What would happen if the world returned to the gold standard?

You have shown truth in my observation/approach that intellect/creativity = rewards

I believe you've shown both, plus a labor element that results in $$$.

I generally have never quoted a price for my efforts, accepting whatever my client felt appropriate. Today my efforts are generally Pro Bono or the least to be found, for one who wants an earned solution.

My education was free, and I always was approached for a solution, and subsequently received an "offer".

I never refused or asked for additional wage, left if unappreciated. I always had support for my efforts.

Others knew affiliation/support generally equaled education, quite often advancement.

My financial problems arose from acquiring too many expensive rewards, and taxing requirements.

$$$ may not equal rewards = legal problems

JMHO

 

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I believe there always will be "soup lines", as from my labor experience providing "freebees" to the public.

In a "team" environment there doesn't need to be a top.

The best assignment I ever had was from a small profit sharing closed corporation company.

I was hired to accomplish supreme international "market-share" in 3 areas of problematic automated food production.

The president of the company gave me absolute "Power of Attorney" for hiring/travel/expenditure and use of fabrication facilities.

Myself and a team of personally selected uninformed existing non-union employees delivered "market-share" as requested.

The largest food-handling company in the world purchased our company, without any changes, other than a salary increase for the team.

I refused the increase and left to be employed by an 80,000 employee international company, producing an estimated 60,000 products/services.

They would allow my innovative original designs for fabrication/installation through-out the world.

JMHO

 

I've been part and party to sharing my life with mentally-challenged individuals who have contributed far more to society in their employment roles than the "normal".

Often, a supreme non-complaining appreciative attitude.

A small bag hand-full of assorted cents with large, Indian, Copper, special-dates, can really be appreciated.

JMHO

 

No because the government wouldn’t need to back all issued banknotes with gold.

Think about it. What are the odds that every single banknote is going to be redeemed for gold at the exact same time?

As I’ve said one thing the US government noticed is that when people are told their banknotes can be redeemed at any time in gold…they rarely actually redeem it.

It’s when people get scared that the ability to redeem banknotes for gold will be unavailable in the future that is when bank runs happen and everyone rushes to redeem banknotes in fear that they will lose their value & redeemability.

 

Not necessarily “only true measure of value” but rather the fact that gold is portable and nearly indestructible.

It’s true they could use land or any other commodity.

I just asked about gold because that’s what was used in the past.

 

Gold IS money though.

I can redeem my gold in cash at anytime
by selling it on the open market at the rate of $1 = 1/2000 troy oz of gold.

If JM Bullion can redeem $2,000 USD for
1 oz of gold without issue why can’t the US government?

However in my hypothetical scenario that role would be taken by the government rather than be a private market thing.

 

You sound like me; consume little produce a lot.

Big businesses don't appreciate this. They promote on the basis of nepotism and education with no concern for competence. And this is why gold would have to be valued at about $40,000 per OZt. We throw away far more than we use.

 

Very true. North Americans definately waste a lot of food/ throw things out that could be repaired. Education is one of my pet peeves. Here in Canada kids are brainwashed to beleive University degrees = big Dollars/ affluent lifestyles/ mansions/ fancy cars. Well, I have grade 12, doing very well, in top 1 percent. I see University grads working at fast food outlets. Most cannot do cursive writing/ figure out a bill, without useing a calculator/ could not even point out five Countries on the African Continent/ also cannot spell. I swear to God, if I walked down an Ottawa street, and polled 100 people, if they could tell me when the "Seven Year's War" took place, main adversaries, I would get...Haven't got a clue I knew the answer when I was 10.....

 

I agree with your general statement, but specifically, DUH!
Take your choice:
https://en.wikipedia.org/wiki/List_of_the_lengths_of_United_States_participation_in_wars

Rank War Dates Duration
1 War in Afghanistan 2001 – 2021[1][2] 19.9 years
(19 years, 10 months)

2 Vietnam War 1955 – 1975[3][4][5][6][a] 19.4 years
(19 years, 5 months)

3 Philippine–American War and Moro Rebellion 1899 – 1913 14 years

4 War in North-West Pakistan 2004 – 2017 13 years

5 Northwest Indian War 1785 – 1795 10 years

6 Iraq War 2003 – 2011[7][8][9][10][11][12] 8.9 years
(8 years, 9 months)

7 American Revolutionary War 1775 – 1783 8.4 years
(8 years, 5 months)

8 War on ISIS 2014 – present 7.7 years
(7 years, 8 months)

9 Second Seminole War 1835 – 1842 6.7 years (6 years, 7 month)

I like believed many, can't keep track of our involvement in "others" affairs!

I have a difficult time remembering the Axioms, and tested out of "High School" where the test included the 3 Rs', brief history and Civic affairs.

I'm hoping to avoid a similar war before my demise.

 

The real problem is we waste entire factories by setting them up to make products that are no good for anything. And then we operate them so poorly that the worthless product requires double the input required to produce them. If all this weren't bad enough we shut them down while they're still "profitable" and the owners take the pensions and assets while shipping the jobs of making garbage to China. We even make products that don't really need to be made or barely need to be made but people buy them to top off their garbage cans every week. Why have a dumpster or a large bin if it's not full week after week?

Even the best factories are wasting significant amounts of raw materials and product and vast amounts of human potential. The left hand never knows what the right hand is doing. The workers who operate the equipment and tools are not told what they cost or trained to operate them, and the leaders are all pulling in dozens of different directions because none of them are trained in the entire business or are not educable in the entire business. Most bosses are not productive at all and their job is to invent work for other bosses which impedes productivity even further unless the new work hamstrings a boss that was even worse than the first.

If you divide the total debt of the world that was created by excessive spending relative the machine that creates wealth by the total quantity of gold in the world you'll get far more than $40,000 per ounce.

 

It appears you're well educated in the practices of our industries, and that of other Countries.

I believe you'll find that China has the greatest world average education, and a recent college graduated individual earns ~5471 Yuan ~= $865.

You really believe they'd accept our worth-less practices to become the worlds productive leader?

I've been involved with them to design/build full circle cycle products.

In those products virtually every component can be recycled.

Their general goal is to produce using minimal manual labor, with an eye on materials availability.

I don't believe your complete understanding is factual.

Having worked in our society for greater than a half-Century on both sides of the aisle, I also believe improvements are warranted.

I personally hope that improvements will free some of those scarce coins I can hardly find, that others are ready to sell, so I can divest my Fiat.

I do however believe that you may be an optimum candidate when you explain your solutions.

JMHO

 

There's only one possible solution; identify each of the problems and take steps that will address that problem. Unfortunately most of the identification and steps can be taken as "politics" so can't be discussed. But each problem involves a simple solution. The issue isn't so much fixing it as it is the upheaval caused by upsetting the status quo. Therefore the goals must be identified in advance and then implemented over many years. Most financial changes can be implemented over ten years and infrastructural over twenty years.

Of course such changes will reduce governmental control over the economy so may be impossible to even discuss. If the economy were running like a well oiled machine it would cut carbon emissions by 75% and gold might be almost anywhere.

The status quo was enshrined by the boomers so even the numerous unsustainable processes we call the "economy" will not be changed. Instead when some vital cog is no longer operable bonds will implode and gold will go up. Civilizations become calcified. Or to put it another way they are half fossilized even before they end.

 

The main problems with going back to some version of the Gold Standard are that (1) it would hamstring the Federal Reserve and (2) if rigidly enforced, it would not allow for external but only INTERNAL devaluations and adjustments.

A (rigid) gold standard would have prevented the quantitative easing that we needed in March 2020 and October 2008.

Since prices and labor wages are sticky to the downside, it would mean larger periods of unemployment and lost GDP. This is what has worked against Italy since it joined the EU and the Euro.

You also have to worry about "The Denominator Effect" whereby nominal GDP is not allowed to grow and reduce the real debt burden of Debt/GDP by either growing nominal AND real GDP or letting it fade via a slowly rising rate of inflation (not the galloping "transitory" nonsense we have now). Austerity measures can INCREASE the debt burden because GDP falls more than debt. See....Greece, Italy, and the rest of the PIIGs, etc.

 

Oh yeah I know for sure it wouldn’t work.

But I’m just curious what would happen if suddenly the world converted to a gold standard over a short period.

For sure the money supply would be crushed and anyone with their wealth in cash would be in big trouble.

However on the other hand I do think we need to find some way to slow inflation. It’s ridiculous how quickly the prices of things is rising.

It seems like from 1776 when America was founded all the way until like 1960 it was possible for someone to get a decent meal at a restaurant for under $1.

Yet now just over 60 years later it’s not $2 or $3 or even $5. It’s $15+ which really just shows how rapidly prices have risen compared to the past.

 

Actually, cash would show a decent real rate of return. Short-term Treasury rates would surely go up.

From 1800 to 1967, the price index doubled (most of that after 1914).

From 1967 to 2021, the price index is up 8 fold.

2-fold in 167 years......8-fold in 54 years.

 

Give us some details on how this would be implemented. But consider the following:

The total world reserves of gold are worth about $US13T. Almost half of that is in jewelry, with the biggest holdings in India and China. Governments own only about 15% of it. The amount of known reserves in-ground is small (about 25%) compared to what’s already above ground. And the biggest in-ground reserves are in Russia and Australia.

Compare the above with the US M1 money supply (very liquid supply such as cash, checking accounts, savings accounts, etc.) of about $US20T. And that’s only the US.

So, how’re you gonna setup backing the dollar with gold … fiscally, physically, legally and politically?

Answer: You’re not. Gold is now an economic pipsqueak compared to the world economy. Since mid20th century, the world population and economy have grown way beyond the ability of any commodity to be a general medium of exchange or to back whatever is designated as a medium of exchange.

Current non-government virtual currencies, like bitcoin, have a design flaw that will lead to their disappearance. Namely, they will eventually disappear due to lost or forgotten passwords. It’s estimated that more than 10% of bitcoin is already gone. There is no easy fix to this problem.

What we’ll continue to have is mediums of exchange established and supported by governments. These are already pretty much virtual. Most of the cash flow of most folks in the industrialized world does not involve cash. And other paper forms (check, money orders, etc.) are fast going away. I would guess that less than 10% of my family’s monthly cash flow involves cash or paper … it’s done via the workings of electrons, radio waves, semiconductors and magnetic memory. In other words, it’s virtual.

The penalty, which won’t go away, is inflation. Only political forces can keep it low, and those will be variable over time.

References:

https://www.visualcapitalist.com/chart-how-much-gold-is-in-the-world/

https://fred.stlouisfed.org/series/M1SL

Cal

 

There are some very good scholarly journal articles on the gold standard and the Depression, which you can find for free. Some are paid or require some college access code that apparently students get through their institutions.

Ben Bernanke, former Fed chairman, wrote a review of "Golden Fetters" a book by Barry Eichengreen, one of the foremost scholars on the gold standard and The Depression.

I just bought the book "Golden Fetters" -- pricey, but if you want a truly scholarly book covering the global economy in the 1920's and 1930's, that's the one to read even above newer ones.

 

Here's Bernanke's review of the book. If you want others, let me know I can post them here.

 

I would never trust a banker/ they want the public to own paper currency/ which is a valuable as the paper content. In the days of real money copper/ silver/ gold/ Nations had to keep their spending in check/ so they could not go into debt like US 31T and coounting/ hence high inflation, or they could steal another nations gold/ silver (Spain) plundered by English/ British navy/ privateers. Proof is this/ US minted Double eagles 1850-1933/ each coin was valued at $20 contained oz. of gold. Now it takes $2200 to have oz. of gold. I would not be surprised if Trump will put US back on gold standard/ he was talking about it in his first term. It would be bad for me, since gold would go up to 60K an oz. so I could not afford more AV coins My collection would stagnate at 1300 AV coins, which is no fun.