Return to Gold Standard and price per ounce

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It's good to meet somebody who understands. I have a past as a militant goldbug; I was libertarian long before it was cool, and can tell you all about the minutiae of Austrian economic theory. I therefore am actually sympathetic with the young versions of my younger self that I come to know.

 

I realize we've beaten this to death before. :hammer:

I know you can't accept that something doesn't become impossible because you can't see how it could be done. But you put your finger on the problem. If you try to BACK the currencies of the world with gold, and simultaneously permit the unlimited printing of currencies by government and/or central banks, there will not be enough gold. But if gold IS the money, there will always be enough gold because price levels adjust to the amount of available gold. Gold will not fluctuate in price because prices would be measured in gold. You need to invert the problem to understand it. I have always freely admitted that gold will never be money again. But this doesn't mean that it could not function as money. You just have to get away from the idea that we must have a "gold exchange" system as we did post-World War I, and instead implement a "gold" system as existed pre-World War I.

I am not a goldbug. I don't disagree that money doesn't have to have intrinsic value as long as it is accepted. The folks in countries where the currency collapsed might be able to provide insight into the dangers of faith-based money. But you seem to be trying to argue tha money cannot have intrinsic value and still function as money, and I disagree with that premise. As for leaves and gravel, good luck with that idea. Money is more than a medium of exchange.

 

The gold standard will not be coming to fashion with this current government. It would like asking a mass of unsupervised spoiled teenagers to go on a budget; not smoke, drink or kiss; and be back to the house before 10 p.m. -

The only way the Gold Standard would come back would be if the mass of teenagers happen to all be kin folk to Sen. Ron Paul.

 

You should probably include what we owe Social Security too. I read over at Zero Hedge that we owe SS 2.5 trillion plus interest. In other words we have robbed Social Security.

In that same article, we were supposed to reach the point where what is flowing in was less than flowing out in 2017. Unfortunately, we have reached that this year.

Also, how would this work if there is no gold in Fort Knox, which is rumored?

Anyway, thanks for crunching the numbers on this.

 

Yes, typically the Fed Reserve buys treasuries and bonds from the Treasury. That is the ruse. The private bank (Federal Reserve) gets to rape the taxpayers (IE interest on money borrowed from the Fed) as the lender of last resort. It's kind of like borrowing money from the mob, you know lender of last resort. :rolling:

 

Ah, we the taxpayers pay the interest! One thing I might add here as to why ZIRP (zero interest rate policy) is so problematic right now. Since our debt is so huge right now, the debt is sort of manageable (not really) at 400 billion in interest a year based on our debt as it is now.

The problem occurs in the future if the interest rates rise to like 6% which eventually it will have to. I read if the rates rise that high (saw a chart along with this) we will end up paying like 1.2 trillion a year in interest to service our debt. Therefore it is really a zero sum game. Once GDP hits 100% for the debt to GDP ratio, we are doomed. Some folks say we are doomed already.

So, just to let you know that any interest is paid is from the taxpayers. And if rates go up higher we pay a lot more in interest. Same if our debt keeps going up. The debt and interest rates together is not good. The Congressional Budget Office (CBO) sees us crossing the 20 trillion national debt mark by the end of the decade (probably sooner the way our government is spending money). Which is why we may not see any interest rates rise in the near future and could have another lost decade like Japan had in the 90's. With the market from 2000 to now, that is really a lost decade already since if you put 10k in the market in 2000 you would have lost some money. Hope this helps!

Just thought I would throw this in on this already great post.

 

I think the reason is because it restrained the unlimited desire of governments to spend and control the economy. The history of fiat currencies is filled with more stories of failure than that of gold and silver.

But my intent isn't so much to convince anyone. Most people here are not generally receptive to the idea that there are things they believe and things they have been taught that might not be correct. I just want to throw out the idea and some source material for anybody who wanted to study the mechanism of the old gold system as it actually operated and not as it is taught in Keynesian-biased economics courses.

So I've had my say and I am satisfied -- until the next opportunity.:hatch:

 

The old gold system as it actually operated caused panics (the old-timey word for depressions) in 1869, 1873 and 1907. The latter was accompanied by a realization even among the hardest of the "hard money" men that attempting to run a burgeoning industrial economy on the back of gold was a fool's errand.

So they contrived a very elaborate monetary shell game, by which America was officially on the gold standard while the currency in circulation dwarfed the amount of gold on hand to back it.

This worked because gold is clunky, heavy and makes a tell-tale noise as you lug large amounts of it around. A 1908 Model T sold for $900 - 45 double eagles. Or one $1000 bill, and you got a hundred back as change. So given the choice, most people would take the $1000 bill, so long as they were convinced they could get the double eagles if they wanted them. And the government was very good at making sure they could.

This shell game worked until the Great Depression hit, and people began not believing any more. The run on gold that resulted stripped the shelves bare, and because of the way the laws were written, every $20 in gold taken out of a bank and hidden under a mattress meant the government had to remove $100 in FRNs from circulation. That led to the bank runs of 1932 and 1933, which almost destroyed the economy, before FDR said "enough" and ended the charade once and for all.

 

It would be more accurate to say that the panics were banking and market panics that arose due to the lack of regulation and the unlimited ability to use fractional reserve banking and leverage. No currency - gold, silver, or paper - will prevent people from overleveraging or operating on an unsound basis. I do not recall hearing about a single instance in history when gold coins were not accepted as money. But fiat money has a history of failures, and as we learned recently, leverage and unsound banking practices will still lead to panics without the intervention of regulators even though we operate without the use of gold.

 

Can you recount for us a couple of instances where, in an economy using the gold standard, people were unable to use their gold as money because it was not an acceptable form of payment and where paper, leaves or gravel were preferred?

 

The Aztecs used cacao beans for money, and gold for shiny decoration.

At least the cacao beans had an actual use beyond just being pretty.

 

We pause here to look at a nice example of the topic being discussed.

 

We pause here to look at a nice example of the topic being discussed.

 

occulus taori

 

Very nice for the grade. I like the clean surfaces.:thumb:

 

Thanks. I love it, even more so because I paid less than $500 for it, back in the day. I hope the webmaster will eliminate my double post, done because my first post didn't do the coin justice.

 

I'll double your money right now.