How would RP increase the money supply?

[anaconda]

Given that velocity is about 2.5 (I think) this means that the money supply needs to be about 40% of annual GDP to facilitate transactions with efficiency.

So my question is, with a gold backed currency, how does the Treasury, in a Ron Paul Monetary System, acquire 40% of each years' increase in GDP (i.e. "growth") to purchase gold or silver? Taxes? Etc?

Help! Brain freeze!

 

[ItsTime]

I thought he would create another currency and let the market decided which one to use? I would assume he would use whatever gold is left in Fort Knox to create the new currency?

Good question!

 

[torchbearer]

money supply doesn't increase, the price of goods decrease.

 

[forsmant]

The market should determine the supply of money. Kind of like it is now.

 

[bander87]

The market should determine the supply of money. Kind of like it is now.

No no, the Fed does that, remember?

 

[dannno]

Probably the same thing he's doing now...

Investing in Gold and Silver exploration

 

[forsmant]

No no, the Fed does that, remember?

The Fed only determines the base monetary supply. Banks and people determine the amount of credit and the liquidity of near money things such as bonds, and stocks.

 

[nate895]

Very simple: mine gold. It won't dry up in the near future, and there should be enough for thousands of years to make sense in trading.

 

[Texan4Life]

increasing the money supply is inflation... the P-master hates inflation.

 

[forsmant]

Debt is inflationary even in a world without central banks. When someone loans a $100,000 to someone else, he still feels as though he has that $100,000. He can then sell it to someone else and they can list the note as an asset. Only when it defaults or gets paid back does it become inflationary. The fed allows this on a massive scale by preventing the check on creditors by becoming the lender of last resort. The fed will make the markets exponentially more volatile.

 

[torchbearer]

watch these two videos to understand how you don't need an increase in the money supply... they are relatively short.
http://www.youtube.com/watch?v=jqz9J4hxh3k

http://www.youtube.com/watch?v=iwAHnpIR8is

 

[The_Orlonater]

The president doesn't increase the money supply.

 

[anaconda]

money supply doesn't increase, the price of goods decrease

The problem I have with this is that, as the economy grows and grows year after year (until now anyway) you would theoretically be using the same little pile of gold to buy the GDP. This makes no sense to me. I think what would happen is that foreigners would see how much stuff you could buy in the U.S. with a relatively small amount of gold and this would result in a huge demand for U.S. exports and an increase in the price of gold worldwide.

Plus, payments in gold from foreigners to buy U.S. exports would increase the money supply (gold). Would this be inflationary?

My brain still hurts thinking about this.

 

[torchbearer]

The problem I have with this is that, as the economy grows and grows year after year (until now anyway) you would theoretically be using the same little pile of gold to buy the GDP. This makes no sense to me. I think what would happen is that foreigners would see how much stuff you could buy in the U.S. with a relatively small amount of gold and this would result in a huge demand for U.S. exports and an increase in the price of gold worldwide.

Plus, payments in gold from foreigners to buy U.S. exports would increase the money supply (gold). Would this be inflationary?

My brain still hurts thinking about this.

listen to this guy: http://www.youtube.com/watch?v=iwAHnpIR8is

 

[2_Thumbs_Up]

The problem I have with this is that, as the economy grows and grows year after year (until now anyway) you would theoretically be using the same little pile of gold to buy the GDP. This makes no sense to me. I think what would happen is that foreigners would see how much stuff you could buy in the U.S. with a relatively small amount of gold and this would result in a huge demand for U.S. exports and an increase in the price of gold worldwide.

Plus, payments in gold from foreigners to buy U.S. exports would increase the money supply (gold). Would this be inflationary?

My brain still hurts thinking about this.

A gold standard would be inflationary at first as gold floods in from the world in order to purchase goods. But this can't happen indefinitely because the rest of the world would run out of gold. By then foreigners would actually have

As some people already said, you actually don't need to expand the money supply. Prices will go down instead. This was the case during most of the 19th century. An analogy i like to use is to compare the money supply with a unit of length. You don't need to increase the length of a foot in order to measure a taller person. Similarly, you don't need a larger money supply to measure a bigger economy (The lower prices are the bigger the economy is in this case).

Any amount of money works fine for any economy. Theoretically you could have just one ounce of gold for the entire global money supply. The only issues would be practical, not economical. You would have to keep track of gold coins the size of atoms.

 

[TulsaRevolution]

There are trillions of dollars that the super wealthy hoarde offshore simply due to regulations and tax codes. Repeal Sarbanes-Oxley, simplify the tax code, along with actually LOWERING the tax burden, and those trillions of dollars will magically find their way back into circulation in America.

 

[anaconda]

listen to this guy: http://www.youtube.com/watch?v=iwAHnpIR8is

I already did. I watched both of the videos linked at your earlier post ( thank you by the way..that cat is very sharp. In fact, I want to find out a little more about him ). But he was not referring specifically to a commodity backed currency. I agree with both you and him that we would see deflation. More specifically, we would also eventually see the need for the treasury to mint currency in smaller denominations.

But my question has to do with a commodity backed currency. Because it seems to me that if you don't expand the gold supply then you are asking a smaller and smaller amount of gold to buy back the same basket of goods in future periods. This would make no sense to me. In fact, an arbitrage opportunity would erupt and one would buy goods locally and sell them abroad for a bigger pile of gold and then trade it at the U.S. bank for treasury notes at a whopping profit. And this in itself would be inflationary.

 

[2_Thumbs_Up]

In fact, an arbitrage opportunity would erupt and one would buy goods locally and sell them abroad for a bigger pile of gold and then trade it at the U.S. bank for treasury notes at a whopping profit. And this in itself would be inflationary.

But as this happens the supply of gold abroad diminish, the price goes up and the arbitrage dissappears.

But I have to ask you, why do you won't the treasury to mint coins at all? Such centralization of the money supply will just lead to what we have today once again. What is needed is a decentralization of money once and for all. Let private mints make coins. Let banks give out bank notes. The government should only be a neutral third part that makes sure the banks doesn't commit fraud.

 

[anaconda]

But I have to ask you, why do you won't the treasury to mint coins at all? Such centralization of the money supply will just lead to what we have today once again. What is needed is a decentralization of money once and for all. Let private mints make coins. Let banks give out bank notes. The government should only be a neutral third part that makes sure the banks doesn't commit fraud.
Reply With Quote

I believe you are correct. There would be an equilibrating mechanism with trade.

With respect to your question, it might be inefficient dealing with lots of currencies. I mean, if you had 43 different currencies trading in the U.S. you would have to look at the newspaper every day just to figure out exchange rates. Plus, what would retailers do? Put their daily exchange rates posted on the wall?

Plus the Constitution provides for it. It seems like a reasonable function of government to mint
money.

 

[Truth Warrior]

Ron Paul wouldn't.<IMHO>