Posted on 12/10/2010 6:48:02 PM PST by Tolerance Sucks Rocks
There’s no reason to limit the money supply (and really, the size of the economy) to the amount of some shiny yellow metal we can dig out of the ground.
The Treasury Department.
Not true,the people own the government not the treasury dept.
We do - USA asset left over from the founding of the Fed. I am sure however if any move to get rid of fed to go to gold standard, the fed (a private company) would buy all the gold at 42.00 an ounce and sell it to us at 1,400.
FDR took us off the gold standard domestically; Nixon took us off the gold standard internationally.
The only problem is the us has the largest military in the world so the fed may have a hard time collecting anything but collateral damage.
“But, unfortunately, deleveraging of the fractional-reserve system combined with a gold standard would lead to an all-out deflation. “
That’s not quite accurate. Milton Friedman writes in ‘A Monetary History’ that it was the absence of deposit insurance that resulted in the collapse of the American money supply in the 1930s.
When banks failed in the 30s depositors were ruined along with the bank’s investors. One third of America’s banks failed between 1930-33 and an equal quantity of the money supply disappeared.
This hasn’t been the case since the invention of FDIC, which Friedman believed to be the most important innovation rising out of the Depression. The deflation of the 30s wasn’t something peculiar or inherent to the gold standard.
Yes, but you have to turn your mind inside out...
The market value of gold would be 10 - 20 k per ounce. I think that this will come about sooner or later, when many truths come to light and markets determine value.
Silver is not to be disregarded in this new reality and has historically followed gold by a 20:1 ratio.
“There’s no reason to limit the money supply (and really, the size of the economy) to the amount of some shiny yellow metal we can dig out of the ground.”
That was never how the gold standard operated. When Hamilton pledged to pay interest in America’s debt in gold that immediately bid up the value of the Continental dollar equal to gold. It is the willingness to exchange gold for dollars that is at issue, not a quantity of specie equal to the money supply.
“In 1936 the U.S. Treasury Department began construction of the U.S. Bullion Depository. The Gold Vault opened in January 1937, and was just receiving its first shipments of the nation’s gold reserves when the 7th Cavalry Brigade (Mechanized) rode to the aid of the beleaguered city of Louisville, struck by a major flood from the Ohio River. Fort Knox troops patrolled the city and established several refugee centers for residents of Louisville and several other flooded communities along the Ohio River between the city and the post.”
http://www.globalsecurity.org/military/facility/fort-knox.htm
Yes, but EVEN if you value it in today’s dollars, its still pittance. Someone do the calculation. US have 8k tonnes gold
[ 1) There just ain’t enough gold in them there hills to back our currency use and debt. ]
WRONG... theres literally TONS of it and copper and some other metals too.. at the Pebble Mine..
http://en.wikipedia.org/wiki/Pebble_Mine
The price of gold with a return to a gold standard will need to be set in New Dollars with every new dollar worth, as an example, 300 old dollars (today’s dollar). Thus $15,000 dollar gold would be valued at $50 in new dollars.
The return to a gold standard will be an acknowledgment of the defacto devaluation of the currency that has been unfolding ever more rapidly, particularly over the last two years.
Facing the music and calculating the gold value that will sustain a convertible currency price is the most responsible, but unfortunately one of the least likely actions that our government could make.
Letting the market lurch and quake it’s way to the true convertible currency value as we are in the midst of risks greater and greater disruptions, possibly leading to the most unwanted outcomes represented by the four horses of the apocalypse.
” I am sure however if any move to get rid of fed to go to gold standard,”
The Fed was created in 1913. The pure gold standard existed then and continued to be in effect for another 20 years, followed by nearly 40 more years of the gold bullion standard.
The existence of the Fed has nothing to do with the gold standard one way or the other. Abandoning the gold standard was a political decision made by a succession of Presidents.
Deposit insurance is like disease insurance. For non-contagious diseases, it works fine. Once a contagious disease starts spreading, it's not fine because the reserves get overwhelmed.
If a real deflationary panic set in, how many people would take the FDIC's word as golden? Especially given the fact that its reserves cover less than 1% of all deposits?
The reason why the FDIC worked so long, is because it was put in place at the right time. The damage was already done, and the scars lasted for more than a generation. The Fed's been aiding the FDIC ever since banking went wild in the '70s. Volker turned on the money spigot in 1982 because a Mexican debt crisis threatened the solvency of the big banks.
Dr. Friedman may not have been aware of it, but the FDIC is nuthin' without the Fed standing behind it. That's been the case since at least 1982.
Now, the question: if the Fed's wings are clipped by a gold standard, what'll happen is a deflationary panic really sets in?
You’re halfway there. Why do you think Nixon closed the window? Because France and other central banks where consistently presenting dollars to take gold. The gold supplies were dwindling. The same would happen today, but to a greater degree given how American finances are managed.
Bone-in-your-nose primitivism.
The amount of gold in the world has increased to 2x the level of 1900.
The amount of people in the world has increased to 7x tle level of 1900.
And gold *evaporates* in circulation! Like any metal, it wears out when transferred from hand to hand. (Why do you think coins have dates, anyhoo? To distinguish newer, unworn coins having full value from older coins.)
The only people that the gold standard would help are those who already own gold.
Having precious metals as our currency ranks up there with banning the automobile and returning to the horse and buggy. Stupid, stupid, stupid.
The American public refuss to accept this likelihood. I HAVE seen this occur, and still keep a 100,000 Ruble (circa 2005) note to show folks. At the time it was worth $20; and they’ve since lobbed off three 0’s.
A pension in 1989 payed you 100 Rubles.
It'd be more like banning credit cards and returning to rent-to-own.
Why would banning credit cards be good?
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