Silly Objections about the Gold Standard

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.

 

526 thoughts on “Silly Objections about the Gold Standard

  1. You really make it seem so easy with your presentation however I find this topic to be really something which I think I would never understand. It sort of feels too complicated and very vast for me. I am looking forward for your next post, I will try to get the hang of it!

  2. Great post. I was checking continuously this blog and I’m impressed! Extremely useful info specially the last part :) I care for such info a lot. I was seeking this certain information for a very long time. Thank you and best of luck.

  3. I haven?¦t checked in here for a while since I thought it was getting boring, but the last few posts are good quality so I guess I?¦ll add you back to my everyday bloglist. You deserve it my friend :)

  4. Thanks for ones marvelous posting! I seriously enjoyed reading it, you happen to be a great author.I will be sure to bookmark your blog and will come back someday. I want to encourage that you continue your great job, have a nice evening!

  5. I think this is one of the most important information for me. And i am glad reading your article. But wanna remark on some general things, The web site style is ideal, the articles is really nice : D. Good job, cheers

  6. Attractive component of content. I simply stumbled upon your site and in accession capital to claim that I acquire in fact loved account your weblog posts. Any way I’ll be subscribing in your augment and even I achievement you get entry to persistently rapidly.

  7. I am no longer certain where you are getting your info, but great topic. I needs to spend a while learning much more or understanding more. Thanks for great information I was searching for this info for my mission.

  8. I am really enjoying the theme/design of your blog. Do you ever run into any browser compatibility issues? A number of my blog audience have complained about my site not operating correctly in Explorer but looks great in Chrome. Do you have any advice to help fix this problem?

  9. With havin so much content and articles do you ever run into any problems of plagorism or copyright violation? My site has a lot of exclusive content I’ve either authored myself or outsourced but it appears a lot of it is popping it up all over the web without my agreement. Do you know any techniques to help prevent content from being ripped off? I’d truly appreciate it.

  10. I like this site very much, Its a really nice office to read and incur info . “…when you have eliminated the impossible, whatever remains, however improbable, must be the truth.” by Conan Doyle.

  11. Oh my goodness! Incredible article dude! Thanks, However I am going through difficulties with your RSS. I don’t know why I am unable to subscribe to it. Is there anybody else getting identical RSS problems? Anybody who knows the solution will you kindly respond? Thanx!!

  12. This design is steller! You 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!

  13. The other day, while I was at work, my sister stole my iphone and tested to see if it can survive a thirty foot drop, just so she can be a youtube sensation. My iPad is now broken and she has 83 views. I know this is completely off topic but I had to share it with someone!

  14. Unquestionably consider that that you stated. Your favourite justification appeared to be at the internet the simplest thing to be mindful of. I say to you, I definitely get irked at the same time as other people consider worries that they plainly do not recognise about. You controlled to hit the nail upon the top as smartly as defined out the whole thing with no need side effect , folks can take a signal. Will likely be back to get more. Thank you

  15. Great blog here! Additionally your website lots up fast! What host are you the use of? Can I get your affiliate link in your host? I wish my web site loaded up as fast as yours lol

  16. Thanks for sharing excellent informations. Your web site is very cool. I am impressed by the details that you have on this blog. It reveals how nicely you understand this subject. Bookmarked this web page, will come back for extra articles. You, my friend, ROCK! I found simply the info I already searched everywhere and just could not come across. What an ideal web-site.

  17. Along with everything which seems to be developing throughout this specific subject matter, many of your points of view tend to be rather exciting. Nonetheless, I am sorry, but I can not give credence to your entire theory, all be it exhilarating none the less. It appears to everybody that your comments are generally not entirely rationalized and in reality you are yourself not thoroughly convinced of your assertion. In any case I did enjoy looking at it.

  18. Thanks for sharing excellent informations. Your site is so cool. I am impressed by the details that you have on this blog. It reveals how nicely you understand this subject. Bookmarked this website page, will come back for more articles. You, my friend, ROCK! I found just the info I already searched all over the place and just couldn’t come across. What a perfect website.

  19. hello!,I really like your writing so much! proportion we communicate more approximately your post on AOL? I need a specialist on this house to solve my problem. May be that’s you! Taking a look forward to see you.

  20. Hello there! This is kind of off topic but I need some help from an established blog. Is it very hard to set up your own blog? I’m not very techincal but I can figure things out pretty fast. I’m thinking about creating my own but I’m not sure where to begin. Do you have any tips or suggestions? Cheers

  21. Hello! This is kind of off topic but I need some help from an established blog. Is it hard to set up your own blog? I’m not very techincal but I can figure things out pretty fast. I’m thinking about creating my own but I’m not sure where to start. Do you have any points or suggestions? Appreciate it

Leave a Reply

Your email address will not be published. Required fields are marked *