Yes/No to the return of the Gold standard?

[Mega]

I heard the thoughts of Keiser/Schiff on the subject, not too sure what EJ thinks.............here in a "No!"
http://blogs.telegraph.co.uk/finance...ld-be-madness/
Mike

[FRED]

Re: Yes/No to the return of the Gold standard?

I heard the thoughts of Keiser/Schiff on the subject, not too sure what EJ thinks.............here in a "No!"
http://blogs.telegraph.co.uk/finance...ld-be-madness/
Mike

Not sure what EJ thinks?

[oddlots]

Re: Yes/No to the return of the Gold standard?

That's a good editorial from the Telegraph to my mind. Life rarely presents you with a choice between having problems and not having them. The everyday quandry is between having one set of problems versus another.

Gold is not a panacea. The ideal to me is to include gold in a basket of values that re-link monetary policy with trade of mutual advantage. I can't see it existing as anything but a "safe" point - think tag - in international trade. That's no small thing to my mind, given the adjustments that have to be negotiated between some very angry (and increasingly whipped up) populations.

[goldy675]

Re: Yes/No to the return of the Gold standard?

That's a good editorial from the Telegraph to my mind. Life rarely presents you with a choice between having problems and not having them. The everyday quandry is between having one set of problems versus another.

Gold is not a panacea. The ideal to me is to include gold in a basket of values that re-link monetary policy with trade of mutual advantage. I can't see it existing as anything but a "safe" point - think tag - in international trade. That's no small thing to my mind, given the adjustments that have to be negotiated between some very angry (and increasingly whipped up) populations.

I agree. The only benefit of a gold standard is the increased likelyhood that the future supply of currency is stable and limited in growth. An identical result could easily be achieved with a law limiting the creation of future paper or electronic dollars. Both of these scenarios would be equally susceptable to future failings, as both would only require a new law doing away with the old. No one should fool himself into thinking that a gold standard would be any guarantee of anything. If one prefers gold as a stable holder of value, then one is currently free to buy as much as he can afford. That will not change after the enaction of a gold standard.

[ThePythonicCow]

Re: Yes/No to the return of the Gold standard?

Ah - I had previously spoken against a return to a Gold standard currency (see Post #4 of the thread Hugo Salinas Price: Silver Money for Americans.)

My basic concern was that we did not have enough physical gold to provide everyone in the world with sufficient gold in coin sized form for all purchases, even small ones.

However there is a way. Make gold the world's reserve currency, against which all paper currencies float. Yes, that could mean the price of gold is $10,000/ounce or some such, so no, I am not going to buy a pack of chewing gum with a gold coin. But this works for larger international trade contracts and foreign currency exchanges.

... now I just read the link FRED posted in his reply Not sure what EJ thinks? In that article, highlighted in red, it states:

Note: An international gold standard does not require a return to national gold standards by participating nations. In an international gold standard gold is only relevant for international transactions between nations. Fiat currencies, such as the dollar, euro, and yen, remain in use for domestic transactions within countries.

Yeah -- like he said.

Unfortunately, in my view, we are not likely to get there from here without a catastrophic collapse first. But I usually am more of a doomer than EJ, so that's not a surprising difference of view.

[oddlots]

Re: Yes/No to the return of the Gold standard?

I agree. The only benefit of a gold standard is the increased likelyhood that the future supply of currency is stable and limited in growth. An identical result could easily be achieved with a law limiting the creation of future paper or electronic dollars. Both of these scenarios would be equally susceptable to future failings, as both would only require a new law doing away with the old. No one should fool himself into thinking that a gold standard would be any guarantee of anything. If one prefers gold as a stable holder of value, then one is currently free to buy as much as he can afford. That will not change after the enaction of a gold standard.

Are you a bot? Seriously. The phrasing is just too strange.

[goldy675]

Re: Yes/No to the return of the Gold standard?

Are you a bot? Seriously. The phrasing is just too strange.

Ha! Really? I've been called a lot of things, but rarely a bot! I have been writing a lot of boring technical papers at work recently though, maybe that style is carrying over a bit too much. I'll try to liven things up a bit in future posts.

[ThePythonicCow]

Re: Yes/No to the return of the Gold standard?

I agree. The only benefit of a gold standard is the increased likelyhood that the future supply of currency is stable and limited in growth.

May I suggest a different way of looking at this.

Currency is always issued against something. That something might be precious metals. It might be bank issued debt. It might be a get out of jail free card (a voucher than can be used to satisfy a tax bill, so that the government doesn't throw you in prison.) It might be opiates, whiskey, goats or seashells.

In any economy using a generally exchangeable currency (any monetary economy), whatever currency is issued against tends to become more common if its quantity can be increased, or more valuable otherwise.

For example, most of us would object if the U.S. Treasury changed from issuing Federal Reserve debt based dollars to issuing Afghan opium based dollars, for we would properly object to the increasing worth placed on that drug.

A fixed gold standard would have another benefit than the one you note of a physically constrained supply to currency. It would also separate us from debt based currency. Debt is currently harming civilization more even than opiate drugs, in my view. We don't need to go to a gold based currency to get rid of a debt based currency. There are other options.

Notice that what EJ is describing is not the use of a fixed gold standard currency in general circulation. What he's describing is using gold as a basis for the world's reserve currency, such as used in international trade and the foreign currency exchange markets. If this still left national currencies being issued against debt, I would object that the biggest monetary problem we face had not been addressed.

[bungee]

Re: Yes/No to the return of the Gold standard?

I don't think it matters that much what backs our currency, what's important is who controls how much of it is issued.

The Secret of Oz

A gold backed currency is probably very attractive to the people at the top as they likely control most of the worlds gold by now. Notice that Robert Zoellick isn't calling for the scrapping of central banks and for the government issuing of debt free money. Whatever he (or the people behind him) have in mind it will likely be a continuation of the same. I mean would you freely give up your power and lifestyle just because the whole world was in debt to you and you can't extract any more from them? No you would bring in a new scheme that looked different but you manipulated to be fundamentally the same (or even better for you / worse for everyone else).

[gnk]

Re: Yes/No to the return of the Gold standard?

Unfortunately, in my view, we are not likely to get there from here without a catastrophic collapse first. But I usually am more of a doomer than EJ, so that's not a surprising difference of view.

Your doomerism is shared by the US Military. In a just posted King World News interview, Jim Rickards describes a war game named "Unified Quest 2011" that the US Military is conducting in order to prepare for a possible economic/dollar collapse. I'm not saying a collapse of sorts is a certainty, but the fact that the US Military is cognizant of the possibility, makes me think a lack of preparation of sorts on the individual level is foolish.

http://kingworldnews.com/kingworldne..._Rickards.html

[c1ue]

Re: Yes/No to the return of the Gold standard?

A fixed gold standard would have another benefit than the one you note of a physically constrained supply to currency. It would also separate us from debt based currency. Debt is currently harming civilization more even than opiate drugs, in my view. We don't need to go to a gold based currency to get rid of a debt based currency. There are other options.

The problem with a fixed gold standard is the mirror image of the problem with a fiat currency: the gold standard restricts growth just as a fiat currency encourages inflation/devaluation.

Just because we are at one extreme, does not mean we should swing to the other.

[shiny!]

Re: Yes/No to the return of the Gold standard?

I don't think it matters that much what backs our currency, what's important is who controls how much of it is issued.

The Secret of Oz

A gold backed currency is probably very attractive to the people at the top as they likely control most of the worlds gold by now. Notice that Robert Zoellick isn't calling for the scrapping of central banks and for the government issuing of debt free money. Whatever he (or the people behind him) have in mind it will likely be a continuation of the same. I mean would you freely give up your power and lifestyle just because the whole world was in debt to you and you can't extract any more from them? No you would bring in a new scheme that looked different but you manipulated to be fundamentally the same (or even better for you / worse for everyone else).

+1

[oddlots]

Re: Yes/No to the return of the Gold standard?

Missing smiley. Glad you didn't take it the wrong way.

[ThePythonicCow]

Re: Yes/No to the return of the Gold standard?

Unfortunately, in my view, we are not likely to get there from here without a catastrophic collapse first.

I should learn to read what EJ writes before commenting on it .

Reading further on his http://fourthcurrency.com/ site, I find:

In a world where trillions in currencies swim the global currency markets sea daily, the re-institution of an international gold standard with some formula of fixed exchange rates, even if temporary, will be wildly disruptive and costly to the global economy, and more to some nations than others. This is why we don’t see this happening until global economic conditions resulting from debt deflation grow much more dire

(Emphasis mine.)

This may not be exactly the "catastrophic collapse" I anticipate, but for EJ's more measured tone, it's pretty close.

[DSpencer]

Re: Yes/No to the return of the Gold standard?

I don't think it matters that much what backs our currency, what's important is who controls how much of it is issued.

The Secret of Oz

I have watched that and there are some good points in it. However, I think there is a compelling case to be made for gold's ability to control how much is issued. It also seems like we would still have the same problems if politicians control the money supply whether it is debt-based or not.

If I recall, the movie touches on the idea of people wanting silver money as well, but misses the significance, in my opinion.

The market is capable of determining what should be used as currency. Gold and silver have historically proven to be good choices, but I think the market should be allowed to decide on an ongoing basis. If people want to put barrels of oil in a vault and use oil certificates to trade with each other, why shouldn't they be allowed?

The point of currency is to facilitate the goal of exchanging one type of value for another by standardizing and limiting what is used in most transactions. It makes no sense to use a currency with no value or an easily manipulated value. Likewise the market is better able to determine the optimum number and type of items (typically commodities) to be used as currency than a group of politicians.

How can we have a free-market with a manipulated currency acting as half of each transaction?