I was curious about one of the things I hear on the negative side about the gold standard is that you’re letting your currency be vulnerable to manipulation to foreign markets such as Russia & South Africa, and that those countries are (or have been) hostile to us and could manipulate the supply of gold such as to lower prices.
I’m not real clear on how to counter this, other than 2 concepts:
A) they’re not going to GIVE us a bunch of gold to flood the market, that would be assinine
B) they’re not going to mine when it costs more to pull it out of the ground
What am I missing here, on how letting the market set the price and volume of gold in the world can be a bad thing?
Sounds right to me. Also, even paper money remains a commodity, and it is consciously manipulated all the time to influence prices. Recall Bernanke’s statement that the Fed’s goal was to stop asset prices from falling. With paper or rather digital money, this manipulation can be done at virtually no cost. With gold, you have to have real savings to finance digging it out of the ground and refining it into circulable form.
A gold standard is likely to make gold more valuable in the first place, because there will be a stock of gold to back the paper. But what would Russia or South Africa sell that gold for? Other commodities they don’t actually need? They’ll suffer huge losses in this attempt, which is likely to damage their fiat money as well. Not to mention that if they’re on a gold standard as well, it’s not going to give them an edge at all.
Predatory tactics don’t work very well. Market manipulation likewise. There are no guarantees, except certainty regarding losses, which are usually huge. And the nice thing is 3rd parties usually benefit.
Yes, inflation is an invisible tool of taxation. All Bernanke’s doing is redistribute wealth, which will temporarily stop the prices from falling, using all available methods of taxation. The bad part is this redistribution isn’t neutral, but damaging, so when the economy eventually gets past the intervention, it emerges with more scars than before.
This is like worrying that Russia will devalue our televisions by producing a bunch of them. Money(gold) is a commodity just like everything else. It is just a good that is in high demand because it is useful as a middle man in trades.