Common sense is sorely lacking in DC, Eli.
Run for Congress!
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I love the creativity of this post and am well engaged with the arts, so this is not theoretical to me. That said, Iâm a paleoconservative who chooses to stick with what consistently has worked best throughout history rather than turning the American population into guinea pigs for alluring but untested propositions.
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About having enough gold, sorry, I didnât read the entire post. I was never in favor of annexation; I think itâs completely wrong. I have some questions, though. Youâre a paleo conservative and Iâm a classical liberal. The U.S. was in a depression in 1893 when it was still on the gold standard. (I was against Free Silver) So how could it have been minimized? Also, when returning to the gold standard, what safeguards would need to be put in place to prevent a shock to the system, and are you in favor of dissolving the Fed in the future? (Though there is that cautionary tale of the Panic of 1837)
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The US entered a long, painful deflation after the Civil War, bringing the value of the greenback back to pre-war parity, leading to decades of misery by workers and farmers, including intermittent depressions (and creating the anti-deflationary âfree silverâ movement and William Jennings Bryan. Just as Chancellor Winston Churchill created a depression (his greatest blunder) that lasted about a decade in the UK. It is not complicated but crucial to get the parity price right, motown, which one does by market price discovery before officially setting the currency/gold conversion ratio, which is the necessary safeguard to prevent deflation (or runaway inflation if one sets the price too high), but by setting it with reference to prevailing prices (with preferably a small bump up to mildly favor labor over capital) itâs easy to do.
I am agnostic as to the Fed. If, as Mundellâs 1999 Nobel Prize acceptance speech definitively points out, the classical gold standard is automated and by protecting that the Fed would be no more pernicious than the National Institute of Standards and Technology (which defines the inch and the ounce).
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This is a must to ever regain our standing on the world stage. I never understood how it was allowed.
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Thank you. No text, but enough information to see you are indeed advocating a pegâŚ
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The dollar HAS been on a long sad slide, but yet we have an endless trade deficit from it being overvalued relative to other currencies due to itâs monetary premium. Doesnât giving the dollar even more premium sustain if not further increase the trade deficit, making more excess dollars flow overseas which in turn drains the gold reserves? A gold peg exacerbates this problem, it doesnât fix it. And in 2024 we are starting from a much much worse position with unfunded liabilities, debts/deficits, demographic decay, gutted industry, much of GDP being unproductive, etc.
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Yes indeed it was. But yet the signal was ignored, why was it ignored? It is because human nature is still human nature. The gold standard is a perfect system if people were perfect, but it is a bad system given human nature because people demand free shit, politicians will spend to stay in power, and people donât want to pay taxes. All the political incentives are to cheat the gold peg just a little, then more, then more, then suddenly it fails.
Conjoin that with the classical gold standard as exemplified by the Jack Kemp Gold Standard Act of 1984, still awaiting enactment, and I submit that you will achieve wonderful results!
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The gold standard has always been among the first casualties of war, JD3, and now that we have won the Cold War it becomes once again possible to take our stash of gold bricks (of which we have an abundance) to lay the foundation for a new Golden Age.
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Thank you for your detailed analysis.
Unfortunately, a thriving economy, in which participants have enough money to spend, save and invest is dependent on a constant supply of new money. If most people save, then that portion of the money supply is not being circulated., and depressions and recessions result. The only way out of these pitfalls in to inflate the money supply. If the source of new/fresh money is a finite commodity such as gold, as you suggest, then the only way out of the depression is to mine more at the expense of the environment. This endeavor is uncertain, as all gold miners know, and unreliable. That is why we went off the gold standard in the first place. To make it easier to increase the money supply to facilitate commerce. The problem with that is the device in which currency is inflated; debt.
The debt contract is useful for inflating the money supply on demand, but invalid as only the principal is created. The physical currency to cover the interest demanded by a loan contract is never created. This makes large loans unplayable and renders the loan contact invalid. This is a grift used by the lenders to hoard the collateral for unplayable debts, like the national debt.
I suggest a remedy via bond contacts to create new/fresh money via individual labor, debt free. This injection of debt free money into circulation at the grass roots will have many favorable redults: it will validate the debt contacts and render them payable. No threat of default. It will eliminate unemployment. If people leverage their property, (labor) like a bond based âequity lineâ then everyone can be self employed first and foremost. This also eliminates the need for public assistance, welfare and food stamps as people can convert their labor into debt free currency daily. This will ease economic burdens on states. With abundant money made by the people, the motivation for most crime is eliminated. With the general.populace able to earn debt free money without permission and limitation by employers, all of the beneficial but not profitable sectors like the environment, education and Healthcare, become profitable in the form of the benefit those sectors yield.
The gold standard is a 600 year old monopoly of suffering and not a suitable foundation for advanced civilization.
Thank you!
As an abundance of scholarly materials have convinced me over almost half a century of resesearch, tedp, your statement that âThe gold standard is a 600 year old monopoly of suffering and not a suitable foundation for advanced civilizationâ is not supported by the historical record and, indeed, strikes me as counterfactual.
Perhaps read this and let me know whether it provided you with some yummy food for thought (as researching and writing it did for me):
Abolish federal reserve, and return to gold standard I agree with. Our current financial system appears to be " legal" fraud.
If there is shortage of gold, as other nations are holding reserves of it-could a second metal be added. Perhaps a gold/silver standard?
Using crypto as a US. Currency backed by gold moving into the future away from the dollar. Government and States will have a crypto wallet with 100% transparency to the public. All transactions and money moving will be easier to track and reduce corruption. XRP is working towards this and is currently being blocked by the SEC.
I vote for a united states based crypto currency backed by the gold standard.
There is no shortage of gold, Dmmidaho. Uncle Sam is by far the holder of the most monetary gold in the world; you could look it up. That said, in fact and in truth you donât need very much gold to run a classical gold standard. The Bank of England used to run the worldâs classical gold standard very capably for decades with sometimes only 2% gold holdings against currency in circulation. Gold provides the signal to monetary authorities to ease or tighten. And bimetallism proved inefficient in practice, which is why we went for the classical gold standard. (You could look that up as well.)
As a paleoconservative, Bastid, Iâm all about âtried and true.â
I donât believe in experimenting with a novel system on the American people, Bastid.
And fwiw I know rather a lot about crypto, one of my two books on the subject has an introduction by W. Scott Stornetta, the co-inventor of the blockchain, and a preface by Jeff Garzik, one of Satoshiâs two core developers of Bitcoin (who gave away about a billion dollars worth, current values, to get it established.
THIS in addition to no more income or corporate taxes would create the largest economic boom in world history!
Historical data strongly supports the proposition that the classical gold standard alone, correctly performed (which we know how to do), alone would generate a golden age of equitable prosperity, no need to repeal the tax code (which we would benefit from mending, not ending)
We agree on bringing back sound money, precious metals.
(Taxes are still legalized theft, even if weâre more prosperous. But that is a separate policy topic!)
The economic system is certainly flawed, but reverting to the gold standard rather than fiat currency poses its own challenges. I would propose that we turn to more novel approaches to shift from fractional banking reserve system altogether. That is why people worked to develop a decentralized currency as a potential way to evolve. Most of the things which we use to be analogous to value are rather arbitrary, as we transitioned from metals to paper to plastic to binary code. It might be beneficial to brainstorm on solutions such as banning interest-based/debt-based economic structures, shifting our values on time exchanged, and full reserve banking by not-for-profit cooperatives, and so on.
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Some considerations:
One argument I sometimes hear against the gold standard, is that there is not enough gold to return to the gold standard. This is false and is based on the assumption that prices in the market and the supply of money, both have to remain the same under a gold standard as they are today. In actual fact, as long as there is a sufficient supply of money to facilitate commerce, then any amount of money in circulation is sufficient for a money supply. The prices of goods and services in the marketplace is determined by the supply of money, good and services in that marketplace. Using rough numbers, the population in 2020 in the United States is 331.4 million people according to the 2020 census and in 1900 it was 92.2 million. The total money supply in 2020 was around $50.3 trillion and in 1900 it was $7 billion. Extrapolating from these numbers, in 1900 there was around $760.87 dollars per person in the total US money supply. In 2020 that number had risen to $151,780.33. If we were to reduce the money supply back to 1900 levels of $760.87 per person, then the total money supply in the US economy would drop from 50.3 trillion to around $252.2 billion and every American would see the prices in the market at 1910 levels and an entrepreneur would be able to run a successful business selling general merchandise at a âFive & Dimeâ store where everything in the store is only 5 and 10 cents. If this were done, we could reinstate the Constitutional standard of one dollar having the composition and buying power of 371.25 grains of fine silver.
How this reduction in the money supply needs to be dealt with carefully and studiously implemented. Anytime there is a decrease in the money supply it leads to a recession if it is slight, or a depression if it is major. Reducing from $50.3 trillion to $252.2 billion would be catastrophic in most instances! If extended over 50 years, could lead to a recession economy spanning three generations of Americans, assuming the American public and politicians had the determination to bear the pain and stay the course the entire 50 year times span which I highly doubt would not be overturned during that time. However, this also assumes that the market place was left to adjust naturally. This could be countered by designating that at 2 AM on January 2, 20XX that all prices, financial accounts, loan principle, monthly payments, rent, bills, salaries, wages, bonuses, taxes, etc, are all reduced by the same percentage. Thus removing money from the economy at large reducing the total money supply, and simultaneously adjusting the prices, wages, salaries, monthly payment amounts, etc. maintaining a proportional reduction adjustment in the entire price structure. This would mitigate the impact of the reduction in the money supply by relieving financial stresses of having to try to make the adjusted price structure which is the reason contracting the money supply is felt as a recession or depression. (Namely, that when the money supply is contracted, it leads to a recession or depression because the prices in the marketplace are still reflecting the previous amount of money supply and have not yet adjusted to the reduced supply of money. By reducing both sides of the economic equation (the money supply and the price structure) in equal proportion, then the effect of recession or depression should be minimal if felt at all. Albeit it is likely there would still be some effect felt as the artificially reduced prices would probably need minute adjustment which would be handled naturally as the marketplace readjusts to the new and reduced supply of money. But the artificial reduction would take care of the majority of the economic shock and thus reducing the effects of the reduction overall.
Originally we were set up under the Constitution to have a bi-metalic money supply consisting of silver and gold. I would like to see a return to that but I would make a change to how it was applied. Originally and as was consistent with bi-metalic economies of the time, the silver coin was the unit of financial measurement and prices were listed in relation to the buying power of the silver coin. The gold coins were set at a fixed ratio, in the US a gold coin (called an Eagle, not a Dollar) had the face value stamped with a set value where a gold Eagle had the value of 10 Silver Dollars. In practice, Greshamâs Law produced the effect that when the value of gold was stronger than its fixed silver value, gold coins were hoarded and silver coins were used in commerce. When the value of gold was weaker than its fixed value in silver, then the reverse happened and silver coins were hoarded and the gold coins were spent. This produced the effect of monetary shortages, and subsequent coinage acts changing the amount of gold or silver in the coins to re-establish the relationship between the gold and silver coins.
Today, we have computer technology and the internet to assist us and we could establish the silver dollar of 371.25 grains of silver as our base unit of money and fix the amount of gold in a gold Eagle coin, but not stamp a dollar value on the coin, thereby letting the dollar value of the gold coin âfloatâ in the market rising and falling in its natural relationship to silver. By statute, this ratio could be fixed each day based on what the value closed at the day before and readjusted at midnight Hawaii-Aleutian Time. This would fix the exchange rate between gold and silver coins at a set rate each day to make commerce easier. If the fixed rate wasnât implemented like this, then every transaction paid in a mixture of gold and silver coins would need to calculate the exchange rate based upon the current data that minute. This would technically be more accurate and is possible with modern computer and internet technology but I think would add a layer of unnecessary complication to commercial transactions beyond what is necessary rather than simply using a fixed exchange rate set for the day which the Point of Sale software could easily calculate without introducing minute by minute fluctuation.
Personally, I support a return to using gold and silver as money. In an ideal world to eliminate as much corruption as possible, I would prefer the use of commodity money only. This is when the store of value (the gold and silver) are also the medium of exchange (the coins used in commercial transactions). Anytime a digital or paper transaction occurs that is allegedly âbacked and redeemable in gold and silverâ is used, it is assumed in good faith by the recipient of such digital or paper money that the certificate itself is valid and not fraudulent, and that the holder of the actual silver or gold will actually make good on their promise to pay the gold or silver when presented with the certificate (paper or digital) for redemption. Historically, this has often been the point when fraud was revealed by the realization the certificate is counterfeit and they had been conned and no longer have the goods they had traded for the counterfeit certificate, or that the holder of the gold and silver, simply refused to honor the promised redemption (what happens when governments went off the gold or silver standard), or substituted debased coinage in place of what was actually stated on the certificates.
That, said, as I do a lot of online shopping, I do recognize the convenience of fiduciary money where the store of value (gold or silver) is held by a 3rd party in exchange for a paper or digital certificate, and the paper or digital certificate is the actual medium of exchange with the assumption that such certificates were not counterfeit and would be honored when offered for redemption in gold or silver. Just be aware that such certificates are subject to inflation due to the issuer issuing more certificates backed by the same gold or silver as other certificates. This is fractional reserve banking and is what lead to the famous bank runs in the past. In my view, this is a form of cheating in weights and measures and is inherently fraudulent and fractional reserve banking practices should be illegal, but that is another issue.
One other thing that should be mentioned for full disclosure is that in todayâs world where all of the worldâs nations use fiat money is that if any nation ever went to war, they have a virtually endless supply of money as they can print however much money they need to fund a war. By returning to a gold or silver standard, we are tying the governmentâs hands by saying that the money has to be tied to gold and cannot be inflated at will to finance military operations. On one hand, this is a good thing as it keeps our country out of unnecessary wars we have no business in, and when we are engaged in a war, the limitation in the supply of available money prevents a prolonging of the war and thus saves lives by forcing the war to end due to lack of supplies. When both sides of a conflict are equally restrained, this does not pose a threat to national security. However, when one nations is so constrained by its monetary policy and the other is not operating on an entirely fiat system, then the fiat nation will ruin its economy and run up its national debt and inflation, but will always have the financial resources to win the war over the financially restrained nation bound to a fixed amount of money backed by, or tied to its, silver or gold reserves. Allowing an exception during war time to suspend a gold and silver relationship to its money supply though, opens the door for corruption and invites engagement in endless wars which is one of the reason we were originally bound to gold and silver in the Constitution originally (that and we had just won a war and our resorting to the printing press had caused out money to go from 10:1 against the Spanish Milled Dollar to 5,000:1 in just one year which had resulted in financial chaos under the Articles of Confederation which was one of the causes that prompted the Constitutional Convention to begin with!) I still support returning to gold and silver but this issue needs to be addressed and born in mind as a consequence of such an action.
I know the BRICS nations had been increasing their supply of gold and the assumption was that they were going to launch their own BRICS currency backed by gold. I am not sure where they stand with this but the latest I had heard prior to the US election was that they had abandoned this idea in place of establishing a convertible rate between their local currencies instead of adopting a single gold backed BRICS currency. But the idea of returning to gold is getting support worldwide as more and more nations approach the end game and collapse of the fiat currency game the world has been on for more than a century.
I do see several policies having to be adopted at the same time for this to work as leaving fractional reserve banking as a system is an open door for rampant inflation regardless of whether the money is backed by gold or not. Backing a currency only works if it is a 1 to 1 ratio between the money in circulation and the gold that is backing it. If the central bank or banks are able to hold fractional reserves, then that reserve requirement can be adjusted to any number making the whole point of backing by gold entirely meaningless. But moving to a 100% reserve requirement of honest banking, and having gold and silver backed honest money are two separate issues but of equal importance and should be done together. I could go into an honest and fair tax system as well but am choosing not to address that topic here. But I will add that in 1913 when the 13th amendment was ratified, and the Federal Reserve Act and Internal Revenue Code were both passed, the US had a surplus in the treasury that they were embarrassed by its size. The Internal Revenue Code was passed not because we needed tax revenue but because it was the method devised to pay the interest to the Federal Reserve they knew fiat money and fractional reserve banking would create.
@Bastid @ralphbenko I agree with Ralph regarding not needing a lot of gold, as I said elsewhere that virtually any supply of money is sufficient to accommodate a nations money supply as long as the prices in the market place were allowed to adjust to that level of money supply. The idea that there is a shortage of gold only exists because of the assumption that prices under gold would have to stay the same as at present which is entirely untrue, we could return to price 1900 levels if we wanted to.
One problem with gold that crypto might solve is in the digital world of online shopping and digital banking. Gold by its very nature is a physical commodity. Gold does not exist in the digital world. Tying a digital currency to gold, relies entirely upon that no corruption or fraud occurs when inputting what the gold supply is and this is adjustable by a few strokes of the keyboard.
By contrast, crypto ONLY exists in the digital world. It is impossible to bring crypto into the physical world. It is as imaginary as the digital world itself. It solely exists in the world of ones and zeros in machine code. Being a creature of the digital landscape, it may be that crypto is the âgoldâ of the digital age. â but ONLY in the digital world.
As the physical world used a bi-metalic economy in the past in a world without a digital landscape, it may be that we in the 21st century will need to utilize a bi-currency economy relying on crypto in the digital-sphere âdigasphereâ and relying on gold (and silver) in the physical sphere âphysisphereâ. The establishment of an exchange rate between physical gold and digital crypto for the two official currencies of an economy, may be the wave of the future.
I will caution though that if that is the case, then let us learn from the past, and rather than tying crypto to a physical aspect (like we tied the gold Eagle to the value of 10 silver dollars), instead let the digital (and second physical metal) float in its market value compared to the unit of measurement/unit of account in which all prices in the economy are directly tied and stated. The dollar is a silver coin, not a gold coin, the gold coin was an eagle with a stated value of 10 silver dollars. I think we should adopt a silver dollar and issue gold coins and certificates whoâs dollar value float based on market value of gold in silver dollars from day to day and the crypto-currency we use should also allow its value in relation to silver dollars to likewise fluctuate by market demand in the digitasphere. both the gold coins and certificates and crypto-currency would circulate in addition to the silver coins and certificates that are the actual base of the money system in the physisphere.