Gold Standard – Now How would this Work? – Please Help!

[spacehabitats]

Gold Standard – Now How would this Work? – Please Help!

[FONT=&quot]OK, I know that Ron Paul proposes allowing a competing U.S. dollar based on a precious metal. How exactly would this take place?

[/FONT] [FONT=&quot]Would there be a date after which the $G (for gold dollar) would also be available? What would the exchange rate be? If the price of gold on that date was, say, $1,000F/ounce gold (for Fed/Fiat dollars), would the value on that date be set arbitrarily at $1,000G/ounce gold and then let the exchange rate float?

[/FONT][FONT=&quot]The beauty of Ron Paul’s plan, of course, is that no one in his right mind would leave his cash in Fed dollars, the exchange rate for $G/$F would soar, and pretty soon people would be using “Feds” for toilet paper. Without banning the Federal Reserve Notes he would have effectively switched us back to a gold standard.

The Fed supporters have had trouble arguing against this without admitting the whole scam ("Hey, that's not fair because our money could never compete. " "Why not?" "Uh,..... because.. Uh... because its basically fancy Monopoly play money with fancier printing.")[/FONT] [FONT=&quot]And if the U.S. were still allowed to pay off its national debt in “Feds” (as opposed to real money) well, they could probably do it with the gold coins I have under my mattress!!! That's the good news.

[/FONT] [FONT=&quot]But my boss will still insist on paying me in Feds.. Yikes!!!

[/FONT] [FONT=&quot]Or am I missing something?[/FONT]

 

[Joseph Hart]

Make coined money out of precious metals. Stock will determine that mints purity at the time.
I could be wrong :/

side note... If they ever did prove we had a ton of gold within Fort K'nex, then it was planted for a photo-op.

 

[d03boy]

bump

I've been wondering the same thing..

 

[LibertyIn08]

I was always for the government not printing currency period, be it metal-based or otherwise.

Let the free market decide the ideal currency(ies). As the saying goes, good money drives out the bad.

 

[Ninja Homer]

OK, I know that Ron Paul proposes allowing a competing U.S. dollar based on a precious metal. How exactly would this take place?

That isn't quite accurate. Ron Paul wants to legalize competing currencies (legal as in "legal tender for all debts, public and private"). Then there could be multiple currencies backed by whatever they wanted to back it with, and the market would decide what to use. The trade rates would be based on whatever the market decides.

I'm 100% positive there's a Kudlow & Co youtube where Ron Paul discusses it, and I think everybody on the panel agreed with the idea.

I think I found the one I was thinking of:
http://youtube.com/watch?v=URgXOJm1P6w
http://youtube.com/watch?v=Cilwld5fj48

 

[Bradley in DC]

I spoke on this topic at the most recent Austrian Scholars Conference at the Mises Institute:

http://www.ustream.tv/recorded/AfycBeR,mnEYaL2pa,BtD5.VBYK3cgTY

(I come on after the first half hour)

 

[nbruno322]

Check out this video that goes over some of the more popular gold bullion coins, damn do they look cool!

http://www.youtube.com/watch?v=tZ5R3SoCDsg

 

[Bradley in DC]

I was always for the government not printing currency period, be it metal-based or otherwise.

Let the free market decide the ideal currency(ies). As the saying goes, good money drives out the bad.

Check out F. A. Hayek's Denationalization of Money essay. It's what made me an "Austrian."

 

[scotto2008]

[FONT=&quot]But my boss will still insist on paying me in Feds.. [/FONT]

Everyone will try to pay in Feds and hoard their $Gs. That's Gresham's law -- bad money drives out good.

If the Fed keeps inflating though, eventually no one will accept Fed notes and the currency will be abandoned.

On the other hand, if the Fed miscalculates and cascading defaults lead to deflation, the federal reserve note will have an amazing, if short-lived, comeback. People will be selling gold like there's no tomorrow.

 

[spacehabitats]

Thanks to everyone!

 

[spacehabitats]

An amazing graph

By the way, I ran across this amazing graph that every RP supporter should see.

http://www.thedailygreen.com/environmental-news/latest/oil-gold-commodities-47041507

If I understand this right it basically shows that the price of oil has not gone up!?! (at least if you paid for it in GOLD)

An amazingly clear picture that all of the business shows ignore.

 

[slamhead]

We already have ways you can use gold as your currency.

http://www.e-gold.com

http://www.mygold.com

Online payment systems where you can pay people in gold. The only thing I would be scared of is that these gold depositories would play with their reserves much like today's banks do. E-gold says they are 100% backed by gold.

 

[DriftWood]

[FONT=&quot]OK, I know that Ron Paul proposes allowing a competing U.S. dollar based on a precious metal. How exactly would this take place?

[/FONT] [FONT=&quot]Would there be a date after which the $G (for gold dollar) would also be available? What would the exchange rate be? If the price of gold on that date was, say, $1,000F/ounce gold (for Fed/Fiat dollars), would the value on that date be set arbitrarily at $1,000G/ounce gold and then let the exchange rate float?

[/FONT][FONT=&quot]The beauty of Ron Paul’s plan, of course, is that no one in his right mind would leave his cash in Fed dollars, the exchange rate for $G/$F would soar, and pretty soon people would be using “Feds” for toilet paper. Without banning the Federal Reserve Notes he would have effectively switched us back to a gold standard.

The Fed supporters have had trouble arguing against this without admitting the whole scam ("Hey, that's not fair because our money could never compete. " "Why not?" "Uh,..... because.. Uh... because its basically fancy Monopoly play money with fancier printing.")[/FONT] [FONT=&quot]And if the U.S. were still allowed to pay off its national debt in “Feds” (as opposed to real money) well, they could probably do it with the gold coins I have under my mattress!!! That's the good news.

[/FONT] [FONT=&quot]But my boss will still insist on paying me in Feds.. Yikes!!!

[/FONT] [FONT=&quot]Or am I missing something?[/FONT]

I dont mean to be rude or anything. Sorry. But, its amazing how many of us Ron Paul gold standard supporters dont know anything about the gold standard. We are almost as clueless as the people that say they are against the gold standard. They dont know what it is eighter. To be honest, I didnt know anything about the gold standard eighter until I read a book about the history of it. An amazing book called "Gold: the once and future money". I recommend it to everyone reading this.

In short the gold standard is/was paper money pegged to the value of gold. The dollar today is pegged to a short term interest rate target. It would be very easy to change that dollar peg, from a short term interest target peg to a gold peg. Most people would not notice a change. All they would see is that on the open gold markets a dollar always buys the same amount of gold. It would simply mean an end to inflation and deflation compared to the value of gold. No more fluctuations in the price of gold. So how do you keep the price of gold stable? Easy, there is two ways:

First the centralized version that requires a central bank (A brenton woods typp gold standard): When the Fed notices that the price in dollars of gold increases then the Fed starts "destroying" dollars. (The Fed has a couple of tools for controling the money supply one of them is by selling bonds). So the Fed could "destroy dollars" simly by selling bonds on the open market. The dollars it got like this it would keep out of circulation by burying them in its safes or by flushing them down the toilet. There would then be fuer dollars in circulation and the dollar would gain in value because it would have become more scarce. The Fed should keep doing this until the price of gold in dollars is again the same as before (before the dollar started loosing value compared to gold). Similarly if the price of gold in dollars decreases, then the fed can "create" more dollars. It does this by selling bonds for dollars on the open market (if it did not have any dollars in its safes then it could print some more). By doing this it lets more dollars into circulation wich lowers the value of the dollar. It should do this until the price of gold in dollar is again the same as it was as before (before the dollar started gaining value compared to gold). The price of gold would always stay the same. No more infaltion or deflation. Easy as cake.

The second way to keep the dollar price of gold stable is the decentralized version. You can keep the price of gold stable even without having a central bank. This is the decentralized automatic approach that I believe Paul would support (The gold standard before brenton woods). This works by the govt simply promising that all dollars would be redemable for a certain amount of gold. The private banks would legaly be required to exchange dollars for a fixed amount of gold weights on request (this gold could be in the form of gold coins, gold teeth, gold bullets or gold whatever as long as the gold weight was the same). This promise is what would keep the dollar price of gold stable. This is because, If the price of gold went up then more people would want to change their dollars for gold and that would mean less dollars in circulation making dollars scarcer and driving up it value. This would continue automagically until the dollar price of gold was again its face value. The same would happen in reverse if gold price went down. The price of gold would always stay the same. No more infaltion or deflation. Easy as cake.

The second option is better in the way that govt has no role in it, for those of us that dont want to trust the govt with powers to control the money supply. The first option is probably more politically feasable. Lets face it, the congress is not going to kill the Fed over night. So instead of all those "Kill the Fed" signs. We should probably have signs that say "Peg the dollar to the price of gold" or "Bring back the redemability of dollars in gold". Okay so it does not have the same ring to it. But it means the same. The Fed and govt would loose all its power to inflate or deflate the dollar. And everyone would live happily ever after.

Hope that makes sense.

(If you guys want a more detailed description look at some of my previous posts. I have probably explained the gold standard in five different threads now, no worries.)

Cheers

 

[spacehabitats]

Thanks again.

I dont mean to be rude or anything. Sorry. But, its amazing how many of us Ron Paul gold standard supporters dont know anything about the gold standard. We are almost as clueless as the people that say they are against the gold standard. They dont know what it is eighter. To be honest, I didnt know anything about the gold standard eighter until I read a book about the history of it. An amazing book called "Gold: the once and future money". I recommend it to everyone reading this.

In short the gold standard is/was paper money pegged to the value of gold. The dollar today is pegged to a short term interest rate target. It would be very easy to change that dollar peg, from a short term interest target peg to a gold peg. Most people would not notice a change. All they would see is that on the open gold markets a dollar always buys the same amount of gold. It would simply mean an end to inflation and deflation compared to the value of gold. No more fluctuations in the price of gold. So how do you keep the price of gold stable? Easy, there is two ways:

First the centralized version that requires a central bank (A brenton woods typp gold standard): When the Fed notices that the price in dollars of gold increases then the Fed starts "destroying" dollars. (The Fed has a couple of tools for controling the money supply one of them is by selling bonds). So the Fed could "destroy dollars" simly by selling bonds on the open market. The dollars it got like this it would keep out of circulation by burying them in its safes or by flushing them down the toilet. There would then be fuer dollars in circulation and the dollar would gain in value because it would have become more scarce. The Fed should keep doing this until the price of gold in dollars is again the same as before (before the dollar started loosing value compared to gold). Similarly if the price of gold in dollars decreases, then the fed can "create" more dollars. It does this by selling bonds for dollars on the open market (if it did not have any dollars in its safes then it could print some more). By doing this it lets more dollars into circulation wich lowers the value of the dollar. It should do this until the price of gold in dollar is again the same as it was as before (before the dollar started gaining value compared to gold). The price of gold would always stay the same. No more infaltion or deflation. Easy as cake.

The second way to keep the dollar price of gold stable is the decentralized version. You can keep the price of gold stable even without having a central bank. This is the decentralized automatic approach that I believe Paul would support (The gold standard before brenton woods). This works by the govt simply promising that all dollars would be redemable for a certain amount of gold. The private banks would legaly be required to exchange dollars for a fixed amount of gold weights on request (this gold could be in the form of gold coins, gold teeth, gold bullets or gold whatever as long as the gold weight was the same). This promise is what would keep the dollar price of gold stable. This is because, If the price of gold went up then more people would want to change their dollars for gold and that would mean less dollars in circulation making dollars scarcer and driving up it value. This would continue automagically until the dollar price of gold was again its face value. The same would happen in reverse if gold price went down. The price of gold would always stay the same. No more infaltion or deflation. Easy as cake.

The second option is better in the way that govt has no role in it, for those of us that dont want to trust the govt with powers to control the money supply. The first option is probably more politically feasable. Lets face it, the congress is not going to kill the Fed over night. So instead of all those "Kill the Fed" signs. We should probably have signs that say "Peg the dollar to the price of gold" or "Bring back the redemability of dollars in gold". Okay so it does not have the same ring to it. But it means the same. The Fed and govt would loose all its power to inflate or deflate the dollar. And everyone would live happily ever after.

Hope that makes sense.

(If you guys want a more detailed description look at some of my previous posts. I have probably explained the gold standard in five different threads now, no worries.)

Cheers

Thank you for taking the time to give that explanation.
I haven't looked at you other threads yet but I will.

Yes, we (many RP supporters) are "ignorant" except that what we DO know the most important fact, that we need a stable and reliable currency that is NOT at the mercy of inscrutable and potentially malevolent powers.


It does sound like when RP talks about "competing currencies" that he is talking about creating another currency based on precious metals that is "LEGAL TENDER FOR ALL DEBTS, PUBLIC AND PRIVATE".

Unfortunately, if we need to get the public at large to read a book for them to understand this issue, we are doomed.
I remember being around when gold was always $35 an ounce and dollars were "silver certificates".
I didn't care how those prices were maintained, and I don't think most people would care that much either, as long as it worked.

What people DO worry about is how we get there from here, and who's ox is going to get gored in the process.

If we had some simple way of explaining how that would work and reassuring them that it would not cause wild speculation and fluctuations in the commodities markets it would help. As bad as the current system is, people will still tend to stick with "the Devil that we know" if you don't give them what appears to be a relatively transparent alternative.

I'll see if your other threads provide that.
Thanks again.

 

[Gilby]

A lot of the misconception is that a lot of people do not know what the gold standard really is because so many different things have been called the gold standard and they really weren't. When most people think of the gold standard today they think of the period from 1933 to 1971 when we weren't really on a gold standard. What we were on was a system where the US dollar could be redeemed for gold by other central banks with the Fed still inflating the paper money supply, with more paper notes out there than gold to back it up, which obviously results in the gold eventually being depleted. This lead to the suspension of the gold window by Nixon in 1971. We do not want that same system today because of the problem of government inflating the paper money supply. Another thing that has been called a gold standard is having the government issue paper notes being backed 100% by gold. While better than the Bretton Woods gold standard, history has shown that government doesn't know how to stick to that standard and they eventually find a way to inflate and adjust the laws to suit their needs. The other gold standard is where gold coin is the actual currency and gold is the index of the unit of account. We've never had that, but instead we've had that with silver instead of gold.

The dollar is the official unit of account for the US, but most people do not know what a dollar actually is. It existed before the constitution was ratified, and in the Coinage Act of 1792, it was declared the official unit of account of the US. The dollar at the time was the Spanish Milled Dollar, which was measured and legally defined in this coinage act. It was defined as 371.25 grains of pure silver (about 0.77 troy ounces or 24 grams of silver). The dollar still has that definition. The constitution requires the coins to be fixed to a standard of weights and measures. When a dollar is defined as a unit mass of silver, then it can not change in value when denominated in dollars. In that Act, gold coinage was also defined. A unit mass of gold was defined as an Eagle. The value of gold when denominated in eagles cannot change, but since the buying power of gold in comparison to silver can change, the value of gold denominated in dollars can change. Thats why the US government in 1933 could change the value of gold, when priced in dollars, simply because the ratio between silver and gold changed in the market.

What we use today, the Federal Reserve Notes, are "bills of credit". It's an agreement between the Federal Reserve and the US government for the Federal Reserve to accept these bills of credit in place of actual dollars to pay any debt. Since the US government needs these notes to pay off the debt, they have extended to us the ability to pay off any of our debt to the US government in these notes. Today, one dollar can buy 14 Federal Reserve Notes denominated as one dollar of credit. If I owed the government money, obviously, I'm going to trade my one dollar for the 14 FRNs and use one of the FRNs to pay my debt to the US government since they accept it as the same.

This raises a problem. The US cannot change the definition of a dollar. They could say they are creating a new currency and simply bring the dollar back under it's original definition, or they could create a new currency, such as "silver grams" or "gold grams". Create both and let them freely fluctuate in the market. The US government does not have the power to issue paper money, so all they should do is create this standard and then coin money. Let the market create any paper notes. In contracts, let the market choose what to use as the index for payment in exchange for services. It could be gold, silver, or something entirely different. What you hold in your bank account could be anything... stocks, bonds, commodities, etc. Whatever you and your bank come up with to meet your goals. When payday comes, your bank and the bank of the payer negotiate what asset to transfer between them and then they buy and deposit into your account whatever asset you have your account set up to hold.