The Panacea of the Gold Standard - The Orange Mane

Rohirrim · 01-13-2012, 11:05 AM

Well let’s spell out what a Gold Standard would imply today:

1) If there were a major domestic recession, the countries would simply have to suffer it. They would not be able to cut interest rates to alleviate the pain. In other words, countries would have to deflate, and suffer the social pain that goes with this, if they are to keep to the Gold Standard in times of economic stress. This may have worked well in the 19th century, when the poorer households who would tend to be affected couldn’t do anything about it, but I can think of few circumstances under which a democracy (with one-man one-vote) would allow it.

2) There would also be a second possibility of deflation (or for that matter inflation) because of the arbitrary factor of tying one’s currency to a metal. If there was suddenly a massive discovery of gold, this would pump extra inflation into the global system; if there was a drop-off in gold discoveries (as there was in the late 19th century), governments would find themselves having to impose swingeing pay cuts on their populations in order to keep to the Standard. The fundamental point here is that the amount of gold in the ground is finite, whereas the capacity of humans to increase their economic output and productivity is still increasing exponentially, and should continue to do so, barring the possibility of falling back into the dark ages.

3) An end to banking as we know it. This might not sound so bad, given the horror the banks brought our way in the crisis, but it is worth dwelling on for a moment. The Gold Standard was incompatible with fractional reserve banking, and the Bank of England could barely carry out its role as lender of last resort in the 19th century without having to bend the rules significantly (which, as far as some are concerned, fatally undermined the system). I'm all for a reconsideration of how we structure the banking system (my favoured plan is to impose unlimited liability on bank owners) but let's not leap into another monetary system without considering how far reaching the consequences would be.
http://blogs.telegraph.co.uk/finance...ld-be-madness/

Rohirrim · 01-13-2012, 11:06 AM

And don’t expect a return to the Gold Standard. The problem is not that it is unfeasible. It has plenty of attractive features, among them the fact that it constrains governments from inflating their debts away. However, it is simply incompatible with democracy as we know it. If you are looking for an example, look no further than Greece. The euro area is an effective Gold Standard. Greece is in dire straits because it is pegged to the same currency as Germany, despite having unit labour costs that are dramatically higher (over time, in a globalised world these should converge). Because it is trapped in this quasi-Gold Standard, Greece can do nothing but deflate – impose massive pay cuts and suffer many years of recession. The euro is facing its biggest existential threat as a result. If it can’t survive, yoked to the same currency, what hope is there for the entire world to tie itself to gold? (ibid)

Bob · 01-13-2012, 11:46 AM

Quote:

Originally Posted by Rohirrim

And don’t expect a return to the Gold Standard. The problem is not that it is unfeasible. It has plenty of attractive features, among them the fact that it constrains governments from inflating their debts away. However, it is simply incompatible with democracy as we know it. If you are looking for an example, look no further than Greece. The euro area is an effective Gold Standard. Greece is in dire straits because it is pegged to the same currency as Germany, despite having unit labour costs that are dramatically higher (over time, in a globalised world these should converge). Because it is trapped in this quasi-Gold Standard, Greece can do nothing but deflate – impose massive pay cuts and suffer many years of recession. The euro is facing its biggest existential threat as a result. If it can’t survive, yoked to the same currency, what hope is there for the entire world to tie itself to gold? (ibid)

Not sure if this is an accurate comparison -- Greece is pegged to other European countries, who are pegged to in reality nothing but the good faith that their people place in their currency, so it could be argued that the whole lot of them are pegged to nothing but trust, which I think will continue to erode.

Could America make an abrupt change back to the gold standard? I don’t think it could but could it be done incrementally? I for one think the American dollar will pop and be worth very little at some point, but until we have the integrity that is needed by those at the top nothing will happen, and so I prepare in those small ways I can, and expect little from those who have been pushing us collectively toward a cliff for some time now.

Play2win · 01-13-2012, 12:48 PM

Quote:

Originally Posted by Rohirrim

[I]Well let’s spell out what a Gold Standard would imply today:

1) If there were a major domestic recession, the countries would simply have to suffer it. They would not be able to cut interest rates to alleviate the pain. In other words, countries would have to deflate, and suffer the social pain that goes with this, if they are to keep to the Gold Standard in times of economic stress. This may have worked well in the 19th century, when the poorer households who would tend to be affected couldn’t do anything about it, but I can think of few circumstances under which a democracy (with one-man one-vote) would allow it.

Same could be said about many of Ron Paul's policies. Like I have said previously, many of Ron Paul's policies would have worked great before the advent of the Industrial Revolution.

Arkie · 01-13-2012, 04:35 PM

EVERY fiat currency fails. History is full of thousands of examples which temporarily enjoyed great prosperity and then inevitably collapsed. Thousands of failures and not even one successful fiat currency ever.

Rohirrim · 01-13-2012, 04:48 PM

Quote:

Originally Posted by Arkie

EVERY fiat currency fails. History is full of thousands of examples which temporarily enjoyed great prosperity and then inevitably collapsed. Thousands of failures and not even one successful fiat currency ever.

The key is not whether it is a fiat currency per se, but whether it is well managed. The Swiss have been operating on a fiat currency for a very long time without issue. What we have to have in place are controls on our currency that limit the government's ability to abuse it to go into debt.

Arkie · 01-13-2012, 04:58 PM

A gold standard or some equivalent is the only control on our currency that will limit the government. A balanced budget amendment won't work any better than the debt ceiling.

Meck77 · 01-13-2012, 09:31 PM

Uploaded with ImageShack.us

Ro makes these wonderful little speeches. Then there are the facts. I'll let the chart speak for itself. This is an old chart which doesn't reflect the several trillion our government pissed away since august or the 1.2 trillion they are requesting to piss away starting in a couple weeks.

Anyone see a pattern?

Rohirrim · 01-14-2012, 06:27 AM

Quote:

Originally Posted by Meck77

Uploaded with ImageShack.us

Ro makes these wonderful little speeches. Then there are the facts. I'll let the chart speak for itself. This is an old chart which doesn't reflect the several trillion our government pissed away since august or the 1.2 trillion they are requesting to piss away starting in a couple weeks.

Anyone see a pattern?

Where did I make a speech? What is it with reading comprehension these days? A lost art?

mosca · 01-14-2012, 08:02 AM

Most of those opposed to Ron Paul, particularly those who have a record of supporting the Democrats, would rather focus on this issue, ignoring the fact that it would be extremely difficult for Ron Paul as president to single-handedly magically force the U.S. to return to a gold standard.

The most important stances that Ron Paul has, such as being the only candidate to oppose the undeclared wars, the only candidate to pursue an audit of the Fed, the only candidate to support civil liberties and oppose the police state, are what constitute the core of his platform.

Arkie · 01-14-2012, 08:31 AM

Alan Greenspan supports a gold standard. He believed in it before he was Fed chairman.

Quote:

"In the absence of the gold standard, there is no way to protect savings from confiscation through inflation. … This is the shabby secret of the welfare statists’ tirades against gold. Deficit spending is simply a scheme for the confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights. If one grasps this, one has no difficulty in understanding the statists’ antagonism toward the gold standard."

He never advocated his beliefs while he was Fed Chairman, but now that he's done playing politics and central banker, he's back to his beliefs.

Quote:

"We have at this particular stage a fiat money which is essentially money printed by a government and it’s usually a central bank which is authorized to do so. Some mechanism has got to be in place that restricts the amount of money which is produced, either a gold standard or a currency board, because unless you do that all of history suggest that inflation will take hold with very deleterious effects on economic activity… There are numbers of us, myself included, who strongly believe that we did very well in the 1870 to 1914 period with an international gold standard."

He understands monetary policy, and maybe now he's feeling a little guilty for his role in this mess, speaking in riddles while he was chair, and fooling the ignorant masses.

mhgaffney · 01-16-2012, 06:48 PM

They will return to the gold standard -- but only AFTER the coming financial crisis --

Which the US/UK financial elite will exploit to save the dollar as the reserve currency

more on this soon...

mhgaffney · 01-16-2012, 06:50 PM

oh BTW -- notice from the graph that the spike in gold started right after 9/11.

It's one of many reasons why 9/11 was/is so important.

9/11 was the turning point.

Taco John · 01-16-2012, 10:59 PM

It's just economic physics. There's already a gold standard, but the people don't have the gold. They have paper. The rich have both the gold and the paper (but they spend only the paper, and use it to collect the gold). Now I'm supposed to favor the paper standard because they can use it to inflate our way out of trouble? A recovering alcoholic and drink his way out of tremors, but that doesn't make it a great idea.

Rohirrim · 01-17-2012, 08:55 AM

Yep. Unregulated corporations don't work. And neither does unregulated government. I see a theme.

Perhaps if we had a government of the people, and by the people, and for the people... a government that couldn't be bought... a government dedicated to the mission: ...to establish Justice, insure domestic Tranquility, provide for the common defence, promote the general Welfare, and secure the Blessings of Liberty to ourselves and our Posterity...

Nah! It would never work.

01-13-2012, 11:05 AM	#1
Rohirrim Partisan Human Cannonball Join Date: Jan 2003 Location: Twixt Hell & Highwater Posts: 48,808	The Panacea of the Gold Standard Well let’s spell out what a Gold Standard would imply today: 1) If there were a major domestic recession, the countries would simply have to suffer it. They would not be able to cut interest rates to alleviate the pain. In other words, countries would have to deflate, and suffer the social pain that goes with this, if they are to keep to the Gold Standard in times of economic stress. This may have worked well in the 19th century, when the poorer households who would tend to be affected couldn’t do anything about it, but I can think of few circumstances under which a democracy (with one-man one-vote) would allow it. 2) There would also be a second possibility of deflation (or for that matter inflation) because of the arbitrary factor of tying one’s currency to a metal. If there was suddenly a massive discovery of gold, this would pump extra inflation into the global system; if there was a drop-off in gold discoveries (as there was in the late 19th century), governments would find themselves having to impose swingeing pay cuts on their populations in order to keep to the Standard. The fundamental point here is that the amount of gold in the ground is finite, whereas the capacity of humans to increase their economic output and productivity is still increasing exponentially, and should continue to do so, barring the possibility of falling back into the dark ages. 3) An end to banking as we know it. This might not sound so bad, given the horror the banks brought our way in the crisis, but it is worth dwelling on for a moment. The Gold Standard was incompatible with fractional reserve banking, and the Bank of England could barely carry out its role as lender of last resort in the 19th century without having to bend the rules significantly (which, as far as some are concerned, fatally undermined the system). I'm all for a reconsideration of how we structure the banking system (my favoured plan is to impose unlimited liability on bank owners) but let's not leap into another monetary system without considering how far reaching the consequences would be. http://blogs.telegraph.co.uk/finance...ld-be-madness/

01-13-2012, 09:31 PM	#8
Meck77 Ring of Famer Join Date: Sep 2002 Posts: 16,308	Uploaded with ImageShack.us Ro makes these wonderful little speeches. Then there are the facts. I'll let the chart speak for itself. This is an old chart which doesn't reflect the several trillion our government pissed away since august or the 1.2 trillion they are requesting to piss away starting in a couple weeks. Anyone see a pattern? Last edited by Meck77; 01-13-2012 at 09:49 PM..

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01-13-2012, 11:06 AM	#2
Rohirrim Partisan Human Cannonball Join Date: Jan 2003 Location: Twixt Hell & Highwater Posts: 48,808	And don’t expect a return to the Gold Standard. The problem is not that it is unfeasible. It has plenty of attractive features, among them the fact that it constrains governments from inflating their debts away. However, it is simply incompatible with democracy as we know it. If you are looking for an example, look no further than Greece. The euro area is an effective Gold Standard. Greece is in dire straits because it is pegged to the same currency as Germany, despite having unit labour costs that are dramatically higher (over time, in a globalised world these should converge). Because it is trapped in this quasi-Gold Standard, Greece can do nothing but deflate – impose massive pay cuts and suffer many years of recession. The euro is facing its biggest existential threat as a result. If it can’t survive, yoked to the same currency, what hope is there for the entire world to tie itself to gold? (ibid)

01-13-2012, 04:35 PM	#5
Arkie Ring of Famer Gggggrrrrrr rrrraaaahhh Arrrrhhhn. Join Date: Oct 2003 Posts: 9,081 Adopt-a-Bronco: Quinton Carter	EVERY fiat currency fails. History is full of thousands of examples which temporarily enjoyed great prosperity and then inevitably collapsed. Thousands of failures and not even one successful fiat currency ever.

01-13-2012, 04:58 PM	#7
Arkie Ring of Famer Gggggrrrrrr rrrraaaahhh Arrrrhhhn. Join Date: Oct 2003 Posts: 9,081 Adopt-a-Bronco: Quinton Carter	A gold standard or some equivalent is the only control on our currency that will limit the government. A balanced budget amendment won't work any better than the debt ceiling.

01-14-2012, 08:02 AM	#10
mosca grand pubah honest optimism Join Date: Dec 2002 Posts: 1,950 Adopt-a-Bronco: Bubby Brister	Most of those opposed to Ron Paul, particularly those who have a record of supporting the Democrats, would rather focus on this issue, ignoring the fact that it would be extremely difficult for Ron Paul as president to single-handedly magically force the U.S. to return to a gold standard. The most important stances that Ron Paul has, such as being the only candidate to oppose the undeclared wars, the only candidate to pursue an audit of the Fed, the only candidate to support civil liberties and oppose the police state, are what constitute the core of his platform.

01-16-2012, 06:48 PM	#12
mhgaffney Ring of Famer Join Date: Apr 2006 Posts: 9,764	They will return to the gold standard -- but only AFTER the coming financial crisis -- Which the US/UK financial elite will exploit to save the dollar as the reserve currency more on this soon...

01-16-2012, 06:50 PM	#13
mhgaffney Ring of Famer Join Date: Apr 2006 Posts: 9,764	oh BTW -- notice from the graph that the spike in gold started right after 9/11. It's one of many reasons why 9/11 was/is so important. 9/11 was the turning point.

01-16-2012, 10:59 PM	#14
Taco John 24/7 Broncos In Elway I Trust Join Date: Apr 2001 Posts: 49,697 Adopt-a-Bronco: Peyton Manning	It's just economic physics. There's already a gold standard, but the people don't have the gold. They have paper. The rich have both the gold and the paper (but they spend only the paper, and use it to collect the gold). Now I'm supposed to favor the paper standard because they can use it to inflate our way out of trouble? A recovering alcoholic and drink his way out of tremors, but that doesn't make it a great idea.

01-17-2012, 08:55 AM	#15
Rohirrim Partisan Human Cannonball Join Date: Jan 2003 Location: Twixt Hell & Highwater Posts: 48,808	Yep. Unregulated corporations don't work. And neither does unregulated government. I see a theme. Perhaps if we had a government of the people, and by the people, and for the people... a government that couldn't be bought... a government dedicated to the mission: ...to establish Justice, insure domestic Tranquility, provide for the common defence, promote the general Welfare, and secure the Blessings of Liberty to ourselves and our Posterity... Nah! It would never work.