i askek a question about it and this is what i got
‘I don’t know what you’ve been reading, but China is not attempting to implement a gold standard, and they wouldn’t try to do that because it would be wildly impractical. Especially for China, such a fast-growing economy needs a fast-growing money supply, and it would be disastrous to constrain the money supply by tying it down to commodity metal.’
obviously no-one learned in austrian econ would say that. the person is clearly betraying economic ignorance.
I guess it would depend on the extent of price rigidity in China. A growing economy only needs a growing money supply to the extent that prices are not free to move downwards.
The value of the existing supply of gold would increase, as it represents more capital or their is more demand for gold. The expansion in the physical volume of the money supply would not come through gold. As the value of gold increases, the volume of denominations will increase. That is silver, bronze or copper coin.
Gold would not be practical for really small transactions, such as buying a sandwhich (1 gram of gold is about USD $35; i concede that gold dust could be used, but I maintain that silver would better serve small transactions). Thus, another commodity will join gold as amoney, such as silver. We Austrians gotta do a better job of noting that a gold standard, in the sense that we Austrians favor, is not necessarily a gold standard, but instead, a money based on multiple commodities. Or in other words, we Austrians favor a money determined by the free market.
Of course it would. E-gold. Maybe people would find/choose another solution, but that one seems rather sensible to me.
What would prevent e-gold from inflating/printing money/practicing FRB like any other bank?
Competition. Electronically circulated gold (or other commodity) is not the same thing as fractional reserve banking, btw.
I don’t think any economy would grow so fast in real terms that you would need a growing money supply. My guess is that a lot of China’s gains in GDP are due to inflation. If their GDP is growing at 10%, maybe only 5% is a real gain in productivity. If a country grew at 5% a year with a fixed money supply you’d get a 5% a year price decrease, right? If a loaf of bread drops from $2 dollars to $1.90 in a year is that a problem?
How so? Also, I never contended that e-gold is FRB, but I did ask what would stop e-gold from practicing FRB. If competition is the answer, then why did bank in the 1800s practive FRB? Of course, there were bank runs, but it would seem a hell of a lot harder to electronically take posession of the gold stored in e-gold’s vaults. Lastly, I’m not saying e-gold doesnt’/won’t work. I simply pointing out that some risks.
By competition I meant that providers who inflated the supply of ‘their’ money would be driven out of the market…IF the market demanded sound money.
Yes, there’s always room for cheating. And yes using a physical commodity in all transactions would minimize the risk of counterfeiting, but it’s probably not that practical.