Would it be possible to have a blended gold-fiat money standard that would work? For instance, say banks had to have 25 percent or 50 percent of their money in gold and have the rest fiat money like we have now. If so, how would it work? If not, why wouldn’t it work?
The reason I ask is people like Ron Paul, a brilliant economist, wants the gold standard, but all the other politicians and bankers want things they way they are with the Fed.
Cite?
What would happen if everyone came to trade in their paper money for the gold that backs it? Only the first quarter to half of them would get it? That’s not a very stable monetary policy.
Basically, it seems to me that the only benefit of the gold standard is that it keeps the government from just printing money to cover its debts. I think there are better ways to prevent that (via laws and market checks and balances), without the problems of the gold standard (e.g., there isn’t that much gold in the world).
Considering how few factual answers there are in economics as a whole, I think this will work better in GD.
No, there is no middle ground. The benefit of having a fiat currency is that it allows the money supply to grow and shrink freely to match the demands of the economy. A gold standard keeps the money supply fixed. In your “mixed” example, the amount of money in the economy is still going to be dependent on the amount of gold in the economy. It’s still a gold standard.
Ron Paul is a doctor. Of medicine. He has no formal training in economics. His views about the economy are rooted in his philosophical and political beliefs, not on any expertise in economic
There is one thing that I’ve never understood from the proponents of the gold standard. Their basic idea is that you can’t trust the government not to manipulate the currency, so that if you fix the value of money to something tangible, like gold, then the government is powerless to mess with it.
Fine and good, but don’t you trust the government to stay on that gold standard? All it would take is one law to remove the gold standard. If you feel that the government would be tempted to toy with the money supply under our current system, why do you think it would be out of bounds for them to pass a law taking us off of the gold standard, and then toy with the money supply?
Well, rather worse than that, there is long historical precedent for countries on metallic standards to tamper with the standard (that is how much gold per unit of currency, or in the case of actual coinage, amount of gold in a unit).
It’s not even hypothetical, it’s bloody historical record. So the gold standard demonstrably achieves nothing particularly permanent, other than returning to some queer atavistic obsession with shiny objects, like crows…