LC475 wrote:
rickb wrote:
The problem of course is that there aren't enough of these coins (particularly gold eagles) to replace the current paper (and digital!) money supply.
Ahh, yes, "of course"! How many tons of paper money exists? How many tons is the right amount?
Irrelevant you say? Depends on what numbers are printed on it? One ton of paper bills with "1"s printed on them is not the same as one ton with "1000"s printed on them? Hmm.
Interesting.
Verrry interesting.
How many tons of gold exist? How many tons would be "enough" to replace the current money supply?
Get it?
What I mean is that if we assume everyone in the US wanted to convert to using "hard money" rather than dollar bills, and wanted to store their dollar denominated savings as gold rather than as book entries at banks - we'd essentially be replacing the components that make up M2 with hard money. M2 in the US is currently about $12T. There is (also of course) a valuation of existing gold and silver, even existing gold and silver coins that have already been minted, that would make this work out - BUT the valuation would then be completely impractical for ordinary daily transactions.
For example, to amount to $12T if we use all the gold in the world (about 170,000 tonnes which is about 5.5B troy oz) each oz of gold has to correspond to slightly more than $2000. Although this sounds reasonable, we've consumed all the gold in the world to equal only M2 in the US (and the rest of the world would presumably not go along with this).
If we instead try to use already minted US gold and silver eagles (
http://www.cmi-gold-silver.com/american ... ns-minted/) we only have about 18M troy oz in gold and 282M oz in silver. Assuming a 100-1 silver to gold ratio we're at about 20M oz of gold equivalent. To replace the $12T M2 amount with this, each oz of gold has to correspond to about $600,000 (and each oz of silver to $6,000) - at which point a silver dime is worth about $550 (way more than a loaf of bread costs). If we throw in the (claimed) 8,000 tonnes of gold at Fort Knox, we have an additional 257M oz of gold - and now rather than $600,000 each oz of gold has to correspond to about $50,000 making a silver dime worth about $45 - still WAY more than a loaf of bread costs.
The point is we don't end up with a usable valuation. We could extend this to include copper pennies which historically were 1/10th of a silver dime - but if a dime is worth $45 a copper penny would then be worth $4.50 - STILL not granular enough to pay for a loaf of bread.
