Topic: Economics
An Interesting Article on the Gold Standard Here is a link to an interesting paper on the Gold Standard. No...I'm not endorsing an anti-Gold Standard point of view.by Jeff Peters
(conservative)
Wednesday, February 20, 2008
Here is Cato Scholar Lawrence White talking about the difficulties and advantages of the Gold standard with comments on its historical successes.
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Perhaps if you or someone else has the time they could explain to me why if people wanted to price their merchandise in dollars relative to gold that they do not do so today. Certainly the technology is there to have variable pricing.
Items could be prices in grams and computers can reprice at the checkout by converting to dollars using the conversion rate for the day, etc.
Posted By: Walt Thiessen
Date: 2008-02-20 07:23:41
EJ: The reason most merchants don't prices in gold is two-fold.
First, U.S. law makes the introduction and use of any other currency besides the dollar a crime. This is how the FBI justified raiding the Liberty Dollar people last Fall.
Second, because it is currently a crime to use gold as currency, no market for clearing gold transactions is able to arise, except for gray market operations like e-gold that currently limit themselves to transferring gold between the accounts of their customers. Even this limited activity attracts a lot of Federal government attention, in the form of charges of money laundering, which e-gold is constantly forced to answer for. They play everything open, so they've succeeded in staying in business, but for how long? No one knows for sure...not even their management.
Walt, I was not saying to accept gold as the medium of exchange. I was referring to pricing the items relative to the price of gold if that was your preference.
Realistically, a shopowner or service provider could set their prices relative to gold whenever they chose to.
For example, a movie theater could easily change their ticket prices everyday relative to the price of gold. Their consumers could, in the end determine whether or not they want to frequent such a business, but it would be their choice. It would be more of a challenge retail stores, but with the ability to have electronic shelf tags today, it is also possible.
We already have many items that fluctuate on a daily basis. Gasoline and natural gas are examples.
I do not think the above practices run afoul of any federal issues, do they?
Not sure what your point is EJ. If you cant use gold as a currency - what use is it to mark prices relative to it? Might as well price a movie ticket relative the the price of a share of Google stock.
The real problem with trade is that from the earliest of time when men traded seashells for goods, you need a resource with a relatively stable supply and consistent demand to warrant its value. Gold - while not perfect has the most longstanding history as such a commodity. You could hoard precious gems and other metals as well to back your currency to a similar effect. Fiat currency just has such a bad track record for performance that I cant believe our country thinks we are somehow greater than any of the hundreds of other nations who have tried this experiment and failed. Runaway inflation has left people holding huge amounts of their respective currencies - with such money not being worth the paper it was written on (happened in the US during the revolutionary war). Kind of makes you wonder what the early humans felt like when they traded their livestock for seashells only to find out that over the ridge was a beach full of them - making them all worthless.
With regards to the article. What good would a gold standard be if the dollar were only reinforced by 2 cents worth of gold as the author suggests? If 1 in 50 people traded their money in for gold - where would the other 49 be? Still left holidng useless paper I would wager...
Marking the price to gold would protect my investment against a declining dollar. If I receive an equilvalent number of dollars to equal what I would have asked for in gold at the time of the transaction, then would I really be as concerned if the dollar were declining? Would I even care if I were able to easily convert those dollars to another form(gold or another currency)? I could then immediately take those dollars and reinvest them in the hard assets I require to protect myself from inflation if that is my fear.
Posted By: Jahfre Fire Eater
Date: 2008-02-20 11:22:27
I found this article to be honest and straight forward but off the mark because it is an academic analysis not a practical one.
The fundamental flaw underlying much of the debate over a 'gold standard' is that the standard implies a physical store of gold under the ownership of the issuer of currency against that standard. This should more accurately be described as a 'gold backed' currency, not as a gold standard currency.
Ignoring this distinction relegates the debate to the realms of academics and political leverage rather that placing it in the realm of practical solutions to be considered.
The goal is not to have a currency redeemable in gold, the goal is stable prices and sound currency that encourages savings. Our fiat currency encourages consumption because savings are eaten up by inflation; making saving a losing proposition rather than prudent behavior.
The standard should be based on the sum total of gold in existence, not on a quantity of gold held by any particular entity. Using this approach, any country can participate, regardless of their stockpiles of gold or the lack thereof.
The money supply should be managed as a function of the central bank as Greenspan described, "a central bank, properly functioning..." In other words our central bank is not properly functioning because monetary inflation is its goal, not its bane.
Ron Paul offers much more intelligent and authoritative position on the means of achieving a sound currency than I ever could. I encourage interested parties to seek out his essays on this topic at The Ron Paul Library.
EJ - Took me a couple reads but I think I understand your point.
Marketing the prices in your store against the value of gold would work to reduce the effect of the declining value of the dollar with respect to each individual transaction. The dollars in profit you acrue, however would still be subject to the inflationary decline of the dollar however. Add that to the fact that the prices in your store would fluctuate versus the American dollar in a fashion unlike that of any of your competitors would place you at a disadvantage I would think. If the dollar loses value vs gold, you raise your prices faster than your competition, and you lose business, etc. You would have to be paid in gold, not just mark your prices to gold for your theory to truly work.
EJ, I think World basically hit half of what I'd say in response.
Unless your salary or wage is also constantly shifting according to its pegged value to gold, the only thing that listing sale prices as weights of gold would accomplish is to piss everyone off. The entire world would suddenly awaken to the fact that they are getting ripped off on the grandest scale ever, and they'd look into it and find a grizzled old howdy-doody puppet from Texas who's been talking about this for longer than a lot of us have been alive, and probably pay attention at that point.
That's simply not going to happen. The reason is that the people who are funneling goods into stores, arranging for salaries to be paid, and running companies - in other words, playing with the most money - are mostly the same people who in some form directly benefit from wild inflation.
The people who would have to agree to this are the same people who are perpetuating this rip-off. It's asking them to leave the most damning evidence of them using everyone else's retirements to line their own pockets right in front of everyone's face.
Gold standard currencies backed by real Gold by IMF,Bureau de Change and International banks worldwide are on old foreign currencies or banknotes reedemable in any currency or solid Gold for an indefinete period like the Yugoslavia Dinars,German Reichsmarks,Vietnam Dongs,Turkey Liras,Romania Leis,Poland zlotych,Zaire zaires,Brazil cruzeiros,Angola kwanza reajastodos, Greece Drachmas,Argentina peso leys,Croatia Dinars,Iraq Dinars and Iran Rials.Notes Denominated from 1 to 500 Billion.
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