Posted on 05/21/2011 9:18:55 AM PDT by SeekAndFind
Sometimes people ask me: If the gold standard is so great, why aren't we using it right now?
This is a good question. The basic answer is that it would prevent central bankers, and governments, from doing something they have become very fond of over the past several decades--attempting to solve their economic difficulties with some sort of "easy money" policy. You can see this remains very popular today.
The Classical viewpoint is that any form of currency instability causes economic problems. An economy functions best when the currency is as stable and reliable as possible. In practice, this always means a gold standard system because that is the most effective way to achieve these goals in an imperfect world.
The Mercantilist viewpoint is, you could say, the complete opposite. Mercantilists don't see currency instability and monetary fiddling as problems; they see them as solutions. A gold standard system prevents them from implementing this apparent solution, which is why they sometimes refer to the "golden fetters" that used to hold them back.
Both of these ideas are literally thousands of years old. People were trying to solve their economic difficulties with currency fiddling in ancient Greece and China, in the 7th century B.C. or earlier.
Which is correct?
(Excerpt) Read more at forbes.com ...
The bankers cannot plunder a nation that is on a gold standard. They NEED fiat money like the “Federal Reserve Note” that they can manipulate at will.
Full faith and credit to do what? Hand you yet another piece of colored paper? The only faith you can have is that the Fed doesn't print so many of these colored bits of paper (or the electronic equivalent) that the value goes to zero. And that's a fairly silly faith to hold since the the Fed has let the dollar fall by 98% since it's inception.
The 'full faith and credit' used to refer to belief that the US Treasury would trade you 1 oz of gold for every $20 on request.
'full faith and credit' is faith in the people who run the Fed. Their objective was a stable dollar, which they did not accomplish. After the Humphrey/Hawkins bill, they added the task of ensuring full employment. They can't do that either.
On what basis would anybody have faith in the Fed? Only the bankers that the Fed protects.
I distinguish between a “modern” gold standard where the supply of a nominally fiat currency is tied to gold prices vs. the gold coin or deposit notes that is more susceptible to to fluctuations due to changes in supply. Both are probably better than what we have now where the high priest of monetary policy determines money supply.
A precious-metals based currency can still be debased . . . just ask the Romans!
A precious-metals based currency can exist for a thousand years . . . just ask the Byzantines!
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.