Gold Standard
Gold Standard
Why not become a gold standard?
Does the golden rule helps the economy around? I know that gs has more rules in print money can not be backed by gold, why not?
Back to a currency based on commodities and away from fiat currency (paper money) certainly benefit the economy. The reason we see all these problems in the economy due to the fact that our money is not backed by anything. It is a fiat currency, just the ticket. A lot of people are opposed to having any kind of precious metals to back the dollar. This is due to its accession the propaganda spewed by government and central bankers. The central bankers who are in bed with the government definitely wants a money printing press legally falsified. They want the flexibility to print money from nothing without the chains of gold or silver to stop. Inflation (increased money supply) is caused by central banks, because they increase the money supply on a whim. In a "gold standard", the money supply can not be increased at the whim and will only be dictated by the supply of gold being mined. People should go back and reread the story and sound economic theory for what it is understandable why a fiat currency is bad, and why a commodity-backed money (eg gold, silver) is better than just paper money. The "gold standard" was not abandoned because "it worked well." The dollar was pegged to gold 200 years and the world was a "gold standard" up until 1971. Then, after World War II, we are convinced other nations to lower the gold standard for a dollar standard (Bretton Woods). In fact, tell the world that "we all the gold and you can convert your currency into dollars and redeem their gold at any time. "However, due to the methods of the government's inflation (increase in supply money), which basically printed dollars to gold in both the U.S. began to decline when foreigners began to exchange their dollars into gold (because learned that the dollar was losing value due to inflation). Because of this, the government of "closed" from the "gold window" to avoid further loss of gold reserves in the U.S. "- So thin and cut the dollar link to gold. Because of this, the dollar lost two thirds of its value, but the influence of the U.S. around the world, the dollar remains the world's reserve currency (at a lower value, without gold backing) In theory, there should be no government or small group of people to decide what kind of money or country people should have. That must be determined by the free market. Long ago, when governments fail to intervene even with the kind of money distributed, free markets (through aggregated transactions through the supply and demand) found that gold and silver was the best "means of exchange." Please know that money and wealth are not the same. Money is a "medium of exchange." Once upon a time, people, shells, rocks, meat, cows for their money. Finally, because of its ease of use and its properties as a commodity, gold and silver became in the medium of exchange (money). Now, with the countries of "leaving" the standard gold / silver, turned to the creation of central bank "prints money out of nothing. "This dilutes the value of money. Imagine few baseball cards of high value – if more of these cards were printed, the less value of these cards get. Same with "fiat money". Just print money from nothing, which increases the money supply (inflation), degrading the currency. Now we are seeing more and more of the destruction of the dollar due to its degradation through inflation. This may be one of the final straws that can crush the dollar. If the government will not return to a sound currency, the dollar's fall would not be a matter of "if" but a matter of "when." People who adhere to the highest Keyensian expansion of money supply should understand that does not work, and the history and theory has shown time and again. History has shown that any nation that goes to a fiat currency is not held financially strong. The idea that nations should expand their money voluntarily to help spending and investment is a farce. Money (medium of exchange), when backed by something (ie, gold, silver), can increase its value (purchasing power), even without having to increase their physical supply.
Gold Standard
Why did the Federal Reserve blame the gold standard for the Great Depression when they were the culprit?
The monetary pumping in the early 1920′s sowed the seeds for the bust.
It is impossible to blame the gold standard because we did not have one. Banks were still inflating paper on gold.
Under a gold standard, the money supply could not have increased at the rate at which it did in the 1920′s.
It must be nice to have all the answers. I congratulate you.
1. The rest of us are not really clear on what caused the Great Depression.
http://en.wikipedia.org/wiki/Causes_of_the_Great_Depression
For a while, Milton Friedman convinced the world that while the Fed may not have caused it, poor Fed policies made it much worse that it needed to be.
http://en.wikipedia.org/wiki/A_Monetary_History_of_the_United_States,_1867-1960
Ben Bernanke, currently head of the Fed, agreed.
But Paul Krugman, noting that this time Ben Bernanke and Fed did exactly what Friedman said the Fed should have done last time, failed to stop the current recession and argues that perhaps Friedman was wrong about the Great Depression too:
http://krugman.blogs.nytimes.com/2008/11/28/was-the-great-depression-a-monetary-phenomenon/
Note that this is about a year after publishing a piece suggesting Fed activisim was the right way to go.
http://krugman.blogs.nytimes.com/2008/01/17/great-depression-blogging/
2. As for the gold standard, there is more than one definition of notion.
http://en.wikipedia.org/wiki/Gold_standard#Differing_definitions_of_gold_standard
Most people do allow a gold standard system to have more money outstanding than there is gold to back it and do allow the quantity of money to fluctuate.
Though the U.S. did suspend convertibility during various wars, there was convertibility during the Depression era
http://books.google.com/books?id=Qk1flhynCD8C&pg=PA116&lpg=PA116&dq=u.s.+gold+convertibility&source=bl&ots=ONZT36kj0M&sig=07wkS12B7fEcvcclW048awlMQU4&hl=en&ei=zSmrSs3ZM4iosgP_mPWDBQ&sa=X&oi=book_result&ct=result&resnum=3#v=onepage&q=u.s.%20gold%20convertibility&f=false
and well after World War II, until Richard Nixon ended it.
http://en.wikipedia.org/wiki/Nixon_Shock
3. I know that this might be a rude shock, but is it possible, just possible that people today know more than people did back then? Is ti possible that they really did they best they could but had it fail because they didn’t know as much as we know now? Is it at all possible that all the economists who have studied the Great Depression as well as other topics since then may have learned something?
If so, then how can you blame the Fed for what they did then on the basis of what you know now rather than what they knew at the time? Do you still hear the Fed blaming the Depression on the gold standard? Shall we blame you for all the mistakes you ever made because you didn’t know any better back then?
The Gold Standard
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