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.

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imotion s14

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.

Up until 1971, gold was money.

lawrenceyang

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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, and a car cigarette lighter for post-castration cauterization.

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kingkilburn

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

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

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

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


The demand out paces production.

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.


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

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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

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 ..

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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.

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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.

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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.

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codyace

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?

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'.


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.

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.

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?


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.


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


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



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.

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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.

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mrmephistopheles

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.

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codyace

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?).



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...


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.

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.

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codyace

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

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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?

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mrmephistopheles

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?

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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

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codyace

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.


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.

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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.

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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



tried to rob this



for all dis



i'm thinking of changing my sigature quote to this one 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

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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.

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drift freaq

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.

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g6civcx

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

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.

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.

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.

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.

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.

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kingkilburn

BAM






EDIT:
Disregard first graph. It's meaningless.

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G O L D E N B E A R R E P U B L I C

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

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