why is gold and silver going down right now?

US citizens pay their income tax with dollars but they don't pay them with base money. Income taxes are withheld from your paycheck, you write a check to the US Treasury drawn from your bank account or something to this extent. Yes these are dollars but they are not base dollars. I am willing to bet more people pay their income taxes with a visa or mastercard than those who actually pay with base money (hard currency). Any takers?

Fractional reserve banking and a gold standard are two seperate animals. They are not mutually exclusive. Even if the United States were to return to a strict gold standard only the dollars you hold in hard currency and coin would be backed by gold. The dollars you have held in the bank, which for most Americans is the majority of their dollars, would still only be supported by the financial soundness of that institution.

 

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I'm confused. I thought the dollars you hold in the bank are insured by the FDIC. Wouldn't that mean those dollars would ultimately also be backed by gold if the US returned to a gold standard?

 

If dollars can only be created when the gold actually exists to back them up, as in not out of thin air to expand the money supply on a whim and not conjured into existence for the sake of a loan then it shouldn't matter if there are paper dollars or electronic dollars representing them. The electronic dollars in the bank today would just need to be accounted for in the gold peg like the paper dollars, as in all dollars.

As long as all of these things are the case, and as long as fractional reserve banking and fractional reserve gold lending are not in practice then the dollars can be in any form assuming that there is no gold contained in the paper which would skew things in this regard, but I don't see why electronic dollars need be treated differently in the case of a gold backed currency.

Ideally yes, assuming the laws aren't changed which does happen from time to time. For all we know the rules will need to change in unforseen ways to support this.

For instance, the FDIC would only be able insure up to as much money as they already have on their books since money printing will not be an option without adding gold, otherwise the gold/dollar ratio would change and then the gold standard would be rendered ineffective just like before. Personally I don't think the FDIC would need to insure anyone because with a sound monetary system devoid of fractional banking the risks of bank default would be nil since they would not be loaning out money they don't have in the first place.

You also may not be able to earn much interest from a bank in this case since they wouldn't be able to create money out of thin air for their loans, thus hindering their profitability and ability to give a free return. Banks would return to simply holding your money for you for a service fee instead of playing with your money as though it were theirs, and without monetary devaluation punishing savers there wouldn't really be a need to keep your money in the bank to earn interest anyway. The way things are currently done makes people unnecessariliy dependent upon banks when their role need not be more than guarding your money from burglars or as a lender.

Low interest rates incentivize banks to make risky loans because they profit on the spread between the rate they borrow at and the rate they loan to folks like us at. Why do they care if you default? It's not their money to begin with, they are merely the channel. Lenders should only be allowed to loan money that they actually have in surplus, and then they would be careful with who they loan to actually having their own funds on the line. People who are fiscally irresponsible would not be invited into the debt spiral, and the need for the welfare state would diminish without both people being robbed by inflation as well as being buried by compounding debt from loans they should have and would have otherwise never been offered. A gold standard enforces this automatically by taking away the money spigot, which incidentally would also have prevented the national debt from getting anywhere near this high.

 

Just a question. How the heck does a gold standard stop the government from borrowing money sir? You say a gold standard would have prevented the national debt, yet as a percent of GDP we were just as far in debt in the 40's as today. How did that happen?

 

Yes your account is insured up to the prescribed limits but the government does not settle the claim by issueing the account holder a check or currency or gold - they just move your account to another financial institution.

 

It only prevents them from borrowing money into existence. Since they would only be able to borrow money from people who actually have money, and since foreign outflows of government bonds are at record levels, the debt simply would not have gone this high because nobody other than the Fed is willing to loan us money. Back in the 40's we had the most productive economy in the world, which was also the reason the rest of the world was willing to accept our dollars for their gold. Today the rest of the world is not so eager to give us their money.

 

I beg to differ China is still more than eager to give US money as are most of gulf states and India. In fact the euro crisis has made dollar and t bonds even more attractive investment. Chances of BRIC agreeing on anything and getting together to find a alternative to dollar is unlikely to happen any time soon.

 

Besides...fatima says we will nuke them if they even try. Plutonium is the new gold and 2 is the new size 6...and your already 10 minutes late.

 

There will probably be a one year end of the world anniversary issue.

 

Lol, I just never understood why the world suddenly pays attention to the Mayans. There is a lot that the world should recognize from the Mayans, but ignore all of those things but latch on to "the end of the world". Kind of shows you the level of our journalism nowadays.

 

The Mayans were the first culture to use Silver in a coin. You can look that up on the internet.

Ruben

 

Well I am sure you could find such a quote on the internet, but I wouldn't believe it.

The Mayans did not exist as a civilization in the 6th century BC, so I do not see how they could have beat the Lydians. I have examples of the proto-coins issued by native american civilizations, and in fact have never heard of a silver coin at all. All examples I have are copper.

 

That is what the Mayans wanted you to think, and it worked! They are very ancient and recent translation of their sacred text makes it clear that since the creation of the earth on the waters, the Turtle Island has had Mayans. But they were not on the gold standard.

ruben

 

Hmm wheren't the first silver coins, white gold coins by the Lydians.

Anyway once again let me bring up this comic

 

That is a cultural bias on your part. This is the 21st century; you should fix that.

Ruben

 

Not sure if you are joking or not. Cultural bias has nothing to do with the claim the Lydians had the first coins, its archeology, ancient numismatics, and history that tells us that.

 

Everyone makes fun of the Mayan's like it is a big joke, but they had great silver coins, and were on the Wampom standard, which proved to be the most stable in the world until Cortez killed all the Lenape Indians.

 

http://www.mexconnect.com/articles/1574-the-ancient-maya-a-commercial-empire

 

I was arguing about their importance as well sir. I am simply stating that I have never seen nor heard of a true coin coming from any part of pre-columbian America. I have many examples of proto-money coming from there, and have all of the major references for the same.

I just wanted to clarify true coins were never issued in this time to my knowledge. However, the article was fine and I agree with it. Mayans had great contributions to science.

 

Sir? What do you think they were doing with all that silver before the spanish came and melted it all down, every ounce, scrupple and grain of it.