Will Ron Paul really bring back the Gold Standard realistically?

[erowe1]

I heard Peter Schiff talking about it. He was saying how basic living expenses either maintained price or went down as the result of technology. Also I am pretty sure he said that the dollar gained a little bit value overall from the beginning of the 1800's to the end of the 1800's.

OK. That sounds like he was making an overall statement about the change from the beginning to the end of the century. In between those points there were wild swings in both directions.

 

[Harald]

Section. 10.

No State shall enter into any Treaty, Alliance, or Confederation; grant Letters of Marque and Reprisal; coin Money; emit Bills of Credit; make any Thing but gold and silver Coin a Tender in Payment of Debts;

--- it is as close to a legal tender as you can get ---

 

[Harald]

I do know that under the gold standard The US Currency maintained it's value throughout the whole 19th century

Where did you hear that?

 

[erowe1]

^ That chart illustrates exactly what I said.

 

[erowe1]

Section. 10.

No State shall enter into any Treaty, Alliance, or Confederation; grant Letters of Marque and Reprisal; coin Money; emit Bills of Credit; make any Thing but gold and silver Coin a Tender in Payment of Debts;

--- it is as close to a legal tender as you can get ---

That says what they can't do. It doesn't say what they must do.

There's nothing in there that says they have to tell you and me that we have to accept gold, silver, or anything else in our exchanges with one another.

 

[mczerone]

Section. 10.

No State shall enter into any Treaty, Alliance, or Confederation; grant Letters of Marque and Reprisal; coin Money; emit Bills of Credit; make any Thing but gold and silver Coin a Tender in Payment of Debts;

--- it is as close to a legal tender as you can get ---

Parse that though.

It says: "No State shall ... make any Thing but gold and silver Coin a Tender in Payment of Debts"

That is a restriction on the States paying back their own debts. It means if Iowa owes a debt to Farmer Joe, Microsoft, or Missouri, they must tender only gold or silver to pay it.

There is no restriction on what a state can accept for payments, and no restrictions on what individuals can trade in.

This covenant is far from a "legal tender" law, and is more of a federal insurance that no one state or another tries to pay bills with IOUs.

 

[Harald]

^ That chart illustrates exactly what I said.

It does not. This chart uses logarithmic scale and thus exaggerate swings below 1.0. Notice how much distance is in between 1 and 2 and 1 and 0.
On a linear chart, you would not see much of a swing.

During 19th century, there were several times when the central bank was intruduced, or gold standard was temporarily abandoned, you would see that on the chart as dollar purchasing power sliding down until the gold standard is reintroduced after which it goes back to around 1.

 

[erowe1]

It does not. This chart uses logarithmic scale and thus exaggerate swings below 1.0. Notice how much distance is in between 1 and 2 and 1 and 0.
On a linear chart, you would not see much of a swing.

During 19th century, there were several times when the central bank was intruduced, or gold standard was temporarily abandoned, you would see that on the chart as dollar purchasing power sliding down until the gold standard is reintroduced after which it goes back to around 1.

On a linear scale the swing would be even bigger.

 

[Krtek]

On a linear scale the swing would be even bigger.

In the text under the graph it says "for roughly 150 years .... the purchasing power of the dollar fluctuated in a relatively narrow range"

 

[erowe1]

In the text under the graph it says "for roughly 150 years .... the purchasing power of the dollar fluctuated in a relatively narrow range"

The loophole in that statement is the word "relatively." In my mind the range from 0.4-1.3 isn't that small.

If it means relative to what it has done since 1913, then that's fair enough. But it still had wild swings in both directions, and they were often changes of greater amounts in less time than what we've had over the past century.

The difference is that in the 19th century, the deflationary periods and the inflationary periods cancelled each other out. I agree that's a good thing. I just think it comes across deceptively if you cherry pcik two dates where the value of the dollar ended up back where it started and say that it didn't change much between those dates, when it did.

 

[Harald]

erowe1:

Here are the raw data:

http://www.minneapolisfed.org/community_education/teacher/calc/hist1800.cfm

If you put them in an excel and do a chart you will notice what we are talking about. You will see extermely stable purchasing power with subsequent insane drop. (Well, since this table shows CPI it will be huge explosion)

 

[erowe1]

You will see extermely stable purchasing power with subsequent insane drop. (Well, since this table shows CPI it will be huge explosion)

No you won't, as the graph above already shows.

 

[Harald]

you made me sign up for flickr. Here is the chart:

http://www.flickr.com/photos/66780791@N05/6080629150/


CPI 1800-2010 by Ivan Bulatov, on Flickr

In the chart above you can see CPI slowly dropping, interrupted by introduction of central bank in early 1800 and the civil war.

 

[erowe1]

you made me sign up for flickr. Here is the chart:

http://www.flickr.com/photos/66780791@N05/6080629150/

I already made it just to satisfy myself. I can't see how anybody would call that extremely stable.

ETA: Notice, by the way, how the largest year-to-year changes in both directions are during the 19th century.

 

[Travlyr]

you made me sign up for flickr. Here is the chart:

http://www.flickr.com/photos/66780791@N05/6080629150/


CPI 1800-2010 by Ivan Bulatov, on Flickr

If I had known this information in 1971, then I would be wealthy like Warren Buffet. Warren's father Representative Howard Buffet gave his son a great head start by giving Warren good information while the same information was banned in America's public school system and libraries.

 

[Harald]

I can't see how anybody would call that extremely stable.

1800 - 1812: Runs under the expansionary first central bank, culminating in suspension of specie payments. Explains the climbing CPI and spike at around 1812.

More reasonable central bank from 1816-1836 - no big swings
1836-1862 - free banking. No big swings until the Civil war when specie payment was suspended

1863-1913 - no central bank. competing national banks.

Apart from the aforementioned disruptions, I don't see how you cannot agree that dollar had pretty stable purchasing power.
If your argument is that the line is not as smooth as the one in 20th century, I wonder how much of it due to less fluid commodity markets and less advanced transportation and delivery system as opposed to deficiencies of the gold standard

 

[Mordan]

Ron Paul doesn't advocate ANY "standards"

Like you said, he advocates repealing legal tender laws. He uses the discussion of gold backed currencies as a mental exercise to show people why fiat currencies are fallible, but does not advocate a gold standard.

I will admit, on other forums that is the #1 complaint I see.. that he is for the gold standard.. so I am constantly having to explain that he is not, in fact, for any 'standards' including the gold standard.. although he has said that it is preferable to the current fiat system, that again is for mental exercise purposes, not for implementation.

exactly!! but tell me why all those people think as President Ron Paul wants to bring back the Gold Standard? How many business people told me about Ron Paul... oh that guy who wants the Gold Standard back! You have no idea how this "Gold Standard" idea is hurting his campaign.

He should say: As President, I will NOT bring back the Gold Standard, I will legalize currency competition.

The campaign needs to run on a platform with specific items!!

 

[Mordan]

this post is not about the merits of the Gold Standard. I would have posted in the Economic Forum.

If you want to win the nomination, Ron Paul needs to change the way he talks about the Gold Standard.