There isn't enough gold in the world for us to go back to the gold standard...

I have heard this nonsense argument against the gold standard before. Apparently, the idea is that our economy is too large in terms of dollars to be backed by gold. How should I best address it this?

 Here is an example: Ron Paul has no economic sense whatsoever. He is consistently obsessed with returning America to a gold standard for her dollar. As he concludes in this article,

The economic law that honest exchange demands only things of real value as currency cannot be repealed. The chaos that one day will ensue from our 35-year experiment with worldwide fiat money will require a return to money of real value. We will know that day is approaching when oil-producing countries demand gold, or its equivalent, for their oil rather than dollars or Euros. The sooner the better.

As the article reveals, Paul is not interested in a dollar partly-backed by gold as it was under Bretton Woods System. Instead, Paul wants a dollar fully backed by gold, as it was in the days before Franklin D Roosevelt. This would be disastrous for America on several fronts. First of all, there is not enough gold in the world to supply America's economy.
 

this is analogous to saying "we cannot measure the size of microbes because inches are too large!"  

money is merely a unit of measure, and providing it's divisible, quantity is completely irrelevant.   divisibility is even less of a concern with today's electronic gold accounts where minute weights of precious metals can be bought/sold (james turk's outfit comes to mind, but there are others).

Economists do tend to be among the stupidest of scientists. 

If one can even call some of them scientists...

If the entire population of the globe switched to using hard asset currencies would there be enough gold, silver, and other commodities to use for monetary purposes given a population of 6.5 billion and growing?

This is not an argument against moving to a free banking and monetary system. 

I just remembering seeing some figures thrown out at some point that there is less than one troy ounce of gold per person if we divided up all the gold that is currently above the ground between all 6.5 billion of us (obviously this would not be equally divided in a free market).  The same figures said that are 6 troy ounces of silver per person.  Are these figures accurate?  If all 6.5 billion of the Earth's people began using gold and silver as currency would there be enough to go around?  How might the market deal with this problem?

Just recalculate what should be the exchange ratio and there is enough.

I have never really understood why the gold was chosen as the standard, other than it is desirable and rare. I almost posted the other day with these questions, but held off, but now, what the heck.

1. Isn't there something else that is desirable and rare yet available in high enough quantities that could be considered our "standard"? For example, couldn't we be put on a plutonium standard? Better yet, is there something something less tangible on which we could base our currency, say the GDP, on which our dollar could be based?

2. What would happen to the gold standard if somehow the all powerful US government found a way to turn lead into gold and was able to start manufacturing gold? Suddenly the gold would be worth less because there would be so much more of it and we our dollar would be useless again.

NewCreature
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I wouldn't worry too much about Alchemy.  After several hundred years, it's still a dead end.  lol

I read somewhere that gold has indeed been made from lead in a nuclear reactor. And as for the several hundred years comment, I think that is a bit narrow minded. I would imagine that people even a few hundred years ago would never imagine the type of things we are capable of today...flying, space travel, computers the size of a deck of cards, oil being pumped out of a hole 2 miles deep and refined into a thin liquid capable of powering a horseless carriage to move more than 4 times the speed of a galloping horse, not to mention all the amazing things we do in medicine these days.

NewCreature
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Alchemists didn't just use chemistry, they tried mysticism as well.  It's not as funny if I have to explain it in detail.

But it is funny you are worried about gold as money being counterfeited, when paper is already counterfeited.

Oh, and I don't think many people were mining or refining uranium 200 years ago.  Also, what is the cost of an ounce of uranium?  If it is more than gold, that exacerbates your problem.

Well, I didn't say anything about counterfeit gold. I simply said that if we or someone was somehow able to drastically increase the quantity of the substance on which our currency is based, wouldn't that undermine our currency?

The reason I ask is that many on this list seem to be in favor of returning to the gold standard. In this modern age, is gold really the best thing on which to base our currency?

NewCreature
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Why do we need a "standard"? Separate government and currency!

 

NewCreature:

The reason I ask is that many on this list seem to be in favor of returning to the gold standard. In this modern age, is gold really the best thing on which to base our currency?

Yes.  It is the best. Ok?

 

NewCreature:

I read somewhere that gold has indeed been made from lead in a nuclear reactor.

I think I heard the same somewhere. But the gold they got was highly radioactive or something. 

Maybe it is just an urban legend. It has the wibe of it.

 

liberty student:

Yes.  It is the best. Ok?

I can see from your rating that you post A LOT. I hope all your comments aren't as useless as the last three. I simply asked a few on topic questions hoping to get some intelligent responses.

NewCreature
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NewCreature:

I can see from your rating that you post A LOT. I hope all your comments aren't as useless as the last three. I simply asked a few on topic questions hoping to get some intelligent responses.

Some of them are even more useless.  Would you like a refund? 

Serious, your questions have been answered dozens of times already.  Did you use the search, or do you expect people to repost the same things over and over again?

 

McDuffie for Congress:

I have heard this nonsense argument against the gold standard before. Apparently, the idea is that our economy is too large in terms of dollars to be backed by gold. How should I best address it this?

-If we were to go to a gold standard, we would need to get as much gold as money as we currently had in circulation.  People who argue against a gold backed standard are afraid of change.  They seem to prefer "hope" which as far as I am concerned means they dont "do".....which fits in perfectly with them not wanting anything to have to be done.

The reason I ask is that many on this list seem to be in favor of returning to the gold standard. In this modern age, is gold really the best thing on which to base our currency?

If consumers choose it, then yes, it is. Currently such a choice is strongly hindered by the government.

Jon Irenicus:

If consumers choose it, then yes, it is. Currently such a choice is strongly hindered by the government.

While I agree that the government is wholly in the hindering business, in an economy where currency exchanged would be a mere representation of the actual valuable asset, in this case gold, I don't understand where the consumer has say in the equation, unless of course you are talking about the possibility of competing currencies that are not government managed.

Can you clarify a bit?

NewCreature
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I mean no government management. Gold was was and is to this day selected in spite of government dictates.

The real issue about money is not whether it should be gold or not, but that it should be a commodity selected by the market that facilitates the transfer of goods and services with a lower transaction cost than direct (barter) exchange.  Lots of different commodities have served as money through out history.  The most recent and most common commodity historically has been gold.  So, that is why today's economist most often speak of using gold.  Take any of the arguments in favor of gold as money and any other commodity could be substituted as could the word specie, provided the market, i.e., not government, selects it and controls it.  The argument is that specie money is better for an economy because the money supply cannot be arbitrarily inflated like fiat, paper money controlled by the government can.

While I do not think the argument that there is not enough gold is valid, it really does not matter because what it really desired is specie money not controlled by the government. 

hello, sorry for bumping this old ass thread, wanted to clear things up.

one of the reasons why the gold std is advocated around here is because fiat money can just be printed as willed by the govt and inflated in its value.

can't the same thing be done to gold? the govt could just revalue gold or the exchange ratio and print as many dollars as they want...? right??

someone set me straight.

also, what is wrong with other metal, silver??? wasn't silver more used historically as a medium of exchange than gold?

can't the same thing be done to gold? the govt could just revalue gold or the exchange ratio and print as many dollars as they want...? right??"

Yes. Which is why most of us advocate not a "Gold Standard" per se - but a free market in money. Rather than having x amount of dollars representing x amount of gold, getting government OUT of the money business which it monopolises is the idea. Let the market choose the medium of exchange. Traditionally, markets have chosen gold (and silver) - probably due to the balance of scarcity, portability, longevity and subjective beauty, but other commodities might feature too. 

who would coin this gold or silver? would it mean a complete abolishment of paper money, even in terms of transferrable certificates?

who would coin this gold or silver?

Private mints? Private banks? If there is demand for such a thing then there is room for entrepreneurs.

would it mean a complete abolishment of paper money, even in terms of transferrable certificates?

Not necessarily. It may well be convenient to have paper notes or digital money just as today, although provided by banks or institutions and backed by a commodity or combination of comodities. Who is to say? We can't imagine the innovations produced by the market because we as individuals don't have the imaginations of 6.5+ billion people.

Historically speaking, private mints have existed in countries, until demolished by government.

I just blogged about this fallacy yesterday:

http://andrewkemendo.blogspot.com/2009/01/gold-and-growth.html

How can there be too little gold? Gold would simply have a higher price. It might take 1/1000000th of an ounce of gold to buy a house? Hows is that a problem? If there's gold in the bank, you can be issued a receipt for that gold. Receipts can be issued that represents all matter of fractions of gold. You could put an ounce of gold in there and issue a trillion receipts.