his concept of going with a Gold standard, it does not mean they have to agree with it or accept it.

They have also present very good arguments for why it is not feasible.

Some of us take an active interest in the economy and financial situations due to our own place in the world. Something you may not know of with out knowing us personally.

Al these things may be true. I don't know how to respond. Did you have a question for me?

[drift freaq]

Compare your comments with this post:





I did 1st year econ. I chose business and finance instead because the difference between the business school and the econ department is about $200 million.



Yes, I know about half of the people in this thread. We argue the same thing over and over and talk offline sometimes about the same thing.

You may not know me, but by "normal" I mean people who have classical training. This comment was not directed at any particular person because there is no such thing as being "normal".

Err stop the presses, I suggest you re read your own words below, you will notice that you contradict your above statement of normal being classically trained. In fact you say classically trained are not normal. LOL


The problem is that statistically, people who have not been classically trained do not fully understand the basic concepts and terminology, or they may understand but cannot communicate.

These people tend to have a big problem expressing themselves and interacting with classically trained people. Notice how I'm like the only person in your corner in most of these threads? "normal" people just don't know what you're talking about.


It is well known that people who are self-taught tend to be a bit more eccentric and creative than classically trained people. This is not anything new.

If you're one or the other, or if you break the stereotype, it's no big deal. It just is.



Al these things may be true. I don't know how to respond. Did you have a question for me?

Not so much a question, just responding to your previous post and the way it was worded.

Though it came out exactly as I called it and you are using previous posts for examples, that you may not have intended it that way.

Though perhaps you should have thought, before making the statement in the first place? It also still does not change the way it came off.


As far as who is normal and who is not it is clearly a subject of interpretation. Though you have contradicted yourself on that as well.

Mainly I see the OP getting told valid and proven reasons of why his theory will not work.

Yet he keeps on going expecting a different answer or to change our minds.

Technically that is quite close to the clinical definition of insanity. Repeating the same thing over and over expecting different results. Though I doubt he is insane. LOL

Now one may say that sometimes a little insanity can prove genius. Though in a thread like this, it turns into a beating your head against the wall contest.


I see this thread entering that phase already. Nothing the OP is going to say is going to make us feel his concept is any more logical.

As we have already present valid arguments and concrete reasons as to why it would not work.

That is all.

[ranger240]

If your statement is true, then a community college could be just as good as Harvard, and just as good as somebody reading textbooks in the basement.

That's very Thoreau and I have no issues with that.



this came to no one else's mind?
http://www.psu.com/media/Good-Will-Hunting-still-two.jpg

Tread lightly people need to tread VERY lightly when ideals found in that movie start mirroring discussion.

Killburn, i respect your desire to want understanding of something that implicitly seems like a flawed mechanism to you. You also havent taken objections towards your stance personally like some 16 year old zilvia poster who's pissed people think he shouldnt do an RB26 swap.

my advice, my strong advice to you is to pursue economics, finance or whatever you academic interest is further. From some of your responses its clear you have some animosity towards the idea of 'academic intellect' (pardon the made up words), i expressed the same degree of insubordination towards established ideals early in my post-HS education. Also, know your sources and their bias.

When something seems so obviously broken and fixable so simply its often the result of having not explored all contributing variables thoroughly enough. this rambling is dragging on a bit too much, i'm typing without my glasses so can hardly read this heap. hopefully its coherent enough to make sense


GNARRRRRRRRRRRRRRRRR

[g6civcx]

Err stop the presses, I suggest you re read your own words below, you will notice that you contradict your above statement of normal being classically trained. In fact you say classically trained are not normal.

I was speaking directly to kingkillburn. That's it.

I put the requote up there hoping you will notice that my comments are a continuation of my previous comments directly addressed to kingkillburn.

Everything else I said is not relevant to you because my comments were directed towards kingkillburn and people currently in this thread who I do know.

If you are not kingkillburn or I do not know you, then clearly my comments do not apply to you.

If my comments are wrong, then it's up to kingkillburn or these other people to take issue. If you took issues with any comments then it's not my concern because the conversation does not involve you and was not directed at you.



If you want to argue what is and is not "normal", this is clearly something I do not want to argue because I put the term in quotes, meaning that it is subject to interpretation.


The rest of your comments don't appear to apply to me. Whether his argument is valid or not is of no concern to me, like I already said above.


If you want to argue for the sake of arguing, pick a topic and create a new thread.

[kingkilburn]

The personal attacks and insinuations really kill what could be a good discussion.

[g6civcx]

The personal attacks and insinuations really kill what could be a good discussion.

How do you feel about the overnight devaluation of currency?

Since our money would be cheaper relative to foreign currencies, imports go down and exports go up. GDP go up?

Good idea?

[kingkilburn]

Firstly I would think that we would announce the change some time before we did it. I think the market would start to change on it's own reflecting what investors think will happen. The question then becomes who much gold does America have vs how much does the world think it has. I think the dollar will start moving towards the later well before the date the actual change would happen.




The balance of trade will not change over night and those countries and individuals who most profit off the current balance would be very resistant to change. I think the American people would love it.

I think imports/exports would come to some sort of equilibrium that would be better for us but I don't think it would happen quickly.



The questions I ask myself when going over all this in my head are what would the buying power of the dollar be and what happens to all the debt.

I'm still not sure on the first on. The second one depends on the FED. I can see them telling the world to adjust the debt amounts to mach the deflation. I can also see the world hating that.





So good idea? I think so but the devil is in the details of implementation.

[g6civcx]

How would we do the devaluation if we went to the gold standard?

Does it require the rest of the world to be on some sort of precious metal standard as well?

[kingkilburn]

I need to think about the first question but the second I would say no.

It is already a traded commodity and has a value that is excepted by those that trade it. We would just go back to a dollar bill being a note exchangeable for a set amount of gold.

[aznpoopy]

I need to think about the first question but the second I would say no.

It is already a traded commodity and has a value that is excepted by those that trade it. We would just go back to a dollar bill being a note exchangeable for a set amount of gold.

there isn't enough physical gold to cover all the dollars in circulation at market price, and, more importantly, everyone pretty much knows this.

that would basically cause a "run" on the dollar (not unlike a bank run), which would quickly become worthless.

we'd basically be back at 1971.

[codyace]

Firstly I would think that we would announce the change some time before we did it. I think the market would start to change on it's own reflecting what investors think will happen. The question then becomes who much gold does America have vs how much does the world think it has. I think the dollar will start moving towards the later well before the date the actual change would happen.

I look at how Europe went into the Euro standard, and how defiant/slow everyone was. Sure it 'works now' but that's probably mostly because of American investment/backing of it.

Now when it comes to the gold standard, the problem is that nations now 'coming to their own' with a nice secure base monetary system (something they've never had before), don't have any gold (or much) reserves. THis would essentially knock them right back to where they were, because undoubtedly there isn't enough gold to support all of the Euros that would need be cashed in. Overnight devaluation, combined with panic, will only lead to civil unrest like we've never seen before.



The balance of trade will not change over night and those countries and individuals who most profit off the current balance would be very resistant to change. I think the American people would love it.

Again, I think the reverse is true, simply because of how much trade (in general) we do. Why would we purposely lower/change our currency purposely? I'm sure China would hate us, as they rely so much on our dollar it's not funny.




The questions I ask myself when going over all this in my head are what would the buying power of the dollar be and what happens to all the debt.

The issue here is, without some sort of leverage, the AMerican business machine wouldn't ever work. Is our debt astronomical? Certainly. Could we save billions by not providing aide to other nations, and attempting at collecting what they owe us? Certainly. The problem here inlies, that by 'asking for our dues/restricting aide' we loose allies worldwide. As simple as it sounds, and as wrong as it sounds, I think our Government/Military will easily pay off nations that way, than through other activity. Having a 'friend' in every corner of the globe is always a great thing 'in case'.

[axiomatik]

There is no intrinsic value to gold. It is just a piece of shiny metal we dig out of the dirt. The value of gold fluctuates wildly due to the fact that it is a widely traded commodity. When the stock market is doing poorly, or other commodities, are doing poorly, people dump money into gold, sending it's value higher. Once the stock market starts doing better, then traders cash out of gold to invest in stocks and its value drops. Money follows ROI. You can not base your currency on a traded commodity. I'd argue that oil is intrinsically much more valuable than gold. It is the lifeblood of the global economy. Without oil, all transportation grinds to a halt. What would happen to the economy if the supply of gold suddenly disappeared? Not nearly as much. And yet, even with oil being such an intrinsically valuable commodity, look at what commodity and futures traders did to the price of oil in the spring of 2008? The price of oil skyrocketed from $40/bbl to $150/bbl. Imagine what would happen to the economy if the US dollar was based on oil?

Going to a gold standard will then subject the value of the US dollar to the same wild fluctuations in gold values.

Also, I am not sure why people think that a "weak" US Dollar is a bad thing. A weak dollar makes goods manufactured in the US less expensive. This makes domestic production more competitive and drives exports up, as US goods are then more affordable in other markets. This is why China keeps it's currency devalued, cheap Chinese goods keep Chinese workers employed.

As for inflation, frankly, inflation is very low. Also, inflation doesn't just affect prices, it affects wages. So while goods were much cheaper 50 years go, wages were even lower. Low inflation is not a problem.

Finally, if you think the Fed's tinkering has made the cycles of boom and bust worse, you should take a look at the 1800s. There were recessions like the current one and worse happening every 5-7 years. Did the average Joe have a better idea of when to invest and in what back then? Post-war America has been very mild when it comes to recessions, this one just happens to be the worst in a long time.

[KA24DESOneThree]

Should we go back to gold? I dunno. Gold has always had value; it's never been worthless nor will it ever be worthless. Gold is a tangible asset with weight as a measure of worth. Nearly every nation on earth holds gold in high regard.

All I know, and this is an integral part of destroying the current fiat system we have now and changing to something else, is that tying worth of a currency to a tangible rather than an intangible would force government accountability for its spending. It would force corporations to be accountable for their spending. It would force the consumers to be accountable for their spending.

Credit would require tangible assets behind it. Credit wouldn't rely on the trading of intangibles, opening the door for legalized Ponzi schemes. Debt would be tangible, real debt, rather than a number with some zeroes behind it with no backing, paper or otherwise.

As long as the printing press and zeroes and ones control the value and quantity of fiat currency, there will never be a free market or true wealth using that currency. Manipulation of currency has gotten us in our current situation, both economically and politically.

Do we really want to stay on paper?

[g6civcx]

Should we go back to gold?

Did the US ever use gold as the official currency?

[axiomatik]

Credit would require tangible assets behind it. Credit wouldn't rely on the trading of intangibles, opening the door for legalized Ponzi schemes. Debt would be tangible, real debt, rather than a number with some zeroes behind it with no backing, paper or otherwise.

nonsense. Having money backed by gold will not change people's behavior. As long as someone can figure out how to make money by extending credit to someone else, overleverage will happen. Especially when the person extending the credit is using someone elses money.

[kingkilburn]

Did the US ever use gold as the official currency?

Until 1933 yes. The paper money in your wallet was exchangeable for a certain amount of gold, an I.O.U. of sorts.

[KA24DESOneThree]

nonsense. Having money backed by gold will not change people's behavior. As long as someone can figure out how to make money by extending credit to someone else, overleverage will happen. Especially when the person extending the credit is using someone elses money.

I concede that greed and immorality will allow many to overleverage, a sound monetary system would doom those companies to long-term failure.

The problem with these ideas is that, given the current political climate, in the US and around the world, they are unfeasible. At this stage, we're too far away from optimal to put them into place. Significant changes in the sociopolitical beliefs of entire countries are extremely difficult and time-consuming to enact.

Add in the fact that people are generally unreasonable and set in their beliefs and we've got a recipe for status quo.

[Mikey213]

NASA uses a lot of gold.

[mrmephistopheles]

NASA uses a lot of gold.

In terms of a consumable commodity, yes. Relevance?

[imotion s14]

Well just to update.. gold has reached all time highs against the dollar and practically every currency. Dollar index below 80..

:keke:

[S14DB]

Well just to update.. gold has reached all time highs against the dollar and practically every currency. Dollar index below 80..

:keke:

Platinum is even higher and climbing faster. Maybe we should go to that?

[kingkilburn]

http://img.photobucket.com/albums/v403/kingkilburn/fromthedead.jpg


It shows both how poor the dollar is even when propped of with other currencies and how strong gold is.

[kingkilburn]

Platinum is even higher and climbing faster. Maybe we should go to that?

There isn't enough of it to use as currency. It could possibly be used along with gold but I'm not sure how well that would work. Something to look into though.

[axiomatik]

How would you use gold as a currency? At $1300/oz, how would you carry $20 worth of gold? As recently as 2000, gold was only $237/oz. Does that mean we'd all magically have 6 times as much money now as we did ten years ago? It's a commodity. It's price fluctuates with the market, and has very little inherent value besides being shiny.

[kingkilburn]

Thanks for READING the thread and CONTRIBUTING something new.

[axiomatik]

I have READ the thread and CONTRIBUTED....several months ago. My points still stand.

[kingkilburn]

Or do they?

[imotion s14]

How would you use gold as a currency? At $1300/oz, how would you carry $20 worth of gold?

lol.

http://usrarecurrency.com/WebPgFl/A41323125A/1928$20GoldCertificateEF45SnA41323125A.jpg

By carrying a $20 dollar certificate that will be redeemable for the fixed quantity of gold. How do you think they did it in the past? You thought that people actually carried physical gold on their persons? :rofl:

As recently as 2000, gold was only $237/oz. Does that mean we'd all magically have 6 times as much money now as we did ten years ago?

Yes, if you bought 1 troy oz of gold in 2000 and you were to sell that 1 troy oz at today's valuation then yes your purchasing power has increased by $1055 dollars. That's what happens when you have monetary policy that uses monetary inflation as a tool to solve economic problems. There is nothing magical about it.

It's a commodity. It's price fluctuates with the market, and has very little inherent value besides being shiny.

The price fluctuates against fiat because of the very nature of fiat currency. A commodity doesn't fluctuate much against other commodities. The historical charts bear this out. It's true today as it was in the past. That's why gold kept near 1:1 ratio with oil.

[chitownguy]

What's to keep someone from using their gold certificates and then selling their physical gold before it is to be redeemed, all under a false name?

Besides there is not enough gold to distribute to over 300 million Americans, physically or not.

[imotion s14]

What's to keep someone from using their gold certificates and then selling their physical gold before it is to be redeemed, all under a false name?

You don't redeem gold certs from private individuals. Typically to redeem the cert you would take it to a bank and they would give you gold. Gold certs were issued by banks based on their gold reserve. :hahano:

Besides there is not enough gold to distribute to over 300 million Americans, physically or not.

and why would you want to distribute gold to everyone, physically or not? Do you understand what a gold standard is?

Man I swear... :hahano:

[aznpoopy]

? As recently as 2000, gold was only $237/oz. Does that mean we'd all magically have 6 times as much money now as we did ten years ago?

i don't know if this is a troll post or what? absolutely.

if we all bought gold in 2000, and if we all sold our gold right now, then yes, we'd all "magically" have almost 6 times as many dollars we did in 2000. that magic is called "investing."

inflation between 2000 and 2010 was 27%. if we held a set amount of dollars in a box somewhere, those dollars would now "magically" have 3/4 times the amount of value they had ten years ago. where did it all go? those dollars the US government printed in the interim sucked the value right out of the box, your wallets and your bank accounts. i don't know about you, but i'd rather have 6x instead of 3/4x.

similarly, if we held a set amount of gold as currency from 2000 to 2010 (and ignored the effect that would have on demand for gold and all that), then yes, in this very instant we'd have roughly six times the buying power we did ten years ago with the same amount of gold, due to artificially inflated demand for gold, (actually not quite 6x, based on the peg of 2000 and 2010 dollars to gold).

why? that magic is simply the power of demand. that's also why you should fear the death of the dollar as the reserve currency of the world. having the dollar as reserve currency "artificially" drives up international demand for the dollar, giving it more buying power it would otherwise have. high demand things are worth more of other types of things. simple enough.

It's a commodity. It's price fluctuates with the market, and has very little inherent value besides being shiny.

alright. i don't see how this is an argument against gold? money is also a commodity. the value of the currency also fluctuates with the market (hi, i'm forex, etc.). it has even less inherent value because the US government pretty much pulls it out of thin air all the time.

that doesn't mean gold can't bubble or crash. economic instability drives demand for gold up. if $237 in 2000 is worth $300 in 2010, you'd expect a steady priced commodity bought for $237 in 2000 to be worth $300 in 2010. but instead, gold is worth what, like $1300. however, that doesn't mean much from 2000-2010. at a minimum, you should be able to conclude quite easily that gold from 2000-2010 is clearly a superior store of wealth compared to dollar (and probably all fiat currencies). it probably would have been even without the artificial demand caused by the economic shitstorm. look at any super long term chart for value of gold; it's pretty obvious.

that doesn't necessarily mean it's a good buy or a bad buy. in short term, it depends on the circumstances of the moment what you think is going to happen. in long term, its a hedge for people who already have alot of money. not people with mortgages and expenses. i wish i bought in 2008. my friend told me it was going to jump up, and i didn't believe him. I think it was at $750 or so at that point. he bought in. he held, i told him it was going to drop, and he should sell. he told me to stfu. he said it was going to crest $1000. i think he sold at $1100/oz or so on something like 50oz. 50 x $350 sick ROI. he held it less than two years. i didn't believe them. now it's at fucking $1300, lol. almost double its value in less than 3 years, and i missed out on all of it. good thing i'm not an investor.

[TheWolf]

There are several points in this discussion that are well founded and several that are pure speculation.

There are several things to point out that no one has addressed in this issue. While the populace struggles throughout the history of this nation with national banks, currently there is zero chance for this nation to goto the gold standard.

It is important to understand the structure of our monetary policy. The "Federal Reserve" is a privately owned corporation. IT IS NOT PART OF THE GOV'T! It is a privately traded company with many of the main share holders, some of the richest families in the world who intend to get richer. The gov't does not control it's own currency. It sold it. I should also point out that the founding fathers thought a national bank would be detrimental. Andrew Jackson struggled with national banks again later. Merchants wanted the borrowing power, banks crushed the common person though.

The Fed is bound by law to "promote policies for economic growth" but there is no lash to enforce that rule. There are zero auditing powers on the fed. Congress, the president, etc can not see what the books are like on our own currency. They must believe the statements given quarterly. Currently the fed is printing money like it's going out of style to purchase treasuries from the gov't to finance their own debt. It costs them about 4 cents to print $100. Currently they are buying $100 for .0004% of face value. It's using inflationary practices to fight out of control debt spending. Essentially utilizing your credit cards to pay your credit cards even after the card companies lowered your rate to 2%. Keep in mind we don't actually make a minimum payment. We struggle to just make the interest payment. No real progress towards the balance is ever made or has ever been made in 70 years.

If we were on the gold standard, it keeps prices stable but prevents a "global" economy. If you look at the american worker this "global economy" was supposed to be a good thing providing cheaper imports. Unfortunately that resulted in all their jobs being exported as well. A slight ooops. To put america back on the gold standard, it would almost have to pay off the national debt. That or to counter act the massive debt and the lack of gold reserves, you would need to devalue the dollar by 90%. There's just THAT MUCH DEBT!. Americans would be beyond broke but have incredible price stability.

I believe that if the gov't sat down and "came clean" they'd realize that it's almost impossible for them to dig themselves out of the hole. You would need about a 10% tax hike with a 25% decrease in spending. With that, in 20-30 years, we'd pay it off. Any policy that doesn't involve tax hikes and cuts in spending is a hand job. That or go through a period of hyperinflation to render the dollar meaningless along with the debt. When you stare at the debt clock and it says your families share is 100k, well they've got to tax 100k out of you and get it.

If we are going to make predictions, obama's economic "dream team" is going to suggest a minor 3-5% VAT tax which will "fix the budget". This will now become the "goto" tax for money and be at 10-12% in 10 years after it's passed for various reasons. The only way to fix this mess is to strangle the tax dollars coming in and make them pay out less and save their way to financial freedom. Tossing more money at them will not fix the problem.

[ranger240]

How would you use gold as a currency? At $1300/oz, how would you carry $20 worth of gold? As recently as 2000, gold was only $237/oz. Does that mean we'd all magically have 6 times as much money now as we did ten years ago? It's a commodihttp://icandy.zilvia.net/img/smilies/cry.gifty. It's price fluctuates with the market, and has very little inherent value besides being shiny.

its ok, dont feel bad that people who havent read books on the interwar period or gold specie flow or any history book on how the gold std DIDNT work disagree with you. they dont get it, they'll never be in a position of power to change back to it, you're arguing french pronunciation to someone who only speaks english, and they speak it poorly.

:cry::cry::cry::cry:

can one of you pro-gold std people read Globalizing Capital by eichengreen

or here... let me google him for you

globalizing capital eichengreen - Google Scholar (http://scholar.google.com/scholar?q=globalizing+capital+eichengreen&hl=en&as_sdt=0&as_vis=1&oi=scholart)




killburn and company, do some research, learn something and then get back to the party...


this article looks juicy

Global imbalances and the lessons of Bretton Woods - Cairn.info (http://www.cairn.info/article.php?ID_ARTICLE=ECOI_100_0039&AJOUTBIBLIO=ECOI_100_0039)

DONE :down::down::down::down::down::down::down::down:

[kingkilburn]

Don't let the door hit you . . .


It is great to see others agreeing with me here on Zilvia. It really felt like I was getting jumped by ignorance incarnate. I mean I don't mind if people do disagree with me but at least be informed on the topic and don't just throw fallacies and ad hominem arguments out there.

[ranger240]

Don't let the door hit you . . .


It is great to see others agreeing with me here on Zilvia. It really felt like I was getting jumped by ignorance incarnate. I mean I don't mind if people do disagree with me but at least be informed on the topic and don't just throw fallacies and ad hominem arguments out there.

please click the link in my post and learn something

[axiomatik]

Or do they?

Thanks for CONTRIBUTING something new.

lol.

By carrying a $20 dollar certificate that will be redeemable for the fixed quantity of gold. How do you think they did it in the past? You thought that people actually carried physical gold on their persons? :rofl:

It was a semi-joking response to kingkilburn's earlier post:

There isn't enough of it to use as currency. It could possibly be used along with gold but I'm not sure how well that would work. Something to look into though.

Where he mis-used the terminology. Gold would not be the currency, it would only serve as a backing for the currency, and be redeemable. There is no reason why any durable material could not be used to back a currency. If the currency was backed by platinum, and you choose to redeem it, you would get some piece of metal that is 0.xxxx% platinum. There is certainly enough platinum in the world to back a currency with, it's just a matter of setting the exchange rate. All modern currencies are really fiat currencies, so the government can announce that $xxx is now pegged to xxx grams of platinum.

If you prefer a more market based transition, then there isn't enough gold in the world either. There is over $8 Trillion US dollars currently in the world. How is the US governement going to buy enough gold to back that many dollars? And, once the government starts buying gold, then the price of gold starts to skyrocket.

Yes, if you bought 1 troy oz of gold in 2000 and you were to sell that 1 troy oz at today's valuation then yes your purchasing power has increased by $1055 dollars. That's what happens when you have monetary policy that uses monetary inflation as a tool to solve economic problems. There is nothing magical about it.

That has nothing to do with inflationary monetary policy. All that tells you is that gold is a commodity with volatile pricing. If you bought 1 troy oz in 1995 at the then current price of ~$550 and then sold it in 2001 at the then market price of ~$325, you would have lost $225. And yet, both periods experienced similar inflation. The difference is what the stock market was doing. Gold is an openly traded commodity considered by traders as a safe haven. When the stock market is tanking and they want to store their money in a safe place to ride out the storm, they put their money it into commodities. That is why the prices of all commodities started shooting up in 2005, as the stock market was starting to show signs of cooling off and the Fed was raising interest rates, so traders poured billions upon billions into commodities. This is also why oil hit $150/bbl back in early 2008, as it was also a commodity that traders were stashing money into.



The price fluctuates against fiat because of the very nature of fiat currency. A commodity doesn't fluctuate much against other commodities. The historical charts bear this out. It's true today as it was in the past. That's why gold kept near 1:1 ratio with oil.

See my comments above. Commodities don't fluctuate that much relative to each other because they are all the same class of investment. Compare the prices of commodities versus the S&P 500, and you will see that commodity prices rise when the S&P goes flat or starts to drop, and then commodity prices drop again once the stock market picks back up again.

i don't know if this is a troll post or what? absolutely.

Yeah, I was joking around there.

if we all bought gold in 2000, and if we all sold our gold right now, then yes, we'd all "magically" have almost 6 times as many dollars we did in 2000. that magic is called "investing."

inflation between 2000 and 2010 was 27%. if we held a set amount of dollars in a box somewhere, those dollars would now "magically" have 3/4 times the amount of value they had ten years ago. where did it all go? those dollars the US government printed in the interim sucked the value right out of the box, your wallets and your bank accounts. i don't know about you, but i'd rather have 6x instead of 3/4x.

You would only have 6x if the US Dollar remained a fiat currency and you invested a bunch of that fiat currency into gold. If the dollar was pegged to gold, you would not have any more money than before.

similarly, if we held a set amount of gold as currency from 2000 to 2010 (and ignored the effect that would have on demand for gold and all that), then yes, in this very instant we'd have roughly six times the buying power we did ten years ago with the same amount of gold, due to artificially inflated demand for gold, (actually not quite 6x, based on the peg of 2000 and 2010 dollars to gold).

Not exactly. If the US Dollar was pegged to gold, then the value of the dollar floats with the value of gold. Assuming the US went to a gold standard, and the rest of the world didn't, then our buying power relative to those currencies would fluctuate with the price of gold. However, it would have no effect on transactions within the US. If you wanted to buy something made in Europe, and gold was worth 6x as many Euros as before, than, yes, you would have 6x the buying power. But if you wanted to go to Quiznos and buy a sub, that sandwich isn't going to cost 75 cents all of a sudden, because the wages they pay are in gold-backed dollars, and the lettuce they buy from california farmers is in gold-backed dollars.

why? that magic is simply the power of demand. that's also why you should fear the death of the dollar as the reserve currency of the world. having the dollar as reserve currency "artificially" drives up international demand for the dollar, giving it more buying power it would otherwise have. high demand things are worth more of other types of things. simple enough.

The much larger factor driving down the value of the dollar versus other currencies is the huge trade imbalances the US maintains. When we import $40 Billion dollars more than we export every month we are constantly expanding the supply of US dollars outside of the US. That drives down the value of the US dollar versus the currencies of net exporters such as Japan and the Euro-zone.



alright. i don't see how this is an argument against gold? money is also a commodity. the value of the currency also fluctuates with the market (hi, i'm forex, etc.). it has even less inherent value because the US government pretty much pulls it out of thin air all the time.

Both are commodities. However, one is much more liquid than the other. Gold is a commodity that is really only traded by a very tiny percent of the population. If you invest in gold, there isn't much you can do with it besides sell it to another gold trader for whatever the current price is. US Dollars are a little more flexible.

that doesn't mean gold can't bubble or crash. economic instability drives demand for gold up. if $237 in 2000 is worth $300 in 2010, you'd expect a steady priced commodity bought for $237 in 2000 to be worth $300 in 2010. but instead, gold is worth what, like $1300. however, that doesn't mean much from 2000-2010. at a minimum, you should be able to conclude quite easily that gold from 2000-2010 is clearly a superior store of wealth compared to dollar (and probably all fiat currencies). it probably would have been even without the artificial demand caused by the economic shitstorm. look at any super long term chart for value of gold; it's pretty obvious.

Gold prices are really all over the place historically. It is really only since 2000 that it has reliably increased. It is an option for investment, but I wouldn't necessarily consider it a safe bet for long term investment, only short term.

http://upload.wikimedia.org/wikipedia/commons/e/e3/Gold_price_in_USD.png

Compare that to the S&P 500 for the past 50 years.

http://eparity.files.wordpress.com/2008/01/sp-500-50-year-monthly-chart.png

[axiomatik]

Forgot to multi-quote this one.....

It is important to understand the structure of our monetary policy. The "Federal Reserve" is a privately owned corporation. IT IS NOT PART OF THE GOV'T! It is a privately traded company with many of the main share holders, some of the richest families in the world who intend to get richer. The gov't does not control it's own currency. It sold it. I should also point out that the founding fathers thought a national bank would be detrimental. Andrew Jackson struggled with national banks again later. Merchants wanted the borrowing power, banks crushed the common person though.

This is not true. The Federal Reserve is a branch of the government. It was created by an act of congress, and it is subject to the laws of congress. It is, however, a semi-independent entity by design, much like the Supreme Court. The chairman and the board memebers are nominated by the president and confirmed by congress. It is not a corporation, there are no shareholders. Board members are appointed and control the Federal Reserves policies, with the aim of promoting long-term growth. They are independent from the Executive Branch to prevent it from being unduly influenced by president.

The Fed is bound by law to "promote policies for economic growth" but there is no lash to enforce that rule. There are zero auditing powers on the fed. Congress, the president, etc can not see what the books are like on our own currency. They must believe the statements given quarterly. Currently the fed is printing money like it's going out of style to purchase treasuries from the gov't to finance their own debt.

The Federal Reserve is buying government treasuries as a tool to increase the money supply, not for the sole purpose of funding a buying spree. It is attempting to increase the money supply in order to increase economic activity and prevent deflation. It very carefully determines how much money to release so that it doesn't spur too much inflation, and it hasn't. Inflation has remained quite low.


To put america back on the gold standard, it would almost have to pay off the national debt. That or to counter act the massive debt and the lack of gold reserves, you would need to devalue the dollar by 90%. There's just THAT MUCH DEBT!. Americans would be beyond broke but have incredible price stability.

The government would not have to pay off it's entire debt to go on a gold standard, but if the dollar were to be backed 100% by gold, it would have to acquire enough gold to back the $8.6 trillion dollars currently floating around the global markets. And, according to wikipedia, only an estimate $4 trillion or so worth of gold has ever been mined. It could get around this by arbitrarily setting the price of gold, as it was prior to 1971, but the shock this would inflict on the economy would be staggering.

I believe that if the gov't sat down and "came clean" they'd realize that it's almost impossible for them to dig themselves out of the hole. You would need about a 10% tax hike with a 25% decrease in spending. With that, in 20-30 years, we'd pay it off. Any policy that doesn't involve tax hikes and cuts in spending is a hand job. That or go through a period of hyperinflation to render the dollar meaningless along with the debt. When you stare at the debt clock and it says your families share is 100k, well they've got to tax 100k out of you and get it.

If we are going to make predictions, obama's economic "dream team" is going to suggest a minor 3-5% VAT tax which will "fix the budget". This will now become the "goto" tax for money and be at 10-12% in 10 years after it's passed for various reasons. The only way to fix this mess is to strangle the tax dollars coming in and make them pay out less and save their way to financial freedom. Tossing more money at them will not fix the problem.

Yes, it will take some time to pay off the national debt, but it wouldn't really be terribly hard. The problem is politics get in the way of almost all progress towards reducing the debt. A period of extended economic growth like in the 90's would have the largest effect on improving the deficit situation.

[kingkilburn]

When we used the gold standard there was enough gold that if every one cashed in their gold certificates every one got what they were owed.

It's funny that in the pictures you posted the two spikes in price are also the two lowest points in the value of the dollar. Coincidence?



THE reason the value of the dollar is tanking is because they are printing BILLIONS of dollars every year. They are making money where there was non before. Every dollar printed devalues the rest.

Thanks for CONTRIBUTING something new.
I didn't bump the thread.

[axiomatik]

Don't let the door hit you . . .


It is great to see others agreeing with me here on Zilvia. It really felt like I was getting jumped by ignorance incarnate. I mean I don't mind if people do disagree with me but at least be informed on the topic and don't just throw fallacies and ad hominem arguments out there.

So, in other words, you just want people in here who agree with you. Anyone who disagrees with you and provides logical arguments and evidence to back their claims should leave?

When we used the gold standard there was enough gold that if every one cashed in their gold certificates every one got what they were owed.

In 1971 when we officially went off the gold standard, there was only $650 Billion US dollars globally circulating. Today there is $8.5 TRILLION. There is not enough gold in the entire world to back that many dollars at 100%.

It's funny that in the pictures you posted the two spikes in price are also the two lowest points in the value of the dollar. Coincidence?

How are you determining the value of the dollar? Versus gold? Because mathematically speaking, a spike in the price of gold would obviously mean a drop in value of the dollar versus gold. Versus the yen? Versus the Euro? Versus the Rupee? Versus a barrel of oil? Versus a bushel of wheat?

There is no single set "value of the dollar".

THE reason the value of the dollar is tanking is because they are printing BILLIONS of dollars every year. They are making money where there was non before. Every dollar printed devalues the rest.

Again, how are you valuing the dollar? Here's a graph of the Yen versus the Dollar, it looks like today's exchange rate isn't much different than in 1995.

http://upload.wikimedia.org/wikipedia/commons/d/df/JPY-USD_1950-.svg

If you look at a graph of the dollar versus the Euro, the dollar is now stronger than it was back in late 2007 when 1 EUR = $1.55 (roughly). Currently it's at ~$1.35 and as recently as this past June 1 EUR was only worth $1.20. (I can't find a good static graph of the dollar versus the euro, everything I found in my quick search is either outdated or a dynamic graph)

Here is a graph of the price of gold versus 6 other currencies. As you can see, the price of gold is way up across the board.

http://www.ritholtz.com/blog/wp-content/uploads/2010/09/goldcurrencies.png


I didn't bump the thread.

Neither did I.

[kingkilburn]

So, in other words, you just want people in here who agree with you. Anyone who disagrees with you and provides logical arguments and evidence to back their claims should leave?

Correct /Sarcasm



In 1971 when we officially went off the gold standard, there was only $650 Billion US dollars globally circulating. Today there is $8.5 TRILLION. There is not enough gold in the entire world to back that many dollars at 100%.

That is due totally to them mass printing more money. Go ask Zimbabwe how that worked out for them. You are correct, there isn't enough. I would scrap the green back entirely.



How are you determining the value of the dollar? Versus gold? Because mathematically speaking, a spike in the price of gold would obviously mean a drop in value of the dollar versus gold. Versus the yen? Versus the Euro? Versus the Rupee? Versus a barrel of oil? Versus a bushel of wheat?

There is no single set "value of the dollar".

Given that the US Dollar is the primary reserve currency of the world it isn't hard to gauge the value of the dollar. It also is not difficult to gauge the value of gold. What is misleading is using the dollar to prove how unstable gold is when in reality the correlation is the opposite and readily apparent.


Again, how are you valuing the dollar? Here's a graph of the Yen versus the Dollar, it looks like today's exchange rate isn't much different than in 1995.

China forces the Yen up and down to maintain the exchange rate and balance of trade.

If you look at a graph of the dollar versus the Euro, the dollar is now stronger than it was back in late 2007 when 1 EUR = $1.55 (roughly). Currently it's at ~$1.35 and as recently as this past June 1 EUR was only worth $1.20. (I can't find a good static graph of the dollar versus the euro, everything I found in my quick search is either outdated or a dynamic graph)

I don't see what you are trying to prove/disprove with this statement.

[axiomatik]

I don't see what you are trying to prove/disprove with this statement.

You are arguing that because the Fed is increasing the money supply, the 'value' of the dollar is plummeting, and that this wouldn't happen if we were on the Gold Standard. However, this summer the dollar was stronger versus the euro than it had ever been since 2005.

[kingkilburn]

The Euro also fell pretty hard with all the financial troubles going on over there. It costs a lot to literally buy out the debt of a country, even if it's a small one.

[Walperstyle]

best foolproof investment is food commodities. (and owning some of your own farmland and contract it out to neighbor farmers)

reason 1) world expands, more people = more need for food = less land to grow it on
reason 2) in worst case senereo where money is worth $0, so is every 'precious metal', and those with food will always provide for family, and have the ability to trade for other goods and services at face value.
reason 3) food is the no1 necessity for every living being... 2nd comes shelter.

[kingkilburn]

Even in a barter system precious metals still hold value.

How do you think gold and silver became valuable in the first place?

[axiomatik]

That is due totally to them mass printing more money. Go ask Zimbabwe how that worked out for them. You are correct, there isn't enough. I would scrap the green back entirely.

So your implication is that what has happened to the US economy over the past 40 years can somehow be described by an economic crisis in Zimbabwe?

Given that the US Dollar is the primary reserve currency of the world it isn't hard to gauge the value of the dollar. It also is not difficult to gauge the value of gold. What is misleading is using the dollar to prove how unstable gold is when in reality the correlation is the opposite and readily apparent.

And yet you don't provide any evidence to back your claims, just vague assertions that the value of the dollar is plummeting. Does a loaf of bread suddenly cost $50? That is Zimbabwe-style inflation. Beyond that, I showed graphs of the price of gold versus 6 major currencies, and every one of those graphs show that the price of gold has been climbing for the past 5 years. Not because the value of the dollar is 'plunging', but because the economic uncertainty driven by first the oil bubble and then the global recession has caused many people to invest in gold as a safe haven. Once economic recovery begins in earnest, gold prices will start dropping relative to all global currencies.


China forces the Yen up and down to maintain the exchange rate and balance of trade.

It does. China holds large sums of dollars and yen to keep it's currency undervalued to promote it export industry. Japan is also hurting from it's over-valued currency because the Japanese economy is so export-driven as well.

Bank of Japan Moves to Buy More Assets (http://www.nytimes.com/2010/10/06/business/global/06yen.html?src=mv)

Japan is working on driving down the value of the yen.

A strong yen hurts Japanese exporters by making their goods more expensive overseas and eroding the value of their overseas revenue. Despite the weaknesses in the Japanese economy, the yen tends to strengthen against other currencies in times of global financial uncertainty, partly because the country still runs a current-account surplus, making a run on the yen unlikely.

Like gold, the yen is considered a safe haven. The global recession has driven the value of the yen up (Japanese is suffering from deflation), and it is killing Japan's export manufacturers.

more on deflation:

NY Times: Deflation (http://topics.nytimes.com/top/reference/timestopics/subjects/d/deflation_economics/index.html?inline=nyt-classifier)

While inflation erodes the value of money, which progressively buys less and less per unit, deflation makes money worth more. That makes people and businesses less likely to spend it -- consumers because they expect even better deals if they wait, and businesses because it's less profitable to produce goods or services that will bring a lower real return. These factors can feed on each other to produce a downward economic spiral, as happened in the Great Depression.

Deflation discourages economic activity. Why buy today when prices will be cheaper tomorrow? Decreases in consumption result in decreases in economic activity which results in higher unemployment, and lower prices as demand for customers increases.

[axiomatik]

Even in a barter system precious metals still hold value.

How do you think gold and silver became valuable in the first place?

Because it is pretty. Gold especially was revered in ancient times for it's apparent magical ability to never tarnish or rust. Not because it is useful.

[S14DB]

Gold Vending Machines: Why We Think It's a Sell Signal - MarketBeat - WSJ (http://blogs.wsj.com/marketbeat/2010/09/28/gold-vending-machines-why-we-think-its-a-sell-signal/)

[kingkilburn]

Keynesian economics - Wikipedia, the free encyclopedia (http://en.wikipedia.org/wiki/Keynesian_economics#Criticism)


Rather than try to poke semantic holes in my claims maybe you should learn more about what you have been trying to use to back up yours. Wikipedia is as good a place as any to start.

[axiomatik]

Keynesian economics - Wikipedia, the free encyclopedia (http://en.wikipedia.org/wiki/Keynesian_economics#Criticism)


Rather than try to poke semantic holes in my claims maybe you should learn more about what you have been trying to use to back up yours. Wikipedia is as good a place as any to start.

Oh please, now you are just insulting everyone's intelligence if you think that is a valid response. I am not arguing semantics in any way shape or form. Not only that, but I am very well familiar with Keynesian economic theory. You are trotting out that link in an effort to hide the fact that you can not refute any of my arguments. You aren't providing any evidence to back up your claims. Instead, you just keep regurgitating the same claims over and over. How many times are you going to mention Zimbabwe in this thread without any evidence as to how it relates to the US economy and the Gold Standard? What the Fed is doing is nothing at all like what Zimbabwe did. Why are you trying to compare the currency of a tiny country with no real industry to the United States? The US is the largest economy in the world, the largest manufacturer in the world, and the 3rd largest exporter in the world. Zimbabwe really isn't relevant.

You keep saying that the value of the dollar is plunging, and when I ask for evidence (and provide counter-evidence), your response is basically "it just is".

You have claimed in this thread that since the US went off the gold standard, the value of gold has just kept rising. I have provided counter-evidence to that as well. Even adjusted for inflation of the dollar, the value of gold steadily declined between 1980 and ~2003. That is almost a quarter-century of declining value. The rise in value of gold is a very recent phenomenon. Not only that, but it is very similar to the run-up in the price of oil. The stock market isn't doing so hot, so people invest in gold. The price of gold goes up as a result, and other people see the price increase, so they invest in gold to get an ROI, further driving up the price of gold. Eventually, there is going to be a massive drop in the price of gold as investors start to believe that it is over-priced (and hence, future gains will be minimal) and turn back to the stock market for investment. As people cash out of gold, the price will drop.

As I have mentioned before, and which you have ignored, the real concern for the value of the dollar is not what the Fed is doing, but America's trade balance. Every year that we run a trade deficit, we increase the global supply of US dollars. The more US dollars outside of our borders, the less it will be worth relative to other currencies. Here is a fantastic graph of the US trade balance and global reserves of US dollars:

http://www.american.com/graphics/2009/us%20trade%20Balance.JPG

As you can see, up until 1992, the US trade imbalance wasn't too bad, and in fact was improving in the late-80's/early-90's. Since 1992, however, the US trade deficit has grown exponentially. This is due to a number of factors. First, the obvious, outsourcing of manufacturing to China and other low-cost countries. While the US is still the #1 manufacturer in the world, we are quickly exporting our manufacturing industry, especially for low-priced goods, but increasingly for high-tech, high-value industries. How many computers and related components are built in the US anymore versus Taiwan and China? How about chip fabs?

The second large factor in our trade balance is the importation of oil. The US hit peak domestic oil production in the early 1970's, and domestic production has been falling ever since.

http://upload.wikimedia.org/wikipedia/commons/c/c5/US_Oil_Production_and_Imports_1920_to_2005.png

However, our consumption has only increased. That, coupled with the rising cost of oil due to the higher demands in emergent economies such as China, India etc, is driving up our trade deficit. Crude oil is currently trading at ~$80/barrel. If we look at the last data in that graph, we imported around 10 million barrels a day in 2005. That's $800 million dollars a day, $24 billion dollars a month, and almost $300 billion dollars a year. To me, that is the biggest concern for the value of the dollar. We are spending $300 billion dollars a year to buy oil from other countries. That's $300 billion dollars of our wealth exiting the country. Every year. And that money is expanding the global supply of US dollars. That is why on the graph above, global reserves of US dollars have climbed to $7 Trillion dollars, because we keep importing more goods than we export. And that isn't going to change unless we can get our oil consumption under control.

Going onto the gold standard is not going to help us if we continue to buy $300 billion dollars of oil every year. Because if those foreign entities holding dollars choose to cash in for gold, what are we going to do? We will only have a finite amount of gold. If we try to purchase more gold on the global market, what happens if that currency is cashed in?

The gold standard would only work if our trade balance was neutral, positive some years, negative other years. But as long as we run astronomical trade deficits, the gold standard is unworkable.

[kingkilburn]

I can refute your arguments all day long but I am tired of going over the same shit as when the thread was started. Nothing new has come to the table and no one has made a single point that absolutely refutes using a gold standard.

If you want to continue with this go read an essay on the subject or something. I'm done.

P.S.
Zimbabwe is the pinnacle of fiat currency. Why be in debt? Just make more money.
Gold has NOT risen. That is the crux of my argument. Over the last few hundred years the value of gold has remained almost unchanged while in comparison the dollar has dropped of sharply since going away from the gold standard.

[axiomatik]

I can refute your arguments all day long but I am tired of going over the same shit as when the thread was started.

100% predictable response. You have not provided a single solid argument nor one shred of evidence in this entire thread, just vague assertions and instructions for everyone else to go read elsewhere. Meanwhile, you do not show any evidence of understanding the ramifications of what you are espousing.

Nothing new has come to the table and no one has made a single point that absolutely refutes using a gold standard.

That's because your mind is closed to opposing viewpoints. Nothing any economist or expert could say would ever sway your opinion. Besides, as I explained, a Gold standard is unworkable when we have such high trade imbalances. As long as we import $50 billion dollars a month more than we export ($600 billion dollars a year), it will be impossible to keep reserves of gold, as foreign countries will be free to cash their dollar surpluses into gold, constantly eroding our gold reserves. And there is no easy solution for our trade imbalances as long as we need so much oil to run our economy, and until we re-import much of our manufacturing.

P.S.
Zimbabwe is the pinnacle of fiat currency. Why be in debt? Just make more money.
Gold has NOT risen. That is the crux of my argument. Over the last few hundred years the value of gold has remained almost unchanged while in comparison the dollar has dropped of sharply since going away from the gold standard.

Another baseless assertion. You reject any valuations based on currency. So that only leaves valuations based on such arbitrary things such as loaves of bread, or number of pigs, or cords of wood. And you haven't exactly provided any evidence to say that gold is worth the exact same number of pigs as it did in 1700. Not that it would prove anything.

It is nothing more than your opinion that the value of gold has not changed. That is hardly a strong basis for upending the entire currency system.

[kingkilburn]

Keep blowing hard, windbag.

I expected to come in here and discuss the possibility of going back but instead was forced to be defensive the entire time while people throw around condescension and personal attacks.

Until you are ready to openly discuss it instead of spouting public school Keynesian nonsense this is over.

[axiomatik]

Insults and name-calling now? I have never attacked you personally nor called you any names. I have only addressed people's claims, arguments, and lack of evidence. I am having a civil discussion here, and presenting evidence to back my claims and refute other's claims.

This is the Loud Noises section, you should expect insults and condescension by the very nature of the controversial topics discussed here. But the proper response is to rise above it and prove your opponents wrong. Instead you sank to their level and wallowed about in angst and self-pity. Go ahead and take your ball and go home then.

[S14DB]

Watch the personal attacks please.

[Strider]

I can't believe there are people who would even argue going back to the gold standard. The fact that there are people who strongly believe this is the solution leads me to believe they've never taken a economics class or even done the data gathering to find out why this is a bad idea.

Good article:

Inflation is coming…
For as long as I can remember, Jim Grant has never been a cheerful fellow. In fact, there was a standing joke in my office that after reading Grant you could cheer up by reading King Lear. The thinking in Grant’s latest missive in the WSJ runs parallel to my recent post Giving inflation chance that with the massive fiscal and monetary stimulus coming down the pipe, inflation is inevitable. Jim wryly notes that “Frostbite victims tend not to dwell on the summertime perils of heatstroke.” He continued:

Prescience is rare enough in the private sector. It is almost unheard of in Washington. The credit troubles took the Fed unawares. So, likely, will the outbreak of the next inflation. Already the stars are aligned for a doozy. Not only the Fed, but also the other leading central banks are frantically ramping up money production…It is far less certain that, once the cycle turns, the central banks will punctually tighten.

A return to the gold standard would be disastrous
Given the enormity of the recent crisis, there have been calls for radical solutions. The hard money crowd, for example, has called for the return of the gold standard. However, a return to the gold standard would be disastrous. It would be a prelude to an global downturn of unprecedented proportions and doom future generations to heightened economic volatility.

First, a history lesson: Many years ago, people decided on the use of gold as a monetary standard. It turned out that gold has many nice properties that could be used as a store of value. Throughout human history, money has been predominantly based on gold but not always. It has also been based on other commodities. Peter Bernstein’s book The Power of Gold details the history of gold and commodity based monetary standards throughout history, from salt to large stones, some of which lay at the bottom of the sea.

As time went on, people found that gold, along with other commodity based monetary standards, was hard to carry around. Used in coinage, they could be difficult to divide and this division problem was a hindrance to commerce.

Then came the financial innovation called banking. You could deposit your gold in a bank. The bank would issue you a receipt and you could use that paper receipt for trade and commerce. The bank would lend out your deposit of gold to others. This was credit creation, which expanded the money supply. For every ducat lent out, that ducat would usually wind back up in the banking system, creating another ducat available to be lent out. Even with the imposition of reserve requirements that constraine the amount of loans they could make based on their deposit base, this form of fractional bank lending expanded credit and created enormous number of jobs and raised prosperity.

When kings and political rulers got into financial trouble, there was always a temptation to debase the currency. The current episode of paper money debasement began in earnest when Richard Nixon took the U.S. off the gold standard and the world went to a Dollar standard for monetary reserves. The trouble was, the U.S. Dollar wasn’t based on anything, other than the good name of the U.S. government.

Today we stand on the edge of a precipice. America is in recession but deeply in debt. It is about to print money to try to climb out of its hole. This consensus has been supported by pretty much all of the central banks and governments around the world. Some analysts have argued that the imposition of a gold standard would create the discipline on the monetary authorities from debasing the currency in this manner.

What does a gold standard really mean?
Let’s think this through – what does a gold standard really mean? Does the hard money crowd want us to go back to carrying around pieces of gold coinage around? In that case, how do we facilitate global trade?

Do we just want to revive a gold backing for money? There isn’t enough gold around in the world to support a gold standard at current gold prices. Rough back of the envelope calculations show that the Fed’s holdings of gold, assuming that it is unencumbered and not lent out, is worth around $200 billion at current prices. Remember that the U.S. Federal Reserve is one of the larger central bank holders of gold in the world. While that change might satisfy the gold bugs, it wouldn’t help the vast majority of the population around the world.

One of the assumptions of a gold standard is that the currency is backed by gold at a fixed rate. Anyone could turn in their Dollars, euros, Yens, Pound Sterling and so on, to the appropriate central bank and get gold at a fixed gold price. Such a monetary regime also implies a fixed exchange rate arrangement like Bretton Woods. Instead of allowing the market to determine currency prices, the world would return to fixed exchange rates and periodic exchange rate revaluations. Is that really the regime that we want to return to?

A gold standard also creates economic volatility in the economy. Monetary theory is based on the elegant formula MV = PQ. Holding V (monetary velocity) constant, changes in money supply directly changes the GDP level. Under a gold standard, money supply is restricted by the supply of gold, based on world mine output. National gold supply could shrink because of shocks. As an example, the Roman empire was subjected to credit crunches during wartime when hostile forces captured Roman gold and territory.

The problem of fractional lending remains under a gold standard. The banking system could still create credit. Under such a regime, if everyone decided to redeem their paper currency for gold, the money supply would collapse and the result would be another Depression. Do we want to get rid of the banking system?

If we were to take the radical step of eliminating fractional lending, going to a gold standard would mean a drastic shrinking of world GDP given the amount of money sloshing around the world today.

Culling the herd?
This is financial Armageddon. The result would be the financial equivalent of mandatory infection of the population with the Ebola virus. Maybe we could get Disney to lend a PR hand as we play “The Circle of Life” while we infect everybody with Ebola so people would be persuaded to sacrifice themselves for the Common Good.

The end of the Dollar as THE Reserve Currency
Let’s face it, the days of the USD as the principal reserve currency are numbered. Roger Ehrenberg over at Information Arbitrage believes that the US is at a strategic inflection point and the start of a downward spiral and I would tend to agree. The long term path of the Dollar and US influence is downward. Investors should prepare themselves for that eventuality.

[unlegendary]

i'd rather invest in currency than gold lol.

[theicecreamdan]

Still, show SOME reason why gold should have any more value than ____.

You're trading one fiat currency for another.

[bb4_96]

I don't really know much about gold standard and whatnot. Unless your an econ major it doesn't seem to get hit very hard in economics class. But it seems to me that if there is a limited supply of gold wouldn't there be a limited supply of wealth? If the economy grows where does the new capital come from? As the population grows where does then new populous' money come from? It isn't the california gold rush anymore. We aren't procuring gold at the same rate as then. I'm ignorant on this topic so any light shed is appreciated.

[wallaka]

I don't really know much about gold standard and whatnot. Unless your an econ major it doesn't seem to get hit very hard in economics class. But it seems to me that if there is a limited supply of gold wouldn't there be a limited supply of wealth? If the economy grows where does the new capital come from? As the population grows where does then new populous' money come from? It isn't the california gold rush anymore. We aren't procuring gold at the same rate as then. I'm ignorant on this topic so any light shed is appreciated.

You are pretty much dead-on. There would be little venture capital, and it would be nearly impossible to respond to changing financial systems. There was a constant boom-bust cycle before we switched from the gold standard. There still are periods of recession and always will be, but they don't reach the lows that they did previously. Fiat currency has a way of leveling out the spikes in the graph.

[kingkilburn]

There was a constant boom-bust cycle before we switched from the gold standard.

That has more to do with the FED changing interest rates and directly affecting the stock market than not being on a gold standard.

If we did nothing else but go back to a gold standard the above would remain almost completely unchanged.

[codyace]

That has more to do with the FED changing interest rates and directly affecting the stock market than not being on a gold standard.

If we did nothing else but go back to a gold standard the above would remain almost completely unchanged.

As I've said in the past in this thread, if the dollar sinks, what do we base the value of gold from?

I think you're main argument is you want a 'backed' system, not a credit based. Unfortunatly that sort of system prohibits many things that keep our businesses growing/expanding/mvoing onward...credit. A backed system or 1:1 system simply would never work in today's world, nor has it ever since 'paper' systems have come in place.

[bb4_96]

Nobody answered my questions. If the system is 1:1 then how does the economy grow? Is gold then worth more wth? I'm fairly clueless with this concept.

[kingkilburn]

The exchange rate from currency to gold gets better. If the economy does better it takes less dollars to buy/exchange for the same amount of gold(assuming gold remains the same value over this time).

[axiomatik]

Nobody answered my questions. If the system is 1:1 then how does the economy grow? Is gold then worth more wth? I'm fairly clueless with this concept.

The only real way to expand the money supply is to acquire more gold, then more currency can be issued that is backed by that new gold. Or, you could adjust the exchange rate of dollars/gold, but that would pretty much defeat the purpose of using a Gold Standard.

Long-term, if you hold the money supply constant, and economic activity increases, than you get deflation, as each dollar can buy more and more goods/services. However, deflation stifles economic growth. Why invest your money when you can just sit on it and watch it grow in value?

[theicecreamdan]

Growing in size and growing in value are two different things.

[axiomatik]

uh, yes, that's true and I addressed both. If the economy is growing (that means more productive work is being done), and the money supply remains fixed, then each and every dollar represents a larger and larger amount of labor. This is deflation: the value of the dollar grows. To avoid deflation, the money supply needs to grow to match the growth of the economy. Under a Gold Standard system, the US would then have to acquire more gold to back any additional money put into the money supply.

[Walperstyle]

best foolproof investment is food commodities. (and owning some of your own farmland and contract it out to neighbor farmers)

reason 1) world expands, more people = more need for food = less land to grow it on
reason 2) in worst case senereo where money is worth $0, so is every 'precious metal', and those with food will always provide for family, and have the ability to trade for other goods and services at face value.
reason 3) food is the no1 necessity for every living being... 2nd comes shelter.

quoted for obvious truth. So far I'm making good money. Cheers!

btw. I strongly urge nobody to buy gold right now. Infact, sitting on it is not safe. Its over inflated.

[axiomatik]

I agree on not buying gold right now. As the price climbs, more and more people will start to believe that it is over-priced, and start cashing out of gold. Especially as the economy picks up and people think that they will get a better return on the stock market.

[ranger240]

Keynesian economics - Wikipedia, the free encyclopedia (http://en.wikipedia.org/wiki/Keynesian_economics#Criticism)


Rather than try to poke semantic holes in my claims maybe you should learn more about what you have been trying to use to back up yours. Wikipedia is as good a place as any to start.

have you read the general theory?

anyway,

i ignored this stupid thread for a month and a half as its dimwitted retorts drove me nuts. they dont anymore, its apparent how sad they are.

Good 'ol Kilburn thinks that he's ''winning'' the argument because he's ignorant of reasons why nobody is clamoring to go back to the gold standard. he hasn't actually read anything of substance on the matter. he's an ''empirical economist'' of the most insular form (he should be happy i called him an economist). by that i mean someone who comes up with a correlation of events and mistakes them as causation. sticking your head further into the sand (or up one's own ass) doesnt change the world around you.

he cites Zimbabwe as his ultimate 'checkmate' in regards to fiat currency, ergo an outlier is the best representation of a spectrum. that's like saying ''hey eating cheeseburgers is bad because you will get fat, checkout this example, i am right"
http://www.expandmywealth.com/wp-content/uploads/2008/02/fat-girls-and-fries.jpg

the sad thing is that instead of learning about the matter he'll be scouring the internet for suspect sources like this one Gold News | Gold Market Analysis & Gold Investment Research - Gold Price Commentary & Forecasts (http://goldnews.bullionvault.com/) (one hes cited) and other garbage ones exampled previously.

killburn... for gods sake read Globalizing Capital... its a book, not some trash website.


in closing, killburn is mistaking two things, 1. what the gold standard actually is and 2. if the fed should adjust money supply.

he's pissed off about number 2. happening and saying we should go back to number 1. but as other posters have pointed out, that just cannot happen.

furthermore the u.s. could NEVER revert back to the gold std, because every other major trade partner isnt and as we know (except killburn because he hasnt read books on international monetary policy), france really screwed up exchange rates back between wwi and wwii by hoarding gold. such ''specie flow'' (another term he'll google) has a propensity to distort things.

i could go on and on and on and on and on and on and on and on and on, as could many other informed zilvia posters but you cannot expect to teach someone calculus when they've only just barely learned how to count.

[kingkilburn]

Please continue. Don't stop your ad hominem arguments on my account.

:l101::l101::l101::l101::l101::l101::l101::l101::l 101::l101:

[axiomatik]

he cites Zimbabwe as his ultimate 'checkmate' in regards to fiat currency, ergo an outlier is the best representation of a spectrum. that's like saying ''hey eating cheeseburgers is bad because you will get fat, checkout this example, i am right"

Actually, a better analogy is "being a lesbian makes you fat, see what happens:"
[I'm not quoting the pic because it doesn't need to be shown anymore than it already has]

[rc1honda]

This is a great thread and i just read all 5 pages and learned a lot. I have no real formal education in econ, but seeing as i now have a lucrative career my money and fiances is something i have been taking a huge interest in.

That said, i have been reading a lot of doomsayer articles about the fall of the US dollar as the global standard currency. Apart from conspiracy theories, and one world currencies, are the consequences as dire as they are purported to be?

The Fed as it seems, is determined to leave me homeless, jobless and hungry with excessive spending. And it's easy to take a alarmist perspective against this future. What does one do as a upper middle class worker do protect their wealth and fiances?

Is the dollar really going to collapse? Should we of bit the proverbial "bullet" and let those banks fail and lived through the following depression? I mean i just wanna know. As a outsider looking in, all of this is really unsettling.

I guess what i am asking, is who do i vote for? What polices should I back. What do i do as a citizen to help keep my family and wealth stable seeing as a gold standard is now completely out of the question and appears more akin to communism then economics.

[kingkilburn]

If the banks were not coerced into making decisions which directly led to their failure I would say let them fail. In reality I am undecided but lean towards letting them fail.