Is it not possible to have a fiat money system comparable to the gold standard in practice as long as you take away the ability to print and manipulate money from the government and make fractional reserve lending illegal on the basis that it is fraudulent (lending money you don’t have).
With the gold standard wasn’t there a problem with other countries who were on fiat currency running to the US and exchanging paper money for gold and consequently taking gold from the US. Like in the 1970s with Nixon. What I’m getting at is, wouldn’t there be problems with international trade if you have the gold standard on one side(US) and Fiat currency on another(rest of the world), where you risk losing gold in exchange for worthless paper money unless you turn down paper money which would stop international trade.
Finally, isn’t the solution to the problems with the monetary system a question of government discipline and not a question of commodities vs fiat. Having a gold standard by itself won’t stop government from going into a gold exchange system and then to fiat like in the past.
You could freeze the monetary base and charge the Treasury with printing new notes based on the % of dilapidated/destroyed notes each year. I guess it would be sort of similar but this system would depend on a responsible govt, something we know doesn’t exist, which is why this idea is vulnerable to failure.
It wouldn’t be a trade barrier because you could just demand payment in gold instead of worthless paper currency.
With the gold standard wasn’t there a problem with other countries who were on fiat currency running to the US and exchanging paper money for gold and consequently taking gold from the US. Like in the 1970s with Nixon.
You’re referring to the gold exchange era. Only foreign central banks could exchange their US dollars for US gold. The US dollar was backed by gold and all other currencies had fixed exchange rate with the USD. That gold standard wasn’t a true gold standard because the USA could still print money.
On a true gold standard, Gold flows out of one country and into another only if there is an imbalance of trade (or people of one country willfully invest their gold into the assets or companies of another country). Under the trade imbalance scenario the gold standard is what automatically corrects the imbalance and in short time lets the country earn back its gold. Say the world is on a true gold standard, where international trade is paid for by gold transfer. If the USA doesn’t export enough to earn back its gold, which it spends abroad to import, then gold flows out of the USA. This causes the US money supply to shrink and creates deflation in the USA. Simultaneously, this gold expands the money supply in other countries and creates inflation there. The purchasing power of gold will fall in other countries (because there’s more of it), making their products more expensive to themselves and Americans, while the purchasing power of gold goes up in the USA. Americans and foreigners find the products in the USA cheaper and will buy more from the USA. Therefore, gold flows back into the USA until there is a balance.
Between 1944 and 1971 on the Bretton Woods the USA had the gold dollar, but they continued to print US dollars to exceed the gold supply. This created inflation in the USA. US products became more expensive. USA thus imported more and foreigners bought less from USA. US dollars started to accumulate in foreign banks. Balance was off. Foreign banks knew the USA was printing too many dollars so they started to claim their US dollars for US gold. Rather than raise interest rates to soak up some US dollars from the economy (and create a recession) Nixon instead broke link between US dollar and US gold. Ever since the world economy has worked with this imbalance. We print more dollars to buy foreign goods. They accumulate those dollars. They try to loan some back to us. We then borrow back those dollars, but even print more, to buy more stuff from them - promising to pay them back all their goods one day. They keep it going (us buying their stuff) because they print new money to buy the US dollars off the businesses that earn the US dollars. Therefore the money supply (inflation) grows in foreign countries and exchange rates between USD and foreign currencies stay the same. We therefore rack up debts abroad that we can never pay back. They now loan us back the money because they think we’re “too big to fail”.