Why would anyone want gold standard?

[Mark6]

The problem with having money linked to a precious metal standard is that mining output of the metal is in no way correlated with demand. Metals are subject to enormous price swings, precisely because high prices incentivise mining development which takes years to complete, so the new supply tends to arrive when prices are already trending down. A gold (or silver, or platinum, or iridium, or uranium) standard has the effect of linking all other prices to a highly volatile commodity. Rather than the price of gold cycling, everything else does. Because the money-supply is fixed, prices only adjust because of changes in demand, so in effect, the commodity cycle gets fed through to wages.

And this is actually what happened in the gold standard era! There were a succession of enormous booms and recessions, which were linked to gold rushes: the 1840s in Australia and California preceded a long bull market up to 1873, then there was a 20 year long depression until the 1890s -- which happens to be just about when the South African gold fields were discovered -- and then a roaring boom up to the first world war.

I have no idea why anyone would actually want this back.

 

[The Central Scrutinizer]

Because the Jews can't manipulate the price of gold.


Or something....

 

[fuelair]

The problem with having money linked to a precious metal standard is that mining output of the metal is in no way correlated with demand. Metals are subject to enormous price swings, precisely because high prices incentivise mining development which takes years to complete, so the new supply tends to arrive when prices are already trending down. A gold (or silver, or platinum, or iridium, or uranium) standard has the effect of linking all other prices to a highly volatile commodity. Rather than the price of gold cycling, everything else does. Because the money-supply is fixed, prices only adjust because of changes in demand, so in effect, the commodity cycle gets fed through to wages.

And this is actually what happened in the gold standard era! There were a succession of enormous booms and recessions, which were linked to gold rushes: the 1840s in Australia and California preceded a long bull market up to 1873, then there was a 20 year long depression until the 1890s -- which happens to be just about when the South African gold fields were discovered -- and then a roaring boom up to the first world war.

I have no idea why anyone would actually want this back.

Because some people are ignorant and a lot have NOT read God and Gold which I highly reccommend!

 

[psionl0]

And this is actually what happened in the gold standard era! There were a succession of enormous booms and recessions, which were linked to gold rushes:

To what extent could gold alone account for these booms and recessions and what role did the banking system play?

Most banks operated on wafer-thin reserves in the 19th century. All it needed was a stage coach robbery and there would be a run on the bank. It's no wonder there were so many depressions and times when people went searching for gold.

I suppose the main objection to a return to a gold standard would be similar to that of bitcoins - it would make gold much more expensive and make those who already have it much more richer.

 

[dvictr]

there are rows of academic texts written by PHd economists from all parts of the world on various monetary systems and exchange rate theories.
"the gold standard" with its numerous variations- is a real alternative, and absolutely practical in our modern economy.

just trying to point out that its not just woo, perpetuated by ranting crazies..

 

[dvictr]

I suppose the main objection to a return to a gold standard would be similar to that of bitcoins - it would make gold much more expensive and make those who already have it much more richer.

it would be speculation to assume "the price" would go up/ or that "the value" of gold would appreciate in a gold standard..

i would argue that because the velocity of gold would rise exponentially, it would actually be more "affordable" in terms of a factor of production like gold priced in your hourly wage.

http://en.wikipedia.org/wiki/Velocity_of_money

 

[psionl0]

it would be speculation to assume "the price" would go up/ or that "the value" of gold would appreciate in a gold standard..

We have been through this before. At current prices, there is not enough gold in the world to replace US base money - not to mention the money created by banks (and we haven't even touched on the rest of the world).

To become the world's money supply, the value of gold would have to increase considerably and since much of the world's gold is privately owned, a lot of people are seriously in favour of a gold standard.

 

[kevsta]

We have been through this before. At current prices, there is not enough gold in the world to replace US base money - not to mention the money created by banks (and we haven't even touched on the rest of the world).

sorry, but of course there is. as you so rightly point out, it's just a matter of what price it's set at.

To become the world's money supply, the value of gold would have to increase considerably and since much of the world's gold is privately owned, a lot of people are seriously in favour of a gold standard.

if the new undercover version of the London Gold Pool (v1) that has been operating ever since the first version blew up had not been there, the free market price of gold would already be exponentially higher.

ultimately the market will correct the price anyway, just like it did in the 60's.

with regards to all these problems "the gold standard caused", this was not the problem of the gold standard itself, the problem was (as ever) governments getting it wrong by pegging the price too low.

 

[Mark6]

To become the world's money supply, the value of gold would have to increase considerably and since much of the world's gold is privately owned, a lot of people are seriously in favour of a gold standard.

Which explains why you never hear anyone proposing iridium, or even platinum standard. No vested interests in it.

 

[kevsta]

no 5000+ year history of being money either.

 

[Cl1mh4224rd]

no 5000+ year history of being money either.

An appeal to tradition? Really?

 

[kevsta]

An appeal to tradition? Really?

lots of things about gold are traditional, and still will be long after we are gone.

 

[WildCat]

lots of things about gold are traditional, and still will be long after we are gone.

Why? Gold has little intrinsic value. Any value put on it is artificial.

 

[The Central Scrutinizer]

lots of things about gold are traditional, and still will be long after we are gone.

Like inferior long term returns, for one.

 

[balrog666]

Why? Gold has little intrinsic value. Any value put on it is artificial.

As opposed to a small quantity of paper, linen, plastic, and ink barely suitable for wiping?



And, BTW, the utility of gold is essentially unchallenged.

 

[Kay]

As opposed to a small quantity of paper, linen, plastic, and ink barely suitable for wiping?



And, BTW, the utility of gold is essentially unchallenged.

Yeah. Both are artificial. Even ignoring that old fallacy of "natural is better", at least paper money's an artificial money that's easy to make and can be controlled, while gold's difficult to mine ( especially at this point) and can't really be controlled to benefit an economy.

 

[WildCat]

As opposed to a small quantity of paper, linen, plastic, and ink barely suitable for wiping?

Actually it's exactly like that, only paper money is far easier to transport, carry, exchange, etc. And quantities can be controlled and money expands as the economy expands. Gold, not so much.

And, BTW, the utility of gold is essentially unchallenged.

What utility do you have in mind?

 

[kevsta]

Why? Gold has little intrinsic value. Any value put on it is artificial.

lack of counterparty risk is probably the tradition that people value it for the most. no "poof, and it's gone.."

lack of ability to print it, its probably the second best tradition.

so lets see, we cant imagine it into existence, nor see it's "value" vaporize into nothingness again.

these 2 traditions alone separate it from any other imaginary (paper) instrument

Like inferior long term returns, for one.

please define "long term" ? in the real long term it will outperform ANY paper "asset", ie you will GET a return on digging it up off the seabed several hundred years later. medieval or Roman bondholders etc.. not so much.

 

[kevsta]

Yeah. Both are artificial. Even ignoring that old fallacy of "natural is better", at least paper money's an artificial money that's easy to make and can be controlled, while gold's difficult to mine ( especially at this point) and can't really be controlled to benefit an economy.

"an artificial money that is easy to make" is the root cause of all of our problems.

politicians printing "easy to make money" all these years has shaped the world around us, and hasnt that just worked out great

 

[kevsta]

Actually it's exactly like that, only paper money is far easier to transport, carry, exchange, etc.

actually I read "paper" money is actually only about 3% of circulation nowadays, the rest is digital 1s and zer0s so this argument is now becoming irrelevant.

give it a few years and it will be primarily digital format. given that would you prefer to have the value of your digital credits based on something the central banks and planners can continue to manipulate and rob you through, or something they cant? (so easily anyway)

And quantities can be controlled and money expands as the economy expands. Gold, not so much.

again, you say this as though it is a bad thing? its better than having the economy "expand" though money volume and not real growth isnt it?

the illusion that is the "growth" of the US over the past decade is entirely based on your approach, and if you didn't notice, it hasn't worked out so well.