For those of you who support the gold standard?

I have been doing a lot of research on the gold standard. Since hearing Ron Paul talk about it, I have been a supporter of it. Even though this is the case, I still have questions about it.

Let’s say we went to a gold standard, where would we get the gold to back the dollar and how would we pay for it?

Would the dollar be indexed to population growth? I am asking this because over the last century our population has grown substantially. Are we supposed to keep the amount of gold notes in circulation the same as our population grows? Wouldn’t this put a strain on the working class? Take for example there are 10 people that are in a market with $100. They each work to compete to get a hand at the $100. Let’s add two more people. This makes the access to wealth more difficult. Let’s add 30 more people with a $100 market. That would be 42 people in the market of only $100. As the population grows the ability to access the $100 lessens. Am I right?

Also how would we determine how much go


ld we would allow in a market and how much each dollar note would be worth in contrast to how much gold we have reserved?

2 Answers

  • NC
    Lv 7
    1 decade ago
    Favorite Answer

    You've got to be kidding... The gold standard is the fastest way to the next world war.

    Under the gold standard, a nation can expand its money supply only as far as its gold stock allows. To expand its gold stock, a nation must have a trade surplus. So expanding the money supply under the gold standard is only possible if a nation has a trade surplus.

    Now recall that expanding money supply is the quickest way of ending recessions and thus keeping the population gainfully employed and reasonably happy. But under the gold standard, it is only possible if a nation has a trade surplus, so governments, mush like they did between 1880 and 1913, would start working on ensuring that their nations always have a trade surplus.

    In practice, just like 100 years ago, it would take the form of pressuring other countries into opening their markets for your exports while keeping imports off your domestic market. The pressure tactics would gradually escalate from diplomacy to the threat or war, until everyone is threatening everyone else.

    P.S. To owain s: The fact that you "have some issues with the idea that a de-monetised currency such as the USD with an open money supply leads to a stable economy" attests only to your unwillingness to look at history. Stupid games with a rare metal doubling up as a currency led to two great depressions (the one of 1929 and the one of 1873, which was even worse) and two world wars, which is exactly why J.M. Keynes called the gold standard "a barbarous relic".

    You say, "it leads to debasement". But of course it does! A mild debasement is absolutely necessary to give the private sector some inducement to invest rather than hoard money. You really should read up on deflation...

    As to "government theft of national wealth from it's people", it's no worse than taxation and way better than having to fight world wars...

    As a concluding thought, you might consider the idea that the gold standard is an arrangement that benefits the leisure class (by ensuring that the value of their precious metal holdings goes up) at the expense of the working population (deflation discourages investment and thus drives up unemployment).

  • shebs
    Lv 6
    1 decade ago

    Okay, in deference to the first answer: I have some issues with the idea that a de-monetised currency such as the USD with an open money supply leads to a stable economy. It leads to debasement and government theft of national wealth from it's people.

    Now, my answer:

    I am theoretically in favour of a Gold Standard, but It would be impossible to re-establish one today in the US, or any western nation, except perhaps Switzerland. There is nowhere near enough gold (and silver) in existence to back the dollar amount of all bank-notes that have been printed by the Federal Reserve, let alone for the currencies for the whole world. The US has very little gold now anyway.

    This does not include floating cheques and electronic funds which is over 85% of the money supply! The horse has bolted, such a standard could never be re-established.

    Every dollar in existence now is someone else's dfebt, so there would never be any way at all, ever, to back the USD again.

    Source(s): Daniels, G. "What in the World is Happening" Daniels, G. "Taxation, from the divine to the ridiculous" Daniels, Peter J. "Why Silver and Gold?" Judge, P. "Stories from the desk of a Bullion Banker" GATA Goldrush 21 conference speeches "Millenium Money" Australia Fair Publishing
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