# The Gold Standard - Actually prefferable to fiat? **URL:** \ **Category:** Great Debates\ **Created:** [March 20, 2016, 1:03pm UTC](https://boards.straightdope.com/t/the-gold-standard-actually-prefferable-to-fiat/749639 "2016-03-20T13:03:41Z")\ **Posts on this page:** 5\ **Page:** 15
**Author:** ![truthSeeker2](https://avatars.discourse-cdn.com/v4/letter/t/7cd45c/32.png) [@truthSeeker2](https://boards.straightdope.com/u/truthSeeker2)\ **Post date:** [April 25, 2016, 4:27am UTC](https://boards.straightdope.com/t/the-gold-standard-actually-prefferable-to-fiat/749639/281 "2016-04-25T04:27:06Z")
> [@Trinopus](#): > > Dropping an interest rate by 1/10 of one per cent, per month, over a period of fourteen months… vs. dropping an interest rate by 1.4 per cent overnight. > > How can this possibly not be obvious? It is not so much about monetary policy now. You can’t raise rates beyond a point. You can take that the rates are going to be low forever for all practical purposes. 0.5% or 1% - it hardly matters. What matters is the discipline of not growing debt larger than in proportion to GDP growth. ---
**Author:** ![Lemur866](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/lemur866/32/434_2.png) [@Lemur866](https://boards.straightdope.com/u/Lemur866)\ **Post date:** [April 25, 2016, 5:33am UTC](https://boards.straightdope.com/t/the-gold-standard-actually-prefferable-to-fiat/749639/282 "2016-04-25T05:33:42Z")
> [@Common\_Tater](#): > > Jeeze Louise, six (6) frickin’ pages and people still don’t get it. Measure the $1912 in terms of gold, not paper. There’s no need for shotguns or caches, keep it at the bank, where it pays interest in, get this - in terms of gold! Wow! This is the unit of account. Gold isn’t an investment, it’s a type of money. > > Whatever you invest in, whether a stock or a bond, that has a return has an underlying denominator. In the case of gold, it would be worth far more than the paper currency that is in use today. > > You take the $1912 > > I’ll take the approximately 95.6 ounces of gold worth about $124,000 in today’s money. Let me ask you a question. You imagine a setup where you can deposit gold at a bank, and the bank will pay you interest on that deposit. Why would the bank do this? The only reason banks pay interest on deposits is because they can take those deposits and invest them. In a bank’s case, the investment is loaning out the money and collecting interest from the loans. They charge more interest on loans than they pay on deposits, and so make money on the difference. Does that mean you are in favor of fractional reserve banking? That is, if you take a gold bar to the bank, does the bank have to keep the gold bar in the vault? Or can they take your gold and replace it with an IOU, and lend the gold bar to someone else? See, if we allow this then the banks can create money out of thin air. They don’t have to keep your gold in a vault, they can do whatever they want with it, as long as they’re able to pay you some other gold when you stop by and ask for your gold back. They create money by taking your money and writing “IOU some money” on their ledger, and giving money to someone else. Twice as much money is on the accounts than actually exists. It doesn’t matter whether the money deposited is gold or fiat dollars. If the bank can lend out deposits, they can create money. So I imagine you don’t want banks to be able to lend out your gold. OK, but now how does a bank pay you interest on your deposit? They can’t lend it out, so it’s not actually helping them make money. They’d have to charge you for the privilege of depositing money. In other words, the bank becomes a safety deposit box company. Put your gold in their vault, they keep it safe, you pay them a modest fee. If you want them to pay YOU for putting your gold in their vault there has to be something in it for them. That is, they have to be able to loan your money to third parties. ---
**Author:** ![UltraVires](https://avatars.discourse-cdn.com/v4/letter/u/ecccb3/32.png) [@UltraVires](https://boards.straightdope.com/u/UltraVires)\ **Post date:** [April 25, 2016, 10:29pm UTC](https://boards.straightdope.com/t/the-gold-standard-actually-prefferable-to-fiat/749639/283 "2016-04-25T22:29:21Z")
> [@truthSeeker2](#): > > \*I am not for gold standard. There are many different solutions. For ex. in the present system itself, just stop growing debt to GDP ratio > > \*Recession isn’t necessarily bad. Don’t make the bubble even bigger before it bursts. Just let the recession happen n let things find their equilibrium. > > - why gold prices will be rising? it’s probably less abt moving back to gold standard but more abt lack of confidence in the present system because of the way debt has been rising. 1. pegging the value of money to anything suffers from the same problems as gold. Calling for smaller government spending is another debate. Trying to stop high government spending by preventing inflation of the currency has no teeth because the government can simply go off of that standard, revalue the currency in relation to that standard, or do any of the above. 2. Until the next recession, except this one caused by an increase or decrease in the supply of whatever we have pegged the currency to. Economic downturns have not been nearly as severe since going to fiat currency. 3. If gold prices “rise” relative to the currency, then what you are proposing is no standard at all. If we say that the dollar is pegged to gold at $100 trillion per ounce, we can print all of the money we want ---
**Author:** ![truthSeeker2](https://avatars.discourse-cdn.com/v4/letter/t/7cd45c/32.png) [@truthSeeker2](https://boards.straightdope.com/u/truthSeeker2)\ **Post date:** [April 26, 2016, 1:15am UTC](https://boards.straightdope.com/t/the-gold-standard-actually-prefferable-to-fiat/749639/284 "2016-04-26T01:15:53Z")
Nice post Ultrawires, I had made a couple of posts on previous page. Copy-pasting one of them below: > [@](#): > > I am not for gold standard, just discussing potential loopholes in present system. > > So inflation will not build up regardless of how much ever debt they create. I see 3 reasons - > > 1. The demographics. Not enough babies born. Population getting old. Putting pressure on demand. > 2. Technology. Producing more with less. > 3. Cheap developing countries labour and competitive devaluation by developing countries. > > I am against this debt based system for the future. It worked brilliantly when world population was increasing (world population was just 1.2 billion in 1920 for ex.). In future it won’t work when working age population will peak and will start to decrease. > > I am in favour of something being done on global scale. All countries coming together, creating a common currency, the poor people in all countries being eligible for something like food stamps in the US. > > Right now, many countries can’t afford this because they have inflation problem. Young people there look to relocate to the US, EU etc. This is not sustainable in long term. USD being the reserve currency, America can do whatever it wants. Although people should think the ethics. Debt growing disproportionately larger than the GDP obviously means that system is unsustainable in the long run. I am saying let other countries, who have many more poor people than USA and who are net importers, also have the ability to spend on the poor. Let’s work on common currency in the world and let’s have spending on the poor (like food stamps etc) untied to ‘public debt’ all over the world. ---
**Author:** ![truthSeeker2](https://avatars.discourse-cdn.com/v4/letter/t/7cd45c/32.png) [@truthSeeker2](https://boards.straightdope.com/u/truthSeeker2)\ **Post date:** [April 26, 2016, 1:58pm UTC](https://boards.straightdope.com/t/the-gold-standard-actually-prefferable-to-fiat/749639/285 "2016-04-26T13:58:59Z")
Brilliant discussion between Harry Dent and Peter Schiff: [![]( " - YouTube") ](https://www.youtube.com/watch?v=vbVAfsXa_Rw) Everyone should watch. [Previous page](https://boards.straightdope.com/t/the-gold-standard-actually-prefferable-to-fiat/749639.md?page=14)