Time to Return to the Gold Standard?

Discussion of the Gold portion of the Permanent Portfolio

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pmward
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Re: Time to Return to the Gold Standard?

Post by pmward » Mon Apr 29, 2019 9:29 am

sophie wrote:
Mon Apr 29, 2019 7:11 am
But, the fact that anyone is even talking about it makes me very happy to own some gold! If seeking alpha is right, the value of gold would shoot up. After which...not sure it would make any sense to own it, except to guard against going back off the gold standard.
If we ever went back on a gold standard I don't think it would be the same as before. I think it would be a hybrid system in some way. Either that would be maybe a yearly revalue of gold to dollars, or they just allow the Fed to break the peg anytime they needed to inject liquidity in a crisis. Or, maybe they even let gold and the dollar both continue to float as a free market and honor the price at the current market value. Either way, I think if (and a very, very slim *if*) politicians ever decided to go back on a gold standard it would look different than before, and would still be likely worth holding gold. I don't think we would ever truly consider going back on a gold standard bar an inflationary crisis of some kind. At the moment, the dollar still holds public faith (probably too much so), and until that faith is broken and people become mass sellers of dollars, there is just no reason they would ever consider it. The government is reactionary not proactive.
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Re: Time to Return to the Gold Standard?

Post by pugchief » Mon Apr 29, 2019 10:51 am

ochotona wrote:
Sun Apr 28, 2019 6:48 pm
Kbg wrote:
Sun Apr 28, 2019 3:55 pm
Don’t forget, we have money so people don’t have to exchange real stuff. As much as we all like to complain about it, it is truly one of mankind’s great inventions. The digital version that for all intents and purposes is the latest iteration of a centuries old concept is amazing. Every time I step back from it I find it marvelous. I go to work for 40 hours and I get some digits in my bank account. Then I go online to Amazon and click on a button, some digits leave my bank account, and some actual real stuff shows up at my door two days later.

Seriously! It is amazing.
That's why it's so destructive in a modern specialized economy for the people to lose faith in the currency and resort to barter. Transactions become impossible. Dr. Lacy Hunt talked about this a few days ago on Macrovoices.com podcast, that would be the end result of MMT in his opinion.
People like barter because it keeps the transactions out of the 'system', thus avoiding taxation.
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Re: Time to Return to the Gold Standard?

Post by Kbg » Mon Apr 29, 2019 2:48 pm

pugchief wrote:
Mon Apr 29, 2019 10:51 am
ochotona wrote:
Sun Apr 28, 2019 6:48 pm
Kbg wrote:
Sun Apr 28, 2019 3:55 pm
Don’t forget, we have money so people don’t have to exchange real stuff. As much as we all like to complain about it, it is truly one of mankind’s great inventions. The digital version that for all intents and purposes is the latest iteration of a centuries old concept is amazing. Every time I step back from it I find it marvelous. I go to work for 40 hours and I get some digits in my bank account. Then I go online to Amazon and click on a button, some digits leave my bank account, and some actual real stuff shows up at my door two days later.

Seriously! It is amazing.
That's why it's so destructive in a modern specialized economy for the people to lose faith in the currency and resort to barter. Transactions become impossible. Dr. Lacy Hunt talked about this a few days ago on Macrovoices.com podcast, that would be the end result of MMT in his opinion.
People like barter because it keeps the transactions out of the 'system', thus avoiding taxation.
Sure, so long as you are cool with limiting your options to people you know or people who know people you know and as limited by those peoples' ability to pack, transport and exchange whatever it is you are exchanging. Given where I live, if I like bananas and coffee in the morning I'm screwed in a barter system.

You get what you "barter" for. (Pun intended)
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Re: Time to Return to the Gold Standard?

Post by Tortoise » Mon Apr 29, 2019 6:15 pm

Kbg wrote:
Sun Apr 28, 2019 3:55 pm
Don’t forget, we have money so people don’t have to exchange real stuff. As much as we all like to complain about it, it is truly one of mankind’s great inventions. The digital version that for all intents and purposes is the latest iteration of a centuries old concept is amazing. Every time I step back from it I find it marvelous. I go to work for 40 hours and I get some digits in my bank account. Then I go online to Amazon and click on a button, some digits leave my bank account, and some actual real stuff shows up at my door two days later.

Seriously! It is amazing.
Transactions in a gold-backed currency wouldn't all have to take the form of gold being physically handed from the buyer to the seller. Convenient electronic transactions would still be a thing.
boglerdude wrote:
Mon Apr 29, 2019 2:34 am
A gold standard is not just gold as money, its gold combined with legal tender laws that force you to use gold as the only money. So the more gold you bury in your yard, the more its worth as the supply shrinks and other money is illegal.
The same argument applies to physical cash. But in any case, it's not a good argument since the stuff you buried is only worth something to you (in terms of goods or services) if you eventually spend it -- at which point it's no longer buried in your yard.

It's always seemed like such a silly argument to me that under a gold standard, people would just hoard gold until it all disappeared. That would never happen, because certain spending isn't discretionary. People always have to spend something to meet their basic needs (food, water, shelter, clothing, etc.), so that sets a floor on the amount of gold that would have to change hands under any conditions.
boglerdude wrote: And how to collect taxes when its easily hidden?
Again, the same argument applies to physical cash. And people are already able to use gold and physical cash to hide assets from the tax authorities :)
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Re: Time to Return to the Gold Standard?

Post by boglerdude » Tue Apr 30, 2019 12:30 am

If gold is the only money, its purchasing power increases with time as more stuff is produced but the supply of gold stays the same. So you spend what gold you must, and bury the rest for a risk free return. Cash burns up at the inflation rate, forcing people to take risk and invest the money. Good for innovation.

Originally, currency was just blank paper and you'd write "I owe Joe 3 pumpkins" on it. Why should that paper be scarce? That would slow the economy (transactions). Then we transitioned to a system where the paper itself has value, it was redeemable for X ounces of gold.

Gold was chosen because its supply is stable, so you can measure everything against it. If Ford doubles the supply of cars for sale next year, they're each worth half as much gold as last year. That deflation helps consumers.
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Re: Time to Return to the Gold Standard?

Post by Kbg » Tue Apr 30, 2019 8:48 am

All forms of money have value solely because people believe it does, including gold. One of the best, most innovative podcasts I've very listened to is Freakonomics "Why Gold?" Highly recommended.

Nothing to do with the podcast, but in the ancient world, bronze, silver and gold were all valued and used as money. Try going anywhere with some bronze in your pocket and see if you could get anything for it (other than a salvage yard) today.

Assuming SHTF doesn't happen and technology continues to roll, in the future on I could easily see all three of the above being nothing but nice decorative or industrial metals with no monetary value as a stand alone feature. Personally, I think silver is a good way there already.
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Re: Time to Return to the Gold Standard?

Post by gaddyslapper007 » Tue Apr 30, 2019 9:29 am

Kbg wrote:
Tue Apr 30, 2019 8:48 am
All forms of money have value solely because people believe it does, including gold. One of the best, most innovative podcasts I've very listened to is Freakonomics "Why Gold?" Highly recommended.
no doubt....value only lives in our (people's) collective mind.

Competing currencies to the US dollar are not illegal...people are free to use whatever currency they choose... If you want a gold standard.....put yourself on a gold standard. Lead by example...encourage others to accept your gold. You cant wait for government to come around....they have no incentive. Create a competing gold standard paper or digital currency.....liberty is taken, not given! (unfortunately) <--If this is too much work, then embrace the next closest thing that currently exists.
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Re: Time to Return to the Gold Standard?

Post by Kbg » Tue Apr 30, 2019 7:56 pm

If you think coming up with an alternative form of money will bring liberty you are seriously deluded and need to read more history...power will come to it and take it over. Those guys are normally the ones with the biggest rocks, spears, guns etc.
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Re: Time to Return to the Gold Standard?

Post by gaddyslapper007 » Tue Apr 30, 2019 8:47 pm

Kbg wrote:
Tue Apr 30, 2019 7:56 pm
If you think coming up with an alternative form of money will bring liberty you are seriously deluded and need to read more history...power will come to it and take it over. Those guys are normally the ones with the biggest rocks, spears, guns etc.

Is gold not an alternative form of money to the US dollar? Does it not provide its holder liberty outside spying government eyes?

Anyway.....my “liberty is taken” comment was more directed at people expecting government to do or give them something. (in this case a gold standard).
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Re: Time to Return to the Gold Standard?

Post by Kbg » Tue Apr 30, 2019 11:01 pm

gaddyslapper007 wrote:
Tue Apr 30, 2019 8:47 pm
Kbg wrote:
Tue Apr 30, 2019 7:56 pm
If you think coming up with an alternative form of money will bring liberty you are seriously deluded and need to read more history...power will come to it and take it over. Those guys are normally the ones with the biggest rocks, spears, guns etc.

Is gold not an alternative form of money to the US dollar? Does it not provide its holder liberty outside spying government eyes?

Anyway.....my “liberty is taken” comment was more directed at people expecting government to do or give them something. (in this case a gold standard).
No it is not in the United States unless it us a US Eagle and you would be pretty stupid to spend it at its face value. To convince yourself of my correctness go to any business that is not a pawn shop/coin dealer/precious metals dealer and see what you can buy with the gold you bring in (try Walmart or McDonalds, they're ubiquitous and easy to find).

By the way, what's wrong with people expecting the government to give them something when they pay taxes? I expect my government to do lots of stuff for me in exchange for my tax money. Preferably they do so efficiently and effectively but sometimes that's a stretch. They do pick up my garbage every week for $21.25 a month and I find that service a great deal for the money. I also like the electricity they brought out to my grandfather's farm in the 1940s which I now get to use for a fee. It is way better than the crappy and very expensive rural internet I pay for provided by the private sector. (I should probably get off now as it's metered too.)
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Re: Time to Return to the Gold Standard?

Post by technovelist » Sat May 04, 2019 9:12 pm

The purpose of the gold standard is to allow people to have one stable point in valuing commodities and labor.

What I'm referring to is an actual gold standard, not anything that could be characterized as "hybrid",r "flexible" or "fractional reserve".

An actual gold-standard bank is a specialized warehouse that holds gold for its customers. It does not lend out that gold, and does not issue receipts in excess of the amount of gold that it holds. Both of those actions are fraudulent and would result in legal jeopardy for the bank owners in a just legal system.

If you deposit one gram of gold in an actual gold-standard bank, you get a receipt saying that they are holding that gram of gold for you.

That receipt may be endorsable to another person. If you endorse it, that other person is now the owner of that gram of gold. You could also transfer it electronically with today's technology. But in any case, that gold is the property of its owner, not of the bank.

The Texas Bullion Depository is very similar to a gold-standard bank, and will become even more similar when it has a credit (or preferably a debit) card that allows you to spend "US Dollars" that are converted to a gold debit at the end of the month (or similar period).

Almost all of the financial panics and crashes that have bedeviled the world since the 1700's are the result of paper "money" and other methods of trying to get something for nothing. The tulipmania is an exception but then it did not result in widespread economic distress as most of the others have done.

Any attempt to "improve" on the gold standard by printing money or otherwise inflating the unit of account causes immense harm to businesses and people because it sabotages their ability to keep track of their wealth and profits/losses.

We will eventually return to a gold standard once the current non-standard monetary system collapses. That's what always happens in such cases. Unfortunately, by the time that happens, great destruction of wealth will have occurred, for no reason other than ignorance and the attempt to get something for nothing.
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Re: Time to Return to the Gold Standard?

Post by Kbg » Sun May 05, 2019 7:50 pm

Tn,

With respect, you are just flat wrong on several points concerning paper money. Financial crises were far more frequent in earlier times and usually more severe on average. Additionally, very few economic crises have anything to do with money per se. They are almost always caused by something more fundamental and real.

Be careful where you get your info on gold and money, inevitably (surprise) the stuff you were spouting sounds like it comes from people who sell gold...

Riddle me this: Why doesn’t anyone use the gold standard anymore? Conspiracy theories not allowed. Actual historical facts and contemporary statements required.
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