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10 Things Every Economist Should Know About The Gold Standard
Submitted by George Selgin via Alt-M.org,
At the risk of sounding like a broken record (well, OK–at the risk of continuing to sound like a broken record), I'd like to say a bit more about economists' tendency to get their monetary history wrong. In particular, I'd like to take aim at common myths about the gold standard.
If there's one monetary history topic that tends to get handled especially sloppily by monetary economists, not to mention other sorts, this is it. Sure, the gold standard was hardly perfect, and gold bugs themselves sometimes make silly claims about their favorite former monetary standard. But these things don't excuse the errors many economists commit in their eagerness to find fault with that "barbarous relic."
The false claims I have in mind are mostly ones I and others–notably Larry White–have countered before. Still I thought it would be useful to address them again here, because they're still far from being dead horses, and also so that students wrapping-up the semester will have something convenient to send to their misinformed gold-bashing profs (though I urge them to wait until grades are in before sharing!).
For the sake of those who don't care to wade through the whole post, here is a "jump to" list of the points covered:
1. The Gold Standard wasn't an instance of government price fixing. Not traditionally, anyway.
2. A gold standard isn't particularly expensive. In fact, fiat money tends to cost more.
3. Gold supply "shocks" weren't particularly shocking.
4. The deflation that the gold standard permitted wasn't such a bad thing.
5. It wasn't to blame for 19th-century American financial crises.
6. On the whole, the classical gold standard worked remarkably well (while it lasted).
7. It didn't have to be "managed" by central bankers.
8. In fact, central banking tends to throw a wrench in the works.
9. "The" Gold Standard wasn't to blame for the Great Depression.
10. It didn't manage money according to any economists' theoretical ideal. But neither has any fiat-money-issuing central bank.
1. The Gold Standard wasn't an instance of government price fixing. Not traditionally, anyway.
As Larry White has made the essential point as well as I ever could, I hope I may be excused for quoting him at length:
Barry Eichengreen writes that countries using gold as money 'fix its price in domestic-currency terms (in the U.S. case, in dollars).' He finds this perplexing:
But the idea that government should legislate the price of a particular commodity, be it gold, milk or gasoline, sits uneasily with conservative Republicanism’s commitment to letting market forces work, much less with Tea Party–esque libertarianism. Surely a believer in the free market would argue that if there is an increase in the demand for gold, whatever the reason, then the price should be allowed to rise, giving the gold-mining industry an incentive to produce more, eventually bringing that price back down. Thus, the notion that the U.S. government should peg the price, as in gold standards past, is curious at the least.
To describe a gold standard as "fixing" gold’s "price" in terms of a distinct good, domestic currency, is to get off on the wrong foot. A gold standard means that a standard mass of gold (so many grams or ounces of pure or standard-alloy gold) defines the domestic currency unit. The currency unit (“dollar”) is nothing other than a unit of gold, not a separate good with a potentially fluctuating market price against gold. That one dollar, defined as so many grams of gold, continues be worth the specified amount of gold—or in other words that one unit of gold continues to be worth one unit of gold—does not involve the pegging of any relative price. Domestic currency notes (and checking account balances) are denominated in and redeemable for gold, not priced in gold. They don’t have a price in gold any more than checking account balances in our current system, denominated in fiat dollars, have a price in fiat dollars. Presumably Eichengreen does not find it curious or objectionable that his bank maintains a fixed dollar-for-dollar redemption rate, cash for checking balances, at his ATM.
Remarkably, as White goes on to show, the rest of Eichengreen's statement proves that, besides not having understood the meaning of gold's "fixed" dollar price, Eichengreen has an uncertain grasp of the rudimentary economics of gold production:
As to what a believer in the free market would argue, surely Eichengreen understands that if there is an increase in the demand for gold under a gold standard, whatever the reason, then the relative price of gold (the purchasing power per unit of gold over other goods and services) will in fact rise, that this rise will in fact give the gold-mining industry an incentive to produce more, and that the increase in gold output will in fact eventually bring the relative price back down.
I've said more than once that, the more vehement an economist's criticisms of the gold standard, the more likely he or she knows little about it. Of course Eichengreen knows far more about the gold standard than most economists, and is far from being its harshest critic, so he'd undoubtedly be an outlier in the simple regression, y = ? + ?(x) (where y is vehemence of criticism of the gold standard and x is ignorance of the subject). Nevertheless, his statement shows that even the understanding of one of the gold standard's most well-known critics leaves much to be desired.
Although, at bottom, the gold standard isn't a matter of government "fixing" gold's price in terms of paper money, it is true that governments' creation of monopoly banks of issue, and the consequent tendency for such monopolies to be treated as government- or quasi-government authorities, ultimately led to their being granted sovereign immunity from the legal consequences to which ordinary, private intermediaries are usually subject when they dishonor their promises. Because a modern central bank can renege on its promises with impunity, a gold standard administered by such a bank more closely resembles a price-fixing scheme than one administered by a commercial bank. Still, economists should be careful to distinguish the special features of a traditional gold standard from those of central-bank administered fixed exchange rate schemes.
2. A gold standard isn't particularly expensive. In fact, fiat money tends to cost more.
Back in the early 1950s, and again in 1960, Milton Friedman estimated that the gold required for the U.S. to have a "real" gold standard would have cost 2.5% of its annual GNP. But that's because Friedman's idea of a "real" gold standard was one in which gold coins alone served as money, with no fractionally-backed bank-supplied substitutes. As Larry White shows in his Theory of Monetary Institutions (p. 47) allowing for 2% specie reserves–which is more than what some former gold-based free-banking systems needed–the resource cost of a gold standard taking advantage of fractionally-backed banknotes and deposits would be about one-fiftieth of the number Friedman came up with. That's a helluva bargain for a gold "seal of approval" that could mean having access to international capital at substantially reduced rates, according to research by Mike Bordo and Hugh Rockoff.
Friedman himself eventually changed his mind about the economies to be achieved by employing fiat money:
Monetary economists have generally treated irredeemable paper money as involving negligible real resource costs compared with a commodity currency. To judge from recent experience, that view is clearly false as a result of the decline in long-term price predictability.
I took it for granted that the real resource cost of producing irredeemable paper money was negligible, consisting only of the cost of paper and printing. Experience under a universal irredeemable paper money standard makes it crystal clear that such an assumption, while it may be correct with respect to the direct cost to the government of issuing fiat outside money, is false for society as a whole and is likely to remain so unless and until a monetary structure emerges under an irredeemable paper standard that provides a high degree of long-run price level predictability.*
Unfortunately, neither White's criticism of Friedman's early calculations nor Friedman's own about-face have kept gold standard critics from repeating the old canard that a fiat standard is more economical than a gold standard. Ross Starr, for example, observes in his 2013 book on money that "The use of paper or fiduciary money instead of commodity money is resource saving, allowing commodity inventories to be liquidated." Although he understands that fractionally-backed banknotes and deposits may go some way toward economizing on commodity-money reserves, Starr (quoting Adam Smith, but failing to look up historic Scottish bank reserve ratios) insists nonetheless that "a significant quantity of the commodity backing must be maintained in inventory to successfully back the currency," and then proceeds to build a case for fiat money from this unwarranted assertion:
The next step in economizing on the capital tied up in backing the currency is to use a fiat money. Substituting a government decree for commodity backing frees up a significant fraction of the economy's capital stock for productive use. No longer must the economy hold gold, silver, or other commodities in inventory to back the currency. No longer must additional labor and capital be used to extract them from the earth. Those resources are freed up and a simple virtually costless government decree is substituted for them.
Tempting as it is to respond to such hooey simply by noting that the vaults of the world's official fiat-money managing institutions presently contain rather more than zero ounces of gold–31,957.5 metric tons more, to be precise–that response only hints at the fundamental flaw in Starr's reasoning, which is his treatment of fiat money as a culmination, or limiting case, of the resource savings to be had by resort to fractional commodity-money reserves. That treatment overlooks a crucial difference between fiat money and readily redeemable banknotes and deposits, for whereas redeemable banknotes and deposits are generally understood by their users to be close, if not perfect, substitutes for commodity money, fiat money, the purchasing power of which is unhinged from that of any former money commodity, is nothing of the sort. On the contrary: its tendency to depreciate relative to real commodities, and to gold in particular, is notorious. Consequently holders of fiat money have reason to hold "commodity inventories" as a hedge against the risk that fiat money will depreciate.
If the hedge demand for a former money commodity is large enough, resort to fiat money doesn't save any resources at all. Indeed, as Roger Garrison notes, "a paper standard administered by an irresponsible monetary authority may drive the monetary value of gold so high that more resource costs are incurred under the paper standard than would have been incurred under a gold standard." A glance at the history of gold's real price suffices to show that this is precisely what has happened:
From "After the Gold Rush," The Economist, July 6, 2010.
Taking the long-run average price of gold, in 2010 prices, to be somewhere around $470, prior to the closing of the gold window in 1971, that price was exceeded on only three occasions, and never dramatically: around the time of the California gold rush, around the turn of the 20th century, and for several years following FDR's devaluation of the dollar. Since 1971, in contrast, it has exceeded that average, and exceeded it substantially, more often than not. Here is Roger Garrison again:
There is a certain asymmetry in the cost comparison that turns the resource-cost argument against paper standards. When an irresponsible monetary authority begins to overissue paper money, market participants begin to hoard gold, which stimulates the gold-mining industry and drives up the resource costs. But when new discoveries of gold are made, market participants do not begin to hoard paper or to set up printing presses for the issue of unbacked currency. Gold is a good substitute for an officially instituted paper money, but paper is not a good substitute for an officially recognized metallic money. Because of this asymmetry, the resource costs incurred by the State in its efforts to impose a paper standard on the economy and manage the supply of paper money could be avoided if the State would simply recognize gold as money. These costs, then, can be counted against the paper standard.
So if it's avoidance of gold resource costs that's desired, including avoidance of the very real environmental consequences of gold mining, a gold standard looks like the right way to go.
3. Gold supply "shocks" weren't particularly shocking
Of the many misinformed criticisms of the gold standard, none seems to me more wrong-headed than the complaint that the gold standard isn't even a reliable guarantee against serious inflation. The RationalWiki entry on the gold standard is as good an example of this as any:
Even gold can suffer problems with inflation. Gold rushes such as the California Gold Rush expanded the money supply and, when not matched with a simultaneous increase in economic output, caused inflation. The "Price Revolution" of the 16th century demonstrates a case of dramatic long-run inflation. During this period, western European nations used a bimetallic standard (gold and silver). The Price Revolution was the result of a huge influx of silver from central European mines starting during the late 15th century combined with a flood of new bullion from the Spanish treasure fleets and the demographic shift brought about by the Black Plague (i.e., depopulation).
Admittedly the anonymous authors of this article may not be professional economists; but take my word for it that the same arguments might be heard from any number of such professionals. Brad DeLong, for example, in a list of "Talking Points on the Likely Consequences of re-establishment of the Gold Standard" (my emphasis), includes observation that "significant advances in gold mining technology could provide a significant boost to the average rate of inflation over decades."
Like I said, the gold standard is hardly free of defects. But being vulnerable to bouts of serious inflation isn't one of them. Consider the "dramatic" 16th century inflation referred to in the RationalWiki entry. Had that entries' authors referred to plain-old Wikipedia's entry on "Price revolution," they would have read there that
Prices rose on average roughly sixfold over 150 years. This level of inflation amounts to 1-1.5% per year, a relatively low inflation rate for the 20th century standards, but rather high given the monetary policy in place in the 16th century.
I have no idea what the authors mean by their second statement, as there was certainly no such thing as "monetary policy" at the time, and they offer no further explanation or citation. So far as I can tell, they mean nothing more than that prices hadn't been rising as fast before the price revolution than they did during it, which though trivially true says nothing about how "high" the inflation was by any standards, including those of the 16th century. In any case it was not only "not high" but dangerously low according to standards set, rightly or wrongly, by today's monetary experts. Finally, though the point is often overlooked, the European Price Revolution actually began well in advance of major American specie shipments, which means that, far from being attributable to such shipments alone, it was a result of several causes, including coin debasements.
What about the California Gold rush, which is also supposed to show how changes in the supply of gold will lead to inflation "when not matched with a simultaneous increase in economic output"? To judge from available statistics, it appears that producers of other goods were almost a match for all those indefatigable forty-niners: as Larry White reports, although the U.S. GDP deflator did rise a bit in the years following the gold rush,
The magnitude was surprisingly small. Even over the most inflationary interval, the [GDP deflator] rose from 5.71 in 1849 (year 2000 = 100) to 6.42 in 1857, an increase of 12.4 percent spread over eight years. The compound annual price inflation rate over those eight years was slightly less than 1.5 percent.
Once again, the inflation rate was such as would have had today's central banks rushing to expand their balance sheets.
Nor do the CPI estimates tell a different story. See if you can spot the gold-rush-induced inflation in this chart:
*Graphing Various Historical Economic Series," MeasuringWorth, 2015.
Despite popular beliefs, the California gold rush was actually not the biggest 19th-century gold supply innovation, at least to judge from its bearing on the course of prices. That honor belongs instead to the Witwatersrand gold rush of 1886, the effects of which later combined with those of the Klondike rush of 1896 to end a long interval of gradual deflation (discussed further below) and begin one of gradual inflation.
Brad DeLong is thus quite right to refer to the South African discoveries in observing that even a gold standard poses some risk of inflation:
For example, the discovery and exploitation of large gold reserves near present-day Johannesburg at the end of the nineteenth century was responsible for a four percentage point per year shift in the worldwide rate of inflation–from a deflation of roughly two percent per year before 1896 to an inflation of roughly two percent per year after 1896.
Allowing for the general inaccuracy of 19th-century CPI estimates, DeLong's statistics are correct. But that "For example" is quite misleading. Like I said: this is the most serious instance of an inflationary gold "supply shock" of which I'm aware. Yet even it served mainly to put an end to a deflationary trend, without ever giving rise to an inflation rate substantially above what central banks today consider (rightly or wrongly) optimal. As for the four percentage point change in the rate of inflation "per year," presumably meaning "in one year," it's hardly remarkable: changes as big or larger are common throughout the 19th century, partly owing to the notoriously limited data on which CPI estimates for that era are based. Even so, they can't be compared to the much larger jumps in inflation with which the history of fiat monies is riddled, even setting hyperinflations aside. Keep this in mind as you reflect upon Brad's conclusion that
Under the gold standard, the average rate of inflation or deflation over decades ceases to be under the control of the government or the central bank, and becomes the result of the balance between growing world production and the pace of gold mining.
Alas, keeping matters in perspective–that is, comparing the gold standard's actual inflation record, not to that which might be achieved by means of an ideally-managed fiat money, but to the actual inflation record of historic fiat-money systems, is something many critics of the gold standard seem reluctant to do, perhaps for good reason.
While we're on the subject, nothing could be more absurd than attempts to demonstrate the unsuitability of gold as a monetary medium by referring to gold's unstable real value in the years since the gold standard was abandoned. Yet this is a favorite debating point among the gold standard's less thoughtful critics, including Paul Krugman:
There is a remarkably widespread view that at least gold has had stable purchasing power. But nothing could be further from the truth. Here’s the real price of gold — the price deflated by the consumer price index — since 1968:

Compare Professor Krugman's chart to the one in the previous section. Then ask yourself (1) Has gold's price behaved differently since 1968 than it did before?; and (2) Why might this be so? If your answers are "Yes" and "Because gold and paper dollars are no longer close substitutes, and gold is now widely used to hedge against depreciation of the dollar and other fiat currencies," you understand the gold standard better than Krugman does. But don't get a swelled head over it, because it really isn't saying much: Krugman is one of the observations that sits squarely on the upper right end of y = ? + ?(x).
4. The deflation that the gold standard permitted wasn't such a bad thing.
The complaint that a gold standard doesn't rule out inflation is but a footnote to the more frequent complaint that it suffers, in Brad DeLong's words, from "a deflationary bias which makes it likely that a gold standard regime will see a higher average unemployment rate than an alternative managed regime." According to Ben Bernanke "There is…a high correlation in the data between deflation (falling prices) and depression (falling output)."
That the gold standard tended to be deflationary–or that it tended to be so for sometimes long intervals between gold discoveries–can't be denied. But what certainly can be denied is that these periods of slow deflation went hand-in-hand with high unemployment. Having thoroughly reviewed the empirical record, Andrew Atkeson and Patrick Kehoe conclude as follows:
Deflation and depression do seem to have been linked during the1930s. But in the rest of the data for 17 countries and more than 100 years, there is virtually no evidence of such a link.
More recently Claudio Borio and several of his BIS colleagues reported similar findings. How then (you may wonder), did Bernanke arrive at his opposite conclusion? Easy: he looked only at data for the 1930s–the worst deflationary crisis ever–ignoring all the rest.
Why is deflation sometimes depressing, and sometimes not? The simple answer is that there is more than one sort of deflation. There's the sort that's caused by a collapse of spending, like the "Great Contraction" of the 1930s, and then there's the sort that's driven by greater output of real goods and services–that is, by outward shifts in aggregate supply rather than inward shifts in aggregate demand. Most of the deflation that occurred during the classical gold standard era (1873-1914) was of the latter, "good" sort.
Although I've been banging the drum for good deflation since the 1990s, and Mike Bordo and others have made the specific point that the gold standard mostly involved deflation of the good rather than bad sort, too many economists, and way too many of those who have got more than their fare share of the public's attention, continue to ignore the very possibility of supply-driven deflation.
Of the many misunderstandings propagated by economists' tendency to assume that deflation and depression must go hand-in-hand, none has been more pernicious than the widespread belief that throughout the U.S. and Europe, the entire period from 1873 to 1896 constituted one "Great" or "Long Depression ." That belief is now largely discredited, except perhaps among some newspaper pundits and die-hard Marxists, thanks to the efforts of G.B. Saul and others. The myth of a somewhat shorter "Long Depression," lasting from 1873-1879, persists, however, though economic historians have begun chipping away at that one as well.
5. It wasn't to blame for 19th-century American financial crises.
Speaking of 1873, after claiming that a gold standard is undesirable because it makes deflation (and therefore, according to his reasoning, depression) more likely, Krugman observes:
The gold bugs will no doubt reply that under a gold standard big bubbles couldn’t happen, and therefore there wouldn’t be major financial crises. And it’s true: under the gold standard America had no major financial panics other than in 1873, 1884, 1890, 1893, 1907, 1930, 1931, 1932, and 1933. Oh, wait.
Let me see if I understand this. If financial crises happen under base-money regime X, then that regime must be the cause of the crises, and is therefore best avoided. So if crises happen under a fiat money regime, I guess we'd better stay away from fiat money. Oh, wait.
You get the point: while the nature of an economy's monetary standard may have some bearing on the frequency of its financial crises, it hardly follows that that frequency depends mainly on its monetary standard rather than on other factors, like the structure, industrial and regulatory, of the financial system.
That U.S. financial crises during the gold standard era had more to do with U.S. financial regulations than with the workings of the gold standard itself is recognized by all competent financial historians. The lack of branch banking made U.S. banks uniquely vulnerable to shocks, while Civil-War rules linked the supply of banknotes to the extent of the Federal government's indebtedness., instead of allowing that supply to adjust with seasonal and cyclical needs. But there's no need to delve into the precise ways in which such misguided legal restrictions to the umerous crises to which Krugman refers. It should suffice to point out that Canada, which employed the very same gold dollar, depended heavily on exports to the U.S., and (owing to its much smaller size) was far less diversified, endured no banking crises at all, and very few bank failures, between 1870 and 1939.
6. 0n the whole, the classical gold standard worked remarkably well (while it lasted).
Since Keynes's reference to gold as a "barbarous relic" is so often quoted by the gold standard's critics, it seems only fair to repeat what Keynes had to say, a few years before, not about gold per se, itself, but about the gold-standard era:
What an extraordinary episode in the economic progress of man that age was which came to an end in August, 1914! The greater part of the population, it is true, worked hard and lived at a low standard of comfort, yet were, to all appearances, reasonably contented with this lot. But escape was possible, for any man of capacity or character at all exceeding the average, into the middle and upper classes, for whom life offered, at a low cost and with the least trouble, conveniences, comforts, and amenities beyond the compass of the richest and most powerful monarchs of other ages. The inhabitant of London could order by telephone, sipping his morning tea in bed, the various products of the whole earth, in such quantity as he might see fit, and reasonably expect their early delivery upon his doorstep; he could at the same moment and by the same means adventure his wealth in the natural resources and new enterprises of any quarter of the world, and share, without exertion or even trouble, in their prospective fruits and advantages… He could secure forthwith, if he wished it, cheap and comfortable means of transit to any country or climate without passport or other formality, could despatch his servant to the neighboring office of a bank or such supply of the precious metals as might seem convenient, and could then proceed abroad to foreign quarters, without knowledge of their religion, language, or customs, bearing coined wealth upon his person, and would consider himself greatly aggrieved and much surprised at the least interference. But, most important of all, he regarded this state of affairs as normal, certain, and permanent, except in the direction of further improvement, and any deviation from it as aberrant, scandalous, and avoidable.
It would, of course, be foolish to suggest that the gold standard was entirely or even largely responsible for this Arcadia, such as it was. But it certainly did contribute both to the general abundance of goods of all sorts, to the ease with which goods and capital flowed from nation to nation, and, especially, to the sense of a state of affairs that was "normal, certain, and permanent."
The gold standard achieved these things mainly by securing a degree of price-level and exchange rate stability and predictability that has never been matched since. According to Finn Kydland and Mark Wynne:
The contrast between the price stability that prevailed in most countries under the gold standard and the instability under fiat standards is striking. This reflects the fact that under commodity standards (such as the gold standard), increases in the price level (which were frequently associated with wars) tended to be reversed, resulting in a price level that was stable over long periods. No such tendency is apparent under the fiat standards that most countries have followed since the breakdown of the gold standard between World War I and World War II.
The high degree of price level predictability, together with the system of fixed exchange rates that was incidental to the gold standard's widespread adoption, substantially reduced the riskiness of both production and international trade, while the commitment to maintain the standard resulted, as I noted, in considerably lower international borrowing costs.
Those pundits who find it easy to say "good riddance" to the gold standard, in either its classical or its decadent variants, need to ask themselves what all the fuss over monetary "reconstruction" was about, following each of the world wars, if not achieving a simulacrum at least of the stability that the classical gold standard achieved. True, those efforts all failed. But that hardly means that the ends sought weren't very worthwhile ones, or that those who sought them were "lulled by the myth of a golden age." Though they may have entertained wrong beliefs concerning how the old system worked, they weren't wrong in believing that it did work, somehow.
7. It didn't have to be managed by central bankers.
But how? The once common view that the classical gold standard worked well only thanks to its having been carefully managed by the Bank of England and other central banks, as well as the related view that its success depended on international agreements and other forms of central bank cooperation, is now, thankfully, no longer subscribed to even by the gold-standard's more well-informed critics. Instead, as Julio Gallarotti observes, the outcomes of that standard "were primarily the resultants [sic] of private transactions in the markets for goods and money" rather than of any sort of government or central-bank management or intervention. But the now accepted view doesn't quite go far enough. In fact, central banks played no essential part at all in achieving the gold standard's most desirable outcomes, which could have been achieved as well, or better, by systems of competing banks-of-issue, and which were in fact achieved by means of such systems in many participating nations, including the United States, Switzerland (until 1901), and Canada. And although it is common for central banking advocates to portray such banks as sources of emergency liquidity to private banks, during the classical gold standard era liquidity assistance often flowed the other way, and did so notwithstanding monopoly privileges that gave central banks so many advantages over their commercial counterparts. As Gallarotti observes (p. 81),
That central banks sometimes went to other central banks instead of the private market suggests nothing more than the fact that the rates offered by central banks were better, or too great an amount of liquidity may have been needed to be covered in the private market.
8. In fact, central banking tends to throw a wrench in the works.
To the extent that central banks did exercise any special influence on gold-standard era monetary adjustments, that influence, instead of helping, made things worse. Because an expanding central bank isn't subject to the internal constraint of reserve losses stemming from adverse interbank clearings, it can create an external imbalance that must eventually trigger a disruptive drain of specie reserves. During liquidity crunches, on the other hand, central banks were more likely than commercial banks to become, in Jacob Viner's words, "engaged in competitive increases of their discount rates and in raid's on each other's reserves." Finally, central banks could and did muck-up the gold standard works by sterilizing gold inflows and outflows, violating the "rules of the gold standard game" that called for loosening in response to gold receipts and tightening in response to gold losses.
Competing banks of issue could be expected to play by these "rules," because doing so was consistent with profit maximization. The semi-public status of central banks, on the other hand, confronted them with a sort of dual mandate, in which profits had to be weighed against other, "public" responsibilities (ibid., pp. 117ff.). Of the latter, the most pernicious was the perceived obligation to occasionally set aside the requirements for preserving international monetary equilibrium ("external balance") for the sake of preserving or achieving preferred domestic monetary conditions ("internal balance"). As Barry Ickes observes, playing by the gold standards rules could be "very unpopular, potentially, as it involves sacrificing internal balance for external balance." Commercial bankers couldn't care less. Central bankers, on the other hand, had to care when to not care was to risk losing some of their privileges.
Today, of course, achieving internal balance is generally considered the sine qua non of sound central bank practice; and even where fixed or at least stable exchange rates are considered desirable it is taken for granted that external balance ought occasionally to be sacrificed for the sake of preserving domestic monetary stability. But to apply such thinking to the classical gold standard, and thereby conclude that in that context a similar sacrifice of external for internal stability represented a turn toward more enlightened monetary policy, is to badly misunderstand the nature of that arrangement, which was not just a fixed exchange rate arrangement but something more akin to an multinational monetary union or currency area. Within such an area, the fact that one central bank gains reserves while another looses them was itself no more significant, and no more a justification for violating the "rules of the game," than the fact that a commercial bank somewhere gained reserves at the expense of another.
The presence of central banks did, however, tend to aggravate the disturbing effects of changes in international trade patterns compared to the case of international free banking. Central-bank sterilization of gold flows could, on the other hand, lead to more severe longer-run adjustments, as it was to do, to a far more dramatic extent, in the interwar period.
9. "The "Gold Standard" wasn't to blame for the Great Depression.
I know I'm about to skate onto thin ice, so let me be more precise. To say that "The gold standard caused the Great Depression " (or words to that effect, like "the gold standard was itself the principal threat to financial stability and economic prosperity between the wars”), is at best extremely misleading. The more accurate claim is that the Great Depression was triggered by the collapse of the jury-rigged version of the gold standard cobbled together after World War I, which was really a hodge-podge of genuine, gold-exchange, and gold-bullion versions of the gold standard, the last two of which were supposed to "economize" on gold. Call it "gold standard light."
Admittedly there is one sense in which the real gold standard can be said to have contributed to the disastrous shenanigans of the 1920s, and hence to the depression that followed. It contributed by failing to survive the outbreak of World War I. The prewar gold standard thus played the part of Humpty Dumpty to the King's and Queen's men who were to piece the still-more-fragile postwar arrangement together. Yet even this is being a bit unfair to gold, for the fragility of the gold standard on the eve of World War I was itself largely due to the fact that, in most of the belligerent nations, it had come to be administered by central banks that were all-too easily dragooned by their sponsoring governments into serving as instruments of wartime inflationary finance.
Kydland and Wynne offer the case of the Bank of Sweden as illustrating the practical impossibility of preserving a gold standard in the face of a major shock:
During the period in which Sweden adhered to the gold standard (1873–1914), the Swedish constitution guaranteed the convertibility into gold of banknotes issued by the Bank of Sweden. Furthermore, laws pertaining to the gold standard could only be changed by two identical decisions of the Swedish Parliament, with an election in between. Nevertheless, when World War I broke out, the Bank of Sweden unilaterally decided to make its notes inconvertible. The constitutionality of this step was never challenged, thus ending the gold standard era in Sweden.
The episode seems rather less surprising, however, when one considers that "the Bank of Sweden," which secured a monopoly of Swedish paper currency in 1901, is more accurately known as the Sveriges Riksbank, or "Bank of the Swedish Parliament."
If the world crisis of the 1930s was triggered by the failure, not of the classical gold standard, but of a hybrid arrangement, can it not be said that the U.S. , which was among the few nations that retained a full-fledged gold standard, was fated by that decision to suffer a particularly severe downturn? According to Brad DeLong,
Commitment to the gold standard prevented Federal Reserve action to expand the money supply in 1930 and 1931–and forced President Hoover into destructive attempts at budget-balancing in order to avoid a gold standard-generated run on the dollar.
It's true that Hoover tried to balance the Federal budget, and that his attempt to do so had all sorts of unfortunate consequences. But the gold standard, far from forcing his hand, had little to do with it. Hoover simply subscribed to the prevailing orthodoxy favoring a balanced budget. So, for that matter, did FDR, until events forced him too change his tune: during the 1932 presidential campaign the New-Dealer-to-be assailed his opponent both for running a deficit and for his government's excessive spending.
As for the gold standard's having prevented the Fed from expanding the money supply (or, more precisely, from expanding the monetary base to keep the broader money supply from shrinking), nothing could be further from the truth. Dick Timberlake sets the record straight:
By August 1931, Fed gold had reached $3.5 billion (from $3.1 billion in 1929), an amount that was 81 percent of outstanding Fed monetary obligations and more than double the reserves required by the Federal Reserve Act. Even in March 1933 at the nadir of the monetary contraction, Federal Reserve Banks had more than $1 billion of excess gold reserves.
Moreover,
Whether Fed Banks had excess gold reserves or not, all of the Fed Banks’ gold holdings were expendable in a crisis. The Federal Reserve Board had statutory authority to suspend all gold reserve requirements for Fed Banks for an indefinite period.
Nor, according to a statistical study by Chang-Tai Hsieh and Christina Romer, did the Fed have reason to fear that by allowing its reserves to decline it would have raised fears of a devaluation. On the contrary: by taking steps to avoid a monetary contraction, the Fed would have helped to allay fears of a devaluation, while, in Timberlake's words, initiating a "spending dynamic" that would have helped to restore "all the monetary vitals both in the United States and the rest of the world."
10. It didn't manage money according to any economists' theoretical ideal. But neither has any fiat-money-issuing central bank.
Just as "paper" always beats "rock" in the rock-paper-scissors game, so does managed paper money always beat gold in the rock-paper monetary standards game economists like to play. But that's only because under a fiat standard any pattern of money supply adjustment is possible, including a "perfect" pattern, where "perfect" means perfect according to the player's own understanding. Even under the best of circumstances a gold standard is, on the other hand, unlikely to achieve any economist's ideal of monetary perfection. Hence, paper beats rock. More precisely, paper beats rock, on paper.
And what does this impeccable logic tell us concerning the relative merits of gold versus paper money in practice? Diddly-squat. I mean it. To say something about the relative merits of paper and gold, you have to have theories–good ol' fashioned, rational optimizing firm and agent theories–of how the supply of basic money adjusts under various conditions in the two sorts of monetary regimes. We have a pretty good theory of the gold standard, meaning one that meshes well with how that standard actually worked. The theory of fiat money is, in contrast, a joke, in part because it's much harder to pin-down central bankers' objectives (or any objectives apart from profit-maximization, which is at play in the case of gold), but mostly thanks to economists' tendency to simply assume that central bankers behave like omniscient angels who, among other things, understand the finer points of DSGE models. That may do for a graduate class, or a paper in the AER. But good economics it most certainly isn't.
* * *
I close with a few words concerning why it matters that we get the facts straight about the gold standard. It isn't simply a matter of winning people over to that standard. Though I'm perhaps as ready as anyone to shed a tear for the old gold standard, I doubt that we can ever again create anything like it. But getting a proper grip on gold serves, not just to make the gold standard seem less unattractive than it is often portrayed to be, but to remove some of the sheen that has been applied to modern fiat-money arrangements using the same brush by which gold has been blackened. The point, in other words, isn't to make a pitch for gold. It's to make a pitch for something –anything– that's better than our present, lousy money.
* * *
*I'm astonished to find that Friedman's important and very interesting 1986 article, despite appearing in one of the leading academic journals, has to date been cited only 64 times (Google Scholar). Of these, nine are in works by myself, Kevin Dowd, and Lawrence White! I only wish I could attribute this neglect to monetary economists' pro-fiat money bias. More likely it reflects their general lack of interest in alternative monetary arrangements.
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11. There is no other standard
The author misrepresents the current fiat currencies as money. One of the main properties is that it must be a store of value!
Your FRNs are def. not a store of value. They have lost about 97% of their value since the Federal Reserve and IRS were created in 1913.
The author also didn't mention the concept of competing currencies. Don't people understand and desire free markets? What makes people think that we need elite men to set, plan and fix everything?
END THE FED!!!!
He should take #5 a step further. Not only were the shocks of the 19th century not caused by the gold standard, they were caused by the expansion and contraction of the money supply through fractional reserve banking, aka debt based money. What the Krugmanites advocate.
Whoa, this is long.
Bookmarked for later reading until ZH deletes everyone's comment history again.
Lesson #1: the gold standard beats the bitcoin standard.
Bitcoin Identity Crisis:
http://www.planbeconomics.com/2015/08/bitcoin-identity-crisis.html
The "gold standard" is a load of fucking dog shit. Notice the word S-T-A-N-D-A-R-D? Whose "standard"? Oh right, the government! Ie, bonafide liars that have nothing to do with GOLD whatsoever! If you like GOLD, then use GOLD the way GOLD was meant to be used... with no "standards" involved. Pieces of gold that say "1 GOLD OUNCE" on it with no fucking government bullshit!
The 'Gold Standard', where you only print as much paper money as you have gold 'backing' is invariably a fraud.
'Gold Money' where gold (or silver) and only the metal is money is THE correct standard. Big difference.
That is what teh we has been saying here for almost 5 years now! Fact is tho, these people aren't into GOLD they are into government bullshit, ie "STANDARDS". If you are really a fan of GOLD you do not care, do not want government to put their stupid marks all over it. Nor do you care if it is official money or not!
Gold is going nowhere. Deflation is kicking its ass. The dolla is king. Just deal with it.
What if we had a world currency thay had a value pegged to the worlds population? I mean, we want a currency that's pegged to "something" that can't just be printed up, right? If you know you have 6 trillion people on this rock and say, "the dollar is worth this: (fill in the blank)"... wouldn't it be difficult if not impossible to artificially inflate or deflate said currency? also, wouldn't this sort of encourage a responsible population approach? I mean, you literally could incentivize a lower population. Peg the currency to a quantifiable commodity (people) and enjoy a stable currency. No?
In the final analysis, the only benefit to the gold standard that needs to be recognized is the powerful fact that it forces fiscal discipline upon the government and the Fed. Without this discipline, our currency becomes a purely political instrument in the hands of people who couldn't run a lemonade stand.
"there is no other standard"
I'd like to make a pitch for "MySperm™" as a suitable replacement
Lord knows you turn on those printing presses multiple times a day.
While I am a gold bug the argument that a gold standard is the answer is not backed by history. Linking money supply to gold supply simply creates a straight jacket where increases in productivity do not get reflected in corresponding increases in money supply. What is needed is a money supply that can easily be expanded to reflect increases in productivity in much the same way that we need a water supply that can cope with increases in demand for water. Money is a surrogate for demand and needs to be flexible. It is incompetence and corruption that causes fiat money to collapse and this is why periodic reversions to a gold standard occur, but long term a gold standard is far too restrictive to be a serious option.
Having fractional reserve gold vs. fractional reserve debt money isn't going to resolve our problem with out of control banksters. Besides, as long as banksters can create money out of nothing, backing it with gold is irrelevant.
Which is why I think we need to go to straight fiat. Get rid of the fractional reserve banking and the debt attachment and we can print away all the debt with little inflation and put thiswhole dismal era of private banker money control to an end.
There is only one way to obviate the evil of monopoly, and it is competition.
Facilitating contraction of the money supply in addition to expansion is also desireable, but as long as there is monopoly control of the money supply the masses of serfs are working their lords' lands irrespective of whether they have the illusion of freedom through subinfeudation or section 8 slavery to da man on his demesne.
http://www.zerohedge.com/news/2014-07-26/has-fractional-reserve-banking-...
Exactly. Gold immutable, tangible, heavy, physical.
Fiat is mutable, intangible, lighter than helium, ethereal and nebulous.
MySperm™: Plentiful, uh, intangible... heavy, yes, "ethereal", desirable, fungible and fun
...or "HilliarysEggs": rare (the stuff of Legend of Yore...rarer than an incriminating email), intangible, desirable (to her, maybe), fungible but definitely(!!) not fun
Dense read. Withholding comment until I'm sober.
I don't think the bansters understand what finite means.
Banksters understand the environment that has been provided to them:
Until those things change, nothing will change
12. The real wage of the average American worker reached its peak the day Nixon closed the gold window. It's been going down ever sense.
Prices tripled in the 70s and early 80s.
Prices doubled again between 1985 and 2000.
Prices doubled again between 2000 and now.
Healthcare has gone up 10x since the mid-90s.
tl;dr;tmv*
* too much vodka
By definition, "inflation" is the creation of additional currency. Gold cannot itself be printed out of thin air, therefore it will never suffer inflation.
The gold standard, however, is susceptible to manipulation and destruction as we already know, because that's how the little bastards got rid of it the first time around.
Because inflation is an increase in the supply of currency, the changes in price up and down in a non-fiat system cannot then be described as inflation or deflation. They would properly be considered reflective of actual market information that is being communicated through price changes.
The idea that price changes are by themselves inflation or deflation is Neo Keynsian propaganda.
In fact most of the misunderstandings on this list are not products of ignorance, but rather of decades of propaganda coming from the Statists and their economic branch. To correct these misconceptions is to attack the propaganda of the State.
"Inflation" = price inflation. Increase in currency supply = monetary inflation. Monetary inflation drives price inflation. But, supply and demand (rational and irrational) also affect price inflation/deflation.
Gold cannot be printed, but it can be dug out of the ground. The supply is always increasing at various rates.
All you have to realise is that the word gold is followed by the word standard. Fiat never has and never will be associated with the word standard.
With a 5000 year pedigree gold can and has withstood every financial and political calamity. What else has?
Gold is good. I have a feeling there about 3 times as much of it as known.
Big deal. 3oz per person on Earth instead of 1oz. Still nowhere near enough to back any MOE.
Heil Satoshi!
You worship air?
Following the discovery in the 16th century of large deposits of silver at the Cerro Rico in Potosi, Bolivia, an international silver standard came into existence in conjunction with the Spanish pieces of eight. These silver dollar coins played the role of an international trading currency for nearly four hundred years.
https://en.wikipedia.org/wiki/Silver_standard
Imagine that. A stable monetary system for nearly 400 years.
However, in 1158, King Henry II introduced Tealby penny. English currency was almost exclusively silver until 1344, when the gold noble was put into circulation. However, silver remained the legal basis for sterling until 1816.
So that makes more than 600 years on a silver and gold standard. Which fiat reserve currency even comes close?
Between the silver drachma of Athens and the gold solidus of Byzantium, you can add another 1000 years of gold and silver currencies.
Mentioned in Genesis and Revelations as good source of wealth too
Or you could just say that gold mining & production of gold and gold prices are far more logically driven than political cost management.
Again, how much bread could one measly ounce of gold buy one hundred years ago vs a greenback?
NOW, today how much?
I rest my case ;-)
Here's your answer exactly:
https://www.youtube.com/watch?v=Jt15F21jpN8
.1 grams for a loaf of bread
Correct sir.
Irrelevant historical trivia because we live in a fiat currency world and it is NOT going to transition to ANY kind of gold-backed currency.
Fuck the FED
Gold is money. Money is power.
I'm seriously trying to understand why TPTB just don't reprice it @ $10,000USD.
Because then people like me would have MOAR purchasing power and run for state senate with financial freedom. I can fund myself now but it would be easier if my metals took off. That might fuck up their plans. They know who I am and they know I am libertarian. I am waiting for them to kill me.
They are the ones standing on the edge of a cliff now.
Gold? But I thought it was dead money? No? I whooped the digit traders asses today on every play today. No one really knows what I am doing. Today I won.
If you use the term Gold Standard.. to simply mean that all currencies, are measured against each other, and Also measured against an OZ of Gold.. it would be a form of stabilization, Gold doesn't have to be used for purchases all the time, but all currencies have to be traded for gold, as the measure of exchange between the different countries..
it's role of showing how much Fiat is really worth at any time.. is what Scares the Governments
If anyone bothered to stop and think about the sheer scale of the economy and it's function, people would stop the same second with the PM horseshit. It doesn't make things better. It makes things more broken for a couple of reasons.
1) There simply isn't enough of it, ever.
2) People fuck with the price action on it and lie continuiously about supply. I know...surprising that they all lie about what they actually have and the fact unless making electronics, it's not worth much except to one tribe. They aren't worth much either and about to get lobbed out the door in a month because of their fucking around. They don't have keys, minerals, a 'throne' or an exit. Strongly suggest not being on that boat, pardon...rowboat.
3) See point one. Anyone really want to repeat the same bullshit of the past cycle? If you do, got news for you. Just no. I think everyone's got better things to do than fuck around with a half assed economic solution that certainly didn't work any better in the past, or today, or the future. Stop repeating the same mistakes and screwing around, no fucks are given how many shiny rocks their are. Besides, we're all a little past that point now aren't we as the clock has been long past midnight for a while? Just let it go. Move on. There are enough issues left over from the previous manager to fix and certainly never enough time in the day. Prioritize where you put your energy.
4) It is a worthless relic, technology moves the milestone on how a civilzation operates. Today lots of new technologies that are already on the street that are going to replace PM's in electronics. Only thing the heavy metal helps with right now is weighing a line with a fish hook on it. Don't be the fish.
The world could go on a gold standard if needed although I prefer freegold instead but:
World Population 1900 , 1.8B, total gold in existence - 24,000 mt or about .42oz per person
World population 2000 , 6.0B, total gold in existence - 165,000 mt or about .88oz per person
Most of the world was on a gold standard in 1900 but in 2000 there was over 2X as much gold per person with no gold standard.
Conclusion: With twice as much gold available per person there is no reason we could not use gold again as a standard, with silver also of course.
Gold isn't free. What do you mean by "freegold"?
http://fofoa.blogspot.com/2013/05/what-is-freegold.html
WHAT makes you think that everyone in the World should have the same amount of gold? So a brain surgeon shouldn't get paid more than a latrine digger? Check yer premises.
CPL
1) 170,000 tons priced right is more than enough gold.
2)Possession will solve the problem of lies. You have it when you need it or not. A man can claim to have a 9"cock. If he never takes it out of his pants...he may as well have it...no one will care.
3) see #1
4)Gold never had a 'use' ..other than as a wealth preservation asset. Most jewellry out side of Western wedding bands is really bought as a wealth asset.
Expand your thinking if you want to survive...though it doesn't matter to anyone but tou.
1) Given today's $/Toz of $1138/Toz, then yeah some folks are gonna be mighty angry, but if that $/Au ratio were to reflect reality, and NOT the manipulated $/AU we have right now, then someone with a few milligrams might be able to eat for a week! Your argument is WEAK, OLD MAN!
It is true there isn't enough gold.
That's why silver is money as well.
What you're really saying is:
People/the world needs a great leader to tell them what to do.
What you haven't and won't be able to answer:
How do we make sure we find a really good leader, not a psychopath posing as one.
We don't need destruction of capital,only destruction of the debt based system.We keep bypassing opportunities to change. Several years back we had JP Morgan under the crosshairs,and they wiggled out free.As I recall they had inherited a bunch of Bear Stearns silver shorts which exploded (just like the commodities doing are now,except upwards back then).Three years of investigation and they found nothing wrong.
Right......
The new gold standard will be Freegold. There is is no other way to preserve the financial and economic systems without it.
If they can't "rig" it, crooks aren't all that interested....
Using gold as a reserve is not a problem. The problem arises when countries fix the price of gold in their currencies and then print the currencies to excess by creating 'gold debt notes'. These notes then trade along side gold and reduce the demand for physical. Only when gold is free to rise and fall against all currencies will we see metal reach its true value.
When this next round of collapse is over (scheduled for the 11th of November I believe) folks will finally figure out how to use the stuff as a wealth asset and will never again trust paper gold ion any form. Some fingers must be serverely burned first I'm afraid.
lots of freegolders here tonight I see...
What is scheduled for November 11?
OK everyone I'm sure most if not all CB are registered with atleast one social media platform obviously to give lip service to being open to transparency and discussion.
So everyone write a post with a link to this article. They might get the hint people are seeing through their bllshit.
We will have it either by "conquest or consent."
The SDR was created by the IMF in 1969 to support the Bretton Woods fixed exchange rate system. A country participating in this system needed official reserves—government or central bank holdings of gold and widely accepted foreign currencies—that could be used to purchase the domestic currency in foreign exchange markets, as required to maintain its exchange rate. But the international supply of two key reserve assets—gold and the U.S. dollar—proved inadequate for supporting the expansion of world trade and financial development that was taking place. Therefore, the international community decided to create a new international reserve asset under the auspices of the IMF.
Only a few years after the creation of SDRs, the Bretton Woods system collapsed and the major currencies shifted to a floating exchange rate regime. In addition, the growth in international capital markets facilitated borrowing by creditworthy governments. Both of these developments lessened the need for SDRs. However, more recently, the 2009 SDR allocations totaling SDR 182.6 billion have played a critical role in providing liquidity to the global economic system and supplementing member countries’ official reserves amid the global financial crisis.
The SDR is neither a currency, nor a claim on the IMF. Rather, it is a potential claim on the freely usable currencies of IMF members. Holders of SDRs can obtain these currencies in exchange for their SDRs in two ways: first, through the arrangement of voluntary exchanges between members; and second, by the IMF designating members with strong external positions to purchase SDRs from members with weak external positions. In addition to its role as a supplementary reserve asset, the SDR serves as the unit of account of the IMF and some other international organizations.
Here is why gold prices are so low:
http://michaelekelley.com/2015/07/20/dear-fed-plz-raise-gold-price/
http://www.zerohedge.com/news/2015-07-09/are-big-banks-using-derivatives-suppress-bullion-prices/
Here are some more signs of a coming recession.
http://michaelekelley.com/2015/05/29/mergers-and-acquisitions-set-record...
http://michaelekelley.com/2015/02/20/fed-warns-of-two-bubbles/
http://michaelekelley.com/2015/02/24/would-you-pay-39-more-than-asked/
http://www.zerohedge.com/news/2015-07-27/when-will-we-ever-learn/
Here is how to prepare.
http://michaelekelley.com/2014/10/16/8-things-to-do-when-recession-happens/
Here is how to get your mind off this stuff.
http://michaelekelley.com/category/humor/
Good luck!
What is doubly odd about the deflation of the 1930's... is that the US stock of gold skyrocketed. Given money theory, shouldn't an increasing supply of gold lead to inflation? Milton Friedman said the FED kept it from adding to the money supply.
See Milton Friedman's video about what caused the depression. https://www.youtube.com/watch?v=RFmMm9NPj3U
I am one to believe the depression was caused by regulation, a view that is in the minority.
No matter what financial system you have, as long as it's administered by financial sociopaths, you're gonna get screwed.
+4,500,000,000,000!
Money is measurement,
backed up by murder.
Gold as money is the measurement of gold
backed by murder, and not really different!
The debt slavery systems have generated numbers which have become debt insanities. That could provoke death insanities. The only theoretically valid solutions would be to develop different death controls, to back up different debt controls. The current situation is globalized electronic monkey money frauds, backed by the threat of force from apes with atomic bombs. To expect that existing system to go back to using gold as money is RIDICULOUS.
It is nostalgic nonsense to expect it is possible to go return to using gold as money. Money backed by commodities, such as precious metals, had some relatively validity derived from the conservation of matter, as a natural law, which manifested as the "ring of truth" in money backed by gold and silver. However, if one looks at any of the history of money backed by metal, from ancient Greece, to early USA, there were death penalties in place to punish debasement of that money, and so, even then that form of money was actually backed by murder. (Moreover, the actual history of that original form of money is that it primarily developed as a way to pay soldiers, which even back that was reinforced by demanding payment of taxes using that form of money.)
Theoretically, what "we should do" is develop money based upon an energy standard. However, when one endeavours to do that one rediscovers how and why the current systems match the operations of the principles and methods of organized crime, and must necessarily do so! Ideally, human beings and civilizations would operate through better understanding of general energy systems, which could better integrate the human, industrial and natural ecologies. However, there are INTENSE PARADOXES that necessarily arise from better understanding of human beings and civilizations as already being general energy systems.
For instance, the general rule that systems follow their own path of least action, or least resistance, in human terms means that civilization follows the path of least morality. As well, systems are controlled by the most labile components, which in human terms are those who are best at backing up lies with violence. Nothing exists other than the dynamic equilibria between different systems of organized lies operating robberies. In that context, governments are the biggest forms of organized crime, controlled by the best organized gangs of criminals, who currently happen to primarily be the international banksters. Hence, the existing systems are based upon symbolic robberies, achieved through governments ENFORCING FRAUDS by privately controlled banks. Those systems are going to follow another general rule of energy systems, as manifested from Le Chatelier's Principle in chemistry, to Romers Rule in evolution, that systems tend to adapt the minimum that they have to, in order to stay the same, unless they are pushed beyond their ability to adapt.
It is simply STUPID to expect that it would be possible to somehow return to using gold as money, as well as to substitute any other commodities, or basket of currencies, or whatever, into that STUPIDITY. The basic problems are due to the money necessarily being measurement backed by murder, because that is what necessarily happens to human artificial selection systems that operate inside of natural selection systems.
It is quite typical for the various reactionary revolutionaries who publish their material on Zero Hedge to promote their own preferred versions of somehow going backwards, such as going back to having the public money supply being based on gold and silver. Doing that spares them having to admit and address the actual issues, such as how to operate the human murder systems after the development of weapons of mass destruction.
Philosophically speaking, it is vital to THINK about the deeper meanings of the special theory of relativity, which enabled atomic bombs to be built! First, matter is a form of energy. Therefore, the conservation of matter, most exemplified in the form of the element gold, actually exists inside the overall fact that all matter is a super-concentrated form of energy. Therefore, any use of the measurement of gold as the basis of money, actually is inside of the overall context of the principle of the conservation of energy.
Moreover, as an even more abstract philosophical point, time and space are not independent absolutes, but rather relative, and depend upon the conservation of energy. Since the ways that energy is spread out in time and space is expressed as the concept entropy, that concept should have been changed by the fact that atomic bombs go boom, just as much as everything else about how we thought about the material world should have been changed. However, of course, mostly that did NOT happen! The ways that "we" think about entropy are absurdly backwards, which problems fits inside of the overall history of the philosophy of science being forced to compromise with the biggest bullies' bullshit world view.
There are deeper reasons for how and why the public "money" supply is now based upon governments ENFORCING FRAUDS by privately controlled banks. Those deeper issues are not remotely close to being better resolved by those who promote the nostalgic nonsense of returning to money backed by gold. Rather, we are stuck with money being measurement backed by murder, while those measurements have become electronic, and those murders could be done by an abundance of weapons of mass destruction, whose magnitudes are similar to the magnitudes of the electronic frauds. Overall, we probably do NOT go back to using gold as money! Rather, we more likely go through the electronic debt insanities provoking atomic death insanities, with the only actually possible alternatives being the development of different death controls, to back up different debt controls, because money must necessarily continue to be based upon measurement backed by murder.
I do not believe anyone in a sound mind would advocate the use of gold money. They do not even exist. A percentage gold backed economy or curency is a different thing alltogether. It is not about money but rather to create and maintain a benchmark.
Many economies trade in USD which is a dying currency. Algebraically the current sitaution works like that: A relies on B; B relies on C; C relies on A. Like a snake eating its own tail. An Escher type of logic. Reality confirms this.
Buy Gold, Silver, Platinum and Palladium with Bitcoin, Litecoin, multiple other cryptocurrencies and bank wire!!
https://www.eurgold.eu
What is the main problem with the gold standard?
It limits private banks ability to create money
Bank lobbyists continually push the reserve requirements for banks lower and lower.
They are already so low that banks can create the whole sum of a mortgage from the fee, where the fee contains the reserve required.
When the banks are in charge they are never going to allow a return to the gold standard.
Whatever the merits of a gold standard, it seems unlikely to me that the US could go back to one since, by many accounts, it doesn't have any gold left any more. It's all been stolen by the likes of JPM and the Squid.
However, China could introduce a gold-backed Yuan since it's been buying up gold at a fast rate recently. And that may be why this news article appeared: "Tianjin explosion carried out by Pentagon".
Is Washington already at war with China??
question to the gold bugs:
money in the economy do not circulate in circles, instead accumulate at the top capital owners and they recycle it in the stock market trying to minimize their ownership risks. General economy does not get the money back.
the question is how under gold standard are we supposed to stimulate the economy if the top 1% accumulates all the gold and keeps it ?
One thing every libertarian should know about economics :
Hayek's The road to Serfdom inspired the current Oligarchy HFT controlled derivative sauced MONOPOLY capitalist model.
Hayek wanted to replace Adam Smith's "invisible" hand of markets; cranky obscurantist notion of operating the supply/demand dialectics of "free markets"; by something more perfect : a cybernetic model where "invisible" was replaced by "guided" hand to MANIPULATE the market mechanism by tilting it in favour of the "intelligent" who had "got the message".
He advised influential people in civil society to set up "think tanks" to influence the Decision makers and it worked : as both Maggie and Ronnie bought into it bigtime. The cybernetic model of Reaganomics and MAggie's TINA (there is no other alternative) was born. It spawned the demise of welfare state, of productive industry in the west; all outsourced to "ping ponged" China; and saw the meteoric rise of supply side FIRE economy of financialzed West.
Now we have Hayek's world in HFT cybernetic plays creating carry trade and currency war rampage; MEDUSA's HEAD economy. With Bernanke doing massive monetarism by CBs to try contain the fire of FIRE's mismanagement in Lehman demise and what followed to save "the free for all Oligarchs of the World" CASINO economy of the TBTF.
Well done Hayek, Ronnie and Maggie...
Here is the low down on that take :http://www.bbc.co.uk/blogs/adamcurtis/2011/09/the_curse_of_tina.html
Now what was that about barbarous relic being better than Greenspan's and Ben's toxic Ketchup?
I SLAP HOES ALL DAY LONG AND MAKE $5000.00 PER DAY, ASK ME HOW
I SLAP HOES ALL DAY LONG AND MAKE $5000.00 PER DAY, ASK ME HOW
Another gold puff piece, seems to be several of these every week. Must be gold holders trying to talk up the price by posting on ZH. You don't need gold to have something like the gold standard, all you need is some method of limiting fiat production like crypto currencies do.
@erk you really have no idea about what your are talking about
The concept of the "Freegold" is gaining some momentum, and personally I believe its arrival is enviable. My understanding of freegold is essentially Physical gold is free to find its true equilibrium against the basket of fiat currencies in existence and not manipulated by CB's and politicos etc. In other words gold becomes the datum point against which all other financial instruments are measured. For anyone already in gold this time cant come quick enough as their " monetary wealth" increases dramatically. For those not in gold, but want to, the current incredibly low $ price of Physical offers an opportunity to get in at the ground floor. For those anti gold.... well your just going to miss out if it comes to pass.. If it doesn't and gold stays static ...well just convert back to fiat.. it wont be the hardest kick in the balls you will ever get.
I've bared witness to older clients/family lose their savings over time because they were hoarding fiat, - why, because while they were hard working, spendthrift they misinformed mislead and/or uninformed. if just 20% of that same fiat was converted to PM and safely stored that 20% would have over compensated them for the depreciation of the fiat over the past 40 years. If gold becomes "free" in the coming months that $price is could shoot to $60k an oz - who in their right mind would not want to take that bet..even the most anti gold needs to dispassionately consider the concept.
http://www.teamramgold.com/about-us/
"6. 0n the whole, the classical gold standard worked remarkably well (while it lasted)."Contains a lengthy Keynesian quote describing an idyllic pre-1914 (and therefore pre-CB in the US, at least in its latest incarnation) time.
While no doubt the gold standard might well have contributed to this state of affairs, it seems amazing to me that anyone would ignore a much more obvious explanation.
The much more obvious explanation for the condition he reveres is the fact that it describes how homogeneous white European society used to be before it was as thoroughly contaminated by cabalist control and cultural marxist doctrine as it is today. At that time most nations of predominantly white European descent were largely homogeneous, and their indigenous cultural and economic attributes were projected upon the colonies and protectorates they controlled (which at that time included much of the world economy).
Funny how systems dominated by high work ethic, civilized and homogeneous white European cultures never seem to have a problem with stability or economic vitality - unless of course they are goaded into world wars against the wishes of their people by cabalist puppets.
Oh sorry, forgot, such a logical and obvious explanation for Keynes’ observation would be anathema to cultural marxist doctrine - and therefore outlawed by the cabal thought police.
The S.D.R's or special drawing rights were around in the 1960's. The Monetary Sin Of The West by Jacques Reuff was very good at explaining the so-called gold exchange system. Reuff was De Gaulle's mentor.
Real people know the difference between PET ROCKS and PET PAPER. Anyone who is still holding PET PAPER will get what they deserve for supporting the WORLD WIDE PONZI PAPER SCHEME (WWPPS), designed to enslave billions of people. The doors to get out of this enslavement are going to close very fast, once the U.S., Japanese, E.U., Chinese and every other citizen realizes that devaluation steals years of value from their savings. U.S. PONZI PAPER SCHEME, Japanese PONZI PAPER SCHEME, E.U. PONZI PAPER SCHEME, Chinese PONZI PAPER SCHEME, What's the difference?.
By the way, who is John Galt?. _ JOHNLGALT