How would a gold standard be practical?

[TravisWadman]

You wouldn’t?

[Bostwick]

@TravisWadman

You wouldn’t?

I think you misunderstand.

You keeping presenting drawbacks which a paper currency does not remedy.

You aren’t merely asking that a gold standard be an improvement over our current system, you expect it to be perfect.

@TravisWadman

For example, say I buy 1/3 the current gold supply right now (lol i wish). We then revert to a gold standard and things operate as you have desribed. What would happen if I were to be like “Oh yea, I forgot to mention I have a hell of a lot of gold in my house that I have been hoarding all these years, let me use it.”

This can not be an argument against a gold currency, as a person is just as able to buy 1/3 of the current supply of dollars. If its an argument against anything, its against private property.

[WisR]

@bbnet

Say there was 100 clones on island earth that used 100 ounces of gold as money. Each clone earned and spent 1 ounce per year. Then the clone master added 900 clones to the island but left the supply of gold the same. Then each clone would then be earning and spending 1/10 ounce of gold per year with no reduction in their standard of living.

Unless land, resources, current goods, and capital goods all also increased by 10x, there would be a drastic reduction in the average clone’s standard of living. There would be 10x as many clones using the same amount of capital goods (hence much lower productivity of labor per clone) and chasing the same amount of land and resources.

A better example would be if half of every clone’s gold suddenly disappeared overnight - perhaps another commodity would take the place of some of the missing gold as money, but with the same amount of land, resources, current & capital goods, the total wealth of the imaginary clone society wouldn’t have decreased at all beyond the nonmonetary uses of the missing gold stock.

[Harry_Felker]

@WisR

A better example would be if half of every clone’s gold suddenly disappeared overnight

Yes that would be a better example…

[TravisWadman]

@JonBostwick

@TravisWadman

You wouldn’t?

I think you misunderstand.

You keeping presenting drawbacks which a paper currency does not remedy.

You aren’t merely asking that a gold standard be an improvement over our current system, you expect it to be perfect.

@TravisWadman

For example, say I buy 1/3 the current gold supply right now (lol i wish). We then revert to a gold standard and things operate as you have desribed. What would happen if I were to be like “Oh yea, I forgot to mention I have a hell of a lot of gold in my house that I have been hoarding all these years, let me use it.”

This can not be an argument against a gold currency, as a person is just as able to buy 1/3 of the current supply of dollars. If its an argument against anything, its against private property.

I wasn’t responding to you, I was responding to the guy who said “how would you buy a million dollar house with 20k?”

[fboisseau]

I have a question in this area. I have recently finished reading Adam Smiths ‘Wealth of Nations’. How do you address his premise that if the common currency is not the actual commondity that it represents? The basic reason for this, if I understand him correctly, that if you do not do that then the banks or government will issue more certificates worth more then the gold they had on hand.

[malgratloprekindle]

@liberty student

@TravisWadman

Alot of Austrian economics enthusiasts I know think we should go back to a gold standard.

Rely on the economists, the enthusiasts are half baked goofballs like me.

Many Austrians believe in a commodity standard which they believe to be the likely outcome of a market determined money. That is, people will likely choose money based on a commodity, and traditionally gold has served this purpose. But Austrians by and large, should not be, and many are not committed only to Gold, or only to Silver.

Unless they own stocks in gold mines, in which case, they are only for Gold.

@TravisWadman

However, since there is a limited supply of gold, what will we use to represent the increase in wealth once we have more wealth than can be backed by our limited gold supply?

Money is not wealth. It is only a representation of wealth. Money’s function is to capture and retain purchasing power.

An increase in purchasing power is wealth. And that can be realized with a stable monetary supply, by falling prices. Your money buys more.

@TravisWadman

Also, wealth can be increased by adding money to the system if it is in accordance with population growth.

No, wealth has nothing to do with the size of the population.

@TravisWadman

Well, maybe not increased but maintained.

We never want to maintain prices. We want them to rise and fall with a stable monetary supply so we can see increases and decreases in purchasing power.

There is nothing wrong with your boss cutting your wage from $5 to $4 an hour, if $4 buys as much or more than $5 did before.

@TravisWadman

With a gold standard, once we have more wealth than can be represented by gold, our labor will result in decreased wages because there is no gold to pay the laborers with!

Decreased wages will signal a rise in purchasing power. Wages will go down as money is divided into smaller increments, but the amount of economic output will remain the same.

The amount of gold is almost completely irrelevant. The only time gold would be an issue, is if it is denominated in such a small amount, that there is not enough to circulate. Then a secondary or new money might be introduced into the market. But with digital money and paper receipts, you could trade in gold grains if necessary (approx. 437.5 grains per ounce).

We no longer have to coin and carry gold, in order to have a 100% gold backed currency. We have moved past that technologically.

You should use the forum search because someone brings this up at least once every 2 weeks since I have been here (almost 18 months).

applause

Outstanding post, LibertyStudent. :')

[Harry_Felker]

@Freddy Boisseau

I have a question in this area. I have recently finished reading Adam Smiths ‘Wealth of Nations’. How do you address his premise that if the common currency is not the actual commondity that it represents? The basic reason for this, if I understand him correctly, that if you do not do that then the banks or government will issue more certificates worth more then the gold they had on hand.

Unlike credit, gold reserves can be checked…

[Steven_Faseler]

I think if the current fiat money system proves anything it is that any volume of money is sufficient once you’ve reached a certain threshold. Obviously you couldn’t base a money system on something so scarce that only three of them were known to exist, but gold exceeds that threshold.

One of the problems I see with a fiat money system is that they are always monkeying with its volume making it more difficult for prices to stabilize because of the background noise.

But the biggest problem I have with a fiat money system is that it enables governments to steal from their citizens by taking away the purchasing power of the citizens’ savings through inflation.

And I do agree with you in your clone example that there would be a transition period. It would happen quickly with a free market system. If a government gets involved and tries to fix either wages or prices the result would probably be unemployment and/or starvation before supply and demand could stabilize.