reply to post by ProjectJimmy
Either you absolutely do not understand economics at all or you are trying to bring about the end of civilization with your answer. The simple problem
is that there is not enough gold in the world to back your currency.
It is clearly you who does not understand economics. Let's take a look at some of your claims and address them realistically:
Currently, there is not enough gold in the world (or that has ever been mined in all of human history) to cover the United States Dollar alone, forget
about every other currency and economy in the world that is just the US only.
This is a gross misrepresentation of a currency backed by wealth, and a gross and disgusting advocacy of fiat currency. Fiat currency has never
worked in all of human history and it is fiat currency that is the source of much of the economic woes we face today. The only thing that keeps the
U.S. dollar stable is that it is not purely fiat, and is instead tied into the price of oil, albeit oil not in reserves as much as that oil being sold
on the market place, and those selling it are under contract to only sell it for U.S. dollars. No one can sell oil for Euro's or any other form of
currency, and this is all that has kept the U.S. dollar from completely imploding. If the tie between oil and the U.S. dollar ever changes the dollar
will most assuredly implode.
The problem with the U.S. dollar being tied to oil is that as that the value of the dollar is depreciating in spite of it being tied to oil. It is
tied to oil, not backed by oil, and the dollar is depreciating because it is, for all intents and purposes, fiat currency and has nowhere to go but
depreciation. This, in turn, artificially drives up the price of oil which affects everyone.
Under a fiat system of money the only thing that can give the currency value is its relative scarcity. Under a fiat money system there is no
restraint on how much money can be printed and without that restraint relative scarcity is a pipe dream.
The unlimited printing of money is directly tied to the unlimited amount of credit creation, and while credit creation can cause an appearance of
economic growth, it is merely an appearance, much like a magicians hat trick, it is misdirection that creates the appearance, and is not at all
reflective of the truth. Markets will expand and contract on their own regardless of what sort of money system is in place, but under a fiat system,
and one reliant on rapid credit creation, when a contraction occurs the pain felt by all is far more painful than it is under a currency backed by a
The losses incurred by a contraction under fiat currency and rapid credit creation are far greater than any expansion experienced by the credit that
created this expansion, making the expansion pointless. One step up and five steps back is not progress. If fiat currency is created to deal with
massive public debt, again this is nothing more than smoke and mirrors and it is, at best, a delay of defaulting on that debt, and all too often
becomes an excuse to continue adding to that debt rather than do what is necessary to control the debt. Debt is, in every sense of the word, a form
of slavery. The best choice is to avoid debt, but once in debt increasing that debt in order to deal with the debt is just plain stupid.
As to your ludicrous assertion that there is not enough gold to back the dollar, the O.P. all ready effectively explained how that works and you just
ignored that and continued with your ludicrous argument as if continually repeating it, this will somehow make it a valid argument. However much gold
Congress has in reserve to back the currency necessarily dictates how much money can be printed, assuming Congress were actually doing the printing as
mandated them by Constitution instead of delegating it to a private organization such as The Federal Reserve. Of course, the Constitution fixed the
price of gold to silver and in effect that is the very first regulation on the market created by the United States, so all ready there is a problem
with backing that currency by gold, but that point is moot since the dollar is not currently backed by gold.
The people calling for the return to the gold standard are by and large holders of great amounts of gold. They would see their personal fortunes
multiply exponentially overnight, making them easily the richest people on earth.
This is yet another ludicrous argument and anyone who owned great amounts of gold a decade ago have seen their personal fortunes rise astronomically
in this last decade. In the past 10 years the price of gold has risen from $282 an ounce to $1300, making your claim a moot point. There are three
basic factors that affect the price of gold, and they are; market conditions, demand, and market fundamentals. Any time the dollar decreases in
value, under a fiat currency, the price of gold will go up. Conversely as the strength of the dollar increases the price of gold will go down.
Failing economies are good for those who own vast amounts of gold and they have no incentive to see the economy do better. Fiat money and an
unlimited printing of money is not good for failing economies and only contributes to a weaker dollar value thereby increasing the price of gold.
This is not an issue of monetary policy in my mind but one of personal greed, if any commodity standard is to be instated to back the fiat currencies
it has to be done in a way that does not create a group of people with the purchasing power of entire nations.
Again another ludicrous assertion. First of all greed is a constant regardless of what sort of currency is in place. Greed is not abolished by fiat
currency, quite the opposite it facilitates the greed of banking institutions and the government allied with those banks. Secondly, it is the
practice of fractional reserve banking that would cause an increase in gold prices if the U.S. were to change its monetary policy to a gold standard.
The only supposed good that comes from fractional reserve banking is that it facilitates lending, and of course, it is lending, and more specifically
borrowing, that has led to the U.S.'s near $14 trillion dollar debt. Fractional reserve banking is good for banks as lending institutions but is not
at all necessary to a thriving economy. In fact, it is uncontrolled lending that in many ways spawned this most recent financial crisis. Of course,
there is always the reality of gold availability, and when the mining of gold creates an abundance the prices will drop, and when it is scarce, the
prices will rise, but this is a market condition and has nothing to do with monetary policy.
If you revalue your currency, you have suddenly made everyone in the US unable to function. For example, let's say that the US can back 1% of the
current dollars with gold, this means that everyone becomes poorer by a factor of 100.
It is not the amount of money that defines wealth it is the amount of wealth that defines money. Money, when it is referred to as a description of
paper and cheaply minted coins, is not wealth and the dollar, in its present state, is nothing more than a promissory note with no obligation to honor
the promise. There was a time when a dollar could be redeemed for its value in gold or silver, but no longer. Today the dollar functions as if it
were wealth, but in reality it is only wealth as long as the value of the dollar is robust. A weakened dollar ensures an erosion of wealth. If
monetary policy is to rely upon fiat currency, and if that currency is to have any meaning at all, it is imperative that that availability of that
money remains scarce. Otherwise the currency will weaken and no amount of printing more will fix it, and only make the problem worse.
On top of this, unlike a hyper-inflation scenario, you cannot make up this difference because the economy itself has had to comparatively shrink. Your
GDP is now 1/100 of what it was. This would place the US's GDP at under that of Somalia's.
Let's be clear here; hyperinflation is caused mainly by the rapid increase in the amount of money that exists and DGP stands for Gross Domestic
Product not Gross Domestic Prices. A decrease in the money supply will necessarily drive the prices of products down but will not necessarily affect
the out put of those products. The output of products is directly tied to that products demand regardless of what price it sells at. Inflation is
not an economic goal to aspire to unless one is greedy and hopes to benefit by the negative effects of inflation. While inflation can have both
positive and negative effects, the negative effects of inflation are that it decreases the real value of money, and uncertainty over inflation can
discourage investment and savings. The positive effects are not at all balanced by the negative effects, other than a steady rate of inflation tends
to mitigate the effects of an economic recession, but as evidenced by the most recent recession, steady inflation does nothing to halt economic
Inflation and recession are market inevitability's and while it is understandable why recessions are periods most people would like to avoid, this
does not change the reality of their inevitability. The greatest economic problem most people face today, at least in the U.S., and many other
nations, is that those people have less money to spend than they once had and are spending more for less. The most recent recession created a market
contraction in investment, and a rise in unemployment. While most economists today tend to favor a slow steady rate of inflation, this most recent
recession did little to drive prices down in many areas of the market causing this problem where too many people are spending more for less while they
have less and less to spend.
The high rise in unemployment is a major source of recessions as more people unemployed means more people spending less money. However, often times
during high levels of unemployment, some of those unemployed abandon the idea of employment and instead make a stake in their own business which in
turn helps ease the high level of unemployment as those who succeed will find a need for employees, but since the Federal Reserve has now spent
decades suppressing the interest rate while encouraging a steady rate of inflation, all this has achieved is the current state of consumerism we now
exist in. The idea of saving money became a losing situation as whatever interest earned on savings was defeated by the rate of inflation. Thus,
fewer people saved money, and even now, even if people wanted to create their own business, far less have the necessary savings to do so, and lending
institutions are not so keen on granting loans in order to facilitate new business ventures.
This phenomenon is what is currently hurting the GDP, and backing currency with a commodity such as gold will not hurt the GDP, and will most likely
help it. Most likely help it because a sound strong dollar is necessary to bolster GDP in terms of actual product output. I say most likely because
a strong currency is not necessarily a good thing if the nation that has this currency is export dependent.
GDP is often alternately referred to as GDI, (Gross Domestic Income), and this fact reveals one of the greatest problems with how GDP's, and
especially GDI's are measured. Equating the output of product to the standard of living is a dubious accounting method that has increasingly, and
rightfully so, come under much criticism. Determining the GDP by income or expenditure is an indirect measurement, and indirect measurements should
only be used when a direct measurement is not possible. A direct measurement of the GDP is wholly possible and that direct measurement is the
product, (output) approach. When a nation relies upon indirect measurement, especially when direct measurement is possible, the chances of an
illegitimate manipulation of unbounded operators becomes too great. Why take that chance when direct measurement is possible?
The United States has a population of more than 300 million and is growing fast and is by no means a nation that is export dependent. While U.S.
exports have decreased in recent times, and this decrease does effect the economy, it would be far worse if the U.S. was actually export dependent for
its economy. Even so, the U.S. still remains one of the leading exporters, particularly in agriculture, even though exports have dropped in that
market. Since the U.S. is not export dependent there is no good reason to keep the strength of the dollar suppressed. For the U.S. a strong dollar
means a strong economy. That is the reality, and the sad reality is that the U.S. dollar is not strong at the moment and is decreasing in value
Backing the dollar with a commodity is a sound and viable strategy towards strengthening that dollar. If this means defaulting on loans, then perhaps
this what should be done, particularly if defaulting on those loans is a direct response to creditors calling in those loans just to reap the benefit
of a changed monetary policy to the gold standard. Of the near $14 trillion dollar debt that the U.S. currently holds, $9 trillion of that is to
creditors. The remaining $4.5 trillion is largely owed to trust funds such as Social Security and Medicare. If the U.S. changed its currency to a
gold standard, and creditors called in their loans demanding that gold, then a default would no doubt be the inevitable outcome. Such an outcome can
lead to such a catastrophic event it could very well destroy the entire worlds economy. Is it truly in the best interest of creditors to call in
those loans just to have the gold the U.S. used to back its currency? Is this the only possible outcome of such a change in monetary policy or would
reasonable minds prevail?
Surely a gold standard would greatly reduce the amount of money that could be printed, and given that the interest rates on the national debt are
huge, a necessary reduction in interest rates is the most reasonable answer, not calling in the loans just to facilitate high interest rates for
creditors. If creditors are less interested in seeing their loans paid off because they profit more from increased interest rates what does this tell
you about the ethics of those creditors? The creditors of the U.S. should be interested in seeing the debt owed to them paid off. At the moment such
an option is not possible, but strengthen the dollar and building a stronger national economy by adopting a gold standard is not only possible, it is
probable. That probability leads to a greater probability of paying off the debt instead of perpetually paying the interest on that debt.
With the current debt load the U.S. holds, and the out of control deficit spending Congress engages in, money printing is just not the answer. It
doesn't take an economist to understand that this current fiat monetary system is only fueling deficit spending and increasing the debt, and this
fundamental understanding is scaring the crap out of investors, in turn fueling the economic downturn. A reasonable and sound strategy must be made
to deal with this problem. If the ability to print as much money as Congress wants is actually fueling the deficit spending, then an obvious answer
to that is to take away that ability to print money based upon whimsy. Reigning in deficit spending is a sound economic strategy and one that should
only make creditors happy, not foolishly greedy. In fact, Congress, or in reality The Federal Reserves ability to print as much money as they as they
choose, only increases the risk of horrendous inflation and mal-investment. This is not a characteristic that sane and ethical creditors find
Decreasing the debt, not increasing it, is the only sound strategy, and ultimately eliminating the national debt is the optimal strategy for a sound
economy. Since the world economy is inextricably tied to the U.S. national debt, it is in the best interest of the world that the U.S. pay off that
debt as quickly as reasonably possible. The only possible way changing monetary policy to a gold standard could lead to a default on the U.S. debt is
by creditors calling in those debts and demanding the gold used to strengthen the dollar. Such an act would be a threat to the entire world, and as
such, an act of war. An offensive attack on the worlds economy solely to satisfy the greed of a limited few. It is not by any stretch of the
imagination a sound strategy and only insane creditors would make such a move. If the U.S. is indeed indebted to insane creditors what does that say
about U.S. governance, and ultimately the U.S. populace?
The threat that creditors would call in their loans if the U.S. changed its monetary policy to a gold standard is just that; a threat, and not even a
threat being made by the creditors of the U.S., but instead a threat being made by people such as you, which leads to a simple question; What do you
have to gain by the U.S. maintaining a fiat currency, and if the answer is nothing, then what do you care if the monetary policy is changed,
especially if that policy results in a stronger U.S. economy? While you make this statement regarding the O.P.:
This will destroy your nation instantly. You are an Anarchist, perhaps that is your intention. Well played Goldfinger, but perhaps I give you too much
The truth is that if the U.S. continues to do business as usual, that being printing as much money as it wants based solely upon whimsy, the U.S. will
most assuredly destroy itself, and you are not at all offering any other strategy than doing business as usual, so while your obvious fear anarchy
fuels your attack on the O.P., your own strategy of non confront on deficit spending and increasing national debt is the much greater threat to the
U.S. than the O.P.'s ideological belief in anarchy.