Gold has always been a medium of exchange. It’s just not available from an ATM.
If you’re talking about TALF and so forth, that’s not actually permanently adding money to the market. That’s mostly lending back-and-forth. I’m talking about 2011-present.
Gold responded strongly to past oil shocks- 1973, 79, the PDVSA strike. The fact that they occured due to things going on in crazy middle eastern countries doesn’t take away from the point.
And if the market can read gold being produced at 1.5% a year, why can’t it read, say, a 5% annual M3 growth over the past five years in the EU?
Currently today, people dont use gold as money. We use little pieces of paper issued by the government.
The price of gold in terms of dollars is high because the amount of dollars outpaces the amount of gold. People also trust gold more than the dollar, this will help it as a currency.
There is only an x amount of supply of gold in the world. Miners cant mine gold at the rate that you can print paper money.
Mining gold is very expensive.
As far as new technologies arise, sure, mining will be easier, but only at a profit (pay worker less than amt of gold harvested).
a) If it does cause business cycles, then too bad, that’s life. There are also weather patterns, climate cycles, sunspot cycle and so on. There’s a moral difference between cycles that occur as a result of voluntary interaction and cycles that occur as a result of telic intervention in the market. The former are amoral and the latter are immoral.
b) (I’m starting to feel like a broken-record here): Changes in the supply of money per se are not the cause of the business cycle. The cause of the business cycle is the discoordination of capital over time which is caused by the distortion of the (government bond) interest rate caused by market intervention of the Fed, where “intervention” here is virtually synonymous with rapid and unpredictable - yet inexorable - expansions of the money supply.
It does and did. As I mentioned above, gold boom towns are an example of a kind of business cycle… a rapid influx of capital, often followed by a rapid abandonment. The difference between a gold rush and the Fed is that the former is localized to one market segment (gold production) and whatever locality is affected, while the latter affects the entire economy (though some portions are more affected than others) and is not local.
Furthermore, an unhampered market in money production creates demand for fraud-detection, anti-counterfeiting, auditing, reputation-certification and other services centered around helping the wise consumer to find a safe haven for his assets. Contrary to popular belief, fractional-reserve banking, counterfeiting and fraudulent note issues do not negatively affect anyone who isn’t actually holding the corrupt notes, and who doesn’t enter into business with anyone who holds corrupt notes. In other words, if you want to put your money in Print-A-Bank Incorporated, feel free to do so… I’ll keep my deposits at Gold Coin Bank, thank you very much, and I won’t give a damn how much your stupid bank prints money and inflates its own banknotes. As their customer, that’s your concern, not mine. Gresham’s Law operates in reverse in an unhampered market in money production. Good money drives out bad.
At the moment, you cant use gold as money as per us tender law.
Gold is very well money but cannot be used due to law. I think you misunderstood me.
We must also distinguish a cluster of errors (boom/bustcycle) vs a miscalculation.
There are miscalculations all the time, in a 100% gold 100% reserve perfect rothbardian free market no gold fluctuation etc etc( play god), there can still be some business men or entrepeneurs that may misallocate their resources and predict wrongly, thats just how business works. The MASSIVE CLUSTER of errors where Most of the economy goes to hell is what we are talking about.
I dont think a 1% fluctuation will cause a MASSIVE CLUSTER. Its gotta be something big like qe 1 2 3 and various bubbles started by the fed.
Oh, so in other words private banks can totally fuck up the economy with their voluntary money creation decisions and insider trading, but it’s morally a-okay. It’s a consistent position, and the only logical one you can take while still being an Austrolibertarian, but it’s not going to make much sense outside of mises.org.
The increase in privately created money in the form of financial derivatives has also been pretty rapid and unpredictable. In fact the MBS market was once worth trillions and expanded much more rapidly than any official monetary aggregate during the 90s and 2000s. Gold, silver, other commodities- their extraction rate may only be slightly slower than typical M3 growth, but they move in and out of circulation very unpredictably. At least the Fed will announce monetary rules and discretionary policies from time to time to grant a heads-up.
Increases in private gold circulation or vast expansion of financial derivatives are not local events. It’s not clear that people would suddenly stop using digitally created private money simply because of deregulation and tax cuts.
The problem is that banks and individuals are still so keen on using that “bad money”. Gold is definetly not an example of good money if the amount in circulation at the moment is growing faster than the overall money supply. That might not have been so at different points in the past or future, but not right now.
And I might even convince you that bitcoins are not good money. They’re terrible money.
man you are being hard headed. You keep bringing up a lot of the same things.
Pick a single topic and lets go with it. Whats your biggest problem? Gold as money? Gold mining? Gold supply as money? banking under a gold standard? banking practices? derivatives? interest rates? gov intervention? fiat money? bitcoins?
i still dont know why you think gold supply is growing faster than dollars? your article says there is an average of 2500 tons of gold produced every year. so thats about 140 billion dollars a year. Thats not in the US… THATS THE WORLD’S ECONOMY. Your article also says 57% of gold goes into jewelry which leaves 60 billion in gold going into markets other than jewelry. Lets just assume 100% of the 60 billion would go into the money supply if we had a gold standard…Are you really suggesting that the WORLD is printing less than 60 billion dollars worth of notes a year???
The US national debt increases everyday by almost 4 billion…
where is your proof? i pointed out that the growth of the gold supply with YOUR references is 60 billion dollars a year. Now present a world monetary supply growth rate that is smaller than 60 billion and you win. Until i can provide proof that refutes it.
You do realize that the Fed is a private bank, that is, it is a cartel of private banks? Please explain to me how the Fed is this super-transparent, super-accountable, super-democratic institution vis-a-vis those evil, mythical entities you keep calling “private banks”???
People choose their heart and brain surgeons. I think they can also choose what banks to patronize.
Do you see me travelling around the Internet trying to win friends and influence people?
You keep trying to imply there is some kind of similarity between the growth in the gold supply and the growth in fiat money supplies. Thereisnocomparisonwhatsoever.
*facepalm
Are you familiar with the principle that both parties to a voluntary transaction simultaneously benefit from it?
Don’t get me wrong, I believe the Fed is run by a Jew. But the fact that that it’s a private bank makes it morally unethical to infringe upon its operations.
It would make a good book.
Unless gold tanks in five years when Peter Schiff goes out of fashion and you lose all your money. Anyway, my advice is to at least diversify. Platinum is actually reasonably priced.
Zimbabwe? Weimar Germany? What about Emperor Diocletian? You’re really taking the comparison into left field.
Gold is a volatile asset. Fluctuations in gold circulation are probably at least as bad as any (non-obscure-third-world-country) currency.
Here’s a test: if QE doesn’t result in a huge hyperinflationary bash, won’t that be kind of dissapointing for Austrian theory?
Allow me to quote one of the founders of the Federal Reserve: “Money is gold and nothing else.” But I guess one of the founders of the Federal Reserve was just out of touch and not with it. What an old fuddy-duddy, monetary crank that JP Morgan was. He clearly had no idea what he was talking about. As Bugs Bunny would say, “What a nincompoop! What an ultra-maroon!”
I wouldn’t say JP Morgan was a founder of the federal reserve. I assume you think he did something illegal because he owned a fractional reserve bank, but whether they’re required 100% or 500% reserves doesn’t prevent a private bank from expanding the money supply on its own as a lender of last resort.
I started this thread to point out that private agents are just as capable of increasing the money supply as “government” ones are, regardless of fractional reserve bans. Even supply side phenomena like historical gold rushes, like the California one, have been enough to affect the global economy. This expansion of the money supply should have caused a recession, but fortunately your theory is incorrect and they had no such effect.
There is no inherent problem with the fed itself. Its private it can print whatever the fuck it wants.
The shitty thing is, us government FORCES every fucking us citizen to use the fed money.
That is where the fucking problem lies. Within the governmnet.
Thats why Ron Paul always talks about competition in currency before abolishing the fed. Once you let gold compete with dollar, then the fed will abolish itself (piece of gold more valuable than paper shit money).
once again, how do you figure gold inflates over 1.5%? 60 billion a year is very small comparable to all the gold out there.
Lets just say the fed doesnt inflate. there will still be a gold to dollar ratio. What do you think people will choose when they could have 100 $ worth of gold? or a piece of paper with the number 100 on it? Explain why people would choose a piece of paper over a commodity?
I think there’s like $1.8 trillion in gold out there.
People will chose whatever is scarcer, and if it’s paper (and not being counterfeited), they might go for that. Of course the dollar would have to deflate a lot first, or maybe a different currency would have to be issued. But as long as it grows less than 1.5% a year it’s a better bet.
