Is going back to the gold standard even possible?

[brawnypandora0]

Financially, no countries in the world to my knowledge still adhere to it. If we do go back, how in the world would we create emergency liquidity if there are no buyers?

[mips]

Somehow I suspect this thread won't live long...

[brawnypandora0]

This is an economics question.

[NovaAesa]

This is an economics question.

An economic question relating to a subject intertwined with politics.

[mips]

I don't see why it's not possible. You will end up with gold being valued at something like US$60000 an ounce but that is not really a problem as you would work on a sliding scale or fractions of that.

Would probably better to tie your currency in to commodities (of which gold is only one). Based on the supply and demand model this would give you a more 'true' currency if I can call it that based on current market trends.

I doubt however governments would be willing to implement this as it will mean they lose all control over currency and the banking industry as they can no longer simply print money at the drop of a hat to make up for their mistakes.

Moving to a currency based on commodities would also stem inflation imho. As far as I'm concerned fiat money is one of the greatest frauds of all time and one of the reasons we have such an economic mess in the world.

The good thing is the above can be established privately without government. No one can stop me from selling something to you and asking for whatever commodity in return, kinda like a barter system except we all decide that barter to be gold, platinum or whatever.

http://en.wikipedia.org/wiki/Hard_money_(policy)
http://en.wikipedia.org/wiki/Representative_money
http://joysteele.newsvine.com/_news/2008/09/16/1874993-should-we-bring-back-the-gold-standard
http://online.wsj.com/article/SB123440593696275773.html
http://mises.org/rothbard/genuine.asp

I'd be all for it if this was implemented.

[mips]

An economic question relating to a subject intertwined with politics.

I responded above trying to leave politics out of it only mentioning governments in general. I think it's possible to discuss this without involving specific politics or politicians but I'm afraid some people might venture down that road. If people do venture down that road maybe the mods can delete their posts.

[SoFl W]

Sudo apt-get instal goldstandard?

[anaconda]

Financially, no countries in the world to my knowledge still adhere to it. If we do go back, how in the world would we create emergency liquidity if there are no buyers?

There is at least one country still on gold standard. It was some Arabic oil country. It moved back to gold standard last year if my memory serves me right..

[madmax75]

This is so going to be locked soon.

Not related to Ubuntu/Linux in any way + politics + economics

[forrestcupp]

It's not possible, at least in the US. That's why we don't do it anymore. We print more money that the worth of the gold that we have.

[Cheesehead]

Sure, it's possible. But it's not worth doing. Current floating-fiat currencies have several big advantages that gold (which, fundamentally is also just a fiat) lacks.

One has already been mentioned - the value of most currencies far exceeds the available gold (at current prices) in that country required for conversion. So either the currency must be devalued, or worldwide gold prices must significantly rise to match the needed value. Both have far-reaching effects on any economy trying to convert, and for very little gain...except, of course, for the gold speculators.

Brazil, for example, successfully replaced one fiat currency with another a few years back to stop hyperinflation...and gold was neither of them.

The other, quite simply, is that gold can't float on currency markets, and it cannot be devalued by a government. Floating and devaluation are important - those are important tools to fix economic imbalances!

Take the examples of Japan, Iceland, and Ireland. When real-estate or banking bubbles in all three nations burst, each nations was faced with massive debts that they could no longer afford to pay - the sectors that had created those debts had collapsed and left taxpayers holding the bag.

Iceland devalued it's currency - suddenly the debts were manageable. The economy rebounded. Foreign goods are more expensive, but Icelanders are employed and the economy is functioning again at an appropriate level for the goods and services it produces. Foreign investors got burned (well, that's the 'risk' part).

Japan chose the route of sacrifice - it took more than a decade to simply work off all the debts. It's now called the Lost Decade, the economy shrank by over 10%, contributing to social unrest. Many younger workers complain of underemployment.

Now, here's the point about gold: Ireland was forced into the route of sacrifice, because it couldn't devalue it's currency (the Euro) because it doesn't control the supply...just like it cannot control the supply of gold.

Governments have *tried* to control the gold supply - limiting transactions, requiring licenses or certificates, outlawing import or export, etc. But those just lead to black markets and smuggling. And getting rid of all that unneccessary rigamarole was one of the reasons for going fiat in the first place.


EDIT: Ugh. Why is this thread even in Ubuntuforums!
sudo apt-get install macroeconomics 201

[forrestcupp]

Sure, it's possible. But it's not worth doing.
That was a great post.

[tumbes2000]

Cheesehead is pretty much right on.

The problem with gold is that it limits national governments' abilities to react to economic changes, such as a financial crisis. In the in a purely libertarian economic view, one would not want governments to be able to manipulate currencies and let markets work themselves out therefore the desire for a gold standard. However, as Cheesehead mentioned, gold is used only because it has been used more than any other material as a way to store value. We could find a massive gold deposit that makes gold so readily available that it would no longer be considered a precious metal.

To me going the benefits of going back to the gold standard - no government manipulation (so no Chinese currency rate fixing, or printing of money to pay bonds) do not outweigh the costs of inability of the government to help the economy in times of need.

[Bandit]

Yea Cheesehead had a great post.

That and I dont believe that we actually have enough gold to backup how much money we claim to have in the world these days anyway. Unless your into Black Gold "oil" which seems to be doing to good these days..

[KiwiNZ]

homework