POLL: The US Govt should SELL GOLD to pay down the debt/ save the Dollar/ etc.

Didn't ANYBODY read POST #30, and the FACT that selling off the presumed 8,133 tonnes of gold -- would keep the U.S. operating for SEVEN WEEKS??

And as for introducing a gold-backed currency at the present time -- we could hardly do anything DUMBER. Countries that receive dollars for our oil imports would rush to the U. S. Treasury and trade in their "new dollars" for gold, regardless of the exchange rate, and in about 3 days, all our gold would be GONE. WHAT are you people thinking??

 

Log in or Sign up to hide this ad.

If the currency was backed by land, issuance would be virtually unlimited because the government could put any value on it that they want.

 

Hmm, France tried that back in the 1790s - assignats. Can buy the worthless little bits of paper for a pittance still.

 

The holders of the last issue, ie the guaranteed issue of 1780 did finally get payment in the late 1790s, literally one cent on the dollar and then only in government bonds that were due in 1815. That was where the phrase "not worth a continental" came from.

 

And Alexander Hamilton did basically the same thing after the Revolutionary war and managed to pay off the debt incurred by the Colonies to finance the war. I guess the lesson is that the integrity of the folks in government is more important than the details of the plan.

 

Good argument bringing up how one country tried backing their currency by land and it failed. How many hundreds of times has money been backed by nothing then fallen to its real value zero.

 

"...issuance would be virtually unlimited because the government could put any value on it that they want."

And that's precisely why it wouldn't work.

​

 

What if it was a fixed rate? One dollar one acre.

 

"Federal lands are lands in the United States for which ownership is claimed by the U.S. federal government. As of March 2012, out of the 2.27 billion acres in the country, about 28% of the total was owned by the Federal government according to the Interior Department."

Let's see; at $1/acre, that creates a money supply of about $635 million, a tiny tiny tiny fraction of the total required in this country. That's about $2 per person.

 

What if it was an inflation adjusted calculation of all of the potential mineral rights and water rights in perpetuity, right of ways, and highest and best uses plus the theoretical value of the interstate highway system if it was all converted to toll roads? Could be a lot. With the toll roads alone, if they did a discounted cash flow with a 5% growth rate and used the treasury bond as a discount rate because it is virtually risk free, the value is infinity. That'll work.

 

No I don't mean today's dollar will buy 1 acre. They can create a new dollar priced at x amount of acres.

 

You can back any amount of dollars with any amount of gold. The functional aspect of a gold standard is derived from the fixed ratio of gold to dollars so that the money supply cannot be expanded without also adding more gold, and thus mandating a constant level of buying power no matter what - as long as the ratio is adhered to. It's true we don't have nearly enough gold to back the current amount of dollars at the current amount of buying power for each dollar, but if those dollars were devalued accordingly to meet the amount of gold we have then it is still doable.

 

If you look at the value of gold to amount of dollars in circulation there have been times where the ratio was 1/1. I think in the future we may hit 1/1 or at least close to it.
http://www.mineweb.com/mineweb/content/en/mineweb-gold-analysis?oid=108331&sn=Detail

 

I think these are the key words. I can visualize Congress arguing over raising the ratio every year the way the do with the debt ceiling now. So I don't think anything is accomplished by backing the currency. Things are better if gold actually circulates as money, but there are probably ways to game the system by hoarding gold in that case too. Maybe enough laws can be passed to make gold work as money, but it just isn't going to happen.

 

It probably won't happen by choice, but when China inevitably does everyone else will follow suit or else watch their currency become obsolete.

 

The question of "obsolete" is not the issue, nor the final outcome. At some point, the most powerful nations will have to AGREE to create gold-backed currencies, on EQUAL terms. This is unlikely. But what is essential is that "half" the countries or any other fraction, "agreeing," won't work; it's all or none. The holdouts would immediately start trading their paper currency for the participating nations' gold, regardless of the exchange rate. The concept is doomed unless you have virtually 100% participation.

Also, suppose an agreement actually comes to pass; the richer nations will grow richer still, and the poor nations will only get the gnawed-over bones of international trade and settlement of counterparty risk. It will take a century to stabilize the currencies, and grow our collective way out of this mess. Do you have teen-agers now? They are the ones who will suffer most, and it's their standard of living that will decline, but they are innocent of any wrong-doing, except not understanding how the world works.

 

Once upon a time, there were 2 nations that settled a new land. The ones who went south found untold mounds of gold, the ones who went north didn't find squat, and had to go to work. The nation that found all that gold, built great armadas to transport that gold and were considered to be the greatest, richest country on earth. The guys to the north, well they made cabinets, farmed, did a little fur trading, and basically whatever it took to get by. No one paid them much attention. Move ahead a couple of hundred years and we find an amazing thing. The ones with all that gold, they were nothing more than a paper tiger. Sure they had a big army, but there was little to no value in what they did. The folks to the north, they built industries, they expanded trade, and although they didn't find much gold until 250 years after they got there, there was a lot value in what they did. That value, my friends, is the thin air that backs our currency.

As far as how much gold is sitting in an army base in Kentucky, Newt Gingrich got it all............

 

I read this occasionally about China, but China has a very authoritarian government that isn't likely to unleash the type of economic freedom that would be necessary to do this. Their number one priority is control, and number two is military power - not prosperity.

 

No offense intended, but I'm more inclined to believe James Rickards about how this sort of thing will play out. He has been called upon by the USG to help role play possible scenarios in this regard after all.

 

Thanks for making this name known to me (and others). Here is a short blurb from Wikipedia about James G. Rickards; now I want to read his book.

"James G. Rickards is an American lawyer, economist, and investment banker with 35 years of experience working in capital markets on Wall Street. He is a writer and is a regular commentator on finance.

Rickards advised clients of an impending financial collapse, of a decline in the dollar and a sharp rise in the price of gold, all years in advance. He believes the United States needs to go back to a gold standard and was one of the first to promote this view. Rickards is the author of The New York Times bestseller Currency Wars, published in 2011..."