BTW, the price of gold is currently about $1,200/oz. A gold dollar coin would be something you’d have to handle with tweezers. (A silver dollar coin would be workable, it would be about the size of a dime, maybe a bit smaller.)
I don’t disagree, but isn’t this type of thing going to be a problem in any economic system save for a straight ‘trade and barter’ one?
Update to my previous post: if gold is too scarce to be a good modern basis for money, and if silver is too common, one might consider picking a precious metal that is somewhere between the two, one chosen on the basis of it’s supply most closely matching the cost/demand ratio- that is, a 10% increase in it’s market price would shortly lead to a 10% increase in supply. Palladium for example might work, being intermediate in both supply and market value.
I don’t think this would fly. As several people have noted, there’s no economic sense to a gold standard. The people who want to adopt one anyway just believe in gold. They feel that adopting a gold standard will somehow magically make problems disappear. They’re not going to have that faith in palladium. It would be like asking somebody who believes in carrying a rabbit’s foot for good luck if they would be willing to substitute a gopher’s foot.
You might not sell me that house for that piece of gold. But you might sell it to me for a ream of carefully-printed paper. Which has even less intrinsic value. That’s kinda how money works. If the house is for sale, then money is how you’d buy it.
The gold standard is a simplistic solution to a complex reality, which under scrutiny is seen to be unworkable. But the people calling for a return to the gold standard are only interested in simplistic solutions, and are not interested in studying complex issues.
You can’t print more of it, but you can randomly dig more of it out of the ground. And I do mean randomly. Unless you think that adding more gold in an uncontrolled way is better than the controlled introduction of more money, fiat currencies make more sense.
And you can and do print more people. Unless the gold supply keeps up with the people supply, you can get less gold per capita in the economy. Is that good?
The kindly old widow lady being kicked out of her house by the evil banker that was a popular plot in the late 19th century came from deflation - where the dollars she was paying were worth more, and an affordable mortgage became unaffordable. You want to go back to that?
That was why the Free Silver movement wanted an inflationary monetary policy. And yet today’s inflation-phobic goldbugs somehow appear to be their ideological descendants, with a common factor of producerism.
I think its worth noting that the fed can put it in and also take it out(raise reserve requirements, discount rate increase etc.). I think it is better to think of the money system as a hydraulic flow system and not as a terminal system, the fed wants to regulate the flow to avoid disruptive shocks to the system - I don’t see how people can begin to understand fully the limitations of a gold backed system until they understand these concepts - and that takes some doin’, which is why I prefer to say look at history we had a gold backed system it failed here, here there, the first gold backed fractional reserve bank crashed and on and on and on.
The economy is kind of like a jet, with all the switches and knobs you find on that. Some people want to run it with only the controls you find on a glider.
I don’t think people nattering on about the gold standard are interested in simple solutions so much as they’re simply mistrustful of the existing system, and there seems something very honest about gold.
That it’s hopelessly silly and unworkable doesn’t matter. Gold seems tangible, solid, REAL. It’s easy to fall into the trap of thinking that it somehow makes the system more honest, less prone to the manipulation of bankers.
Right, but it is regulated by the market in gold. Why is that a good idea? Again, think of the things in your life that have value in the sense that other people would pay you for: your labor, your house, car, chickens, and lumber. How much gold do you have? Why should gold represent the only store of value that individuals have in society?
Why should you pay more or less for chicken because of a new discovery of gold in Nebraska? There might be charm in that type of simplicity, but it is foolish in a modern economy to stop somewhere just because it is simple.
Look at what the modern economy has brought to the world: A regular working person making about $60k per year can live in a house worth $250k, he can drive a car worth $40k, he can send his kids to college at about $15k per year, and take vacations to places in the world that our grandparents would have only been able to dream of visiting. And the reason he can do that is because of an advanced monetary policy that realizes that the man’s worth is not limited to shiny metal that he might own.
I think this is a really good point and something that has been lost on me for a while; a lot of beliefs people have about economics are rooted in emotion as much as logic; that explains a few things. Some people I consider certainly intelligent enough(frankly if I can understand it I think a lot of people should be able to) seem to not ever move from their gold lovin’ ways.
A Toronto based comic, Darryl Orr, has a joke about those cash-for-gold commercials: “I always figured someone with a lot of gold was already doing all right financially. But maybe not, so here’s my advice; if you’re short on money but sitting on a mountain of gold, wait for your next paycheck, and don’t spend it all on gold.”
I don’t know how this helps the discussion but he’s very funny.
I think it was Hellestal in another thread who pointed out the basic problem with the gold standard is this:
- The entire point to the gold standard is that the money just represents gold - it is a guarantee that you can trade your money for gold.
2. The entire system relies on nobody actually doing that.
The gold standard, in its most simple terms, is simply a system whereby the peice of paper is transferred in place of gold. It relies on the interchangeability of the paper and the gold to make any sense. But it does not work unless nobody (or almost nobody) ever takes advantage of that, because if they did, you’d have an endless number of runs on banks to get the gold. People would distrust the paper and trust only in the gold. So the government would end up limiting access to the gold… thereby making the paper the real currency. And since the gold could not keep up with any significant degree of economic growth, pretty good the pressure to change the paper-to-gold ratio would be overwhelming and soon they’d do exactly that and then the gold doesn’t matter anyway, it’s really a fiat money system.
I mean, that’s just the *first *argument against it.
Well, you are a doctor. Suppose every patient brought in their own calibrated thermometer using their own scale of temperature, and their own timepieces and you had to use those to take vitals. (Hey, every analogy breaks down at some point.) You could do it, but it would be absolutely maddeningly at time wasting and you would damn well insist that they use your standards and your charts would be in your standards. But the charts and the body and the instruments are theirs uniquely, they were all they had to engage in the trade of this information. Money is a standard. A weight and measure. The government controls them as the “neutral” arbiter, even though it is in no sense neutral. If we all price our goods and services in dollars, we all have a much better sense of what that means to us during the transaction and why exactly the parties on the other side want/need different amounts.
You decide to become a survivalist. You want to trade your Malibu beach house for my survivalists cottage/fortress? Well, I, as a survivalist the last thing on earth I need is a house in Malibu, and I don’t want any property in the LA Basin. But if you give me money, I can immediately start building my next dream cottage/fortress in my new dream location, five miles upstream from my old one. Sucker.
Right. I think that even the most devoted subscriber to the gold standard agrees with the shortcomings of the barter system. We need a medium of exchange, or money.
So, lets say that we all agree that 5 chickens are worth a certain amount of lumber. The market bears that out through thousands of transactions. Once that is established, why should that value, called money, be dependent on a certain amount of shiny metal? It could be pegged to chickens, or to lumber, granite, iron, coal, or ALL of the above. Why only gold?
[Nitpick]
As far as I am aware, the two Hunt families are not directly related:
[ul]
[li]Nelson Bunker Hunt and William Herbert Hunt, whose exploits led to Silver Thursday, were the sons of Texas oil tycoon H. L. Hunt (born in 1889, and one of the inspirations for J.R Ewing of Dallas fame).[/li][li]Joseph and William Hunt founded Hunt’s (the tomato product people, most famous nowadays for their ketchup) in California in 1888.[/li][/ul]
[/Nitpick]
But why all these various products. How about what civilizations has given us. Dollars, Euros, Pounds, etc. And instead of being backed by just one commodity, back it by the entire full faith and credit of the country issuing it and make it a non-dischargeable unit of specie. We call those dollars.
And more prone to manipulation by gold dealers. I have to question their honesty. If they’re telling the truth and they really believe that fiat currency is facing an imminent collapse and the only safe thing to do is hold on to gold - then why are they eagerly offering to exchange gold for dollars?
Or of government.