You don’t see a lot of businesses getting started up with chickens or sacks of wheat.
The whole point of the gold standard is there’s a fixed amount of money. Let’s say a dollar equals a tenth of a gram of gold and there are four billion grams of gold in the country. That means you have forty billion dollars in circulation - and you will never get any more (barring digging up new gold).
So your economy is limited to those forty billion dollars. All business will be based on trying to get a share of those dollars from other people. Creating wealth is impossible because the grand total is fixed. There’s no incentive to share wealth because the amount of wealth owned by any one individual means there’s less for everyone else. Population growth alone means that everyone will grow poorer on average as time goes on. You’ve essentially changed your economy from an open-ended capitalist system into a zero-sum mercantilist system.
I don’t think this is correct, unless you use bullion only. But gold standard money doesn’t mean that the issuing government has 1 unit of gold for every unit of currency they issue, only that they guarantee that they will always exchange a unit of currency for a given unit of gold and vice versa. So if the government issues paper currency and declares it is convertible to 1/10 of a gram of gold, they don’t have to have 4 billion grams to issue 40 billion goldbucks. They could have much less than 4 billion grams, as long as they have enough to supply the demand for gold.
The trouble comes when everyone tries to convert their goldbucks into gold, and the government doesn’t have enough, and then you have a run on the bank, and the government has to suspend payment in gold, and suddenly your gold standard currency that will hold value forever becomes fiat money at the stroke of a pen.
Abandoning the gold standard is only as good as the competence of the board charged with managing the money supply in its stead. The Fed, after the death of Benjamin Strong in 1928, failed the competence test. Recent histories of the period have described the Fed as suffering from a “vacuum of leadership” which “wrought near paralysis” (David M. Kennedy, Freedom from Fear) and “continuing to treat the patient–the U.S. economy–for fever long after it had begun to freeze to death” (John Steele Gordon, Hamilton’s Blessing).
Since we can’t rerun history with the US going off the gold standard in 1931, we won’t get an answer, but I maintain that the Fed of that era woiuld have done no better.
Okay, perhaps you can explain what you think these terms mean.
I do know that wealth is not always counted in dollars. But wealth always has a dollar value in any money-based economy - that’s the point of having a money-based economy. Nobody says that Bill Gates is worth one billion shares of Microsoft and Warren Buffett is worth one billion shares of Berkshire Hathaway. They’re considered to be worth sixty billion dollars even though they don’t actually own that much money.
Based on hazy ideas of credibility about which perceptions can be entirely unreliable? Credibility is important, of course, but then you’d have to argue that the US position was unique in its lack of credibility when every other advanced country’s recovery was based most significantly on when they abandoned their gold standard. You’re trying to rely on another variable, one that can’t actually be measured, when the available data answers the problem damn near perfectly.
I’m personally going to stick with the research on this one.
