I was listening to the radio today and some commentator mentioned that going back to the gold standard is totally unreasonable because we “don’t have enough gold”. This is really a silly objection. The merits of gold take some explaining while the “don’t have enough gold” line is just a slogan type phrase without any thought put into it. So lets take a look at the “don’t have enough gold” line and root out the falsehoods impregnated in it.
Gold has traditionally been used as money precisely because it is rare. The freemarket picked gold and silver because they are precious metals. What makes them precious? They are uncommon/rare. It’s pretty simple, we don’t want gold to be common place because it would not work well as money. The maket could have chosen steel but, steel production is about 545,500 times that of gold. If I wanted to buy stuff with steel, I would need a huge truck to transport it. The reason that gold has been used as money is because of its high value per unit of weight.
It is true that if the U.S. returned to the gold standard today that their would be far more dollars in circulation than in the past in proportion to U.S. gold reserves. I would say “so what?” The fact that there are more dollars in circulation simply means that gold would have to be re-linked to the dollar at a higher amount. This has been done before in the 1930s when FDR revalued gold because of all the money that was printed under his and the Hoover administration. Today we could re-link to gold in much the same way (but hopefully without confiscation). So instead of 36 dollars for every ounce of gold it would be something like 1500 dollars an ounce or maybe even 40000 dollars an ounce according to some estimates. This would simply mean that I would need to turn in 1500 dollars to the bank to recieve an ounce of gold. With modern banking electronics and bank cards I would not even need to turn in Federal Reserve notes to recieve hard currency. When I swipe my card for $15 it would simply remove gold from my alloted pile in the bank and put it into another alloted pile that is owned by the seller of the good I just bought. Whether the gold is physically moved or just kept track of in a ledger would probably be up to the bank. As you can see, modern technology would make a present day gold standard much more cost effiecent than 100 years ago when you had to physically withdraw gold from the bank.
I would also argue that the “not enough gold” argument misses the whole point entirely, or more precicely three points.
1) The fact that gold is linked to the dollar means that the federal government could not print off money at will. This money printing steals wealth from the population and hurts the poor and the middle class the worst because their wages are largely fixed and do not benefit from inflation like Wall Street and other politically connected groups. Putting a check on government inflation(theft) is the whole point of the gold standard. The dollar could be linked to anything hypothetically; silver, copper, land, or even oil could be used in the same way. The reason gold has been used is because of its high value per weight but, this doesn’t mean that something else could not be used in the future. Hell, the governemnt could use sea shells and it would still limit how much money it could print.
2) Gold has value in itself. I know pundits on TV and on financial shows say that gold does not have any value because it does not do anything but, they are simply wrong. Go into any pawn shop or Jewelry store. Gold is obviously highly valued by large segments of the population. The reason it is money is because it is widely in demand. This does not mean that everyone has to want gold but, instead means that someone, somewhere down the road will want to own gold. This could change to silver or maybe energy units (like oil or killowatts) but gold has traditionally been the most widely valued good and that is why it is used as money.
3) Gold also provides a function as well. Gold provides a unit of account that allows all of society to make long term investment decisions. Other things can be used as a unit of account but, gold arose on the free market because its supply is relatively stable, only growing at a very predictable rate of about 2% a year. Today we use Federal Reserve notes as a unit of account but, we never know how much inflation is going to be year after year. This creates massive distortions in the economic system that makes society poorer because of peoples inability to make long term investment decisions because of the intertemporal nature of investment. All of civilization is based on people being able to judge the value of things in the present and over time. Gold does this pretty well, government bureaucrats are pretty poor substitutes. Once again, many things can be used as a unit of account but in the past, the freemarket has used gold.
In conclusion, the whole “not enough gold argument” is pretty naive. There are some better arguements against gold that are more intellectually sound like the “we need to inflate to save the economy!” argument. You can read more about that here, here, and here.
Hello to every one, the contents existing at this website are
actually amazing for people experience, well, keep up the good work fellows.
I know this web page provides quality depending articles or reviews and other material, is there any other web page which gives these stuff in quality?
What’s up it’s me, I am also visiting this web site on a
regular basis, this web site is actually nice and the viewers are
genuinely sharing good thoughts.
I’ll immediately grab your rss as I can’t find your e-mail subscription link or newsletter service. Do you have any? Please let me know so that I could subscribe. Thanks.
I like looking at and I think this website got some really utilitarian stuff on it! .
This is the precise blog for anybody who wants to find out about this topic. You understand so much its virtually arduous to argue with you (not that I actually would need…HaHa). You positively put a new spin on a subject thats been written about for years. Nice stuff, simply nice!
I discovered your weblog site on google and check just a few of your early posts. Proceed to maintain up the excellent operate. I just further up your RSS feed to my MSN Information Reader. In search of ahead to studying more from you later on!…
Thank you for the good writeup. It in fact was a amusement account it. Look advanced to far added agreeable from you! By the way, how can we communicate?
Wow, awesome blog layout! How long have you been blogging for? you made blogging look easy. The overall look of your website is wonderful, let alone the content!
Unquestionably believe that which you said. Your favorite justification appeared to be on the internet the easiest thing to be aware of. I say to you, I certainly get irked while people think about worries that they plainly do not know about. You managed to hit the nail upon the top and also defined out the whole thing without having side effect , people could take a signal. Will probably be back to get more. Thanks
I’m curious to find out what blog system you have been using? I’m experiencing some minor security problems with my latest blog and I would like to find something more secure. Do you have any suggestions?
Thanks a lot for giving everyone an exceptionally breathtaking opportunity to read in detail from this website. It really is very awesome and also packed with a great time for me personally and my office acquaintances to search the blog at a minimum three times a week to see the newest things you have. And of course, I am also usually contented with the fantastic methods you serve. Certain 2 areas on this page are in fact the simplest I have had.
certainly like your website but you have to check the spelling on several of your posts. A number of them are rife with spelling problems and I find it very bothersome to tell the truth nevertheless I will certainly come back again.
You really make it seem really easy together with your presentation but I find this topic to be actually something that I think I’d never understand. It sort of feels too complex and extremely wide for me. I am having a look ahead to your next put up, I’ll try to get the dangle of it!
Lovely just what I was looking for.Thanks to the author for taking his clock time on this one.
Hi, Neat post. There’s a problem with your site in web explorer, could test this… IE still is the marketplace chief and a big element of other folks will omit your great writing because of this problem.
I like the valuable info you provide in your articles. I will bookmark your blog and check again here regularly. I am quite sure I will learn a lot of new stuff right here! Best of luck for the next!
You are my inspiration , I have few web logs and infrequently run out from to brand.
This design is steller! You most certainly know how to keep a reader amused. Between your wit and your videos, I was almost moved to start my own blog (well, almost…HaHa!) Great job. I really enjoyed what you had to say, and more than that, how you presented it. Too cool!
obviously like your web-site but you need to check the spelling on several of your posts. Several of them are rife with spelling issues and I find it very bothersome to tell the truth nevertheless I will surely come back again.
Good day! Do you know if they make any plugins to help with SEO? I’m trying to get my blog to rank for some targeted keywords but I’m not seeing very good gains. If you know of any please share. Many thanks!
There is obviously a bunch to realize about this. I believe you made some good points in features also.
Some genuinely nice and useful information on this website , likewise I think the layout holds great features.
Glad to be one of several visitants on this awe inspiring website : D.
Everything is very open and very clear explanation of issues. was truly information. Your website is very useful. Thanks for sharing.
It¦s really a great and useful piece of info. I am happy that you shared this helpful information with us. Please stay us informed like this. Thank you for sharing.