Supporters of the gold standard like to point out that since creation of the Fed in 1913 the dollar has lost 95% of its value. Well in 1913, the dollar was convertible into an ounce of gold at $20.86 an ounce. So while the dollar has lost 95 percent of its value, gold has appreciated even more rapidly than the dollar has depreciated. If gold had kept its value in 1913, its value today would be somewhere between $400 and $500 an ounce. Accept for argument’s sake the claim of supporters of the gold standard that the recent run up in the value of gold was caused by a loss of confidence in the dollar. Would it not be reasonable to conclude from that assumption that if the dollar were made convertible into gold, people would then start selling off their gold, the threat of dollar depreciation having been eliminated?
But wait. If people started selling off their gold, the value of gold would decline. If the real value of the gold fell from its current value back to its value in 1913 when the dollar was convertible into gold at $20.86, the value of would lose two-thirds to three-quarters of its value. We are talking about two or three hundred percent inflation. Does that make feel more confident about the value of your savings?
The official U.S. Government dollar value has been mostly fixed to gold at a hair under $20 per troy ounce from 1792 to 1834 then a bit over $20 till 1934 then $35 till 1972 and then to over $42 in 1973. Its been free to move on its own since then. To help decipher its value to you consider the relationship of total money supply to the price of gold. Heres a chart from the 1970s to present, before this the chart is mostly flat.
This guy is an idiot. The price of gold in 1913 has nothing to do with the gold price today. If dollar convertibility into gold was re-established, it is impossible to say what would happen to the gold price. While it is true that many current gold holders would shed their gold holdings and move back into the more tradeable dollars, it is also true that demand for dollars from holders of other assets - such as foreign currencies or real goods - would also skyrocket. An increase in demand for dollars would be an increase in demand for gold according to some fixed convertibility ratio. This is the most braindead thing I’ve read all day and I’ve been debating newbies all day.
If dollar convertibility into gold was re-established, it is impossible to say what would happen to the gold price.
Not sure I get this. The gold price in terms of what? Dollars? How could that fluctuate when a gold standard means, by definition, that a dollar is eternally redeemable for a certain amount of gold, always the same amount?
who supports a gold standard? Where do they get this? all i want is competing currencies that are hopefully backed by some commodity that doesn’t randomly shift in its quantity. Gold just happens to be one commodity that does that.
"But wait. If people started selling off their gold, the value of gold would decline. If the real value of the gold fell from its current value back to its value in 1913 when the dollar was convertible into gold at $20.86, the value of would lose two-thirds to three-quarters of its value. We are talking about two or three hundred percent inflation. Does that make feel more confident about the value of your savings?"
That is stupid. The gold would not decline but the amound of money would be adopted to fit the amount of gold available for backing the currency. As of today 1 Dollar would equal: 0,01928 grams of gold (theoretically), practically we would have to know how many dollars are out there and we’d see that amount of gold would be in fact 1000 or even more USD. And what one does it not to say gold 1g equals 20 $ but one would say a Dollar can be redeemed with xy gram of Gold. we would not care about the “price” of gold anymore it’s just that we would calculate in grams an milligrams of gold. And we always would know and it would be guranteed that a certain kind of currency is redeemable with some fixed amount of gold
It would be easy to have diverse currencies. One bank could say our Dollar is “worth” 5 g Gold another our Dollar 2.5 G and so we would immediatly have a ration between those two diverse Dollars.