But doesn't the gold standard idea suck?

Ar Scion

Ar Scion

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I've always heard about how the gold standard is a good thing, and getting off the gold standard was a cheap, nasty shortcut to temporary bubbles, boom-bust cycles and wasn't good for the country's health.

But then I heard someone say that tying the dollar to the gold standard chains economic growth to the gold mining industry, most of which is in another country. Moreoever the industry is not supposed to be booming, meaning if US economic growth outpaces gold reserves we'll be held back.

Am I understanding it wrong? What's the story here?
 


Ar Scion said:
But then I heard someone say that tying the dollar to the gold standard chains economic growth to the gold mining industry, most of which is in another country.
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Economic growth isn't based on the amount of money or consumption. Here is a pretty good explanation of this:

Irwin Schiff's "How an Economy Grows"

Alternatively, here is the same thing in video format with narration:

[ame=http://www.youtube.com/watch?v=bFxvy9XyUtg]How an Economy Grows and Why It Doesn't (by Irwin Schiff) - YouTube[/ame]
 
I think the misconception is that RP wants the US to run purely off of the gold standard but that isn't the case.

He wants to allow competitve currencies to enter the market.

Federal Reserve Notes? okay;
Euro's? go ahead;
gold? fine;
silver? sure;
seashells? if anyone accepts them, then why not.

Under RP the liberty dollar raid of 2007 would have never happend and the person running it would have never been branded a terrorist.
 
Then you'd have deflation to the point where everything becomes worthless. That's why you can't have a gold standard monetary system. People would be creating value in goods and services and there just wouldn't be enough gold itself to support the ever going value being created.
 
I'd also just like to know the truth about what is good and bad for monetary policy. One thing I know is that I'll never get the truth from a gold bug or large investor of gold. They are already biased because they own so much of it, or are trying to sell it.

You'll probably also never get the truth from the Federal Reserve - or anyone making a profit out of monetary policy.

I've lazily read/watched a bunch of ideas over time and what sounds like the best solution to me is government issued fiat currency like what Lincoln introduced in the civil war. He introduced the original greenback - which was a highly regarded.

This is basically what Bill Still talks about in "The secret of Oz" which is the monetary solution that makes the most sense to me. Bill Still is the maker of "The Money Masters" classic.

I think you'll really like 'The Secret of Oz' if you watch it. It's got a lot of good history in there too.

'The Secret of Oz' Torrent:
The Secret of Oz the revised Money Masters Torrent - btjunkie

Yes, without question, going to a gold or silver standard puts us at the mercy of mining companies and other countries that are rich in gold/silver. And there is no need for it.
 
Jeeta said:
Then you'd have deflation to the point where everything becomes worthless. That's why you can't have a gold standard monetary system. People would be creating value in goods and services and there just wouldn't be enough gold itself to support the ever going value being created.
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WRONG.... Falling Prices Are the Antidote to Deflation - George Reisman - Mises Daily

the money supply would stay the same or near it (it would actually be increasing as more gold is mined), its that the prices of things would get cheaper because the money supply would stay the same thus making prices lower which is a good thing. This means the *value* of money stays the same. something you have never experienced in your lifetime. Do you even remember when there was penny candy, well thanks to your idea that you must inflate the money supply because of goods and services (which is keynesian) now you have to earn more money to buy the same good.

"Indeed, under a full-bodied, 100-percent-reserve gold standard, falling prices, caused by increased production, are likely to be accompanied by a modest elevation of the rate of profit and a somewhat greater ease of repaying debt, both owing to the increase in the production and supply of gold and thus in the spending of gold. Under such a gold standard, prices fall to the extent that the increase in the production and supply of ordinary goods and services outstrips the increase in the production and supply of gold and the consequent increase in spending in terms of gold."
 
The money supply doesn't matter.

The deeper reality, however, is that the supply is not even important. Remember that the primary function of money is to measure the value of the items for which it is exchanged. In this sense, it serves as a yardstick or ruler of value. It really makes no difference if we measure the length of our rug in inches, feet, yards or meters. [...] no matter what measurement we use, the reality of what we are measuring does not change. Our rug does not become larger just because we have increased the quantity of measurement units by painting additional markers onto our rulers.

If the supply of gold in relation to the supply of available goods is so small that a one ounce coin would be too valuable for minor transactions, people simply would use half-ounce coins or tenth-ounce coins. The amount of gold in the world does not affect its ability to serve as money, it only affects the quantity that will be used to measure any given transaction.

-G. Edward Griffin; The Creature From Jekyll Island
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What is the effect of a change in the money supply? Following the example of David Hume, one of the first economists, we may ask ourselves what would happen if, overnight, some good fairy slipped into pockets, purses, and bank vaults, and doubled our supply of money. In our example, she magically doubled our supply of gold. Would we be twice as rich? Obviously not. What makes us rich is an abundance of goods, and what limits that abundance is a scarcity of resources: namely land, labor, and capital. Multiplying coin will not whisk these resources into being. We may feel twice as rich for the moment, but clearly all we are doing is diluting the money supply. As the public rushes out to spend its new-found wealth, prices will, very roughly, double—or at least rise until the demand is satisfied, and money no longer bids against itself for the existing goods.

- Murray Rothbard; What Has Government Done to Our Money?
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Let us now suppose that the miners, in their quest for a better standard of living, work extra hours and produce more gold this year than previously [...] Now things are no longer in balance. [...] The result of this expansion of the money supply over and above the supply of available goods is the same as in our game of Monopoly. The quoted prices of the suits go up because the relative value of the gold has gone down.

[...] When the miners see that they are no better off than before in spite of the extra work, and especially when they see the tailors making a greater profit for no increase in labor, some of them decide to put down their picks and turn to the trade of tailoring. [...] When this happens, the annual production of gold goes down while the production of suits goes up, and an equilibrium is reached once again in which suits and gold are traded as before.

-G. Edward Griffin; The Creature From Jekyll Island
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