Posted on 03/30/2009 12:58:42 PM PDT by mnehring
Russia has become the first major country to call for a partial restoration of the Gold Standard to uphold discipline in the world financial system.
Arkady Dvorkevich, the Kremlin's chief economic adviser, said Russia would favour the inclusion of gold bullion in the basket-weighting of a new world currency based on Special Drawing Rights issued by the International Monetary Fund.
Chinese and Russian leaders both plan to open debate on an SDR-based reserve currency as an alternative to the US dollar at the G20 summit in London this week, although the world may not yet be ready for such a radical proposal.
(Excerpt) Read more at telegraph.co.uk ...
This was probably September’s destination.
Personally, I believe in simply letting the market determine the medium of exchange. Paul’s position is that legal tender laws should be abolished and I very much like the idea. Gold may end up being the medium chosen on the market, but IMO probably only for large transactions. Perhaps silver or even copper would be chosen for smaller transactions. I’m just speculating; hell it could be anything so long as it is divisible, serves as a store of value, relatively scarce (and by that I mean high value per unit; it would have to be common enough to be used), etc.
One reason I don’t favor a “standard” is because of bimetallism. If there are two metals with an official exchange rate, one will eventually be driven out of circulation because the market rates will be constantly fluctuating. The relatively undervalued metal will be driven out while the relatively overvalued will tend to take its place.
***...to only increase currency at a set rate below natural inflation...”
What do you mean by the natural rate of inflation?
Spain spent that gold centuries before the Spanish Civil War.
How do you feel about long-term deflation?
“How do you feel about long-term deflation?”
Not well, I just wonder if in the long run a gold standard would help create a more honest and solid economic system.
How solid was our economic system under the gold standard?
“How do you feel about long-term deflation?”
Pretty good actually, so long as it is not the kind preceded by central bankster-induced hyperinflation.
IOW, if a gradual lowering of prices occurs as a consequence of the free market setting interest rates, long term market-based investment decisions being made without too much government interference, and an increase in technology and productivity due to the same, it would be wonderful for America.
That would be great. But what if it was a consequence of gold production increasing the money supply 1% per year while output increased 3%-4% per year?
“How solid was our economic system under the gold standard?”
That is sort of what I was asking. I don’t really know. We did go through the Great Depression, we still had the standard then, correct? Yet we understand from recent research that the Great Society programs extended the Depression for years.
If we don’t base our currency on gold, what shall we base it on?
“That would be great. But what if it was a consequence of gold production increasing the money supply 1% per year while output increased 3%-4% per year?”
The supply of gold (money) should be set by the free market as well. Why would industry, in the long term, produce more output than the market can sustain?
Your example is actually a good illustration of why the private Fed cartel, which does not set interest rates or the money supply according to the free market, should be abolished. The artificial housing boom was partially a result of artificially low interest rates, which allowed many without real resources to purchase homes on credit.
How can ANYONE make proper long-term savings & investment decisions when the biggest market players are the Fed, the government and other insiders rigging interest rates, devaluing the FRN “dollar” aka US dollar, and propping up the stock market through Treasury’s Working Group on Financial Markets?
The supply of gold (money) should be set by the free market as well. Why would industry, in the long term, produce more output than the market can sustain?
Exactly! We should limit our GDP growth to the growth of the supply of a pretty yellow metal. What could go wrong?
The artificial housing boom was partially a result of artificially low interest rates, which allowed many without real resources to purchase homes on credit.
And we both know there were no booms or busts while we were on the gold standard, right?
“Exactly! We should limit our GDP growth to the growth of the supply of a pretty yellow metal. What could go wrong? “
The growth of supply of gold money in the long run should be sufficient to meet the needs of a market economy. Have you ever heard of a gold mining operation? Are you just being obtuse?
“And we both know there were no booms or busts while we were on the gold standard, right?”
The depression of 1920-1921 lasted for about 18 months without a socialist fiat currency and socialist government intervention, both of which you seem to favor. A free market “boom” or “bust” is always preferable to hyperinflationary depression followed by deflationary depression, induced by massive malinvestment and resulting in the destruction of the wealth of the productive class AND the currency itself.
Why, because you say so?
Have you ever heard of a gold mining operation?
Exactly how fast do you imagine the gold supply expands? Are you just being obtuse?
The depression of 1920-1921 lasted for about 18 months
What? A depression while we were under the free market gold standard?
a socialist fiat currency and socialist government intervention, both of which you seem to favor.
You picked a bad week to stop sniffing glue.
A free market “boom” or “bust” is always preferable to .......
LOL!
It’s important to note that even when we were on a “gold standard”, fractional reserve banking was practiced and often propped up by the government per the approval to suspend specie payments, meaning banks didn’t have to meet their depositors’ demands when they came in and demanded their own money from the bank. We also had two central banks prior to the Federal Reserve, both before 1850, and then centralized banking with multiple levels of fractional reserve banking (each level having a stated reserve requirement) under the National Currency Acts (I believe that’s what they were called but it might have been the National Banking Acts) from 1864 up until the Federal Reserve System in 1913.
There were plenty of booms and busts associated with these periods since exactly the same kind of thing happens as under the Federal Reserve, namely that banks inflate credit and are able to do so in relative harmony because of the central bank (or centralized nature of the banking system). Eventually, the inflation stops and a contraction sets in and you get a depression/panic/recession (whatever). I can’t say for sure that we were ever truly on a gold standard because there was constantly manipulation of the currency in the banking sector. Even the period of “free banking” from the late 1830’s till about the Civil War saw the banks given the ability to suspend specie payment, which took away a natural check against fractional reserve banking and thus made it easier to do.
As for a free market boom and bust, I think they are indeed possible, but without the (seemingly) limitless supply of credit available, the errors would be exposed much more quickly and the malinvestments liquidated relatively painlessly. There would always be fluctuations as some companies went out of business, but nothing to the degree of what the current system is like.
Just my 2 cents.
“The growth of supply of gold money in the long run should be sufficient to meet the needs of a market economy.
Why, because you say so? “
No, because that’s what happens in a free market, Forrest.
“The depression of 1920-1921 lasted for about 18 months
What? A depression while we were under the free market gold standard? “
A depression without a bankster bailout, but still WITH fractional reserve banking. Recessions are the market’s way of sorting out malinvestment.
We had sufficient gold to meet demand? You have any backup for your feeling about that?
A depression without a bankster bailout, but still WITH fractional reserve banking.
Fractional reserve banking under the gold standard? Shocking!
So when gold supply increases 1% a year and the economy grows 3% a year, does that cause any problems? Or would we be just fine even if the money supply didn't grow at all?
“So when gold supply increases 1% a year and the economy grows 3% a year, does that cause any problems? Or would we be just fine even if the money supply didn’t grow at all?”
The purchasing power of gold relative to other goods can change. If technology and efficiency improve, more goods can be produced at a lower real cost. And that is assuming that market forces do not encourage gold & silver exploration and mining to ramp up to meet demand.
You may have heard of this exploration and mining thing in regards to other valuable resources and commodities, such as oil.
Are you saying that we can have inflation or deflation under the gold standard?
If technology and efficiency improve, more goods can be produced at a lower real cost.
You're not confusing increased productivity with deflation, are you?
And that is assuming that market forces do not encourage gold & silver exploration and mining to ramp up to meet demand.
That's just what our economy needs, more resources diverted to mining a pretty yellow metal.....because it's MONEY!
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.