That’s the problem with me. You’re a normal human being, and I’m a night owl. Hope you feel better tomorrow.
I support a return to a gold standard, but there are a few problems to be addressed in getting back to one.
1. Gold is currently around 1000 (fiat) dollars an ounce. We need to figure out what to do in order to deflate back to $35/oz. or $20.67/oz. or whatever Congress finds suitable without destroying our national economy.
2. We need to insure a steady domestic supply of gold, perhaps by ensuring that all gold mines are owned by U.S. companies, something that usually isn’t necessary in a given economic sector, IMO.
3. We have to prepare for shocks to the market somehow. For example, the IMF apparently holds about 3/4 of the world’s gold. Suppose they decide to dump gold onto the world market, thus effectively devaluing our currency?
Sleep tight.
IMO the best thing to do is not put the dollar on a gold standard, but rather get rid of legal tender laws. Most “dollars” in the economy exist as debt. In order to keep that amount the same, we’d have to issue debt as fast as it matured, no faster, no slower. I suppose in theory it would be possible to tie gold to the dollar, but the very idea of issuing money as debt and being on a gold standard is contradictory.
There would have to be a massive deflation of the money supply (I believe less than 5% of money is not “debt” money) in order to back the dollar with gold. This scenario is almost impossible to imagine though and would most certainly cause massive panic throughout the economy, since prices would be spiraling downward until they stabilized at the new level of the money supply (which would be drastically lower).
The actual dollar to gold exchange ratio would simply be the amount of dollars divided by the amount of gold. It wouldn’t have to necessarily be $20.67 per ounce. It could be anything really.
The reason I favor getting rid of legal tender laws is because then the market would determine what would be used as money. Most likely gold and silver (perhaps copper, platinum, or some other metals) would be used. Almost certainly, paper currencies, or receipts, would emerge (100%) backed by the metal they represented and circulate instead of the metal (e.g. a certificate that says redeemable in 1/10 of an ounce of gold, or 2 ounces of silver, etc., which is exactly what the dollar used to be).
The dollar would have no tie to any of these metals except a fluctuating exchange rate, since the dollar would also be its own currency. However IMO demand for the dollar (being unbacked paper continually inflated and thus gradually losing purchasing power) would decline as people moved into harder currencies (since those can’t be inflated). There would be no government decree, it would just happen (in all likelihood IMO). If this were to play out, the dollar would eventually die since at the end of the day it’s just paper.
The market would always use the currency most suited for the needs of buyers and sellers, i.e. whatever people wanted to use. There would not have to be any rate at which gold (or whatever currency was most dominate) entered the market. If gold becomes to scarce, then it would likely only be used in large transactions with silver being used for day to day use, and perhaps copper for small transactions.
If suddenly we found a huge gold mine that made gold so readily available that it became useless, the market would move into another form of currency. If silver became much too scarce, then it would likely not be used at all in favor of something the market found more preferable. The great thing about this system is that it requires no government (or centralized) tinkering. There is no optimal rate of money expansion. There is only what is most useful to the market and thus only what the market wants as currency will serve as currency.
Just my thoughts.