Gold Standard

Started by Mozart, October 12, 2008, 11:55:43 PM

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Mozart

I jumped on the Ron Paul bandwagon a few months ago and I think there is a case for the gold standard. Besides the US constitution stating that money should be gold and silver, the current system robs people of their savings. This was a very informative video on how money is created.

http://www.youtube.com/watch?v=5wA5y_oGGsI

I am not really a conspiracy theory type, and maybe I spend to much time on youtube, but how is this allowed to go on? If everyone paid their debts, including the government, no money would exist! That is ridiculous!
"I am the musical tree, eat of my fruit and your spirit shall rejoiceth!"
- Amadeus 6:26

Todd

#1
Quote from: Mozart on October 12, 2008, 11:55:43 PMIf everyone paid their debts, including the government, no money would exist! That is ridiculous!



I'm confused by your statement.  First, do you mean currency or money, because they are different things?  Second, how would what you describe happen?  Third, please explain how the gold standard would be beneficial now.  It is my understanding that when the US adopted the Gold Standard in the 1870s, there was significant deflation since the money supply dwindled.  Economic growth was rapid in many parts of the country, but that was during the post-Civil War boom when the US was expanding westward and rebuilding.  Do we have such an outlet for economic growth and expansion now?  Did converting to the Gold Standard not lead to extensive political battles calling for bi-metalism?  Would that be acceptable?  Does not deflation substantially aid the wealthy, skewing wealth further?  By contrast, does not mild (<4-5%) inflation help workers?  (That is, doesn't deflation aid those who own debt, and inflation those who pay debt.)  How would we avoid deflation now if we readopted the Gold Standard, when there is excess liquidity in the system?  Would the US situation be better or worse than Japan's deflation of the 1990s?  Would we adopt something similar to Bretton Woods where the dollar is exchangeable for gold?  What if the price of gold substantially exceeded the fixed conversion rate?  Would not gold flow out of the country, like happened in the 1960s and 1970s?

That's a lot of questions, but since you are the one proposing it here, I want to know how you answer these questions.
The universe is change; life is opinion. - Marcus Aurelius, Meditations

People would rather believe than know - E.O. Wilson

Propaganda death ensemble - Tom Araya

Mozart

Well I am no expert on economics, but is the current system really sufficient where money can be created irrespective to goods and services available? Inflation increases faster than wages do, and the middle and lower classes standard of living go down. The cost of living goes up more than 3% a year according to the consumer price index.
"I am the musical tree, eat of my fruit and your spirit shall rejoiceth!"
- Amadeus 6:26

Todd

Quote from: Mozart on October 13, 2008, 10:40:18 AMWell I am no expert on economics, but is the current system really sufficient where money can be created irrespective to goods and services available? Inflation increases faster than wages do, and the middle and lower classes standard of living go down. The cost of living goes up more than 3% a year according to the consumer price index.



Interesting, you support using the gold standard, yet you can't answer the questions I posed.  I can only assume you don't understand the gold standard, or why the world abandoned it long ago.  Listening to crackpots like Ron Paul and his like will get you nowhere.  I have very serious doubts about how much Ron Paul understands regarding monetary policy.

At the present time "inflation" is rising faster than wages, resulting in a decline of real wages.  Of course, the picture is more complex than that, but it is possible for real wages to go up - that is, when wage growth exceeds the rate on "inflation."  It happens from time to time - check some stats.  Inflation is in quotes because it definitely needs to be defined properly.  When prices for some goods rise, that is not necessarily the same as inflation.  And that's why there are multiple inflation statistics.

Yes, the current system can be made to work better.  Once the current situation has abated, then it is fully possible for Congress to alter the focus of the Fed, making price stability the primary or even only focus of policy making.  As it is the Fed is expected to focus on a variety of goals at once, and some are partially contradictory.  But there will have to be a discussion whether people really want the Fed to pursue a rigid policy or not.  At times like this they claim they do, but that's not the case in good times. 

I'm all for a tighter monetary policy, but not one as rigid as people like Ron Paul want, or even Milton Friedman.  I'm a reformed Monetarist in some regards; stable, predictable monetary policy is ideal, with no inflation the ultimate goal.  Such things will never happen, though, and mild inflation is better than even mild deflation, at least for the middle class.  Imagine paying a fixed mortgage in a world of declining nominal wages.  That's a whole lot uglier than the alternative.
The universe is change; life is opinion. - Marcus Aurelius, Meditations

People would rather believe than know - E.O. Wilson

Propaganda death ensemble - Tom Araya

scarpia

#4
Quote from: Mozart on October 13, 2008, 10:40:18 AM
Well I am no expert on economics, but is the current system really sufficient where money can be created irrespective to goods and services available? Inflation increases faster than wages do, and the middle and lower classes standard of living go down. The cost of living goes up more than 3% a year according to the consumer price index.

I think the internet should be abolished and we should return to telegraph.

Quote from: Todd on October 13, 2008, 11:02:42 AM
Interesting, you support using the gold standard, yet you can't answer the questions I posed.  I can only assume you don't understand the gold standard, or why the world abandoned it long ago.

You're just an elitist.  Who needs economic textbooks when we have YouTube?

bwv 1080

With a gold standard you get disinflation if economic growth outstrips the expansion of the supply of gold.  This is what happened for most of the 19th century, even with huge finds in the US and South Africa (The introduction of South African gold actually did cause inflation).  With a relatively mature gold mining industry, how do we increase supplies at 3% a year?  That is doubling the world gold stocks every 25 years or so.  On the other hand, what if we go to a gold standard and technology makes transmuting lead or some other element into gold feasible at scale?

drogulus

Quote from: Todd on October 13, 2008, 11:02:42 AM


Interesting, you support using the gold standard, yet you can't answer the questions I posed.  I can only assume you don't understand the gold standard, or why the world abandoned it long ago.  Listening to crackpots like Ron Paul and his like will get you nowhere.  I have very serious doubts about how much Ron Paul understands regarding monetary policy.

At the present time "inflation" is rising faster than wages, resulting in a decline of real wages.  Of course, the picture is more complex than that, but it is possible for real wages to go up - that is, when wage growth exceeds the rate on "inflation."  It happens from time to time - check some stats.  Inflation is in quotes because it definitely needs to be defined properly.  When prices for some goods rise, that is not necessarily the same as inflation.  And that's why there are multiple inflation statistics.

Yes, the current system can be made to work better.  Once the current situation has abated, then it is fully possible for Congress to alter the focus of the Fed, making price stability the primary or even only focus of policy making.  As it is the Fed is expected to focus on a variety of goals at once, and some are partially contradictory.  But there will have to be a discussion whether people really want the Fed to pursue a rigid policy or not.  At times like this they claim they do, but that's not the case in good times. 

I'm all for a tighter monetary policy, but not one as rigid as people like Ron Paul want, or even Milton Friedman.  I'm a reformed Monetarist in some regards; stable, predictable monetary policy is ideal, with no inflation the ultimate goal.  Such things will never happen, though, and mild inflation is better than even mild deflation, at least for the middle class.  Imagine paying a fixed mortgage in a world of declining nominal wages.  That's a whole lot uglier than the alternative.


      The gold standard would be radically deflationary, and you can't regulate the currency to hit a single target or a group of them if the value is pegged to a single commodity. There's no sound reason to do this. The Libertarians want this because they hate the government equally for the good and the bad it does. They are, IOW, insane.  :D
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scarpia

Perhaps currency should be based on something that is valued in our modern age.  We should consider making every dollar redeemable at energy Federal Reserve branch for 60 seconds of YouTube video.