i understand how the gold standard keeps down inflation, and all of the evils of inflation and the benefits of keeping it to a minimum.
but, how would foreign trade be affected if we returned to the gold standard in the US. for example, China keeps its goods cheap by devaluating their yaun faster than we can devaluate our dollar (spell checker does not recognize devaluate lol). if we were on the gold standard all of our trading partners on fiat money could just devaluate their currencies and really screw up our trade deficit. how is this prevented or mitigated.
plus, what is appealing about hard money that would encourage foreign investment in the US?
Hard money means that foreign capital would be safeguarded against inflation, hence foreign investors would finance capital investments with very low interest rates. This would make domestic capitalist able to invest much more, and thus produce more goods at lower prices, as well as increasing employment.
It will be just as if we remain on the dollar but the money supply of dollars remains relatively constant. There will be an exchange rate between the yuan and the gold just like there is today with gold, or the dollar.
Trade deficits are statists concepts anyway and do not exist in free markets. What ever is refereed to when one speaks of a “trade deficit”, it is important to realize that they are always a creation of government policy and the arbitrary definitions of what a trade deficit means.
The effects on foreign trade will be dramatic from two primary reasons: 1. Western consumers and governments will not be able to support these huge debt loads generated through the creation of electronic currency which would reduce the debt load by banks who would have less real money to fraction. This change in leverage will force dramatic changes in the economy and on what is demanded between nations. 2. Under a commodity standard the entire world would be able to put the Mercantilist Idea that exports are always good and imports are always bad. The race to the lowest value currency would end.
I belive that the more significant changes will come from consumers who would change their behavior to account for the slow increase in the amount of currency.
okay, i can see how low inflation would be attractive to foreign investors, but how does that make domestic capitalist able to invest much more, and produce more goods at lower prices?
but, how would foreign trade be affected if we returned to the gold standard in the US.
demand for the dollar would shoot through the roof. and if gold went up the dollar would go right up with it. Which means US citizens could buy foreign stuff dirt cheap with their sought for dollars.
for example, China keeps its goods cheap by devaluating their yaun faster than we can devaluate our dollar (spell checker does not recognize devaluate lol). if we were on the gold standard all of our trading partners on fiat money could just devaluate their currencies and really screw up our trade deficit.
You mean we would get all there goodies almost for free [unlike now when we go into debt for it]**, and that’s bad? Why?
how is this prevented or mitigated.
why does it have to be?
plus, what is appealing about hard money that would encourage foreign investment in the US?
Say you take your hard earned euros or yen or whatever and build a factory in zimbabwe. your profits are in zimbabwe dollars, which are worth less and less every single day. don’t you wish you had built a factory in the USA instead, where your profits are in gold?
are there any other benefits?
duno, Im interested in the answer to that as well.