Quit drinking Ron Paul kool-aid: What are the NEGATIVE consequences to switching to Gold Standard?

Think of it this way ... if there is no inflation, we are no longer encouraged to grow exponentially forever and destroy the entire biosphere.

I love the postulation that "the rich will hoard all their money."

Well duh, do you want the rich to throw it around the streets for everybody else to gobble up? Each class has different values on things that are important to them and how they "spend their money." According to people like Dr. Ruby Payne, working class people place their values in physical objects (electronics, food, clothes). Middle class values physical objects as well, to compete with others in the middle class, and save enough of their money for retirement. The rich invest and deal with other rich counterparts to get richer. (That's not necessarily a bad thing.)

As people, we shouldn't fault a rich business man for choosing to invest money to make more money any more than we should judge a man who chooses to not work, lives in subsidized housing, but has a 50"+ TV.

There is no wrong-or-right way to live life. So let's stop the finger-pointing.

As for "Paultonians" or whatever such supporters of Ron Paul were so eloquently dubbed...

...I am a Ron Paul supporter, but I don't agree returning to the Gold Standard is a fiscally-sound thing to do, at this time.

This entire thread was originated with negative-tone, rather than having discussion and discourse.

Disappointing.

Now, allow me to get another drink of my COFFEE, not "Ron Paul Kool-Aid."

Originally posted by saabacura

With gold standard, money value never changes.

I do not believe this is true...the value of our paper currency that is backed by gold would rise-and-fall based upon the supply of gold, no?

The positive of this, is that a federal government can't directly inflate or hyper-inflate the value of paper currency backed by a Gold Standard.

To the OP. There would still be lending performed, thereby giving interest income to the lender. You would still have incentive to save and start businesses, to build streams of income. Ever read The Richest Man in Babylon?

Originally posted by TheWalkingFox
I wait to see the replies from the Paultopians. I'm forseeing lots of denials that there could ever be a drawback to anything Mr. Paul has ever uttered.

So, I'll just be making popcorn.

It's actually nigh impossible to go back to a gold standard now... but not for any reason in the OP.

People still took risk and invested before the 70's.... which pretty much proves his thesis incorrect. The rising/declining value of the dollar is what causes people to take risks.... If it had a static value -- people would still want more of it.

OP is an idiot that doesn't understand economics.

Paul knows what is right, but not how to make it so... if he becomes president -- you can bet it... that it won't be the gold standard as we all ever knew it.... You have to take money out of circulation first... and this would bankrupt so many people.

Dr. Paul knows this, he just knows the average voter doesn't. Don't underestimate him.... but at the same time... we can't over estimate him either. He is the clear choice however.

(Who else is better? Obama? Rick Perry? Sarah Palin? Commmmmme onnnn guys.....)

I guess all I have to say when it comes to the gold standard. Can it get worse? I say if we stay on our current path , yes it can. If we switch to the gold standard, yes it also could get perceptibly worse, but in the long run 10-20-30 years from now, there will still bel a United States.

What would be the negative consequences of destroying the FED and having a greenback type of currency without interest? Or would you have to have a gold standard in order to do that?

Plus no matter what monetary system you have, %1 of the population will still figure out how to make the most money and in time that money just ends up in a bank account and just sits there. Isn't there a thread right now about how the rich have hoarded $46trillion?

Its just human nature to want to have more for you and your family without thinking of the well being of others, It's just the way it is for now and I don't think its going to change unless we figure out free energy or some other breakthrough.

If we were on a gold standard, the amount of gold in circulation wouldn't make any difference. If you assume all dollars were frozen at current levels, you could count up the total amount of dollars in existence and divide it by the total weight of gold in existence (in ounces, say) and you would come up with a rough idea of how much each ounce of gold would be "worth" in dollars. A stable supply of gold doesn't prevent growth. What happens when the growth in goods and services happens faster than the growth of the supply of gold? Prices drop.

Which is perfectly natural, and would be quite welcome for all of the struggling consumers. Falling prices only hurt debtors. All consumers would benefit form falling prices. You have the same amount of gold chasing more and more "stuff" all the time, the "stuff" becomes less and less "valuable" as compared to gold.


Secondly, hoarding would not be a problem for anyone since the act of hoarding only serves to further increase the value of the rest of the gold in circulation, which again would benefit anyone else who has gold since that same weight of gold in their pocket would have more purchasing power as a result of a part of the money supply being taken out of circulation.

Until we figure out a way to fuse atoms, a massive increase in the supply of gold is not very likely. The supply of gold in the world increases fairly steadily to the tune of about 2,500 tons a year. The total supply of gold already mined in the world is estimated to be around 160,000 tons. It is also estimated that about 85% of the gold ever mined is still available for use, with the other 15% being either lost or used in a non-recyclable industrial manner. It is entirely within the realm of possibility that the gold chain on your neck contains gold that once was used in an Egyptian temple or was part of a Roman aureus. But the magnitude of the supply doesn't matter much. What matters are the things which make gold a great thing to use as a money.

Here are some of the "moneyish" qualities that gold has: it is portable, highly divisible/combinable, easily made homogeneous, it is fungible, durable, and it has value for non-monetary uses as well, which is an important quality of "good" money. This is by no means an exhaustive list. See how many of those qualities dollars have, or packs of cigarettes (a common 'money' in some parts...). Some, but not nearly all.

Also, people shouldn't get confused and think that a gold standard means you could/would only use gold. You could also use silver and copper for much the same reason as gold, however for smaller purchases where it wouldn't be as feasible to trade a tiny amount of your gold for, say, a pack of gum. But there are even ways you can use gold for that. Check these out, for instance: Shire SIlver Card Products. Just one of many ways gold and silver could be made useful for small purchases. Likewise, you could use platinum if you wanted for some huge purchases. Nothing stops this except the existence of legal tender laws and capital gains taxes on precious metals.

There are many more reasons why gold/silver would make a better money than dollars, and people shouldn't forget that there is nothing wrong with paper money that is 100% backed by gold with no fractional reserve banking going on and healthy competition between banks. There just wouldn't be a central bank controlling a banking cartel and protecting the member banks by "loaning money" at virtually no interest to cover any runs on deposits.

If you want more information about all of this, check out these books for free courtesy of mises.org:
What Has Government Done To Our Money?
The Case Against The Fed

Both are by Murray Rothbard, and he does an excellent job going over the history of money and banking and also explains in greater detail some of what I have posted here. He also covers some other questions I saw asked in this thread. If you would like any sources for any of the info I have here, let me know. Most of these facts are easily verifiable, though.

reply to post by OrionsRage


Exactly. Our fiat currency and the system surrounding it has nothing to do with money. Money, being defined as gold or silver. Gold "investors" are licking their chops, waiting for the system to crash, because the very same system is telling them that their gold will be worth 20 quintillion dollars in only a short while. What a joke. The system itself is valuing the gold against its own fiat currency.

I personally know that if crap hits the fan, I wouldn't take on trade a shard of gold for a fat heffer cow that could feed me and my family. Eat your gold, buddy!

Gold is only valuable because we say it is, paper money is only valuable because we say it is. Either way the gold or the paper money only represents the idea that physical matter holds worth comparable to that of other physical objects. You could replace gold from the equation with silver, or dirt, or even another form of paper money. It's all just an idea.

Gold is a limited and finite resource

a gold backed currency could only back up 10% of the worlds currency float....
other resources, PM, or things like coal/oil/uranium/plutonium even fresh water would need to make op the balance if the object is to have resources or collateral to back the currency @ 100%


but, with abstract money & credit swaps, bonds, derivitives that total something like $600 Trillion
~~ there just is not enough resources in the world, to store up as the security for the ammounts of money both in use by the practical world---- and the casino derivitives that are created, almost willy-nilly, at the drop of a hat by these money-out-of-thin-air TBTF banks & investment houses.


the only way a gold backed system would work would be 2 tiers of money....

A) one tier for the MainStreet economies in the world...(operating on a est. $250.Trillion float)
B) the other tier for the Central Bank (FED) = (operating on +$600. Trillion float)
....together with the Global group of TBTF banks/ and the casino bankers/insurance generators that work beyond the USTreasury

As far as I know, the "implementation" of Ron Pauls ideas on the currency topic, is not to make a government mandate that all money will be backed by gold. Right now it is illegal for anyone but the fed to make currency of any kind. This is why the liberty dollar got raided (whether it was a sound business is not the point). Ron Paul would work to get rid of these laws that give the Fed a government mandated monopoly on the creation of currency. New ideas should be legal and allowed to stand on their own merits. If the Federal Reserve System is so great, then it will have no problem dealing with this competition. The simple matter is that this is more about freedom. Freedom is NOT free and nobody has ever argued that the FED is not convenient.

There are a lot of conveniences in this world and false sense of security that we GIVE UP our freedoms for more and more everyday.

The idea for allowing gold and silver to be used as currency is not the same thing as returning to a gold standard. While he does talk about the gold standard as well, quite often in the debates and stuff he is talking about THIS issue: If you go to a store with 100 dollars and ask for change, you get back 100 dollars in money. If you go to the store with 100 dollars and ask for gold, you get back some gold but you have to pay taxes on that gold. So it's not currency, yet it's not a product - and the law can't seem to decide on what it is. The point is to make it LEGAL for people to use gold AS CURRENCY in their transactions. To make it legal, not governmentally mandated. This is about freedom. And it's an issue that lawmakers won't touch with a 10 ft. pole.

So it's really 2 or 3 pretty small things, removing a lot of laws that are a soft form of fascism and corporatism that go against what a free market is about, and inhibit the people's efforts to bring about new ways of doing things, and live how they want to, legally, when they are doing nobody harm.

Anyone like the idea of bartering? If you do that in todays America, you can get in serious trouble. Haven't some of these bartering websites and people that use them gotten into trouble because it can be considered tax dodging? With a Ron Paul philosophy this is another thing that would go extinct. You would not get in trouble for doing things a certain way, just because it means the government gets no taxes on it - you won't have the FBI kicking your door down for selling a few chickens under the table, etc.

But really, I'm no scholar or expert on this. That's just my basic understanding of what Ron Paul is getting at. He has said quite simply his implementation of such ideas would be slow and transitional, the first steps are simply getting rid of the laws I discussed, which are laws about what PEOPLE can and cannot do.

It's about freedom and freedom is not free. Nobody said being free would be easier, we live very convenient lives because we give up most of our freedom. And more freedom is obviously what nobody wants in today's world, the world just isn't ready for these ideas. People just want easy, and the government to take care of everything. (Edit: and I wouldn't mind the government taking care of everything for us, but the world has serious problems - poverty and war and natural disasters cause millions to suffer horribly, and humanity sits on it's butt as if we've accomplished all there is and there's nothing left to do but watch TV.)

reply to post by saabacura


Good. Money value should never change. This is the fundamentals to a stable economy.

Originally posted by Rockdisjoint
reply to post by byteshertz

 

Exactly, if something can not occur on the market it's a govt creation. Privatization is fine with me, but privatization hasn't happened here. If it had the Fed wouldn't be dependent on the govt for survival.
...
Do you consider the EPA, SEC, CIA, USDA, ACF and FDA private too? They have very little oversight and some of them even get to write laws.

We are not going to see eye to eye on this point even though we have both explained our views. Thank you for the discussion on this.

That isn't what central banking is.

A central bank, reserve bank, or monetary authority is a public institution that usually issues the currency, regulates the money supply, and controls the interest rates in a country. Central banks often also oversee the commercial banking system of their respective countries. In contrast to a commercial bank, a central bank possesses a monopoly on printing the national currency, which usually serves as the nation's legal tender. en.wikipedia.org...

Given the fact that money is one half of every commercial transaction and that nations literally rise and fall on the quality of their money, giving a select few people such an awesome power is pretty absurd to me. Central banking didn't work in the past, it isn't working now and it won't work in the future.

Ok on this point I was admittedly wrong.
Although WIki is not a reliable source as it takes user added content (hence it is calling it a public institution , other sources indicate the definition of central bank includes the function of regulating the money supply.)
My definition of central banking was having a central bank which could loan to other banks, and the fractional reserve system was the system in place that alows them to lend more than they have giving them they ability to regulate the money (As a function of a central bank not the central bank by definition).
But given the definition you have provided I see what you are talking about and agree with you we need to get rid of the central bank and it's function in regulating the money supply.

It doesn't matter what the law says, the Fed is a govt agency. In fact the Feds charter is up for renewal in 2013, why does a ``private corporation`` need permission from congress to continue doing its job?

Maybe I can convince you, that you are wrong on this point now that you have seen I will admit when I am wrong.
Lets look at the ownership of the Fed a bit closer:
Organization And Ownership
The Federal Reserve consists of 12 regional Federal Reserve banks, with boards of Directors, under an umbrella direction of the 7 member Federal Reserve Board in Washington, with the power to determine major aspects of banking activity, such as setting interest rates, and the reserve and other operational requirements. There are no shares of the Washington Fed Board organization; the only “ownership” of the Fed is in shares of each of the 12 regional banks which are entirely owned by the private member banks within their respective districts, according to a formula based on their size (they must subscribe to the shares with 3% of their capital plus surplus). The ownership is highly restricted in that such ownership is mandatory; the shares can’t be sold; and they pay a guaranteed 6% annual dividend.. Source

So you are right in that there are no public shares - BUT the 12 reigional banks each have an equal share and they are privately owned, which is even more dodgy if you ask me. If a ficition enitiy is owned by another ficitional enitity that is privately owned then it inherits the same status as now private parties have an interest in the entity.

The Fed faces no competition though, just like every other govt agency. There is only one central bank in the U.S

Because the Government chooses to not alow other central banks - if they allowed it their would be competing central banks popping up overnight.

edit on 16-8-2011 by byteshertz because: (no reason given)

edit on 16-8-2011 by byteshertz because: (no reason given)

"first thing we do is, we kill all the lawyers."

- Shakespear

Then, we end the fed.

reply to post by byteshertz

We are not going to see eye to eye on this point even though we have both explained our views. Thank you for the discussion on this.

But given the definition you have provided I see what you are talking about and agree with you we need to get rid of the central bank and it's function in regulating the money supply.

Indeed.

So you are right in that there are no public shares - BUT the 12 reigional banks each have an equal share and they are privately owned, which is even more dodgy if you ask me. If a ficition enitiy is owned by another ficitional enitity that is privately owned then it inherits the same status as now private parties have an interest in the entity.

So the Fed is quasi-private then? I can agree with that, I use to call the fed quasi-private. I'm not sure why I stopped.

Because the Government chooses to not alow other central banks - if they allowed it their would be competing central banks popping up overnight.

If the U.S govt allowed monetary competition central banking would cease to exist over night.

Originally posted by asmall89

Originally posted by saabacura
With gold standard, money value never changes. So basically, there is no desire to invest/spend/use your money to take risks... So basically with the gold standard, I envision the rich hoarding money. Money doesn't flow like above. Money is stagnant. The rich will hoard all the gold/currency and never use it.

edit on 12-8-2011 by saabacura because: (no reason given)

edit on 12-8-2011 by saabacura because: title.

Your wrong about on the Gold Standard that the money value wouldn't change. It actually would here's why:

1) New Gold enters the market all the time: Through mining corporations, Prospectors, people selling jewelry, and another big overlooked one is people discovering ship wrecks carrying gold. Gold is being hidden and rediscovered all the time.

2) Supply and demand: right now we have a certain amount of people in the American job market, when new people enter the market (i.e. babies are born and grow up) there will be more demand for Gold driving the prices up. If you haven't noticed Gold has skyrocketed since 08 from about 980 to 1800. That's a solid investment, although that has nothing to do with population.

3) The other Gold and Paper Currency: Silver is also a popular metal to use for currency during the late 1880's there was a big political movement (part of the early populists) to try to add Silver as a currency. Just because you are on the Gold standard doesn't mean you have use it everyday as coinage. Paper currency has been used to act as a certificate that can be traded for a certain amount of gold if you so please, but Paper can be easily manipulated.

Also would people hoard gold any more than people hoard our current fiat money? I doubt it.
I'm not big on this idea of Paul's and would prefer something else, however Gold is solid and doesn't sway to inflation since there is a fixed amount on Earth. There is more to Ron Paul's campaign than the Gold Standard that I support way more. Plus who says he'd implement this right away?

edit on 12-8-2011 by asmall89 because: Spell Check

edit on 12-8-2011 by asmall89 because: grammar

1. new gold digged up right now would be negligable compared to the current level of gold.
2.gold went up only due to perception of weaking dollar??? weak economic growth in the future. Gold goes up in value cause we have dollar
3.maybe you can try using baskets of global currency????

would people hoard gold anymore than hoarding our fiat money?

well look at the incentives of gold vs fiat money. like i said, with fiat money, you lose money/value when you hoard/save money.... you know that due to inflation.

with gold standard, you know that you will not lose value by saving/hoarding. so you will take less risks. less investments. thus higher interest rates for all. money does not flow as well as it does now.

Is the problem right now with fiat money due to the undisciplined control of interest rates/money supply????

I hope everyone know that the WHOLE WORLD USES FIAT MONEY.

Your currency is as valuable as your belief in the value of the country..... that is printing it.

LETS ASK RON PAUL!!!!!!!

CONSIDERING THAT OUR WHOLE MODERN ECONOMIC SYSTEM IS BASED ON fiat CURRENCY AND THAT ALL COUNTRIES HAVE MONETARY CONTROLS...

WHAT ARE THE NEGATIVE CONSEQUENCES OF USA UNILATERALLY GETTING RID OF MONETARY POLICY WHILE THE REST OF THE WORLD HAS ONE?

Originally posted by m1991
Think of it this way ... if there is no inflation, we are no longer encouraged to grow exponentially forever and destroy the entire biosphere.

that is a reasonable reply which i agree

Originally posted by MOFreemason
I love the postulation that "the rich will hoard all their money."

Well duh, do you want the rich to throw it around the streets for everybody else to gobble up? Each class has different values on things that are important to them and how they "spend their money." According to people like Dr. Ruby Payne, working class people place their values in physical objects (electronics, food, clothes). Middle class values physical objects as well, to compete with others in the middle class, and save enough of their money for retirement. The rich invest and deal with other rich counterparts to get richer. (That's not necessarily a bad thing.)

As people, we shouldn't fault a rich business man for choosing to invest money to make more money any more than we should judge a man who chooses to not work, lives in subsidized housing, but has a 50"+ TV.

There is no wrong-or-right way to live life. So let's stop the finger-pointing.

As for "Paultonians" or whatever such supporters of Ron Paul were so eloquently dubbed...

...I am a Ron Paul supporter, but I don't agree returning to the Gold Standard is a fiscally-sound thing to do, at this time.

This entire thread was originated with negative-tone, rather than having discussion and discourse.

Disappointing.

Now, allow me to get another drink of my COFFEE, not "Ron Paul Kool-Aid."

edit on 13-8-2011 by MOFreemason because: (no reason given)

sorry, I edited my title to include Kool Aid for more attention? perhaps.... I see how it turned you off and your right. but still, this is online!!!