LeftistSpew

A fake gold standard is bad. A fake gold standard is where the government has the power to specify that its own fiat currency supported by legal tender laws has a particular fixed exchange ratio to the underlying commodity (gold for a gold standard). It is a form of price control. The economic arguments made against such policies are epistemological (the government can never know what the price should be) and moral (economic moral hazard).

Governments have debased their gold-backed currencies in the past simply by changing the exchange rate, including putting less of the underlying metal into same face value coins. Gold standards don't prevent government currency debasement.

What we have now is less bad: fiat dollars and legal tender laws but with a floating exchange rate to any and all possible commodities. At least you can shield your own personal finances to a large extent from deliberate inflation by holding real goods and commodities, or even inflation indexed dollar-denominated instruments.

I am not certain what the best arrangement would be. The government needs some way to manage its finances. Perhaps a government can have its own bank and own currency but not a monopoly on issuing paper currencies. No government has a total monopoly anymore due to the existence of large foreign currency exchange markets.

Giving your numbers the benefit of the doubt, don't you think it dangerous to come to a conclusion on the effects of fed policy by analyzing 1 cherry picked, 10 or 20 year period? If you were to go back a mere 25 years you find a world where a nice, average home in orange county, Ca could be bought for 60k and a new Toyota for 2 grand. This with only a %50 decrease in minimum wage. The differences are more stark as you go back. In the 1940's my grandfather payed .09/gallon for gas and bought running, used cars for $25.

And of course, as usual for defenders of inflation, you ignore the the massive value gained by a technologically advancing civilization. Even if there was 0% perceived inflation on all goods and services, there still remains a massive transfer of value, from everyone else, directly to the owners of the printing press when the world is increasing its productivity through technological advance. When a washing machine is invented, the hours of labor required to perform that work is reduced by maybe 90% versus a washboard in the river? If the price to have clothes washed remains unchanged, where did the extra value of that labor go? The theft is even more magnificent when you consider the value created for all businesses when industrial geniuses like Al Gore in vent the internet for us. What more is produced by the use of computers? 10, 20, 50% of the US economy in terms of true labor? A lack of deflation alone, is a sign of theft on a grand scale in our current world. Inflation is just their refusal to even give us a reach around.

This replies to just the initial post.


It’s a most peculiar stability where goods that twenty years ago took 100 dollar bills to purchase today take 170.

One could say relative stability, but it would be relative to an even worse performing currency, say one in South America.


This is our standard of stability? If you aren’t wiped out – unadorned with Make-Light Of-It quotes – everything’s OK? Not having been completely wiped out, just robbed somewhat – a mere 40%.

From the linked-to article:
“As 17th-century Latin American silver production dropped, debtors flooded the Dutch economy with debased foreign silver coinage, creating a stagflation risk. The [Dutch] Bank experimented with a bullion standard, converting different coins to paper at fixed exchange rates, but it could never get the rates right for long, triggering Gresham’s Law events where bad money drove out good.”

First off it wasn’t the fault of gold or silver that some crooks debased it – meaning filing off the edges of coins or counterfeiting them using mostly tin or lead.

Second, comparing paper money to coins, paper money is no harder to debase, easier in fact per unit value.

Third, the Dutch Bank didn’t really experiment with gold as money because then there would have been no set rate of conversion to a quantity of paper money. Using gold as money means the users (buyers and sellers) decide how much of what goods an ounce buys, not a government bank.

A bank (or the bank, if it’s a government monopoly) can still issue paper money in this system, but the piece of paper saying “1” on it must mean there really is 1 ounce of gold in the bank’s vault payable to the bearer. (A bank – or the bank – issuing more paper than gold on hand, in this system, would be defrauding each bearer. His loss would be inflation.)

Fourth, only the author of the linked-to article knows what he meant by bad money drives out good when all the paper money is the same. Maybe he meant people abandoned the money in favor of gold, or vice versa. It’s hard to believe vice versa.

I didn’t read much more, so many hours in the day, just skimmed. The introduction is loaded with emotional, over-the-top phrases: “otherworldly purity,” “stomach-churning,” etc. The style of writing is obscure, the above quote about debased coinage is typical.

Just noticed: The article is published by the American Enterprise Institute, a hardcore neoconservative think-tank, if anti-Americanism masquerading as Americanism can be called thoughtful. John Yoo of torture infamy is there, and Michael Ledeen (author of Machiavelli on Modern Leadership: Why Machiavelli’s Iron Rules Are as Timely and Important Today as Five Centuries Ago – I’m not making this up) used to be. In 2003 they hosted a dinner celebrating Irving Kristol.

Now they’re debunking gold backed currency. Makes me want to buy more gold, at least in the short term. Even if gold’s a bubble it looks like it has a way to go before it bursts.

This is great news--I think you all agree with me. After I posted that I had the same thought as well: qua Objectivist, there's really no particular opinion about the the form of money a society should use, since a proper government shouldn't be in this business anyhow. This "decision" should, properly, belong in the realm of business decisions--and pontificating on "what people would decide on" is just speculation no different than guessing what sort of computer people will buy in 2046.

What is confusing, however, is that there is so much apparent linkage between Objectivism and "the gold standard". Clearly there was that article in CUI (a long long time ago obviously), but more recently, even this site has the occasional official-looking linkage to pro-GS articles. It seems that at least "some" people who are calling themselves "Objectivists" are also calling for a return to the Gold Standard.

But I agree, such an exercise has nothing to do with Objectivism. I'd also agree that even advocating such a thing is actually contrary to the advocacy of Objectivism since it muddies the issue of true economic freedom.

http://american.com/archive/2011/march/fools-gold

This is a nice historically-based essay on the non-effectiveness of the gold standard in accomplishing anything useful.

***

On this anniversary of 9/11, I am reminded of one of the early debates about airline security in the post-9/11 world: whether pilots should be able to carry guns.

I recall plenty of arguments on both sides, and some had merit and some didn't. It was ultimately decided by the FAA that such a move would not improve security (I personally have no opinion on the matter).

I recall this debate only because of one argument in particular: that a pilot could "go nuts" and start shooting people. This is an obviously example of somebody not thinking the whole thing through: if the man flying the plane you were on "went nuts", then a mere gun would be the least of your worries.

This is a great analogy for the gold standard. Yes, without the gold standard, governments are free to inflate their currency and fuck over the population. However this is certainly not their only means of doing so, and arguably not even the most effective one.

In the last 20 years our currency here in the USA has been relatively stable. I defy anybody to show me somebody (an actual person, not a contrived example) who has been "wiped out by inflation" in the USA in the last 20 years. Inflation has been relatively low, and relatively predictable. It most certainly has not made any difference with respect to all of the bad things that have happened to cause the current Depression: all of that could have just as easily happened on the gold standard.

If you are fighting for a better government, then solve problems that are problems, not problems that are... not problems. The latter makes you sound like a crazy person and diminishes are ability to fight for anything.

http://american.com/archive/2011/march/fools-gold

This is a nice historically-based essay on the non-effectiveness of the gold standard in accomplishing anything useful.

***

On this anniversary of 9/11, I am reminded of one of the early debates about airline security in the post-9/11 world: whether pilots should be able to carry guns.

I recall plenty of arguments on both sides, and some had merit and some didn't. It was ultimately decided by the FAA that such a move would not improve security (I personally have no opinion on the matter).

I recall this debate only because of one argument in particular: that a pilot could "go nuts" and start shooting people. This is an obviously example of somebody not thinking the whole thing through: if the man flying the plane you were on "went nuts", then a mere gun would be the least of your worries.

This is a great analogy for the gold standard. Yes, without the gold standard, governments are free to inflate their currency and fuck over the population. However this is certainly not their only means of doing so, and arguably not even the most effective one.

In the last 20 years our currency here in the USA has been relatively stable. I defy anybody to show me somebody (an actual person, not a contrived example) who has been "wiped out by inflation" in the USA in the last 20 years. Inflation has been relatively low, and relatively predictable. It most certainly has not made any difference with respect to all of the bad things that have happened to cause the current Depression: all of that could have just as easily happened on the gold standard.

If you are fighting for a better government, then solve problems that are problems, not problems that are... not problems. The latter makes you sound like a crazy person and diminishes are ability to fight for anything.

http://american.com/archive/2011/march/fools-gold

This is a nice historically-based essay on the non-effectiveness of the gold standard in accomplishing anything useful.

***

On this anniversary of 9/11, I am reminded of one of the early debates about airline security in the post-9/11 world: whether pilots should be able to carry guns.

I recall plenty of arguments on both sides, and some had merit and some didn't. It was ultimately decided by the FAA that such a move would not improve security (I personally have no opinion on the matter).

I recall this debate only because of one argument in particular: that a pilot could "go nuts" and start shooting people. This is an obviously example of somebody not thinking the whole thing through: if the man flying the plane you were on "went nuts", then a mere gun would be the least of your worries.

This is a great analogy for the gold standard. Yes, without the gold standard, governments are free to inflate their currency and fuck over the population. However this is certainly not their only means of doing so, and arguably not even the most effective one.

In the last 20 years our currency here in the USA has been relatively stable. I defy anybody to show me somebody (an actual person, not a contrived example) who has been "wiped out by inflation" in the USA in the last 20 years. Inflation has been relatively low, and relatively predictable. It most certainly has not made any difference with respect to all of the bad things that have happened to cause the current Depression: all of that could have just as easily happened on the gold standard.

If you are fighting for a better government, then solve problems that are problems, not problems that are... not problems. The latter makes you sound like a crazy person and diminishes are ability to fight for anything.

You don't see anything wrong with this argument?


Here's a diverse basket of useful goods for which that statement isn't true: oil, silver and Tibetan medicinal plants. You're welcome to research that, I'm confident you'll find that gold is much less volatile than the dollar, compared to those.

With a little looking into I could also name a diverse basket for which lettuce is the most stable currency on the planet. Hand picked baskets, no matter how diverse, don't make for valid arguments.

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I'm not sure what he's saying (although I know that the statement "gold is just gold" does not mean all those things you're saying it means), but I here's what I'm saying:

In a free economy, the market value of gold is less volatile and more predictable than most things, because both the supply and the demand of it are quite stable and predictable.

With state issued currency, supply can (and is being) manipulated, and with most other goods (like oil, iron, etc.) demand can change quickly with technological advancements or just changes in consumers' preferences. If you believe that supply and demand dictate the market value of goods, then this simple inference should be pretty difficult to not understand.

In an economy that's subject to the whims of fiscal policy makers, gold does tend to shift its value somewhat, because it is used as a safe haven from inflation, etc. Any time the policy makers screw up, the value of gold goes up. But a quick math (the kind you learn when you study supply and demand in Economics) will tell you that, as long as this practice doesn't become more widespread than it is now, gold should still remain more stable that the inflated currencies which are driving people to it.

In 2000, you would need to bring about 73 ounces of gold to the Toyota dealer if you wanted to walk away with a brand new Camry. Today you would only need to bring 14 ounces. I could go on and on with examples. Compared to the average price of a diverse basket of useful goods, gold has been absurdly volatile whereas the US dollar has been relatively stable.

Or are you saying that everything in existence is volatile and gold is "just gold"? That sounds a lot like you are ascribing magic powers to this metal.




What planet do these "market participants" live on and why would we care about them?

By that logic, Walmart should cease their acceptance of US dollars (and every other major currency on the globe) starting tomorrow. Do you suppose they are going to do this? Really? Why not? Are they stupid? Is the whole world stupid?

Here on Earth, people evaluate a currency based on its ability to be a stable instrument of trade. Period. End of story.

Based on the above, Gold has done a terrible job, and US dollars have done a perfectly fine job.

Is it possible all of this can change, and we could elect crazy people and they could legally turn our currency into toilet paper? Sure. Anything's "possible". However there's no evidence, of anything of the kind happening any time soon. There's no smoke, let alone fire. In the past the markets have been great firemen, instantly reacting to potential issues with currencies. There are no such alarms going on with the US dollar. Quite the opposite.

Despite the oppressive regime we (often correctly) complain about here, everyone in the USA is perfectly free to trade in whatever form they choose. If the US dollar is so terrible, and gold is the benchmark of value, then why doesn't Amazon.com take gold coins in trade for goods? Why isn't the free market making a choice here?

In 2000, you would need to bring about 73 ounces of gold to the Toyota dealer if you wanted to walk away with a brand new Camry. Today you would only need to bring 14 ounces. I could go on and on with examples. Compared to the average price of a diverse basket of useful goods, gold has been absurdly volatile whereas the US dollar has been relatively stable.

Or are you saying that everything in existence is volatile and gold is "just gold"? That sounds a lot like you are ascribing magic powers to this metal.




What planet do these "market participants" live on and why would we care about them?

By that logic, Walmart should cease their acceptance of US dollars (and every other major currency on the globe) starting tomorrow. Do you suppose they are going to do this? Really? Why not? Are they stupid? Is the whole world stupid?

Here on Earth, people evaluate a currency based on its ability to be a stable instrument of trade. Period. End of story.

Based on the above, Gold has done a terrible job, and US dollars have done a perfectly fine job.

Is it possible all of this can change, and we could elect crazy people and they could legally turn our currency into toilet paper? Sure. Anything's "possible". However there's no evidence, of anything of the kind happening any time soon. There's no smoke, let alone fire. In the past the markets have been great firemen, instantly reacting to potential issues with currencies. There are no such alarms going on with the US dollar. Quite the opposite.

Despite the oppressive regime we (often correctly) complain about here, everyone in the USA is perfectly free to trade in whatever form they choose. If the US dollar is so terrible, and gold is the benchmark of value, then why doesn't Amazon.com take gold coins in trade for goods? Why isn't the free market making a choice here?