Total Posts:37|Showing Posts:1-30|Last Page
Jump to topic:

Return to Gold

glodt2123
Posts: 53
Add as Friend
Challenge to a Debate
Send a Message
1/12/2010 10:58:13 PM
Posted: 6 years ago
What do you think would be the short and long term cost and benefit associated with returning to a gold standard? On economy, politics and health of The US economy. What would you see as the largest and most desireable and undesirable effect of said transition and the fallout of the conversion.
wjmelements
Posts: 8,206
Add as Friend
Challenge to a Debate
Send a Message
1/14/2010 1:57:21 PM
Posted: 6 years ago
A gold standard is a government promise to sell its gold for a certain amount of currency. The standard is usually determined and frequently updated by the Federal Reserve.

The gold standard is not the best policy for several reasons:

First, the entire Great Depression was caused by the gold standard when the gold standard was under-valued. Foreign investors rushed in to buy gold from the American government. The gold was so under-valued that an entire third of the entire currency returned to the federal reserve within two or three years. This was the greatest factor in causing the Great Depression.

Second, any gold standard is essentially a price floor and price ceiling---at the same time. Because government will buy gold at such and such amount, any company seeking to buy gold would have to buy at a higher price than the government. Because government will sell gold at such and such amount, any company seeking to sell gold will have to sell at a lower price than the government.

Third, such a standard would not have the anti-inflation and anti-deflation effect desired by enacting a gold standard if the government updated its standard to that of the market price every hour. Therefore, any attempt to use the gold standard to fix the value of currency will ultimately lead to random surges in which the currency is undervalued or overvalued. And suddenly we have a more severe business cycle than before.
in the blink of an eye you finally see the light
I-am-a-panda
Posts: 15,380
Add as Friend
Challenge to a Debate
Send a Message
1/14/2010 2:00:34 PM
Posted: 6 years ago
I honestly don't get the gold standard. Is it like a failsafe for a bad currency?
Pizza. I have enormous respect for Pizza.
wjmelements
Posts: 8,206
Add as Friend
Challenge to a Debate
Send a Message
1/14/2010 2:04:36 PM
Posted: 6 years ago
At 1/14/2010 1:57:21 PM, wjmelements wrote:
A gold standard is a government promise to sell its gold for a certain amount of currency. The standard is usually determined and frequently updated by the Federal Reserve.
in the blink of an eye you finally see the light
Frodobaggins
Posts: 602
Add as Friend
Challenge to a Debate
Send a Message
1/14/2010 2:07:34 PM
Posted: 6 years ago
At 1/14/2010 1:57:21 PM, wjmelements wrote:
A gold standard is a government promise to sell its gold for a certain amount of currency. The standard is usually determined and frequently updated by the Federal Reserve.

The gold standard is not the best policy for several reasons:

First, the entire Great Depression was caused by the gold standard when the gold standard was under-valued. Foreign investors rushed in to buy gold from the American government. The gold was so under-valued that an entire third of the entire currency returned to the federal reserve within two or three years. This was the greatest factor in causing the Great Depression.

Second, any gold standard is essentially a price floor and price ceiling---at the same time. Because government will buy gold at such and such amount, any company seeking to buy gold would have to buy at a higher price than the government. Because government will sell gold at such and such amount, any company seeking to sell gold will have to sell at a lower price than the government.

Third, such a standard would not have the anti-inflation and anti-deflation effect desired by enacting a gold standard if the government updated its standard to that of the market price every hour. Therefore, any attempt to use the gold standard to fix the value of currency will ultimately lead to random surges in which the currency is undervalued or overvalued. And suddenly we have a more severe business cycle than before.

10/10
Ragnar_Rahl
Posts: 19,297
Add as Friend
Challenge to a Debate
Send a Message
1/14/2010 2:15:47 PM
Posted: 6 years ago
At 1/14/2010 1:57:21 PM, wjmelements wrote:
A gold standard is a government promise to sell its gold for a certain amount of currency.
No. It's a government use of gold AS the currency. Paper in such a system is nothing more and nothing less than a deed to a given amount of gold.

The standard is usually determined and frequently updated by the Federal Reserve.
That's hardly a gold standard. That's standards-free gold. The entire point of a gold standard is to be unable to "update," i.e., renege on one's promise by lowering the amount of gold each certificate can be exchanged for. Obviously if you corrupt a policy to the point where it is no longer implemented, and you just use the symbol of it while in fact using the practices of the opposite system, it won't achieve anything. That doesn't tell us anything about a gold standard in general

Therefore, any attempt to use the gold standard to fix the value of currency will ultimately lead to random surges in which the currency is undervalued or overvalued.
The currency is gold. How can stating that one pound of gold is worth one pound of gold be undervalued or overvalued?

Does having a checking account lead to greenbacks being undervalued or overvalued? No, the check is nothing but a reference to the greenbacks. It's not a good that has any meaning externally, and no more checks should be written than one has greenbacs-- no more gold-backed paper should be printed than the government has gold to back it.
It came to be at its height. It was commanded to command. It was a capital before its first stone was laid. It was a monument to the spirit of man.
Xer
Posts: 7,776
Add as Friend
Challenge to a Debate
Send a Message
1/14/2010 2:19:42 PM
Posted: 6 years ago
At 1/14/2010 1:57:21 PM, wjmelements wrote:
A gold standard is a government promise to sell its gold for a certain amount of currency. The standard is usually determined and frequently updated by the Federal Reserve.

No, it's not. The gold standard is simply when currency and circulation of money is determined by how much gold is backing the money up. The US hasn't had a gold standard since the early 1970s, and the Federal Reserve didn't control the standard before then.

The gold standard is not the best policy for several reasons:

First, the entire Great Depression was caused by the gold standard when the gold standard was under-valued. Foreign investors rushed in to buy gold from the American government. The gold was so under-valued that an entire third of the entire currency returned to the federal reserve within two or three years. This was the greatest factor in causing the Great Depression.

According to who? The vast expansion in the money supply caused by the Federal Reserve was the main cause; which led to easy credit, which led to a credit boom, which led to a massive bubble burst. I've never heard that as a cause of the Great Depression before.

Second, any gold standard is essentially a price floor and price ceiling---at the same time. Because government will buy gold at such and such amount, any company seeking to buy gold would have to buy at a higher price than the government. Because government will sell gold at such and such amount, any company seeking to sell gold will have to sell at a lower price than the government.

Do you even know what a gold standard is? This has nothing to do with the gold standard.

Third, such a standard would not have the anti-inflation and anti-deflation effect desired by enacting a gold standard if the government updated its standard to that of the market price every hour. Therefore, any attempt to use the gold standard to fix the value of currency will ultimately lead to random surges in which the currency is undervalued or overvalued. And suddenly we have a more severe business cycle than before.

Government can't change the standard unless they buy or receive more gold, again you're wrong.
wjmelements
Posts: 8,206
Add as Friend
Challenge to a Debate
Send a Message
1/14/2010 2:48:56 PM
Posted: 6 years ago
At 1/14/2010 2:15:47 PM, Ragnar_Rahl wrote:
At 1/14/2010 1:57:21 PM, wjmelements wrote:
A gold standard is a government promise to sell its gold for a certain amount of currency.
No. It's a government use of gold AS the currency.

That would be gold currency, not a gold standard. Unless you are trying to say that gold is some sort of un-exchangable standard, in which case it is not a standard of value at all, but just some meaningless number.
http://www.thefreedictionary.com...

Paper in such a system is nothing more and nothing less than a deed to a given amount of gold.

Which fits my definition entirely. Unless, again, you are trying to assert that gold is untransferable under a gold standard.

The standard is usually determined and frequently updated by the Federal Reserve.
That's hardly a gold standard. That's standards-free gold. The entire point of a gold standard is to be unable to "update," i.e., renege on one's promise by lowering the amount of gold each certificate can be exchanged for. Obviously if you corrupt a policy to the point where it is no longer implemented, and you just use the symbol of it while in fact using the practices of the opposite system, it won't achieve anything. That doesn't tell us anything about a gold standard in general
Changing the gold standard was a tool of monetary policy in the twenties. And I stated your point about the government's changing of the standard in the third paragraph.
Therefore, any attempt to use the gold standard to fix the value of currency will ultimately lead to random surges in which the currency is undervalued or overvalued.
The currency is gold.
Not a true equivalency. The government can't decide that all bread is exchangable at $5.50/lb or all labour at $6.00/hr and expect the value of the commodities to regulate the value of the currency when the value of the commodities themselves change.
How can stating that one pound of gold is worth one pound of gold be undervalued or overvalued?
Currency, like any other commodity, can not be assigned a fixed value for exchange because of the true nature of price, which, as you said once upon a time, was determined by supply and demand. The gold standard, as any other price control, either causes a shortage or a surplus in, for this case, the gold reserves. The moment one chooses to exchange dollars for gold or gold for dollars, the supply of one increases and the supply of the other decreases. This works in the same way that purchasing a large amount of stocks from the stock exchange increases the price of the stock.
in the blink of an eye you finally see the light
wjmelements
Posts: 8,206
Add as Friend
Challenge to a Debate
Send a Message
1/14/2010 2:55:10 PM
Posted: 6 years ago
At 1/14/2010 2:19:42 PM, Nags wrote:
According to who?
Milton Friedman, Capitalism and Freedom, in a chapter regarding the gold standard.
in the blink of an eye you finally see the light
wjmelements
Posts: 8,206
Add as Friend
Challenge to a Debate
Send a Message
1/14/2010 2:59:27 PM
Posted: 6 years ago
At 1/14/2010 2:19:42 PM, Nags wrote:
The vast expansion in the money supply caused by the Federal Reserve was the main cause; which led to easy credit, which led to a credit boom, which led to a massive bubble burst. I've never heard that as a cause of the Great Depression before.

The gold standard was one of the monetary tools back then. It was part of the contraction, as I detailed in my OP.
in the blink of an eye you finally see the light
Xer
Posts: 7,776
Add as Friend
Challenge to a Debate
Send a Message
1/14/2010 2:59:58 PM
Posted: 6 years ago
At 1/14/2010 2:50:22 PM, wjmelements wrote:
At 1/14/2010 2:19:42 PM, Nags wrote:
http://www.econbrowser.com...

I don't see how that refutes what I said.

Gold standards aren't good when a country wants to spend when a lot of money, that much is given. It was very typical for countries to suspend the gold standard in times of war, as they needed to spend more money then they had. That guy never made an argument anyway.

gold standard (from your link)
- (Economics) a monetary system in which the unit of currency is defined with reference to gold
- a monetary standard under which the basic unit of currency is defined by a stated quantity of gold
- the value behind the money in a monetary system

I don't know what you think a gold standard is, but you don't really know what you're talking about.
Xer
Posts: 7,776
Add as Friend
Challenge to a Debate
Send a Message
1/14/2010 3:00:55 PM
Posted: 6 years ago
At 1/14/2010 2:59:27 PM, wjmelements wrote:
The gold standard was one of the monetary tools back then. It was part of the contraction, as I detailed in my OP.

No, it wasn't. The gold standard has nothing to do with credit or interest, and the Federal Reserve doesn't control the value of gold.
wjmelements
Posts: 8,206
Add as Friend
Challenge to a Debate
Send a Message
1/14/2010 3:01:37 PM
Posted: 6 years ago
At 1/14/2010 2:59:58 PM, Nags wrote:
At 1/14/2010 2:50:22 PM, wjmelements wrote:
At 1/14/2010 2:19:42 PM, Nags wrote:
http://www.econbrowser.com...

I don't see how that refutes what I said.

At 1/14/2010 2:19:42 PM, Nags wrote:
the Federal Reserve didn't control the standard before then.
in the blink of an eye you finally see the light
Xer
Posts: 7,776
Add as Friend
Challenge to a Debate
Send a Message
1/14/2010 3:03:03 PM
Posted: 6 years ago
At 1/14/2010 3:01:37 PM, wjmelements wrote:
At 1/14/2010 2:59:58 PM, Nags wrote:
At 1/14/2010 2:50:22 PM, wjmelements wrote:
At 1/14/2010 2:19:42 PM, Nags wrote:
http://www.econbrowser.com...

I don't see how that refutes what I said.

At 1/14/2010 2:19:42 PM, Nags wrote:
the Federal Reserve didn't control the standard before then.

Right, the Federal Reserve never controlled the gold standard. That article says nothing about the Federal Reserve anyway.
wjmelements
Posts: 8,206
Add as Friend
Challenge to a Debate
Send a Message
1/14/2010 3:04:46 PM
Posted: 6 years ago
At 1/14/2010 3:00:55 PM, Nags wrote:
At 1/14/2010 2:59:27 PM, wjmelements wrote:
The gold standard was one of the monetary tools back then. It was part of the contraction, as I detailed in my OP.

No, it wasn't. The gold standard has nothing to do with credit or interest

http://www.debate.org...
When someone sells gold to the federal reserve under a gold standard, there is more money in the system. Monetary policy.

the Federal Reserve doesn't control the value of gold.
You're correct. It does not presently, but it has in the past. See my OP and ping.
At 1/14/2010 2:50:22 PM, wjmelements wrote:
At 1/14/2010 2:19:42 PM, Nags wrote:
http://www.econbrowser.com...
in the blink of an eye you finally see the light
Xer
Posts: 7,776
Add as Friend
Challenge to a Debate
Send a Message
1/14/2010 3:06:24 PM
Posted: 6 years ago
At 1/14/2010 3:04:46 PM, wjmelements wrote:
When someone sells gold to the federal reserve under a gold standard, there is more money in the system. Monetary policy.

The Federal Reserve didn't buy gold...

the Federal Reserve doesn't control the value of gold.
You're correct. It does not presently, but it has in the past. See my OP and ping.
At 1/14/2010 2:50:22 PM, wjmelements wrote:
At 1/14/2010 2:19:42 PM, Nags wrote:
http://www.econbrowser.com...

What are you talking about? The Federal Reserve never has controlled the value of gold, never.
Ragnar_Rahl
Posts: 19,297
Add as Friend
Challenge to a Debate
Send a Message
1/14/2010 3:07:47 PM
Posted: 6 years ago
At 1/14/2010 2:48:56 PM, wjmelements wrote:
At 1/14/2010 2:15:47 PM, Ragnar_Rahl wrote:
At 1/14/2010 1:57:21 PM, wjmelements wrote:
A gold standard is a government promise to sell its gold for a certain amount of currency.
No. It's a government use of gold AS the currency.

That would be gold currency, not a gold standard.
As far as I know everyone who actually advocates the "gold standard" these days means-- gold as the standard which backs the paper, i.e., the gold is the currency and the paper is a claim upon it. I realize in the twentieth century the statists did what they frequently do and tried to corrupt a word to mean something other than it does-- but they've given up on that now, and as far as I know no one today advocates a return to the twentieth century so-called "gold standard" (which was a tool used between governments, as far as I know private citizens couldn't buy gold under it), they advocate a universal gold standard in which gold is the money.

The standard is usually determined and frequently updated by the Federal Reserve.
That's hardly a gold standard. That's standards-free gold. The entire point of a gold standard is to be unable to "update," i.e., renege on one's promise by lowering the amount of gold each certificate can be exchanged for. Obviously if you corrupt a policy to the point where it is no longer implemented, and you just use the symbol of it while in fact using the practices of the opposite system, it won't achieve anything. That doesn't tell us anything about a gold standard in general
Changing the gold standard was a tool of monetary policy in the twenties.
Meaning, in actual fact: there was no gold standard. There was a fiat currency and there was a government selling gold at varying prices.

Therefore, any attempt to use the gold standard to fix the value of currency will ultimately lead to random surges in which the currency is undervalued or overvalued.
The currency is gold.
Not a true equivalency. The government can't decide that all bread is exchangable at $5.50/lb or all labour at $6.00/hr and expect the value of the commodities to regulate the value of the currency when the value of the commodities themselves change.
Because that's not a gold standard. A gold standard is the government having reserves of gold, issuing notes based on those reserves and nothing more to purchase things (to be returned for the same amount of gold at will), where it is entirely up to the person they are purchasing the things from whether they choose to accept it. The desirability of gold is the basis of the government's decision to attempt this.

How can stating that one pound of gold is worth one pound of gold be undervalued or overvalued?
Currency, like any other commodity, can not be assigned a fixed value for exchange because of the true nature of price, which, as you said once upon a time, was determined by supply and demand.
The paper, again, isn't the "currency." It's a certificate of ownership, a check if you will. It's assigned a "fixed value" in exactly the same sense that the check you write on your checking account is exchangable for a fixed number of greenbacks. It's not a "price control" but a contract which you may choose to participate in or not.
It came to be at its height. It was commanded to command. It was a capital before its first stone was laid. It was a monument to the spirit of man.
wjmelements
Posts: 8,206
Add as Friend
Challenge to a Debate
Send a Message
1/14/2010 3:09:00 PM
Posted: 6 years ago
At 1/14/2010 3:03:03 PM, Nags wrote:
At 1/14/2010 3:01:37 PM, wjmelements wrote:
At 1/14/2010 2:59:58 PM, Nags wrote:
At 1/14/2010 2:50:22 PM, wjmelements wrote:
At 1/14/2010 2:19:42 PM, Nags wrote:
http://www.econbrowser.com...

I don't see how that refutes what I said.

At 1/14/2010 2:19:42 PM, Nags wrote:
the Federal Reserve didn't control the standard before then.

Right, the Federal Reserve never controlled the gold standard. That article says nothing about the Federal Reserve anyway.

Don't have the book in front of me, but some agency of the government had changed the gold standard (again, I only believe it was the Federal Reserve).
in the blink of an eye you finally see the light
wjmelements
Posts: 8,206
Add as Friend
Challenge to a Debate
Send a Message
1/14/2010 3:10:40 PM
Posted: 6 years ago
Ragnar, we're referencing two different things, it seems. "Gold Equivalency" and Gold Standard. Both have been called the gold standard and I was referring to the former.
in the blink of an eye you finally see the light
Xer
Posts: 7,776
Add as Friend
Challenge to a Debate
Send a Message
1/14/2010 3:11:45 PM
Posted: 6 years ago
At 1/14/2010 3:07:47 PM, Ragnar_Rahl wrote:
As far as I know everyone who actually advocates the "gold standard" these days means-- gold as the standard which backs the paper, i.e., the gold is the currency and the paper is a claim upon it. I realize in the twentieth century the statists did what they frequently do and tried to corrupt a word to mean something other than it does-- but they've given up on that now, and as far as I know no one today advocates a return to the twentieth century so-called "gold standard" (which was a tool used between governments, as far as I know private citizens couldn't buy gold under it), they advocate a universal gold standard in which gold is the money.

Correct.

Meaning, in actual fact: there was no gold standard. There was a fiat currency and there was a government selling gold at varying prices.

Correct if wjm was right, however wjm is wrong. The gold standard changed in 1900 and 1933, that's it. http://en.wikipedia.org...

Because that's not a gold standard. A gold standard is the government having reserves of gold, issuing notes based on those reserves and nothing more to purchase things (to be returned for the same amount of gold at will), where it is entirely up to the person they are purchasing the things from whether they choose to accept it. The desirability of gold is the basis of the government's decision to attempt this.

Yup.

The paper, again, isn't the "currency." It's a certificate of ownership, a check if you will. It's assigned a "fixed value" in exactly the same sense that the check you write on your checking account is exchangable for a fixed number of greenbacks. It's not a "price control" but a contract which you may choose to participate in or not.

Yup.
wjmelements
Posts: 8,206
Add as Friend
Challenge to a Debate
Send a Message
1/14/2010 3:12:22 PM
Posted: 6 years ago
At 1/14/2010 3:06:24 PM, Nags wrote:
At 1/14/2010 3:04:46 PM, wjmelements wrote:
When someone sells gold to the federal reserve under a gold standard, there is more money in the system. Monetary policy.

The Federal Reserve didn't buy gold...

Then there's no gold standard. If the government cannot buy gold in exchange for currency, the exchange number is just a figure in the sky. The gold can't be a determining factor of the value of currency if there is no way to exchange them.
in the blink of an eye you finally see the light
Ragnar_Rahl
Posts: 19,297
Add as Friend
Challenge to a Debate
Send a Message
1/14/2010 3:15:13 PM
Posted: 6 years ago
Correct if wjm was right, however wjm is wrong. The gold standard changed in 1900 and 1933, that's it. http://en.wikipedia.org......
That wouldn't really change my point. Congress making occasional adjustments is just as much a problem as the rest.

And 1933 means that any semblance of gold being the standard (impossible with legal tender laws) passed away when gold was seized from people who had in all likelihood previously claimed it :).

Glad we agree in the rest though :).
It came to be at its height. It was commanded to command. It was a capital before its first stone was laid. It was a monument to the spirit of man.
Xer
Posts: 7,776
Add as Friend
Challenge to a Debate
Send a Message
1/14/2010 3:15:27 PM
Posted: 6 years ago
At 1/14/2010 3:12:22 PM, wjmelements wrote:
Then there's no gold standard. If the government cannot buy gold in exchange for currency, the exchange number is just a figure in the sky. The gold can't be a determining factor of the value of currency if there is no way to exchange them.

What are you talking about, an "exchange number"? The gold standard is a fixed weight of gold used to back up paper money.
wjmelements
Posts: 8,206
Add as Friend
Challenge to a Debate
Send a Message
1/14/2010 3:16:51 PM
Posted: 6 years ago
At 1/14/2010 3:15:27 PM, Nags wrote:
At 1/14/2010 3:12:22 PM, wjmelements wrote:
Then there's no gold standard. If the government cannot buy gold in exchange for currency, the exchange number is just a figure in the sky. The gold can't be a determining factor of the value of currency if there is no way to exchange them.

What are you talking about, an "exchange number"? The gold standard is a fixed weight of gold used to back up paper money.

How can you expect the value of the dollar to be the value of the gold if there is no way for them to be exchanged. Exchange value is value. If there is no exchange possibility, the value is entirely imaginary.
in the blink of an eye you finally see the light
Xer
Posts: 7,776
Add as Friend
Challenge to a Debate
Send a Message
1/14/2010 3:17:20 PM
Posted: 6 years ago
At 1/14/2010 3:15:13 PM, Ragnar_Rahl wrote:
Correct if wjm was right, however wjm is wrong. The gold standard changed in 1900 and 1933, that's it. http://en.wikipedia.org......
That wouldn't really change my point. Congress making occasional adjustments is just as much a problem as the rest.

And 1933 means that any semblance of gold being the standard (impossible with legal tender laws) passed away when gold was seized from people who had in all likelihood previously claimed it :).

Glad we agree in the rest though :).

Yes, I completely agree, however I was just pointing out that you never had to make that point since the United States never had the frequent problem that wjm suggested. You're right on that point though, it's just that wjm was wrong. I suppose I should have worded my statement better.
Xer
Posts: 7,776
Add as Friend
Challenge to a Debate
Send a Message
1/14/2010 3:19:07 PM
Posted: 6 years ago
At 1/14/2010 3:16:51 PM, wjmelements wrote:
How can you expect the value of the dollar to be the value of the gold if there is no way for them to be exchanged. Exchange value is value. If there is no exchange possibility, the value is entirely imaginary.

Right. You can exchange paper money for fixed quantities of gold. The fixed rate doesn't change.
Xer
Posts: 7,776
Add as Friend
Challenge to a Debate
Send a Message
1/14/2010 3:22:30 PM
Posted: 6 years ago
I think you're confused that the exchange rate changes based on market demand. The fixed rate is pre-set and doesn't change. It changed two or three times in the history of the gold standard in the US.