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To: Sherman Logan
I assume if gold were monetized it would tend to damp price swings.

On the contrary. A single commodity currency would result in easier manipulation and continued price swings. For us it may be currency, but to other countries that actually have a pretty large gold production operation, it is just a commodity. Let's take South Africa (a very large gold producer for example). Knowing that our currency is based off gold and we get a lot of it from them, they can hold supply or dump supply on the market at their whims in order to get the price or demand they want. They could hold off supplying the market for a long time, resulting in less supply for greater demand (ie higher prices). Then, sell a lot to the market at once at these higher prices- lining their market and 'popping the bubble' causing the price to fall. Now imagine these games with every major gold supplier? There is a reason no major country ever has been able to keep a single-commodity based currency.

The only way it could be practical and secure is to first highly ramp up our domestic mining operations to where we can control the market more.

49 posted on 01/09/2012 7:57:20 AM PST by mnehring
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To: mnehring
There is a reason no major country ever has been able to keep a single-commodity based currency.

From 1717 (or possibly earlier) to 1914 Britain, the world's dominant economic power for most of this period, was on a de facto or de jure gold standard. With difficulty during the Napoleonic Wars and other periods, of course.

The US was on a gold or gold/silver standard for most of its history up to about 1930, with intermissions for Civil War and WWI.

This ~200 year period saw a long-term and quite remarkable economic expansion. It remains to be seen whether the fiat system we've had for the last almost-century will be able to show similar legs. Recent events do not give grounds for optimism.

The only way it could be practical and secure is to first highly ramp up our domestic mining operations to where we can control the market more.

That would seem to put the ability to manipulate the money market into private rather than government hands. Unless gold-mining were to be nationalized or highly regulated.

68 posted on 01/09/2012 8:11:27 AM PST by Sherman Logan
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