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Very Hot Topic (More than 25 Replies) The Return to the Gold Standard (Read 539 times)
Snarky Sack
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Re: The Return to the Gold Standard
Reply #10 - Aug 29th, 2018 at 2:18pm
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Jeff wrote yesterday at 3:20pm:
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So they define a Ruble as a very small fraction of an ounce of gold, or as a fraction of a gram of gold.


SkyChief wrote yesterday at 10:11pm:
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Ruble holders would revolt.

Most folks become very disagreeable when government declares their wealth worthless.

I know I would!    

No country can convert to gold-backed currency.   There is simply not enough gold to back all the fiat bank-notes in circulation.


Jeff wrote on Aug 29th, 2018 at 7:36am:
Chief, inflating fiat currency renders your stored wealth worthless, tying the currency to gold would prevent that.

As I said Chief, if Russia backs its Rubles with gold, one Ruble won't be worth very much gold, but it will be worth some amount of gold. That's better than having one Ruble continue to lose value until it's worth virtually nothing.


It's your math that's the problem once again here, Jeff.  Not your fault.  We mind scientists know that the mind has components including once similar to a computer's arithmetic logic unit that does math or as in your case, does not do math.

There is indeed not enough gold held by the government to back all the dollars now in circulation:

Quote:
Book Value: The Department of the Treasury records U.S. Government owned gold reserve at the values stated in 31 USC § 5116-5117 (statutory rate) which is $42.2222 per Fine Troy Ounce of gold. The market value of the gold reserves based on the London Gold Fixing as of September 29, 2017 was $335.5 billion.


Quote:
As of July 2013, currency in circulation—that is, U.S. coins and paper currency in the hands of the public—totaled about $1.2 trillion dollars. The amount of cash in circulation has risen rapidly in recent decades and much of the increase has been caused by demand from abroad.


That's just cash.  I doubt they know how much electronic money they've created.  Just converting the cash to gold backed bills would lower their value to just under 28 cents worth of gold for each dollar.  What would that do to their value in non-gold trades?  They would absolutely be worth far less than now if the government at the same time took away the fiat.  If the left the fiat in effect, they  might hold their value or at least drop down to match their backing gradually.

The real winners would be people with mortgages and other large loans.  They would be paying them back with hugely inflated dollars.  But that benefit only helps them if they've convinced their employers to pay them dollars equal to the value of the dollars before Jeff's plan crashed them.

Your hearts in the right place, Jeff (really, your mind's emotional function), but the math doesn't work. 

What we need to stop right now is the legalized counterfeiting of money that causes inflation.  Then possibly the value of the gold could catch up with the value of the money.

Either that or gradually start issuing new money that is backed by gold and put a sunset clause on the fiat for non-gold backed money.


  

"Taxes are morally justified theft" - Jeff
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Jeff
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Re: The Return to the Gold Standard
Reply #11 - Aug 29th, 2018 at 2:49pm
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Snarky Sack wrote on Aug 29th, 2018 at 2:18pm:
There is indeed not enough gold held by the government to back all the dollars now in circulation:
I don't know how much gold the U.S. has, or how many fiat Dollars are out there.

I do know that gold is divisible, and any number of fiat Dollars can be backed with the gold the U.S. claims to possess. 

The result might be that your gold backed Dollar would be backed by one thousandth of a grain of gold, but it would be backed by something, which is better than having it backed by nothing.

I think you are confused in thinking that the current market value of gold in fiat dollars has something to do with that. It doesn't.
  
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Snarky Sack
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Re: The Return to the Gold Standard
Reply #12 - Aug 29th, 2018 at 5:09pm
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Jeff wrote on Aug 29th, 2018 at 2:49pm:
I don't know how much gold the U.S. has, or how many fiat Dollars are out there.

I do know that gold is divisible, and any number of fiat Dollars can be backed with the gold the U.S. claims to possess. 

The result might be that your gold backed Dollar would be backed by one thousandth of a grain of gold, but it would be backed by something, which is better than having it backed by nothing.


Totally agree.

Quote:
I think you are confused in thinking that the current market value of gold in fiat dollars has something to do with that. It doesn't.


Love your thinking!

So, what is your plan for transition to this new, gold-backed dollar?  What happens to the fiat dollars I have in the bank now?
  

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Jeff
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Re: The Return to the Gold Standard
Reply #13 - Aug 29th, 2018 at 5:14pm
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Snarky Sack wrote on Aug 29th, 2018 at 5:09pm:
So, what is your plan for transition to this new, gold-backed dollar?  What happens to the fiat dollars I have in the bank now?
I just explained that to you. It's good that you understood. Wink

There is no transition.

Just do it.

Anyone can turn in their fiat dollars for new gold backed dollars at whatever rate the supply of gold divided by the number of fiat dollars in existence is.

No one will be forced to do anything.

Keep your fiat dollars if you want to. Don't expect to have me accept them from you. I won't.

When my option is to get a dollar backed by a teeny weenie bit of gold or a fiat dollar backed by nothing... Well, It looks like an easy choice to me.
  
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Re: The Return to the Gold Standard
Reply #14 - Aug 30th, 2018 at 8:50am
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Jeff wrote on Aug 29th, 2018 at 5:14pm:
I just explained that to you. It's good that you understood. Wink

There is no transition.

Just do it.

Anyone can turn in their fiat dollars for new gold backed dollars at whatever rate the supply of gold divided by the number of fiat dollars in existence is.


So for every dollar in fiat you turned in, you'd get about 29 cents worth of gold dollars?  Not saying that's a bad thing, I just want to be sure that's what you mean.

How about instead of giving them paper backed by gold, the government just gives them the gold in the form of coins, maybe using silver for smaller denominations?  What's the point of government sitting on huge vaults of gold to back paper?

I would think that a constitutionalist would insist on that since the constitution only authorizes congress to coin money, not print money.  Banks can print the paper as they did before the civil war.

Quote:
No one will be forced to do anything.

Keep your fiat dollars if you want to. Don't expect to have me accept them from you. I won't.

When my option is to get a dollar backed by a teeny weenie bit of gold or a fiat dollar backed by nothing... Well, It looks like an easy choice to me.


I like it.
  

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Re: The Return to the Gold Standard
Reply #15 - Aug 30th, 2018 at 2:10pm
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As for whether it will happen, I think most likely it will, over the next few decades at the latest.  Any way you look at it, you just can't continue to have these highly perverse incentives to inflate money and cause instability.  90% of the modern period was under a precious metal standard, for a reason.  (Of course, whether official commentary will communicate this ahead of time is a totally different story, as the elites won't want people to rush into gold and destroy asset values overnight.)

But I believe the public narrative won't be the old 'gold is money and paper money is debt.'  That rigid stance caused endless troubles for the elites, including exposure of the dishonesty of the whole system.  The new narrative will be, that gold, silver and maybe crypto values are a sign of the public's confidence in the system.  When these values are too high, a storm is coming, so we'd better get our house in order: cut back printing and borrowing money, rein in bankers, etc.

Over the long term, state currency will be effectively devalued against non-state money on a rolling basis, with short-term U-turns for deception and bubble-support.  From the elites' point of view, this would combine the best features of both the gold standard and 'fiat' periods.

(Note that this system would not be very different from our 'fiat' system, except that today's official narrative, which might be going away gradually, is that gold is just a shiny barbarous relic.  It's a subtle but important distinction, and I would listen carefully to the mainstream news, etc. for signs of the shift.)

Sure, the 'fiat' system gave the elites a huge amount of power, and no one wants to give up power, everything else being equal.  But I think the state of the world today is such that the elites are thinking the 'benefits' were temporary and not worth the instability.  Also, the elites received enough power and unearned wealth under the gold standard too.
  
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Re: The Return to the Gold Standard
Reply #16 - Aug 30th, 2018 at 3:08pm
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Snarky Sack wrote on Aug 30th, 2018 at 8:50am:
So for every dollar in fiat you turned in, you'd get about 29 cents worth of gold dollars?  Not saying that's a bad thing, I just want to be sure that's what you mean.

How about instead of giving them paper backed by gold, the government just gives them the gold in the form of coins, maybe using silver for smaller denominations?  What's the point of government sitting on huge vaults of gold to back paper?

I would think that a constitutionalist would insist on that since the constitution only authorizes congress to coin money, not print money.  Banks can print the paper as they did before the civil war.
Good idea, I'm fine with that, but other than small denominations like silver dimes and quarters, maybe half dollars, coinage isn't practical for everyday use. Even a quite small gold coin is worth quite a lot.

But your plan is great. When I get my gold in return for my FRNs, I'll take most of it to a bank and get banknotes, at least until I trust the government... But if my bank will give me gold or silver for U.S. Notes, I'll use them instead, because not everyone will trust my bank.

I still have some U.S. Notes and Silver Certificates, promising to give me silver on demand...
  
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Snarky Sack
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Re: The Return to the Gold Standard
Reply #17 - Aug 30th, 2018 at 4:03pm
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Jeff wrote on Aug 30th, 2018 at 3:08pm:
Good idea, I'm fine with that, but other than small denominations like silver dimes and quarters, maybe half dollars, coinage isn't practical for everyday use. Even a quite small gold coin is worth quite a lot.

But your plan is great. When I get my gold in return for my FRNs, I'll take most of it to a bank and get banknotes, at least until I trust the government... But if my bank will give me gold or silver for U.S. Notes, I'll use them instead, because not everyone will trust my bank.


I'd love to see that happen. 

Quote:
I still have some U.S. Notes and Silver Certificates, promising to give me silver on demand...


Interesting.  If the government would give you a silver dollar coin from when they minted those you'd make out.  Your certificates are worth about a buck fifty to collectors but the silver dollar coins are worth more than eleven bucks just for the silver.  Even the Ike  40% silver coins are worth almost five.

I envy the people who used to walk around with real silver coins in their pockets.  Coins that bought about the same in 1964 as they did in 1892.
  

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Snarky Sack
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Re: The Return to the Gold Standard
Reply #18 - Aug 30th, 2018 at 4:11pm
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Oh, and look:

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What is a silver certificate?
Silver certificates were issued between 1878 and 1964 in the U.S. These were representative money and part of the circulation for paper currency. The certificates were originally redeemable for their face value in silver dollar coins, and then for one year, from June of 1967 to June of 1968, for raw silver bullion. Since 1968, silver certificates have only been redeemable in Federal Reserve Notes and are therefore basically obsolete, though the certificates are still legal tender.


Sounds similar to your plan and it didn't cause any economic disaster.

I say go for it!
  

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Re: The Return to the Gold Standard
Reply #19 - Aug 30th, 2018 at 5:53pm
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Snarky Sack wrote on Aug 30th, 2018 at 4:03pm:
I'd love to see that happen. 


Interesting.  If the government would give you a silver dollar coin from when they minted those you'd make out.  Your certificates are worth about a buck fifty to collectors but the silver dollar coins are worth more than eleven bucks just for the silver.  Even the Ike  40% silver coins are worth almost five.

I envy the people who used to walk around with real silver coins in their pockets.  Coins that bought about the same in 1964 as they did in 1892.
I did. Dimes and quarters.

When I was very young (8-10) a silver dime would buy a loaf of bread and you'd get a couple of real copper pennies in change.

Nobody liked carrying silver dollars. Silver Certificates were much easier.

All of the silver Dollars I had saved, I gave to children, telling them this was a real dollar, and therefore worth quite a few phony dollars.
  
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