It is a pipe dream to think the US can ever get back onto the gold standard. - Politics Forum.org | PoFo

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#14866647
Currently the US holds 195,203,000 troy oz of gold. I'l call it 200,000,000 oz.
There was about $5T in cash and coins in circulation in 2013.
In 2017 the total US debt is about $16.5T [including the Soc. Sec. T-fund].

If the current gold price is assumed to be $1000/oz, the 200 million oz are worth just $200B.
This isn't even half of the dollars currently in circulation.

To get on to the gold standard the US would have to totally default on all the debt and revalue the dollar to just about $2500/oz. More than double the current price of about $1000/oz.

This would destroy the US economy and bankrupt all the pension plans and insurance comp. in the US and many of the world's banks. The result would be worse than can be imagined.

Holders of gold would do well if they can survive the economic storm that would result. But, I find that very doubtful.
#14867625
I guess I thought this should be totally and completely obvious, but

upon further thought maybe it isn't. So, I say it for those few of you-all who can't see it for themselves.

The reason the US can't have a $16 T debt when it goes onto the gold standard is,
it would be quite easy for the holders of that debt to convert it into cash and then demand gold for their cash. As soon as the US Gov. ran out of gold [which would be soon because it has less than $500 B worth of gold in Fort Knox] the dollar would be backed by nothing and the US would in fact be "BANKRUPT".
#14867696
What serious economist recommends that the US should go back on the gold standard? A few college-kid lolbertarians who live off the trust fund daddy set up for them and have never worked a day in their lives may bang on about the gold standard, but anybody with a functioning brain just ignores then. Who are you debating with? :eh:
#14867700
I will put in some debate for you @Steve_American.

In not so many years to come, the US will learn that they should never have replaced the gold standard with the petro-dollar. They have printed dollars for fun since doing so and with the passing of the GOP tax bill and construction of an expensive non-monetary improving wall, it appears that the US are not taking the threat of hyperinflation seriously.

I suspect that it is only a matter of time before the US does return to the gold standard model from their fiat currency, at the expense of hyperinflation. Overall though, because of the resources/infrastructure/industry that America holds they would never go bankrupt and instead the capitalist model will just reset itself to bring currencies back to their true value. Nonetheless it will put a massive dent in the wallets of those who hold dollars - both in the US and around the world.

One silver lining you can take from this though, in real terms, it would take away the US poors debt and narrow the gab between rich and poor.
#14867701
Overall though, because of the resources/infrastructure/industry that America holds they would never go bankrupt

I think you misunderstand the nature of economic recessions or depressions in a capitalist economy. The US had huge industrial capacity throughout the Great Depression, yet factories sat idle and workers were laid off. This is the point of a capitalist crisis - it is so clearly unnecessary. After all, the industrial capacity is still there, the factories exist and are in working order, the capitalists want to make profits, and the workers want to work. So why don't they? Because the capitalist system won't let them. Production has to be for profit. No profit, no production. It's that simple.

But it means that the amount of resources or infrastructure or industry which a nation holds means nothing when a crisis of capitalism hits. People can end up starving while still being surrounded by huge resources and potential wealth, lying idle and untapped. This is the nature of the capitalist system.
#14867703
Potemkin wrote:I think you misunderstand the nature of economic recessions or depressions in a capitalist economy.


Any item created, resource mined or harvest tendered has value. The US has the means to create wealth. So even under a fiat model the Dollar has worth. The problem is the amount of IOUs (Dollars) they have printed. Their value relies on demand. The lower the demand, the lower its value. For the US to go bankrupt, it must have no means to create wealth. It does. Their problem is the amount they owe. So they need to create an awful lot of wealth to prevent hyperinflation. At the moment, the only thing keeping the Dollar from tanking is the petro-dollar system and the reserves China and Japan hold.
#14867792
Rugoz wrote:The gold standard is fucking dumb.

1) There's a reason why a currency has value, because it's accepted as a medium of exchange everywhere.
2) There's no reason for gold to have value. It's scarce, but horse shit is also scarce. Go figure.
3) The supply of gold is not guided by the needs of the economy.


The US is the global reserve currency, and it is based on debt (the ability of the Fed to lend money at interest to the Federal Government).

Before the abandonment in 1971 of the post-WW2 Bretton Woods system if international settlement, foreigners were able to exchange dollars for gold, but domestically there was already in place a debt-backed currency system, which was in place since FDR removed the US from the gold standard in 1933.

The Chinese Yuan is a currency which is apart from the Euro-American-Japanese monetary universe; the CNY value derives from its official rate of convertibility to the USD. Thus, the USD has a position vis-a-vis the CNY almost somewhat analogous to gold when gold was the world currency, although the USD, as an American institutional arrangement, is thus uniquely effected by the goings on in that country. On the other hand, the Chinese are themselves heavily invested in American debt.

The Gold Standard failed; it was flawed from the start; however, it was the backbone of arguably the first truly international monetary system. The system that replaced it is also flawed; which means the world is at an impasse. It doesn't even seem like a distant memory that people were talking about the Euro as a global reserve currency; such talk is long over now.

These days, sometimes people talk about the CNY as a future reserve currency; but how will this come to be, when under current arrangements the CNY is dependent on the value of the USD? The process is a tricky one, should it happen.

The USD, meanwhile, is propped up by the US Navy's control of international shipping lanes, which supports the Dollar's status as the global means of trade (in particular for oil). The US military is retrenching. It does not seem feasible that the current status quot in this area will persist.

These are momentous challenges, but I think that one inevitable aspect may be the emergence of more regional trading blocks.

China is the elephant in the room, and they will likely have a decisive role in shaping the future course of the international monetary system. Likely the current system will persist for some time, as it's in effect the best alternative there is, but I don't see it being perpetually sustainable. (Oh yeah, the global oil economy also has a role in this.) But it's difficult to know how things are going to go down.
#14867800
Crantag wrote:The US is the global reserve currency, and it is based on debt (the ability of the Fed to lend money at interest to the Federal Government).

Before the abandonment in 1971 of the post-WW2 Bretton Woods system if international settlement, foreigners were able to exchange dollars for gold, but domestically there was already in place a debt-backed currency system, which was in place since FDR removed the US from the gold standard in 1933.

The Chinese Yuan is a currency which is apart from the Euro-American-Japanese monetary universe; the CNY value derives from its official rate of convertibility to the USD. Thus, the USD has a position vis-a-vis the CNY almost somewhat analogous to gold when gold was the world currency, although the USD, as an American institutional arrangement, is thus uniquely effected by the goings on in that country. On the other hand, the Chinese are themselves heavily invested in American debt.

The Gold Standard failed; it was flawed from the start; however, it was the backbone of arguably the first truly international monetary system. The system that replaced it is also flawed; which means the world is at an impasse. It doesn't even seem like a distant memory that people were talking about the Euro as a global reserve currency; such talk is long over now.

These days, sometimes people talk about the CNY as a future reserve currency; but how will this come to be, when under current arrangements the CNY is dependent on the value of the USD? The process is a tricky one, should it happen.

The USD, meanwhile, is propped up by the US Navy's control of international shipping lanes, which supports the Dollar's status as the global means of trade (in particular for oil). The US military is retrenching. It does not seem feasible that the current status quot in this area will persist.

These are momentous challenges, but I think that one inevitable aspect may be the emergence of more regional trading blocks.

China is the elephant in the room, and they will likely have a decisive role in shaping the future course of the international monetary system. Likely the current system will persist for some time, as it's in effect the best alternative there is, but I don't see it being perpetually sustainable. (Oh yeah, the global oil economy also has a role in this.) But it's difficult to know how things are going to go down.


Fantastic post @Crantag, and clearly you have some understanding of monetary politics. I too think the future of the international monetrary system is in Chinas hands. I have no doubt they are the elephant in the room. They are currently playing a great hand. They are investing into every country that they can and not allowing anyone to interfere with their politics - along with keeping foriegn investment at bay as much as possible. They are doing all they can to keep the Yuan from becoming a reserve currency because they do not want to be in debt international nations along with the notion that they need to curp its value for its export trade.

As for the Dollar continuing to be the reserve currency, don't underplay the Euro just yet. This is more conspiracy and judgement than fact but since Trump, it appears that the EU is aligning themselves more Eastward and even doing the unthinkable and removing their interests from SA and instead teaming up with Iran to perhaps do just that. I would not be surprised if we see the introduction of the Petro-Euro and split Opec completely on this. This could effect the demand for Dollars and allow the ECB to continue to print Euros at an unpresidented rate so growth within the EU during Brexit is more achievable. Who knows? But what I do know is that America should seriously think about their debt more than they currently do because they are so invested in the Dollar being the global reserve currency that they are the nation who has the most to lose in a global recession. They literally rely on the international community having faith in their economy. This is fine today because there economy is strong. But they are not doing themselves any favours by reducing their poors spending powers and increasing their debt further, because how are ordinary working class people going to afford to buy US goods if all they are doing is buying the basics?

@Rugoz, I agree with Gold having an overpriced value, but because the US have printed so many Dollars, the likelihood is when the oil does run out and Petro-dollar does indeed end, they will have no choice but to align it to a commodity and that is likely to be gold. But sure, I think a fiat currency is the best system if you are sensible with your monetary policies.
#14867803
Any item created, resource mined or harvest tendered has value. The US has the means to create wealth.

Not under a capitalist crisis of over-production, it doesn't. If there are too many manufactured goods chasing too few consumers (e.g., because the relative share of the nation's wealth possessed by the working classes drops below a certain level), then it is no longer profitable to continue manufacturing those goods. The industrial capacity to continue to do so will still be there, but those factors of production will remain idle so long as there are no profits to be made. The items will not be made, the resources will not be mined, the harvest will not be gathered. Under capitalism, all production must be for profit. If there is no profit, then there will be no production. America's factories did not suddenly disappear in a puff of smoke when the stock market crashed in 1929, nor did its workers suddenly become lazy bums for no apparent reason. No, the capacity to create wealth still existed during the Great Depression, but it lay idle and untapped.
#14867805
Potemkin wrote:Not under a capitalist crisis of over-production, it doesn't. If there are too many manufactured goods chasing too few consumers (e.g., because the relative share of the nation's wealth possessed by the working classes drops below a certain level), then it is no longer profitable to continue manufacturing those goods. The industrial capacity to continue to do so will still be there, but those factors of production will remain idle so long as there are no profits to be made. The items will not be made, the resources will not be mined, the harvest will not be gathered. Under capitalism, all production must be for profit. If there is no profit, then there will be no production. America's factories did not suddenly disappear in a puff of smoke when the stock market crashed in 1929, nor did its workers suddenly become lazy bums for no apparent reason. No, the capacity to create wealth still existed during the Great Depression, but it lay idle and untapped.


Of course you are correct in some extent, but as a Communist you underestimate the resilience of the capitalist model. The demand for goods and resources would never stop, what will happen instead is weak competition failing so the stronger competition can continue to exist. This of course will affect jobs and hyperinflate the Dollar but within time (years), the Dollar reach a new lower rate and the US will be able to grow again (due to their resources).
#14867808
Of course you are correct in some extent, but as a Communist you underestimate the resilience of the capitalist model. The demand for goods and resources would never stop, what will happen instead is weak competition failing so the stronger competition can continue to exist. This of course will affect jobs and hyperinflate the Dollar but within time (years), the Dollar reach a new lower rate and the US will be able to grow again (due to their resources).

Indeed. The capitalist system tends to be a self-correcting homoeostatic system, in the sense that there are negative feedback mechanisms which tend to draw it back to an equilibrium state. However, this can only happen within certain limits. After all, every such crisis is incredibly destructive of human potential and social cohesion, not to mention destructive of material wealth and of the forces of production. Every crisis of capitalism can also be seen as a 'market correction' to a previous unsustainable state of existence (e.g., the huge, unsustainable boom of the 'Roaring Twenties'). However, the destructive nature of such crises, and the fact that they tend towards a greater and greater magnitude as the capitalist economy matures, means that the capitalist system will eventually 'correct' itself into oblivion.
#14867970
B0ycey wrote:@Rugoz, I agree with Gold having an overpriced value, but because the US have printed so many Dollars, the likelihood is when the oil does run out and Petro-dollar does indeed end, they will have no choice but to align it to a commodity and that is likely to be gold.


And why should that be? All central banks have massively expanded their balance sheet but inflation remains a non-issue:

Image

As you can see, the FED isn't anywhere near the top in terms of % to GDP.
#14868029
Rugoz wrote:And why should that be? All central banks have massively expanded their balance sheet but inflation remains a non-issue:

Image

As you can see, the FED isn't anywhere near the top in terms of % to GDP.


The Federal reserve isn't near the top because the US has plenty of reserve @Rugoz. I think that was established when the OP mentioned gold. And sure, the largest economy in the world has plenty of assets. Go figure.

I was discussing Bitcoins the other day with someone I know about the sudden rise in its value. They couldn't understand why it has shot up in value if the general consensus was that it was valueless. I pointed out, the holders of Bitcoin aren't selling and people that want to be part of the phenomena will pay premium to do so. When enough holders want to sell up to get their money back, that is when the price will crash... and it will crash. The same is true with dollars. When the demand for them reduces significantly due to the end of the petro-dollar or nations wanting to get their money back, the US will need to use their reserve and assets to calm traders in Dollars down and gain confident in the Dollar again. So yes, because the US are print happy, I anticipate the return of the Gold Standard.
#14868031
B0ycey wrote:
Any item created, resource mined or harvest tendered has value. The US has the means to create wealth


Not true.

An item has value based on the perceived value of the item. The perceived value of an item can be 0 at times. A bottle of water in the desert is worth a lot. Yet, the same bottle of water will have 0 value if I try to sell it to my neighbors as they have easy access to water in their own homes. There can be situations where no one wants a bottle of water. Thus, it's value is 0.

This can happen with any item, or resource under capitalism.
#14868032
Rancid wrote:Not true.

An item has value based on the perceived value of the item. The perceived value of an item can be 0 at times. A bottle of water in the desert is worth a lot. Yet, the same bottle of water will have 0 value if I try to sell it to my neighbors as they have easy access to water in their own homes. There can be situations where no one wants a bottle of water. Thus, it's value is 0.

This can happen with any item, or resource under capitalism.


Supply and demand @Rancid. The bottle of water has value even if your neighbour doesn't want to buy it. Why? Because the guy in the desert will buy it. Perhaps re-read the sentence again. Are you implying the US doesn't have the means to create wealth?
#14868039
Supply and demand @Rancid. The bottle of water has value even if your neighbour doesn't want to buy it. Why? Because the guy in the desert will buy it. Perhaps re-read the sentence again. Are you implying the US doesn't have the means to create wealth?

But what if the guy in the desert can't afford to buy it, B0ycey? What if nobody can afford to buy it? Does it still have value then? It would certainly have use--value, since it might save the man in the desert from dying of thirst. But under the capitalist system, if he can't afford to buy it then he can't have it. Production is for profit, not need. If nobody can afford to buy that bottle of water, then its exchange-value is nothing, and nobody can make a profit from manufacturing or selling it.
#14868041
Potemkin wrote:But what if the guy in the desert can't afford to buy it, B0ycey? What if nobody can afford to buy it? Does it still have value then? It would certainly have use--value, since it might save the man in the desert from dying of thirst. But under the capitalist system, if he can't afford to buy it then he can't have it. Production is for profit, not need. If nobody can afford to buy that bottle of water, then its exchange-value is nothing, and nobody can make a profit from manufacturing or selling it.


Clearly you have been reading Das Kapital before bedtime haven't you? If the guy in the desert can't afford it, then he can't have it, that is true. And that will affect its value. But if he wants it, he can trade something of value in return that he mined himself. Perhaps sand for Rancids sandpit in his garden.
#14868043
Clearly you have been reading Das Kapital before bedtime haven't you? If the guy in the desert can't afford it, then he can't have it, that is true. And that will affect its value. But if he wants it, he can trade something of value in return that he mined himself. Perhaps sand for Rancids sandpit in his garden.

If he's in the desert already, then Rancid could just gather that sand for himself. Or, more likely, pay some peon to gather it for him. He doesn't need the guy dying of thirst in the desert, who probably isn't strong enough to even stand up let alone gather sand to pay for that bottle of water. You're just being silly now, B0ycey. :D
#14868045
Potemkin wrote:If he's in the desert already, then Rancid could just gather that sand for himself. Or, more likely, pay some peon to gather it for him. He doesn't need the guy dying of thirst in the desert, who probably isn't strong enough to even stand up let alone gather sand to pay for that bottle of water. You're just being silly now, B0ycey. :D


Perhaps if he was going to die, he might trade his labour for the bottle of water. Maybe Rancid wants a gardener. I don't know. But what I do know is that bottle of water has some worth.

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