Gold Standard

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i say we need a new monitary system...but like someone said there isn't enough gold for that to work. so...what would be some new alternatives besides the fed or gold standard? (real or made up)

I propose a dual commodity money system. A unit of currency based on gold and a unit of currency based on oil. The only question is what to call these units. I propose we call the gold based unit The Trojan since Gold is measured in Troy weight. And the oil based unit should be called the Sheik since most of the oil comes from Arabia and the Emirates. As we look in our wallets stuffed with Sheiks and Trojans we will know exactly what the bankers and OPEC are doing to us.

ruveyn

An interesting question... what could be used today as a monetary standard.

Food production is one. Sure, it cannot be stored but the ability to produce it is perhaps the most important factor in human history. A nation's food production capability could determine if the purchasing power of its money is strengthened or weakened.

Honestly, I don't think that setting a tie-back to a real good is a good idea. It will tend to be arbitrary and unstable, and lead to all sorts of pricing issues.

Well played, sir. Well played.

To spitball further. The rarest, and therefore most expensive, gem in the world is the emerald. Yes, it's true that we can manufacture emeralds. The truth also is, unlike diamonds, emeralds takes two years before their close to completion, require high pressures and exacting amounts of raw materials, and even then, because of the expense of manufacture, are just as pricy as natural emeralds.

A solution? A lot of cultures have based their wealth on gems in the absence of precious metals. A solution?

It is unfortunate that you feel the need to pre-emptively defend yourself. For what it's worth, I have no reason to believe that you are stupid. I might not agree with your ideas, but that simply means we differ in our understanding of issues, not that either one or the other of us is intellectually superior.

So, that being said....



I have to disagree with you on technical grounds here. Stagflation requires the presence of both high interest rates and low growth. Given the degree to which monetarist policy has focussed single mindedly on inflation during the last two decades, I think you have a hard row to hoe to demonstrate that stagflation lasted much beyond the mid-80's.



The first problem with a commodity based currency (and it needn't be gold, it could be oil, silver or a pre-define basket of goods) is that the currency issuer must take those commodities out of circulation in order to issue currency. Gold has a few practical uses, but it lends itself to treasury reserve because it is largely non reactive, and so remains very durable, and it is relatively compact.

The second problem is that with a reserve currency, you cannot respond to changes in fiscal policy quickly. Suppose the US were currently on a gold standard. With the upheaval in the middle east, the price of gold is climbing. That means that the US dollar would be climbing as well. Which would mean that US exporters would be at a significant competitive disadvantage when trying to sell their goods and services overseas. Because the US relies so heavily on trade for its economic prosperity, commoditization of currency will provide the US with almost no opportunity to maintain free trade links.

Commoditizaton creates deflation. If there are one-billion ounces of gold at Fort Knox, then that sets the upper limit of how many US dollars can be in circulation. Short of finding more in the sofa cushions that is the complete extent. So if the money supply is fixed, then straightfoward supply and demand tells us that the value of each dollar will rise as demand for dollars rises and supply cannot keep up. Every single bit of GDP growth must be matched by increases in the commodity reserve, otherwise deflation results.

Now, deflation benefits savers and hurts borrowers, because you save and borrow in actual dollars, not constant dollars. But this serves as a disincentive to investment. In a deflationary world, it is better to put your money under your matress than to put it at risk. Furthermore, manufacturers are disincentivized from producing, because they must carry not only the carrying charges of their inputs, but also the delfationary pressure between spending those inputs and realizing sales.

As for the proper place for the US in the economic world, I think you are going to have cope with the realization that the European Union is now a larger economy than the United States in absolute terms. While Europe's per capita GDP lags behind that of the US in PPP terms, when you restrict yourself to the Eurozone, the picture perks up a bit, and, more importantly, the Eurozone has a trade surplus. (Not that the Eurozone is all happiness and light at the moment...) The US dollar will continue to be a reserve currency, simply because there is so much of it in circulation. But as the Euro begins to become a reserve currency of choice, the singular preeminence of the Bretton-Woods period will be impossible to reestablish.

As for welfare, you could stop all welfare tomorrow and still not come close to tackling the US government's fiscal pressure. As long as the US economy has slack with which to finance the government, the deficit can continue to be met onshore. But those days are numbered, I fear.

@visagrunt

The Canadian economy is much like my own beloved Australian economy, based on so many diversified commodities its almost too diversified for its own good. So many commodities skews bank profits and commodity profits to the detriment of other sectors of the economy, notably lately foodstuffs and services. Still, however, we enjoy greater stability for our base and for our taking, albeit at over parody, our dollar base from the US.

Taking everything you wrote, do you share the increasing fear that I see that unless the US finds something objective upon which to base itself, it will end up like Japan?

If so, then where does that leave China? I heard it said once, and I agree with this, that the Chinese authority, whomever that is, sets the limits of growth and then manipulates the economy to fulfill it. The Eurozone, of which I would encourage Germany to disconnect if it wants any sort of economy into the second-half of this century, is the other way. It's about limiting growth, about limiting expenditure to what it determines, almost Nazi-esque, as the limits of consumption for its people. Anything above what it sets as subsistence is wrong. As it, further, as growth continues despite their attempts to limit it, allows social policies that when the economy booms redistributes the wealth to an increasingly slummed immigrant, both continental and African, not necessarily Muslim, population who are supported not through growth, but through limits on growth.

Personally, as long as the US holds its position as encouraging full growth and innovation, I would rather live in the US. Or Canada or Australia. However, the more the US listlessly falls through the motionlessness of non-objective bias for its economy, remembering that most of the agriculture in both Europe and the US is grown to be grown in order to fulfill the subsidy obligation rather than to be eaten which would impose a market mechanism on the food, thereby instantly basing the economy, even limitedly, on something substantive, the more the US falls prey to the anti-American, ask de Toqueville, European limits both socially and institutionally. This, no matter your political persuasion, cannot be a good thing.

I guess, and I have never really liked economics, I only took it at school and my year of university because it was easy, all I really want is an answer to the simple problem:

Where to from here in the face of a rising China which, because of its structure will never accept the free market, and with Europe, the only hope to match with China outside of the US, being increasingly limited by the same bureaucratic structure, inasmuch as it is unelected and unaccountable by popular plebiscite, that bolsters China and is only weakening Europe, is there a hope for a market-based system that will encourage the growth in living standards that enables me at twenty-four to live my life comfortably and with great aspiration, but my children at a similar age won't have?

Every epoch such as this brings its own challenges. The US led us out of the last one by showing the world that democracy and affluence was the answer. The more the US loses its way and people see China as the world's default leader and therefore totemic structure by which to live, the more we slide into regressive nothingness the US, as it moves inexorably closer to these more "socially-minded", wealth-redistributing mannerisms, cannot save us from.

The UK is already there, France was born there, Germany is allowing itself to be dragged down by the rest of Europe and its need for German subsidy, Australia is being dragged down by incompetent administration at the moment, Canada, well, who knows what Canada actually stands for at the moment, they certainly don't, what with their internal political schism being the same as the one that arose in Australia fifteen years ago and is now parasitically destroying us, good luck averting that, and the US still stands alone and head-and-shoulders above the rest of the world.

For how long, I don't know. But something went wrong in Japan. They, with their incredible cultural arrogance, will never admit it. But something went wrong. If the West identify what it was and then avert it for ourselves, then the world will be affluent in one-hundred years. If not, well, I hope you enjoy the weather an Saudi Arabia and the political structure in China, because they will be the only countries with wealth, albeit un-real wealth, due to their ownership of the US Treasury.

Very incorrect.

The reason that the price of gold is climbing is because no nation on the planet backs their currency with anything. We are looking at a global currency crisis when people realize the worthless paper is exactly that. This is why people (and nations) have been acquiring gold which is used by the global banks to settle accounts among each other.

The price of gold is going up because of the instability in the fiat currency system, not because it is suddenly more valuable in it's own right.

What gives money value is the fact that taxes must be paid in the country in question in that currency. It can be printed on paper, papyrus, they can be plastic chips, they can be condoms filled with cocaine, or they can be gold coins, it makes no difference.

We were on the Gold Standard when the Great Depression happened.

next question?

ruveyn

The Great Depression was engineered to happen after the FED was granted control over monetary policy. It wasn't that currency was backed by gold, it was what those who control monetary policy chose to do with the power granted to them.

The countries that abandoned the gold standard escaped depression quickest. Countries on the silver standard escaped depression.

Right, obviously.

The truth is the Illuminati/Elders of Zion were granted control of monetary policy, not the FED. Sheesh, get your facts straight

Just remember, all the history books are written by the winners.

The real history isn't exposed until generations later when someone truly impartial examines all the facts.