Gold Standard

[Seos]

Greetings Seos, lol, yeah perhaps my phrasing was a bit out. I was after all trying to prove the bare minimum: that growth can occur in the prescence of falling prices. It was an error on my part to say "gold standard and deflation have led to prosperity". Clearly there is only one source of economic prosperity: an lenghtening of the structure of production and positive capital* accumulation.

As I said, I have attempted to show a period of time where the economy expanded faster than the money supply and this did not end in calamity.

Heh, the phrasing is more then a little bit off!

Lol, I made those graphs myself. Give me some credit! And yes, GDP per capita also rose by the way.

The correct description of the phenomenon is growth deflation, where the real economy expands. I could link you to a good lecture pointing out why falling prices due to all causes, that is, economic growth, hoarding and monetary contraction are all self correcting.

Link away! I'm very dubious about that claim. Is that saying there is no deflationary spiral?

I was wrong when I said "gold standard and deflation have led to prosperity", however this phrase was more of a semantic error. I still maintain that my answers to questions 3 and 4 are correct in response to the Friedmanite claim that we need the money supply to increase by the same amount as goods and services do.

Yeah it's a good response to that. Doesn't convince me that gold standard is desirable though.

After all, just imagine how cheap computers would be without central banks inflating the currency!

Their real price would be that same.

The part about restricing government spending is vitally important - the US hasn't had a single balanced budget in 40 years.

There have been 14 budget surpluses in the last 40 years in the US:
http://www.gpoaccess.gov/usbudget/fy04/pdf/hist.pdf

[Seos]

Hello again ILF!!

Could you answer my post from our debate last month?
http://www.politics.ie/1327336-post13.html

So I would like you to explain:
1. Why is gold being useful for non-monetary reasons a reason for it to be used as money?

2. What's stopping people using or trying to use gold coin now?

3. How would money supply be constant if people continue to lose the smallest denominations of it?

4. How would money supply be constant when gold supply isn't?

5. If money supply is made independent from gold supply then wouldn't it just be paper money that's "printed" on gold coins?

6. Why would banks have near 100% reserves?

7. If you can't say why banks would have near 100% reserves then doesn't gold have many of the same problems as fiat?

8. Do you believe grossly irresponsible monetary policies are possible under the gold system?

9. Why do you think or act like you think inflation can only incentivise bad investment, instead of just incentivising all types investment which includes bad and good?

10. What is the difference between an under-regulated badly audited fiat system and an under-regulated badly audited gold system?

[Irish Liberty Forum]

Those questions were fantastic and I really appreciate them, Seos, but I wanted to do them justice. That however, would take time. I'll see if I can provide some quick one-line answers...

[ibis]

Not a very clever reply, ibis.

I didn't expect you to like it.

[silvernut]

I'm with Alan Greenspan on this one...


"In the absence of the gold standard, there is no way to protect savings from confiscation through inflation. ... This is the shabby secret of the welfare statists' tirades against gold. Deficit spending is simply a scheme for the confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights. If one grasps this, one has no difficulty in understanding the statists' antagonism toward the gold standard."

[Irish Liberty Forum]

I didn't expect you to like it.

I think I'll put you on my ignore list now, your posts are a waste of my time.

[Seos]

Those questions were fantastic and I really appreciate them, Seos, but I wanted to do them justice. That however, would take time. I'll see if I can provide some quick one-line answers...

Thank you, I await your response.

[Seos]

I'm with Alan Greenspan on this one...


"In the absence of the gold standard, there is no way to protect savings from confiscation through inflation. ... This is the shabby secret of the welfare statists' tirades against gold. Deficit spending is simply a scheme for the confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights. If one grasps this, one has no difficulty in understanding the statists' antagonism toward the gold standard."

Inflation when used like that is just taxation. It is redistribution of wealth. That type of argument isn't very useful because it will only convince people who already believe in lassiez-faire economics.

[Irish Liberty Forum]

1. Why is gold being useful for non-monetary reasons a reason for it to be used as money?

Money is the most saleable commodity - the commodity for which there is the most widely held and highest demand. Useless paper with € symbols would have no demand except that people are forced to use it. It only persists because of a fake economic system which relies on our confidence in the stability of governments. When the government abuses the currency, the functions of money (including medium of exchange, unit of account, and store of value) cannot be properly fulfilled. If the commodity had non-monetary uses, we wouldn't need to worry so much about the stability of those who manage it.

That answer was longer than I wanted it to be - I'll see if I can make them shorter from now...

[Irish Liberty Forum]

2. What's stopping people using or trying to use gold coin now?

Legal tender laws. Central bank money is legal tender for all debts, public and private. Your taxes are payable in central bank money. Contracts in gold coins will not be defended in the same way as contracts in €s (e.g. if somebody defaults on a gold contract, compensation may be payable in €s!)