posted on Mar, 29 2010 @ 05:23 PM
But you cannot eat gold. Also, if the quantity of gold goes up, the value of your dollar goes down.
I still haven't figured out all the ins and outs of it but I can give a rundown as the best I can.
As of now, our fiat money can be manipulated by many different things. The money supply, the discount rate that banks are offered their rates at,
other currencies comparitive to it amongst a couple more.
With gold, you cannot manipulate its value as easily. Yes it can be manipulated, by hoarding, new deposits discovered, the old Clinton trick of
plating tungsten bars. Ever wonder how he manipulated that nice surplus?
But what cannot be done, is the fractional banking if you are on a commodity based currency.
Meaning you cannot create money from nothing. See our system of currency really is not currency. It is debt. It is a promise to pay system.
You go to the bank and ask for a loan. They do not take that money out of their deposits completely. They are allowed a certain ratio, say for every
10 you want, they create out of thin air 9, poof, new money based on your promise to pay. This is what causes the debt society and why our economies
are crashing. Besides of course the corrupt bankers, corrupt wall street, and corrupt politicians.
With a gold standard, you have to have the money or you cannot spend it. Unless you can borrow it from another person of bank that has the gold.
Now, I am sure if you left the Federal Reserve in charge they would still try the fractional reserve component. Which of course would make the gold go
down in price. Which defeats the very purpose of the gold standard. But, with the gold standard, increase in values of the total assets needs to be
taken up somewhere. This is where your value of the gold will increase in value. Meaning prices will actually decrease in regards to the quantity of
gold. Things do not go up, they will go down over time. At least I think so.
We need an Austrian trained person. I had a crappy keynesian in college. Sorry I could not help more.
Now, I may have made an error or two. It has been awhile since I have had Macroeconomics. I am very shaky on my explanation here. Hoped it helped a
You know what, I may be totally wrong on this whole thing. Do not listen to me. But hell if I am going to throw it away.