Can we afford to go back to the gold standard?

In discussion of a gold standard as the basis of the U.S. dollar, it has been estimated that all the gold mined in the history of the world by the end of 2009 totaled is 165,000 tonnes. At a price of 1000.00 per oz one ton of gold or 32150.75 troy ounces, has a value of approximately $32.15 million. The total value of all gold ever mined in the history of the world would barely exceed $5 trillion at that valuation.

The officially admitted national debt of the United States as of August 2010 was 13.3 trillion dollars, with unofficial estimates by private economist placing the the actual deficit - including non-budgetary items like unfunded liabilities of Medicare, Medicaid, Social Security and the defense budget - at $202 trillion. Source: http://www.eutimes.net/2010/08/official-us-deficit-put-at-staggering-202-trillion/

In an earlier letter to 'The Paper' (June 25, 2010), a letter signed by Democrat Congressmen Gary Akerman and Mike McMahon was quoted, that placed the total US private derivatives business of large US based financial institutions at 600 trillion dollars, this is in addition to whatever valuations can be placed upon the total public debts outstanding of the United States as previously mentioned here - with those numbers being in the gazillions of gazillions of dollars, I ask the readers;

Can we afford to go back to a gold standard for the infamous "Greenback" as some are suggesting?

Because if we go to a gold backed dollar with bank reserve requirements based on the total ounces of gold on hand, then we are going to have a very meager, miserly, mean economic existence - you can bet your last bottom dollar, on that...

 

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No mate, we cant do this. Economy always is not based on the standard of gold, but the planning commission also takes other factors such balancing inflation rates, usually that is 4 percent in many countries. The balancing inflation rates can absorb smaller inflations that exists sometimes.

 

What also could be mentioned is that the US govt uses creative book keeping so the numbers look better than they are.

 

What you are exactly trying to point out here about creative book keeping.

 

We would love to but its just not possible, I mean even if the 20 percent of the people in the Us economy go to US State bank and ask for gold for in place of their money, cash which is , they wont be able to provide that you know, our money is not gold backed, thats the reason why we face inflation in the economy.

 

I doubt it would help our financial situation to go back to gold. may worsen it or screw us if we did.

 

hmmmm it depends on the world scenario you cant say that it might worsen your situation

 

I think we possibly could. Alot of other contrys still use it!

 

I know some countries still do, but it's impossible for US.
We have way too much gold in circulation.
As much as it will be nice to have the gold standard back...
I guess we're stuck with slow but steady inflation.

 

Yeah some countys still do it, though i can't see us doing it but its a thought.

 

yeah i doubt it...

i hope we can though!

 

It was a good thing we got off the gold standard because it helped with the recovery from the Depression since this affected three economic variables. These three variables would be exports, investment and real wages.

Exports: Going off gold made domestic output cheaper abroad and raised exports.

Investment: Going off gold made it more profitable to invest. Countries that had more depreciated exchange rates allowed investment to recover more quickly.

Real wages: Going off gold raised inflation or price levels. Since nominal wages were "sticky" this led to lower real wages and less unemployment or more hiring since labor was now less expensive. This employment regenerated demand and made for recovery.

We also had double-edged sword with the Brenton Woods system where other countries were relying on the U.S. Dollar.

 

Im not from the us but the uk and would love to see the current currency replaced for gold.

 

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I'm not sure. On one hand I rather like the idea of the dollar having actual value again, but that also means that visible cost for everything drops, which makes it even more valuable which means pay-cuts are likely and that'll throw people into a panic. Even if at the end of the day they're getting the same bang for their buck, people don't like it at all when their wages get cut.

It would also mean that either the gold-to-dollar ratio would have to be low on the gold side and high on the dollar side. The Fed would have to stop printing as much money (...good thing.) and maybe the inflation will stop. But...I don't know. I'm not well versed in currency.

 

If the "slow and steady inflation" becomes hyperinflation, the masses will be begging for a return to the gold standard.

 

If it gets to a place where hyperinflation becomes that much of a problem then it probably would be too late to experience the benefits of the gold standard (not until after things have stabilised). Having a currency that's actually worth something on the market is valuable, but just because you're on the gold standard that doesn't mean your currency can't collapse. Remember what happened in Zimbabwe.

As for getting back to the standard, the sooner the better I say. I'm not sure if the US could afford it without making some spending cuts and putting an end to the Federal Reserve's money printing abilities, but since those are all things that need to happen anyway...The increased confidence investors would have in the economy as a result of the decision could go a long way.

 

Yeah I totally agree that it depends on world's scenario!