Gold Standard

If we were to go back to a gold standard (especially worldwide) would the holders of gold and silver be highly rewarded? What would the fixed value of gold look like? Silver?

 

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Who said the value of gold would be fixed?

 

Check out this article....a prediction by Forbes that we will return to the gold standard within 5 years.....

http://www.humanevents.com/article.php?id=43439

 

I think if we did, everyone who bought over about $450 oz would be crying foul.
Guy

 

It won't happen and it wouldn't work.

 

I think we might see some version of the gold system. It is unlikely that gold will be returned to its historical role as currency, but it is very feasible to use gold as partial backing for the issuance of currency.

Interestingly, most people think they know what the gold system is, but almost nobody really understands it. There isn't much information available regarding the mechanics of the system that existed prior to World War I, a time when international trade was a higher portion of world GDP than at any time up to about the mid-1990s. No university program that I am aware of teaches how it actually worked, and usually it is just mentioned in passing. Antal Fekete has done a good job of recording how it worked and how it related to the "real bills doctrine" of Adam Smith which enabled a small quantity of gold to support a massive amount of commerce. It's interesting reading for anybody who wants to know how gold functioned as currency in the real world instead of imagining that people walked around with pockets full of gold coins.

 

Sure let's go on a gold standard and yeild control of the world's money supply to goverments such as Russia, China, South Africa and Peru. I just don't get it. All the gold bugs are concerned about the US Dollar losing reserve status - but if you go to a gold standard by default the US dollar loses reserve status.

 

It's losing it anyway. The rest of the world's patience for the USA exporting their debt to them has run out. This is why the world's central banks have bought up close to 130 tones of gold over the last quarter. Gold is the hedge to the USD.

 

It hasn't lost it yet - why bury it before it is dead?

 

Because in the process it is absolutely killing the American economy as well. The $ has become nothing more than the vehicle to transfer accumulated wealth of the common people to the top 1% of this country and the primary method the gubment has to control the people well beyond what the Constitution allows.

 

The national debt as a percentage of GDP was higher at the end of World War II than it is now. So there is no doubt that there are things that can be done to fix the current problems. Since it takes politcal courage, they won't get done until the last possible moment, but the probability of eventual success seems higher than the probability of economic collapse.

 

Apples & Oranges. The GDP is no longer calculated as it was in the 1940s.

 

Didn't you suggest just a few posts above that the US is exporting their debt to foriegn governments? You do know that the US ranks something like 6th in annual gold production behind such stellar governments like Russia, China South Africa and Peru? Are these the people you want in control of the world's money supply?

 

Total US government gold reserves are around 261 million ounces, at $1500 per ounce it's worth less than $400 billion. US GDP is $14 trillion a year. Divide 14 trillion by 400 billion, and you see that each ounce of gold, or a certificate of deposit therefore, has to change hands 35 times a year to carry its share of economic activity.

Put another way - the government has less than 38 grams of gold on hand for each US resident. A total of about 560 cubic meters. Your share is a cube about 25mm on a side.

Good luck making change.

 

The GDP number would be useless if it was calculated as it was in 1940.

 

Gold doesn't have to circulate to have a gold-backed currency, and the amount of gold in hand isn't that important. All it takes is to begin backing all or part of the currency issued by the Fed with gold instead of with US Treasury securities. In a world of fiat currency, one backed partly by gold will come out on top.

 

Annual gold production is only about 2% of gold stocks. If you back the dollar with gold but don't permit the withdrawl of gold, what other nations do is irrelevant.

 

I'm sorry, but that's simply nonsense. Unless a unit of currency is freely and readily redeemable for a fixed amount of a commodity, then asserting it is backed "in part" by that commodity means nothing.

At the moment, Federal Reserve Notes are legally first liens on the property of the Federal Reserve Bank. That means nothing, too, unless you're free to take your FRNs to an office of the FED and exchange them for furniture, light fixtures or primo parking spaces.

It's just a different version of nothing.

 

If you include unfunded entitlement obligations, it is much worse now than World War II. I would also bet consumer debt and state debt in many states is worse now than then.

 

Indeed, I agree with you.