Thread: The gold standard?

So what is your take on Nixon taking us off the gold standard? Do you think it was a good thing or the biggest mistake of the century? How do you think it changed us as a nation? Do you think we can ever go back? Should we ever go back?

Now here is my bigger question it’s a philosophical one. If gold itself has an arbitrary value placed on it then how is that any different then having an arbitrary value placed on paper money?

In other words, what good is gold if nobody is willing to exchange anything for it? If I had a bar of gold and nobody wanted to buy it or exchange anything for it, they I have a very heavy paper weight right?

Isn’t it the same with paper money? It has no inherent value. To me only usable goods and labor have value. If I have a broken fence and my neighbor fixes fences I can have him fix my fence in exchange for me fixing his car.

I am sure this is just a simple naive explanation of the issue but it’s a start. So come on lets have a discussion!

Gold Standard: Abandoned Gold Standard Means Inflation With Fiat Paper Money

Originally Posted by muffins

The value of gold isn't arbitrary. The market decides the value of gold. Paper money came out originally as 'gold receipts', where you could get your gold back at any time by presenting your banknote to the bank.

But market price is arbitrary. In a liquid market, it appears smooth and reasonable (one may say?) but in illiquid market, you see that market price is quite erratic and may not reflect good information at all.

Gold has NEVER gone to zero, unlike paper money. It's very rare and its quantity cannot be easily inflated.

YouTube - Gold/Silver Bubble My Arse! (Full HD)

For that reason people, nations and central banks hold huge quantities to protect the purchasing power of their savings/reserves.

A brick of gold will ALWAYS be worth something, unlike a brick of fiat paper money (see Zimbabwe). Even if there was a global ban on investment gold and you could only get gold for industrial use or for electronics, there would still be a market and a value for gold.

On the other hand paper money often becomes toilet paper or wallpaper.



No.




Fiat only has value because of government decree ('fiat'). Without that paper money goes to its true value as determined by the market (zero). Gold does not need its value to be decreed by government because the marketplace already tells you that it has value.



Yes. In the European medieval period, after the dark ages, feudalism (a method of paying rents and taxes to either local landowners or to the government with your labour) came about because there was a shortage of silver to act as a monetary unit.

But how do you store your labour for future consumption?

Governments love fiat money because it lets them print money to spend, so whenever we are on a hard-money standard and something expensive comes up (WW1, WW2, Veitnam etc, social programmes) the temptation to debase the money is very strong. Fiat systems always fail in the end and we always return to gold/silver money after the final hyper-inflationary event. This time round is no different.

When have we ever had a world on a full fiat money fractional reserve banking system, that we know it will fail and we will go back to gold standard? I don't know of any. I do know that the gold standard had failed again and again because it was subjected to government intervention as much as fiat money is. If there's a day when the USD fails in this century, I don't want to see it because it will make this recession looks like a piece of cake.

Originally Posted by Feetie

So what is your take on Nixon taking us off the gold standard? Do you think it was a good thing or the biggest mistake of the century? How do you think it changed us as a nation? Do you think we can ever go back? Should we ever go back?

Now here is my bigger question it’s a philosophical one. If gold itself has an arbitrary value placed on it then how is that any different then having an arbitrary value placed on paper money?

In other words, what good is gold if nobody is willing to exchange anything for it? If I had a bar of gold and nobody wanted to buy it or exchange anything for it, they I have a very heavy paper weight right?

Isn’t it the same with paper money? It has no inherent value. To me only usable goods and labor have value. If I have a broken fence and my neighbor fixes fences I can have him fix my fence in exchange for me fixing his car.

I am sure this is just a simple naive explanation of the issue but it’s a start. So come on lets have a discussion!

Gold Standard: Abandoned Gold Standard Means Inflation With Fiat Paper Money

I think the going off the gold standard frees the world economy to grow at a faster rate. How that will ends, I don't know. Growing is good but growing too fast might lead to a big explosion. Other than putting some restrains on government expenditure, I don't see the Gold standard as superior to fiat money fractional reserve banking system. I think the last hundred years has shown that fractional reserve banking system is more stable while without the restrain of the gold standard the monetary system is more flexible. Whether gold or fiat money, they both requires trust in the system. Monetary system (essentially a system of lending and borrowing) base on the gold standard (even when there's no paper involved) have failed during economic shocks. It's never been foolproof. Gold might hold its value better than paper but they can both lose their value quickly in time of shocks. In war, gold's value will go down pretty quickly compared to other more sought after commodities that you would for survival.

The gold standard is good and all, but the removal from it helps to protect us from the same economic collapse as in the Great Depression.
It allows for bank bailouts in the case they go bankrupt. That's good. You know what's better? Not allowing bankruptcy of banks in the first place.

The solution would then be regulations. Public banking systems. Privatized ones were proved to fail without government intervention. It's all or none, imo.

Originally Posted by muffins

The value of gold isn't arbitrary. The market decides the value of gold. Paper money came out originally as 'gold receipts', where you could get your gold back at any time by presenting your banknote to the bank.



Gold has NEVER gone to zero, unlike paper money. It's very rare and its quantity cannot be easily inflated.

YouTube - Gold/Silver Bubble My Arse! (Full HD)

For that reason people, nations and central banks hold huge quantities to protect the purchasing power of their savings/reserves.

A brick of gold will ALWAYS be worth something, unlike a brick of fiat paper money (see Zimbabwe). Even if there was a global ban on investment gold and you could only get gold for industrial use or for electronics, there would still be a market and a value for gold.

On the other hand paper money often becomes toilet paper or wallpaper.



No.




Fiat only has value because of government decree ('fiat'). Without that paper money goes to its true value as determined by the market (zero). Gold does not need its value to be decreed by government because the marketplace already tells you that it has value.



Yes. In the European medieval period, after the dark ages, feudalism (a method of paying rents and taxes to either local landowners or to the government with your labour) came about because there was a shortage of silver to act as a monetary unit.

But how do you store your labour for future consumption?

Governments love fiat money because it lets them print money to spend, so whenever we are on a hard-money standard and something expensive comes up (WW1, WW2, Veitnam etc, social programmes) the temptation to debase the money is very strong. Fiat systems always fail in the end and we always return to gold/silver money after the final hyper-inflationary event. This time round is no different.

You are talking in circles. What is the difference between the bar of gold being worth a market amount and a paper dollar being worth a certain amount. Neither of them change. Nothing happens to the physical item at all. If the market suddenly decided to value gold at one price today and another price tomorrow nothing would change in the bar of gold at all.

If we as a nation changed the value of a dime to 15 cents we could do so. The piece of metal that makes up a dime has no value other than that which we place upon it. The same goes for gold. It has no inherent value. It is only valuable because we want it. The same with diamonds. The market is not some holy magical thing that changes gold. It is a made up system that is decided by men.