[Cheesecake_Marmalade]

That and the fact that a gold standard wouldn't work if you print money ad infinitum is no surprise, because no system of money works that way. Your issue is with a priniting of excess money, not with the fiat system on a whole.

[TropicalK]

As it so happens, medieval nobles would often use the mint in the same reckless way which opponents of fiat money talk about the government using the printing press. There were some very inflationary regimes using not just gold-backed money, but actual gold and silver coins.

A gold standard would have the currency redeemable in physical gold at a predetermined number of ounces. What some statist dictator did to defraud his populace is of little concern.

That and the fact that a gold standard wouldn't work if you print money ad infinitum is no surprise, because no system of money works that way.

There are quite a few examples in history where it works precisely that way. Game-theory economics results in printing money ad infinitum. Marginal revenue = marginal cost.

[Paradigm]

A gold standard would have the currency redeemable in physical gold at a predetermined number of ounces.

But what we're talking about here is actual gold, not some currency that is theoretically redeemable in gold(in actual practice, such a gold standard has never existed, as there was always more money than there was gold to redeem it in).

[Wolfman]

Not to mention I've yet to see one good argument why to back currency in Gold itself. Really, gold is pretty useless. A better thing to back currency in would be something that will keep you alive, which is not gold. I've also never heard someone try to explain why we should use a finite resource. There simply isn't enough gold in the world to completly back currency. Eventually we'll run out, and then the phrase 'uncontrollable hyperinflation to our destruction' kind of comes to mind.

[Huntster]

Because gold has limited availability. If one prints currency "ad infinitum", it is no longer "gold backed", because the amount of gold is limited.

Read the post above you.

The post above mine makes no sense:

As it so happens, medieval nobles would often use the mint in the same reckless way which opponents of fiat money talk about the government using the printing press. There were some very inflationary regimes using not just gold-backed money, but actual gold and silver coins. However, the people didn't mind too much, because the inflation was expected, and basically was treated as a de facto tax.

1) This statement is unsupported in any way with any citation, reference, or links

2) Are we to assume that, for some unexplained reason, these "medieval nobles" flooded their economy with gold and silver coin, and this was a bad thing for the populace/economy?

Your issue is with a priniting of excess money, not with the fiat system on a whole.

My issue with "the fiat system on a whole" is that it always leads to, includes, or results in "a printing of excess money". It is part and parcel of such a system. Again, as Greenspan wrote:

This is the shabby secret of the welfare statists' tirades against gold. Deficit spending is simply a scheme for the confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights. If one grasps this, one has no difficulty in understanding the statists' antagonism toward the gold standard.

Not to mention I've yet to see one good argument why to back currency in Gold itself. Really, gold is pretty useless.

1) The good reason to back a currency in gold is it's limited availability, which is precisely the purpose; to keep the value of the currency solid

2) While gold has little actual utility, it is highly desirable for it's value. I doubt you'd decline if somebody offered you gold.

A better thing to back currency in would be something that will keep you alive, which is not gold.

I agree that commodities have more utility. The commodities that I find most valuable are (1) food, (2) infrastructure, (3) fuel, and (4) ammo. However, none of these can compare to gold in terms of stabilizing a monetary system because they (1) deteriorate, (2) aren't limited in availability, and/or (3) are consumable commodities.

That's why I don't horde gold or keep it in my home or safe. I don't even own it per se. However, I've kept an appropriate amount of my investment portfolio in Swiss francs, which (while weakened by the referendums in the year 2000 which lowered the 40% gold reserve to 20%) are still backed by gold more than any other Western currency. This provides the dual benefits of a strong currency which still works as an investment with regards to earnings.

With regard to commodities, I store a few hundred gallons of gas and diesel, several months worth of food, I own my own home on acreage, maintain a stock of sheep/goats, and have plenty of ammo for the really tough times.

I've also never heard someone try to explain why we should use a finite resource.

So that tyrants can't use (or easily use) infinity (the printing press) to devalue the society's currency.

There simply isn't enough gold in the world to completly back currency.

Then the currency has no value. It is nothing but faith, and my faith is in God alone.

Eventually we'll run out, and then the phrase 'uncontrollable hyperinflation to our destruction' kind of comes to mind.

That is why I say that fiat currency "always leads to, includes, or results in 'a printing of excess money'. It is part and parcel of such a system."

Those who advocate such are simply betting that they themselves won't be the ones caught up in it. They're gamblers.

[Figlio di Moros]

My issue with "the fiat system on a whole" is that it always leads to, includes, or results in "a printing of excess money". It is part and parcel of such a system.

You've made that assertion several times in this thread, then denied it when I questioned you about it, and now re-assert it. fiat monetary systems do not necessarily lead to hyperinflation, nor does gold prevent it; there was hyperinflation during both the early colonial period, as well as during gold rushes, etc. In turn, gold-back dollars are relative fluid themselves when backed by fractional reserve banking; if there is a high rate of loans relatively quickly, it has the effect of expanding the monetary supply by the same amount.

Furthermore, I think you might want to consider the fact that demand for gold has skyrocketed since the start of the recession, meaning that what you consider a safe protection against inflation, despite the fact the monetary supply is contracting due to the recession, is possibly a gold bubble relative to the housing-market bubble before it. I'd consider myself in a much safer position with my "printing-press" dollars sitting in the bank or in stocks than anyone putting into gold right now.

[Huntster]

Huntster wrote:
My issue with "the fiat system on a whole" is that it always leads to, includes, or results in "a printing of excess money". It is part and parcel of such a system.

You've made that assertion several times in this thread, then denied it when I questioned you about it, and now re-assert it.

I fail to see where I denied it. Perhaps "leads to", "includes", or "results in" are where your confusion lies?

fiat monetary systems do not necessarily lead to hyperinflation, nor does gold prevent it.

I agree with those words, however, I again maintain that if the currency is truly backed by gold (not just in word or in whimsically changed portions), there will be no hyperinflation. Limited availabilty cannot equal hyperinflated. Period. Those words are diametrically opposed.

there was hyperinflation during both the early colonial period, as well as during gold rushes, etc.

In the early colonial hyperinflation of the Continental dollar, the hyperinflation was primarily caused by British counterfeiting as a war tactic (which is yet another obvious flaw with fiat currency), and the stabilization of the currency occurred................when....................?

When the later dollar was backed by precious metals:

Continental currency was a paper currency issued by the Continental Congress, after the Revolutionary War began in 1775. Eric P. Newman, a leading authority on the early paper money of America, distinguishes between Continental Currency, issued by the authority of the Continental Congress, Colonial currency, issued by the colonies before the revolution, and state currency, issued after the Declaration (though many collectors lump together state and colonial issues and refer to both as Colonial Currency). Continental currency was denominated in dollars from 1/6 of a dollar to $80, including many odd denominations in between, while Colonial currency was denominated in pounds, shillings, and pence, as well as in dollars. When war with England broke out the British began a large scale counter-fitting operation against the Continental as an act of war to destabilize the economy of the colonies.[1] Benjamin Franklin is recorded as having said, "The artists they employed performed so well that immense quantities of these counterfeits which issued from the British government in New York, were circulated among the inhabitants of all the states, before the fraud was detected. This operated significantly in depreciating the whole mass."[2]. By the end of 1778 the Continentals retained from 1/5 to 1/7 of their value against coinage. At the end of 1779, they retained only 1/25 of their value against coinage, giving rise to the phrase "not worth a continental"

The painful experience of the runaway inflation and collapse of the Continental dollar prompted the delegates to the Constitutional Convention to include the gold and silver clause into the United States Constitution so that the individual states could not issue bills of credit.

In turn, gold-back dollars are relative fluid themselves when backed by fractional reserve banking; if there is a high rate of loans relatively quickly, it has the effect of expanding the monetary supply by the same amount.

Which is the effect which also includes the hyperinflation occurring during gold rushes which you referred to. I experienced this personally during my early years in Alaska during the oil rush. It can occur with economic booms caused by any number of economic boom activities like a software boom, oil boom, gold rush, agricultural crash in one area causing a migration to another flourishing agricultural area, etc. It is extremely localized and temporary and is simply profiteering on limited supplies and services. It is not hyperinflation caused by monetary instability.

Furthermore, I think you might want to consider the fact that demand for gold has skyrocketed since the start of the recession, meaning that what you consider a safe protection against inflation, despite the fact the monetary supply is contracting due to the recession, is possibly a gold bubble relative to the housing-market bubble before it.

That is a very valid consideration, and that is why I don't play "boomtown" economic speculation. Like I wrote: been there, done that. Alaska was a boom/bust economy well into the 1990's, and I rode it both up and down, and then back up again.

I learned. The hard way.

And won.

I'd consider myself in a much safer position with my "printing-press" dollars sitting in the bank or in stocks than anyone putting into gold right now.

Then your future is set, is it not?

Like I wrote: live your opinions out. If you're correct, you win.

If not................oh, well.........................the gubmint will always bail you out...........................right?.......................

[Figlio di Moros]

Hunster-

1) "trully backed by gold" doesn't mean the supply can't expand, nor does it take into consideration the effects of FRB.
2) By early colinial period, I meant early spanish colonization when the conquistadors flooded the domestic market with the gold they brought back.
3) As I said earlier, I'm a country boy; we tend not to be too reliant on washington.

[Cheesecake_Marmalade]

There are quite a few examples in history where it works precisely that way.

How are you using works in this sentence? I don't mean to say that it can't be "used" that way, in theory, I'm trying to say that if used that way it cannot function.

Furthermore, I think you might want to consider the fact that demand for gold has skyrocketed since the start of the recession, meaning that what you consider a safe protection against inflation, despite the fact the monetary supply is contracting due to the recession, is possibly a gold bubble relative to the housing-market bubble before it. I'd consider myself in a much safer position with my "printing-press" dollars sitting in the bank or in stocks than anyone putting into gold right now.

QFT. I talked to my dad about it and he said that every time a recession rolls around, people go crazy and start buying gold. Then when the recession ends they realize that gold is basically useless and doesn't accrue any value over time, so they all sell off their gold and it becomes useless again. Also I remember it was noted on CBS radio news that the supposed "rise" in the value of gold is actually not a rise at all, it's just a rise in the amount of dollars an ounce of gold is worth because the value of the dollar has gone down. In reality gold hasn't gained much real value and never will because, aside from jewelry, gold has about as much of a practical use as a scrap of paper.

[Huntster]

Hunster-

1) "trully backed by gold" doesn't mean the supply can't expand, nor does it take into consideration the effects of FRB.

"Truly backed by gold" means that the supply shouldn't expand, or it's backing is compromised and it becomes inflationary.

2) By early colinial period, I meant early spanish colonization when the conquistadors flooded the domestic market with the gold they brought back.

The phenomenon called price revolution, or (like I wrote above) the "boomtown economy":

Used generally to describe a series of economic events from the second half of the 15th century to the first half of the 17th, the price revolution refers most specifically to the high rate of inflation that characterized the period across Western Europe, with prices on average rising perhaps sixfold over 150 years.

It was once thought that this high inflation was caused by the large influx of gold and silver from the Spanish treasure fleet from the New World, especially the silver of Peru which began to be mined in large quantities from 1545. According to this theory, there was simply too much money for the amount of available goods.

This is not a destabilization of the currency. It is growth of currency faster than it can be spent because available goods haven't kept up (like in any gold rush/boom town). It is true supply and demand; the supply of goods and services is low because they are not available even though the marketplace has plenty of money to buy it with, thus the commodities are more valuable than the money. It is not a long term problem and it always fixes itself because the commodities will always flow toward the wealth in relatively short order. It is true monetary growth, which is rather opposed to falsely printing fiat (which is seen as worthless).

3) As I said earlier, I'm a country boy; we tend not to be too reliant on washington.

If you're reliant on fiat, you're reliant on he who prints it.

I talked to my dad about it and he said that every time a recession rolls around, people go crazy and start buying gold. Then when the recession ends they realize that gold is basically useless and doesn't accrue any value over time, so they all sell off their gold and it becomes useless again. Also I remember it was noted on CBS radio news that the supposed "rise" in the value of gold is actually not a rise at all, it's just a rise in the amount of dollars an ounce of gold is worth because the value of the dollar has gone down. In reality gold hasn't gained much real value and never will because, aside from jewelry, gold has about as much of a practical use as a scrap of paper.

Bingo: Gold stabilizes money. It isn't needed if the money supply is kept in proper check, but since it's easy to print for political reasons, it will eventually happen, which is why it is best kept legally backed by a set amount of gold, or if not done socially, the wise individual will set his investment foundation on a set amount of gold assets.

[TropicalK]

Have you even looked at a chart of gold? Gold declined during the last recession, but rises when the government prints dollars. Currency is used as a STORE of value, not someting that outperforms everything. In fact, if something is expected to continuouly appreciate, than it is a bad candidate for a currency. It would be a good candidate for an investment however.

How are you using works in this sentence? I don't mean to say that it can't be "used" that way, in theory, I'm trying to say that if used that way it cannot function.

So if it is used in a way typical in the way it has been used in the past, then its no good, yet this is a reason to be FOR fiat?

I'm personally not for a gold standard, but I'd like the accepted medium of exchange to be backed by something other than threat of death.

[Cheesecake_Marmalade]

So if it is used in a way typical in the way it has been used in the past

Prove that it's typical and prove that there is no way to safeguard against it.

I'm personally not for a gold standard, but I'd like the accepted medium of exchange to be backed by something other than threat of death.

Why? Your life is your most valued possession, if you back currency with your life then it'll always be valuable. :D

[Figlio di Moros]

Hunster... just...



Look, seriously? You admitted it yourself, the new supply of gold and silver from the new world expanded the supply faster than domestic production could keep up; this is known as inflation. When the supply of gold expands, the supply of gold-back money expands. When a bank signs a new loan, this, too, creates inflation; the lower the reserve limit, the higher inflation/deflation, gold-backing or not. Atleast in a fiat monetary system the government can control the base monetary supply...

[dilpill]

Do all of you gold standard supporters really think that having a gold standard would prevent a tyrant from inflating the money supply; causing inflation? Are you really that oblivious? If a leader truly wanted to print money to fund the state, having a gold standard wouldn't stop him. Turning a gold backed currency into a fiat one isn't exactly a big endeavor. He would just end convertibility and start printing as if the currency had been fiat all along.

A fiat currency in the hands of a benevolent government is just as safe as a gold backed currency, while a gold backed currency in the hands of a malevolent government will quickly become fiat anyways.

There is little point in going back to a gold standard.

[TropicalK]

So the gold standard fails when there is no gold standard, so we should just jump to the failure of fiat.

It is possible that currency be privately issued, but lets just jump to the endgame where tyranical governments murder and rob civilians, lets do that.


Quote\\if you back currency with your life then it'll always be valuable.

I prefer to back it with your slave labor. I'll print as much as I want, and you'll do the labor.

[dilpill]

So the gold standard fails when there is no gold standard, so we should just jump to the failure of fiat.

The gold standard fails because nothing prevents a government from dropping it on a whim. There is zero functional difference between a gold backed currency and a fiat currency managed in a noninflationary* way. Well, actually there is a drawback with the gold standard in that situation because you've made it prohibitively expensive for gold to be used industrially.


*I don't say properly managed because there is a very good case for having a rate of inflation of around 1% to prevent deflationary spirals

[Cheesecake_Marmalade]

lol, I love it when people pretend to be jaded with a government-managed anything, and yet they leave it on faith that a government would not inflate a gold-backed currency.

[Huntster]

Hunster... Look, seriously? You admitted it yourself, the new supply of gold and silver from the new world expanded the supply faster than domestic production could keep up; this is known as inflation.

No, I did not. I admitted that the influx of gold and silver into Spain expanded the supply of wealth (which can be likened to an expanded money supply, but it is true wealth expansion, not fiat expansion) while, simultaneously, the supply of goods and services lagged way, way behind. Thus, with goods and services in high demand while the supply of goods and services still lagged, their value went up. Thus there is an "inflationary" period which primarily affected those who didn't have the gold and silver (pretty much everybody except the king, queen, and their "people").

This is not an inflation due to the instability of the currency like fiat currency creates, which is much more devastating, long lasting, and more difficult to extract a society from.

When the supply of gold expands, the supply of gold-back money expands. When a bank signs a new loan, this, too, creates inflation; the lower the reserve limit, the higher inflation/deflation, gold-backing or not. Atleast in a fiat monetary system the government can control the base monetary supply...

And that is precisely the reason why a gold backed currency is more desirable than fiat currency; the government has less control of monetary supply peaks and valleys.

Do all of you gold standard supporters really think that having a gold standard would prevent a tyrant from inflating the money supply; causing inflation? Are you really that oblivious?

Of course not. That's why it happens; tyrannical government sets the gold standard aside in order to manipulate the economy to their whims. Yet again:

Alan Greenspan, Federal Reserve Chairman from 1987 to 2006, was a critic of fiat money in his early career, arguing in his essay, Gold and Economic Freedom, that,

This is the shabby secret of the welfare statists' tirades against gold. Deficit spending is simply a scheme for the confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights. If one grasps this, one has no difficulty in understanding the statists' antagonism toward the gold standard.

If a leader truly wanted to print money to fund the state, having a gold standard wouldn't stop him.

If that leader is a leader of a nation of sheep, you are quite correct.

Turning a gold backed currency into a fiat one isn't exactly a big endeavor. He would just end convertibility and start printing as if the currency had been fiat all along.

A fiat currency in the hands of a benevolent government is just as safe as a gold backed currency, while a gold backed currency in the hands of a malevolent government will quickly become fiat anyways.

Yup. And since no government is benevolent forever, the gold standard is ideal. And when the malevolent government seeks to destroy it, the populace should destroy the malevolent government.

There is little point in going back to a gold standard.

It will occur eventually, anyway, in order to re-stabilize the currency after utter failure, just like in the past:

The painful experience of the runaway inflation and collapse of the Continental dollar prompted the delegates to the Constitutional Convention to include the gold and silver clause into the United States Constitution so that the individual states could not issue bills of credit.

Cycles. I love it. More, I love to watch those who are destined to experience these repeated tours through reality.

[dilpill]

And when the malevolent government seeks to destroy it, the populace should destroy the malevolent government.

But a population will not seek to destroy a government unless its policies' effects on the welfare of the population (ie inflation) become substantially burdensome. Considering that its possible to have a fiat currency and low inflation, overthrowing a government for simply having a fiat currency would be an idiotic, knee-jerk reaction.

This is not an inflation due to the instability of the currency like fiat currency creates, which is much more devastating, long lasting, and more difficult to extract a society from.

How so? You pretty much defined inflation in the paragraph above this one.

[Figlio di Moros]

How so? You pretty much defined inflation in the paragraph above this one.

Because he's talking about the gold-standard, and gold can never be inflationary, duh!!!