Posted on 03/15/2011 5:54:12 AM PDT by expat_panama
ML/NJ
Don’t forget to read the article, at least look at the pictures...
Let every country keep its own fiat currency. As long as no fiat currency has reserve status, no country can afford to run a printing press.
When the dollar devalues by 80% sometime this year, the world will learn a useful lesson about the limits of fiat. They will continue to use it: they may however learn not to abuse it. And people who own Gold and Silver will get to buy some serious real-estate.
I'm not taking sides here, but I think ML has a point if you extend it to:
The only thing stupider than a gold standard is a paper standard backed by political promises based on unrealistic expectations of any economic system.
I think an inflationary fiat monetary policy, and socialist security ponzi schemes for the USA might have worked somewhat given a non-decreasing growth in productivity...workers actually working.
But when such a system from the 50s turns into the sloth consumerism of the 21st century so far, it can't be sustained....no matter what the monetary system.
Because gold is a real asset and real estate isn't?
Amen. The one thing the gold standard does for our money is at least provide a floor. These Fed worshiping fools will see how bad it will get when bond markets fully collapse.
The whole point, basically, was that gold too can be abused by central banks and governments.
Because after the devaluation Gold and Silver will hit their peak levels for this cycle.
However - domestic real estate will be at a deep low due to the problems with issuing mortgages in an uncertain inflationary environment. At that point people who can buy houses with a lump sum will do well.
Right, what we might call a 'disinterested partisan'. That's OK, gold sometimes has a dazzling psychedelic affect.
Devalues with respect to what, the Euro?
The gold standard was a major source of grief all during the 1700s and 1800s. It will destroy any nation stupid enough to re-implement it at this juncture.
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“Because gold is a real asset and real estate isn’t?”
No; because gold is the benchmark of liquidity and real estate is dusty dry.
Gold is "abused" by central banks? Central banks have no control over gold. In fact that is one of its beauties. If the United States goes the way of the Roman Empire and takes the Federal Reserve along with it, all those gold coins that were minted a century ago will go along being worth more or less what they have been worth over the years. Little pictures of dead politicians will be worthless historical curiosities.
The only function the US Government had with respect to gold (and silver) was to coin it, which is to say the formed it into little discs of recognizable weight and purity. The metal was brought to the mint(s) by miners who had to pay a fee (seigniorage is the term) to the government for this service. The government didn't create money. The private sector did, which is why it was so much more honest.
ML/NJ
Some 60% of USD reserves are held outside of the US. When the buying power of those USD reserves contracts by 80%, a lot of fiat currencies backed by USD reserves will devalue sharply as well. Currencies backed by hard assets (e.g. the Canadian Dollar, maybe the Rouble(!)) will do better but I wouldn't like to be in them when the storm comes.
The net result is that the middle class across the world and especially America will lose a great deal of buying power - unless they move to hard assets before D-month.
” Devalues with respect to what, the Euro? “
A bit closer to real-world home, how about ‘devalues in terms of the purchasing power of Joe Six-Pack’s pocket money’.....
Contrary to the apparently heartfelt belief of many on these forums, most of us don’t, as a First Principle, think in terms of arbitrage....
Yes, but the article: 1. confused the problems of the gold standard with the problems of central banking and 2. failed to justify quantitatively its conclusions that the difficulties of the gold standard are as bad as those of the Keynesian fiat money system he appears to like.
You are confusing gold and government, although I admit that they both begin with “g”.
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