An argument AGAINST returning to the gold standard

[CogWheeler]

fresh article:
http://seekingalpha.com/article/386...e-modern-economy?source=email_cfa_daily&ifp=1

What he said.

Its a great recap of how the gold standard fosters deflation, and how modern monetary theory recognizes that to keep the price level so much as flat, you need to grow money with resources, population, etc.

Nothing beats well managed currency growth. Now, our fractional reserve system, QE, and money creation are horses of another color.

Being hell bent on a gold standard will never win the argument against the populace. The Farmer's Alliance of the late 19th century, that became the Populist Party, wasn't looking to be fast and loose with money creation. They weren't stupid, either. They were part of a growing population, in the face of a gold standard.

Give the link a read, and keep an open mind. I'm not on the bus that wants to relive this.

 

[sailingaway]

There is a sound money forum, where this belongs. You will find it there.

 

[bluesc]

Lol.

 

[ForLiberty2012]

Being on the gold standard doesnt mean you cant print money.

 

[Travlyr]

Lol... The author has no clue what money is.

 

[specsaregood]

Lol... The author has no clue what money is.

Do they at least realize that Dr. Paul's position is not a return to the gold standard?

 

[Travlyr]

Do they at least realize that Dr. Paul's position is not a return to the gold standard?

I didn't see any mention of Ron Paul. He's a fiat money guy. He doesn't understand commodity money.

Ultimately, money is merely a system we design for ourselves to aid us in unleashing our innate productive potential. It would do us well if we focus our efforts in improving and fine-tuning the modern paradigm that brought us unprecedented prosperity since its inception, rather than regressing to a system that has already been disproven by history.

Disclosure: I am short GLD.

 

[ctiger2]

Its a great recap of how the gold standard fosters deflation, and how modern monetary theory recognizes that to keep the price level so much as flat, you need to grow money with resources, population, etc.

You want mild deflation over time, that means the purchasing power of the currency is increasing and that's a GOOD thing. The people are getting wealthier over time vs the people are getting poorer over time is how to think of it. The problems I see with a Gold Standard have nothing to do with Gold, it's simply the people who have the control/power over the system and abuse it that causes the problem. Will a return to a Gold Standard ensure Sound Money? Sure, for a while, at least until the people in control start to abuse it (AND THEY WILL). Everything is cycles.

IMO A paper money system with Ron Paul in control of it would be highly preferred to a Gold Standard with The Federal Reserve System in control.

Ron = Honest/Trustworthy
Fed = Dishonest/Not Trustworthy

 

[hazek]

I abhor the gold standard. I would rather see the planet burn than to return to the gold standard which will eventually lead to the same fucking problems. The gold standard is a horrible horrible standard.

What most of us if not all of us around here support is letting THE MARKET FREELY PICK THE MONEY IT WANTS TO USE. And all we're saying in regards with gold and other precious metals is that whenever the market had the option to choose it tends to choose precious metals over everything else and we believe it would do so again.

 

[twoggle]

Paraphrasing the author of the linked article: "Nothing beats well managed currency growth. Now, our fractional reserve system, QE, and money creation are horses of another color."

The free market is far better than a "managed" currency. The author of the article assumes
that the value of gold vs. other goods and services will be set (as it was in the 1920's) rather
than determined by the free market. So, yes, if we go on his version of a gold standard, we
would be asking for trouble sometime in the future as the population increased and we weren't
allowed to adjust the value of gold.

Fortunately, societies have gone off the gold standard and gone back on the gold standard
so we know it works fine if you can keep the government from screwing things up.

 

[ctiger2]

Being on the gold standard doesnt mean you cant print money.

The purpose of a gold standard is to fix the qty of gold in possession to the qty of currency in circulation. Gold mining increases roughly 2% per year so the currency would be increased at the same rate to keep the fix in place.

A free market gold coin standard would be ideal. The market (all of us) would be in charge of setting the USD value of the gold/silver VS bankers setting the price.

 

[The Gold Standard]

The article is an absolute joke. The way an economy grows is not by increasing the number of dollars flowing in it. An economy grows by businesses producing more products and services.

Let's look at their island economy. Five people, ten dollars. The guy who owns the guava plants only has what nature has given him, so his guavas are expensive. The guy who owns the banana trees has limited bananas available, and therefore high prices. They refrain from consuming so they can pay some labor to clear their land or plant more banana trees. In the future they will have many more guavas and bananas available. The money the 5 people spent on food before will yield much more food now, and leave them money left to save and invest or consume something else. No printing press needed to grow this economy. The same $10 will keep buying more and more goods making everyone wealthier.

 

[Brian4Liberty]

Competitive and free-floating (market-valued) currencies is the preferred solution right now.

Its a great recap of how the gold standard fosters deflation,
...
Give the link a read, and keep an open mind. I'm not on the bus that wants to relive this.

Always keep an open mind.

So I must ask the question, what is wrong with deflation? It makes my savings and wages go up in value. It makes prices drop. Is that a problem?

Answer: It is a problem for the banksters, who want to take that increased value (wealth) from the people, and they do that via inflation.

As for the quantity of a metal based currency, new metals are constantly mined. Metal is divisible. Smaller and smaller denominations can be created.

 

[Brian4Liberty]

The same $10 will keep buying more and more goods making everyone wealthier.

Except for the banker sitting there doing nothing and eating bananas and coconuts.

 

[dannno]

Wow, I'll bet the OP can't even tell us why deflation could be a GOOD THING.

I mean, who is stupid enough to want to see their grocery bill and their energy bills go down, amiright

 

[Steven Douglas]

Its a great recap of how the gold standard fosters deflation...

"...fosters deflation..." the first pernicious fallacy, right off the bat - the idiotic notion that deflation is bad. It is very bad under a debt-money regime, by design. Nothing fosters deflation (while forcing inflation) like a collapsed debt-based monetary system, once the economy is incapable of further growth, further credit expansion. That's when the piper comes calling, and the end game is the disappearance of all currency from circulation. All such currency was created with the intent to destroy it, even while siphoning interest that was never created. That's when all debts are still due and owing, but the supply of future Ponzi scam marks, who are need to provide payment for past debts, have dried up. No more Peters of the Future left to invite into the debt-creation musical chairs circle to pay all the Pauls of the Past. And when that happens, paying existing debts plus interest, the deflation is catastrophic.

Under a sound money regime, with no collectivized "business cycle" based on fractional reserve lending, deflation and inflation are isolated, localized, natural phenomena - as good, natural and necessary as inhaling and exhaling.

 

[Domalais]

Wow, I'll bet the OP can't even tell us why deflation could be a GOOD THING.

I mean, who is stupid enough to want to see their grocery bill and their energy bills go down, amiright

People don't want their paycheck to shrink. That is the problem that deflation creates.

 

[dannno]

People don't want their paycheck to shrink. That is the problem that deflation creates.

No, that is a problem that comes with deflation and decreases in production.

If you increase production and hold the currency stable, then you have deflation in prices while maintaining a steady paycheck.

 

[Domalais]

No, that is a problem that comes with deflation and decreases in production.

If you increase production and hold the currency stable, then you have deflation in prices while maintaining a steady paycheck.

What you're describing is not a 'steady paycheck,' it is a growing paycheck. In the situation you describe, real wages are increasing.

In order to have a steady wage in a deflationary economy, your nominal wage would have to decrease.

 

[The Gold Standard]

People don't want their paycheck to shrink. That is the problem that deflation creates.

If their paycheck shrinks in total dollars but buys more goods and services, did it shrink? Of course not. Not understanding that is a failure of our government run school system.