Should/could the USA go back on the gold standard?

Would this even be possible? Do you think it would solve our economic issues by forcing us to rethink the way we spend?

I do not think that any "metal standard" has much to do with this economic problem.
For 30 to 40 years we have had trade imbalances and recently, huge...
The money has left this country to be in China, Saudi-Arabia, and the two nations we defeated over 60 years ago....anyplace but the good old USA.
Strange that I have not heard one word about this drain of our money...

The only reason why some libertarians argue for a gold standard is that they have some cult like belief that anything done in the public sector is bad, in this case the Federal Reserve is the Great Satan.

Say we decide to go to a Gold Standard. Well, first the government has to reissue all currency in circulation. There would be a gold shortage in the treasury at first, so we would start out with far less currency than we have now. The government would then seek to remedy the situation by purchasing huge amounts of gold, which was result in a massive spike in gold prices.

Then, how do we engage in any sort of trade with all the other developing and developed nations in the world that are not on a Gold Standard. Can't use the good old normal exchange rate, no, in our case the countries we trade with will redeem our currency for gold, thus reducing our nation's gold reserves, thus resulting in deflation. Which is one of the reasons why we had depressions about every 3 decades or so prior to switching from the Gold Standard. So basically, all we would get out of a Gold Standard is a much more volatile economy than we have under our current system where the value of our currency is not tied to a commodity, but rather its ultimately tied to the value of our economy in general. Don't believe me? Compare economic cycles in the United States prior to our moving away to the Gold Standard to afterwards. You will see a great moderation in economic cycles as we moved away from the Gold Standard.

SouthernDemocrat said:

Say we decide to go to a Gold Standard. Well, first the government has to reissue all currency in circulation. There would be a gold shortage in the treasury at first, so we would start out with far less currency than we have now. The government would then seek to remedy the situation by purchasing huge amounts of gold, which was result in a massive spike in gold prices.

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What's wrong with reissuing all currency?

There wouldn't be a gold shortage. You only get to print as much cash as you have gold for. Thus, it would increase the value of the dollar. You have to view the spending proportionally. So instead of paying $20 for everything, we would go back to paying $0.25.

SouthernDemocrat said:

Then, how do we engage in any sort of trade with all the other developing and developed nations in the world that are not on a Gold Standard. Can't use the good old normal exchange rate, no, in our case the countries we trade with will redeem our currency for gold, thus reducing our nation's gold reserves, thus resulting in deflation.

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Why does it matter if they're on the gold standard or not? Gold is universally valued. It just means that the dollar is actually backed by something other than a show of good faith.

Going on the gold standard does not necessarily mean that you are able to redeem your dollar for gold at any given point. Just like how with banks you can't just waltz in and say you want to withdraw $1,000,000 in cash. All it means is that you COULD redeem it for gold. Your dollar is backed by gold.

SouthernDemocrat said:

Which is one of the reasons why we had depressions about every 3 decades or so prior to switching from the Gold Standard. So basically, all we would get out of a Gold Standard is a much more volatile economy than we have under our current system where the value of our currency is not tied to a commodity, but rather its ultimately tied to the value of our economy in general. Don't believe me? Compare economic cycles in the United States prior to our moving away to the Gold Standard to afterwards. You will see a great moderation in economic cycles as we moved away from the Gold Standard.

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You mean the time before your money in the bank was insured and other post depression safe guards were put in place?

earthworm said:

I do not think that any "metal standard" has much to do with this economic problem.
For 30 to 40 years we have had trade imbalances and recently, huge...
The money has left this country to be in China, Saudi-Arabia, and the two nations we defeated over 60 years ago....anyplace but the good old USA.
Strange that I have not heard one word about this drain of our money...

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Right now western nations operate on a debit system. Because we can all basically go to negative infinity, there is absolutely no way to put a cap on all these "trillion dollar" bailout things. I mean, what's a trillion dollars when all it is is a number you punch in the computer? Look! I'll generate it right now: 1,000,000,000,000.

If all the stupid "budget" junk was thrown out the window and in came down to "we literally can't spend more than X amount of dollars," government spending would have to drastically change. As in, do we really need to be funding all those missile silos that are collecting dust?

SouthernDemocrat said:

The only reason why some libertarians argue for a gold standard is that they have some cult like belief that anything done in the public sector is bad, in this case the Federal Reserve is the Great Satan.

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The Federal Reserve system is supposed to be public/private.

It is not a cult like belief but there are problems with the Federal Reserve.

SouthernDemocrat said:

Say we decide to go to a Gold Standard. Well, first the government has to reissue all currency in circulation. There would be a gold shortage in the treasury at first, so we would start out with far less currency than we have now. The government would then seek to remedy the situation by purchasing huge amounts of gold, which was result in a massive spike in gold prices.

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I personally don't think we should go to a gold standard but there is really no need to print new currency.

The old can be reassessed to be inline with whatever the system allows.

SouthernDemocrat said:

Then, how do we engage in any sort of trade with all the other developing and developed nations in the world that are not on a Gold Standard. Can't use the good old normal exchange rate, no, in our case the countries we trade with will redeem our currency for gold, thus reducing our nation's gold reserves, thus resulting in deflation. Which is one of the reasons why we had depressions about every 3 decades or so prior to switching from the Gold Standard. So basically, all we would get out of a Gold Standard is a much more volatile economy than we have under our current system where the value of our currency is not tied to a commodity, but rather its ultimately tied to the value of our economy in general. Don't believe me? Compare economic cycles in the United States prior to our moving away to the Gold Standard to afterwards. You will see a great moderation in economic cycles as we moved away from the Gold Standard.

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Your partially incorrect and should check it out.

These websites cover the basics of those years.

Economic
Depressions of the United States

The History Box | Panics, Depressions and Economic****** Crisis Prior to 1930

DGomez said:

Would this even be possible? Do you think it would solve our economic issues by forcing us to rethink the way we spend?

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No, we shouldn't go to a gold standard. We should either use a free banking model or a multi commodity model.

I may even support a fiat/multi commodity combo. We need to have a tangible value to our currency though.

Harry Guerrilla said:

We need to have a tangible value to our currency though.

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Agreed. The system we have now is doomed for failure. I clearly remember arguing with my 8th grade teacher during social studies years ago about how our dollar is worthless. There has to be a limit or we'll just keep doing what we're doing now. So long as other countries are ok with our expenses, who cares if we blow another 20 trillion?

The gold standard is a worse way of valuing money than simply printing money. Our government may be irresponsible and stupid, but tying money to the value of a commodity is risky and dangerous. The prices can fluctuate too wildly and there is no human input. Our current system, imperfect as it is, is still a more stable and safe way of handling a currency.

rathi said:

The gold standard is a worse way of valuing money than simply printing money. Our government may be irresponsible and stupid, but tying money to the value of a commodity is risky and dangerous. The prices can fluctuate too wildly and there is no human input. Our current system, imperfect as it is, is still a more stable and safe way of handling a currency.

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Good plan. Let's just print more money whenever we need it. That wouldn't cause any inflation whatsoever.

I don't think we should switch back to the gold standard. I agree with a lot of Southern Democrat's reasons.

DGomez said:

Why does it matter if they're on the gold standard or not? Gold is universally valued.

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I saw a twilight zone where gold became as common and cheap as ordinary rocks. these bank robbers had stolen billions of dollars in gold bars and stashed it in a cave and then froze their bodies for a few hundred years so they wouldn't have any trouble spending the money when they woke up. however when they did wake up (and fought over their shares, killing each other until there was only one of them left) gold was no longer valuable and it had all been for nothing, proving once again that crime doesn't pay.

DGomez said:

Right now western nations operate on a debit system. Because we can all basically go to negative infinity, there is absolutely no way to put a cap on all these "trillion dollar" bailout things. I mean, what's a trillion dollars when all it is is a number you punch in the computer? Look! I'll generate it right now: 1,000,000,000,000.

Click to expand...

I don't think the government just generates numbers on a computer. I was under the impression that it sold bonds to both US citizens and foreign investors, so that we do owe tons of money to places like china, and even more to ourselves.

Harry Guerrilla said:

I may even support a fiat/multi commodity combo. We need to have a tangible value to our currency though.

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please explain, harry guerrilla

rathi said:

The gold standard is a worse way of valuing money than simply printing money. Our government may be irresponsible and stupid, but tying money to the value of a commodity is risky and dangerous. The prices can fluctuate too wildly and there is no human input. Our current system, imperfect as it is, is still a more stable and safe way of handling a currency.

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printing more money is at best a short term solution, but I agree with you that tying money to one commodity is too risky.

DGomez said:

Good plan. Let's just print more money whenever we need it. That wouldn't cause any inflation whatsoever.

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I don't think he was suggesting that it was a good idea, just that it was a better idea than the gold standard.

emdash said:

I don't think we should switch back to the gold standard. I agree with a lot of Southern Democrat's reasons.



I saw a twilight zone where gold became as common and cheap as ordinary rocks. these bank robbers had stolen billions of dollars in gold bars and stashed it in a cave and then froze their bodies for a few hundred years so they wouldn't have any trouble spending the money when they woke up. however when they did wake up (and fought over their shares, killing each other until there was only one of them left) gold was no longer valuable and it had all been for nothing, proving once again that crime doesn't pay.

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It doesn't matter how much gold is worth. It doesn't even have to be gold, it could be any finite resource. In having a finite resource(s) back your currency, you will limit the supply and increase demand; simple economics.

emdash said:

I don't think the government just generates numbers on a computer. I was under the impression that it sold bonds to both US citizens and foreign investors, so that we do owe tons of money to places like china, and even more to ourselves.

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Same diff.

DGomez said:

It doesn't matter how much gold is worth. It doesn't even have to be gold, it could be any finite resource. In having a finite resource(s) back your currency, you will limit the supply and increase demand; simple economics.

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How about oil then!.. I mean it will make oil prices spike, forcing American's to buy small energy saving cars!.. hey one can dream!

Or how about land value? Human resources? good looking women? Fat people? Energy consumption? Stupidity? Intelligence?

My point is that you are already doing it. The US dollar is valued depending on how much we "trust" the US to run its own economy and the value we have in that. If we dont trust the US.. helllllllloooo Zimbabwe 2.0 (currency wise and inflation wise), but as long as there is a trust then there is no problem.

Hence the US dollar and the value of other currencies are how much we "trust" in that economy and country at that point in time. This trust includes such things as land value, education, political stability, democracy, business activity and so on. Hell even good looking women, stupidity and fat people are part of the whole "trust" thing.

The same principle is with the gold standard (or any standard related to a commodity). The only reason gold has a value is that we put a value into it.. and not everyone values gold in the same way btw. Jade is more "valued" in some Asian countries, water in others.

However if that value goes away or gets reduced, then you are screwed.. just as you would be if the trust aspect goes away in the present system. By binding yourself to one commodity or a small range of commodities then you bind yourself to an external factor you have very little control over. What if you bind your currency and economy to a commodity that looses its appeal because other things are more important? Spices was once a very very valuable commodity, but it aint today. Gold use to be the most key commodity, but I would claim it is not today. Things like oil, water, platinum and other far far more limited and more used resources are far more valued... until they are not. In fact, the only commodity I see in having any value in 1000 years is water, since that is something we need so we can live... we do not need gold.

So no, going over to the gold standard (or a commodity standard) will not solve any problems the US has and is frankly the wish of the uneducated and the greedy people who happen to have a lot of the commodity they are pushing for to be the standard.

What the US and the world needs is transparent and fair oversight and regulation of all markets, but not over-regulation of course. With such transparent and fair oversight and regulation the present economic credit crunch could have been lessened if not avoided.

DGomez said:

Would this even be possible? Do you think it would solve our economic issues by forcing us to rethink the way we spend?

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No no no.. Its much more viable to create a "food standard" currency, and tie the value of the currency to different food items.

Perhaps the Mexican Pesos could be tied to sex, and the Canadian dollar to water

There's no way we can go back to a metal standard. Last time the market on silver was just about cornered, there's no way that if a country like the US went onto a metal standard the metal wouldn't be cornered. Plus it makes our debt real, which wouldn't be the best of all things now. Right now our debt is written in our dollar and we have a printing press (not saying we'd print away our debt as the inflation would cause bad things, but that it's something we control rather than controls us). We'd more or less been on and off of some metal standard for awhile, but Nixon put the final nail in it when France wanted all the gold in Ft. Knox to pay off our debt and Nixon basically said "come get it".

As much as I distrust the fed and fiat currency, with the global economy and modern technology; it's really the only practical, working system out there. We just have to constrain the fed and keep our currency under control. More work for us, but there's not so much more we can do about it.

PeteEU said:

Or how about land value? Human resources? good looking women? Fat people? Energy consumption? Stupidity? Intelligence?

My point is that you are already doing it. The US dollar is valued depending on how much we "trust" the US to run its own economy and the value we have in that. If we dont trust the US.. helllllllloooo Zimbabwe 2.0 (currency wise and inflation wise), but as long as there is a trust then there is no problem.

Hence the US dollar and the value of other currencies are how much we "trust" in that economy and country at that point in time. This trust includes such things as land value, education, political stability, democracy, business activity and so on. Hell even good looking women, stupidity and fat people are part of the whole "trust" thing.

The same principle is with the gold standard (or any standard related to a commodity). The only reason gold has a value is that we put a value into it.. and not everyone values gold in the same way btw. Jade is more "valued" in some Asian countries, water in others.

So no, going over to the gold standard (or a commodity standard) will not solve any problems the US has and is frankly the wish of the uneducated and the greedy people who happen to have a lot of the commodity they are pushing for to be the standard.

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But there is an issue: rampant inflation. The "gold" standard is not the same thing as a "commodity" standard. You're not simply backing your money with a commodity, you are backing it with a FINITE resource.

You would not back currency with water, for example, because in most first world countries water is practically limitless; we would be in the same predicament as we are now.

If you backed your money with a resource that is not freely available, you are putting a cap on how much money can be printed. Thus, one would be forced to ACTUALLY balance a government budget instead of just printing up a trillion more dollars to dig you out of the hole.

Ikari said:

Plus it makes our debt real, which wouldn't be the best of all things now. Right now our debt is written in our dollar and we have a printing press (not saying we'd print away our debt as the inflation would cause bad things, but that it's something we control rather than controls us).

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It would make our debt real, the dollar worth something, and keep inflation on a tight leash. And this is a bad thing....?

What we need is a government where the politicians don't have their heads stuffed up their asses and are more interested in getting relelected in a couple years than they are in real solutions to problems.

Maximus Zeebra said:

No no no.. Its much more viable to create a "food standard" currency, and tie the value of the currency to different food items.

Perhaps the Mexican Pesos could be tied to sex, and the Canadian dollar to water

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Based on this post, you obviously have no idea what it means to be on a "gold standard." It does not mean that you are backing currency with whatever the country values. You are backing it with a resource that people have limited access to; thus, limiting supply and increasing demand.

Please read a wikipedia article (or something) on the subject.

DGomez said:

Based on this post, you obviously have no idea what it means to be on a "gold standard." It does not mean that you are backing currency with whatever the country values. You are backing it with a resource that people have limited access to; thus, limiting supply and increasing demand.

Please read a wikipedia article (or something) on the subject.

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I know the gold standard.. I am just saying in a rather stupid way its not viable at all.

Phoenix said:

What we need is a government where the politicians don't have their heads stuffed up their asses and are more interested in getting relelected in a couple years than they are in real solutions to problems.

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Well this goes without saying.

Maximus Zeebra said:

I know the gold standard.. I am just saying in a rather stupid way its not viable at all.

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Why? The examples you gave had nothing to do with the theory or practice. You'll have to be more specific.

DGomez said:

Why? The examples you gave had nothing to do with the theory or practice. You'll have to be more specific.

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The gold standard will not work in this day and age, there is not enough gold, not enough resources, too many people.. Anyways, there is kind of a gold standard already, there is a fluctuating free market price of the dollar against a bunch of commodities, including gold, so todays economy is really a mixed standard of everything.. Why go back to 1 standard? Thats not going to work, the economy will collapse. Anyways, gold didnt work, thats why you left it in the first place.

DGomez said:

It would make our debt real, the dollar worth something, and keep inflation on a tight leash. And this is a bad thing....?

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When we loose control of our currency, yes it is a bad thing.

Maximus Zeebra said:

The gold standard will not work in this day and age, there is not enough gold, not enough resources, too many people.. Anyways, there is kind of a gold standard already, there is a fluctuating free market price of the dollar against a bunch of commodities, including gold, so todays economy is really a mixed standard of everything.. Why go back to 1 standard? Thats not going to work, the economy will collapse. Anyways, gold didnt work, thats why you left it in the first place.

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It's a mixed limitless standard. The gold standard did work until the depression. The reason it stopped working was because of issues regarding how money is handled in the bank. Those issues have since been resolved. There theoretically could be enough gold if we adjusted our prices accordingly. Instead of charging $1 for a soda you would charge $.01.