Clearing up some questions and comments that need some explanation (Economics 240 or thereabouts):
BTW, which of those seized metals "are inflation free and can restore stability to financial markets by allowing commerce based on a currency that does not fluctuate in value"?
Last I checked, value of gold, silver, and copper have been pretty volatile.
The idea in a standard is an attempt to peg the value of your money to some average cost of living (combined cost of goods a services to an everage person) in such a way that the value of the money can buy the same goods and services that it did in the past, and can be relied upon to do in the future.
So when asking Wildcat's question, you need to assume a standard. He or she is assuming the dollar is standard and measuring the cost of metal. It is just as correct (or incorrect) to assume the metal is constant and the money value is fluctuating. Einstein was right about relativity, you know. The real standard you seek is the mythical "average cost of goods and services". Unfortunately, that is not really easy to determine.
A real honest money system will attempt to make the currency buy the same thing at the same price through time. It is also deemed proper to add a markup as a difference in buying and selling price to make up for the costs of coinage and printing, but no profit (one reason the gov does the work). Any other messing is just fraud to one group of people or another.
Gold and silver is useful as a basis for a monetary system because:
- it is durable, doesn't rot or dissolve in many solutes readily, weighs essentially the same at all points in time, can be split into smaller parts or combined into larger ones easily, accurately and traceably (thanks, Archimedes).
- it is relatively rare, so that a small physical amount represents a goodly amount of goods/services.
- it is not so rare as to have to be traded by microscope.
- it's rarity remains relatively constant through time (a toughy). This can be done most readily by outlawing trade in that commodity, and stating a standard such as "one ounce of gold is worth $32.00". This is where we were when silver certificates were what we called dollars, in the middle of the 20th century. You can back this up, if your gutsy, by actually using an ounce of gold to make a $32 (plus small markup) piece, and use it publicly. The US was once gutsy in this way, but for various reasons (mainly having to do with international trade, where the US standard doesn't reach) has abandoned it, which is theoretically what upsets these people and Jerome.
The gold standard is essentially a bet that the price of a chunk of gold reflects the average cost of goods and services through time. Likewise the silver standard. Unfortunately, that makes your currency volatile due to efforts to "curb the market" in the commodity, like the Hunt brothers tried to do about twenty years ago.
The fed took the US off the gold and silver standards to stop the endemic monetary panics in the 19th century as speculators caused the metals to bob up and down.
I believe that the LD passing rules 5 and 6 in this thread constitute a borderline case of fraud, because if the receiver doesn't take the time to argue about the use of non-tender coinage he's suffered a loss which makes trust in real coinage decline. Truly, the receiver can decline the coin because it is not legal tender, but that assumes he's knowledgeable about what he's doing, something that another thread in this forum finds very iffy. The proof in the pudding is whether the transaction is symmetric; would the LD owner allow the LD to flow the other way just as readily as he tries to pass it? The answer is no, and that makes the transaction suspect. That, I think, is what an honest fed should be looking to curb.
