Return to Gold Standard and price per ounce

Understanding
Government Debt

"Our nation's wealth is being drained drop by drop because our government continues to mount record deficits. The security of our country depends on the fiscal integrity of our government, and we're throwing it away." Senator Warren Rudman.

Warnings like this are commonplace today. The assumption is that the Federal government has limited financial resources and at some point will be unable to service its growing debt, in short that it will become bankrupt. Responsible fiscal policy is viewed as requiring a balanced budget. Individuals and firms can indeed borrow their way into bankruptcy. There is no such danger for the government when it borrows in the same currency that it creates. In a fiat money system the government has just as much money at its disposal under a budget deficit as with a budget surplus.

When we adopted a monetary base of intrinsically worthless paper money in the mid-20th century, we created a new paradigm that is still widely misunderstood. The imperatives are quite different from those of the earlier gold-based system. The key to maintaining the purchasing power of money is to control the price of credit. That means controlling the cost to banks of acquiring the reserves they need to cover their depositors' transactions. The Fed has the primary responsibility, but the Treasury plays an indispensable role.

Government Money

We can think of "government money” as existing in two forms: the monetary base issued by the Fed, and securities issued by the Treasury. Base money represents immediate purchasing power, while Treasury securities represent future purchasing power. Treasury securities necessarily pay interest to compensate owners for the delay in purchasing power.

The private sector runs mainly on bank money created by banks when they lend to the public. Banks must hold enough reserves of base money to cover their depositors' transactions. The amount they must hold varies with the net amount of borrowing, which in turn depends on the interest rate. Since the Fed controls the interest rate, it is ultimately up to the Fed to limit the demand for bank money to what the public can absorb without undue inflationary pressure.

Treasury Operations

The Treasury deposits its receipts from taxes and the sale of its securities into accounts at commercial banks, known as Treasury Tax and Loan (TT&L) accounts. It spends out of its account at the Fed, and replenishes that account with transfers from its TT&L accounts. To minimize variations in aggregate reserves of commercial banks, the Treasury targets a constant balance in its Fed account. Thus for all practical purposes, the Treasury spends out of its commercial bank accounts.

If Treasury outflows consistently exceeded inflows, the money supply would steadily increase and create unacceptable inflationary pressures. Therefore the Treasury recaptures all of its spending on average. It does so with taxes and the net sale of securities when there is a shortfall in tax revenues. In effect the Treasury pays for its deficit spending by issuing securities rather than base money. That means deficit spending has no net effect on the immediate purchasing power of the private sector.

 

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Tax or Borrow?

The choice between government taxing and borrowing, i.e. fiscal policy, is entirely at the discretion of Congress. That choice has economic consequences which can be either good or bad. Unfortunately fiscal policy is often governed by the belief that deficit spending is ipso facto bad. The real economic consequences are seldom considered in that decision.

Deficits represent no financial risk to either the government or the public. All too often the focus has been on irrelevant accounting issues. Indeed attempts to balance the budget can easily be counterproductive, especially during recessions. Conversely when the economy is sluggish or in recession, deficit spending helps support aggregate demand needed for recovery.

 

Rolling Over Government Debt

Nothing about government debt requires that it be paid off. Of course individual securities must be redeemed as they mature, but the Treasury can roll over its maturing debt indefinitely. Rolling over means selling new securities to pay for the redemption of maturing securities. This involves no new tax revenues.

Treasury securities offer a risk-free, interest-earning alternative to base money spent into circulation by the government. If the private sector has more non-interest-earning base money in the aggregate than it wishes to hold, its only alternative is to buy Treasury securities. Since the Treasury can pay whatever interest rate the market demands, there will always be willing buyers of its securities.

 

Net financial wealth of the private sector

Treasury securities are valuable assets for the holders. They can readily be sold for money or pledged as collateral for loans. Together with the monetary base created by the Fed, they comprise the net financial wealth of the private sector. By contrast, bank lending cannot change the net financial wealth of the private sector because bank credit is matched by an equal amount of borrower debt.

The value of Treasury securities to the private sector as a whole is in the principal, not in the interest payments they shed. The interest payments are matched by tax revenues, and are therefore a wash in the aggregate. Some fear that as the national debt grows it will create an ever increasing inflation rate. That fear is not supported by the historical record. The debt/GDP ratio reached an all-time high at the end of World War II, yet the inflation rate during the next two decades averaged only 2%. In the following decade the debt/GDP ratio fell to a long-term low, while the inflation rate averaged about 8%. If there is an upper limit to the debt in terms of its effect on the inflation rate, it has yet to be experienced.

 

Really, what is the subject here? Are you off topic?


Ruben

 

I have a better idea.. This entire Gold Standard topic should be permanently removed from the forum and relegated to PRWE forum...where it belongs along with all the other religious and political nonsense.

Ruben

 

Yeah that is wrong....and we have GONE over that before. The Fed is not a private institution.

Ruben

 

Thanks Ruben,

"According to the board of governors of the Federal Reserve, "It is not 'owned' by anyone and is 'not a private, profit-making institution'. Instead, it is an independent entity within the government, having both public purposes and private aspects.""

 

Hyperinflation

On another site I posted how all fiat money (money not backed by gold or other tangible thing) fails. ALL FIAT MONEY FAILS. Historically. Across all societies. From time immemorial, from the start. Think the American indian currency, Wampum.
In germany to finance fighting their wars, the Weimar government printed ceaselessly. Until a loaf of bread cost a wheelbarrel full of Deutschmarks. I posted this in a forum.
The parallels to our government were frightening to some of the readers, and I was told to shut up. I did not post to a forum for five years, too much for people too hear me.
The Rothschilds, that family so rich they may even own YOU, announced a $52,000,000,000 billion dollar investment (I hope that is enough zeros, seems like I needed more) in a gold fund which has the largest accumulation of gold outside any government. Larger than all but five world national holdings. So, the stratification of wealth worldwide is so extreme that the wealthiest one percent of Americans control 95 percent of the nation's wealth.
How they do it.

Well, they buy it. Take telecom and media. Did you know that five companies control ALL OF MEDIA in America? They have been tightening control financially since the 50's, when dissent was first noted over Korea.
Just let US servicemen be taken captive to demonstrate the core of people in this country who would have preferred we actually reap the peace dividend created by the relative peace of the Clinton years (and daggit, I did not say I endorsed him). So this war is siphoning off SO MUCH MONEY that we cannot afford to send our kids tho schools who employ teachers, like in California.
The point is, whatever the cost of gold should be right now, the wealthiest family of friends and industrialists the world has ever known just said bye bye to massive dollar holdings. Let's not even begin to moot just what they are thinking, but they sure wanna stay rich.
Some folks believe gold will be at 10,000 per ounce. At that point, the dollar may be something that will no longer actually be accepted, like wampum fell away. As all fiat currencies fall away. And just HOW MUCH is in FT Knox? No longer matters. Last year it represented only one fifth of one year's national debt, not sufficient to rescue Americans who are starving anymore.
Americans are buying silver ingots like crazy. They are called US Eagles. Mind you, the uncirculated are not money. So nationalization of this asset is easy.
Land, staples, fuel sources. Wait, I sound like-a survivalist. I am sure some of the starving in Germany wished that they had food during the Weimar years and that they had thought ahead too. Stock your shelves, whatever IT is, IT is coming. And in a big way. Bigger than Weimar. Here.
The Rothschilds, who are not stupid, are preparing for IT. So should you.
I have served but one purpose in this post. I informed. I attacked no one, a maligned not a sole.
It seems folks value information in this forum. Hope the welcome mat stays here. Buy gold soon. And food. Maybe silver proof sets too. Those were NOT confiscated back in 1930's America- COLLECTIONS were off limits. I believe.
Not so bad to have coins of US Mint issue after all. Who would have dreampt it?

 

You missed a few.

 

There is not a single verifiable fact listed here, and a smattering of paranoid consperiacy theory.

there is a welcome mat for information, but this is misinformation and exploitative of individuals.

Ruben

 

Have you heard of this new media outlet called the INTERNET? Granted that a lot of whackos are on it proposing that the end of the world is here, and the world is flat, and that 9-11 was an Israeli plot, or that we can be saved by the gold standard, and that the Elders of Zion is a genuine source of history, but it also has created a HUGE number of reliable news sources, from all around the work. See http://news.google.com/

Ruben

 

This thread,if you go back to page one,is about a return to the Gold Standard.It may not be a reality in the near future but it was at one time in U.S. history an acceptable standard.There have been a lot of interesting comments and has been very interesting and informative.Although you may not agree with some comments,that is no reason to belittle other people.The only one who has used religious connotations has been you.So rather than remove the Gold standard topic from this forum,perhaps you can find another forum which is of interest to you and comment to the best of your ability.

By the way,your portion of the U.S. debt,of which you think is a good idea,is approximately $42,294.89 and growing daily.

 

So what does that have to do with coin collecting....NOTHING.

It was the direct cause of 3 recessions and it was NEVER acepted. Maybe you would like to review the Andrew Jackson recession/depression. That was good. Maybe you still missed point that there isn't enough gold in the world to cover what you want. Maybe you refuse to actually read the facts about a political economy that was posted and perfer to have a fantasy about a gold standard instead of banks and treasury bonds.

Only if interesting includes MISLEADING and DESTRUCTIVE

The Gold Standard is not topic about coin collecting. It is not a serious area of study. It have no practical application in economics. Its proponents are not making arguements based on credible facts, but political bent. The topic is without a doubt POLITICS. And Politics is expressly banned from Cointalk.

I don't give a darn. Take your politics to another forum. OFF TOPIC.

Ruben

 

slabbing a beaver

Actually they do slab beavers.........just the pelt,on a board or slab of wood during the drying process...........unfortunately the beaver became extinct putting an end to using the beaver pelt as a form of currency.

 

LEG END:
Thanks for saying what needed to be said.

 

Beavers are not extinct.
maybe they just became rare.

 

They're not extinct here in Canada!

http://www.winnipeg.ca/publicworks/naturalist/NS/ff/beaver.asp

 

I see beavers all the time in Colorado! Sorry to derail the thread but again I would rather have people laugh than fight.