Journal chill's Journal: Thoughts on a Gold or Silver Standard 2
While I'm on the subject...
Giving some thought to the idea of moving the U.S. to a gold- or silver-backed currency, I don't believe it is possible or even a good idea. Here is why.
First, the prices of both gold and silver fluctuate fairly widely on the international markets. When we were on a gold standard before, the price of gold was FIXED at $35 per ounce not only here but in every major nation around the world. Today, both metals are traded freely as commodities. What that means is if, using round numbers for example, we set the U.S. $20 bill to equal 1 ounce of silver, guess what happens if for some reason silver jumps to $25 / ounce? It would mean a serious run on the treasury as people traded in their $20 bills for $25 worth of silver -- then selling it for cash and repeating the cycle, making 25% profit on each trade. The Treasury would be empty in short order.
In the other direction, if silver dropped to $15 per ounce, who'd want to accept the $20 bills? Hell, I'd demand payment in silver with the price set by weight then take my $15 / ounce of silver to the Treasury and trade it in for $20 bills waiting for a rebound -- assuming people didn't lose total confidence in the paper money and it fell to worthlessness. The exact same scenario works with gold, too. In fact, it works with any freely trading commodity with a floating price.
Fixed exchange rates only work if EVERYONE uses the same fixed rate. See Venezuela and Cuba for recent examples of "convertible" and "non-convertible" money and the black market they spawn.
The other big reason is it doesn't accomplish what proponents seem to want it to accomplish. Namely, fiscal restraint on the part of the gov't. Short of a Constitutional Amendment (ha!), the gov't would do exactly what they've done in the past -- adjusts the fractional reserve required to be held in the Treasury, or adjust the price of gold/silver, or just change their mind (Roosevelt, Nixon, et. al.).
i also do not think (Score:1)
the wealth of a nation should be correlated, or a strong function of, the productivity of its metal mining
i think the wealth of a nation should be related to a weighted function of the happiness of its people and the happiness of all the people of the world
call me a dreamer. call me a socialist. call me a liberal. call me a man of god. please call me a cab. and don't call me a conservative.
Standards (Score:1)
Right now we are running on the "connected insiders, not even secretly anymore, paying off their frat brothers to the tune of trillions, and putting everyone else in the nation into incredible layers of overlapping debt" "standard". Accurate enough?
I see the problems with that, and also the problems with a strictly one or two metals backed currency, that's why a long time ago now I came up with the alternative I have outlined, the top basket of traded commodities. Something that can be actually measured, is