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Old 09-23-2007, 08:11 PM
adanthar adanthar is offline
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Default Re: Explain to an idiot the benefits of going back to the Gold standar

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in inflation, the money is becoming worth less, in deflation, the money is becoming worth more. (in reality I don't think this would occur as mining gold would free market be more appealing and thus keep the balance).

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O rly?

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One of the main disadvantages of the gold standard is that it artificially inflates the value of gold. The total amount of gold that has ever been mined is estimated at ~125,000 tonnes.[1] At the current gold price of around USD $640 per Troy ounce, or around $20,000 per kilogram, the value of this entire planetary stock would be USD $2.5 trillion, which is less than the value of currency circulating.

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It's gonna take a whole lot of extra gold mining to get there from here.

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This totally ignores reality, since if no one was spending money then prices would drop so low that anyone who had money saved (everyone) would start buying since their purchasing power had hit the point that they were waiting for it to hit. Since individuals have different thresholds for when spending > consuming, and the fact that current consumptions is preferred to future consumption, your hypothetical non consumption economy never comes about. Every lowering of prices due to deflationary pressure adds another group of people who now meet their requirements for spending.
To your point about investing in businesses in the future having a population with large amounts of savings built up means that there is a large incentive to produce newer and better products sine there is a huge market to tap into. Target consumers for businesses are the ones with the most to spend, the more is saved the more can be spent.

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This is all well and good, but that's not at all what happened in Japan (edit: and, I should say, every other deflationary economy ever, although Japan is the only really recent one).
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