"the gold standard" (1 Viewer)

[diat150]

after hearing ron paul whine and moan about this forever I finally got around to looking it up and found that no nation currently follows this system. I also saw that its been like half a century since any has. I looked for the ron paul thread but couldnt find it, I wanted to put this in there but oh well. Also, there is more american currency than gold available in the world. I assume that our dollars have inflated for other reasons than not having a gold standard. I understand the reasoning behind it but it doesnt seem feasible in this day and age. What the heck is ron paul thinking?

 

[jackers]

Yeah, especially since our currency system is working so well for us.

 

[diat150]

I guess what i am getting at is... is it our currency system or is it other factors? if the gold standard was some magical success for currency then it seems someone in the last 50 years would have used it, or still be using it. In my limited knowledge I would think that it is other factors, which may be the encouragement of people to spend all of their money, and the ability for just about anyone to build up insane amounts of debt. if you have any info to add please do. The sarcastic line really hasnt added anything to the discussion. I would like to hear more.

 

[Furor]

Yeah, especially since our currency system is working so well for us.

It works fine for me.

 

[Taceo]

Yeah, especially since our currency system is working so well for us.

So anytime there is a kink in a system we should totally re-haul it? :dunno:

 

[bclemms]

after hearing ron paul whine and moan about this forever I finally got around to looking it up and found that no nation currently follows this system. I also saw that its been like half a century since any has. I looked for the ron paul thread but couldnt find it, I wanted to put this in there but oh well. Also, there is more american currency than gold available in the world. I assume that our dollars have inflated for other reasons than not having a gold standard. I understand the reasoning behind it but it doesnt seem feasible in this day and age. What the heck is ron paul thinking?

No country uses the gold standard for several reasons. The first and most important is because it gives so much power to the people because governments can not easily manipulate the money supply, wealth and power. It was in the banks best interest that the gold standard simply go away. See with fiat money like we have now the money supply is endless and it is easier for governments to spend more money than they have.

What scares you more?
The fact that no nation country currently uses the gold standard.

or

The fact that no fiat currency has ever withstood the test of time.


Ron Paul is for the gold standard but has said on numerous occasions it couldn't be instituted overnight and it would only work in an ideal situation. Ron Paul has said numerous times that he would settle for the dollar being tied to something like silver or a commodity. He has also said that competing currencies would be fine. In other words people could use gold, silver or dollars for payment.

The modified gold standard is another option. Paul doesn't like this option nearly as much because the rate of the dollar against gold can still be manipulated by governmnents and banks but he believes it is still a better system than what we have in place.

Even though no countries use the gold standard quite a few produce gold coins and they are legal currency. The British Pound is backed by silver and I'm pretty sure there are a few other currencies backed by something other than confidence.

The constitution was clearly against a fiat currency.



Here are the main reasons empires have failed.
1) Collapse of confidence backed currency (fiat) aka hyper inflation.
2) Debt, which was usually tied to #1.
3) Overextending of military, usually tied to #1 and #2.
4) Political Corruption. see 1-3
5) Lack of affordable health care.
6) Lack of a middle class.
7) Decline in Morals and Values but this has been heavily debated.

Compare that to the US now.
1) The dollar weakened more in the last 37 years than it did in the rest of the history of the us.
2) The current deficit is at an all time high and this years budget is expected to be close to a trillion in the red plus the leading candidates from both parties will likely push this even farther.
3) We have troops in 130 countries and more than 800 foreign military bases.
4) We certainly aren't lacking political corruption.
5) Health care is becoming less affordable every day.
6) The gap between the upper and lower class is becoming wider at paces not seen since the great depression.
7) I'm not going here since this isn't measurable.


The main reason so many are against the gold standard is the false belief that the gold standard was the reason for the great depression. The reality is the fed screwed up.

 

[blackadder]

I guess what i am getting at is... is it our currency system or is it other factors? if the gold standard was some magical success for currency then it seems someone in the last 50 years would have used it, or still be using it. In my limited knowledge I would think that it is other factors, which may be the encouragement of people to spend all of their money, and the ability for just about anyone to build up insane amounts of debt. if you have any info to add please do. The sarcastic line really hasnt added anything to the discussion. I would like to hear more.

The basic fact of the gold standard is that gold -- a real asset -- backs the paper currency. The only way to expand credit and the broader money supply is to get more gold, either by mining or by producing goods and services of real value and taking gold in payment. Wall street and big finance has never really liked the gold standard because it puts a cap on that mount of money they can lend and earn interest on.

Also, when gold is flowing out of the country due to balance of payments problems, the broader economy will contract, tending to more frequent cycles of boom and bust and generally slower long term growth trend.

The gold standard really ended about 35 years ago. After World War II the U.S. dollar was made the defacto international reserve currency, backed by gold. Because we printed more dollars than we could back with our gold holdings in order to finance the VietNam war and the Great Society, Nixon simply svered the gold backing of the dollar.

Since then we have just been a pure fiat money system: it's just paper.

The gold standard forces you to live within your means. If you don't have the real asset wealth to back the currency, you can not expand the money supply and credit will tighten up. Under the fiat system money can be printed at will and the economy inflated at a much faster rate.

Wall Street prefers fiat money because it allows us all to live beyond our means. We borrow from them and pay the interest forever to enjoy our consumption.

We will see where the fiat money system goes. Huge imbalances/debt bubbles have built up and the system may become unstable in the not too distant future. The only answer we seem to have to previous bubbles is to fuel new ones by printing still more money and expanding credit and encouraging consumption.

And it's not just Ron Paul. Alan Greenspan argued for the gold standard as a younger man:

http://www.constitution.org/mon/greenspan_gold.htm

 

[diat150]

it seems as though china is pretty successful with money, since we have to borrow from them and of course they dont use the gold standard. why is that? what about other countries such as in europe. the euro seems to be doing very well.

 

[blackadder]

it seems as though china is pretty successful with money, since we have to borrow from them and of course they dont use the gold standard. why is that? what about other countries such as in europe. the euro seems to be doing very well.

The lender is always successful, most borrowers always beholden, especially when they are borrowing to sustain consumption rather than invest in infrastructure or some productive enterprise.

The root of the problem is always human nature. The gold standard is not fool proof, it just makes it a little more difficult to engage in shenanigans when stock of gold is supposed to cap the paper currency you circulate.

When we had the last vestige of the gold standard 35 years ago that did not stop us from printing more money than we could cover with our existing gold holdings. That is why the system broke down.

Even in the days when precious metals were coined and used as actual money governments almost always eventually resorted to debasing the coinage -- reducing the actual precious metal content -- in order to try to sustain exorbitant spending habits with funny money. In the end they usually collapsed.

In theory I suppose fiat money could be made to work sustainably if the central bank were trully disciplined and occasionally allowed the economy to take its lumps and work off excesses. If they could carefully control the rate at which they print money it might work better.

But the central bank becomes politicized or captive to Wall Street and they do not discipline themselves. Money is printed excessively and the system ultimately becomes unstable.

This is just human nature. Even at the national level we disdain limits. We take the cruise down Denial river and believe we can live beyond our means indefinitely.

 

[bclemms]

it seems as though china is pretty successful with money, since we have to borrow from them and of course they dont use the gold standard. why is that? what about other countries such as in europe. the euro seems to be doing very well.

China is having inflation and energy problems as we speak because their currency is tied to the dollar.

The Euro is not doing as well as it seems because all currencies have been weakening against commodities. However, it is doing much better than the dollar because Europe is not financing a war at the expense of its currency, they are not dropping interest rates to protect the stock market and they are not borrowing and printing to the extent we are. Currencies follow supply and demand just like everything else and since the supply of Euros has not increased nearly as fast as the dollar then it has held its value. Since it is holding its value more than the dollar the demand for the Euro has increased making it even stronger against the dollar.


I agree with blackadder. Fiat money could work and could work very well but it takes a level of confidence, ethics, seperation from the financial markets and will power we haven't seen in government before.

 

[JimEverett]

The lies coming out of the "gold standard" camp are unreal.
If you want to know about the gold standard read turn of the century history. Power to the people? It meant power to the eastern establishment - which partly explains why midwest farmers were increasingly moving to leftist politics.

 

[SaintsFan11]

I'm not an expert on economics, but it would seem to me that the US just doesn't have the gold reserves to be on a gold standard. If we were to move to the gold standard, yhe amount of money in circulation would have to be drastically reduced from its present level.

Someone more knowledgeable than me might be able to set me straight, but I would imagine that if the gold standard was realistic we'd be using it right now.

 

[MLU]

No need for gold with globalization. Embrace it or get left behind. That is the cold, hard truth.