Using Gold As Online Currency 214
JerkyBoy writes "Salon.com has an interesting story about using gold for online transactions. One company that provides the service (goldmoney.com) describes itself as "an online payment system that combines the world's oldest money, gold, with Internet technology to provide a safe, easy and inexpensive way for anyone to transact business 24 hours a day. Payments are made electronically using GoldGrams(TM), which are grams of gold that circulate world-wide through the Internet." I wonder if I can configure the MIME types on my Apache server to send golden email attachments?" Hehe - this is basically the same thing as people have been trying to do with creating new online currency.
Re:Gold is shiny. So what? (Score:2)
Alchemists dreamed about a way of turning lead into gold, but our modern system allows just that. There is nothing that prevents the treasury departments from printing more money because there is no scarcity for paper and ink. If you get right down to it, we are trusting those who print the bills. In the US the printing press runs 24 hours a day.
In short, this is the major factor in inflation. In my short life of 27 years I have seen many prices double. As a consumer I think of it as an increase in price, but wages have also gone up. Everything is fine, right? Wrong. There is a brief period between the time when money is printed and when it is circulated where the value of money hasn't caught up with the new supply. It is a very small and gradual shift, but it basically acts a hidden tax that the majority of society pays. This isn't an entirely new process. It has been recorded that kings would require all citizens to turn in their coins and they would be clipped smaller and the king would have the clippings remelted into new smaller coins. After this point everyone's money was less valuable and wages had to raise to compensate... but not before the king enjoyed the spending power of his coins at the old perceived value.
So what is so great about gold? The fact that governments can't capricously manufacture more gold means that you are shielded from this problem. That deeply disturbs financial planners. Mind you, hard currency like gold does have its own set of problems, but the great thing about it is how it eliminates the arbitrary inflation and hidden tax of paper currency.
Re:A guide to digital currencies (Score:2)
It seems that the guy on this website has a vested interest in e-gold, so take this with a grain of er... salt.
Jacco (to e-mail me, please remove all yourclothes) /var/log
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# cd
Money laundering (Score:2)
Money laundering is a fundamental human right. Your money, your property, your business and nobody else's. The government only hates it because it lets people bypass thieving taxes and idiot prohibition laws. Forget talk of "the mob" - they can launder money anyway, trivially, by coordinating a slew of tiny transactions. This BS about money laundering is aimed square at the free individual who doesn't want to have to ask government permission to spend his OWN DAMN MONEY.
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Re:It's time to go back on the gold standard (Score:2)
there were bank runs and panics every 5 years
or so. Count me the hell out.
Gold is shiny. So what? (Score:2)
I seriously don't understand why gold has value anymore. For the first couple thousand years of civilization, sure, I can see it-- it's a limited resource, it's pretty and shiny and malleable, you can make jewelry out of it.. but today does gold have any fundimental value as a resource, like say natural gas or oil? Is there really that much demand for it? If so, why? Just wedding rings 'n the like?
Basically, I'm thinking about it and aside from its "agreed upon" value, I don't really need any.
Aside from such things as electronics, tooth fillings, and necklaces, is there any non-traditional gold is worth anything?
Incidentally, I hear that the world's diamond supply is controlled largely by one company that artificially caps supply, thus maintaining its value. True?
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Re:A lot of folks in the U.S. are missing the poin (Score:2)
Actually, there is a point to this sort of thing for some of us. Some of us don't live in the countries in which we are citizens, and have such a hard time transferring money back home (because it seems that anyone who sends money over a border is by definition a money launderer), that this sort of thing would be great.
Most of the measures that have got in my way transferring money seem to make the assumption that money launderers don't lie. This would be laughable, if I didn't have people checking my every move. So, we know money launderers probably don't mind lying, so why exactly are the powers-that-be making my life difficult? Hmmmm? It seems more like a privacy issue to me than anything else.
I find it very irritating that governments can help themselves to my money for a month or more whilst I write facile faxes to confirm that I don't launder money, and give them my life story and sexual habits.
In short, I will do whatever I can to avoid this crap because I see it as tantamount to censoring books because they might contain pornography, whilst asking me for all sorts of personal details to make sure I'm not the pornographer.
So what is dirty money anyway? Does it have something to do with that money-making war-on-drugs thing?
Re:e-gold (Score:2)
What kind of power do you think it gives the government to control money? I will tell you the answer, since I doubt you know: a government fiat currency can be inflated, easily, cheaply, and most importantly, without the knowledge of the voters. Historically, fully gold backed money, on average deflates over time, at something like 2% or so per year. Even with the modern Fed emphasis on "low" inflation, we are still getting something like 3-4% per year. So that is something like 6% actual inflation.
The effect of inflation is a hidden tax on everyone who has money. How about that for a neat thing one can do with "control"? Take 6% of all the money in circulation, each and every year? Who do you think this affects more? Poor people, or rich? Do you think it is right for the government to tax poor people in a super slick hidden way? (Of course, part of the loot is returned to the poor in the form of welfare, food stamps, etc -- but most of it is spent on government programs (defense, interest on debt) which benefit the non poor.)
In contrast to your implied suggestion that a private currency would be just as bad, note that only a government can enforce inflation over time. A private money, inflating in the same manner in a competitive market, would become disfavored and finally abandoned for better competitors.
One of the great effects of globalization, incidentally, is the integration of the market for cash into a worldwide thing. A lot of the people in the world, who are stuck with a much more inflationary government than the US has, can and do use relatively sound US dollars instead. A huge number of the actual printed US notes are overseas serving as the world's cash of choice. In fact it was counterfeiting operations in the rest of the world, not in the US, that really drove the recent redesign of the notes to make them harder to copy. It appears the Treasury is getting a bit businesslike and fighting for its market!
Meanwhile, there is a second reaction possible to the dawning awareness that competition from other countries' currencies is reducing a nation's ability to inflate. And that is: arrange international agreements to inflate in tandem. As it happens, such agreements are hard to get done and hold to. So there is a better solution: monetary union. That way you can automatically inflate in tandem. I wonder if this sounds familiar to any of the Europeans reading this?
As for "money laundering", that's just another modern pseudocrime created by the insane War on Drugs. Even if you are the sort of conservative who thinks that it is just fine for the government to nationalize our bodies to keep out drugs, perhaps you should consider the blow to the human right of private property entailed in the criminalization of control over your own cash.
Re:e-gold (Score:2)
This cuts both ways, for both borrowers and lenders. As long as they foresee accurately what inflation will be, they will factor it out in deposits and loans.
So who does inflation really affect? Well, for one thing people that fail to accurately predict it. But this might be either rich or poor (though, which class as a group do you think can hire the better prognosticators??)
The second effect, is on cash holders. The money in your wallet, that is, is being degraded even as you read this. To the extent which your total assets are bound up in cash, inflation hurts you. Now, what class do you think has the larger percentage of its assets in cash, rich or poor?
The third large effect is on the people who are getting all the newly created cash first. This effect is in proportion to how close they are to the newly created money. The banks are closest; they are ones who create the new money out of thin air, by pyramiding on deposits. Imagine that with a flick of a switch, you are allowed to add a few $million to your balance at a bank. Does that help you? Well, no -- not yet. You have to spend it to get any real effect. But banks do; they loan it to people.
After the banks, there is some effect on the people lent to. Of course, if the proportion of the loan to their total assets is small, they don't benefit very much. But there is still an effect; even if everyone has predicted it, the price effect still has to ripple out into the economy, and all those that get the cash early still pay less than those that get it late.
One final effect worth mentioning, though it is a lot less class skewed. And that is, that by artificially affecting interest rates, partial reserve banking creates the business cycle. Bad investments are made due to bad predictions of future demand. These help nobody. This is really the main reason to be against inflationary banking, IMO, not the relatively small effect of robbing from the poor to give to the rich.
As for that 2% figure: that is essentially the inverse of productivity. Non inflated cash increases in value because the sum of all goods and services increases. You are correct that we mine gold, which does suppress that figure somewhat. Perhaps it is 1%. There is really no way to know, absent setting up an honest and large scale hard currency. Perhaps we shall find out, in the future, if egold of some sort proves to dominate the world.
Re:Uh, no (Score:2)
You fail Econ 101. The value of the currency changes as the supply of currency changes relative to all goods and services which can be purchased for that currency. When the government causes the supply of currency to grow faster than the supply of purchasable goods, which is historically pretty much all the time, there is inflation.
"Inflationary Pressures" have been low since the beginning of the Reagan years because the Federal Reserve has deliberately acted to restrict the growth of the money supply to not much faster than the growth of the economy. In the late 1990s, the money supply increased more rapidly, in a way that a lot of the new money was fed into the tech boom; we're seeing a typical end-of-inflation crash in at least the tech sector this year and likely next year.
The Gold standard was a nightmare in the United States. There were depressions every 10-15 years caused by bank panics as the relative values of silver and gold shifted. Inflation ran as high as 15%, since after 1860 the amount of gold in the economy ceased to expand.
The "gold standard" which caused "panics" was a fractional-reserve gold standard, which allowed a small increase in the gold supply to create large increases in the money supply. Generally, the maximum potential money supply, as some multiple of the gold supply, was not circulating, so the money supply could increase rapidly up to a point, but then could not increase once the limit was reached. The end of the inflation was what caused the crash - investments which counted on paying back dollars worth significantly less than the dollars loaned would fail when the dollar ceased to drop in value.
You can't get inflation of 15% if your money supply isn't growing, unless the supply of goods and services drops. There was inflation after the Civil War, as prices were freed from wartime controls and rose to match the inflated money supply.
Gold is a worse investment than dollar bills (Score:2)
According to this Paul Krugman column [msn.com], between 1971 and 1996, the price of gold has increased by about 1,000%, while the Consumer Price Index increased by about 250%, and the Dow rose by about 700%.
So if the country had maintained a gold standard over that period of time, then the price of gold would have remained stable, but the price of everything else would have dropped -- and the last time we had such a price deflation was the Great Depression.
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Re:Gold is shiny. So what? (Score:2)
Well, she probably won't be your girlfriend much longer.
Why this is done. (Score:2)
The whole idea is, they are acting as a bank, in the more traditional sense. You give them money, they buy gold, and hold that gold for you. It's yours. They don't spend it, lend it, or anything else, but they do charge you a small service fee.
They will transfer gold between accounts, etc. The gold is a security to represent your money.
They could just as well skip the gold part, and hold the money for you, but I have a feeling that would requrie a Banking license, which they probably don't have.
So instead, they buy gold.
Excuse me? (Score:2)
Untracable? Who cares. Cash is not traceable EITHER.
Over the long term, gold retains value (I make this statement by looking at history, not by predicting the future).
An couple ounces of gold, in Roman times, would buy a nice outfit for a roman statesman. A couple ounces of gold today will buy you a nice suit.
An ounce of gold will buy you dinner at a fine paris restaurant. An ounce of gold a hundred years ago would do the same.
The odds of a mine 'flooding the market' with more gold are very low. Gold production has remained relatively constant for recorded history; that's one reason it IS trusted so much; there is no percieved risk of someone distorting the market in the way you describe.
'Printing money' is up to mining corporations? The amount of gold held by a company like this is a small fraction of the global gold supply. There is a global, steady market for gold... it's more liquid than stock.
Re:who modded this moron up??? (Score:2)
Gold's value is basedon market perception, and for thousands of years, there has been a merket for gold.
If we encountered economic collapse, and the dollar was worthless, people WOULD accept gold.
No. (Score:2)
Banks by definition are places to hold your money; everything else varies.
Wow. Way to twist those words. (Score:2)
Yes, of COURSE they are in this to make money... who thought they weren't? They make money off service fees, off volume of business. The reserves they hold, which would be audited by a reputable financial firm. I've had a look at e-gold's.. looks good to me, have you?
Re:Gold is a worse investment than dollar bills (Score:2)
Yes, the price of gold was no longer fixed after 1971. It was also illegal to own gold buillion in the US prior to 1974 so..... the point is somewhat moot.
I'm talknig about stability over generations, over 100's of years, of COURSE there will be regional burps. Your 1000% increase was due to the normal way of thigns being supressed prior to this....
Re:Excuse me? (Score:2)
Gold ingots can have serial numbers; transactions can be recorded. Yes, you can also melt it down, and find a buyer; harder to do when it's not in a recognized form.
Either way, you can take extra effort to have someting not traced.
Re:It's time to go back on the gold standard (Score:2)
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this seems familiar (Score:2)
That aside, there are some obvious questions (IMO). Is there really a need for a service such as this? I can buy stuff online from other countries with my credit cards. The vendors get their currency of choice, while I pay my card off in dollars. I recently made a purchase at amazon.co.uk and never once found myself thinking "this would be so much easier with an online standard." But maybe things like that are just hacks to get us through until there's a viable uniform currency available.
ck
AP Article also, with pic of Doug Jackson (Score:2)
http://wire.ap.org/APnews/?SITE=KSPAR&FRONTID=HOM
then "tech"
then "Cyber Currencies Spawn Money-Laundering Fears"
(sigh, as if green paper doesn't work for that!)
JMR
(speaking only for myself.)
Re:this seems familiar (Score:2)
JMR
Re: (Score:2)
better summation (Score:2)
It's these same rules which will not allow many governments to allow online gold companies to flourish. What's really cool about gold is it holds its weight no matter where you are in the world as opposed to currency which means a country's currency means squat.
Do you think the US with a strong dollar wants you to trade for gold which can bring down the value of a dollar? e.g. Take 1,000 US dollars and travel through Europe without spending a dime solely exchanging the currency and you will see it will be gone quickly without you even spending, but with gold, it's always going to be a set price. There is no competition for it, which is why all governments are paranoid of people turning to gold.
Re:e-gold (Score:2)
Re:Why gold has, might have, value? (Score:2)
WHY are all high-end audio/video connectors GOLD plated? Because gold doesn't corrode.
Re:Gold is shiny. So what? (Score:2)
I've read horror stories about how in previous decades hundreds of ultra-low-paid African workers either worked in the fields to get diamonds (apparently in one spot they were so abundant they could be found above ground) or in dangerous mines.
Don't think that this kind of pratice is over, its' not. As a matter of fact there is currently a civil war in Sierra Leonne being fought over diamond fields. THe "rebels" have taken to chopping civilian's arms off at the elbow in order to keep them in line. There are whole viliages there with only one arm.
The really twisted part of this is that DeBeers doesn't own all of the mines in the world but they do own most of the distribution network. If these guys are selling diamonds from the fields guess who they are probably selling them to.
Ethical Money (Score:2)
Federal Reserve money buys protection from punishment. You are punished if you don't pay taxes. This has become the Federal Reserve's primary monetary authority. The moral hazard of basing monetary authority on punishment has now been realized in the systemic and out-of-control gang rapes of prisoners in the US. All other unlawful acts by US governments are now overshadowed by the murderous, sexually sadistic character of governmental authority that has developed in US penal systems. Federal Reserve money is now protection racket money, or, if you prefer "punishment protection money". Calling it "fiat money", "debt money" or even "legal tender" obscures its true character.
E-Gold is _not_ a bank. (Score:2)
For most of us, the most important difference is that if E-Gold were to go bankrupt, we should be able to get our gold back out, not subject to being used to pay off the creditors first.
Re:Nope (Score:2)
In reality, inflation has been virtually non existent through history with gold based currencies.
However, I would like to point out that the primary reason why there was really no statistical inflation prior to the end of World War II was primarily because the Fedral Reserve, indeed other central banks took it upon themselves not to intervene much in the economic affairs of their nation. That is to say they let the currency float and sink according to economic conditions. Long periods of economic growth and inflation were often followed by periods of severe deflation since, instead of relying only on cutting employment, buisnesses would often cut wages of employees to bring down the cost of their products. Needless to say that paycuts now, espcially in union dominated industries are not as common as they were in the late 1800s - early 1900s. Instead we people just get fired, and even then most of the work force has unemployment insurance that will kick in to insure that people always have money. If you can find a graph of inflation in the US from 1840-present, you'll notice that there were huge spikes and dips (meaning inflation and deflation) prior to the adoption of Keynsian economic theory.
Also on the subject, since you have read Freidman, you should know that one of the primary goals of a moniterist is to match money supply to the economic growth. This was very hard to do when the economy's money supply was fixed (essentially) as it was under the gold standard. The lifting of the standard allowed better control of the money supply so that it would be easier to as Friedman, Volker and other moniterists wanted to do, contract and expand the monetary supply according to growth. True this policy din't last long, but still the lifting of the gold standard, allowed for greater shifts and fluctuations in the supply of money then would be possible with fixed supply.
There also is the matter of fixed money supply causing balance of payments surpluses and deficits in international markets, since with a fixed currency value (as the US dollar had when it was the benchmark during the days of Brentonwoods), it makes it very hard for the currency to maintain a value indicative of the economies strength when it was pinned to the value of gold. This most effected developing nations who were often subject to runs on their currency since revaluations had to be announced in advance, thus leading to currency speculation. (Well it's something like that, please correct me if I'm off a little... or a lot).
Hope this corrects my mistakes and doesn't create new ones, feel free to respond!
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Gold: the oldest currency? (Score:2)
E-money (Score:2)
A new currency will never be accepted by all banks all over the world, gold is not only the oldest money around, it is also a global currency. The U.S. dollar is not a global currency as in some parts of the world it is even an 'illegal' currency (ie Iraq, China), so gold is accepted everywhere. Problem is the exchange rate between your local currency en the gold currency. Also the right to own gold and trade with gold is something which differs among different countries. PayPal is the biggest player in E-Money, I understand that even the CityBank is scared is hell from PayPal (and I'm not even a U.S. citizen!). PayPal has a working concept, it is very unlikely that a competitor in E-Money will survive.
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Re:e-gold (Score:2)
Re:Highlights to be noted (Score:2)
Re:It's time to go back on the gold standard (Score:2)
Hint: the reference to the Vienna Philharmonic is a big giveaway.
--Fesh
Re:Why gold has, might have, value? (Score:2)
Hedge against what? Hedge against civilization, the US government, the Global economic system,
or whatever, from falling apart tomorrow.
As many people have mentioned previously, Gold has no more inherent value than paper money.
Gold has value becuse someone says it does.
Food has more inherent value than Gold because you need it to survive.
You don't NEED gold for anything, therefore it has no inherent value.
If civilization colapses I'd rather have a basement full of gardening supplies than gold.
And, if you were to come around my place with nothing but gold to trade, you'd be turned away hungry...
Gold is a commodity (Score:2)
Gold is a commodity, and it fluctuates like a commodity.
There's now a promotional organization, the World Gold Council [gold.org], trying to hype up the price of gold. They're trying to do for gold what the DeBeers Consolidated Selling Organization ("A Diamond is Forever") did for diamonds. It's not working.
There are many marginal gold mines, mothballed until the price of gold goes up. Some have been waiting since the 1970s. If the price ever goes up much, those old mines will open again and flood the market.
Don't look to gold for long-term stability. There's an argument for currency diversification, but not for gold.
Re:Gold is shiny. So what? (Score:2)
Gold Standard In The US Was Abandoned... (Score:2)
...for a reason, wasn't it? Perhaps there were problems having the value of money tied to a commodity that might fluctuate in value for reasons beyond our control. For example, right now gold is at a historic low. If we were on the gold standard the dollar would be really weak right now instead of really strong. Of course, that would be good news because the dollar is too strong right now.
OTOH, one of the reasons gold is less valuable now is that gold jewelry apparently isn't as fashionable as it once was (remember the 80s? Mr. T and his chains, etc. You don't see that anymore). Do we really want the value of the dollar tied to fashion sense? You think Greenspan is bad? Wait till some Paris designer starts making economic policy.
If this e-gold stuff has legs, then maybe I'll go back and study some economic history from when we had the gold standard. It might be possible to score some wins buying and selling e-gold at the right times.
Re:who modded this moron up??? (Score:2)
Actually, gold does have a fairly high intrinsic value. It's a very useful material with a variety of highly desirable characteristics. It's nearly perfectly corrosion resistant, easy to work, has a wide range of useful alloys, is a wonderful conductor of heat and electricity, and is extremely reflective. A lot of people also think that it's very attractive. Its use is currently restricted to high-value applications because of its scarcity, but it would be an excellent material for a wide range of everyday applications if it were common enough.
Re:Excuse me? (Score:2)
You're using a poor standard for value because the relative cost of goods has changed dramatically over time. Take a look at the cost of labor instead of finished goods. In Roman times, an ounce of gold would hire a skilled craftsman for about 3 months or a soldier for 6 months. Today an ounce of gold will hire a skilled craftsman for a day or two and a soldier for maybe 3.
Why gold? (Score:2)
Let's face it, gold is just another merchandice. It's not even very stable, gold prices has been known to have relatively big variations. Why not silver, plastic, tobacco, oil, stock bonds, toothbrushes or even bananas? Well the last two are somewhat silly, and bananas are pretty volatile, but the idea remains, and at least bonds seems to be a very attractive idea (with proper care they will even increase value, meaning you can issue more of the currency without inflationary effects). But there are many other choices as well...
What is it that is so special about gold that it always remains a popular choice to base a currency upon? I don't know...
Re:Gold vs the money market ? (Score:2)
You just stated what may be the biggest myth of currency. I believed it until I took my first Economics class. Currency represents buying power, or the amount of goods or services others are willing to give you for a certain amount of the currency. Yes, the U.S. government does have a gold store locked up at Fort Knox, but not enough to make up for the trillions of U.S. dollar value floating around.
If you think about it, the buying power idea makes a lot of sense. It explains (in part) why some currencies can change value compared to others by several percent each year (or in some cases, dozens of percent). The Ruble (Russian currency) would not be so low in value if there was gold backing up each ruble. It's just that the Ruble has very little buying power, because merchants either don't want it or don't want to give much for it.
That's the simplified explanation of currency.
Re:Gold is shiny. So what? (Score:2)
Yes, diamonds are almost exclusively controlled by DeBeers Corporation (not sure if I spelled that correctly). They bought out their competitors and control the mining of diamonds worldwide.
I've read horror stories about how in previous decades hundreds of ultra-low-paid African workers either worked in the fields to get diamonds (apparently in one spot they were so abundant they could be found above ground) or in dangerous mines. I'm not sure how much DeBeer's has stocked up, but they sure managed to make diamonds seem quite valuble.
For this reason I absolutely hate society's fascination with diamonds - people have the false sense that they are really rare. Truth is look-alikes aren't hard to make, industrial ones can be manufactured, and one company controls the supply so we all overpay.
Good thing my girlfriend isn't the diamond type =).
Re:Uh, no (Score:2)
The gold standard in the late 19th century set the price of silver to a specific quantity of gold.
Your statement regarding the "panics" of the 19th century is partially true; but increases in silver supply were more to blame -- little new gold was discovered post 1860
More transactions were made with silver coin & specie, as the supply of gold was constricted. As the supply of silver changed relative to the set silver/gold exchange rate speculators made millions as banks failed and merchants went out of business when their loans were called.
Re:Uh, no (Score:2)
An example of fiat money would be the "Continentals" of the revolutionary era. These were paper notes printed by congress that traded at par with gold despite having no tie to gold. You traded with them because the army said to take them, and their actual market value was 1/16 of the "face" value.
Re:Uh, no (Score:2)
Re:It's time to go back on the gold standard (Score:2)
Setting your currency to some amount of some raw material sitting in a vault somewhere is a sure path to ruin in an expanding economy.
The gold standard resulted in a shortage of capital which starved capital markets for centuries. In addition, changes in gold prices relative to other precious metals (ie silver) made accurate cost accounting difficult and equitible taxation impossible, since taxes are payable in gold, while much of the money supply is actually backed by silver, since enough gold is not available.
Re:Money laundering (Score:2)
Before you start harping for 'the good old days' when men were men, and private banks issued private currency; do a little reading.
-- Private money was rarely accepted outside of a limited region. (Your county) If you needed to travel, you needed to get notes drawn from a large New York or Chicago bank, or haul metal with you.
-- Small bank failures created financial panic which wiped out farmers and businesses alike.
Uh, no (Score:2)
You have displayed your complete and utter ignorance of economics. The most reliable monetary standard has been (and will be for some time) the US Dollar.
The dollar is not 'fiat' money, as you describe it. The US Dollar is backed by the faith and credit of the United States Government. That means that US specie is backed by the full taxing power of the United States, which is quite alot of value. In addition, the value of currency increases and decreases as the size of the economy rises and falls; limiting inflationary pressures.
Gold is simply a commodity, with no unique value. Why not base your monetary supply on pork bellies, or oil, or iron?
The Gold standard was a nightmare in the United States. There were depressions every 10-15 years caused by bank panics as the relative values of silver and gold shifted. Inflation ran as high as 15%, since after 1860 the amount of gold in the economy ceased to expand.
Take a couple of hours to learn what money is, and you'll find out what all of these 'e-gold' and 'real money' schemes are -- schemes to dump lousy investments (look at the historical price of gold over the last 30 years) into the hands of ignorant suckers at inflated prices.
Re:Private money (Score:2)
No, gold is a rare and valuable commodity, nothing more.
Government money is backed by the ability of the government to tax and issue bonds; this links the value of a nations money supply to the economic power of the nation.
Many of the benefits of gold that you describe are also attributable to the US dollar, namely universal acceptance (85% of US printed currency is overseas) and that fact that many nations base their currency on the dollar.
The US Dollar, the Euro, and the Yen are 'real money'. Gold is just metal.
Re:who modded this moron up??? (Score:2)
- There is a fixed amount of gold. Productivity however increases, resulting in increasing "value" of gold in the long run, in other words deflation. Deflation is counterproductive because it stiffles investments. Keep your gold, get more for it tomorrow.
- The amount of accessible gold is not fixed and not coupled to relevant economic processes or goals. "Printing money" is up to mining corporations. Advancements in mining technology cause your gold to drop in value, a flooded mine make it more valuable. Not exactly predictable or desirable.
- But at least with gold there is a "hard" reference of value. So we won't tumble into a situation where suddenly all our money is worthless. Bzzzt. Wrong. If I get the impression that I can't buy what I want or need, because no one has the skill or will to produce it, I won't give my products to you, no matter if you pay in gold or not. In return, you refuse to sell your products for gold. So do your former customers. Suddenly gold will buy you nothing. It has become worthless. The "intrinsic value" of gold is what it can be used for in production, no more no less.
- Gold is untraceable. This creates all sorts of problems, for example it makes fighting organised crime much harder.
The most important part is of course the fact that while money is seen as a placeholder for gold in a gold-backed currency system, gold itself is just a placeholder for trust. If people stop trusting an economic system, basic needs dictate what is most valuable. Most people do not count possession of gold as one of their basic needs.Re:this seems familiar (Score:2)
A guide to digital currencies (Score:2)
Re:Reasons for going off the gold standard. (Score:2)
And engaged men the world around would jump for joy! Two months' salary, indeed.
Re:who modded this moron up??? (Score:2)
Yes, and people would also accept guns, butter, and sugar. And all the Y2K people would become the nouveau riche. Hmm... that gives me an idea.
Coming soon: e-guns.com (or e-sugar.com)
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D. Fischer
Re:If it's real money..... (Score:2)
Re:If it's real money..... (Score:2)
Anyone having any credits (currency) that has the value of gold better be ready to cash it in for it's full value in gold. Otherwise it inflates and becomes worthless. Remember a dollar could pay a days wages to a good worker at one time. It has de-valued some since.
Re:Been there, done that. (Score:2)
Those who do not learn from history are condemmed to repeat it.
Re:this seems familiar (Score:2)
Yes, a standard currency would make it easier for, say someone in France to buy stuff in the U.S, or Japan, and vice versa. But e-commerce seems to have that taken into account. I've bought things from U.K. sites and I could have paid in pounds or dollars. I decided to see the prices in dollars so I could better appreciate how much I was paying. Heck, I don't even think there was a fee for currency exchange.
Kierthos
Re:It's time to go back on the gold standard (Score:2)
And if more then one bank is getting rushed by customers who are withdrawing all their cash, it snowballs.
Kierthos
No matter how far we come... (Score:2)
But we humans just can't help bright shiny objects. Pretty... shiny! All the world's economies are a collective hallucination, swapping gold for $$, yen or pounds doesn't mean anything. I just hope that everyone doesn't notice money has no real value at the same time.
--
Re:e-gold (Score:2)
Because e-gold is not a bank that lends money -- it's more akin to a warehouse that stores gold on behalf of its customers -- it's not covered by those rules.
Right there's your answer. The feds didn't the idea, so they raided the business and shut them down. Not that they were doing anything illegal, but hey, the feds don't like anything that's not under their control. Sure, in a few years maybe, the feds will be found negligent and restitution will be made, but that's a little late for e-gold, which is pretty much the idea.
Gold vs the money market ? (Score:2)
Just wondering weather this is so - and then what "gold currency holders" do in case of a dot-crash ?
--
Didnt someone get in trouble for this? (Score:2)
And the fbi was happy to shut down a service where people could use untracable money?
The Lottery:
back to basics (Score:2)
Re:Excuse me? (Score:2)
Untracable? Who cares. Cash is not traceable EITHER.
But I think we can establish that cash carries serial numbers. Serial numbers, while a pain in the ass to deal with, make cash traceable. At least in small quantity. Gold though, as you said, is more liquid than stock. Which is true is both sences of the word. Yes, gold is closer to M1 than stock, but it's also a meltable metal, which means that short of isotopic taging, it's very hard to trace because you can melt it down! Try doing that to a dollar bill.
This has been another useless post from....
Re:It's time to go back on the gold standard (Score:2)
On a related note, Delta-V is very cheep when you're allready on the asteroid. See R.A. Heinlein's The Moon is a Harsh Mistress for examples of creative use of Earth's gravity well. I used to have figgures for this, but basicly it boils down to this. Shipping anything to earth from space (not from another planet surface) is the cheepest air freight you'll ever pay. The answer is the rail gun or celonoid cannon (different designs, same basic end). This page [google.com] would have you belive one could construct a device at home capable of reaching escape velocity.
This has been another useless post from....
Re:It's time to go back on the gold standard (Score:2)
The initial investment is huge, but so is the potential payback -- from the steel, because it won't take many hundred-ton shipments of gold to run the price way down.
Re:On credit (Score:2)
Re:On credit (Score:2)
We went off this in the 30s (Score:2)
And what some people forget (Score:2)
Now this isn't to say there aren't some advantages to a gold backed currency (personally I don't think it's a good idea), however it doesn't make any fundimental difference in what money is or how it's used. Much of the money in modern scoiety doesn't exist as anything more than numbers inside computer networks. However, so long as people trust that and value it as money, it works as such.
Fools Gold (Score:2)
Perhaps Clams next?
who modded this moron up??? (Score:3)
if you would like to learn more about economics, go to your local community college and sign up for something called "economics 101".
Gold doesn't have intrinsic value (Score:3)
_____
Re:Gold is shiny. So what? (Score:3)
They don't add up to squat, but they have value, because there is a market for them.
Same reason money has value; because people accept it.
Yes, Diamonds are actually not rare at all; DeBeers keeps them artificially rare. As far as you or I are concerned; they ARE rare, but factually, DeBeers has an unimaginable number of diamonds locked up in vaults all over the place.
This is not the case for gold.
Re:this seems familiar (Score:3)
Well, the credit-card companies will, of course, charge you for the service of exchanging currency. They don't put this directly on your bill, but there will always be a difference between the rates for exchanging one currency into another and then back.
But there is also another cost. Foreign currency exchange rates are based on supply, demand, and speculation, not on actual "value". "Value" is a nebulous term, but, to take an example, the current exchange rate of Canadian dollars into American dollars is about $0.64 US. However, by a different and more accurate representation of the "value" of money called "purchasing power parity", the Canadian dollar is worth about $0.80 US. That is to say, if a Canadian buys stuff in Canada, he gets about $0.80 US for his money, but if he buys it in the US, he only gets about $0.64 worth of stuff.
Of course, some commodities are less expensive in the US to compensate for the difference, but there is still an additional "cost" to exchanging currencies, caused by supply, demand, and speculation on the supplies and stability of currencies themselves, never minding what they will actually buy for you.
Re:Gold doesn't have intrinsic value (Score:3)
Diamonds, having fewer industrial applications than gold, would be sold by the pound if it wasn't for a marketing campaign. In the 1940's(?), De Beers made deals with the Hollywood studios to have them portray diamonds as symbols of everlasting love. Nowadays, people are brainwashed into spending two months of income to buy a pretty looking rock.
Re:Gold vs the money market ? (Score:3)
Also, the US government would very much like to get rid of the gold that it has in Fort Knox, now that it is financially useless. This is true of most governments that have gold reserves.
It explains (in part) why some currencies can change value compared to others by several percent each year (or in some cases, dozens of percent).
Currencies can change value dramatically overnight entirely because of speculation, the same as stocks. A national economy doesn't fundamentally change overnight; only the perception of it can change that quickly. Also, foreign-exchange traders are given to torpedoing currencies in order to move markets and turn quick-and-dirty profits.
The Ruble (Russian currency) would not be so low in value if there was gold backing up each ruble.
The Ruble has a low value because the Russian government and economy are in political and financial chaos. The Russian government probably has a stockpile of gold somewhere, but it's financially useless in the modern world. Anyone with enough money to buy lots of gold would probably understand how useless it is.
Comment removed (Score:3)
Who's the moron? (Score:3)
They have taken economics 101.
OK, but... (Score:3)
So I guess what I should have said was that Friedman finds the original posters position a perfectly reasonable and respectable one, even if he may not fully agree with it. Calling it "one of the stupidest things i've ever heard" that is refuted by economics 101 is clearly a statement from an ignoramus. I'm sorry that I let myself get dragged down to that level, and I appreciate you correcting it
Nope (Score:3)
Yeah, expect it's completely opposite. If money is backed by gold, the money supply is by definition the gold supply, which while not constant, grows very slowly. The money supply can only grow strongly by abandoning the gold standard, and printing more money than you have gold. You can do that without officially acknowledging that that's what you're doing, which may be what you're referring to.
In reality, inflation has been virtually non existent through history with gold based currencies.
For those of you who think I'm blowing smoke all this stuff I got out of my college economics book (Baulmer and Blinder are the authors I think ).
I hope that's a misreading of the book. A good book on the subject is Money Mischief : Episodes in Monetary History [amazon.com] by Milton Friedman.
Makes zero sense (Score:3)
First of all, you have to realize that gold has very little useful value. Sure, it is used in industry, and in jewelry, but most of it is merely stored for currency purposes.
So why is the global economy so reliant on gold? It's very simple, because it can't be counterfeited. Au is an element. Short of a nuclear reaction you just aren't going to produce it from something that doesn't already contain gold. There therefore need no government regulations on it whatsoever.
You could just as easily have a monetary system based on points stored in a computer system. As long as the total number of points in the system was fixed, you'd have the same stability as gold (more since gold is being found every day). The reason you don't do that is because of fraud and regulations.
Now consider goldmoney.com. Even if they really do back your "points" with real live gold, how are they protecting against robbery? If someone steals the gold, goldmoney.com is going to go out of business, and guess what, you're broke. Goldmoney.com is also only as secure as the country in which it is located. Someone takes over that country, they can then confiscate all your gold. Even without a coup the gold could still be confiscated by the government.
Really the only thing you're getting here is the promise of privacy. If that's what you need, and you can't find it anywhere else (you certainly don't get it with credit card payments), fine. But for stability, I'd say the Swiss government is much more stable than the corporation running goldmoney.com. You even get the privacy there, just not the privacy for the transactions themselves. Maybe Switzerland should look into forming it's own e-transaction system.
There are more interesting things out there! (Score:3)
A lot of folks in the U.S. are missing the point (Score:3)
I also liked the comment by the providers of this currency:Translation:
We welcome money launderers, those looking to hide funds from their spouse, and just about anyone else who wants to enguage in any sort of even halfway shady dealings.
There is one other application of this sort of independant international currency. That is, when someone (aparently not Hilton 1 [slashdot.org], 2 [slashdot.org], 3 [slashdot.org]) get around to building a hotel or other tourist [slashdot.org] destination [slashdot.org] in space, or some other location beyond the jurisdiction of any one country, such as a deep sea hotel. Currently, there is only one player remaining in this arena [slashdot.org] as far as I know, but they'll need a currency, and in order to avoid national ties, this type of cyber-currency would be perfect.
--CTH
---
Flaky banks? hmmmm.... (Score:3)
Does that sound like a fly-by-night company or what?
Re:Nope (Score:3)
Population halved, money/person doubled, value of money halved. Not to imply that our republican government would handle a similar problem any better...
Theoretically, big gold discoveries could similarly inflate a gold based currency, but it hasn't happened in the industrial age. They mined a lot of gold in California, but the US economy was growing faster -- for instance, more value was harvested from the timber in Michigan than was mined from CA. The problem was _deflation_, when the economy grew much faster than gold production later in the 19th century. This meant that prices dropped and farmers often couldn't make their loan payments, while the bankers grew richer. Hence, William Jennings Bryan and his campaign to temporarily inflate the currency by basing it on gold and silver both. (If he'd won, no doubt a few years later he'd have been trying to get copper declared a coinage metal also, then iron and lead.)
What happened instead was an unannounced change in the currency systems. Originally, paper money was just a deposit receipt declaring that someone was holding the equivalent amount of gold, and you could go to them and exchange the paper for gold. This made commerce considerably easier, instead of carrying 100 pounds of gold across the countryside, you deposited it and carried a note from your banker. So paper money was initially issued by a private bank. Some of those bankers in the early 19th century US were less than honest, and discovered that since all the paper money wouldn't come back at once, you didn't have to hold the full amount of gold in the vault. Well, that worked until word got out, and then everyone was rushing to the bank to try to cash in before they ran out... So the US government took over the job of holding the gold and printing paper money in exchange. Most of the time before 1900 they did it honestly, but in the Revolutionary and Civil Wars, American governments were issuing greenbacks with nothing to back them except a promise that someday they would raise enough real money from taxes to redeem them. I'm sure European governments often made the same compromise.
Around 1900, what had been temporary expedients during wars began to become a permanent situation governments started printing the amount of money needed to keep the economy flowing, even though the gold backing was insufficient. The US probably stayed close to a gold standard longer than most, because in WWI much of Europe's gold went into Fort Knox, but by 1935 we abandoned the gold standard while pretending not to: the dollar was theoretically redeemable at $35/ounce (compared to $16/ounce in 1900), but American citizens were not allowed to own gold.
I guess the moral here is: even gold currency is not a panacea, and politicians will f* up any system when the heat is on...
On credit (Score:3)
There is of couse the issue of credit itself. Some people (like me) have real problems living on borrowed money. I'd much prefer to be able to spend MY OWN money, thanks. Especially as I don't have to worry about over-extending myself, as once the money's gone, I can't incur interest.
Please don't make me quote statistics on how many university grads declare bankruptcy, in no small part due to the $5,000.00 credit cards issued upon graduation...
For some of us, credit just isn't the answer.
(Note: I'm Canadian, and maybe the financial world is just skewed here.)
It's time to go back on the gold standard (Score:4)
When the Founding Fathers wrote the constitution, the fundamental property rights it embodies were rooted in actual intrinsicly valuable commodities. When the Federal government took your land under the 5th amendment, they had to compensate you in gold. Even well into the end of the 19th century, the biggest hotbutton currency debate concerned minting silver instead of gold.
Today, we're off the gold and silver standards altogether. This is truly sad. Instead of being able to predict how much a dollar will be worth tomorrow, we leave that decision up to the whims of international currency daytraders. It's little surprise that inflation rates under the Carter administration crested well over 10% so soon after Nixon pulled us out of Vietnam and took us off the gold standard.
The economy of the twentyfirst century cannot withstand uncertainties. The technological revolutions of the industrial age all occurred under the gold standard. Why should we experiment with a proven thing? Why let politicians pay off their political debts by devaluing our currency? Brazil went down that path, and we needn't follow.
In today's economic climate, the prudent investor will consider converting at least part of his or her paper assets into precious metals. Right now, with metal prices at a fraction of their all-time highs, may be an ideal time to invest in precious metals. The Gold Vienna Philharmonic sets the standard in purity and popularity. And with the exclusive Monex buy-back guarantee, your gold investment can only maintain or increase in value for one year, which adds a unique benefit to your gold purchase. Sign up today and receive a free copy of Gold In The Age Of Uncertainty.
banks (Score:4)
wont last long here's why (Score:4)
source: Wired Magazine [wired.com]
For those interested in gold, and the government I suggest reading "End of Ordinary Money [orlingrabbe.com] by Orlin Grabbe, and take a quick look at Jim Bell's [antioffline.com] case where he created Assassination Politics, which delved slightly into currency which could be used anonymously. Now please don't jump the gun so quick to say it won't happen, if that were the case the government would be quick to assist developing a financial system they thought would improve the economy, business, etc., and they haven't in fact it's been the opposite.
Great Idea, but... (Score:4)
Then I can start looking around the internet for Armour and Swords and maybe a lantern and a sack, and head off to the Sword Coast to find adventure and loot.
(Submitted in the five minutes before heading home from work, brain broken, must sleep...)
"I'll take the red pill, no, blue. AAAHHHHHHHHHHHHHHHH........"
Reasons for going off the gold standard. (Score:4)
The way I understand it, part of the reasons for going off the gold standard was to give the Federal government more control over the economy. When you're tied to only issuing as much money as you have gold in stockpile, then there's a limit to your control over that aspect of the economy. But when you are working in a money-market type situation, you can look at the given value of your currency in the money market, and then decide to either print / issue more money and see how the markets react to you.
Anyone read "Cryptonomicon"? Remember the absurdity of the chinese banks in the first chapter, running about demanding of each other to see the gold? This is another aspect to the money-market situation that makes it advantageous not to use gold. In the case of a serious economic downturn, you can prevent the 'run on the bank' in which everyone dashes to their local bank and demands gold for their money - which can't happen when you're off the gold standard. It also prevents 'goldrush' type phenomena, which is bad when you find rich new gold deposits somewhere and the market is flooded with gold which devalues all currencies around the world.
DeBeers has been artificially controlling the diamond market for years to prevent exactly this sort of thing. They have huge stockpiles of diamonds from south africa and russia, but only release them in small quantities to keep the prices up. Apparently if they released them all then diamonds would be worth about as much as - I don't know really, but not worth much anyway.
This isn't the only example of an artificial market: aluminum ( or aluminium if you prefer ), is actually 'worth' a whole lot more than we normally think. The only way to extract aluminum from other metals is with powerful electric currents, which makes it very costly to produce, but governments subsidize the aluminum industry so heavily that it keeps the consumer price very low. This is why the first thing government wants to get out of a recycling program in any city is lots of aluminum.
As an aside, being off the gold standard is not always a bad thing for all countries. Switzerland for example has had a currency that over the last 100 years or so has been more stable than the gold market - so its actually a better investment ( if you want stability ) to put your money in a swiss bank than to buy gold.
Why no modern economy can use the gold standard (Score:4)
Both systems failed for the same basic reason, there simply was not enough metal to back the amount of money required by a modern economy. If you think about it the idea that the optimum amount of money in circulation should be tied to the amount of a shiny metal that has been taken out of the ground is rather odd.
The US federal government still has ownership of something like 50-60% of the total world gold reserves. Most of that is the payment on war loans made by the British following world war I and II which in turn was the booty of Empire. The total quantity of gold bullion has at most doubled since WWII, in the same time the GDP of the US has in real terms expanded at least ten fold.
There simply is not enough yellow metal to go round. Nixon abandoned the gold standard for the simple fact that even under the system of managed exchange rates there was simply not enough yellow metal to support the economic activity. The supply of gold had become the limiting factor for the economy.
The idea that money should be backed by real value has emotional appeal to many. Back at the turn of the century the Deomcratic party was essentially captured by a monomaniac called Willian Bryans Jennings whose sole speech was 'that man should not be crucified on a cross of gold' - monetary reform by moving to a bimetalic standard.
It is not surprising that people trying to invent their own currencies should attempt to base them on gold. But there is a big difference between having a gold ingot in the hand and having an account with a fly by night operator in St Mcru (pop 5 penguins).
It is now 30 odd years since the US was on the gold standard and the number of people expecting a return is rapidly diminishing. At the same time most other countries have abandoned the gold standard and nobody wants to have a managed exchange rate (although some are forced to). I suspect that the diminishing gold price reflects the fact that gold is loosing its traditional role as a safe haven in troubled times.
Re:It's time to go back on the gold standard (Score:4)
A currency is a lubrication for the economic activity of capitalist system. If there is not enough currency in ciculation to support the level of economic activity, the society will suffer due to reduced level of investment, production etc. On the other hand if there is too much of currency, it will lead to inflation affecting the most vulnerable sections of the society.
A gold standard ensures that the amount of currency in circulation is tied to the amount of gold available with the government. This is the reason for the flurry of economic activity witnessed whenever there was a new 'God Rush' during the gold standard days.
In today's floating currency systems the amount of currency in circulation is determined by the governments. In many countries this is managed by largely autonomous central banks who look at the economic activity and take necessary policy and physical steps. If the central bank does a good job, the economy benefits otherwise it suffers (Mexico!!)
Going back to gold standard will not ensure prosperity. At best it will make certain that the governments act responsibly. At worst it will stiffle economic progress by tying the amount of available currency to the skills of miners than to the knowledge of central bank governers!!
Re:wont last long here's why (Score:5)
e-gold (which has so far lasted since 1996) andOmniPay [omnipay.net] (I work for them, not e-gold, and I speak only for myself) are doing fine, actually. I'd like lots of Slashdot folks to try the stuff, because you tend to be programmers, and nice things [metalproxy.com] happen when programmers play with e-gold. I'd like for Slashdot-like sites to sell mod points (a quickly expiring currency) so I've offered a ten-gram reward for it (about 80-90 bucks' worth, at the moment, so not much). I'd like for folks to think of e-gold for the cool stuff [magazinedepot.com] that can be done with it. Using the shopping cart as a tipjar [e-gold.com] and direct, voluntary donations to musicians might solve the Napster problem someday, IMO. e-gold is a bit tough to understand at first (grams as a currency?!?) although selling gold (a very emotional substance with humans, still, whether it's electronic or physical) can be a business where it's very hard to love *every* single customer...Mostly it's fascinating and lots of fun. The currency is growing pretty fast without much marketing budget, in part because of the "fan club" of sites like BananaGold [bananagold.com] and cool directories maintained by others. It's very nice for me.
Anyway, if folks on Slashdot want to try it, I have a promotional account, so just send me your account number and I can click you some (not much, I don't toss this stuff [e-gold.com] around like Paypal, but OTOH we're in the black...) gratis. Thanks.
JMR
Re:OK, but... (Score:5)
Well, I don't really think he says that they're responsible for all the monetary disasters in history. He certainly regards political meddling in the money supply as a very bad thing, and governments are inflationary creatures. It might be safer to think he'd say that bad monetary policy is the common factor behind monetary disasters, and that fiat currencies make bad monetary policy easy.
A fixed currency would be something of a remedy to this. But he regards an exchange rate, pegged directly to a commodity, to be unworkable... and there have certainly been monetary disasters in partial reserve systems.
Overall I feel safe in saying that he advocates (for large countries) floating exchange rates, at the other end of the spectrum entirely. The common factor is that the role of government is limited.
There's a nice summary in a 1998 interview [abc.net.au]:
[Friedman]: 'a floating exchange rate is one in which the government does not intervene in the exchange rate market but allows the market to set its own values. [Here you find] one very interesting historical phenomenon. No nation that has had a floating exchange rate has ever had external currency crisis in international finance.'
[...]
'And I have always argued that for a large country, like the U.S., Germany, France, Britain -- none of them are going to be willing to give up their independent central banks, and therefore, the best course for them to follow is to have a freely floating exchange rate determined in the market. But for small countries, they will on the whole do better if they peg their currency, unify their currency with a foreign currency, and avoid having an independent central bank -- provided that they do it with a country which is one of their major trading partners so that a lot of their business is being done in that currency anyway.'
[...]
'The lesson for Asia is; if you have a central bank, have a floating exchange rate; if you want to have a fixed exchange rate, abolish your central bank and adopt a currency board instead. Either extreme; a fixed exchange rate through a currency board, but no central bank, or a central bank plus truly floating exchange rates; either of those is a tenable arrangement. But a pegged exchange rate with a central bank is a recipe for trouble.'
[Gorimek]: I'm sorry that I let myself get dragged down to that level, and I appreciate you correcting it
For my part, I think I was a little harsh. But it wasn't clear from your short reply that you were not a crank yourself, merely invoking a name. No offense intended.
Re:Who's the moron? (Score:5)
They have taken economics 101.
Um... no. Some of us actually have read Milton Friedman. To state Professor Friedman's conclusion first, for the impatient:
'My conclusion is that an automatic commodity standard is neither a feasible nor a desireable solution to the problem of establishing monetary arrangements for a free society.'
The following passages are excerpted from Capitalism and Freedom. It's really an excellent book, if you're into this sort of thing. Keep in mind, though, this was written in 1962, so the 'current situation' isn't very current.
'The fundamenal defect of a commodity standard, from the point of view of the society as a whole, is that it requires the use of real resources to add to the stock of money. People must work hard to dig gold out of the ground in South Africa -- in order to rebury it in Fort Knox or some similar place. The necessity of using real resources for the operation of a commodity standard establishes a strong incentive for people to find ways to achieve the same results without employing these resources.'
[...]
'But, as just noted, such an automatic system has historically never proved feasible.'
[...]
'It should be noted that despite the great amount of talk by many people in favor of the gold standard, almost no one today literally desires an honest-to-goodness, full gold standard. People who say they want a gold standard are almost invariably talking about the present kind of standard, [ed. 1962] or the kind of standard that was maintained in the 1930's; a gold standard managed by a central bank or other governmental bureau, which holds a small amount of gold as "backing" -- to use that very misleading term -- for fiduciary money. Some do go as far as to favor the kind of standard maintained in the 1920's, in which there was literal circulation of gold or gold certificates as hand-to-hand currency -- a gold-coin standard -- but even they favor the co-existence with gold of governmental fiduciary currency plus deposits issued by banks holding fractional reserves in either gold or fiduciary currency. Even during the so-called great days of the gold standard in the nineteenth century, when the Bank of England was supposedly running the gold standard skillfully, the monetary system was far from a fully automatic gold standard.'
-- Milton Friedman, Capitalism and Freedom