Puffer Fish wrote:The current amount of gold bullion that exists in the world is worth about 5 trillion US dollars.
We could suppose it might only be realistic for a country like Russia to hold 8 percent of that. Since US dollars are so ubiquitous in the world, we might suppose it could be realistic for the US to hold up to 20 percent of that.
There is about 2 trillion US dollars (specifically issued by the Federal Reserve) in circulation.
That means it could theoretically be possible to back all US dollars with gold, but it would be a very big stretch. The US would need to have 40 percent of all gold bullion that exists in the world. This would be very problematic for a variety of reasons.
Another idea could be some sort of arrangement to partially back the currency with gold.
Here is some insight though. One major problem is that the Federal Reserve owns over $2.5 trillion in US debt. What this means is that the US dollar is in large part backed by government debt (artificially contrived as that may seem). I think that is one major reason why it is impossible to back the dollar with gold, because the Federal Reserve has created so much money buying government debt.
(Obviously it's hard to back a huge amount of money that doesn't even really "actually exist" with gold, since this is money the government is promising to pay back in the future)
I think though if the government were able to greatly reduce its debt (not at all an easy task), then going back to a gold standard would not be too unrealistic.
I have asked every place I can for anyone to provide a plan for the US to pay -off its debt with tax revenue dollars, i.e. with a surplus. Nobody has even tried.
I have asserted in all the same places that it is impossible. It is impossible because the lesson of history is that a surplus will push the nation's economy toward a recession. This happens because a Gov. surplus is by definition matched by a non-gov. deficit. The non-gov. sector of the economy is the nation's private sector and the nation's foreign sector together.
Puffer Fish, can you name 3 nations that have even paid of a large national debt with money from a surplus? I know the US did in about 1830 to 1835. However, this 'caused' the worst Bank Panic of the 19th cent. And, it wasn't paid off with tax revenue dollars. It was paid off with dollars received for land recently taken from native peoples between the mountains and the Mississippi River. [The Homestead Act was passed during the Civil War by the new Repub. Party. This ended this massive drain of dollars out of the economy.]
IIRC, the nation's GDP = its money supply X its velocity of money. Right? So, for the GDP to increase either or both the supply or velocity of its money must increase. Velocity of money is hard to increase.
Now consider this fact. The population of the "US" doubled each generation from about 1700 to 1970. A generation was about 23 to 26 years. These 2 facts mean that the per capita GDP would be reduced to half of what is was at the start of a generation by the end of the generation. Take a couple of minutes to let that sink in. . . . . . If GDP/person drops to half over a 25 year period and prices don't drop as much, then it follows that the people are getting poorer. And, this only got worse as time went on because the population did not stop growing. IIRC, this was avoided by allowing Banks to print "bank notes", which were used as money, but were not backed by anything. In each Bank Panic. most bank notes became worthless. Try googling 'ban note' to see what I'm talking about.
Before 1913 banks lent out either their depositors' money or bank notes that they printed. In 1913 the federal Reserve Bank was created and banks were allowed to create US dollars backed by the Gov. with every loan. Since then economists who claim that banks lend their depositors' money have been lying. It seems like most posters here believe the lie.
Now, reread my posts in my thread about how the US national debt has functionally been converted into the assets of the people. All debts are an asset of someone. Economists focus on the loan contracts held by banks as their assets and down play the liability of the borrowers. However, they do the opposite when they talk about the US national debt. Why do they do these 2 things? I'll stop here with that question. I'm waiting for your, or anyone's answer. Why do economists just talk about the Gov. liability from its debt and never talk about what will happen if the people are forced to pay back that debt by being taxed to create a surplus to pay back $30T? Why is it a good economic idea or plan to destroy or tax away $30T worth of assets held by the American people (and foreigners too)?