Gold Standard

nuj

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Are advocates of a return to the gold standard generally of the tinned-food-and-shotgun-Ayn Rand libertarian survivalist tendency, or do some of them make sense?

In what way, if any, are they ideologically related to the "with one bound our hero was free" devaluationist tendency?
 
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ballot stuffer

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Yes in my experience. But if you held gold im sure you would advocate substancilly increasing its value too.
 

nuj

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(response to ballot stuffer)

That's called talking your own book, though. Just like bankers did.
Why gold, and not some other commodity, if we're to chain ourselves to some random commodity with extremely uneven distribution of both mined and unmined quantities?

The question is not whether or not gold will increase in value (whether that value is measured against some or all fiat currencies or bushels of wheat - the favoured long-run measure of goldbugs) but whether a return to the gold standard makes any sense at all as a remedy to current ills.
 

nuj

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Why not concentrate on the economic arguments for gold instead of calling proponents "tinned-food-and-shotgun-Ayn Rand libertarian survivalists".
One doesn't preclude the other.
 

goosebump

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The Gold Standard system involves the establishment of a reserve currency that is directly convertible into gold.

What country is going to offer to have its currency designated the reserve currency?
 

ibis

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I vote for cowrie shells.
 

20000miles

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For you Mr. Deregulation:

Here are the common objections:

1. There's not enough gold in the world

The overall quantity of money doesn't matter, prices will simply adjust to fit the new money supply.

2. If the economy grows at 3% (for instance) while the money supply grows at only 1-2% then the overall price level will fall.

Falling prices for goods are a good thing! Are you crazy!

3. But doesn't that mean an end to economic growth, since entrepreneurs will prefer to put their money under a matress rather than take the risk of investing?


No. While it is certainly "risk-free" to keep your money under the bed, it comes with a very real opportunity cost. Investors have a peculiar trait: they prefer goods in the future to goods in the present. In other words they forego consumption today and prefer a larger return later.

So a deflationary economy a nominal return (i.e., $1) becomes $1.10 when repaid compounds the real return (i.e., the purchasing power of $1.10 is now $1.21)

The desire for future goods may increase the desire for investment.

4. Can you show me a period of time where a gold standard and deflation have led to prosperity?

Why thank you for asking. The period between 1870 and 1896 in the United States and Germany were deflationary. Annualised prices fell 1.6% in the US, while output rose 3.6% per annum. Investment was wide-spread - this was the era of huge advances in manufacturing, railroads and chemistry.

Here are the measuringwoth.com figures for the period:




5. Are you a member of the tinfoil hat brigade?

No, I just want a sound monetary policy

6. Will this mean the end of the boom-bust cycle?

No, you will have to tackle the expansion of bank credit as well, ie. fractional reserve banking.

So that's it!
 

ManOfReason

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I suggest we go to the 'green' standard, What being Irish and all.

[ame=http://ie.youtube.com/watch?v=bzG-AvlKBAA]Youtube - Purest Green[/ame]
 

Dios

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whether a return to the gold standard makes any sense at all as a remedy to current ills.
Why would it? Backed by gold, backed by property, theres little difference.

20000miles, you seem like a reasonable and intelligent person with a sense of humour in the face of severe ribbing, why are you feeding your brain from the half-bakery of neo libertarian goldbugging Austrian economics?
 

20000miles

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20000miles, you seem like a reasonable and intelligent person with a sense of humour in the face of severe ribbing,
Cheers for the kind words. There are many intelligent people who support sound money, perhaps you might consider re-evaluating your opinion?

why are you feeding your brain from the half-bakery of neo libertarian goldbugging Austrian economics?
That's a big word jumble.
 

Clanrickard

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Why thank you for asking. The period between 1870 and 1896 in the United States and Germany were deflationary. Annualised prices fell 1.6% in the US, while output rose 3.6% per annum. Investment was wide-spread - this was the era of huge advances in manufacturing, railroads and chemistry.
:
Er..aren't you leaving out variables like NO social welfare, NO employment legislation and wasn't this the era of the robber barons in the US? Headline figures mask the fact that tiny handful got the benefit of any economic growth.
 

nuj

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For you Mr. Deregulation:

Here are the common objections:

1. There's not enough gold in the world

The overall quantity of money doesn't matter, prices will simply adjust to fit the new money supply.

2. If the economy grows at 3% (for instance) while the money supply grows at only 1-2% then the overall price level will fall.

Falling prices for goods are a good thing! Are you crazy!

3. But doesn't that mean an end to economic growth, since entrepreneurs will prefer to put their money under a matress rather than take the risk of investing?


No. While it is certainly "risk-free" to keep your money under the bed, it comes with a very real opportunity cost. Investors have a peculiar trait: they prefer goods in the future to goods in the present. In other words they forego consumption today and prefer a larger return later.

So a deflationary economy a nominal return (i.e., $1) becomes $1.10 when repaid compounds the real return (i.e., the purchasing power of $1.10 is now $1.21)

The desire for future goods may increase the desire for investment.

4. Can you show me a period of time where a gold standard and deflation have led to prosperity?

Why thank you for asking. The period between 1870 and 1896 in the United States and Germany were deflationary. Annualised prices fell 1.6% in the US, while output rose 3.6% per annum. Investment was wide-spread - this was the era of huge advances in manufacturing, railroads and chemistry.

Here are the measuringwoth.com figures for the period:




5. Are you a member of the tinfoil hat brigade?

No, I just want a sound monetary policy

6. Will this mean the end of the boom-bust cycle?

No, you will have to tackle the expansion of bank credit as well, ie. fractional reserve banking.

So that's it!
That's straw man clownishness. Where is the gold, now? Not how much exists, but who has it? Governments? Individuals? Where? "Enough" doesn't matter spit - distribution ab initio is one of the the key issues.
 

20000miles

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Er..aren't you leaving out variables like NO social welfare, NO employment legislation and wasn't this the era of the robber barons in the US? Headline figures mask the fact that tiny handful got the benefit of any economic growth.
There was no need for employment welfare or social welfare because employment and real wages rose throughout the period.*

I'm not surprised that you argue this way, even mainstream economics describes this period as a "Long Depression" simply becuase they assume falling prices *MUST* mean economic calamity.


*I'm not implying that there is a need for it today
 
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20000miles

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That's straw man clownishness. Where is the gold, now? Not how much exists, but who has it? Governments? Individuals? Where? "Enough" doesn't matter spit - distribution ab initio is one of the the key issues.
How is it a strawman? These are the exact questions that are posed in objection to a gold standard, even in this very forum. I simply tore a hole in the main "economic" arguments against gold, which was the purpose of my post.

Distribution is mighty important, I agree, and there's no doubt that the people who have benefited from the current inflationary monetary regime can't simply be the ones who will get all the gold.

Rothbard offers this method of transition for the United States in: The Case for a 100 Percent Gold Dollar - Murray N. Rothbard - Mises Institute

1. Arrival of a 100 percent gold dollar, either by deflation of dollars to a gold stock valued at $35 per ounce, or by revaluation of the dollar at a “gold price” high enough to make the gold stock 100 percent of the present supply of dollars, or a blend of the two routes.
2. Getting the gold stock out of the hands of the government and into the hands of the banks and the people, with the concomitant liquidation of the Federal Reserve System, and a legal 100 percent requirement for all demand claims.
3. The transfer of all note-issue functions from the Treasury and the Federal Reserve to the private banks. All banks, in short, would be allowed to issue deposits or notes at the discretion of their clients.
4. Freeing silver bullion and its representative in silver certificates (which would now be issued by the banks) from any fixed value in gold. In short, silver ounces and their warehouse receipts would fluctuate, as do all other commodities, on the market in terms of gold or dollars, thus giving us “parallel” gold and silver moneys, with gold dollars presumably remaining the chief money as the unit of account.
5. The eventual elimination of the term “dollar,” using only terms of weight such as “gold gram” or “gold ounce.”[47] The ultimate goal would be the return to gold by every nation, at 100 percent of its particular currency, and the subsequent blending of all these national currencies into one unified world gold-gram unit. This was one of the considered goals at the abortive international monetary conferences of the late nineteenth century.[48] In such a world, there would be no exchange rates except between gold and silver, for the national currency names would be abandoned for simple weights of gold, and all the world’s money would at long last be freed from government intervention.
6. Free (but presumably not gratuitous) private coinage of gold and silver.
I must here differ with Professor Mises’ and Henry Hazlitt’s suggestion for return to the gold standard by first establishing a “free market” in gold by cutting the dollar completely loose from gold, and then seeing, after several years, what gold price the market would establish.[49] In the first place, this would cut the last tenuous link that the dollar still has to gold and yield us a totally fiat money. Second, the market would hardly be a “free” one, since almost all the nation’s gold would be sequestered in government hands. I think it important to move in the reverse direction. The Federal government, after all, seized the people’s gold in 1933 under the guise of a temporary emergency. It is important, for moral and economic reasons, to permit the people to reclaim their gold as rapidly as possible. And since the gold is still held as hostage for our dollars, I believe that the official link and official convertibility between dollars and gold should be re-established as soon as Congress can be so persuaded. And finally, since the dollar is merely a weight of gold, properly speaking, it is not at all appropriate to establish a “market” between dollars and gold, any more than there should be a “market” between one-dollar bills and five-dollar bills.
 

jcdf

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No Gold Standard. It does not work!
 

20000miles

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I forgot what mr 2000miles said, but I seem to agree with it. He's usually right.

My pro-Keynesian friend thinks its a bad idea, and he works in banks. He said something about countries collapsing.
Lol. Let's not forget that gold standards were suspended so that governments could fight their wars - WWI being the obvious example of a war that could not have lasted 6 months without fiat currency notes.

But then again your Keynesian friend probably thinks war is good for the economy!
 


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