Thoughts on the gold standard vs fiat money?

I believe we should eliminate thwe fiat money and return to a gold standard. The change back will be painful, but will be even moreso the longer we wait, so the sooner the better.

The benefits: reduce/eliminate inflation; even out the booms/busts; make us more prouctive (capital will be more wisely spent); reduce government overspending and control in our lives.

How does a cold standard remove infaltion? Doesn't the value of the gold change?

What happens if a large gold deposite is found?

Is there even enough gold on earth for the amount of money used in the US economy?

How does a cold standard remove infaltion? Doesn't the value of the gold change?What happens if a large gold deposite is found?

Very astute observation - I did oversimplify. When new gold is discovered there could be an inflationary spike. But in general this would be short lived and localized. The newly discovered wealth will be spread around a much vaster region.


Is there even enough gold on earth for the amount of money used in the US economy?
Well, the short answer to that is yes, it's just that any given dollar would not be worth much gold. At the beginning of the 20th Century, $100 would get 4.5 Troy oz gold. Now $100 gets about 0.25 Troy oz gold. And this is exactly the problem with fiat money. Without having to back the money with gold, the US government issues as much money as it wants, causing constant inflation and continually devaluing the dollar.

Originally posted by ChrisR246
Thoughts on the gold standard vs fiat money?

I believe we should eliminate thwe fiat money and return to a gold standard. The change back will be painful, but will be even moreso the longer we wait, so the sooner the better.

The benefits: reduce/eliminate inflation; even out the booms/busts; make us more prouctive (capital will be more wisely spent); reduce government overspending and control in our lives.

:topic:
What symbol do you type into something like yahoo stocks to see what an oz of gold is trading for?

You do realise this is pretty much impossible? Britian spent the 19th and 20th Century going on and off with the gold standard, before having to abanden it completely due to the cost of fighting a couple of rather major war. And if Britain couldn't manage it then, what makes you think it can be done now, with the much large, and much more interlinked, economies?

hugs

lilnymph

Originally posted by 92Notch


:topic:
What symbol do you type into something like yahoo stocks to see what an oz of gold is trading for?

I just look here (http://www.kitco.com/)

Originally posted by lilnymph
You do realise this is pretty much impossible? Britian spent the 19th and 20th Century going on and off with the gold standard, before having to abanden it completely due to the cost of fighting a couple of rather major war. And if Britain couldn't manage it then, what makes you think it can be done now, with the much large, and much more interlinked, economies?

hugs

lilnymph

IMO, you have it slightly backwards - they went off the gold standard so they could fight the wars. The US did the same thing for the Civil War (well, not off a gold standard, as, IIRC, gold and silver were used, but to fiat money). Which exactly highlights the problem - by having no backing, the government is pretty much free to print as much money as it wants to finance all kinds of bad ideas. If the government had to have real money to fight it wars, give handouts to everyone, etc, it would spend a heckuva lot less, and hopefully make better decisions.

edited to add:
As to larger, interlinked economies - I'm not saying there can't be paper money, or even e-money, simply that it must be backed by gold held somewhere.

Yes, I meant it how you said it, I just explained it badly hehe :)

However I just don't think its possible for countries with modern economies. If it was possible it would probably be being done

hugs

lilnymph

It's not done, IMO, because it would constrain the powers that be. It's too easy and tempting to just spend, spend, spend and let someone else worry about it later. A gold standard would, IMO, be healthier for the economiy, simply because it would mean that capital had to be spent on only the best ideas. The fiat system allows for fake money to create real debt when it is wasted on bad ideas, e.g. the internet bubble.