Gold Standard--is it likely to reoccur in some form, and if so how?

[Anarchist420]

I think it's likely to reoccur, but in half-assed (or worse than half-assed) form.

2 reasons why it will be a half-assed form:
1. The Constitution. It will always allow Federal borrowing and government will never give up the power to create money. That is, it could just debase the currency if it felt to be necessary and then declare legal tender. I think the central government should be disallowed from borrowing (require unanimous consent of the member states to repeal a no borrowing clause), and it should be required to collect taxes in gold by their weight, and disallowed from nationalizing the gold in any way. (unanimous consent of the member states required to have a national currency).

2. The bankers would never allow a supreme law that allowed the people to unconditionally have sound money. If we go back to the gold standard, the Fed will just print more gold certificates than they have in physical gold, and they'll declare those legal tender. So much for 100% reservism right there, when you have a central bank. There will never be a return to Van Buren's Sub Treasury System, gold standard or not.

Edit: Note that this poll is not based upon what you or I prefer, but rather what the respondant expects to happen.

 

[Schadenfroh]

Why should we return to the gold standard when we have the world's premier reserve currency that we can manipulate / print to our heart's content? Other countries loan us money in our own currency, we are in a very sweet spot, if we can maintain it.

 

[JS80]

Replace fiat with fiat. Brilliant.

 

[dullard]

No. We can't return. At least not without completely destroying us in the process.

The very most we could do (if that were even a good idea, which it isn't) would be a partial return to gold backing. The US money supply (using the M3, which is the total sum of all money) is approximately $9 trillion. The total value of all gold in the entire world is approximately $7.5 trillion. So, even if the US government owned each and every speck of gold in the entire world, we couldn't go 100% gold backing.

So, now we are limited to partial gold backing or taking 20% of the entire US economy out so that we could have 100% gold backing. Do you want to lose 20% of the US economy? Is it even worth trying?

Lets pretend it is worth trying. Lets assume the US government is to buy all $7.5 trillion in gold. Well it does have $0.5 trillion already. So we only need to tax the US citizens enough to afford the remaining $7 trillion. The US collected about $2 trillion last year. So that means to do this now, we'll have to increase tax collections to $9 trillion. Are you willing to pay 4.5 times the tax rate? Probably not.

But, if the US tried to collect $9 trillion in tax, it'll destroy our economy (on top of that 20% you destroyed it above). So, really, lets say it removes another 30% of the economy. Oh, now we have to raise $9 trillion on only half of our economy. Make that 9 times your current taxes.

But wait, not everyone would be willing to sell every scrap of gold. The price will start skyrocketting (but only temporarilly). So, the US will have to pay a premium. A realistic premium is about double the going rate. So, the US will have to really collect 2*$7 trillion + $2 trillion = $16 trillion in taxes. Now you have to pay 16 times your current taxes. Oh, and we are still in deficit spending, increase your taxes even more if you want to correct that too. And that doesn't even begin to include the social costs of repairing the destroyed economy. Imagine the costs of repairing 59% unemployment rates. Taxes go up further!

A 16x increase in taxes would further destroy our economy, if there was anything left after the 9x increase. All for an intellectual game, since gold backing has no real meaning or real benefit anyways.

Without going into those levels of details, the final question remains. Now that we'd have every single spec of gold ever produced, does it have any value? We can't sell it, since we need it to back our monetary supply. Is it worthless if it can't be bought or sold? If you think that, then we'd destroy our economy, raise taxes by 16 times, all for a pile of nothing. Is it worth something? If so, what? How much is something worth if it is no longer bought or sold? Is that value fixed? If so, as our population grows, we can't have more money, thus each of us must get poorer and poorer over time. Or is it's value variable? If its value is variable, then does it really back anything? If you can't count on its value, then it loses it's pretend price stability and we can't use it to back our currency.

 

[Siddhartha]

No. We can't return. At least not without completely destroying us in the process.

The very most we could do (if that were even a good idea, which it isn't) would be a partial return to gold backing. The US money supply (using the M3, which is the total sum of all money) is approximately $9 trillion. The total value of all gold in the entire world is approximately $7.5 trillion. So, even if the US government owned each and every speck of gold in the entire world, we couldn't go 100% gold backing.

So, now we are limited to partial gold backing or taking 20% of the entire US economy out so that we could have 100% gold backing. Do you want to lose 20% of the US economy? Is it even worth trying?

Lets pretend it is worth trying. Lets assume the US government is to buy all $7.5 trillion in gold. Well it does have $0.5 trillion already. So we only need to tax the US citizens enough to afford the remaining $7 trillion. The US collected about $2 trillion last year. So that means to do this now, we'll have to increase tax collections to $9 trillion. Are you willing to pay 4.5 times the tax rate? Probably not.

But, if the US tried to collect $9 trillion in tax, it'll destroy our economy (on top of that 20% you destroyed it above). So, really, lets say it removes another 30% of the economy. Oh, now we have to raise $9 trillion on only half of our economy. Make that 9 times your current taxes.

But wait, not everyone would be willing to sell every scrap of gold. The price will start skyrocketting (but only temporarilly). So, the US will have to pay a premium. A realistic premium is about double the going rate. So, the US will have to really collect 2*$7 trillion + $2 trillion = $16 trillion in taxes. Now you have to pay 16 times your current taxes. Oh, and we are still in deficit spending, increase your taxes even more if you want to correct that too. And that doesn't even begin to include the social costs of repairing the destroyed economy. Imagine the costs of repairing 59% unemployment rates. Taxes go up further!

A 16x increase in taxes would further destroy our economy, if there was anything left after the 9x increase. All for an intellectual game, since gold backing has no real meaning or real benefit anyways.

Without going into those levels of details, the final question remains. Now that we'd have every single spec of gold ever produced, does it have any value? We can't sell it, since we need it to back our monetary supply. Is it worthless if it can't be bought or sold? If you think that, then we'd destroy our economy, raise taxes by 16 times, all for a pile of nothing. Is it worth something? If so, what? How much is something worth if it is no longer bought or sold? Is that value fixed? If so, as our population grows, we can't have more money, thus each of us must get poorer and poorer over time. Or is it's value variable? If its value is variable, then does it really back anything? If you can't count on its value, then it loses it's pretend price stability and we can't use it to back our currency.

Going by past posts about the economy, the OP does not care if going to a gold standard would trash the US and global economies.
I still have not figured out why he\she is so passionate about gold. What is so magical about gold?

 

[Anarchist420]

Why should we return to the gold standard when we have the world's premier reserve currency that we can manipulate / print to our heart's content? Other countries loan us money in our own currency, we are in a very sweet spot, if we can maintain it.

That's a good point, but the current system is losing popularity.

No. We can't return. At least not without completely destroying us in the process.

The very most we could do (if that were even a good idea, which it isn't) would be a partial return to gold backing. The US money supply (using the M3, which is the total sum of all money) is approximately $9 trillion. The total value of all gold in the entire world is approximately $7.5 trillion. So, even if the US government owned each and every speck of gold in the entire world, we couldn't go 100% gold backing.

So, now we are limited to partial gold backing or taking 20% of the entire US economy out so that we could have 100% gold backing. Do you want to lose 20% of the US economy? Is it even worth trying?

Lets pretend it is worth trying. Lets assume the US government is to buy all $7.5 trillion in gold. Well it does have $0.5 trillion already. So we only need to tax the US citizens enough to afford the remaining $7 trillion. The US collected about $2 trillion last year. So that means to do this now, we'll have to increase tax collections to $9 trillion. Are you willing to pay 4.5 times the tax rate? Probably not.

But, if the US tried to collect $9 trillion in tax, it'll destroy our economy (on top of that 20% you destroyed it above). So, really, lets say it removes another 30% of the economy. Oh, now we have to raise $9 trillion on only half of our economy. Make that 9 times your current taxes.

But wait, not everyone would be willing to sell every scrap of gold. The price will start skyrocketting (but only temporarilly). So, the US will have to pay a premium. A realistic premium is about double the going rate. So, the US will have to really collect 2*$7 trillion + $2 trillion = $16 trillion in taxes. Now you have to pay 16 times your current taxes. Oh, and we are still in deficit spending, increase your taxes even more if you want to correct that too. And that doesn't even begin to include the social costs of repairing the destroyed economy. Imagine the costs of repairing 59% unemployment rates. Taxes go up further!

A 16x increase in taxes would further destroy our economy, if there was anything left after the 9x increase. All for an intellectual game, since gold backing has no real meaning or real benefit anyways.

Without going into those levels of details, the final question remains. Now that we'd have every single spec of gold ever produced, does it have any value? We can't sell it, since we need it to back our monetary supply. Is it worthless if it can't be bought or sold? If you think that, then we'd destroy our economy, raise taxes by 16 times, all for a pile of nothing. Is it worth something? If so, what? How much is something worth if it is no longer bought or sold? Is that value fixed? If so, as our population grows, we can't have more money, thus each of us must get poorer and poorer over time. Or is it's value variable? If its value is variable, then does it really back anything? If you can't count on its value, then it loses it's pretend price stability and we can't use it to back our currency.

I don't agree that it's not possible. The Fed would handle it, so the big banks wouldn't have any problem with it, and like you say, there is always a partial gold standard. After 1913, the most the dollar was ever backed by gold was 40%, IIRC. I think right before Nixon ended, the gold standard was only 10%. If they wanted to start by backing just 10% of the dollar by gold, then that wouldn't cause much short term damage to the economy, and certainly no more long term damage than compared to what we have now will cause.

The reason why I think that a return to a partial gold standard is possible, is because the government probably wouldn't mind it if they could debase it and force it as legal tender.

I wouldn't be surprised if Romney came out in support of a partial gold standard as long as it was partial and as long as we still had the Fed and legal tender.

 

[Trianon]

good discussion on this topic here:

John Rubino: During the couple years before that, I had written a book on the coming real estate bust. I went into that piece of research with the idea that it was just the real estate market that was the problem. It would blow up and the US economy would go on as before. But as I dug into the research, I realized that we really had systemic problems. Things were much more serious than just home prices getting a little out of hand and mortgage money getting too easy. We were across the board taking on massive amounts of debt, which would inevitably lead us to do something extreme. Either we would collapse under all that debt and have a 1930s style depression, or we would inflate our way out of it, destroy the currency in order to pay back the debt in cheaper dollars, and have some kind of an inflationary episode.

I knew James Turk, the founder of GoldMoney.com, because we had done a couple of articles together. I had interviewed him and found him to be brilliant and also a nice guy. I approached him and asked if he'd like to write a book on gold and the dollar. He liked the idea and we worked out a deal. So we spent the next year basically putting that book together. A lot of the writing is mine. A lot of the really deep ideas in that book are his of course.


The timing was a little early. It was only by about a year or so. It came out in 2004, and the dollar went up for the year after that. So had it come out a year later it would have been perfect. Even so, gold was about $400 an ounce at the time. Silver was $4 or $5 dollars an ounce. So in the ensuing six or seven years, most of the book's predictions have come true. We have been inflating away the dollar in order to pay off our debts. That has been causing precious metals to go up, which is to say that precious metals have held their value while the dollar has been going down. This process has really just begun. The US has done nothing to manage its finances in the meantime. Things have actually gotten a lot worse, since we have clearly made the decision to try to inflate our way out of all of our debt.

Going forward I know there are a lot of other things going wrong in the world, but just looking at the US finances would be enough to lead you to say that the world was headed for some kind of a catastrophe. When it’s the biggest economy, the issuer of the world’s reserve currency, doing stupid things on this scale and clearly trying to destroy its own currency, you get a global crisis out there somewhere. That is really what we are looking at now.

http://www.chrismartenson.com/blog/...at-currencies-devalue-accelerating-rate/58178

 

[dullard]

good discussion on this topic here:


http://www.chrismartenson.com/blog/...at-currencies-devalue-accelerating-rate/58178

So, assuming they wrote the book the year before it came out, then they were writing when gold was just about an inflation adjusted all time low. Then they predicted gold would go up and they are somehow smart for doing so? That is like prediciting the stock market would go up in 2008/2009 and low-and-behold it did eventually go up.

But lets flip it around. We were fully off of the gold standard for two decades when they wrote the book and gold was very, very low. So their idea fails the history test: Being off the gold standard led to very low gold prices. So according to them, that means, being off the gold standard led to very low inflation?

 

[dullard]

That's a good point, but the current system is losing popularity.

I don't agree that it's not possible. The Fed would handle it, so the big banks wouldn't have any problem with it, and like you say, there is always a partial gold standard. After 1913, the most the dollar was ever backed by gold was 40%, IIRC. I think right before Nixon ended, the gold standard was only 10%. If they wanted to start by backing just 10% of the dollar by gold, then that wouldn't cause much short term damage to the economy, and certainly no more long term damage than compared to what we have now will cause.

The reason why I think that a return to a partial gold standard is possible, is because the government probably wouldn't mind it if they could debase it and force it as legal tender.

I wouldn't be surprised if Romney came out in support of a partial gold standard as long as it was partial and as long as we still had the Fed and legal tender.

Well if people are happy with a small partial gold standard, we basically do have one already. It was 10% in the 1970s and we now have 6% (gold reserves are 6% of total M3 monetary supply). Which is basically the same thing. Having this pile of gold didn't solve any problems.

 

[Trianon]

So, assuming they wrote the book the year before it came out, then they were writing when gold was just about an inflation adjusted all time low. Then they predicted gold would go up and they are somehow smart for doing so? That is like prediciting the stock market would go up in 2008/2009 and low-and-behold it did eventually go up.

But lets flip it around. We were fully off of the gold standard for two decades when they wrote the book and gold was very, very low. So their idea fails the history test: Being off the gold standard led to very low gold prices. So according to them, that means, being off the gold standard led to very low inflation?

Please listen to the whole thing before commenting

 

[LegendKiller]

Replace fiat with fiat. Brilliant.

Notice he won't answer this. Nor did he even begin to address the fact that gold has been debautched by paper gold. Nor did he even begin to address in a prior thread that his bitching about FRB is utterly moronic and wouldn't solve a damn thing and, if anything, causes more problems than it is worth.

The doof isn't interested in debating points or thinking outside of his own self-centered and egotistical thinking. He posts things to make them seen as fact, then when somebody challenges, he just posts his "fact" again, then leaves the thread. His whole debate "tactic" is cemented in petitio principii and nothing else, therefore his whole "debate" is a fallacy.

 

[dullard]

Please listen to the whole thing before commenting

If there is something worth mentioning, please mention it. I don't have audio capabilities. Nor would I listen to someone beating his chest for 45 minutes. I went based off of the parts you thought were important enough to copy in the thread.

 

[Trianon]

If there is something worth mentioning, please mention it. I don't have audio capabilities. Nor would I listen to someone beating his chest for 45 minutes. I went based off of the parts you thought were important enough to copy in the thread.

He is not arguing that gold standard is "end all be all" ideal monetary system, the discussion is about way to preserve accumulated wealth in conditions of credit system crisis. When further payments on accumulated debts cannot be made without either going into default on portion of payments or destroying the currency via money printing, which is what every elected polititian would vote for. Basically that condition will run as long as general masses allow it to. And the only way to hedge against losing "earned credit"(fruits of your labor) is to stick to real assets of some type, one of those could be gold, because it's been accepted as medium of exchange and store of value through the course of human history.
Transcript is there too, if you don't have audio.

 

[Darwin333]

No because I don't believe that even our politicians are that stupid.

 

[Darwin333]

That's a good point, but the current system is losing popularity.

I don't agree that it's not possible. The Fed would handle it, so the big banks wouldn't have any problem with it, and like you say, there is always a partial gold standard. After 1913, the most the dollar was ever backed by gold was 40%, IIRC. I think right before Nixon ended, the gold standard was only 10%. If they wanted to start by backing just 10% of the dollar by gold, then that wouldn't cause much short term damage to the economy, and certainly no more long term damage than compared to what we have now will cause.

The reason why I think that a return to a partial gold standard is possible, is because the government probably wouldn't mind it if they could debase it and force it as legal tender.

I wouldn't be surprised if Romney came out in support of a partial gold standard as long as it was partial and as long as we still had the Fed and legal tender.

How would the Fed "handle" or control the value of a currency that is backed by something that is mostly mined outside of the US by entities and countries completely out of US jurisdiction and some of which are hostile to the US???

Don't think the gold market can be tampered with to fuck us over? Take a look at what a single company has done with the diamond market and get back to me.

 

[halik]

LOL

Is there like a DB of ron paul talking points?

The only place where the "current system is losing popularity" is the circle jerk of IT guys that got their econ eduction from you tube.

 

[JS80]

Notice he won't answer this. Nor did he even begin to address the fact that gold has been debautched by paper gold. Nor did he even begin to address in a prior thread that his bitching about FRB is utterly moronic and wouldn't solve a damn thing and, if anything, causes more problems than it is worth.

The doof isn't interested in debating points or thinking outside of his own self-centered and egotistical thinking. He posts things to make them seen as fact, then when somebody challenges, he just posts his "fact" again, then leaves the thread. His whole debate "tactic" is cemented in petitio principii and nothing else, therefore his whole "debate" is a fallacy.

That's why it's best not to engage in "debate" with him.

 

[Anarchist420]

How would the Fed "handle" or control the value of a currency that is backed by something that is mostly mined outside of the US by entities and countries completely out of US jurisdiction and some of which are hostile to the US???

Don't think the gold market can be tampered with to fuck us over? Take a look at what a single company has done with the diamond market and get back to me.

They would control the reserve ratios throughout the entire country, which they already do. They could also issue more gold certificates than there is gold and those would all be legal tender, whereas with free banking, no one would have to accept bank notes they were suspicious of.

As for the diamond market, I got back to you a while back on that. All it took was a quick google search to see that Da Beers is a government-backed cartel.

 

[Anarchist420]

Replace fiat with fiat. Brilliant.

I don't exactly understand how gold can be fiat as it can't be printed by a government whenever they feel like it. Correct me if I'm wrong, but I always thought that fiat simply meant it was backed by nothing other than the full faith and credit of the Federal government.

 

[LegendKiller]

I don't exactly understand how gold can be fiat as it can't be printed by a government whenever they feel like it. Correct me if I'm wrong, but I always thought that fiat simply meant it was backed by nothing other than the full faith and credit of the Federal government.

Oohhh, you're wrong. One main tenant of a fiat currency is that it has no intrinsic value. Gold has an intrinsic value of more or less $0. That's not even to get into the fact that Goldman Sachs or John Paulson or others can wish hundreds of trillions in gold into existence overnight simply by writing futures contracts and bidding up the value like mad while pumping toolbags like you.

So much for your "physical" metal.

 

[halik]

I don't exactly understand how gold can be fiat as it can't be printed by a government whenever they feel like it. Correct me if I'm wrong, but I always thought that fiat simply meant it was backed by nothing other than the full faith and credit of the Federal government.

If I open up a new gold ETF index to GC, does that not "print" new gold? Or If I put an offer in on CME, didn't I just increase the supply of gold for Sept 21?

Value of a fiat is by definition derived extrinsically, that is not by the value of it's use, but by value of what other people will pay for it. Gold is a fiat, because bulk of the $1500/oz has nothing to do with jewelry or electronics.

 

[Doppel]

LOL

Is there like a DB of ron paul talking points?

The only place where the "current system is losing popularity" is the circle jerk of IT guys that got their econ eduction from you tube.

basically this

There will be no gold standard anymore than there will be a silver standard or one in xboxes.

 

[Taejin]

I think it's likely to reoccur, but in half-assed (or worse than half-assed) form.

2 reasons why it will be a half-assed form:
1. The Constitution. It will always allow Federal borrowing and government will never give up the power to create money. That is, it could just debase the currency if it felt to be necessary and then declare legal tender. I think the central government should be disallowed from borrowing (require unanimous consent of the member states to repeal a no borrowing clause), and it should be required to collect taxes in gold by their weight, and disallowed from nationalizing the gold in any way. (unanimous consent of the member states required to have a national currency).

2. The bankers would never allow a supreme law that allowed the people to unconditionally have sound money. If we go back to the gold standard, the Fed will just print more gold certificates than they have in physical gold, and they'll declare those legal tender. So much for 100% reservism right there, when you have a central bank. There will never be a return to Van Buren's Sub Treasury System, gold standard or not.

Edit: Note that this poll is not based upon what you or I prefer, but rather what the respondant expects to happen.

get a fucking education

jesus

 

[Taejin]

he's just a 16 year old kid or something with NO real education and easily suckered into talking points. he doesn't do anything except regurgitate and obviously does not do any real processing and synthesizing of information on his own.

 

[matt0611]

No. We can't return. At least not without completely destroying us in the process.

The very most we could do (if that were even a good idea, which it isn't) would be a partial return to gold backing. The US money supply (using the M3, which is the total sum of all money) is approximately $9 trillion. The total value of all gold in the entire world is approximately $7.5 trillion. So, even if the US government owned each and every speck of gold in the entire world, we couldn't go 100% gold backing.

So, now we are limited to partial gold backing or taking 20% of the entire US economy out so that we could have 100% gold backing. Do you want to lose 20% of the US economy? Is it even worth trying?

Lets pretend it is worth trying. Lets assume the US government is to buy all $7.5 trillion in gold. Well it does have $0.5 trillion already. So we only need to tax the US citizens enough to afford the remaining $7 trillion. The US collected about $2 trillion last year. So that means to do this now, we'll have to increase tax collections to $9 trillion. Are you willing to pay 4.5 times the tax rate? Probably not.

But, if the US tried to collect $9 trillion in tax, it'll destroy our economy (on top of that 20% you destroyed it above). So, really, lets say it removes another 30% of the economy. Oh, now we have to raise $9 trillion on only half of our economy. Make that 9 times your current taxes.

But wait, not everyone would be willing to sell every scrap of gold. The price will start skyrocketting (but only temporarilly). So, the US will have to pay a premium. A realistic premium is about double the going rate. So, the US will have to really collect 2*$7 trillion + $2 trillion = $16 trillion in taxes. Now you have to pay 16 times your current taxes. Oh, and we are still in deficit spending, increase your taxes even more if you want to correct that too. And that doesn't even begin to include the social costs of repairing the destroyed economy. Imagine the costs of repairing 59% unemployment rates. Taxes go up further!

A 16x increase in taxes would further destroy our economy, if there was anything left after the 9x increase. All for an intellectual game, since gold backing has no real meaning or real benefit anyways.

Without going into those levels of details, the final question remains. Now that we'd have every single spec of gold ever produced, does it have any value? We can't sell it, since we need it to back our monetary supply. Is it worthless if it can't be bought or sold? If you think that, then we'd destroy our economy, raise taxes by 16 times, all for a pile of nothing. Is it worth something? If so, what? How much is something worth if it is no longer bought or sold? Is that value fixed? If so, as our population grows, we can't have more money, thus each of us must get poorer and poorer over time. Or is it's value variable? If its value is variable, then does it really back anything? If you can't count on its value, then it loses it's pretend price stability and we can't use it to back our currency.

This is not how it would work.

M0 should be covered by gold (aka, the actual currency bills in circulation).

If you do the math, with the gold in Fort Knox, it comes out to be around $5000 / oz of gold.

This would be the new gold price (and in fact dollars would be equivalent to gold, i.e. receipts for gold stored in the treasury vaults) and the treasury or the fed could simply start buying gold at this price until an equilibrium is met.

Its pretty simple. You're way over-complicating things.