Gold is no solution

[matt0611]

Which would mean that such a firm would have to own that gold and silver and be willing to give it away if people wanted to trade in their notes with them. What is their incentive to do that? They would also need a large amount of the commodity if they wanted to back any significant amount of their currency at a level which would allow it to circulate a lot. If you hoped to capture one percent of M1 money supply with your alternative currency, you would need $250 billion worth of it. http://research.stlouisfed.org/fred2/series/M1/ Total current value of US Gold reserves is about $139 billion. http://data.worldbank.org/indicator/FI.RES.TOTL.CD

Pretty easy Zippy...

I open a bank. I offer gold and silver certificate and accounts for anyone who wants em. You deposit gold or silver with me you can get a checking account denominated in gold and silver, you get checking services, debit card services, wires, saving accounts, CDs, credit cards and all the rest of it etc. You can take withdraw money as physical gold / silver or by withdrawing our certificates. All for a small yearly fee.

That's just one off the top of my head, there are endless models for doing it.

And we're talking about using gold and silver as the BASE money...not M1.

US M0 is what? 8 trillion?

 

[Zippyjuan]

So I am drawing against my own gold? That is basically taking out a loan with my gold as collateral. And I am still using FRNs for transactions. Not exactly a competing currency. Just a way for your bank to make more money.

 

[matt0611]

So I am drawing against my own gold? That is basically taking out a loan with my gold as collateral. And I am still using FRNs for transactions. Not exactly a competing currency. Just a way for your bank to make more money.

We're talking about a free market where the FRN is obsolete and people use private competing currencies.

But even if not, why do you *need* to use FRNs for transactions? You can trade in gold or silver oz's directly via physical exchanges of the metals, physical exchanges of the certificates, checks, debit cards, credit cards, bank wires, etc.

 

[Zippyjuan]

I was asking how those "competing currencies" backed by metals and commodities could be established. What you described is a collataralized loan.

 

[matt0611]

I was asking how those "competing currencies" backed by metals and commodities could be established. What you described is a collataralized loan.

I just described it to you. People bring in gold and silver to my bank and they create bank accounts denominated in gold and silver and use it as money. We also have certificates if you don't want to withdraw your metals in physical form.

These aren't loans, this is YOUR gold and silver that you can DIRECTLY use for transaction, hence -> money -> private currency.

We hold your gold and silver in your account for you, there is no "loan", its storage for your convenience. Is it a loan when you put your things in a private storage garage?

In the exact same way that you use FRNs now you can use our gold and silver certificates to transact.

 

[Zippyjuan]

I see you expanded your post. Earlier it said I deposited my gold and you let me draw against it for an annual fee. It said nothing about certificates at the time of my post.

Physical gold and silver are inconvenient to carry around which is why people have chosen paper and electronic money instead. M0 (cash and some deposits) runs about $2.5 trillion. All the US gold reserves are worth about $139 billion so this would be an extremely limited supply of alternative money if it relied on clients to deposit their gold and silver with you to fund it.



More currency options means more costs for businesses and more confusion both for them and consumers so they prefer to keep options for money limited.

 

[matt0611]

I see you expanded your post. Earlier it said I deposited my gold and you let me draw against it for an annual fee. It said nothing about certificates at the time of my post. Physical gold and silver are inconvenient to carry around which is why people have chosen paper and electronic money instead. M0 (cash and some deposits) runs about $2.5 trillion. All the US gold reserves are worth about $139 billion.

More currency options means more costs for businesses and more confusion both for them and consumers so they prefer to keep options for money limited.

You can use electronic methods with private currencies as well. You can use debit and credit cards with gold or silver as the money.

 

[MrTudo]

wow, so profound.

 

[Madison320]

Which is why virtually none of us advocate a gold standard.

Free market money is the solution - it just so happens that the anchor for free market money has always been gold and that is likely not ever going to change.

Gov't gold standard is just another fiat edict.

I agree that the government should stay out of the currency business. But I think the free market would end up choosing gold. So I think a government gold standard is far better than a paper standard. Not ideal but it makes it a harder for the government to screw things up.

 

[Acala]

Physical gold and silver are inconvenient to carry around which is why people have chosen paper and electronic money instead..

People, at least in part, had paper money forced upon them. When you could buy dinner for your family with a dime, there was nothing at all inconvenient about metallic money.

All the US gold reserves are worth about $139 billion so this would be an extremely limited supply of alternative money if it relied on clients to deposit their gold and silver with you to fund it. .

You mistake the exchange value of demonetized gold in the current market for the exchange value of a gold currency. The exchange value of money rises and falls with supply and demand just like any other commodity. If gold were to be re-monetized, the increase in demand would increase its exchange value as needed. The market would easily adjust to the quantity available.

More currency options means more costs for businesses and more confusion both for them and consumers so they prefer to keep options for money limited.

Businesses and consumers are very good at sorting out what costs too much and what is too confusing. If they truly do prefer keeping their options limited they can certainly limit those options themselves by choices in the marketplace. History has shown that by far the greater danger for a currency is debasement at government hands, not confusion among consumers at having too many choices.

 

[PierzStyx]

You have no understanding of the subjective worth of money.

Gold standard makes booms and busts impossible to engineer. If you can't make fiat money you can't inflate the money supply with paper in order to engineer a boom in the first place. Gold does not need to be minted by anyone. In fact for most of history gold was minted by private individuals in addition to government. Gold can be abused through clipping and such, true. But thus the development of honest weights and measures and the prosecution of anyone committing fraud by mixing gold dishonestly or clipping. Clipping isn't a huge issue anyway since you can see the clipped edges. Fractional Reserve Banking is actually a function of interest not gold. As long as usury is legal fractional reserve banking will be possible since interest and its imaginary money is what makes fractional reserves exist.

None of your objections hold water, especially compared to paper money.

 

[Zippyjuan]

You have no understanding of the subjective worth of money.

Gold standard makes booms and busts impossible to engineer. If you can't make fiat money you can't inflate the money supply with paper in order to engineer a boom in the first place. Gold does not need to be minted by anyone. In fact for most of history gold was minted by private individuals in addition to government. Gold can be abused through clipping and such, true. But thus the development of honest weights and measures and the prosecution of anyone committing fraud by mixing gold dishonestly or clipping. Clipping isn't a huge issue anyway since you can see the clipped edges. Fractional Reserve Banking is actually a function of interest not gold. As long as usury is legal fractional reserve banking will be possible since interest and its imaginary money is what makes fractional reserves exist.

None of your objections hold water, especially compared to paper money.

Does historic evidence support that? Can you point to any periods of gold standards where there were no bubbles? We have had gold standards and bi-metal standards and fiat currency and competiting currencies and still averaged a recession of different scales roughly every four years under all of them. http://en.wikipedia.org/wiki/List_of_recessions_in_the_United_States

NO bubbles would mean no prices moving up and down. Was that the case under our gold or metalic standards? How about the competitive currencies of the Free Banking era in the mid 1800's (besides numerous different coins we had over 30,000 different notes as well and no central bank)?

https://commons.wikimedia.org/wiki/File:US_Historical_Inflation_Ancient.svg

 

[Occam's Banana]

Gold standard makes booms and busts impossible to engineer.

Not so. See below.

Does historic evidence support that? Can you point to any periods of gold standards where there were no bubbles? We have had gold standards and bi-metal standards and fiat currency and competiting currencies and still averaged a recession of different scales roughly every four years under all of them. http://en.wikipedia.org/wiki/List_of_recessions_in_the_United_States

NO bubbles would mean no prices moving up and down. Was that the case under our gold or metalic standards? How about the competitive currencies of the Free Banking era in the mid 1800's (besides numerous different coins we had over 30,000 different notes as well and no central bank)?

Pre-Fed recessionary periods can be attributed to the inflationary policies of central banks (such as in the "panic" of 1819) and assorted other (general or localized) expansions of "easy" credit (such as was induced by "unit banking" laws). Tom Woods has addressed these issues, though there is much more research to be done.

Tom Woods resource page for "Economic Cycles Before the Fed": http://www.libertyclassroom.com/panics/

https://www.youtube.com/watch?v=TxcjT8T3EGU

 

[Henry Rogue]

Does historic evidence support that? Can you point to any periods of gold standards where there were no bubbles? We have had gold standards and bi-metal standards and fiat currency and competiting currencies and still averaged a recession of different scales roughly every four years under all of them. http://en.wikipedia.org/wiki/List_of_recessions_in_the_United_States

NO bubbles would mean no prices moving up and down. Was that the case under our gold or metalic standards? How about the competitive currencies of the Free Banking era in the mid 1800's (besides numerous different coins we had over 30,000 different notes as well and no central bank)?

https://commons.wikimedia.org/wiki/File:US_Historical_Inflation_Ancient.svg

To the first half of your chart, I see balance between inflation and deflation, with large swings that are short lived. I would say that is a nicely balanced monetary system, despite government legalizing banking fraud, deterring state banking, printing colonial dollars and debt based green backs, fixing the exchange rates of coined precious metals and creating the first centralized bank. At about WW1 to the beginning of the Great Depression I see sustained debt inflation brought on by the creation of a central bank. At the beginning of the great depression to the beginning of WW2 i see sustained deflation caused by Hoovers government interference in the market and FDR's New Deal. From about the beginning of WW2 to present I see no balance only sustained inflation. Dipping only at the end of a war economy and cresting during a highly fractionalized world reserve currency and the ending of gold based paper. Personally I am not for a standard, if a standard means government mandated and rate fixed money. I believe the Free Market should choose it's money and the rate of exchange. There should be a separation of government medium/s of exchange.

 

[Henry Rogue]

Not so. See below.



Pre-Fed recessionary periods can be attributed to the inflationary policies of central banks (such as in the "panic" of 1819) and assorted other (general or localized) expansions of "easy" credit (such as was induced by "unit banking" laws). Tom Woods has addressed these issues, though there is much more research to be done.

Tom Woods resource page for "Economic Cycles Before the Fed": http://www.libertyclassroom.com/panics/

https://www.youtube.com/watch?v=TxcjT8T3EGU

Just finished Tom's lecture that you linked, very good. Have you read "A History of Money and Banking in the United States The Colonial Era to World War 2" by Rothbard. I read this on pdf a year or two ago. A lot of information, but kind of a monotonous read for me personally. To much info for me to absorb in one reading, may have to read it two more times. I think I will buy it for those reads. pdf link for those who are interested> http://mises.org/books/historyofmoney.pdf
I will read "The panic of1819" by Rothbard at some point. found the pdf, linked here>http://mises.org/rothbard/panic1819.pdf

 

[pathtofreedom]

You have no understanding of the subjective worth of money.
If something is subjective how does one understand it?

Gold standard makes booms and busts impossible to engineer. If you can't make fiat money you can't inflate the money supply with paper in order to engineer a boom in the first place.

Booms and busts can be engineered under any monetary system including gold. Creating a boom simply requires that more gold is minted or large quantities of gold are made available as loans. The so called business cycle is mostly a result of bank activity.

 

[pathtofreedom]

People, at least in part, had paper money forced upon them. When you could buy dinner for your family with a dime, there was nothing at all inconvenient about metallic money.

Nobody has had paper money forced upon them. This is nonsensical rhetoric. Paper money is a result of market forces. It came about because of the gold smiths. the gold smiths would create more paper certificates then they would have gold to back these paper certificates because people would rarely ever exchange the certificate for gold. These paper certificates weren't truly gold backed in any meaningful sense. The same exact process happened during the various free banking eras of the US.

 

[TruthisTreason]

Nobody has had paper money forced upon them.

I disagree, see America's Legal Tender Laws.

 

[pathtofreedom]

I disagree, see America's Legal Tender Laws.

Not really the government might give advantages to the Federal Reserve System but that is not forcing paper money on people. In fact Federal Reserve notes were backed by gold for most their history. Also consider the examples of paper money coming through the free market through the gold smiths.

 

[VBRonPaulFan]

Not really the government might give advantages to the Federal Reserve System but that is not forcing paper money on people. In fact Federal Reserve notes were backed by gold for most their history. Also consider the examples of paper money coming through the free market through the gold smiths.

the legal tender laws basically state that:

“United States coins and currency (including Federal reserve notes and circulating notes of Federal reserve banks and national banks) are legal tender for all debts, public charges, taxes, and dues. Foreign gold or silver coins are not legal tender for debts.” - 31 USC § 5103 – Legal Tender

so if you ever had to pay a tax, due, a court decision, etc - the fedGov could REQUIRE you to settle that debt with their fiat. don't have any because you only use gold/silver? guess what, convert it or they'll come into your house with guns and take it themselves.

the hilariousness of someone with the quote 'freeman on the land', sort of defending the federal reserve on ronpaulforums is not lost to me, either.