Posted on 12/19/2015 11:51:06 AM PST by Jim W N
THE NEW YORK TIMES recently ran an article trashing the idea of a return to a gold standard. A growing number of Republicans, including presidential hopeful Senator Ted Cruz, advocate fixing the value of the dollar to gold.
The purpose of a gold standard is to ensure that a currency has a fixed value, just as measures of time, weight and distance are fixed.
A few of the widespread misconceptions about gold:
- Gold restrains economic growth. It does the opposite. When the value of a currency is stable, investment flourishes-and so does economic activity.
- Gold dangerously constricts the flexibility of authorities to respond to crises. No, it doesn't. Gold-based money has nothing to do with the ability of a central bank to mitigate a financial crisis by acting as a "lender of last resort."
- Gold artificially constrains the money supply, thereby hurting the economy. [T]he amount of gold doesn't restrict the money supply any more than the supply of rulers would restrict the size of a house you might construct. It merely ensures that money has a fixed, stable value.
As Nathan Lewis has pointed out, from 1775 to 1900, [t]he global output of gold went up 3.4-fold, yet the U.S.' money supply burgeoned 163-fold.
What virtually all economists fail to grasp today is that you can have a gold-based currency without owning a single ounce of gold. Gold is a barometer. We could set the dollar/gold ratio at, say, $1,100 an ounce. If the price rose above that level, it would mean there was too much money in the economy, and the Fed would tighten. If it dropped below, the Fed would ease.
The crux of the gold debate is about power: The NYT and many economists [support] government dominating the economy; honest money advocates don't.
(Excerpt) Read more at forbes.com ...
Since qold futures trade on a number of commodities markets then wouldn't the price of gold fluctuate daily? And wouldn't the Fed be tightening then loosening then tightening the supply of money hourly?
If the dollar is pegged to gold, then gold would not fluctuate in dollars at all. It would, however, fluctuate in terms of all other currencies not either pegged to gold or to the dollar. Which it does anyway.
Sure it would. You can say that one ounce of gold can be exchanged for $1000 U.S. dollars but elsewhere in the world the market price of gold will fluctuate with supply and demand.
The purpose of a gold standard is to ensure that a currency has a fixed value,
WRONG sort of.
A Gold Standard Prevents GOVERNMENT FROM DEVALUING MONEY by limiting how much they can PRINT!
Looks like Steve Forbes might be long in gold, and is trying to pump it up before he loses his shirt.
No. Unstable commodity prices come from an unstable, weak dollar that is not fixed to a standard value. History shows that the gold standard made the dollar a reliable and stable currency and brought growth to our economy.
But how does one measure global wealth? And who would be setting the definitions and doing the accounting?
And even if you could measure global wealth, how would you go about guaranteeing that only so much gold is mined and refined? Would we have to create some sort of cartel like De Beers if too many companies started mining too much gold? What would happen if they didn't find enough gold? Would we have to destroy a proportionate amount of wealth?
In the 'good old days' gold was pretty much valued for purely aesthetic reasons. It was easy to just affix some random price to it. However, now gold has many industrial uses so it has real intrinsic value that may go up or down depending on supply and demand.
And what about all those derivatives? Gold today will not be treated like gold in the past. It will not just be a commodity but will be a raison d'etre for numerous derivatives upon derivatives upon derivatives which will result in wild speculation leading to massive swings in the global price for gold.
We would need to set the price at 64,000 an ounce to cover all the dollars we have floating out there......
That’s the effect. The purpose is to stabilize the value of the dollar.
When the dollar was on the gold standard it was considered by far the most reliable and solid currency in the world. Everything was measured in terms of dollars.
Its not called the “gold standard” for nothing.
Seems some of our peeps need a Constitutional refresher, mine doesn’t have a FED but Def gold and silver
And the problem with that is?
Crap. Fluctuations in commodity prices comes from supply, demand, and rumor.
The history of gold prices is that if the dollar is strong and stable, investors go that way and do not tend toward investing in gold and commodities, keeping the price of gold relatively stable.
But when the dollar is weak and unstable, gold prices tend to go up because investors shy away from traditional financial investments and feel safer investing in tangible things like gold and other commodities.
The history of gold prices is that if the dollar is strong and stable, investors go that way and do not tend toward investing in gold and commodities, keeping the price of gold relatively stable.
But when the dollar is weak and unstable, gold prices tend to go up because investors shy away from traditional financial investments and feel safer investing in tangible things like gold and other commodities.
marron is correct. The price of gold in dollars would be the same no matter what country you were in.
The price of gold and the value of the dollar would adjust in tandem against the local currency. The value of the dollar in terms of gold would remain constant.
“We would need to set the price at 64,000 an ounce to cover all the dollars we have floating out there..”
That’s not how it works. If we established a gold standard right now it would be at or very near the present price of gold.
“Seems some of our peeps need a Constitutional refresher, mine doesn’t have a FED but Def gold and silver”
You’re confusing two unrelated issues.
Congress wrote the legislation that allowed banks to incorporate. Congress wrote the legislation that created a lender of last resort out of a consortium of banks e.g. the Fed.
FDR, Nixon, and various Congresses abrogated the gold standard for the US dollar. The Fed had no say in whether or not the dollar is exchangeable for gold. Any complaints about the current lack of a specie standard for US money needs to be aimed at Congress and the President.
No, I think I have the problem licked fairly well:
1) Congress, having NO authority to delegate that which We the People gave it, like many other areas/agencies/departments/etc., abrogated their responsibility by ‘creating’ a non-govt entity from which we borrow, with interest, fiat ‘money’.
2) Presidents, having ZERO authority over the monetary system, arbitrarily decided to illegally/unconstitutionally take the U.S. off the gold standard [from where this idea originated, aside from FDR’s hind-quarters, is beyond me...].
3) Coupled, the Socialists/Left (I repeat myself), along with their ‘conservative’ (R) quislings, have been allowed to turn our Republic into a ‘Democracy’, creating programs/agencies/departments from the ether, inverting the Federalism principles of our Founding, stripping the People of their Rights, Liberty and Freedom while creating economic slaves of the same.
Seems pretty crystal. But, I’m at least open to hear where I might be ‘off’.
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