Let’'s say the country goes back to a Gold Standard, how would people have money if they didn’t own any gold?
Lets say that it is a gold coin standard. Gold will circulate in the economy as money. The gov’t would make a declaration that, say, every $5000 dollars will get you a one ounce coin. There would be smaller coins than the ounce also, so say half oz coins or quarter oz or 1/10 oz coins also. You would trade in your dollars and receive the gold coins, depending on what the exchange rate is.
The real question is how does the gov’t determine the exchange rate between dollars and gold. Today gold is at $1050 but that wouldn’t be the exchange rate. There are several ways one could attempt to determine the exchange rate.
Read this book What Has The Government Done To Our Money
And read page 43 of this book : What You Should Know About Inflation
Thank you bearing01. Under a Gold Standard wouldn’t we still use a currency though? The actual gold coins would not be divisible and it would slow economic activity. The nice thing about dollars or credit cards is the number of transactions that can occur quickly.
We wouldn’t have to carry gold around. Just swap paper money backed by nothing, with paper money backed by gold. And credit cards and debit cards and checks etc.
Instead of denominating the price of goods in dollars, we would denominate them in gold.
Also, the idea of “going back” is not quite correct. Austrians generally promote going forward to market money. That is a standard (which may be gold) determined by market participants, not by legal tender. What was a “gold standard” in early America, wasn’t a true free market gold standard. It was a bi-metal standard which was doomed to fail.
This is the video you’ll want to see, which discusses some myths regarding gold as money, but also discusses (in the second half) different possibilities for going to a free market gold standard:
The Gold Standard in Theory and Myth (by Joseph Salerno)
http://www.youtube.com/watch?v=ToEgZnMUuno
To learn all about the general idea of money, you can go here:
What Is Money?
“Let’'s say the country goes back to a Gold Standard, how would people have money if they didn’t own any gold?”
isnt that called being broke?
and if a ‘country’ goes back to a gold standard woudlnt the country just redeem its non-gold money in use for its newly standardized gold?
“Let’'s say the country goes back to a Gold Standard, how would people have money if they didn’t own any gold?”
People would have to get gold by trading goods or labor. With a gold standard, there would be some disruption in transitioning to a different system of currency. Relaxing the legal tender restrictions and taxation of gold, plus not raiding Liberty Dollars HQ, would free things up and allow a smoother transition.
The alternative is that without a gold standard, we will continue to have debasement of people’s savings and pensions through inflation, periodic recessions caused by out-of-control central banks commiting counterfeiting and bailment fraud, ever-increasing government intrusion and subjugation, the propping up of engines of wealth destruction, the blowing-up of pregnant Iraqi women, and the approaching doom of a world-wide fiat currency collapse.
It probably would not take long for gold to get in the hands of the consumers. During the 19th century, when metals were pushed out of the country by bad money, each time the bad money system collapsed, the metals would rush back into the country. I imagine the same would happen today.
From various readings around the site, probably Rothbard’s what has gov’t done to our moolah, a Gold Standard is not Holy Writ. The way to go is very simply to declare “any two people can use anything they agree on in advance as payment,” and also “anyone who feels like minting his own personal coins or any other kind of money in hopes that people will accept it is welcome to do so.” Nowadays both those things are illegal. One HAS to accept dollars as payment, even if the contract insists on payment in gold or euros or whatever [this has to be checked, but I think it is so]. Certainly the second is illegal.
Your q may be “When everyone wakes up to the fact that their paper money is useless, what can they do about it?” Answer: Nothing. Dump it now if you can.
Your q may also be “How can I make money when I have none?” Answer: Get a job etc, and get paid in coin of the realm, same as before gold or whatever is legal tender.
Finally it may be, “Say the govt decides to go on a gold standard, and is willing to convert everyone’s paper dollars to gold. How will this be done? How will the price be determined?” Possible Answer: You order gold over the internet from the gov’t. They exchange it at the current market rate for the price of gold minus perhaps a delivery fee. Paper money and gold are both legal tenders, with the option of any seller to insist on one kind of payment in advance, as above. Of course this will probably wipe out paper money really quickly, but that will happen much earlier anyway [due to inflation] in all likelihood, because it’s the only reason the gov would ever consent to going on a gold standard or giving away their monopoly of coining money.
As for bimetallism or even twenty different kinds of money running loose, Rothbard sees nothing wrong with that. Whatever people want is fine.
Bump, because this is important.
So what’s the first move in the gold standard chess game?
Abolish legal tender laws? that would be quite a “shock” because the money people would probably know exactly what would happen and act quickly.
Announce (and follow) a policy of gradual adjustment to 100% reserve to deflate the currency - would that ease the gold transition? The people would probably not be patient through the “shocks” of adjustment.
Adopt a policy of 0% to negative inflation? Teach people that savings need not be at a bank or in the stock market to maintain value..