No doubt the pre-eminence of the dollar helps the U.S., and the U.S. would like to preserve that advantage, but none of the rest of your “argument” makes any sense. For example, the Fed recently “printed” a huge amount of money to get the U.S. through the financial crisis and Great Recession. There was no hyperinflation. In fact there was barely any inflation at all. What happens to emerging economies can indeed impact the US, but that has nothing to do with the dollar being a fiat currency.
If you want historical examples of what happens to an economy backed by massively extracted precious metals, let’s look at colonial era Spain. The huge amount of silver from the Americas resulted in…hyperinflation.
No one is arguing that the instant you print fiat there’s a hyperinflation the next day. But certain assets have inflated to a fairly extreme extent. Look at the inflation rates in average housing costs and university tuitions. How are they related? They’re paid for by debt to the bank, which the banks can facilitate because they got wheelbarrows of free cash from the response to the financial crisis. What else is inflated? Stock prices. P/E ratios and the Shiller PE index are ramping up on an exponential curve. Why is that related? Because stocks are being pumped up by stock buybacks paid for by corporate debt to banks, which again have excess funds.
What? No, it has everything to do with both countries using fiat. Both the USD and Turkish Lira are falling in value, but the Turkish Lira is falling much, much faster than the dollar. The dollar, thus is relatively “stronger.” Countries require USD to perform foreign trade (mostly oil but also other products) because the USD is the reserve currency. So Turkey takes out $1000 debt at 10% interest, which at the former exchange ratio was about L3:$1. That means turkey owes L300 in interest plus L3000 in principle. This is fine, Turkey has L300 in revenue and can pay it back. Then Turkey undergoes a devaluation to L6:1, and now owes L600 in interest plus L6000 principle… but still produces the same amount of goods and collects the same tax revenue (L300). Well, they wont default, so their only means of making that L600 payment is to print money (thanks Fiat!), which devalues their currency in the next round and starts this cycle over again.
Argentina does this. Venezuela does this.
Oh yes, that was definitely problematic in the past. But the vast majority of gold and silver reserves are known and that can’t happen again in the same way. And I’m not advocating growth through gold mining… if that’s what you got from what I said you’ve completely missed the argument. We wouldn’t base our economy on the proceeds of mining gold, we’d just limit the money supply (and thus debt). That’s all a gold standard does.
It’s entirely relevant. The point to economic policy is to encourage the most efficient use of limited resources. Pouring money into mining more gold is not an efficient use of resources, whereas the current rate of mining is such that the economic costs balance out the economic benefits in terms of prices that freely float subject to all market forces.
Expanding the money supply in order to allow commerce to operate more freely and allow everyone to participate in the market allows for the market to efficiently price everything, including gold. Central banks print more money as there is demand for it in the economy, so that prices remain stable and people are able to plan meaningfully for the future. Yes, if they are corruptly run they can cause hyperinflation. So what? If things are corruptly run there can be all sorts of problems. If the central banks follow their mandate, there is no reason why the inflation rate can’t be maintained at a steady low rate. That some countries can’t manage it is not evidence that it can’t be done. We have gone through a few business cycles since the gold standard ended, and once we understood the way to kill inflation was to raise interest rates, inflation has been very steady and very predictable - the best conditions for businesses to operate in.
All of the cheap gold has been extracted. Gold mining is almost on the brink of extinction because it’s extremely uneconomical at today’s prices. If we drive the price of gold up further, instead they’ll fire up the miners and try to extract every last atom they can. People will try to figure out ways to extract the gold from seawater, simply because one atom of gold is worth so much in terms of other goods. The activity of trying to extract every last bit of gold does not benefit people in the same way that extracting a base metal with which to create goods that people will use to improve their life does. The amount of gold extracted by these new techniques would be meaningless in terms of jewelry, and it would make gold jewelry effectively disappear because it would be far too expensive for much of anyone to use that way.
In 2000 M2 was $4.6 trillion. In 2016 it was $12.8 trillion. Inflation in those 16 years was around 40%, so that $12.8 trillion was really only $9.14 trillion, but that’s still around twice as much. On a gold standard, where we couldn’t nearly mine anywhere close to twice as much as what we already had, instead of prices going up 40% over that time period, they would have gone down 50%. And that’s assuming that the economy didn’t tank because of the deflation since there wasn’t an elastic money supply to help it along. Small amounts of inflation work well to encourage people to spend. Deflation does the opposite.
I perhaps overstate my points too much in that last post for which I can no longer make edits. As gold prices rise, there will be more gold available to be economically mined, and if the world goes on a gold standard it probably will. What the effect would be on the money supply would be unknown, other than that it couldn’t be controlled by central banks. There are some people that think central bank control over the money supply is a good thing, and some that think it is a bad thing. I don’t think I can convince anyone of the latter persuasion using reason, for they did not use reason to enter into that position, but the gut feeling that allowing bankers to print money must be bad.
The entire point is that gold is just as much a fiat currency as the dollar is, but one in which the money supply cannot be manipulated for the betterment of the economy but is dependent on technology and exploration results. Not allowing the central bank to print money as the economy needs it leads to deflation, which discourages economic activity. By encouraging money to slowly but steadily become more and more “worthless”, central bankers encourage it being used and thus spur economic activity. If you think that having a more restricted economy is worth not allowing central bankers to print money as they need it, well, you’re entitled to your opinion.
Keep waiting for hyperinflation then. Let me know when it happens. QE has long ended and Fed interest rates are rising, with the stated intention of further hikes.
Rising prices in housing, tuition, and stock prices are all problematic in their own different ways–but are related to separate policy decisions that have nothing to do with the U.S. monetary system. To pick the one that has the most to do with federal policy, stock buybacks are a creation of the current tax regime.
To someone whose only tool is a hammer called the gold standard, every problem is a nail called fiat currency.
ITT: Venezuela is a healthy, happy economy. Same with Argentina and Turkey. Also India, and potentially Brazil.
Inflation is a boogeyman that never gets out of control. Central banks are hyper competent and never make mistakes. Money printing is great for everybody in the long run! Inflated currencies have no historical examples in ancient history like Rome or China, recent history like the Continental, The papiermark, the Pengo, every previous Ruble and the Argentine Peso or current events like the Bolivar or Lira.
Stock buybacks have nothing to do with corporate debt despite occurring at a continually increasing pace well before Trump’s election and/or tax breaks (since 2013, in fact).
Oh, and apparently I’m the one who denies reality. What’s next, are y’all going to tell me they solved the derivatives issue with all that hard hitting regulation and banker arresting they did after 2008?
The first 3 have incompetent governments for a good while. They are going to have messed up economies regardless of being on the gold standard or not. (The other two swing back and forth.)
Remember, inflation is a symptom of a country’s economy going south. Not a cause! Being on a gold standard would have no positive effect on their actual economy!
I have no idea why gold bugs avoid learning the lessons of history caused by the shortage of gold/silver and their manipulation like the US went thru in the late 1800s. The gold standard has serious, really very serious, problems in a growing economy. And you sort of really want a growing economy.
Am I the only one old enough to remember the old “Stop! You’re both right!” commerical for Cert’s breath mints?
This thread reminded me of that commercial
… except I want to say “Stop! You’re both wrong!”
The anti-gold bugs become almost as silly as the gold bugs. Of course gold has an intrinsic worth … even if much of that worth is just that girls like pretty shiny things.
And it’s because gold’s value is intrinsic that the idea of that value rising to meet the needs of a multi-trillion dollar world economy, as our latest gold bug proposes, is absurd. One reason Pres. Lincoln eventually issued “greenbacks” to finance the Civil War was that the need for physical transfers of precious metals made it hard to recycle funds at the faster pace required by war. Does etasyde want us to believe that the price of lead (needed for bullets) should have declined relative to the price of gold (specie) during those war years? Or should Lincoln have ordered his soldiers to search for gold and silver, delaying the war several years until stocks of “money” were sufficient? :smack:
Paper promises to pay gold become worth less than gold in times of crisis. (Lincoln’s greenbacks were worth only 37¢ of gold at one point, though eventually they were redeemed at face value.) And even precious metal is subject to manipulation: by 1600 England’s Kings were minting 62 shillings of silver pennies from a single Troy pound of silver (despite that the switch from avoirdupois to troy was itself intended to justify a smaller penny-weight).
Ancient money and 20th-century money are very interesting subjects to discuss, but for now I’ll close with this:
TL;DR: The U.S. dollar may indeed be heading for a fall; maybe sooner rather than later. However restrictions on gold purchases by Roosevelt and Nixon were solutions NOT part of any problem. And switching to a gold standard now would be insane and disastrous.
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The value of a fiat currency comes from the fact that it is the only thing you can pay taxes with, and if you don’t pay your taxes the government has the power to make your life rather unpleasant. This creates an ongoing demand for fiat currency, which makes it an excellent basis for the currency used in the economy as a whole.
So I’d say fiat currency has more value. You can’t pay taxes, and thereby avoid going to prison, with gold, not unless you sell it first. In fact, what can you do with it? Make jewellery or fancy AV cables? Meh.
You’d have an extremely hard time quoting me mentioning gold’s intrinsic value. It helps to actually debate a person instead of a strawman. I talked about valuation pegs and their impact on demand. Not once did I mention intrinsic value as some cause for gold’s value.
I’m glad you smacked yourself because 1) for most of the life of the greenback, it was redeemable only below face value (half at one point) and 2) nobody is advocating using physical gold coins and hauling bullion on 19th century infrastructure. More strawmen. A gold standard only involves delivery of gold between nation states, and that only if they do not trust the holder of the gold (France called our BS when we printed out the wahoo to fund the Korean and Vietnam wars - wars, you’ll notice, don’t mesh well with a gold standard. That’s actually a good thing, though).
Gold standard are definitely not perfect. I don’t advocate for perfection. But in general, a gold standard would curtail the madness of the current system (which royally screws over the overwhelming majority of the population, and not just the US population).
Yeah, stagflation never happened (immediately thereafter).
The consequences of the present madhouse cannot be avoided. There will be a really, really awful period no matter what we do. The only path with a bright future after all that pain, however, is one that restores sanity to the world monetary system.
Let’s see if I got this right. “Houssein’s[sic] major sin [was trying] to go back to a gold standard” but when challenged you immediately admit that this claim was not entirely truthful. For the other claim you cite a website that rationalwiki’s 1st sentence describes with
I did do you the courtesy of clicking on your link, however. What was it about? Wait for it…
Hillary’s e-mails :eek:
Thanks for the jokes, etasyde. I won’t bother with any more “contributions” from you in GD but maybe you can do something amusing in Thread Games.
I specifically called out those opposing gold-bugs like you for their insistence that gold has no intrinsic worth. If you agree with them on that point, it just makes you wrong on that matter too. And, as I explained, it makes your vision for a gold standard even more absurd.
Which, more or less- is Gold. Gold, based upons is true value, without being used for jewelry or coins or gold standards- would be about $20-30 oz.
No nation on Earth has the Gold standard. Only weird conspiracy websites claim crap like “Hillary had Gaddafi murdered as he was about to go on the Gold standard”. Some minor nation like Libya could go on the gold standard and it would be meaningless. Except they’d go bankrupt.
And you dont have to have US Dollars- the Euro is just fine.
I always love when gold bugs come in here with their crazy conspiracy theories and complete non-grasp of economics.
“I didn’t make an argument involving intrinsic value…”
“THEREFORE YOU AGREE WITH…”
You don’t follow discussions well. You have no idea what my position on the intrinsic value of gold is because I have not argued it one way or the other. Intentionally, because it’s a useless rabbit hole in this context. My argument is not predicated on the intrinsic value of gold. That is all you know. I didn’t even elude to it until after you started talking about it. Why are you even participating in the discussion when you seem to be arguing with people who don’t exist? If you’re going to participate, respond to what is said not your imagination of what people may or may not believe.
You clearly have no understanding whatsoever of “my vision of a gold standard” and so your assessment of its alleged absurdity is completely invalid.
Global research is not a legit site, it’s has no facts, just loony conspiracy theories.
*Globalresearch is an “anti-Western” website that can’t distinguish between serious analysis and discreditable junk — and so publishes both. It’s basically the moonbat equivalent to Infowars or WND.
While some of GlobalResearch’s articles discuss legitimate humanitarian concerns, its view of science, economics, and geopolitics is conspiracist — if something goes wrong, the Jews West didit! The site has long been a crank magnet: If you disagree with “Western” sources on 9/11, or HAARP, or vaccines, or H1N1, or climate change, or anything published by the “mainstream” media, then GlobalResearch is guaranteed to have a page you will love.
The website (under the domain names globalresearch.ca(link), globalresearch.org(link), globalresearch.com(link), and sister site mondialisation.ca(link)) is run by the Montreal-based non-profit The Centre for Research on Globalisation (CRG) founded by Michel Chossudovsky,[2][3] a former professor of economics at the University of Ottawa, Canada.[4]
Whenever someone makes a remarkable claim and cites GlobalResearch, they are almost certainly wrong.*
"*Michel Chossudovsky (born 1946) is a Canadian economist, author and conspiracy theorist.[1][2] He is professor emeritus of economics at the University of Ottawa[3][4] and the president and director of the Centre for Research on Globalization, which publishes conspiracy theories.[5][6][7][8] Chossudovsky has written that the September 11 attacks were not committed by Islamic terrorists, and that the attacks were a pretext for war in the Middle East.[9][10][11][12]
In 2017, the Centre for Research on Globalization was accused by NATO information warfare specialists of playing a key role in the spread of pro-Russian propaganda.[*
Procon is not a nutcase site, but there again here’s all it says: “Was Iraq’s decision to change payment for its oil from dollars to euros a reason for the US to attack Iraq?” with arguments on both sides. Nothing whatsoever about gold standard.
The point I was making was entirely accurate (Realpolitic - the US savagely attacks any threats against the petrodollar, specifically gold backed currencies). Because I wrote that reply in a few seconds, I didn’t phrase it as well as I should have and that lead to a misleading/inaccurate statement. I acknowledged that my statement was inaccurate because I’m not an intellectually dishonest person, but apparently in your sad world that’s a terrible offense.
Probably a shock to you that I voted for Hillary. But apparently anything contained in leaked emails has no bearing on the goings on in government… I mean, you’d much rather trust what governments say publicly about their intentions rather than, you know, what they talk about behind closed doors. Now I said the source was annoying, but that was because you aren’t worth more than the 2 seconds it took to type “Gadaffi oil gold” into google and link you the first result. You can pick any of the thousands of pages, emails, and other analysis if you want to take the time, but don’t ask me to waste time on your disingenuous argument.
Still, if you’re exiting the conversation, then by all means don’t let the door hit you where the good lord split you. Your participation has been the exact opposite of contribution.