How would you argue for a commodity standard?

Economics Economics Questions
1

I’ve had some success arguing a commodity standard on internet message boards… these are the main points I make

#1- A commodity standard tied to the dollar, or, to whatever national currency we have would raise the purchasing power of our currency. If the international community would take them off the dollar we wouldn’t be as affected as much.

#2- An inelastic currency is fine. The only people who want an elastic currency are the ones that are profiteering over the current fraudulent system and who just want to rip other people off for more money than they deserve. I use a little populist rhetoric here…

#3- Fractional reserve banking is criminal. If you took a look at it you’d see why it’s one of the biggest problems of our banking system today. Unless you invest in a wall-street bank banks shouldn’t be allowed to create money out of nothing. People wouldn’t need so much money if we didn’t have so much inflation. Under a commodity standard if we had deflation, and, relatively steady growth it would do even better than a system with lots of inflation where most of the money goes to people who shouldn’t have been making as much in the first place. Usually I get people’s attention when I talk about fractional reseve banking.

#4- You don’t necessarily need to just trade with the particular commodity. A lot of transactions would still be made in cash. People could trade commodities, and, the value would go up and down depending on how much money would be in the market. My idea here is that the supply of money goes up and down regularly even now under this current system… so this wouldn’t really be that much different. That, and there could still be a potentiality for inflation… it just would be much harder to do so. The money would be tied to the commodities of which we have a standard for.

#5- People want more for their bucks. They don’t necessarily want a lot of money. Basic economics makes this point… so in fact having a money that’s based on something would give you more. Under our current system you just need more and more. One of the arguments against a commodity standard is that you’re not getting enough money… but you actually would just have enough money to get what you want since you don’t need as much. And if there’s not enough money because the standard you’re on is too scarce, the people can just switch to another one… or even combine standards, and, run on many different standards. Either way, people want value. They don’t want cheap monopoly money.

#6- We don’t necessarily need gold as a standard. This goes along with #5. We just need something that will hold the value of the dollar, or, whatever currency we have. It should be decided by the people as to what they want. Money is something that’s an agreed upon medium of exchange. So it would be whatever the people decide would be best at backing the medium of exchange.

Those are the main points I make, and, I’ve only recently come with these conclusions… but when I’ve argued them I’ve had some success. What other points should I make about a commodity standard to better strengthen my argument? Am I missing anything? What do you think?

2

#2 is doubtful.

#3 is false.

#4 would be impossible assuming #3.

3

How is 2 false. Are you saying that an elastic currency is a good thing? If anything I consider an elastic currency to be an evil that I would like to get out of. I think the majority of people just want more bang for their buck. New economists even admit this. A commodity currency would just be giving them that.

As for #3-- Fractional reserve banking is criminal. It’s the process where banks can create $400 out of an $80 bill. You would know that if you knew the math. I think it’s quite criminal. It caused the 2008 bank failures for small banks and just left us with these big banks. You know as well as I do that it should be outlawed.

#4 wouldn’t be impossible. There would just be a fixed amount of currency within the system. You would trade with that currency. Because the rest of the international community still uses a paper money standard something tied to any commodity would be worth far more. So you would trade with the cash still.

Those aren’t serious objections are they?

4

Can someone give me some feedback on my views? I want to know what other people really ACTUALLY think of my arguments. I realize the importance of a hard currency. So I would need a good argument to convince other people of it.

5

I’m a bit worried over the terminology used in number two. Is not inelastic money a bad thing? As compared to an elastic commodity that allows for greater economic calculation by entrepreneurs in determining whether to continue saving capital or begin investing ect.? I presume you meant to say that a currency not controlled by a central authority is better, as it properly displays prevailing circumstances in the market, while ‘money’ controlled by a central authority is subject to artificial manipulation and so sends incorrect signals to entrepreneurs on how they should use their current capital. ect. ect.

As for number four, I’m hesitant about the whole using ‘cash’ as money. Mainly because fiat money has no value in itself. I suggest instead focusing on how gold wouldn’t necessarily be the only currency used. Other precious metals such as silver, platinum, or even copper could be used for transactions of different scales. All of course competing with one another as the dominant money, and having no set conversion rate.

Just my two cents.

Edit: Just a quick addition. On number three, you should go into further detail on how artificial inflation by a central banking authority (CBA) destroys and discourages savings by entrepreneurs (who would prefer to purchase real goods than to hope that the CBA does not pump even more money into circulation). This is of course horrible, because if there isn’t an entrepreneur accumulating capital to use for future ventures requiring large amounts of capital, how is society to advance? We will, at best, be able to maintain our current level of technology and reach a state of technological stagnation.