Fgfg asked in Social ScienceEconomics · 1 decade ago

fiat vs gold and silver capitalism?

uhm so history has shown that fiat capitalism is more prosperous and productive than gold and silver-based capitalism. the law of diminishing returns shows that when we're creating more wealth based on wealth that was previously created, we need a certain degree of market regulation (mixed economy) so our currency doesn't become valueless and lead to a zero-sum outcome.

so, libertarian republicans want to go back to the gold standard. they forget that when we were on the gold standard, we didn't have the fine consumer goods and electronics (cars, refrigerators, televisions) because people didn't have the purchasing power to do it. fiat capitalism is what helped us thrive. but fiat capitalism needs a level of government intervntion to be legitimized.

so, do you libertarians want to give me your television sets and refrigerators and ipods and automobiles? would you guys mind living on a corral in the middle of the desert if our country decided to switch to the gold standard? you could still own a tv or a computer, you'd just have to work like 40 years to own one.

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  • 1 decade ago
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    1. History has shown no such thing. What it has shown is that:

    A. Contrary to what the classical economists have argued, there is a real connection between money and the "real" economy, and that if you want the economy to grow you have to let the money supply grow.

    http://en.wikipedia.org/wiki/Friedman's_k-percent_...

    B. Similarly, if you want reasonable economic growth, you have to some inflation, but you don't want to increase the money supply too quickly because that just gives you inflation without real economic growth.

    http://pages.stern.nyu.edu/~nroubini/NYT/krugecona...

    If there is steadily growing supply of gold, then a gold standard currency doesn't affect the growth rate (even if it would be a bad idea for other reasons). This was the case between 1900 and 1965:

    http://www.zealllc.com/2007/goldprod.htm

    Note the extent of economic growth, innovation, etc. during that period.

    As it happens, the world's supply of gold has not been growing as rapidly since then, so now the constraint is real.

    But that just tells you that you have a trade-off to make. Some people, such as Alan Greenspan and Milton Friedman, are well aware of the trade-off and are perfectly willing to give up growth in exchange for other benefits - such as a stable currency, which they consider essential to freedom.

    http://www.usagold.com/gildedopinion/greenspan.htm...

    http://en.wikipedia.org/wiki/Capitalism_and_Freedo...

    There is no reason to believe that as society gets richer, people are happier, so it is not unreasonable to put your efforts towards other goals. It does turn out that within a society, people who are better off tend to be happier. But across societies, or across time, the correlation breaks down. There is no reason to believe that Americans are happier today than they were 50 years ago, even though they are clearly better of in material terms.

    http://www.nytimes.com/2008/03/09/business/09view....

    2. The real question is what happens when one country makes one choice and another country makes another. History also shows that economic power is correlated with and contributes to military power.

    If one society deliberately decides not to go for maximum growth and hence, over time, becomes relatively poorer compared with other countries, it also becomes relatively weaker compared with other countries.

    So the real question isn't whether gold-bugs are willing to live with fewer cars per family, etc. but whether they would accept a U.S. that is only a middling player on the world stage. My guess is that many of those who would say to the first, would say no to the second.

    3. BTW, an important element to this is that the free market price of gold does not track inflation very well. If a country does choose the gold standard, it will be come poorer - it is not that its currency will gradually grow stronger:

    http://www.project-syndicate.org/commentary/feldst...

    (Of course, even it did, you'd still have the problem of a society in continuous price deflation - a major burden on the economy - but that is a separate issue.)

    http://krugman.blogs.nytimes.com/2010/08/02/why-is...

    4. There are very few true libertarians in the world. Most of those who claim to be really aren't, and most of those who claim to want a return to the gold standard clearly aren't either.

    For example, even MIlton Friedman strongly advocated government funding of schools:

    http://www.schoolchoices.org/roo/fried1.htm

    There are very few who would argue that governments shouldn't build roads, etc. And even when they don't like regulation in the abstract, most are happy when it benefits them (zoning laws that keep our the riff-raff and keep their home values high, tax deductions for home mortgage interest payments, etc.)

    So if you are looking for a logical consistency, forget it.

  • Anonymous
    1 decade ago

    the Fiat currency is going to collapse - that's why the Chinese are buying up as much gold as possible

    gold prices are going up and up and up and...

    The US Dollar is a faith based currency. Eventually the markets will wake up and stop believing in it.

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