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<p>[QUOTE="GoldFinger1969, post: 3713480, member: 73489"]<b><i><span style="color: #ff0000">We are NEVER going back to a gold standard, pure or modified or otherwise.</span></i></b></p><p><br /></p><p>The reason we used gold in the first place was because at least <b>it represented a fixed standard of value with a defined set of information. </b> That information was that <b><span style="color: #59b300">$20.67 could be exchanged for 1 ounce of gold.</span></b> This was important because information travelled much slower in the 19th and early-20th centuries: telegraphs lagged by minutes, sometimes financial information took hours to be received. </p><p><br /></p><p>A currency could plunge 50% and it would take minutes or hours (even days) to reach the exchanges and the general public. Today, that same infomraiton is disseminated to millions of individuals within seconds, hundreds of millions within minutes.</p><p><br /></p><p>Today, that same fixed standard of value is via the faith we have in central banks, justified or not. We know that the purchasing power will be defended (inflation is a no-no). The dollar can be exchanged for goods and services, even payment on the national debt. <img src="styles/default/xenforo/clear.png" class="mceSmilieSprite mceSmilie8" alt=":D" unselectable="on" unselectable="on" /></p><p><br /></p><p>Tying monetary policy to a commodity is to surrender fiscal and monetary control to the vagaries of a commodity. This is the crux of the problem in Europe with the ECB controlling monetary policy (in lieu of a gold standard) and supplanting national central banks. Countries no longer have the ability to engage in an EXTERNAL SHOCK ADJUSTMENT (i.e., inflation, currency devaluation, etc.) in response to financial or economic stress and must rely on INTERNAL SHOCK ADJUSTORS like falling wages, rising unemployment, etc.</p><p><br /></p><p>Internal adjustments are LIGHT-YEARS more difficult to withstand than external ones -- just ask the Greeks or Italians. <img src="styles/default/xenforo/clear.png" class="mceSmilieSprite mceSmilie8" alt=":D" unselectable="on" unselectable="on" /></p><p><br /></p><p>The Denominator Effect (National Debt / GDP) is tied to monetary flexibility since GDP growth (real + nominal) is tied to the monetary aggregates.[/QUOTE]</p><p><br /></p>
[QUOTE="GoldFinger1969, post: 3713480, member: 73489"][B][I][COLOR=#ff0000]We are NEVER going back to a gold standard, pure or modified or otherwise.[/COLOR][/I][/B] The reason we used gold in the first place was because at least [B]it represented a fixed standard of value with a defined set of information. [/B] That information was that [B][COLOR=#59b300]$20.67 could be exchanged for 1 ounce of gold.[/COLOR][/B] This was important because information travelled much slower in the 19th and early-20th centuries: telegraphs lagged by minutes, sometimes financial information took hours to be received. A currency could plunge 50% and it would take minutes or hours (even days) to reach the exchanges and the general public. Today, that same infomraiton is disseminated to millions of individuals within seconds, hundreds of millions within minutes. Today, that same fixed standard of value is via the faith we have in central banks, justified or not. We know that the purchasing power will be defended (inflation is a no-no). The dollar can be exchanged for goods and services, even payment on the national debt. :D Tying monetary policy to a commodity is to surrender fiscal and monetary control to the vagaries of a commodity. This is the crux of the problem in Europe with the ECB controlling monetary policy (in lieu of a gold standard) and supplanting national central banks. Countries no longer have the ability to engage in an EXTERNAL SHOCK ADJUSTMENT (i.e., inflation, currency devaluation, etc.) in response to financial or economic stress and must rely on INTERNAL SHOCK ADJUSTORS like falling wages, rising unemployment, etc. Internal adjustments are LIGHT-YEARS more difficult to withstand than external ones -- just ask the Greeks or Italians. :D The Denominator Effect (National Debt / GDP) is tied to monetary flexibility since GDP growth (real + nominal) is tied to the monetary aggregates.[/QUOTE]
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