The total amount of gold that has ever been mined has been estimated at around 142,000 tons. Assuming a gold price of US$1,000 per ounce, or $32,500 per kilogram, the total value of all the gold ever mined would be around $4 trillion. This is less than the value of circulating money in the U.S. alone, where more than $7.6 trillion is in circulation or in deposit
What has the price of gold in dollars got to do with anything?
-Jon
Freedom of markets is positively correlated with the degree of evolution in any society...
xSFx:Is this a limiting factor? The fact that there's less gold than value.
No, that quote demonstrates a lack of understanding. If a gold standard was created then how much each dollar was backed by would be determined by the US government's gold ownership.
Of course, a gold standard wouldn't solve anything. Only economic freedom will.
Peace
To my understanding a gold standard is still fiat currency. It's still the government dictating the currency of legal exchange. What would change would probably be the ability to inflate money, as gold is historically hard to produce in large quantities. Ron Paul (who's probably the most recognized political figure in reguards to "touting" the gold standard, I suppose) doesn't actually believe in it, or support it. He supports competing currencies, private monies, and, I believe, has proposed legislation on demonopolizing monies from the government, however I havn't been able to pinpoint the exact proposal, so all I can offer is word of mouth. Tangent asside, it [gold] is a "sounder" form of currency, but it's not at all desireable, as the monetary system (be it gold or paper) would still in the hands of the government.
xSFx:What would change if the whole world turned to the gold standard, by magic? What would dissapear? What would appear? Hypothetically speaking, of course :) I am now learning about gold and the gold standard. I have a series of videos in my TODO list: "GoldRush 21 The GOLD Bull Market" But I have a question first, from Wikipedia: The total amount of gold that has ever been mined has been estimated at around 142,000 tons. Assuming a gold price of US$1,000 per ounce, or $32,500 per kilogram, the total value of all the gold ever mined would be around $4 trillion. This is less than the value of circulating money in the U.S. alone, where more than $7.6 trillion is in circulation or in deposit Is this a limiting factor? The fact that there's less gold than value.
Gold is no longer used as currency. If it was suddenly used as currency again, the extra demand for it would increase its value drastically, up to the point where it would replace the current money supply.
The amount of paper dollars and the amount of gold has no relation. You can have 1 gazillion dollars in circulation and still switch over to a gold standard. The value of the dollar is what the dollar will buy and with a gold backed dollar the dollar will naturally buy more. So the exchange rate of dollars for gold would be entirely dependent on how much gold the government held. I'll deffer the technical aspects of this to more learned members of this board. I understand theory but not numbers. You don't need an ounce of gold to replace a dollar, five dollars, ten dollars or even a hundred dollars. An ounce of gold might be used to replaced $5,000 dollars -- it doesn't matter since the paper dollars have no value anyway.
A gold standard isn't the solution anyway (though a step in the right direction). In order to rid us of this worthless paper we are forced to accept we would have to do away with legal tender laws and allow the market to create independent private currencies. I assume gold or silver would be the more preferred method of payment under this type of system.
"It does not require a majority to prevail, but rather an irate, tireless minority keen to set brush fires in people's minds. " -- Samuel Adams.
kingmonkey: The amount of paper dollars and the amount of gold has no relation. You can have 1 gazillion dollars in circulation and still switch over to a gold standard. The value of the dollar is what the dollar will buy and with a gold backed dollar the dollar will naturally buy more.
The amount of paper dollars and the amount of gold has no relation. You can have 1 gazillion dollars in circulation and still switch over to a gold standard. The value of the dollar is what the dollar will buy and with a gold backed dollar the dollar will naturally buy more.
Setting $4000 to be freely redeemable for an ounce of gold wouldn't let the dollar buy anything more than it could now - it would, however, provide an upper limit to inflation.
(Conspiracy theories notwithstanding, the US has 8,133 metric tons of gold in its reserves, that's 261.5 million troy ounces, and if there are one trillion printed dollars, that's roughly $4,000 per ounce. However, if you go by M3, around $11 trillion, you'd have to set an ounce of gold to be equal to around $40,000.)
One advantage of a gold standard is that real interest rates can't fall below 0%. In the present, if I keep my savings in a money market account, I get 2% interest but inflation is 7%-30% (depending on what measure of inflation you use). This makes it hard for me to raise money to start a business. If I try to accumulate capital via saving wages, I'm fighting an uphill battle against inflation.
Negative real interest rates subsidize banks and large corporations. They can borrow at 5%-6%, while inflation is 7%-30%. Using leverage, they earn huge profits, just from their extensive use of debt.
For example, Freeport McMoran bought out Phelps Dodge. They loaded up on debt to fund the purchase. Two years later, copper prices have been rising 20%-30% per year. The debt that funded the purchase was around 6%. Freeport McMoran's management and shareholders profited from leverage and negative real interest rates. This profit isn't free; it came from somewhere. When my dollars lose their value to inflation, part of the proceeds go to corporations like Freeport McMoran. In this manner, negative real interest rates encourage consolidation of industries.
Under a gold standard, you would see a lot more small businesses and fewer megacorporations. Suppose a small business owner wants to raise capital. Reinvested profits works very slowly, because of the inflation problem. A small business owner can only borrow at very high rates, or not at all. The small business owners is at a competitive disadvantage relative to large corporations. Management of a large corporation can borrow a lot of money, use the proceeds to bankrupt smaller competitors, lobby the State for regulations that shield it from competition, and then wait for inflation to make the borrowing profitable.
There's also a common fallacy you're using. The total value of the economy is a lot greater than all the gold there is. Therefore, a return to a gold standard is infeasible. That assumes that someone, after receiving gold, puts it under their mattress. In practice, a gold coin will change hands many times during a year. In this manner, the size of the economy can be a lot greater than the supply of physical gold.
A gold standard is a fair benchmark for determining price. You can have on a gold standard without shipping physical gold. For example, if imports equal exports, you're on a gold standard but you aren't shipping any gold around.
If you follow Austrian-style "time deposit banking" or the "Bills of Exchange" system, then you can have trustworthy paper promises for gold that trade at parity with gold.
However, if the government issued a declaration that the US was on a gold standard again, that would be a windfall profit for anyone currently holding gold.
You may ask "If gold is such wonderful money, why aren't people using it?" People don't use gold as money due to taxes and regulations. If I use gold as money, I pay a *GREATER* taxation rate than if I use Federal Reserve Notes as money. I can't go to my bank and make a deposit of gold. Taxes and regulations make it impractical to operate a gold-denominated warehouse receipt bank. I can't easily trade back and forth between gold and Federal Reserve Notes because taxes and regulations make it hard to operate a gold dealer business.
The correct way to return to a gold standard is to repeal all the taxes and regulations that prevent people from using gold as money. That isn't going to happen.
I have my own blog at FSK's Guide to Reality. Let me know if you like it.
Harksaw:if you go by M3, around $11 trillion, you'd have to set an ounce of gold to be equal to around $40,000
M3 is not appropriate because it includes time deposits, which are actually loans to the bank. M2 also includes time deposits under $100K. MZM would be a better measure, but then much of MZM probably consists of money that is not actually required on demand, but is held there because it earns almost as much interest as time deposits.Under a gold standard, no interest would be paid on any deposits which were withdrawable on demand. On the contrary, you would have to pay the bank's safe-keeping costs. So, much of MZM might be transferred to time deposits under a gold standard. You might end up with little more than M1 (currency + demand deposits) that is actually required for withdrawal on demand.Now M1 isn't so bad - just $1.5 T.And M0 (i.e. currency + bank reserves) would be even smaller - just $840B. And that 840B is already backed by approx $240B of gold and $600B of securities. Over time, the securities could be sold for gold.So - best case scenario, you could back M0 with gold for just $1000/oz. But if you leave it at that, bank runs would probably force all the banks to close. To avoid that, you'd have to back M1 rather than just M0. But that's still only $2000/oz.$2000/oz isn't too bad. $40K/oz, in contrast, would be a huge gift to existing gold-holders.You could just leave it to the market to create competing currencies instead. But the outcome of that might be a mass exodus from fiat currencies, and then many people would lose their life savings. That's pretty harsh. Rothbard and de Soto preferred to convert existing money to a gold standard.
LanceH: Rothbard and de Soto preferred to convert existing money to a gold standard.
There is a way to convert existing money to a gold standard. Go to a coin shop or Internet store and buy some!
I saw a very interesting post elsewhere. If you're planning for a SHTF scenario, physical gold will be practically useless during a severe crisis. Assuming you can survive the crisis and safeguard your gold, then metal is a way to preserve wealth across the collapse of an economic system. You can buy gold now, store it someplace safe and survive, and then sell it when the SHTF has subsided and a sense of normalcy has returned.
During a collapse of a monetary system, the people who convert to hard assets first profit the most! I feel slightly hypocritical saying that, because I don't own any silver or gold yet. There's no need to rush (yet). I'll buy some in the next few years.
Since no one seems to have answered the direct question, I will. A gold standard is the shorthand way to denominate a Laissez-faire/market-anarchist monetary system. Which in all likelihood would be gold with possibly some silver. It probably would not be Pringles (unless they are still in the can since then they'd last as long as gold lasts), but hypothetically it could be Pringles.
With a gold standard you lose:
War, Democide, Fammine - civil unrest, torture camps, genocide, religious persecution, etc. These events on the massive 20'th century historical scale could not happen. Dinosaur killing asteroids not-withstanding.
With a gold standard you gain:
World Peace (and very inexpensive whirled peas too), Prosperity, Liberty - health, longevity, benign neglect from tribes who don't like you (a.k.a. genuine tolerance, not P.C. tolerance), art, music, food, energy, transportation. Basically you gain civilization instead of destruction.
Jon Irenicus: What has the price of gold in dollars got to do with anything? -Jon
I would find it more helpful if you would expand this statement to include why you think gold and dollars are not relevant to each other.
It seems to me that gold has been of value as a media of exchange more due to its NOT being manipulated (created out of air or printed on paper) which is in great contrast to other money 'systems' - especially printed money. Even electronic accounting (bank accounts, credit cards) has no limiting factors if it is not tied to something that can be 'expanded' at whim.
Jain
I don't see why there is this fascination with using gold. Why not something more valuable, like platinum, so there is less to store? Or go with something like palladium? I prefer the idea of a platinum standard, myself.
Jonas: I don't see why there is this fascination with using gold. Why not something more valuable, like platinum, so there is less to store? Or go with something like palladium? I prefer the idea of a platinum standard, myself.
This is not just a reply to Jonas, but an overall remark on this topic -
The reason gold has any 'value' is either in its use - jewelery (which is wearable storage basically) or for its great electrical conductivity (think computer chips) or such realities as it being so malable and pure vs. weight and alternatives. I believe that the reason it has had historic value as 'money' (media of exchange) is due to its 'fudge factor' being so difficult. Mankind seems to love to fool and fake each other out and this 'game' gets real serious when it comes to values like 'wealth'!! So gold became the default 'benchmark/standard' by which one could measure exchange 'values'. One could argue the use of the # of hours that a person has available to offer as a value exchange media, but we all know that such a measurement would be 'flexible' by several factors - age of person, that person's ability AND willingness to produce etc. So gold, as a scarce and non-fake-able item developed into 'THE' benchmark by which the fudge factors could be minimized.
Jain Daugh:The reason gold has any 'value' is either in its use
All these values can be attributed to any of the other precious metals. Most people talk about a "Gold Standard" just because of the history behind gold.
But I will conceed that there is more of a "mystique" around gold than something like palladium or rhodium. While rhodium is a LOT more expensive than gold on the global markets, you just try trading a troy ounce of it to some chicken farmer in the middle of nowhere.
xSFx:Would there be different currencies (like we now have: $, Euro, Yen, etc), or that will be irelevant since they'd all be calculated in terms of gold? I guess there won't be any currency trade either. No more EUR/USD exchange rate, etc. Right?
Yep. Currencies used to be simply gold measurements, like miles versus kilometers.
Equality before the law and material equality are not only different but are in conflict with each other; and we can achieve either one or the other, but not both at the same time. -- F. A. Hayek in The Constitution of Liberty
Gold and silver are what the free market selected as money, before government became strong enough to force people to use unbacked fiat paper instead.
Other metals are just as usable as gold. If you owed me 1 ounce of gold, I'd accept 0.8 ounces of platinum instead (or whatever the appropraite ratio is).
When there are a few people hoarding nearly all the gold *AND* government violence demands people only use gold as money, then you can have distortions. It's one thing to say "gold is my preferred method of payment". It's another to say "I *DEMAND* payment in gold and will use violence to prevent people from using other forms of money."
If you don't have a centralized authority controlling money, then money *MUST* be backed by tangible goods. Metal coins have advantages over other forms of money. Metal doesn't spoil. Metal is fungible; every .999 purity one ounce coin is equivalent to every other such coin. If you trust the mint, metal coins can be quickly counted or weighed.
Also, hoarding gold is pointless, if you trust that the economic system isn't going to collapse. You're better off investing in tangible, revenue-producing assets instead of gold. In the present, all other forms of investment are heavily taxed, making gold very attractive. You can't invest in land due to property taxes; you don't get full allodial title. You can't invest in stocks, because you can't prevent the CEO from granting himself a lot of stock options or mismanaging the corporation. Metal coins are the *ONLY* investment where you can get true full allodial title.
It's really simple - the current price of gold is not the parity it would trade at were a gold standard to be reinstated.
BlackSheep:Yep.
This is, of course, assuming that the entire world hasn't converted to just exchanging gold coins of certain weights. If everyone just carries around gold nuggets then there is no need for any currency. A nugget of one weight in Japan is the same as a nugget of the same weight in South Africa.
I don't think there are too many people who hold to this plan, though. Most people think of a gold standard as a representive currency system where you have gold stored in a vault somewhere, and you use paper or electronic currency to exchange ownership of that gold. That is my leaning, at least.
You hit the nail on the golden head. It is the violence backing up legal tender laws that ruin the chances of commodity money. As hyper rich folks horded gold then some might switch to silver or platinium or whatever. The Hunts proved this when they tried to buy up large portions of the silver market. The price of silver shot up when the Hunts made their first move. As people figured the Hunts were serious they sold silver and purchased other stuff. Eventually the price of silver dropped. The same thing would happen under a gold standard as well.
I wrote a post on the Hunt Brothers. It's one of my most popular!
What happened to the Hunt brothers is that they were borrowing in dollars and buying gold. When the Federal Reserve jacked up interest rates *AND* changed the margin rules, their scheme collapsed. The problem was not buying silver. The problem was *BORROWING* and then buying silver.
As an individual with a small budget, I'm not going to buy enough gold or silver to substantially move the price.
The "gold" standard doesn't necessarily refer to gold but any commodity. In reality most of the world used silver for day to day trades. Large purchases were often made with gold because it was valued more. The first dollar was actually silver. Of course you don't have to use gold, silver, platinum or even palladium. You could back a warehouse receipt with roads and bridges, buildings, diamonds or fine cognac. It isn't so much what backs it but that it is backed by something which has value, which has taken human labor to produce or collect. Mankind settled on gold and silver because they are beautiful and rare and are relatively easy to carry. Yes, you can back money with bridges but it is hard to carry a bridge to the store. If you wanted to trade with me I'd accept anything from gold to diamonds to platinum just so long as the weight is true to what you claim it to be.
LanceH:Under a gold standard, no interest would be paid on any deposits which were withdrawable on demand. On the contrary, you would have to pay the bank's safe-keeping costs.
That's simply untrue, at least in an anarchic commodity money regime (in which there is no reason to believe that gold would be the sole chosen backing for money, but that is beside the point). It's what a lot of gold bugs want to be true, and what the prevailing hard-money delusion presumes to dictate should be true, but neither makes it true.
It's almost guaranteed there would be interest-bearing, or at least free-of-storage-charge demand deposits, and the FRB that is required to make it anything but a loss-leader - even in a convertible commodity backed currency - because it's very likely the market would demand it, and that bankers would respond. It's not fraud if the reserve requirement is stated up front and there is enough transparency to satisfy the depositors. It may or may not be inflationary - depending on the agreed-to rules of the reserve requirement and use of deposited notes as further reserves - but that cannot be prohibited except through market discipline. It's not even a fiat currency if the notes are redeemable, and if the reserve amount cannot (by contractual obligation) be changed arbitrarily.
It's simply a matter of trading risk for gain. If you hold a fractional reserve currency, or demand deposit, you are exposed to a risk of default by the issuer/banker. If you don't like that, there will almost certainly be safe-deposit boxes you can store your hard money in, for a charge. There will also likely be CD-type accounts that pay interest but are not redeemable on demand. Even these are not free of risk, they are only free of the particular risk of bad monetary decisions by the issuer/banker. But that's a risk I'm quite certain many people would be willing to accept, based on the fact that they did in the past, even prior to a Federal Reserve and FDIC insurance.
As somebody said before, it's not gold that makes for sound money, but freedom in the markets and in the issuance of money. If you have freedom, you cannot prohibit any type of commodity being used for backing, FRB, and even outright fiat currencies from trying to compete in the market. Gold/silver-backed and convertible currencies are the most likely kind to succeed, simply because they are the most suitable forms to the purpose.
The state won't go away once enough people want the state to go away, the state will effectively disappear once enough people no longer care that much whether it stays or goes. We don't need a revolution, we need millions of them.
Let's also not forget that any bank or group of banks that did inflate through FRB wouldn't upset the whole economic order once they finally collapsed. Without a central bank to spread the sickness throughout the country any financial collapse would be limited to the area or region in which it occurred. While it could potentially have an impact in other parts of the world the devastation it would unleash would be limited and through the free and unfettered market it would be quickly resolved.
kingmonkey:Let's also not forget that any bank or group of banks that did inflate through FRB wouldn't upset the whole economic order once they finally collapsed. Without a central bank to spread the sickness throughout the country any financial collapse would be limited to the area or region in which it occurred. While it could potentially have an impact in other parts of the world the devastation it would unleash would be limited and through the free and unfettered market it would be quickly resolved.
Yup. With real freedom, damage is routed around, and bad decision making is self-limiting in it's ability to influence others.
kingmonkey: It isn't so much what backs it but that it is backed by something which has value, which has taken human labor to produce or collect.
It isn't so much what backs it but that it is backed by something which has value, which has taken human labor to produce or collect.
l would add that it also needs to be valued by others you would want to trade with. You might have a country with a "cognac standard", and it might even work in a society where cognac is highly prized. But good luck trying to purchase something from someone in another country where they prefer beer over fine liquors. Since gold has nearly global appeal, it can be used as a global exchange. Unlike something like palladium or rhodium. Platinum could still work, although it doesn't have nearly the same "reputation" as gold.
histhasthai: LanceH:Under a gold standard, no interest would be paid on any deposits which were withdrawable on demand. On the contrary, you would have to pay the bank's safe-keeping costs. That's simply untrue, at least in an anarchic commodity money regime... It's almost guaranteed there would be interest-bearing, or at least free-of-storage-charge demand deposits, and the FRB that is required to make it anything but a loss-leader
That's simply untrue, at least in an anarchic commodity money regime... It's almost guaranteed there would be interest-bearing, or at least free-of-storage-charge demand deposits, and the FRB that is required to make it anything but a loss-leader
I assumed that the OP was referring to a "full" gold standard of 100% gold reserves, and in that context it would be true.If you are willing to accept FRB banks who redeem in gold, then I agree that their extra income from lending out some of their reserves would cover the storage costs. I doubt the reserve fraction would also be small enough to pay interest on demand deposits, and as far as I am aware historically interest was not paid.However, I agree with Mises that free banking under the discipline of 100% gold redemption would never permit a reserve fraction anything like as small as today. A bank which issued too much fiduciary media would simply lose too much of its gold reserves to 100%-reserve banks. Even if all domestic banks colluded in credit expansion, there would be a net outflow of gold reserves overseas which would soon put a check to the practice.
LanceH:I assumed that the OP was referring to a "full" gold standard of 100% gold reserves, and in that context it would be true.
Fair enough. I just doubt that that would be the only, or even the dominant form in a fully free monetary system.
LanceH:I agree with Mises that free banking under the discipline of 100% gold redemption would never permit a reserve fraction anything like as small as today.
That's almost certainly the case. Some would probably try, but I don't think they'd compete well, for, among others, the reasons you cite. It would probably take banks a very long time to establish a reputation sound enough to do any FRB, but even once they do, I doubt anything less than 50% reserve would be viable (just a hunch), if even that low. That may be enough to pay a small interest, but should at least cover storage costs.
Then there's the question of whether it is merely the reciepts that are fractionally backed (fractional reciept banking), or whether deposited reciepts can themselves count toward the reserve (full fractional reserve banking). The latter, I think, is a major source of instability and would not likely be tolerated by the market.
A bank which issued too much fiduciary media would simply lose too much of its gold reserves to 100%-reserve banks.
Could you explain how the process would function?
Even today most checking accounts do not pay interest and every savings account I ever had paid so little interest I didn't even bother with it. I think under a 100% reserve gold standard you'd see checking accounts and other demand accounts that would not pay interest. People don't open those accounts for interest payments but instead for the security and ease in which they can make purchases. I, like most people, use my checking account because it is safer than walking around with a wad of cash in my pocket, it makes it quicker and safer to make purchases (with my check card) and I can buy things online, something I can't do with cash. There is no reason to assume that banking services under a 100% reserve gold standard would be that much different than it is today except our money would actually be there when we went to get it, people would save more instead of using credit for everything, and interest rates on our savings account would more than likely be much higher than they are today.
"In Heaven His throne is made of gold
And the ark of His testament is stowed"
There you go.
I just came across this forum and find it interesting. I know I'm coming in late, but maybe someone will still see my post and reply to my questions.
I understand, from reading this forum, that the US would set the price of buying gold with dollars if we went back to the gold standard. That answers one question I've had for a while.
Other questions I have are:
1) How would this affect our currency against that of other countries? If other governments followed suit and backed their currency with gold using their own method of valuing the exchange from, say, yen to gold, would we be forever locked into a currency devalued against theirs?
2) If I understand it correctly, the reason we changed from gold standard to the current system is France (or China??) held a lot of US currency and demanded payment in gold. What would prevent this from happening again?
3) Will the amount of gold available worldwide affect the value of our gold? For instance, I understand there has been a huge amount of gold discovered in the hills of China - probably the biggest find in history. Will this devalue gold and, therefore, our gold standard currency? Would China be forever in the driver's seat?
4) I understand one argument for going back to the gold standard is that our current currency is now unconsititutional. If I remember the constitution correctly, we are actually only supposed to use coinage, which would make even paper money backed by gold unconstitutional.
5) I've seen one or more comments here that government should not be in control of our currency or that any kind of currency or metal should be allowed. I believe the constitution states that Congress is to manage, control or decide our currency. I believe the reason this was in the constitution was because each territory, before becoming a state, had their own currency and the founders wanted just one currency for the entire US.
I'm pretty ignorant on this issue, so I'm not making arguments here - just asking questions and hoping to get some answers. Please also excuse any really stupid questions. This is a really new topic for me.
gailtoo: 1) How would this affect our currency against that of other countries? If other governments followed suit and backed their currency with gold using their own method of valuing the exchange from, say, yen to gold, would we be forever locked into a currency devalued against theirs? 2) If I understand it correctly, the reason we changed from gold standard to the current system is France (or China??) held a lot of US currency and demanded payment in gold. What would prevent this from happening again? 3) Will the amount of gold available worldwide affect the value of our gold? For instance, I understand there has been a huge amount of gold discovered in the hills of China - probably the biggest find in history. Will this devalue gold and, therefore, our gold standard currency? Would China be forever in the driver's seat? 4) I understand one argument for going back to the gold standard is that our current currency is now unconsititutional. If I remember the constitution correctly, we are actually only supposed to use coinage, which would make even paper money backed by gold unconstitutional. 5) I've seen one or more comments here that government should not be in control of our currency or that any kind of currency or metal should be allowed. I believe the constitution states that Congress is to manage, control or decide our currency. I believe the reason this was in the constitution was because each territory, before becoming a state, had their own currency and the founders wanted just one currency for the entire US.
1. If there's an international gold standard and free shipment of gold between countries, that eliminates the currency derivatives market. Exchange rates would be stable and interest rates would be equal everywhere. Currently, currency speculators are profiting off central banks' actions. For example, in the "carry trade", you borrow one currency at a low interest rate and lend another currency at a higher interest rate, making a practically riskless profit.
2. The gold standard was abandoned in 1913, when the Federal Reserve was created. In 1933, President Roosevelt defaulted on the gold redeemability of the dollar for US citizens and confiscated the gold. In 1971, President Nixon defaulted on the gold redeemability of the dollar for foreign central banks. Due to huge budget deficits for the Vietnam war, international banks started demanding to exchange their dollars for gold, and Nixon defaulted.
The reason gold standards fail is that the insiders can't resist the temptation to print more gold-redeemable paper than physical gold they have. This guarantees an eventual default.
3. Even if someone has a huge gold hoard, that doesn't break the gold standard. In a true free market, there is no requirement to use gold and people may use whatever they choose as money. In a true free market, gold coins circulate. This allows the value of the economy to be a lot greater than the supply of physical gold.
4. Who cares about the Constitution? **** the Constitution! It isn't a valid contract.
However, a government that strictly followed the Constitution would be far better than what's in place now. Pretty much every individual freedom protected by the Constitution has been substantially eroded.
5. All government is theft. When you say "It's the government's job to 'manage the economy'.", you're advocating for communism. Who needs a government?
Before the Constitution was signed, each State had its own money and competing currencies were leading to increased individual freedom. The new Federal government put a stop to the freedom that was developing at the time.
I'm pretty surprised I got this reply so quickly and thank you for it. I'll have to think about some of the comments, though.
regards
When you say "It's the government's job to 'manage the economy'.", you're advocating for communism. Who needs a government?
Ontopic: Can we use non-fiat currencies for electronic transactions? Like Pay Pal and banking cards and such.
gailtoo: I'm pretty surprised I got this reply so quickly and thank you for it. I'll have to think about some of the comments, though.
Look around on my blog for more stuff. I've already written posts on most of the common topics.
banned: To my understanding a gold standard is still fiat currency. It's still the government dictating the currency of legal exchange.
To my understanding a gold standard is still fiat currency. It's still the government dictating the currency of legal exchange.
You're thinking about the gold exchange standard, when a government pegs its fiat currency to gold. A gold standard is when private banks issue reciepts for their stored gold that can then be used as money.
Mises Community Natural Rights Discussion Group
fsk: The reason gold standards fail is that the insiders can't resist the temptation to print more gold-redeemable paper than physical gold they have. This guarantees an eventual default.
A quick comment on this: it is vastly more probable that a government will engage in this sort of fraud, and on a vaster scale, than competing private entities, since liability for the latter is far higher, as thus is accountability. So this looks to me like a stronger argument against a gold exchange standard than against a gold standard.
As far as I am concerned, the entire matter boils down quite simply: fiat currencies offer only endless financial chicanery, both from government itself and its willing agents (like the Fed and the financial industry), to the great expense of the individual who would be free. The sophisticated financial manipulations which enrich the money and power elites and impoverish the rest of us spring directly from the fact that we have been saddled with fiat currency and legal tender laws.
Always thought this quote pretty much said it all:
"It is a [disputed] question, whether the circulation of paper, rather than of specie, is a good or an evil... I believe it to be one of those cases where mercantile clamor will bear down reason, until it is corrected by ruin." --Thomas Jefferson to John W. Eppes, 1813.
Hard to shake the notion that we're in the midst of that correction, and that ruin, even as we speak.
None are more hopelessly enslaved than those who falsely believe they are free. - Goethe
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