Blended gold-fiat $ monetary system?

[Francesca R]

Not quite. As you admitted in the earlier post, this only approximates the value of current wealth. And it assumes a degree of trust in the evil Druish bankers that run the economy that many gold bugs are unwilling to grant.

No, the real interest rate approximates to the trend (real) growth rate of output/income. Over the two generations between your grandpappy's wealth being earned as income and later transferred to you in estate, the approximation gets better and better. Under no historical 50 year windows (or even 20) has cash (in USD) not delivered a positive real return, meaning the purchasing power was more than preserved. All gramps had to do was put it in a savings account at the deposit-insured Ninth Fifty-Twelfth Bank of Wherever. All bets are off if he stuck it under the mattress, or bought a non interest-bearing commodity because he thought the Bureau of inflation Labor Statistics were a bunch of Pinocchios.

 

[drkitten]

Well, when we abolish the Fed, and go back to the gold standard, there are going to be an awful lot of us living in that townhome.

I foresee a big dance-off.

I'm practicing now..... My mad dance skillz will make me Landlord of the Dance!

 

[drkitten]

All gramps had to do was put it in a savings account at the deposit-insured Ninth Fifty-Twelfth Bank of Wherever.

Oh, Gramps did better than that; since he wasn't afraid of investment risk, he got a better rate of return via the risk premium. He was a pretty cagey man with a buck, which is one of the reasons that he didn't particularly mind the fact that he was being paid in valueless paper. (I believe he came out of the Depression substantially wealthier than he went into it, uninsured bank failures and all.)

The people who know how to work the system -- "working the system" being defined by the exceptionally lofty bar of "put it in a bank" -- tend not to be the gold bugs. Which makes sense, because the system, by and large, work. That's why I can't find a two bedroom house for sale anywhere in my city -- they've all been torn down and renovated to make four and five bedroom houses that Gramps would have considered to be mansions in 1940.

But the fact that Conrad Hilton was a financial genius doesn't mean that Paris will be.

... which gets back to my point that I think a lot of these nuts are more concerned with preserving wealth than they are with creating it, and a lot of them simply don't understand the idea of planning for inflation.

All bets are off if he stuck it under the mattress, or bought a non interest-bearing commodity because he thought the Bureau of inflation Labor Statistics were a bunch of Pinocchios.

Exactly. The reason Gramps was able to leave a fairly large legacy is because he was smart enough not to invest it in gold. (Well, part of the reason, anyway). Someone who inherited his legacy might not be smart enough to do that.....

 

[TriskettheKid]

See, my thing with the "gold bugs" is that I don't understand what I see as a basic contradiction:

They want a free market.

They want to tie currency to gold.

But how do you tie your currency to gold and maintain gold as a good without heavily regulating it's production or price?

 

[drkitten]

See, my thing with the "gold bugs" is that I don't understand what I see as a basic contradiction:

They want a free market.

They want to tie currency to gold.

But how do you tie your currency to gold and maintain gold as a good without heavily regulating it's production or price?

By making gold itself your currency, as was done for literally thousands of years. If the price of a gram of gold is defined as one gram of gold, that's not a particularly heavy regulation. Of course, then we get to decide how many grams of gold equate to a fifty pound sack of flour -- but that's what the (free) market will decide.

 

[TriskettheKid]

By making gold itself your currency, as was done for literally thousands of years. If the price of a gram of gold is defined as one gram of gold, that's not a particularly heavy regulation. Of course, then we get to decide how many grams of gold equate to a fifty pound sack of flour -- but that's what the (free) market will decide.

I'm thinking larger.

Do you restrict mining? Restrict the use of gold in areas other than currency? Keep it from being a good?

And how can you tie the price of gold to currency with changing demographics? For thousands of years we used gold, yes, but the world population was much smaller. As was our ability to mine gold. Now that gold is nearly ubiquitous in our world (it's in all sorts of electronics, etc), and now that the world population has exploded? What other way is there besides regulation of gold prices/uses?