What happens if Russia introduces the gold standard??? - Politics Forum.org | PoFo

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#15216050
Sandzak wrote:I think this could work... 65% of economics is simple psychology... and we humans have some strange connection with gold...

Gold was the first metal humans melted...


The use of pronouns without an antecedent is not a good way to communicate.

The concept of a gold standard sounds fine. The devil is in the details. How much is a troy oz. of gold going to be worth? Is that amount going to provide enough 'money' for the whole world?

Is a fixed amount of money a good thing? Or, did the covid crisis demonstrate why that is a bad thing? Bad because the world needed to spend to save the lives of millions of people.

BTW -- How much gold do you own? If it is a lot, then did you're hoping to get a windfall influence your opinion?

As an MMTer, I can say with certainty that going back on gold would 1st cause chaos, and then beyond the chaos, 2nd would turn out to be a very bad thing for masses of people.

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#15216116
Well for starters, I wouldn't believe Russia if they did that. (I wouldn't believe us or China either)

Rehypothecation will take place which is just shenanigans. If you don't know what that is, that's when there's something of value stored away by a trusted party. And you have a claim to it. You soon find out that others have a claim to that same thing. So those 30,000 gold coins that sit in a vault in St. Peterburg or Ft. Knox to back the money will actually be owned by several people or oligarchs and the govt at the same time, none of them knowing each other. Half the world will have claim to the same physical holdings. It's corruption. It'll happen. Just more Bernie Madoff and Social Security ponzi scheme BS.

If you want the safety of gold or silver, YOU hold it physically in your house or wherever you have control of and don't trust anyone else, because when the SHTF, they're not going to be there for you. I'm not a cynic. I'm a realist.
#15216126
There are a couple of problems. As @BlutoSays pointed out any gold standard scheme is only as good as people's belief that the gold is actually there. This is another way of saying that all currencies are fiat, including yclept "gold standard" currencies.

Let's assume the ruble becomes exchangeable for gold. First thing that happens is that all the gold in Russian vaults is going to whistle right out the door, as people redeem worthless rubles. Russian authorities will be faced an either/or/both decision:
* make private gold possession illegal (as the US once did)
* institute capital controls to prevent gold from escaping its national borders.

So either way a Russian gold standard is rendered a theatrical gesture, with no actual economic significance.
#15216231
I my reply I said that the exchange rate matters. It matters a lot.

I'll use US$ to illustrate.

If the rate is set at $5000/troy oz. people with gold will want to sell gold to the Gov. for$5K/oz.
OTOH, it it is set a $1K/oz. many people will rush in to trade $1K for an oz. of gold they can sell for about $1.8K(or what ever the current gold price is).

The thing is that, the US would need to set the price very high so that it had enough gold to be able to exchange all the outstanding dollars for gold. Or mybe half of the dollars would be OK, maybe.

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#15217907
Steve_American wrote:The thing is that, the US would need to set the price very high so that it had enough gold to be able to exchange all the outstanding dollars for gold. Or mybe half of the dollars would be OK, maybe.

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.
#15217993
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)?
I'm waiting.

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Last edited by Steve_American on 16 Mar 2022 11:40, edited 1 time in total.
#15218014
When @BlutoSays talks about silver and gold as a good thing to have when the SHTF, he is way off base. What shit? A currency crisis?

If the problem is war....no amount of gold will protect you.

If the problem is widespread famine in a country like the US with its heavily armed populace...gold won't buy you food, guns will. For awhile. They they won't.

Fiat currency is more easily protected than gold backed currency. In fact, the shear task of giving someone gold for a dollar would exceed our ability to engineer.

Society runs like it runs. Nothing is going to change in that regard.

As for Russia? It is just Saudi Arabia with snow.
#15218030
Steve_American wrote: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.

Any yet isn't it ironic that you also view this massive debt as "absolutely nothing to worry about", "perfectly normal and healthy"?

You know, normally when there is a gigantic debt that there is no way for the borrower to ever be able to pay back, that is a bad thing.

(And yes, I'm already aware of your argument for why you think Americans should not worry about it. You can link to a separate thread if you want to argue about that)
#15218073
Puffer Fish wrote:Any yet isn't it ironic that you also view this massive debt as "absolutely nothing to worry about", "perfectly normal and healthy"?

You know, normally when there is a gigantic debt that there is no way for the borrower to ever be able to pay back, that is a bad thing.

(And yes, I'm already aware of your argument for why you think Americans should not worry about it. You can link to a separate thread if you want to argue about that)


Puffer Fish, nowhere there is there a plan for how to pay-off the US national debt with tax revenues with a surplus.
Until there is a plan for how to do it, it remains impossible to do it.
And, I assert that it makes no sense to worry about that which nobody can change.

For example, if science proved that the sun would explode in 10 years. Why worry? Nobody can change things like that.
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#15218081
Puffer Fish wrote:Any yet isn't it ironic that you also view this massive debt as "absolutely nothing to worry about", "perfectly normal and healthy"?

You know, normally when there is a gigantic debt that there is no way for the borrower to ever be able to pay back, that is a bad thing.

To whom does the American government owe this money, and in what currency? It's not like a household debt, where the householder has to obtain currency from elsewhere before he or she can repay the debt; the US government can simply print more dollars to pay it off, in effect inflating the debt away. The American government's creditors cannot force it into insolvency.

Besides, I fail to see the logic behind the right-wing's obsession with the national debt. It can only be repaid by either raising taxes or by printing more dollars. They are against the latter on principle (I think they call it "helicopter money"), which just leaves taxes. In effect, the right-wingers want to hand over all their money to the US government so it can repay a debt which even its creditors are not pressing it to repay. I thought you guys hated the gubmint and wanted to keep all your hard-earned dollars? :eh:
#15218098
Drlee wrote:@Potemkin

Blutosays is an example of the economic savvy of the right wing. Need I say more?

Good point, @Drlee. Unfortunately, despite their idiocy, they tend to have a disproportionate political influence in Washington, due to their loud voices and the financial backing of certain billionaires.

They don't seem to realise that if they actually got what they wanted, it would be a disaster for them personally and probably for the nation as a whole.
#15218158
Potemkin wrote:Good point, @Drlee. Unfortunately, despite their idiocy, they tend to have a disproportionate political influence in Washington, due to their loud voices and the financial backing of certain billionaires.

They don't seem to realise that if they actually got what they wanted, it would be a disaster for them personally and probably for the nation as a whole.


IMHO, it is more like "got what they say they wanted." It would not surprise me to find out that because their goal is to keep the Gov. small and more deficit spending makes it larger, that they just say whatever is necessary to achieve that goal. MMTers point out that when cutting taxes and increasing the money for the Dept. of Def. they don't worry about how they are going too pay for it. It is only when the money is going to the mass of Americans that they start to say that they worry about it. When they passed the Cares Act that gave trillions to the rich and their corps, but less than half as much to the people they didn't ask how they would pay for it either.
. . . IMO, Trump would tell any lie to his supporters because he knew that the right has been doing the same thing for 4 decades, ever since Nixon took the US off of gold . Trump made the mistake of telling obvious lies, while the right have been telling non-obvious lies. Like, "Someday the Gov. will have to repay this increase in the national debt with tax revenue dollars, and not roll it over by borrowing to repay these bonds."
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Last edited by Steve_American on 17 Mar 2022 04:16, edited 1 time in total.
#15218165
Well they're already stealing IP again, which for some reason every time I write anything about this it seems to get deleted without any sort of comment :?:

I think it would be great if they attempted a gold standard though. They have a ton of gold to mine I think?
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