The gold standard

[deseretgov]

First, there is no difference between a cow standard and a gold standard, except for the cow standard has much less durability.

Now, if we are going to print up this cow paper, who gets to print it? How do we keep them from printing extra paper with no real cows to redeem the paper for? And, if a cow dies, whose piece of paper becomes valueless? What system will determine who gets the bigger, better, more healthy cows for their piece of paper rather than a scrawny less healthy animal? And, in your example of the destitution of the wilderness, would anyone really except our worthless cow paper?

Plus, what difference is there between the current system and this cow paper besides the fixing of the price of cattle?

-a-train

The cow was just a example. What I'm saying is using all resources as backing for currency. That would include gold but not be limited to gold. I would also include labor in there as well since labor has value as well. The goverment itself would print the money. Property could be registered with a national treasury and then the appropriate number of markers would be printed.

How would we keep too much money from being printed? A public registry that would list all property and the corresponding ammount of money in circulation. The courts would hold the treasury accountable for any problems.

My whole gold thing was a seperate example about a slightly different topic.

The difference between a value based system and the current system is that the curenmt system is based on debt. The government borrows money from the Fed at interest. The Fed gets the money to give the government out of no where, because it's a loan. Because the fed charges interest the government can't possible pay back the loan without loaning more money. So technically the American dollar is a marker of debt that must eventually be paid back to the Fed. So for every dollar you have in you pocket or bank account you owe the Fed that much, plus your share of teh national Debt.

Edited October 27, 2008 by deseretgov

[Guest DeborahC]

I actually have BOTH - me cats and me gold! ::laughing::

[a-train]

The cow was just a example. What I'm saying is using all resources as backing for currency. That would include gold but not be limited to gold. I would also include labor in there as well since labor has value as well. The goverment itself would print the money. Property could be registered with a national treasury and then the appropriate number of markers would be printed.

How would we keep too much money from being printed? A public registry that would list all property and the corresponding ammount of money in circulation. The courts would hold the treasury accountable for any problems.

So then we are fixing the price of every piece of property to this new paper currency? Walk me through the actual process of the creation of this money.

I am picturing: a person knits a sweater, he calls the treasury and they give him the given number of monetary units they deem equal to the value of the sweater. He goes out and spends the money into the economy. Is that close? Don't you see why that would be a disaster?

-a-train

[deseretgov]

So then we are fixing the price of every piece of property to this new paper currency? Walk me through the actual process of the creation of this money.

I am picturing: a person knits a sweater, he calls the treasury and they give him the given number of monetary units they deem equal to the value of the sweater. He goes out and spends the money into the economy. Is that close? Don't you see why that would be a disaster?

-a-train

It wouldn't be every piece of property, unless the government already owns it. So if the yard that made the sweater was already registered then only the labor would be registerable. Any property that backs the currency wouldn't be able to be sold since it's backing the currency. basically what it is doing is simplifing the barter system. Instead of carrying a chicken around with you to trade for some clothes you carry markers that represent the chicken. Then a person could use that to trade for the clothes.

It could be done on a personal level with each person making their own markers but to avoid obvious problems with that the treasury would make the markers.

What ideas do you have for a currency system? I would be interested to hear them. If you could make one how would your currency system work?

[a-train]

It wouldn't be every piece of property, unless the government already owns it.

Woah. Slow down. Your loosing me and losing me. The government owns the property it prints the notes for?

So if I own the sheep, produce the wool and knit the sweater, the government gives me notes for the product and the labor and then the government owns the sweater? Where does the sweater go?

Instead of carrying a chicken around with you to trade for some clothes you carry markers that represent the chicken. Then a person could use that to trade for the clothes.

So what if the guy selling the clothes isn't looking for a chicken? Are there chicken markers, clothing markers, auto markers, etc.? Or are these markers simply units of legal tender?

What ideas do you have for a currency system? I would be interested to hear them. If you could make one how would your currency system work?

I would use a free precious metal system.

We are actually still on a barter system of sorts. As an owner of a given product, I can demand whatever I want for it. I could say, for example, that I will only accept a dozen black cats for my skateboard. A potential buyer could offer U.S. FRNs, but if his offer doesn't suit me, I could simply say: "no sale".

Before there was precious metal money, there certainly was monetization. If a man wanted a horse and offered a cow for it, and upon his offer being rejected finds that the seller of the horse is looking for sheep, he could go in search of a shepherd who wants a cow. He trades the cow for some sheep and then uses the sheep to trade for the horse. In this case, the sheep were monetized.

The cow owner only traded for the sheep because they were convertible. He did not actually want the sheep. He only wanted to use them to get the horse.

Convertibility: Items that are the most convertible (the highest number of sellers will accept them for payment) become good candidates for money. Precious metal is good for virtually countless applications in every corner of the world. I have yet to hear of a nation or a people at any time in recorded history that simply felt that precious metal was worthless and threw it away. With the advent of new industrial uses for precious metal, its convertibility has only risen.

As the various scenarios play out in a barter system, items of more universal worth, rise to the top of the list as possible monetary units. Gasoline would be very convertible today. But imagine needing 100 gallons to purchase a watch. Gasoline is expensive and burdensome to transport. We need our items to store value in a small and easy to carry unit.

Portability: Sheep, hay, cars, tires, houses, and all sorts of stuff can be valuable, but they need to be easily delivered if we intend to use them as highly convertible items of money. Precious metals can store large amounts of value in very portable sizes and weights. An ounce of gold or silver fits in the palm of your hand. Traveling ancient Romans carried a coin under their upper lip. The pockets in your jeans could easily carry enough gold coinage to buy that new Volkswagen Passat CC VR6 4Motion with heated leather seats and a sunroof.

Diamonds are also generally deemed valuable everywhere and they are extremely portable. But, they are each of differing value and you can't simply break one into smaller diamonds without hurting the value.

Divisibility: Precious metal is easily divisible into virtually any weight: twenty ounces, ten ounces, five ounces, ounce, half ounce, quarter ounce, one tenth ounce, one twentieth ounce, one hundredth ounce.

Items that could be easily measured in various amounts will make them much more useful in trade. A given pig would go for so many pounds of wheat, or so many pounds of flour, or so many gallons of gasoline. But, if all I have to trade is a diamond, I may need to ask the farmer to throw in something else to make up the "change" because the diamond is more valuable than the pig. What if he doesn't have something of the appropriate value that I want, or that is easily convertible? Precious metal coins minted in standardized units solve this problem efficiently.

Another trouble with the diamond is its determination of value. We value diamonds with cut, clarity, color, and carat weight. This makes each diamond a different value. Experts at valuing diamonds would always have an upper hand in trading them. Convertiblity would be enhanced if every diamond were identical.

Homogeneity: Precious metals are easily minted into standardized units that are of the same quality and purity wherever they are minted. No two diamonds are exactly alike, but two one ounce coins of silver can be virtually identical. They are also easily measured for purity and authenticity.

Recognizability: Precious metals cannot be easily counterfeited. Although coins can be sweated or trimmed, only a tiny portion of the total value can be removed and someone accepting the coin as payment could demand more compensation if the mass of the coinage was significantly low. A coin known to be pure could be compared to one that is suspected to be counterfeit or tampered with. A difference in weight or size is easily noticed with simple, easy to obtain, and inexpensive devices.

Paper money is easily counterfeited by comparison and in the event that funny money is accepted, the resulting loss for the loser is total. If the loser lost the value of metal trimmed from a coin, he would only lose a small fraction of value.

What if flour could be produced at a very standard quality and packaged in very homogenious units? Imagine that a very simple test would prove its purity. But it isn't very portable and is also perishable. The age of the flour would have an effect on its value. If it was soon to go bad and the potential recipient couldn't use it in that time frame, he may not accept it. We need our monetary device to be durable. It needs to have a long shelf life. This not only makes it more convertible, but keeps the money supply from shrinking. If our money was flour, and tons of it went bad, there would be a money shortage.

Durability: Precious metals last for thousands of years. Gold and silver do not rust and decay. Coins from the time of Jesus are still in usable condition today. And even if they are damaged, they can be melted and made into bright new coins with minimal loss of material. Coins stored or circulated for generations can retain their form, weight, and desirabilty. I have coins that are over 100 years old and they look as good as many of the coins you received in your change at Taco Bell this week.

Excluding the numismatic value of old coins, their melt value (the value of the precious metal in them if melted and sold as scrap) remains relatively sound. An old coin may be worth a fortune as a collector's item, but its melt value is closely similar to it's original.

Paper money, when easily printed for a fraction of its face value will lose face value as it is in more supply or gain value as supply decreases. When the ability to print paper money is given exclusively to a select body or individual, this entity has the tremendous power of altering the value of the currency through creation or destruction of individual units. This power, in the wrong hands can be as destructive to wealth for those storing it in those units as an atom bomb.

What if one corporation controlled all the gasoline in the world? There would be fears of monopoly pricing. Such a monopoly could only exist if all the gasoline came from the same place, or this corporation conquered every place that gasoline came from, or was given control over gasoline from a body that did the conquering.

Without competition, the corporation could demand whatever it wanted per gallon of gasoline: monopoly pricing.

Competitive freedom: Mining and minting of precious metal goes on throughout the world. Although there are countries that do not have precious metal to mine, they have other resources to trade. Regardless, no one entity controls all precious metal mining and minting. As demand rises, more mining will take place due to the rising profitablity of mining. Likewise, minting will increase as demand for minted metals increases. More competitors will come out of the woodwork as more profit is to be made.

If demand goes down, only those with competive advantages (technology, expertise, logistics) will survive as production decreases due to the decrease in consumption. This natural free market regulation of the value of precious metal has been in place throughout all known history. It is unalterable. Attempts to manipulate the price of precious metals (or any commodity) are only acts of deception, not real changes in value.

Our current U.S. Federal Reserve Note system allows a select group (the Federal Reserve Banks) to regulate the money supply without even government supervison. The people of the United States have ZERO control over it. That is fine, but control IS available to the Federal Reserve Banks.

Through inflation and deflation, the insiders can make a fortune.

Imagine that a select group could control the value of IBM stock. They would buy when it is cheap, increase the price to a point whereupon the insiders would sell, then collapse the price back down to a point where the insiders would buy again. Then they would repeat the process. That is what the Federal Reserve Banks do. Every holder of a U.S. Federal Reserve Note is victim to this insidious scheme. Where do the profits go? To whoever it is that the new money is spent by the government: the military industrial complex, big business, and the banks.

The most common defense for the fiat paper monopoly is: "We need a money system that can expand in order for the economy to grow". The supply of precious metals has not ever stopped expanding. And, if a fiat paper system is the only way to grow an economy, how did economies grow before the invention of paper money in the tenth century?

Some would claim it was fractional reserve lending that gave rise to growth, but this practice is only a late European practice. The Roman government debased their currency by issuing less and less pure coins, but this had the opposite effect of destroying their economic power rather than building it.

Real economic growth comes from the increase in productivity, not the money supply. It matters not whether the money supply is growing, shrinking, or remaining the same, if productivity increases, so does the economy, if it decreases, so does the economy.

A precious metal standard is a natural system that no invention of man has ever been able to outperform in the above categories. If we simply allow precious metal coins to be our money, every other country on earth would quickly follow. Hosts of mints would arise and international trade would become much easier.

If a quarter ounce of silver were minted by many mints around the world and easily acceptable in any business establishment in the U.S., I could pay with any of those. Mexican, Canadian, Peruvian, German, Italian, and Austrailian quarter ounce silver pieces would all be usable the world over. For working people, productive in the global economy, this would be fine. For those making their living speculating in world currencies, this would be a disaster.

The control of banks and major financial institutions over the world economy would vanish. The financing of worthless pork through the federal government would be tremendously limited. The inflation tax would be gone. Interest rates would be market set, not monopoly priced. War would be more troublesome to finance and therefore more difficult to wage.

A true free precious metal system would be the most advantageous to the most amount of people. It would not favor a select few. It would be honest and would limit economic expansion to sustainability and would help to place responsibility of bad investment in the hands of the investors and out of those of the public.

-a-train

Edited October 28, 2008 by a-train

[MarginOfError]

Property could be registered with a national treasury and then the appropriate number of markers would be printed.

With a system like this, we could run 0% unemployment. In fact, we'd have to import half the population of China and India combined to staff an agency large enough to keep track of all the property.

[a-train]

With a system like this, we could run 0% unemployment. In fact, we'd have to import half the population of China and India combined to staff an agency large enough to keep track of all the property.

The bureaucracy would be impossible to manage.

Also, this would mean that everything we do was double paid. I could receive payment for my knitting from the treasury, then go out and sell the sweater. But, the market would then expect the sweater for free because the producer was already paid. Would the bureaucracy then decide who gets the sweater? Would the producer retain it? If so, could he sell it for a price different than the amount of notes he already received from the treasury? If so, wouldn't the market pay way less than what the treasury paid at first? Then, massive creation of money would lead to tremendous inflation and people would demand much more than what the treasury initially paid.

Would employers have to pay their employees if their labor was already being monetized by the treasury? The whole matter is confusing.

-a-train

[MarginOfError]

The bureaucracy would be impossible to manage.

Also, this would mean that everything we do was double paid. I could receive payment for my knitting from the treasury, then go out and sell the sweater. But, the market would then expect the sweater for free because the producer was already paid. Would the bureaucracy then decide who gets the sweater? Would the producer retain it? If so, could he sell it for a price different than the amount of notes he already received from the treasury? If so, wouldn't the market pay way less than what the treasury paid at first? Then, massive creation of money would lead to tremendous inflation and people would demand much more than what the treasury initially paid.

Would employers have to pay their employees if their labor was already being monetized by the treasury? The whole matter is confusing.

-a-train

Everything being double paid is easy to fix...we just cut the price of everything in half.

Or we could cut the products in half! Then you can create twice as much output with the same level of labor! Think of the expansion of wealth under this new system!

[rameumptom]

Everything being double paid is easy to fix...we just cut the price of everything in half.

Or we could cut the products in half! Then you can create twice as much output with the same level of labor! Think of the expansion of wealth under this new system!

But have you considered the MarginOfError involved in such a big undertaking? What if someone made their product for twice of 1/2 as much as the full amount the government paid, and then sold it for 1/2 as much again? Then the reseller took the item and sold the item marked down to 4 times the original cost, minus 50% overhead and stocking fees, plus packaging expenses?

All that being the case, what would the federal government charge for exports?

[NeuroTypical]

Ok - I have a question for the gold standard advocates out there.

There have been about 158,000 metric tons of gold mined in all of human history. 12% has been used for industrial purposes. Setting that aside, if we assume we raid all the museums, melt down all the jewelry, and make all other gold available for use as currency, that makes about 139,000 tons available. At $800/oz, that makes up around $4 trillion dollars worth of gold mined out of the earth and owned by the residents of Earth. According to the 2007 CIA world fact book, the sum total of all nation's GDP was $54.6 trillion in one year alone.

My question: How do you let the world do $55 trillion worth of business every year, if there's only $4 trillion worth of gold to use as the currency base?

LM

[a-train]

Current number of U.S. Federal Reserve Notes in world circulation: between 800 billion and 1 trillion.

An estimated half to two thirds of which are not even in domestic circulation, but in foreign reserve.

Regardless, it would take less than 1/1000th of the mined gold supply to replace our current monetary system including all the funds not even in domestic circulation. Of course, not even that would be necessary because the monetarization of gold alone would increase its purchasing power.

So I guess my question for is: How do you let the world do $55 trillion worth of business every year, if there's only $800 billion to $1 trillion dollars to use as the currency base?

The argument long stated: "There is not enough precious metal to use it for money", has been beaten to death and the horse is totally decomposed.

-a-train

PS: Knowing what the money supply is, think about the remarkable scope of a $700 billion bailout. It is enough to almost double all the dollars on earth.

Edited October 27, 2008 by a-train

[NeuroTypical]

Current number of U.S. Federal Reserve Notes in world circulation: between 800 billion and 1 trillion.

Yeah, and how many floating around in electron form? Isn't that an important number to know as well? Our invested $$'s aren't reflected in paper currency anywhere, right?

Regardless, it would take less than 1/1000th of the mined gold supply to replace our current monetary system including all the funds not even in domestic circulation.

Please explain how $4 billion in gold can replace our current monetary system, when that system includes oodles of dollars that exist only on balance sheets.

Of course, not even that would be necessary because the monetarization of gold alone would increase its purchasing power.

I don't know the term - what does it mean?

The argument long stated: "There is not enough precious metal to use it for money", has been beaten to death and the horse is totally decomposed.

I hear you and JBS making that claim over and over, but I missed the actual beating. Is there a link somewhere? I'm not adverse to doing a little research, if someone can point me to it...

LM

[a-train]

Yeah, and how many floating around in electron form? Isn't that an important number to know as well? Our invested $$'s aren't reflected in paper currency anywhere, right?

Please explain how $4 billion in gold can replace our current monetary system, when that system includes oodles of dollars that exist only on balance sheets.

OK, M3 is around $10 trillion. That INCLUDES ALL U.S. dollars, whether electronic or physical. Can you answer my question then?

How do you let the world do $55 trillion worth of business every year, if there's only $10 trillion dollars to use as the currency base?

Again, that figure INCLUDES money physical or otherwise.

In 2007, almost $13 billion worth of gold was produced. This means we could replace all the physical currency (M0) over a ten year period WITHOUT increasing the purchasing power of gold or using any gold currently available. However, that amount of gold would not be necessary. Why? Because the value of gold would go up. This also would not take into account the monetization of silver and other metals.

I don't know the term - what does it mean?

Pardon. Not even that would be necessary because the monetization of gold alone would increase its purchasing power.

-a-train

Edited October 27, 2008 by a-train

[FunkyTown]

OK, M3 is around $10 trillion. That INCLUDES ALL U.S. dollars, whether electronic or physical. Can you answer my question then?

How do you let the world do $55 trillion worth of business every year, if there's only $10 trillion dollars to use as the currency base?

Again, that figure INCLUDES money physical or otherwise.

In 2007, almost $13 billion worth of gold was produced. This means we could replace all the physical currency (M0) over a ten year period WITHOUT increasing the purchasing power of gold or using any gold currently available. However, that amount of gold would not be necessary. Why? Because the value of gold would go up. This also would not take into account the monetization of silver and other metals.

Pardon. Not even that would be necessary because the monetization of gold alone would increase its purchasing power.

-a-train

Actually, the Gold Standard would result in a lowered standard of living for many, but a raised standard of living for many others.

Simply put: The more your country imports, the more gold that must be sent out to adjust the difference. This makes the monetary value of your government backed scrip ("Dollars" for instance) drop. When it drops, you can no longer afford those things from other countries, which means what -they- purchase from -you- worth much more. They will then make up the difference to you.

The reason it failed earlier on is that the reaction to the market wasn't instant. With modern computers, that could be adjusted fairly easily.

Because, currently, the US and China represent the largest consumers, this would work well to adjust the economies of the world. I may be biased, though, because so many countries purchase from Canada.

[a-train]

Actually, the Gold Standard would result in a lowered standard of living for many, but a raised standard of living for many others.

Simply put: The more your country imports, the more gold that must be sent out to adjust the difference. This makes the monetary value of your government backed scrip ("Dollars" for instance) drop. When it drops, you can no longer afford those things from other countries, which means what -they- purchase from -you- worth much more. They will then make up the difference to you.

The reason it failed earlier on is that the reaction to the market wasn't instant. With modern computers, that could be adjusted fairly easily.

Because, currently, the US and China represent the largest consumers, this would work well to adjust the economies of the world. I may be biased, though, because so many countries purchase from Canada.

This is another reason why a precious metal standard would be good for the globe and for individual nations. It would curtail importation sooner than our current fiat system. We would not monetize debt just to keep buying imported goods for what seems inexpensive.

-a-train

[FunkyTown]

This is another reason why a precious metal standard would be good for the globe and for individual nations. It would curtail importation sooner than our current fiat system. We would not monetize debt just to keep buying imported goods for what seems inexpensive.

-a-train

You have hit the nail on the head for why I agree with the gold standard.

[a-train]

I'm going to go ahead and say more on the subject of having enough precious metal in supply to monetize it. Currently, there are around 305 million people in the United States. With M3 (the total money supply) currently being at around $10 trillion, that means there is only around $33,000 in supply for every individual in the country. That is $10,000 less than the median annual income for men and around $1000 less than the median annual income for women.

How do we pay all these people more money than exists? How can GDP be over $47,000 per capita when the money supply is $14,000 per capita lower? There isn't enough money right? Add to this the fact that a very large portion of that money is held in foreign reserve! Where does all the extra money come from?

Is it debt? No, all debt is included in the $10 trillion M3 figure.

What gives?

Only a tiny fraction of American household income is kept in currency reserve, the vast majority of it is spent on goods and services. Much of the money spent is spent many times in one year. Thus the GDP has to be more than the sum of all individual incomes.

A shoe maker earns money selling shoes and spends it on a car. The car dealer spends it on real estate, the real estate seller spends it on furniture, the furniture seller spends it on prescription drugs, the pharmacist spends it on shoes. Thus the same money is spent and increases the GDP and individual incomes more than once a year.

The purchasing power of the people will not and cannot catch up to the GDP's total. As the purchasing power increases, the GDP will increase and remain far and above the sum of the purchasing power of all the money at any given point in time.

-a-train

Edited October 27, 2008 by a-train

[JohnBirchSociety]

I'm going to go ahead and say more on the subject of having enough precious metal in supply to monetize it. Currently, there are around 305 million people in the United States. With M3 (the total money supply) currently being at around $10 trillion, that means there is only around $33,000 in supply for every individual in the country. That is $10,000 less than the median annual income for men and around $1000 less than the median annual income for women.

How do we pay all these people more money than exists? How can GDP be over $47,000 per capita when the money supply is $14,000 per capita lower? There isn't enough money right? Add to this the fact that a very large portion of that money is held in foreign reserve! Where does all the extra money come from?

Is it debt? No, all debt is included in the $10 trillion M3 figure.

What gives?

Only a tiny fraction of American household income is kept in currency reserve, the vast majority of it is spent on goods and services. Much of the money spent is spent many times in one year. Thus the GDP has to be more than the sum of all individual incomes.

A shoe maker earns money selling shoes and spends it on a car. The car dealer spends it on real estate, the real estate seller spends it on furniture, the furniture seller spends it on prescription drugs, the pharmacist spends it on shoes. Thus the same money is spent and increases the GDP and individual incomes more than once a year.

The purchasing power of the people will not and cannot catch up to the GDP's total. As the purchasing power increases, the GDP will increase and remain far and above the sum of the purchasing power of all the money at any given point in time.

-a-train

Add to this excellent treatise the fact that our REAL GDP (in terms of real money, not fiat currency as we currently have) is a fraction of $10Trillion.

In real money (In the US remember, that's Gold or Silver Coin) our GDP, based upon the devaluation of the FRN versus a real dollar of gold / silver since 1913 is 21.60 times less ($1 in 1913 can purchase $21.60 in 2007).

So $10,000,000,000,000.00 / 21.60 equals $462,962,962,962.96. So actual GDP based on real money / "dollar" value is about $470Billion.

The GDP in 1913 in the US was about $517Billion (real dollars, real money). So, today's real value GDP is less then it was in 1913.

So, given that in 1913 there was enough Gold / Silver coin to cover the nation's needs, it would seem there would be more than enough now, since there is more Gold and Silver (processed) in existence than there was in 1913.

Again, there is no real, valid argument against the Gold / Silver Standard as Constitutionally mandated.

[FunkyTown]

Well, there -is-, but it's selfish.

"In a gold standard, any trade deficit results in the country with the deficit sending gold to make up the shortfall."

Since the US has had a trade deficit for decades - And a very large one - You would face massive inflation if changing didn't make people smarten up with their buying. It also would result in a poorer nation overall, but be less inclined to horrid crashes(Though it would happen if people continued to consume as they do now). I'm not saying you're wrong in this, JBS(Though this may be the only thing we have ever agreed on on here), but I am saying it isn't as rosie as you're painting it.

[a-train]

JBS,

Your logic is pretty good there, but GDP is currently estimated at $14.3 trillion, not $10 trillion. Divided by 21.6 that is $662 billion. This would still only be a 28% growth in GDP since 1913.

-a-train

[JohnBirchSociety]

JBS,

Your logic is pretty good there, but GDP is currently estimated at $14.3 trillion, not $10 trillion. Divided by 21.6 that is $662 billion. This would still only be a 28% growth in GDP since 1913.

-a-train

Thanks for the clarification on that. You are correct. Bad form on my behalf.

Allow me to modify my original numbers.

In 2007 the US GDP in FRN's was $13,843,825,000,000 according to the IMF.

Given a depreciation of the FRN value versus a real Gold / Silver dollar in 1913 ($1 in 1913 buys $21.60 in 2007) our real value (as measured by real dollars, 1913 style) GDP was $640,917,824,074 or just about $641Billion.

The US GDP in 1913 was $517,383,000,000. So today's real value GDP is $123,000,000,000 more than in 1913. That's a 23.8% increase from 1913.

Given the premise of M0 (Currency supply), we would need approximately $34,720,000,000 dollars of real money (Gold / Silver coin as mandated by the US Constitution) for circulation. This is well within the means of total Gold / Silver (and especially Silver) supply of today and represents essentially the same amount needed (based on population, now versus then) in 1913.

Thus, there is no problem in respect to the amount of precious metals available for coinage.

[JohnBirchSociety]

Well, there -is-, but it's selfish.

"In a gold standard, any trade deficit results in the country with the deficit sending gold to make up the shortfall."

Since the US has had a trade deficit for decades - And a very large one - You would face massive inflation if changing didn't make people smarten up with their buying. It also would result in a poorer nation overall, but be less inclined to horrid crashes(Though it would happen if people continued to consume as they do now). I'm not saying you're wrong in this, JBS(Though this may be the only thing we have ever agreed on on here), but I am saying it isn't as rosie as you're painting it.

Gold / Silver money in the hands of the people would not make them poorer.

We would not have massive inflation. We'd have enormous deflation with foreign purchases nearly coming to all halt if the other trading nations did not follow suit (it would be illegal to exchange paper fiat currency for Gold / Silver coin or notes).

And of course, this would all take time. The Big-Banker establishment / FED would kick-n-scream all the way through their dismantling. Not to mention they would interfere at every step of the way to make it look like it would work.

[deseretgov]

I just read your ideas for a monetary system a-train. It doesn't seem like that bad of an idea. The only problems I would have with it are:

1. Carrying around pounds of coins in my pockets.

2. A metal only currency excludes all the other riches a nation may have.

I would think it would be much more advantageous for a nation to use all of it's resources to determine it's wealth, not just it's prescious metals. I'm not saying there wouldn't be enough metal, I'm just saying that it's only a small fraction of a nations total value.

Of course I'm not an advocate of paper notes. I do like polymer notes though.

I'm also a fan of another system. It's a type of fiat system where the Government prints money as legal tender then sets it's value. With government enforcement it would always retain that set value. This would only work in a planned economy where products were of set value as well. So regardless of how much money was made it would have the same value. No inflation or deflation. Instead of the value being determined by international trading it is set. Obvoiusly this would take a lot of work to actually work.

But keep in mind I'm not a pure capitalist. Nor am I an supporter of pure democracy. So maybe that explains something.

[a-train]

I just read your ideas for a monetary system a-train. It doesn't seem like that bad of an idea.

I can't take any credit for the notion of a precious metal monetary standard. It is ancient. Further, there have been people in our country fighting to protect and to restore such a standard throughout all our history. Today, there is a resurgence of the notion among Americans.

The only problems I would have with it are:

1. Carrying around pounds of coins in my pockets.

This would not actually be a problem, you could still use a debit card or paper bills, but you would also be able to get coinage from the bank or at the store.

2. A metal only currency excludes all the other riches a nation may have.

I guess I don't know what this means. If it means that there are certain things one cannot buy with the currency, or certain things that one cannot sell for the currency, then that is not correct.

It is often said that a currency is "backed" by something. What people are talking about here is convertibility. A paper currency "backed" by gold is one wherein a person can go into a bank and exchange their note for a certain weight in gold. But you can also exchange that same note for anything in the world that someone is willing to give for it.

Why do you accept federal reserve notes in payment for your labor today? Well, because you know that you can pay your bills and buy your necessities with those notes. Thus, in a way, our dollar IS backed by everything for sale in the economy right now. The more motivated those sellers get, the stronger that backing gets. In other words, as someone becomes more eager to sell a car, he will sell it for less notes.

The difference is that there is no price fixing on our current currency. I can convert it to gold and/or silver today. I can walk into a coin shop and exchange notes for silver or gold. The transaction is sales tax free. The only difference is that the ratio between one note and one ounce of silver or gold is not fixed, the seller and buyer must negotiate a price. The note is not a gold or silver note, it is simply a device of legal tender.

If you are under the impression that we need to have enough dollars in supply to buy up everything in the nation, that is also incorrect and further, it is impossible without price fixing. Not everything in the country will be sold at once. In fact, think of how many houses will sell in your neighborhood this year. I know in my neighborhood only one or two out of dozens will sell. How much of your property in your home will you sell this year? How about today? How about within the hour? Not much.

It is neither necessary nor possible for there to be enough money in our economy to buy all the non-currency value in the economy.

I would think it would be much more advantageous for a nation to use all of it's resources to determine it's wealth, not just it's prescious metals. I'm not saying there wouldn't be enough metal, I'm just saying that it's only a small fraction of a nations total value.

In a precious metal standard, items don't suddenly become valueless. A major land owner may have not a single ounce of gold, but he is extremely wealthy. This is just the same as today. I could own $20 million worth of land and have $1.05 in my bank account, would that mean I have nothing but that $1.05? We DO use every article of wealth in this country to determine our total wealth.

A free economy with a free money system DOES account for all the wealth in the system and allocates it without prejudice.

I'm also a fan of another system. It's a type of fiat system where the Government prints money as legal tender then sets it's value. With government enforcement it would always retain that set value. This would only work in a planned economy where products were of set value as well. So regardless of how much money was made it would have the same value. No inflation or deflation. Instead of the value being determined by international trading it is set. Obvoiusly this would take a lot of work to actually work.

But keep in mind I'm not a pure capitalist. Nor am I an supporter of pure democracy. So maybe that explains something.

So let us imagine that prices were set by the government on everything. People would buy only what seems to be a good deal and sellers would not be able to lower the price of given items to make them a good deal. These items would collect dust on the shelves of businesses and ruin those businesses. Items that were set at too low a price would also subtract from the profitabilty of businesses.

Perhaps then this price fixing government would control production and enforce purchasing. A ten gallon hat would be made for and issued to every household regardless of demand and every household would be taxed a certain amount therefore. The whole system is unfeasible. New products could not emerge because entrepreneurship would be essentially banned. Welcome to communism. No toilet paper? Oops, the Board of Essential Products and Services for Toiletry and Bathing misfigured the nation's toilet paper needs and production will not catch up for 4 months. You can get in a toilet paper line and wait several hours for your family's two rolls.

The old saying is: "It was impossible to determine the price for a pair of shoes in the U.S.S.R." is true.

Would the government set the price of stocks? Think about that for a few minutes. Big problems emerge.

I suggest Henry Hazlitt's Economics in One Lesson. Read that. It will help you get a handle on free economics and the necessity thereof.

-a-train

[deseretgov]

This would not actually be a problem, you could still use a debit card or paper bills, but you would also be able to get coinage from the bank or at the store.

Well that would solve that problem. But I would still be wary of private banks controling the supply of precious metals.

I guess I don't know what this means. If it means that there are certain things one cannot buy with the currency, or certain things that one cannot sell for the currency, then that is not correct.

What I mean by that is that everything that is of value and is available to be traded should be represented by a note. So instead of having a banknote that represents metal that can buy something. Just have a note that represents this things to be bought.

It is often said that a currency is "backed" by something. What people are talking about here is convertibility. A paper currency "backed" by gold is one wherein a person can go into a bank and exchange their note for a certain weight in gold. But you can also exchange that same note for anything in the world that someone is willing to give for it.

Why do you accept federal reserve notes in payment for your labor today? Well, because you know that you can pay your bills and buy your necessities with those notes. Thus, in a way, our dollar IS backed by everything for sale in the economy right now. The more motivated those sellers get, the stronger that backing gets. In other words, as someone becomes more eager to sell a car, he will sell it for less notes.

The difference is that there is no price fixing on our current currency. I can convert it to gold and/or silver today. I can walk into a coin shop and exchange notes for silver or gold. The transaction is sales tax free. The only difference is that the ratio between one note and one ounce of silver or gold is not fixed, the seller and buyer must negotiate a price. The note is not a gold or silver note, it is simply a device of legal tender.

If you are under the impression that we need to have enough dollars in supply to buy up everything in the nation, that is also incorrect and further, it is impossible without price fixing. Not everything in the country will be sold at once. In fact, think of how many houses will sell in your neighborhood this year. I know in my neighborhood only one or two out of dozens will sell. How much of your property in your home will you sell this year? How about today? How about within the hour? Not much.

It is neither necessary nor possible for there to be enough money in our economy to buy all the non-currency value in the economy.

What I'm saying is, why do we need to go through gold or silver to trade? Why not trade the items directly?

In a precious metal standard, items don't suddenly become valueless. A major land owner may have not a single ounce of gold, but he is extremely wealthy. This is just the same as today. I could own $20 million worth of land and have $1.05 in my bank account, would that mean I have nothing but that $1.05? We DO use every article of wealth in this country to determine our total wealth.

No problems here. But as I mentioned above. Why would I trade land for gold when I could trdae it for something directly. Or in other words Why trade land for notes that are tradabel for gold which is tradable for something else. Just cut out the gold middleman and tie the currency to the items being traded.

A free economy with a free money system DOES account for all the wealth in the system and allocates it without prejudice.

So let us imagine that prices were set by the government on everything. People would buy only what seems to be a good deal and sellers would not be able to lower the price of given items to make them a good deal. These items would collect dust on the shelves of businesses and ruin those businesses. Items that were set at too low a price would also subtract from the profitabilty of businesses.

Perhaps then this price fixing government would control production and enforce purchasing. A ten gallon hat would be made for and issued to every household regardless of demand and every household would be taxed a certain amount therefore. The whole system is unfeasible. New products could not emerge because entrepreneurship would be essentially banned. Welcome to communism. No toilet paper? Oops, the Board of Essential Products and Services for Toiletry and Bathing misfigured the nation's toilet paper needs and production will not catch up for 4 months. You can get in a toilet paper line and wait several hours for your family's two rolls.

The old saying is: "It was impossible to determine the price for a pair of shoes in the U.S.S.R." is true.

Yeah as I said it would take a lot of work to get that system to work.

Would the government set the price of stocks? Think about that for a few minutes. Big problems emerge.

There shouldn't be stocks. I don't support corporations. I think that a business should be owned by all those who work in it. The profits of that corporation would be divided among the members of the business accdording to the job and time that a person contributes. Any "stocks" would be loans to help a business get funding that would be paid off with interest and the creditor ending up having no say in the what goes on in the business. Simply put there would be no corporations or emplyers and employees, only really big partnerships.

The point of this whole organization would be to keep down corruption and stop ceos from getting insane wages, while the people who actually keep the business running get next to nothing.

I believe we should have a system where every person gets what they work for. true not everyone will be equal but that will only be because some people will work harder and in different professions than others.

I suggest Henry Hazlitt's Economics in One Lesson. Read that. It will help you get a handle on free economics and the necessity thereof.

I'll have a look.

Edited October 28, 2008 by deseretgov