Gold standard question

[Zavoi]

Suppose we used gold as money (or silver, or cowrie shells, or whatever). If someone has extra money that they don't intend to spend immediately, they won't want to bury it in their back yard when they can make a profit by lending it at interest, even if only for a single day. We would therefore expect that each person's currency holdings (that is, the amount of gold that they have stashed away or sitting in a bank vault under their name) would be negligible. But obviously, the gold has to be somewhere. The question is this: under a commodity standard, why would anyone want to own any money at all, if doing so is always a losing proposition compared to spending or lending it? And if nobody wants it, how can it be used as money?

 

[jonahtrainer]

People will only lend their capital if they are adequately compensated for the risk. The artificially low interest rates are going the way of the dodo as systems like GoldMoney extremely reduce expenses and risk associated with the currency.

 

[sratiug]

Suppose we used gold as money (or silver, or cowrie shells, or whatever). If someone has extra money that they don't intend to spend immediately, they won't want to bury it in their back yard when they can make a profit by lending it at interest, even if only for a single day. We would therefore expect that each person's currency holdings (that is, the amount of gold that they have stashed away or sitting in a bank vault under their name) would be negligible. But obviously, the gold has to be somewhere. The question is this: under a commodity standard, why would anyone want to own any money at all, if doing so is always a losing proposition compared to spending or lending it? And if nobody wants it, how can it be used as money?

If money went up in value 10% a year instead of down people would save that money, and they wouldn't need to put it in a bank to get interest. It might be better to bury it.

More people saving money means more people with friends or relatives possibly willing to loan them that money with no need to charge interest. They wouldn't need to worry about someone stealing it until you paid it back.

 

[danberkeley]

If money went up in value 10% a year instead of down people would save that money, and they wouldn't need to put it in a bank to get interest. It might be better to bury it.

More people saving money means more people with friends or relatives possibly willing to loan them that money with no need to charge interest. They wouldn't need to worry about someone stealing it until you paid it back.

I hope you are not an investor. You are supposed to buy low and sell high. If gold (money) went up 10%, that means that the price of everything else (in real terms) went down. The correct move would be to trade the gold for something else.

 

[noxagol]

I hope you are not an investor. You are supposed to buy low and sell high. If gold (money) went up 10%, that means that the price of everything else (in real terms) went down. The correct move would be to trade the gold for something else.

Or hold onto it for even lower prices in the future.

 

[sratiug]

I hope you are not an investor. You are supposed to buy low and sell high. If gold (money) went up 10%, that means that the price of everything else (in real terms) went down. The correct move would be to trade the gold for something else.

Since fed notes are going down all the time I guess you're saving them?

 

[tmosley]

I hope you are not an investor. You are supposed to buy low and sell high. If gold (money) went up 10%, that means that the price of everything else (in real terms) went down. The correct move would be to trade the gold for something else.

No, that means that the value of the gold goes up 10% per year. If they can put off purchase of consumable goods, they will be better off, because their gold will buy 10% more a year later.

Of course, enterprising people would invest in something that would give a better return than gold. One of the best ROI in such a situation would come from increasing industrialization (which is the engine that drives prices down).

 

[krazy kaju]

Your question doesn't make much sense. If you're loaning out or spending money you are owning it. You'd always keep some money on hand to spend when you need it.

 

[danberkeley]

Or hold onto it for even lower prices in the future.

IF prices go lower (in real terms).

No, that means that the value of the gold goes up 10% per year. If they can put off purchase of consumable goods, they will be better off, because their gold will buy 10% more a year later.

Of course, enterprising people would invest in something that would give a better return than gold. One of the best ROI in such a situation would come from increasing industrialization (which is the engine that drives prices down).

You guys gotta stop presupposing things. Don't add things that arnt given in my scenario. Obviously, if gold goes up 10%, all else being equal, then the price of everything went down.

Since fed notes are going down all the time I guess you're saving them?

They have gone up in the past 6 months.

EDIT: And gold has gone down.

 

[Dr.3D]

They have gone up in the past 6 months.

EDIT: And gold has gone down.

Don't hold your breath that it will stay that way for another 4 months.

 

[Josh_LA]

Suppose we used gold as money (or silver, or cowrie shells, or whatever). If someone has extra money that they don't intend to spend immediately, they won't want to bury it in their back yard when they can make a profit by lending it at interest, even if only for a single day. We would therefore expect that each person's currency holdings (that is, the amount of gold that they have stashed away or sitting in a bank vault under their name) would be negligible. But obviously, the gold has to be somewhere. The question is this: under a commodity standard, why would anyone want to own any money at all, if doing so is always a losing proposition compared to spending or lending it? And if nobody wants it, how can it be used as money?

first of all, you can't have a standard unless you have an exact count and honest audit of how much is considered how much

Secondly, people would want to own money the same reason people don't want to own money today, to have control and responsibility.