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Old 09-23-2007, 11:49 PM
tolbiny tolbiny is offline
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Join Date: Mar 2004
Posts: 7,347
Default Re: Explain to an idiot the benefits of going back to the Gold standar

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the "gold standard" i typically hear about from people who share your beliefs is one in which no government can move the price of gold vs. the currency against which it is set, and one that cannot be removed so as to engender complete faith in the standard that would be unchanging.

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The gold standard that I would hope for would be for no central bank controlling currency, and among the competing banks I would personally choose the bank that I trusted the most to avoid FRL, and used a commodity (most likely gold) as its reserve.
If there is to be a central bank then I would prefer them to be on the gold standard so that when they do get greedy or power hungry you can figure it out/point it out to everyone easier. Then they have to explain why they are breaking their promises to everyone.

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so what would you expect to see under a gold standard?

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I would expect higher savings rates in general, in the long run more goods and services targeted toward those who had saved, and more rigid lending practices. Were you asking for something more specific? I am not very sure where you want to go with that question.

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to my knowledge, this has never occurred in reality. nor could it ever occur in reality given where we are now

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There have been quite a few periods of commodities standards that I know of. The pound sterling in Britain and Roman coinage come to mind. Neither lasted indefinitely (that would be to much to ask) but both currencies were fully backed for significant periods of time.

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so what woudl you expect a true gold standard to be and how would you expect to get there?

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We can get there by private businesses making payments in gold to each other during periods of crisis in currencies. If the problems are big enough and last long enough more and more will flock to stability, once you hit that point a country could become a haven for investment by pegging its currency to gold.

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also, another question, are you saying that the deflation that occurred in the 1930s was an entirely non-monetary phenomenon?

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What I meant to convey was that the depression was not caused by deflation, but that the deflation was one of the symptoms of the problems of the economy created during the 20s.
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