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Posted on 01/06/2011 7:36:18 PM PST by dollarbull
Fed Governor Hoenig shocked many observers yesterday when he stated, “The gold standard is a very legitimate monetary system...We're not going to have fewer crises necessarily. You will have a longer period of price stability or price level stability, but I don't know that you'll have lower unemployment, I don't know that you'll have fewer bank failures.” King World News immediately interviewed Jim Rickards who has worked with both the Fed & US Treasury, and who also has a background in national defense as well as consulting with government directorates around the world.
(Excerpt) Read more at kingworldnews.com ...
You are partially correct, but the US does have assets to sell. We have advanced weapons, we are still a leading nation in certain areas of technology innovation, plus we have a six hundred year supply of coal, about three hundred years of natural gas that can be sold to the emerging world and the leading world producer of food. Standing in the way is environmentalists and liberal economic illiterates. If we are deep in debt, the dollar’s status as the reserve currency is threaten enough and prospect of default/bankruptcy maybe our true ruling elites will read the riot act to the liberals and something will be done.
“okay I think I understand the arguments on both sides. The usual argument in favor of a fractional reserve system is there is not physically enough gold for it to be used as a means of exchange in the economy.”
It is also extremely inefficient, gold standard is thought to be a good idea by those who have no idea what money is...the primary function of the Fed is to manage money supply. Making certain that there is enough...not too much nor too little currency in circulation. The same would have to be done if we went for a “gold standard”. Personally, I think we should be on a water system...there is plenty of water right??? And water can be bottled and carried in so many convenient sizes...:)
how about a system based on energy - joules.
you give me a piece of paper that say 100 MJ on it.
I can redeem it later for 100 MJ of energy.
I’d like to see the math.
The dollar is already pegged to gold. It depends on how many dollars it takes to buy an ounce of it. It used to be 20 now it is 1500. Gold is worth about the same and dollars are worth a lot less. The Fed may fear Ron Paul investigations.
Because nine people in a room are perfectly capable of determining how much money a nation with a complex economy and a GDP of $14 trillion dollars and 308 million people needs.
We all know that that most of the money supply is bank accounts, right ? People are paid by check, business sales are transacted with check or electronic payment. Currency (paper money) transactions are quite a small percentage of money transactions. There is nowhere near enough paper currency to pay out the dollars in all bank accounts. I think there was only about $800 billion or so, may a trillion, as of this year. That’s chump change compared to our multi-trillion dollar economy, not to mention our multi-trillion gubmt spending. How much paper currency does a person spend out of their paycheck anyway any more ?
Also, in terms of gold, U.S. government-owned gold (fort knox, etc.) is only worth about $300 billion at the current dollar price of the metal. The dollar value of physical gold in the world is trivial compared to the money supply, so it would have to be priced many times what it is now in order to effect money transactions. The industrial uses of gold would then have that much more added cost (gold is a fantastic electrical conductor which lasts a very long time without corrosion due to its physical properties).
It mostly makes sense for anyone with at least modest wealth to simply continue to use it as a convenient and mobile medium of exchange for times of emergency. It can be stored for years, not corrode, and still gain value relative to any currency after many years. People with power and wealth can use it as a little “last resort” value store, i.e., money to “get started again” with. It has always worked great for this during and after wars, certainly better than any currency, because it’s value after the war does not depend on who wins the war.
On the other hand, the number and dollar amount of money transactions continues to increase every year simply based on people wanting a raise, companies trying to increase sales and increase of human population, even if inflation were 0%. Businesses and people need enough money to operate, and there’s no problem with that since banks don’t need to settle up every day with paper currency, they just settle up every night with electronic payments; the check-clearing process is all electronic, has been for years.
To a person or a business, whether a dollar is “backed” by the government or not is irrelevant, right ? Does anyone have the urge to cash their paycheck and demand gold ? No, not as long as they can spend the dollars in their bank account, and get paper currency to buy ice cream cones with.
Our overeducated Federal Reserve guys just don’t understand the physics of business, they think on a “macro economic” level, so they think they can control business revenue and hiring by adjusting the money supply through leveraging and lending by banks. The money supply simply has to be adequate to handle transaction volume; it could be adjusted by formula and we could do without the Fed and never miss it; it’s just not that important to business transactions, it’s just important to the pinheads who sit waiting for basis point announcements.
They don’t understand that the economy is not about the money supply, but total value, i.e., net worth, which increases every year we make a profit. Money is simply part of the asset allocation of the balance sheet. As our equity (net worth) pile grows every year, the gubmnt has to just keep enough currency in the system to replace worn out currency so we can spend cash if we want to. They can lend and print all the dollars they want, only money that is earned is important. Borrowed money is not revenue. Only Revenue can add to Retained Earnings.
They also don’t see that business efficiency is the biggest driver of profitability, and we have reached a plateau for that until people realize that unions, regulation and big business being in bed with big government will hold business efficiency and investor confidence back until those obsolete mechanisms are effectively eliminated. They must be eliminated simultaneously or they will bring each other back, since at this point they are all wound up together.
The benefits of the correct approach at this point would be utterly amazing in a good way, i.e., the world would be shocked at the resulting new standard level of prosperity and consequent U.S. dollar strength. I theorize that the currency strength is actually a measure of total national efficiency relative to other nations (but I’ve never heard an economist say that). Don’t forget that the stronger the U.S. dollar is, the more of a tailwind it gives our economy. Or we can just keep making the government bubble bigger and it will crash even harder when it crashes.
Banksterz like Zoelick>>>>>>>
http://en.wikipedia.org/wiki/Robert_Zoellick
Now head of World Bank
Has been a managing director at Goldman Sachs
That traitor goes way back. He has been in the revolving door of lawyer/lobbyist/government official for years.
He spent many years getting us into retarded trade agreements like NAFTA and GATT. Since 1990 I have noticed him since he has an unusual name
Then again, I could be wrong. I might decide to buy some gold when it stops going down and the dollar stops going up, as Larry Kudlow was talking about last night.
sfl
Roosevelt's order recalled all circulating US gold coins and also voided contracts specifying payment in gold coin.
EO 6102 did not confiscate "privately held gold" except US coin - I'm wearing my grandfather's gold wedding ring while I'm typing this, and he was the most law-abiding man on earth.
They can't, and they won't take your gold, and they don't have to.
They will either outlaw transactions involving monetary gold in the G-20 countries (i.e., you can't sell it) OR crash the price by selling large lots into the private market.
Neither of those will require you to get out your AR-15.
They have done fine for the most part up to and including now...their decisions are transparent. There are a lot more than nine individuals involved in coming to the decisions.
You can now...only you aren’t limited to energy. You can purchase any legal (and illegal) good in the economy with currency that is easily recognizable, very easy to transport, respected, and whose value is very stable.
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Wendy, you’re probably joking but:
1) if you listen to Kudlow you’re an idiot
2) if you can’t pull up a 10 year chart of gold you’re an idiot
3) if you can’t pull up a 50 year chart of the dollar you’re an idiot
You appear to have quite a high opinion of your own intellect (probably incorrectly so), so what’s going on?
In the judgment of the Committee, that is a trust [appropriately managing the money supply] which it is unreasonable to expect that the Directors of the Bank of England should ever be able to discharge. The most detailed knowledge of the actual trade of the Country, combined with the profound Science in all principles of Money and circulation, would not allow any man or set of men to adjust, and keep always adjusted, the right proportion of circulating medium in a country to the wants of trade.’
Didn't work then, won't work now. It's only a matter of time before it fails.
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