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.
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.
Would this even be possible? Do you think it would solve our economic issues by forcing us to rethink the way we spend?
We need to have a tangible value to our currency though.
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.
Why does it matter if they're on the gold standard or not? Gold is universally valued.
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.
I may even support a fiat/multi commodity combo. We need to have a tangible value to our currency though.
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.
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.
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.
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.
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.
Would this even be possible? Do you think it would solve our economic issues by forcing us to rethink the way we spend?
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.
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).
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
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.
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.
I know the gold standard.. I am just saying in a rather stupid way its not viable at all.
Why? The examples you gave had nothing to do with the theory or practice. You'll have to be more specific.
It would make our debt real, the dollar worth something, and keep inflation on a tight leash. And this is a bad thing....?
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.