View Full Version : US$ backed by gold again?


Athelwulf
04-23-06, 06:54 AM
For a while now, I've been playing with the idea of the US going back to the gold standard. From what I've learned in economics class lately, money backed by gold is much more stable than fiat money. So I did some researching to try to see how feasible going back to the gold standard would be.

A specific plan I had in mind was to define the value of a dollar as that of a gram of gold. This would make a dollar twenty times as valuable as it is now, so to compensate for this, either 95 percent of our money would have to be taken out of circulation, or new-looking money (not necessarily new currency) would have to be printed and the old money totally depreciated.

Unfortunately, going back to the gold standard wouldn't work as smoothly as I hoped it would. There are $760 billion (http://en.wikipedia.org/wiki/United_States_dollar) in circulation as of 2005 (a lot of it is overseas), but we only have $162.7 billion (http://en.wikipedia.org/wiki/Official_gold_reserves#Official_reported_gold_rese rves) worth of gold in reserve as of this February. So it seems like there simply isn't enough gold.

However, I figured out that in 1995, there was about half as much money in circulation as there is now: $380 billion. I'm sure the dollar has inflated since then, but I don't think that the 1995 dollar had much more purchasing power than the 2005 dollar. This leads me to believe that we don't really need $760 billion. Therefore, it seems to me that we might be able to cut down the amount of money we have in circulation so that it all represents 50 to 70 percent of our gold reserves. Why leave extra? This would enable us to make more money when it's needed. One reason we went off the gold standard was because the president at the time, FDR, wanted to put more money into circulation to help get us out of the Depression – something he couldn't do if there wasn't enough gold to back it.

This would all be a very drastic change, yes, but is it feasible? Or do I not know what the fuck I'm talking about?

Communist Hamster
04-23-06, 06:58 AM
A small note, but perhaps silver would be a better alternative to gold? There is more of it, but on the other hand it looks rather similar to many other metals, so it could be easier to "forge".

Athelwulf
04-23-06, 07:41 AM
A small note, but perhaps silver would be a better alternative to gold? There is more of it, but on the other hand it looks rather similar to many other metals, so it could be easier to "forge".
It's another possibility, I suppose. And it's one I shall look into.

spuriousmonkey
04-23-06, 07:51 AM
Why not use enriched uraninium for american currency? Or depleted uraninium if you want to be a cheap ass.

Communist Hamster
04-23-06, 09:23 AM
Something about that, spurious, strikes me as rather impractical. I wonder if it could be the γ

Athelwulf
04-23-06, 07:21 PM
Something about that, spurious, strikes me as rather impractical. I wonder if it could be the γ
I agree. The shame of a wasted PhD.

Edit: Oh nice, that rhymed.
Edit: No HTML? Lame...

invert_nexus
04-23-06, 07:27 PM
Wow.
You're serious about the statistics for how much money is in circulation today as compared to 1995? That seems like a large change, doesn't it?

What is this tied to? Is it tied to inflation?

It makes me think of the Confederate states pumping out their currency like it was nothing towards the end of the Civil War. The dollar doesn't seem to be going through great difficulties at the present time, so I can only assume that this is not exactly the case of what is happening here.

Do you have statistics for how much money has been in circulation over time?

spuriousmonkey
04-23-06, 07:27 PM
If you had any brain you would know that the idea of coupling enriched or depleted uranium with the dollar is just as moronic as coupling gold to that standard.

But I guess you were thinking again with ur'anium.

invert_nexus
04-23-06, 07:32 PM
Anyway, it isn't like you'd have uranium currency. Rather, you'd have uranium certificates. Just like the old paper money used to be silver certificates.

What about that, anyway? If it was based on gold, then why did it say "Silver certificate"?

Answered my own question:

"Silver Certificates were used for a time in the United States as a form of paper currency. They were produced in response to silver agitation by citizens angered by the "Crime of 1873", which placed the United States on the gold standard. The certificate was matched to the same amount of value in silver coinage. For example, one fifty dollar Silver Certificate = fifty silver dollars."

http://en.wikipedia.org/wiki/Silver_Certificate
So. It would appear that for awhile we had money based both on gold and silver. Or were silver certificates a different situation than the gold standard?
What exactly does the gold standard entail? I know squat about economics.

leopold
04-23-06, 09:44 PM
the question i have about money is where does it come from
yes i know it comes from printing presses
but what determines how money is added to our economy?

Athelwulf
04-23-06, 09:54 PM
invert_nexus,


What is this tied to? Is it tied to inflation?
I really doubt it's directly and solidly tied. Though I wouldn't reject the idea either.


It makes me think of the Confederate states pumping out their currency like it was nothing towards the end of the Civil War. The dollar doesn't seem to be going through great difficulties at the present time, so I can only assume that this is not exactly the case of what is happening here.
Yeah, I think it's the US printing more money than it strictly needs to. It's trying to pay off its debt, is the problem. But surprise surprise, the debt is climbing along with inflation. :bugeye:


Do you have statistics for how much money has been in circulation over time?
I don't, but I'm sure it can be Googled. For it to be worth anything, though, it would have to be adjusted for inflation.


Anyway, it isn't like you'd have uranium currency. Rather, you'd have uranium certificates. Just like the old paper money used to be silver certificates.
I suppose. But uranium neither a precious metal nor a tradable commodity, like gold and silver are.


It would appear that for awhile we had money based both on gold and silver.
Yup. In fact, we were still on the silver standard long after the gold standard was done away with. We minted our coins with silver until 1964.


What exactly does the gold standard entail? I know squat about economics.
Same here. But as I said in the OP, money backed by gold would be stable, so inflation would be hindered. Furthermore, it would be easier to trust. You may be used to the idea of using a small piece of cotton-linen blend and little disks of copper-nickel to buy things – but when you think about it, the idea of fiat money is a bit worrying.

spuriousmonkey,


If you had any brain you would know that the idea of coupling enriched or depleted uranium with the dollar is just as moronic as coupling gold to that standard.
You have one post to reasonably explain why the gold standard is moronic. Beyond that, I will no longer take you seriously within this thread. Use your one post wisely.

spuriousmonkey
04-23-06, 09:59 PM
You have one post to reasonably explain why the gold standard is moronic. Beyond that, I will no longer take you seriously within this thread. Use your one post wisely.

Because we switched to fiat currency a long time ago.

Athelwulf
04-23-06, 10:03 PM
Because we switched to fiat currency a long time ago.
Wow.

F-

Communist Hamster
04-24-06, 04:43 AM
Anyway, it isn't like you'd have uranium currency. Rather, you'd have uranium certificates. Just like the old paper money used to be silver certificates.
Which is, of course, the origin of the British "pound". The banknotes used to say "I promise to pay the bearer [of this note], on demand, the sum of x pounds of gold." Nowadays the note omits the "of gold" part.

So, wouldn't a gold standard eventually lead back to paper money?

Athelwulf
04-24-06, 03:36 PM
Which is, of course, the origin of the British "pound". The banknotes used to say "I promise to pay the bearer [of this note], on demand, the sum of x pounds of gold." Nowadays the note omits the "of gold" part.

So, wouldn't a gold standard eventually lead back to paper money?
Of course it would. But the gold standard doesn't imply that we not use paper. The important thing is that the paper money would represent an amount of gold that is being held somewhere, rather than be factually worthless. That's much different from how the US dollar and UK pound work nowadays.

spuriousmonkey
04-24-06, 03:56 PM
http://www.kwaves.com/fiat.htm

here you can see how the US has switched between fiat currency and gold standard many times during its history.


Alan Greenspan:

Those who advocate a return to a GOLD STANDARD should be aware that returning our monetary system to gold convertibility is no mere technical, financial restructuring. It is a basic change in our economic processes. However, considering where the policies of the last 50 years have eventually led us, perhaps there are lessons to be learned from our more distant GOLD STANDARD past.
http://www.gold-eagle.com/greenspan011098.html

Why not the gold standard?
http://www.j-bradford-delong.net/Politics/whynotthegoldstandard.html

Loss of control over economic policy. If the U.S. and a substantial number of other industrial economies adopted a gold standard, the U.S. would lose the ability to tune its economic policies to fit domestic conditions.

Recessionary bias. Under a gold standard, the burden of adjustment is always placed on the "weak currency" country.

The gold standard and the Great Depression. The current judgment of economic historians (see, for example, Barry J. Eichengreen, Golden Fetters) is that attachment to the gold standard played a major part in keeping governments from fighting the Great Depression, and was a major factor turning the recession of 1929-1931 into the Great Depression of 1931-1941.

Average inflation determined by gold mining. Under a gold standard, the long-run trajectory of the price level is determined by the pace at which gold is mined in South Africa and Russia.Imagine being dependent on Russia for your inflation...

Roman
04-25-06, 01:51 PM
One reason we went off the gold standard was because the president at the time, FDR, wanted to put more money into circulation to help get us out of the Depression

That was the reason for gold no longer being an international standard. American money was back by gold until 1971 when high inflation from the cost of 'Nam pretty much ended it.
http://en.wikipedia.org/wiki/Bretton_Woods_system#The_.22Nixon_Shock.22

Currently, inflation is very low in the US. So low that Bernanke, now the chairmen of the Fed, was worried about deflation.

If the US went to a gold standard, all control the Fed has over maintaining steady economic growth would pretty much be obliterated. The conversion to gold would cause shocks to the economy. Investors would become cautious, people would be nervous, and the expectation of bad things would indeed lead to bad things. And since the Fed would have essentially lost control over the money supply, the US would have a very hard time of pulling out of a recession.

Hapsburg
04-25-06, 05:53 PM
A small note, but perhaps silver would be a better alternative to gold? There is more of it, but on the other hand it looks rather similar to many other metals, so it could be easier to "forge".
Isn't the value of gold really low these days, tho?

Nasor
04-26-06, 02:43 PM
Unfortunately, going back to the gold standard wouldn't work as smoothly as I hoped it would. There are $760 billion (http://en.wikipedia.org/wiki/United_States_dollar) in circulation as of 2005 (a lot of it is overseas), but we only have $162.7 billion (http://en.wikipedia.org/wiki/Official_gold_reserves#Official_reported_gold_rese rves) worth of gold in reserve as of this February. So it seems like there simply isn't enough gold.

Oh no, it’s much worse than that. The total U.S. money supply in 2005 was around $6.8 trillion. Only a small fraction of that ($760 billion, as you correctly stated) actually exists in printed form. The rest exists electronically in bank computers. The Federal Reserve periodically prints new money to meet the demand for cash (to stock ATM machines etc.), but that’s just giving “physical form” to money that actually already existed. The total value of the U.S. money supply is probably far, far greater than the value of all the gold in world. There simply isn’t enough gold for the U.S. to switch back to the gold standard, unless the value of gold were to suddenly skyrocket.

There are a couple of problems with the gold standard. First, it ties the value of your currency to the international value of gold; if international gold prices go down for some reason, your currency value also goes down and there’s nothing you can do about it. Second, it severely restricts the government’s ability to control the money supply to fight inflation or recessions.

The only serious legitimate argument that I’ve ever heard in favor of the gold standard is that under our current system of fiat money the government can simply create more money to cover its expenses, basically creating a “stealth tax” via inflation.

The_Dude
04-27-06, 07:24 PM
There simply isn’t enough gold for the U.S. to switch back to the gold standard, unless the value of gold were to suddenly skyrocket.

Well, if the gold standard were readopted, the price of gold would skyrocket. The value of things and the absolute value of the total wealth in the world need not change, but their relationship to the value of gold would.

First, it ties the value of your currency to the international value of gold; if international gold prices go down for some reason, your currency value also goes down.

Remember gold is just a conduit for the transfer of wealth. If the international value of gold falls, then your currency probably also falls, but so what. The thing that you care about is whether the stuff the goods that you can buy with your currency remains the same.

* * *

You folks ought to check out the recent news that the Fed has stopped reporting the M3 (the broadest survey of the total money supply), which is fascinating and quite confounding since the cost to produce the figure is limited to tabulating the data since they continue to go on collecting the constituent data.

Please don't get the wrong idea from my comments. I am not nor ever will be a goldbug. But I find this topic endlessly fascinating. Particularly given the huge deficit spending that we Americans now run. The check that the fiat currency system usually employs to close down countries that run large current account deficits has been short-circuited by the patterns now in place.

candy
04-27-06, 07:56 PM
The value of gold is currently about $640/oz up from about $435/oz a year ago.
For gold bugs there are a couple of e-currencies that are gold based.

UNIVERSE TODAY
04-27-06, 11:35 PM
As soon as I buy a rocketship and plant a flag on Eros you'll see a marked drop!

:)

Nasor
04-28-06, 07:35 AM
Remember gold is just a conduit for the transfer of wealth. If the international value of gold falls, then your currency probably also falls, but so what. The thing that you care about is whether the stuff the goods that you can buy with your currency remains the same.
I'm not sure you really got my point there. If the US switched back to the gold standard the amount of goods that you could buy with a dollar would drop considerably. U.S. dollars are currently backed by "the full faith and credit" of the United States, and currently that "faith and credit" is worth a lot more than gold. For example, one US dollar is worth about 0.8 Euros. But if you were to take all the gold that the US would be likely to reasonably be able to stockpile and divide its mass by the number of US dollars that exist, the amount of gold associated with each dollar would be worth far less than 0.8 Euros.

The_Dude
04-29-06, 01:12 PM
U.S. dollars are currently backed by "the full faith and credit" of the United States, and currently that "faith and credit" is worth a lot more than gold.

I am afraid that I have no idea what this means. Are you saying that it is this promise which secures government debt more than the gold reserves that the government keeps on hand at Fort Knox? If so, then of course I must agree. But otherwise, it seems to me you are dealing with incommensurables. The full faith and credit clause is the idea behind which we get the concept of a riskless rate of return. But this takes us to other issues in finance like inflation and interest which are of no import to the more narrow discussion that I think we are talking about.

If I understand your larger point correctly, I think that where our reasoning differs is that you are assuming that the current ratio between a given currency, take the dollar say, and the price of gold will remain intact. But if you asssume that it is variable, then I think you will end where I am.

So for instance, if you were to focus on a single country -- say the US. If you were to take all of the assets in the US and then denominate them in gold-backed US dollars, then the value of gold would skyrocket to accomodate the need. (You would take some measure of the money supply - probably M1 or M2, divide that number by the amount of gold reserves the Fed has on hand, and reach a new value for the dollar to gold.) Gold would be several factors of ten more valuable than it is today. But other goods within the US need not change in value relative to each other. So for instance the ratio of widgets to 2 bedroom condo in Boca Raton could be the same. And in fact, if the ratio just right, the number of dollars for a widget or a condo in Boca Raton could remain exactly the same as before. Remember currency not stores wealth but facilitates barter, and unless there is a reason to believe that people will value one good relative to another more, then there is no reason for these ratios within an economy to change.

Expanding this to Europe, the same thing could happen there. By this I mean that the Euro value of Euro-denominated goods within Europe could remain as it stands today. But switching back to a bullionist system in this way would obviously jigger by ratio of US dollars to Euros by the amount of gold reserves of the respective central banks and correspondingly this ratio would shift by the amount of gold that these banks would have on hand at a given time. So this would obviously favor the US since the European central banks have been selling off their gold reserves faster than the US has for the past several decades. What is going to change is the value of European goods Americans, and American goods to Europeans.

This bullionist system is unworkable for a lot of reasons so this is never going to happen. One obvious problem with going back to the gold standard is that it discourages international trade and encourages protectionism, despite the fact that the Ricardo's law of comparative advantage shows that international trade works to the benefit of both nations. Other problems are in controlling the money supply to counteract the cyclical economic swings.

Businesswiz
04-30-06, 11:05 AM
I'm a young buck, and I can't seem to understand why there has been a run up in gold prices.. Is it the uncertainty in the U.S. dollar? What triggered the up-tick in price? What can cause it to plummet?

Sci-Phenomena
04-30-06, 12:09 PM
When a currency isn't backed by gold or silver, that currency is much more likely to be printed frivoulously and get a nation into alot of debt, and into alot of war.

When money can be made on a printing press, it may as well be taxed directly from all those people who own that money, because of inflation. But for politicians fiat money is so addictive they can't help themselves and so they spend the money in YOUR savings account by inflating it, bringing its worth down with each and every dollar that is pumped into the system.

I would venture to say that we wouldn't be in Iraq if the Federal Reserve Bank had been abolished and reformed to a precious metal standard before the war.

Roman
04-30-06, 02:32 PM
When a currency isn't backed by gold or silver, that currency is much more likely to be printed frivoulously and get a nation into alot of debt, and into alot of war.

A baseless claim.

Nasor
05-01-06, 03:23 PM
So for instance, if you were to focus on a single country -- say the US. If you were to take all of the assets in the US and then denominate them in gold-backed US dollars, then the value of gold would skyrocket to accomodate the need. (You would take some measure of the money supply - probably M1 or M2, divide that number by the amount of gold reserves the Fed has on hand, and reach a new value for the dollar to gold.) Gold would be several factors of ten more valuable than it is today. But other goods within the US need not change in value relative to each other. So for instance the ratio of widgets to 2 bedroom condo in Boca Raton could be the same. And in fact, if the ratio just right, the number of dollars for a widget or a condo in Boca Raton could remain exactly the same as before.
The problem is that there's a lot of gold for sale on the free market outside the U.S., and the international price of gold wouldn't necessarily follow U.S. monetary policy. If you suddenly announce that each dollar is backed by X amount of gold, where X is some very tiny amount, then the dollar will suddenly have a terrible exchange rate; if you can purchase 50X amount of gold with a Euro, then it would take $50 US to equal the value of a Euro.

Nasor
05-01-06, 03:29 PM
A baseless claim.
Although I don't think that it would be a good idea for the U.S. to switch back to a gold standard, if you check into the history of fiat money I think you'll find that it's almost always first initiated in a country when the government needs to pay for a expensive war.

The_Dude
05-04-06, 12:10 PM
The problem is that there's a lot of gold for sale on the free market outside the U.S., and the international price of gold wouldn't necessarily follow U.S. monetary policy. If you suddenly announce that each dollar is backed by X amount of gold, where X is some very tiny amount, then the dollar will suddenly have a terrible exchange rate; if you can purchase 50X amount of gold with a Euro, then it would take $50 US to equal the value of a Euro.

I would agree with most of what you wrote. But I think that you are forgetting the actions cannot happen in isolation. I only considered them stepwise for the sake of simplifying the explanation. The effect of the US switching to a gold standard would obviously not leave the ratio of gold to euro unchanged. If the value of gold were to rise by some factor of ten in the US, you can be damn sure that the price of gold is going to skyrocket in Europe as well thus your arbitrage play wouldn't persist. The wealth of nations would again be gold-based, and the dollar might get devalued against the euro. But not as you describe.

The US no longer has the ability force its economic arrangements on the rest of the world, but it can more narrowly insist that gold be used as the currency for balances of trade. This alone would be sufficient to make the price of gold soar against all of the world's currencies.

And actually, for the record, Europe would end up worse off than the US since their central bank sold off most of their gold assets at record lows in the late 90s.

dadasays
05-17-06, 06:50 PM
Sorry to resurrect a thread from a week or two ago. I foun this site through a Google search. I'm a goldbug, run a gold blog (which I won't splog here) and have run a gold standard newsletter for 6 years. I also live on a personal gold standard.

Much of what is being debated here is counter to the true value of gold -- there are many common misunderstandings about gold and how a 100% gold reserved dollar would make the US dollar incredibly powerful and desired again in the world.

The US dropped the gold standard completely in 1971, which is about the time that the value of the dollar started a big time decline. It is also about the time when the US was unable to compete on a global basis (due to a declining currency and an increasing inflation in wages). The dollar was untied from gold in 1913 by the Federal Reserve central bank, but between 1913 and 1971 it held some sort of gold partial reserve.

If the dollar was tied to gold, it would greatly reduce inflation in the U.S. Price inflation comes from one and one only place: new money being created out of thin air by the Federal Reserve. When they print new money (lately between 7 and 10% a year), it makes every other dollar in existance worth less. You have more dollars competing for the same item, so the seller raises prices to compensate.

Imagine if we only had 100 $1 bills in existance (it is closer to 11 billion). If you all of a sudden printed 10 new ones, prices would gravitate upwards by 10%.

This inflation of the dollar (in high speed since Greenspan took power of the FedRes) is what created the stock market bubbles and the new housing bubble. The boom-and-bust of bubbles is attributed to an elastic devaluing currency.

Right now the dollar is in high gear to being worthless on a global scale. On my gold blog I give links to world news sources (and world governments) that are hoping to untie the dollar from oil and many commodoties -- making it worth even less. In just 5 years the dollar has lost 40% of its value against the Euro because we printed more dollars than new euros were printed in that time. BOTH currencies fell against gold because they both are being created out of thin air.

When the dollar was "invented" it was named after "thaler" which was a standard for gold money. The dollar WAS gold. $1 was actually a bank IOU for 1/20th of an ounce of gold. Gold wasn't priced at $20 per ounce, it was actually the dollar that was worth 1/20 ounce of gold in a bank vault.

From 1750 to 1913 when the dollar was 100% tied to gold, it was a stable currency -- prices didn't go up or down. Gold has been a fairly stable currency for almost 8000 years -- it was the first metal discovered by man and has been used as money for all 8000 years. Since 1913, the dollar has lost 95% of its value.

Inflation by the Federal Reserve is a way to transfer wealth from the middle class to the elite -- it is a silent tax. Rather than taxing us more, they print more money, making our dollars worth less. Even the stock market hasn't returned very good gains in 40 years because much of the stock market growth has been to compensate for a declining dollar value. Stock market charts go up just as much because the dollar is just worth less -- and more readily available.

Nasor
05-17-06, 09:24 PM
The problem, though, is that the current U.S. money supply is worth far more than the total gold in U.S. reserves. If you divided the amount of U.S. dollars by the mass of gold in U.S. reserves and say "We have X dollars and Y mass of gold, so each dollar is now worth X/Y gold," the value of the dollar would go down.

Billy T
05-17-06, 09:32 PM
The problem, though, is .... the value of the dollar would go down.Yes it is in any case - Dollar is like a plane over the ocean, beyond the point of no return, and low on gas. - It is going down.

Carcano
05-18-06, 03:12 AM
If the dollar was tied to gold, it would greatly reduce inflation in the U.S. Price inflation comes from one and one only place: new money being created out of thin air by the Federal Reserve. When they print new money (lately between 7 and 10% a year), it makes every other dollar in existance worth less.Perhaps this is the reason why the gold standard was dropped - so the government could create money without raising taxes.
Something similiar happened in the late Roman empire when the currency was increasingly devalued by debasing with less valuable metals.

Or, maybe it was dropped because their wasn't enough gold in the US to back all the real wealth that was being created???

Excellent post btw Dada...how do you live on a "personal gold standard"?

Nasor
05-18-06, 07:43 AM
Yes it is in any case - Dollar is like a plane over the ocean, beyond the point of no return, and low on gas. - It is going down.
If the dollar ever dropped so low that it wouldn't take a hit in value if it were backed by gold, perhaps there wouldn't be a reason not to switch to a gold standard. As it stands, there would be a sudden and massive drop in the dollar.

dadasays
05-18-06, 10:42 AM
Perhaps this is the reason why the gold standard was dropped - so the government could create money without raising taxes.
Something similiar happened in the late Roman empire when the currency was increasingly devalued by debasing with less valuable metals.

This is absolutely why the dollar was taken off a 100% reserve standard -- government power. The first person who wanted to have a government controlled "fiat" money was Henry Clay -- a Whig. He mentored Alexander Hamilton, another Whig, who wanted government money so that he could inflate it to give money to friends for corporate welfare. He was shut down. Hamilton mentored Abe Lincoln, who actually created federal money without gold (which devalued nearly instantly). Lincoln actually fought the "Civil" war not for slavery but for the power to tax people to pay off his friends to build useless things.




Or, maybe it was dropped because their wasn't enough gold in the US to back all the real wealth that was being created???

Wealth is never truly created in a gold standard -- it is actually shared. If you have a fixed base of money, you can be proud that your income dropping doesn't mean you're getting poorer, it actually means that the economy is experiencing positive deflation -- more people are chasing the same amount of money, so prices become more efficient to attract the money. Slow deflation is a huge benefit to society as it causes people to save and invest rather than just spend stupidly (consumerism through debt).



Excellent post btw Dada...how do you live on a "personal gold standard"?

Basically I earn in gold and silver (about 40% of my work) directly. What I don't get paid in gold and silver I get paid still in fiat US dollars, which I convert to gold or silver right away. I have no banks, no credit cards and no loans -- I own my home, my vehicles and my junk.

The benefit of saving in gold/silver is not if it goes up or down in price (I believe that when gold goes up, it isn't worth any more because consumer goods go up equally). The benefit is that I have "cash" now that I can sell anywhere in the world at any time, and I don't have to worry about government inflation destroying my savings. I believe (and have proven in my newsletters) that most people LOSE money on stock markets over their lives because the dollar is worthless by the time they retire. So what if charts go up if the value of the dollar goes down? In the entire 100 year history of the stock market, taking into account the fall of the dollar over that time, you'd only make 500% on your money. Ridiculous.

After I've hit a good amount of posts here I'll post the link to my main site so interested parties can take a gander. I hate when people spam my forums so I don't do it elsewhere :)

Billy T
05-18-06, 12:52 PM
...Lincoln actually fought the "Civil" war not for slavery but for the power to tax people to pay off his friends to build useless things....I agree that the civil war was not fought to free the slaves - that was just the best "window dressing" cause available for making ignorant farm boys willing to die for the north's factory owners to become richer. Now days "free the slaves" is not available so "make world safe for Democracy" is the best available slogan to make ignorate city boys, usually poor black ones, willing to die for the oil owners to get richer.

But, that is all old. To come to the reason I am posting: What are you making reference to with: "useless things"?

If refering to the canal systems that were built, I would argue that they did give the rail roads a real "run for the money" for a few years. - Sort of like the beta tape recording system did recently until it was abandoned for the VCR system. Just because something in the long run lose 100% of the market, does not mean it was "useless" - Sometimes tha only way to determine what is best is to let them fight it out in the market.

dadasays
05-18-06, 12:57 PM
Billy:

I agree that something useless today might have been useless yesterday, but there is no reason for government to be the ones to tax everyone to pay for something that might or might not have a positive gain for everyone. The great thing about the market is the supply and demand are always met at the best rate possible for both sides. Why build canals if the cost of the canals outweighs the benefits -- as is often the case in any government bureaucracy.

I can understand the debate point that highways, canals and telephone systems might not be built because acquiring the property would be expensive and difficult, but I also believe that if government didn't create these mechanisms we might have seen different ones from the market. Why do we use roads and not personal aircraft? Why did we use telephone wires for so long when wireless technology was available (but not cost effective because of reduced demand).

I'm no fan of any big government, but I do see the inefficiencies that always come from government-sponsorship and regulations of markets.

For me, gold is the ultimate answer to restricting government to their basic power: preventing others from trampling on our private property rights. Everything within the Constitution is based on the right to private property and how it is used (including your body).

Billy T
05-18-06, 02:43 PM
...there is no reason for government to be the ones to tax everyone to pay for something that might or might not have a positive gain for everyone....For me, gold is the ultimate answer to restricting government to their basic power: preventing others from trampling on our private property rights....My point was that the market will not always put the "up front" money into all projects that may turn out to economically very useful, or may turn out to be a total waste. To mention just two currrent examples: Fusion research or anti-viral drugs for the possibility that the "bird flu" will jump the species barrier and kill millions of people. In both these case private fund are being invested, but not at the rate I think worth while. To take two historical examples: Alaska was purchased from the Russian and called "Fulton's Folly" for much longer than any private firm commits funds. It has had a fantastic ROI for the public good. Closer to the lower 48 and more recently, Bolder Dam (also called Hover Dam) has been a economic success that private funds would not touch.

Despite this, I too am a supporter for limited government and have little faith in its decisions, but sometimes it is necessary for more than you listed.

I do not hold any gold stocks or gold, although years ago I did own some stock in Giant Yellow Knife (I doubt it still exists, at least under that name.) - My timing was not good and I lost a little money on it, especially if one considers the lower purchasing power of the lesser number of dollars I recieved when I sold. (Sold it as I "needed" an offsetting tax loss.) I mention this to point out that the ratio of dollars to oz of gold is not a monotonicly increasing function.

For me, gold and to some extent, silver, are "dead assets" perhaps less likely to appreaciate that rare coins or fine paintings* - all have most of their value based on the "greater fool theory" instead of practical utility. I prefer "productive assets" like land (but that has the disadvantage that you can not move it if the local government taxes it at too high a rate) or industries (stocks).

The Indian and Brazilian ADRs I invested in several years ago, well before I began to post here views that you also have of the dollar's collapse, have done much better than gold. For example, I bought ADRs of the local Sao Paulo water company (ticker symbol SBS) at under 5 and and it is now trading in the 20 to 25 range and still pays several percent dividends.

The more the dollar falls, the more the price rises (in dollars) to buy a share in a foreign company. Gold may be $650 an oz now, but that price may come down as well as go up. Of more concern to me is fact that either you must pay to have gold held securely* for you or expose your self to risk of being killed for it. (My faith in the governments ability to protect you from that risk is not very high, even that is their sole function according to you.)

It might be both informative for you and your web site readers to compare the "Betas" of gold and ADRs vs. the dollar and see which is really the better protection against inflation.
---------------------------------------
*There is no possibility that more of these will be produced, but as gold is a dense metal, probably more abundant in the Earth's and other planet's cores, it is possible that a lava, with 5% gold content, may come pouring out of some volcano or some fantastic "dike" or meteorite of it may be discovered. (Neither very likely I admit, but possible.) Even the old dream of the alchemists may become economical. - It is certainly possible to transmut another element into gold with today's technology, just not economical to do so, yet.

I still do not like collectables, even the ones with limited supply, as they can be stolen and provide no dividends, etc. I strongly suspect that, just as banks need not keep 100% of the deposits in the bank, so too the firms that hold gold for you would be unable to give it all back to the depositors if all asked for it back at the same time.

Carcano
05-18-06, 10:19 PM
If you have a fixed base of money, you can be proud that your income dropping doesn't mean you're getting poorer, it actually means that the economy is experiencing positive deflation -- more people are chasing the same amount of money, so prices become more efficient to attract the money. Ah, I see. If inflation is reversed enough, I suppose we would again be able to buy something with a penny - as was the case a hundred years ago.

Carcano
05-18-06, 10:24 PM
The benefit of saving in gold/silver is not if it goes up or down in price (I believe that when gold goes up, it isn't worth any more because consumer goods go up equally). The benefit is that I have "cash" now that I can sell anywhere in the world at any time, and I don't have to worry about government inflation destroying my savings. But inflation is very low at the moment. Doesn't it makes sense only to invest in gold when inflation is higher?

Carcano
05-18-06, 10:33 PM
Basically I earn in gold and silver (about 40% of my work) directly. What I don't get paid in gold and silver I get paid still in fiat US dollars, which I convert to gold or silver right away.
Why don't you set up your own version of Fort Knox for people like yourself who want to own gold without actually having it in their house or safe deposit box.

You could issue bonds backed by your company's gold reserve, which would be redeemable for dollars at any time based on the current price of gold.

dadasays
05-18-06, 11:31 PM
Bingo, Carcano. Inflation CAN happen if there is an undersupply of a particular product or service -- yet this rarely happens because of market reasons.

If you look at where prices have REALLY skyrocketed, you can blame two areas, usually: an oversupply of money ("easy credit") and an undersupply of product or services, generally caused by government regulation or licensing. For example, look at doctors. The AMA is a lobbying organization that gets Congress to reduce the supply of doctors -- this causes prices to skyrocket. Their other arm also lobbies to produce tax loopholes that give employers a way to increase benefits by providing health care for employees, which makes everyon want insurance for medical help that normally was paid for by cash (giving people reason to find the most inexpensive service).

We also see massive price increases in steel products because of the government's pro-steel industry laws and support. Look at a 1996 Toyota Corolla versus a 2006 Corolla -- the price increase in 10 years was only about 25%. Look at a 1996 Chevy Tahoe versus a 2006, that increase over 10 years is over 100%. The steel "tariffs" have saved 200,000 jobs at the expense of millions in other industries.

Billy T -- I don't support the stock market because I morally don't agree with how most corporations operate. I'm a pure capitalist (anarcho-capitalist) so I tend to put my investable money in businesses I can control and have input it, generally local businesses. I think there are great gains to be made in a few national and international businesses, but I don't trust them to stick to their "do no harm" beliefs. Once you get involved in the larger market, it is very easy to take the easy way out.

The biggest problem with money supply inflation is that it creates a real scary mask of the realities of being middle class. In the last 40 years, both spouses have needed to work, and most families "have more" but also owe a lot more. We're all more pressured, even though we earn more dollars than our parents did. We earn more dollars, but they buy a heckuva lot less. We also can't save like our parents did because we all know, deep inside, that the dollar falls too quickly.

dadasays
05-18-06, 11:33 PM
Carcano: I've been talking about this idea at one of my forums (I'll post a link not for spam purposes but to bring it up) in what I call a Bullion Bank -- a debit card whose balance is based in grains of gold (or silver). When you withdraw, we do a FOREX currency conversion based on the price of gold or silver and actually withdraw grains (that are converted to dollars or pounds or euros). Deposits make the same conversion.

The link is here: Bullion Bank (http://www.unanimocracy.com/forum/viewtopic.php?t=263+Debating%20a%20real%20bullion% 20bank%20+%20ETF%20+%20security)

Apologies if this breaks any TOS here.

Billy T
05-19-06, 04:33 PM
...Billy T -- I don't support the stock market because I morally don't agree with how most corporations operate....Boy! You are more unusual than I thought! A "gold bug" with morals!

dadasays
05-19-06, 04:44 PM
Haha. Most people are surprised to hear that there are more like me than they'd realize.

The stats:

1. An anti-corporation pure capitalist
2. A Bible-banger who believes in only judging himself and only forcing himself to live by the book
3. A pacifist pro-gun-rights activist
4. A music producer and writer who repudiates copyright laws
5. An inventor who repudiates patent protection.

The overall term is "anarcho-capitalist" but I prefer AnarCap myself!

Pleasedtameetcha.

Carcano
05-19-06, 09:04 PM
Carcano: I've been talking about this idea at one of my forums (I'll post a link not for spam purposes but to bring it up) in what I call a Bullion Bank -- a debit card whose balance is based in grains of gold (or silver). When you withdraw, we do a FOREX currency conversion based on the price of gold or silver and actually withdraw grains (that are converted to dollars or pounds or euros). Deposits make the same conversion.
Is this a totally unique idea? How would that be different from a company like e-bullion.com?

rrram2
12-25-06, 07:46 PM
Sorry going back to the Gold standard is NOT at all possible nor will it EVER happen. The Federal Reserve Bank ( a coporation owned over 90% by foreigners) already has most all of our gold. There is NO gold in fort knox anymore.

The Chinese have 1/4 of our dollars, sent to them by Wal-Mart and the like.
We but thier cheap goods (which are cheap because thier currency is seriously undervalued according to the US GOV) AND they don't buy ours.

SO billions upon billions of our dollars are piling up in thier country.

What they fail to realize is that the USD crash is coming soon and those dollars they have will be good for nothing more than to wipe thier asses.

We don't need them anyways, our GOV is printing them up at a cost of 3.9 cents per $100 bill, a sheet of 100 $100 bills costs them $39 to print!

AND sadly there is no assets to back them up. It has the same economic effect of counterfeiting.

My advise is to spend those dollars while they are still worth something. And BUY gold seriously for real as in HARD currency. OR invest in the liberty dollar,
libertydollar.org. This money is at least backed up by gold in thier warehouse and growing in popularity. And it actually increases in value because it is backed by gold and silver.

According to my estimates the US GOV will be bankrupt before the end of 2008. The national debt is so far past being able to pull out its unreal.
The GOV has stolen most all of our Social Security money we have put in there since 1964. There isn't much left. The GOV is running on fumes,
when they run out of gas it is all over, and we step into the next phase of one the new one world government.

TimeTraveler
12-25-06, 08:46 PM
For a while now, I've been playing with the idea of the US going back to the gold standard. From what I've learned in economics class lately, money backed by gold is much more stable than fiat money. So I did some researching to try to see how feasible going back to the gold standard would be.

A specific plan I had in mind was to define the value of a dollar as that of a gram of gold. This would make a dollar twenty times as valuable as it is now, so to compensate for this, either 95 percent of our money would have to be taken out of circulation, or new-looking money (not necessarily new currency) would have to be printed and the old money totally depreciated.

Unfortunately, going back to the gold standard wouldn't work as smoothly as I hoped it would. There are $760 billion (http://en.wikipedia.org/wiki/United_States_dollar) in circulation as of 2005 (a lot of it is overseas), but we only have $162.7 billion (http://en.wikipedia.org/wiki/Official_gold_reserves#Official_reported_gold_rese rves) worth of gold in reserve as of this February. So it seems like there simply isn't enough gold.

However, I figured out that in 1995, there was about half as much money in circulation as there is now: $380 billion. I'm sure the dollar has inflated since then, but I don't think that the 1995 dollar had much more purchasing power than the 2005 dollar. This leads me to believe that we don't really need $760 billion. Therefore, it seems to me that we might be able to cut down the amount of money we have in circulation so that it all represents 50 to 70 percent of our gold reserves. Why leave extra? This would enable us to make more money when it's needed. One reason we went off the gold standard was because the president at the time, FDR, wanted to put more money into circulation to help get us out of the Depression – something he couldn't do if there wasn't enough gold to back it.

This would all be a very drastic change, yes, but is it feasible? Or do I not know what the fuck I'm talking about?

A new currency might actually be a good thing. I don't look forward to our ecoomy crashing, but in the end it could restore our economy back again if we can survive the crash.

Sci-Phenomena
12-25-06, 09:33 PM
I must say to my fellow sci-forum goers, I just LOVE people who know what is really going on here on Planet Earth! :)

Stryder
12-26-06, 06:26 AM
The Chinese have 1/4 of our dollars, sent to them by Wal-Mart and the like.
We but thier cheap goods (which are cheap because thier currency is seriously undervalued according to the US GOV) AND they don't buy ours.

Just look at it like this, currently the USD's position has apparently been lowering. Initially alot of people concerned themselves over "China's Cheap Imports" with the understanding that they couldn't compete with their own country because the currency was too strong.

You can suggest that there are many people out there in the US that aren't happy about a Communist country selling products to them and not just doing that but using Capitalism to do it.

So what do they do to rectify this matter? They can't exactly start a war, as in this case it doesn't really warrant it. However what they can do is crash their own economy to a level where they can compete with the country they are upset with.

This is why I believe the USD has/is collapsing until it reaches a level that is on the same level as China, Then everyone will be buying US made cheap imports.

Odin'Izm
12-26-06, 10:08 AM
Wow.
You're serious about the statistics for how much money is in circulation today as compared to 1995? That seems like a large change, doesn't it?

What is this tied to? Is it tied to inflation?



Its caused by the Federal reserve bank a PRIVATE bank not part of the government which in 1913 won the power to print americas money, enslaving it's government...they cause inflation and deflation by simply taking and putting dollars in and out of circulation.

Watch the 3 parts of MONEY MASTERS its on google video. its long but worth it...gives an abstract basic of the situation.

Billy T
12-26-06, 05:22 PM
In my post 39 made 7 months ago I said:

"For me, gold and to some extent, silver, are "dead assets" perhaps less likely to appreaciate that rare coins or fine paintings* - all have most of their value based on the "greater fool theory" instead of practical utility. I prefer "productive assets" like land (but that has the disadvantage that you can not move it if the local government taxes it at too high a rate) or industries (stocks).

The Indian and Brazilian ADRs I invested in several years ago, well before I began to post here views that you also have of the dollar's collapse, have done much better than gold. For example, I bought ADRs of the local Sao Paulo water company (ticker symbol SBS) at under 5 and and it is now trading in the 20 to 25 range and still pays several percent dividends.

The more the dollar falls, the more the price rises (in dollars) to buy a share in a foreign company. Gold may be $650 an oz now, but that price may come down as well as go up. Of more concern to me is fact that either you must pay to have gold held securely* for you or expose your self to risk of being killed for it. (My faith in the governments ability to protect you from that risk is not very high,..."

I do not know what how much gold has incresed from the $650 mentioned here, but the trading range for the ADR mention above (SBS) is now 30 to 35, instead of 20 to 25 mentioned above. - This sort of proves my point which was:
ADRs, not only protect agains the dollars fall, but being shares in foreign companies, in the long term, ususally grow in intrinsic value, unlike gold which will cost you money to store.

D H
12-26-06, 08:25 PM
Why not use enriched uraninium for american currency? Or depleted uraninium if you want to be a cheap ass.

;) This is an excellent idea! The US economy depends on money flow. Think how much faster money would flow if the coins were radioactive. We would want to spend it as quickly as possible. It would literally be burning a hole in our pockets.

Some other advantages are that radioactive money would spell an end to
The macho man. Men would start carrying purses to avoid having their money create a generation of monsters.
Counterfeiting. One swipe over a geiger counter would tell whether the money was hot or not.
Unencumbered wealth. Nobody would want a thermonuclear pile in their backyard.

Jeff 152
12-27-06, 09:58 PM
As long as people have faith in the stability of the US Government and continue to hold our debt instruments, there is absolutely nothing to worry about. Also, the great thing about fiat money is that the government can regulate the money supply and interest and tax rates to keep inflation in check. A gold standard is a ridiculous and impractical idea and actually less stable than our fiat money which we can at least regulate. If we put the country on a gold standard, there would be an increase in the ming of gold, there would be a lot more of it, and then we would really be in trouble.

Nasor
01-02-07, 02:48 PM
Its caused by the Federal reserve bank a PRIVATE bank not part of the government which in 1913 won the power to print americas money, enslaving it's government...they cause inflation and deflation by simply taking and putting dollars in and out of circulation.


Sigh

Ok, let's clear up a few things:

-The Federal Reserve Chairman and Federal Reserve Board (the people who make all the decisions) are appointed by the US Federal Government. For all intents and purposes, it is controlled by the federal government. If the fed starts doing something that the government doesn't like, they can always simply fire the chairman and his board and replace them with whoever they want. You are trying to make it sound like the Federal Reserve isn't under the government's control, when that simply isn't the case.

-The Fed does not simply print money at whim; rather the Fed will always cash checks that the Federal Government Prints. The Fed is (among other things) the government's special bank that will create new money to honor a government check, allowing the Federal Government to spend as much as the want. However, that new money only gets created when the U.S. Congress decides to spend it. So the creation of U.S. government debt is entirely under the control of Congress, not the fed.

-The Federal Reserve is only "private" in the sense that companies can invest money in it to provide it with operating capital. And, most importantly, unlike with most institutions that issue stock the stock holders don't get to make decisions. The decisions get made by the people appointed by the federal government, remember?

-The Federal Reserve makes hardly any profit for its owners. By law, the fed is only able to keep a very small fixed amount of profit every year; everything else is rebated back the US Federal Government.

So, let's recap:
1. The Federal Reserve is under US Federal Government control.
2. The people who "own" the Federal Reserve do not actually get to make decisions - they simply provide operating capitol.
3. The Federal Reserve hardly makes any money. Almost all of its profits are sent back to the US Federal Government.
4. The creation of US government debt is under the control of congress.

Carcano
11-16-08, 09:58 PM
This just in...Iran's reserve currency is now GOLD!

http://www.reuters.com/article/GCA-Oil/idUSTRE4AE1F820081115

TEHRAN (Reuters) - Iran has converted financial reserves into gold to avoid future problems, an adviser to President Mahmoud Ahmadinejad said in comments published on Saturday, after the price of oil fell more than 60 percent from a peak in July.

Iran, the world's fourth-largest oil producer, is under U.N. and U.S. sanctions over its disputed nuclear programme and is now also facing declining revenue from its oil exports after crude prices tumbled.

"With the plans of the presidency...the country's money reserves were changed into gold so that we wouldn't be faced with many problems in the future," presidential adviser Mojtaba Samareh-Hashemi was quoted as saying by business daily Poul.

He gave no figures or other details.

Before oil prices plunged by more than 60 percent from a peak of $147 per barrel in July, Iran made windfall gains from its crude exports and in April estimated its foreign exchange reserves at about $80 billion.

Iranian officials in July denied reports Iranian banks were moving funds from Europe, with one report suggesting as much as $75 billion had been withdrawn and converted into gold or placed in Asian banks, because of a threat of tightening sanctions.

Billy T
09-25-09, 05:36 PM
Read interesting interview with Ron Paul here: http://www.fool.com/investing/international/2009/09/25/should-we-abolish-the-federal-reserve.aspx R. P. favors returning to the gold standard and believes an end to the Fed will put an end to the dollar's long-trending depreciation. Paul also calls for more regulation on the government and not the markets. Here is start of interview:

"... Jennifer Schonberger:
In the wake of the financial crisis, some in Congress want to give even greater power to the Fed. You want to abolish the Fed. Why?

Congressman Ron Paul:
Because they caused all the trouble. A monetary policy of easy credit and artificially low interest rates was the main source of the financial bubble, and the correction is always trying to fix what the Federal Reserve has done. The only way you can address the business cycle and prevent wild swings in the business cycle is by addressing the Federal Reserve and how they cause nothing but mischief.

Billy T
09-27-09, 02:32 PM
"... World Bank President Robert Zoellick said: “The United States would be mistaken to take for granted the dollar’s place as the world’s predominant reserve currency.” Policy makers from China to Russia repeatedly have called for an alternative to the world’s main currency in foreign- exchange reserves.

{Billy T notes: Gold, IMF's SDRs, an AE (Asian Euro) or agreed basket of currencies and combinations there of, are all being discussed now. Also many countries are signing currency exchange agreements with China so their bilateral trade avoid any use of dollars. Brazil and China are negotiating the terms of theirs now.}*

"The trade-weighted Dollar Index has fallen 11 percent since President Barack Obama’s inauguration in January, in part because of a budget deficit projected to rise to $1.6 trillion this year as the government increases spending to boost the economy. The index measures the currency’s performance against the euro, yen, pound, Canadian dollar, Swiss franc and Swedish krona.

U.S. Treasury Secretary Timothy Geithner last week defended the dollar’s role as the world’s reserve currency. The U.S. has a “special responsibility” ** to preserve confidence in its financial system, and “sustain the dollar’s role as the principal reserve currency in the international financial system,” he said at a press conference Sept. 24 in Pittsburgh, where leaders of the Group of 20 nations met. ..."

From: http://www.bloomberg.com/apps/news?pid=20601087&sid=aINN4BM6Fy5w

-----------------
*Also regional IMFs are forming. For example:
"The Bank of the South, a project- finance bank of South American countries, will start with $7 billion in capital and will grow to $20 billion, Venezuelan Finance Minister Ali Rodriguez said. Presidents of Argentina, Brazil, Bolivia, Ecuador, Paraguay, Uruguay and Venezuela signed the foundational document on the sidelines of the Africa-South America Summit in Margarita Island, Venezuela, last night, after almost four years of attempts to form a regional financial institution. ... The bank’s objective will be to finance development projects in agriculture, energy and health care for member nations and boost trade, according to a copy of the document obtained from the finance ministry. The bank will have its headquarters in Caracas with smaller branches in La Paz, Bolivia, and Buenos Aires.

The bank will get $2 billion each from Venezuela, Brazil and Argentina and the remainder will come from other member countries, Rodriguez said. All members will have equal voting rights, he said. ..." From: http://www.bloomberg.com/apps/news?pid=20601087&sid=a7PU8ZmpUZ3E


**A “special responsibility” yes, but Congress must raise taxes of cut costly programs so don't hold your breath for them to be responsible.
Only way that might happen is if second terms were illegal, but that for sure ain't gona pass thru Congress.

philipthegreat
10-13-09, 07:39 PM
Considering that a Gold Standard would be pretty much impossible to go back to (far more money in circulation then we have gold) I would say a definite no. Also, we had some of the worst economic periods in our history (1893 and 1929) while we were on the gold standard, so it isn't exactly a fullproof system.