Azelma wrote:
1. I'm not sure what is meant by this but at least the last part, gold is a hard thing to fake. One cannot simply print gold out of thin air, as they can for fiat-based currencies. This is what makes a gold-based standard much more rigid for governments. While they can find more gold, it is much much more difficult than just going down to the printing presses and saying ok here is another trillion dollars. I mean look at the value of the dollar since 1913!
http://www.aier.org/images/stories/char ... ppd_lg.pngValue of the dollar has nothing to do with my point which is that government can just get more gold one way or the other, and that is what governments have done when they needed it.
Azelma wrote:
2. Not sure if i would call the EU a 'success story' given that a bunch of the countries are on the verge of default and are economic basket cases. I mean they are going to have to put more than a trillion dollars into a fund in order to make sure a bunch don't default, HOW is that a success? Japan is also a total mess and is only still afloat because people in that nation save so much of their income and are willing to invest in low yielding JGBs. Please also see:
http://en.wikipedia.org/wiki/Japanese_a ... ice_bubbleBubbles are a fact of economic life and have been since long before we went off the gold standard. There were several panics in the late 19th century.
The only EU country in serious trouble is Greece, which has a population of 11 million (less than many American states). Germany and France are some of the strongest economies in the world. Insofar as there is a problem, it's due to irresponsible lending. Putting the EU back on the gold standard wouldn't change that.
Azelma wrote:
3. My point is that governments have no management skills over the long term; they are
always concerned about the next election and are focused on giving people as much in benefits as possible with no regard for long term health. This is human nature, and is why fiat based currency systems ALWAYS fall throughout history. See this article for more on this
http://dailyreckoning.com/fiat-currency/ OR
Read up on the Mississippi bubble for an example of how governments can never seem to maintain control of their money supplies.
Quote:
In 1719 Law created a plan to restructure the French national debt under the Mississippi Company's auspices, exchanging company shares for debt and guaranteeing significant profits. Investors flocked, the national bank (now effectively owned by Law) printed money in response and massive inflation ensued. A bank run followed in May 1721 and the French treasury admitted that it did not have enough metallic currency to cover its paper instruments. It attempted to devalue Mississippi Company shares to no avail and finally the bank stopped paying in coinage. Shares in the company quickly plummeted to zero, the company was overtaken and divested of its assets divested and Law went into exile once more.
Read more:
http://www.investopedia.com/terms/m/mis ... z1bvJ0jWrtThis is a non sequitor. The Mississippi Bubble (which was caused by speculation on a privately held corporation) has nothing to do with my point that many other things happened during the 1970s besides Nixon ending the gold standard.
Azelma wrote:
4. That's kind of the point, the government couldn't do anything about it. Plus, I'm not so sure that this would allow anyone to 'run' the currency as it would just cause a bout of deflation if anything, and nothing more.
Alan Greenspan wrote:
In the absence of the gold standard, there is no way to protect savings from confiscation through inflation […] Deficit spending is simply a scheme for the “hidden” confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights. Gold and Economic Freedom (1968)
"a bout of deflation and nothing more". Uhh, no. If you back the currency with gold, and the amount of gold on the market increases while the value of the economy remains constant, the result is inflation - each gold-backed dollar buys less.
So...you'd be okay with massive, RANDOM, totally unpredictable inflation whenever someone hits the mother lode or some third world country gets the idea of flooding the market with currency? Example: When Qadafi fled Libya, he did a spot sale on 143 tons of gold. If we were on the gold standard, that would be enough to cause an inflationary shockwave.
Who would be running the currency? Whoever puts the new gold on the market, that's who.
Azelma wrote:
5. Not sure why this would happen in a gold standard and not during any other economic issues like the one we are currently facing. People hoard things when the going gets tough that is just what happens when confidence is low. However, you said "Meaning, assuming there was growth, the currency would deflate quickly (incentivizing the hoarding of gold instead of investment of capital)" why would people choose to hold on to gold when it is deflating? Why would someone hoard a depreciating asset? Seems to me that during this type of scenario demand for gold would fall and investment in capital would accelerate........
Inflation incentivizes investment because it prevents hoarding of capital. "Use it or lose it". Opportunity cost at its finest.
You apparently don't know what deflation is. When currency deflates, its value
appreciates (increases). If the currency is backed by gold and its value is on the rise, there's a strong incentive to hold onto it because it will buy more and more.
...what did you major in again?
Azelma wrote:
6. This flat out isn't true... The list of biggest holders of gold is here:
http://en.wikipedia.org/wiki/Gold_reserve the list is a who's who of economic powers with nations such as the US, Germany, China, France, etc. all in the top ten. Furthermore, gold makes such a great medium because it doesn't have any other uses,
unlike oil. The primary use of gold can be as a medium for exchange because it won't screw up the economy, as it isn't used for any vital applications. The same cannot be said for virtually every other commodity which ensures that supply/demand issues can be kept to a minimum.
I'm talking about unrefined gold deposits, not refined gold reserves. There is a lot of gold still in the ground and even in the seawater that isn't currently economical to retrieve. That would change if we were on the gold standard.
Azelma wrote:
7. This is pretty weak... why couldn't we just have dollars backed by gold? This allows people to still use dollar bills but at least it would be backed by something other than confidence in the Fed. Additionally, I am pretty sure drug dealers and what not still use dollars even though they still have serial numbers.....
The definition of a gold-backed currency is that the dollar and the gold are freely interchangeable. Of course you could put up bureaucratic roadblocks against this (as is common) but that would contradict your "free market" beliefs. So which is it?
Azelma wrote:
8. Doesn't this go back to your point in number 3? How do we know it wasn't a coincidence because of the rapid expansion of industrialization in the early 20th century (in which there was still a gold standard) and the ability of people to move out of farms and into cities? The U.S. dollar was effectively tied to gold until 1971 so a great deal of the economic gains came during a gold standard period. So basically you are saying that the internet is a result of a floating currency? That seems like a stretch to me...
Wasn't the dot-com revolution driven by investment? If the country was on the gold standard, there wouldn't have been as strong an incentive to invest as to hoard wealth or engage in wasteful mineral exploration.
The gold standard has been used since the beginning of time and ours is the only civilization to make such rapid progress. Why didn't the gold standard cause rapid growth for any of the other civilizations that have used it for the last three thousand years?
Azelma wrote:
Consider reading this link below as to why the US economy hasn't collapsed yet despite its monetary policies:
http://www.globalresearch.ca/index.php? ... a&aid=3482Basically, the same rules don't apply when you can borrow unlimited amounts of your own currency at home and abroad.. The U.S. dollar is still the reserve currency of choice (largely thanks to a lack of alternatives) so people are still willing to hold greenbacks despite their incredibly poor fundamentals...
That article corroborates my point which is that the problem is with the underlying strength of the country and not the greenback system itself.
Hamilton did the same thing the Fed did, which was using debt as a form of leverage. It worked for him because he didn't overplay his hand.
Azelma wrote:
Voltaire wrote:
At the end fiat money returns to its inner value—zero.
Henry Ford wrote:
It is well enough that people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before morning.
And what's the intrinsic value of gold...?
Henry Ford was one of those people who believed the Jews controlled the world through banking and supported Hitler for that reason.
Winston Churchill wrote:
It is a good thing for an uneducated man to read a book of quotations.
You didn't answer all or even most of my questions (most specifically about why what you believe about Smith contradicts what he actually said, or why you don't seem to have any other influences), and most of what you did were just a series of weak or non sequitor answers propped up by Googling.
You say you majored in finance and fete Adam Smith and market economics, but you don't even know what "deflation" means, or understand the concept of opportunity cost as it relates to inflation vs investment. Is that a problem with the "superior education" you didn't get or you personally?