Economic: Monetary Policy: How does having a gold standard help?

[FX883]

Either a gold (does it have to be gold, or can it also be silver?) standard or having competing currencies. How would this help our monetary policy?

 

[The Gold Standard]

If you have a gold standard where dollars are redeemable in gold, then the threat of people trading in all of their dollars for gold is usually enough incentive to prevent the government/central bank from creating too much money.

If you don't have a gold standard but you allow competing currencies, if the government/central bank inflates the money supply too much the people will just refuse to accept dollars and will prefer payment in gold or silver, thus providing similar incentive to being on a gold standard.

The reason for both of these is to restrict the ability of the central bank to print too much money, debasing and devaluing the currency. If you need to know why inflating the money supply is a bad thing, there are several threads in the Economics section of this site that touch on that topic.

 

[Deft9]

I recommend reading Alan Greenspan's article "Gold and Economic Freedom" from 1966, before Alan turned traitor. Read the last couple paragraphs carefully. Keep in mind inflation is a method of transferring wealth from savers and working people to the people getting the new money. It's the slickest way to steal from people you could ever imagine.

http://www.321gold.com/fed/greenspan/1966.html

 

[smartguy911]

I remember watching Ron Paul saying he doesn't want to the same Gold standard we had in the past. The economy today is more complex, so we need to come up with something new when it comes to Gold Standard.

 

[FX883]

Thank you for your responses!

These forums are very helpful.

 

[FreedomIsPopularRPF]

It limits the printing of fiat currency which makes the currency vastly more stable, thus ending the boom-bust cycles. It also ends the welfare/warfare state and helps limit the federal government.

 

[erowe1]

The government's control over our money is essentially a wild card they hold in their hand that they can use at any time to impose a tax on us up to 100% of our monetary wealth without legislating any new taxes, just by printing and spending money. This threat hangs over us constantly like the sword of Damocles. It's virtually certain that they will eventually use it, and the dollars we have will lose all of their value very rapidly.

All of the things listed in the OP are ways of taking that power out of the government's hands.

 

[Foolness]

I remember watching Ron Paul saying he doesn't want to the same Gold standard we had in the past. The economy today is more complex, so we need to come up with something new when it comes to Gold Standard.

I think that's just Paul's PR people (or maybe he himself) taking away from the idea that he is for the Gold Standard because you can't win that battle with the media unless they allow for a history lesson but as O'Reilly once told Paul, people don't have time for the history reason.

...therefore the best free way is to simply support competing currencies i.e. let the market decide on a new standard. Such issues then would push forth the education of what gold currency is really about (especially to the poor) and at the same time allow an opening of a true better standard to be discussed as then people's mind won't be infatuated with thinking paper as simply currency.

That and of course the already stated, less run away spending anti-corruption firewall.