When was the last time gold was used as money? And just what do you mean by “wildly”? And just what do you think obligates me to go along with your necessarily subjective interpretation of fluctuations in gold circulation?
So has the United States. Your point?
What definition of “base money” are you using? What definition of “recession” are you using? What definition of “trash an economy” are you using? Does that 8% growth figure apply to the entire period or to each year on average? (No, I’m not opening up that spreadsheet yet.)
See above, Ban-Evader. You’re being intellectually dishonest to an extreme, and I’m sure it’s deliberate - though I fail to see how this is bringing you any real amusement.
Aside from that, please provide the definition of “disaster” you’re using. Along with that, please explain exactly how lack of overnight lending probably (if not necessarily) leads to a “disaster”.
Finally, do you consider it “statist” to protect oneself (let alone others) against fraud?
Oh and since you ignored my earlier question, I’m going to repeat it: Why must anything prevent the amount of gold in circulation from fluctuating under a gold standard? I’ll repeat this question in every post I make to you from now on in this thread (at least) until you answer it. Do you understand?
It’s used as money all the time. You just can’t use it to buy groceries at Wal Mart. What obligates you? Nothing, I guess, you can just not care about whether Austrian Business Cycle Theory makes sense all you want.
currency 2) see source 3) credit cycle 4) entire
I’m just going to paste Wikipedia if you don’t mind.
Of course. Plus, 100% reserve banking would not stop growth in the money supply because there are all kinds of financial derivatives to fill the role of fractional reserve banking. Are those going to be outlawed too?
Because if it doesn’t you get growth in the money supply.
I don’t think this is true. Do you have any figures for the amount of gold in circulation? Either way, the amount of fluctuation in available gold is far outstripped by the amount of fluctuation in dollars so it’s fairly trivial to say that gold is a better currency than the dollar.
You seem to think that gold fluctuations are somehow an issue for Austrian Economics or ABCT in specific, however they really have nothing to do with one another outside of AE/ABCT describing things that will occur in the event of fluctations in gold availability. It may very well be an issue for people who want to use gold as money (and I doubt even that), but that is not something that reflects on AE/ABCT at all.
You’re still missing the point. Let’s say there are 10,000 tons of above-ground gold and new mining is 100 tons this year (1%). Next year, the stock of above ground gold will be 10,100 tons and, to maintain a 1% increase in gold supply, 101 tons will have to be mined. So, the amount of gold being mined per year must increase exponentially to maintain a constant rate of increase in the gold supply. This is a consequence of the fact that the vast, vast majority of gold is not consumed into an unusable state.
In the case of fiat dollars, this is just a matter of ledger entries. It costs no more to write “1,000” than it costs to write “100”. Either way, increases in the fiat money stock are very close to costless, regardless of the size of the increase. Hence, the central bank can guarantee a constant rate of increase in the supply of fiat money from year to year. This is in stark contrast to gold mining where new technologies must be discovered, new deposits must be located, more human resources must be drafted, and so on. There is no way to be sure that any particular rate of gold supply increase can be maintained indefinitely.
also i would add that the market understands that gold is being mined and new gold will hit the market at a somewhat regular rate. So the price of gold already has the expected additional gold valued in to the price. So there is a smooth fluctuation in prices.
vs
the fed’s secret board meeting where the public literally have no idea whats going on.
As long as people continue to use gold (and other instruments subject to money supply growth), that’s supposedly going to cause credit growth.
As Jargon said, a megahertz of computing power used to cost much more than it does today before Free Market Capitalist Innovation was unleashed. If asteroid mining ever becomes practical, there will have to be regulations to prevent gold mining technology from causing rapid money supply growth.
Although I guess there’s no point because normal fluctuations in gold circulation will cause extended periods of money supply growth anyway.
As discussed in the past several pages, the gold supply in use as money is the amount of gold in circulation, which fluctuates greatly.
You’re also ignoring the fact that many financial derivatives (mortgage back securities, credit default swaps, etc) are forms of privately produced money which cost next to nothing to create.
Besides, even if the Fed was only increasing the monetary base 1% per year, wouldn’t you still blame it for every single business cycle?
How do you know that “once money supply growth falls below X% a year, there won’t be any more credit cycles?” How do you know that a 1% rate of growth is insufficient to cause a credit cycle?
Wouldn’t it be desireable to instate some government regulation that outlawed bringing new monetary gold into circulation to stop growth of the money supply?
@als: You’re all over the map. Remember that Austrian economists are not married to the chemical element Au. It really doesn’t matter what is used as money, so long as the market selects it. But there are very good reasons to believe that gold, rather than some other element, will continue to be money into the foreseeable future.
Great. So how do you know that a 1% rate of growth in the gold supply is insufficient to cause the credit cycle?
What about the much greater variations in circulating gold, derivatives, and other forms of privately created money? Why doesn’t this monetary growth cause credit cycles?
your base money and gold reserves chart doesnt prove anything. in fact it disproves your point. every great fluctuations in the market was government interference.
through the 1890 was the free silver. where the west was expanding and huge silver deposits were discovered so in order to push exports they wanted a soft currency so they over valued silver to gold (or under value of gold). This caused gold to leave the market because the people were not willing to use their gold as money and everyone started using silver. one of the biggest political factors in the 1896 election was silver or gold. well the silver candidate lost and gold started coming back out.
1907 was the recession
1913-1920 - the fed was founded and world war 1. with the huge jump in paper money people took out gold from the market.
1920-29 was of course the credit boom and everyone getting rich spending money.
1933- all gold is confiscated and made illegal. then gold was repriced from 20 to 35 bucks. which drew out a ton of gold from everywhere.
then of course the huge decline in the 40s was WWII where the whole world was printing. So everyone wanted their gold back.
Then from then on out you can just look at the increase of paper money and the correlation with gold leaving the market.
I’m not a historian their a thousands of books out there on these subjects and time periods. and i could of added a lot more detail, and i probably left out other huge points and government interference that caused the variance.
Why didn’t the market react? Why does the market respond differently to “government” interest rates versus “private” interest rates? If gold circulation or production didn’t stabilize after the introduction of the Fed, bimetallism, etc, what makes you think it would be affected by privately made interest rates and currency choices?
im not talking interest rates. im talking the monetary base. the market doesnt respond differently from gov vs private. however please tell me how in a free market 16 oz of silver is worth 1 oz of gold, but the supply and demand that the people are willing to trade at is 32 oz of silver to 1 oz of gold. private companies cant do that or they go out of business.
private companies cant force people to trade gold at 20 an oz then a week later force people to trade at 35 an oz.
Under libertopia, production of gold and all other commodities will be far higher than it is now. Deregulation and privatization of public libraries will boost gold production to unprecedented levels as free market innovation crafts much more efficient mining techniques. Consumer want is unlimited for all scare resources, including commodity money, but producers continually compete to deliver them to consumers at lower cost and greater quantities. The inevitable result is a vast increase in economic growth, gold production, and gold supply growth.
no you are missing it. what fluctuations are you talking about? Massive of amounts of people dont just wake up one day and say i dont want gold then flood the market with it. then a year later just wake up and say wait i really want gold now. People have subjective values of how much gold is worth to them. when you average out 7 billion people’s demand for gold it is VERY stable.
What you see is outside forces effecting the price of gold which causes huge changes in demand. So what i would like to know what outside forces would change the price of gold in a free market? the only think you can come up with is gold mining. Well the market is aware of gold mining and historic mining numbers and takes that into consideration when pricing gold. So if gold is being produced at 1.5% of the money supply a year then the market will read that.
Where are the outside forces? the price of gold is not related to oil. oil is priced to gold not the other way around like you suggest.
Why do people still use gold as money then? If the supply of money is growing slower than the supply of gold now, why is gold still in such high demand? Is it… market irrationality?
why do you think supply of money is growing slower than supply of gold? the fed bailed out the banks when they failed with 29 trillion $$$ (GAO said 16 trillion). how much gold is being added to the market again!?!?
gold has such a high demand and growing because more people everyday are coming to the realization that the dollar will collapse/losing value and they want to put it in a commodity to protect themselves. Market rationality.