DA says:

#64 bobbo,

Your idea of inflation is confused, I think thats where you’re getting tripped up.

“Seems to me that under a gold standard, as the economy grows either the par value of gold has to go up or the amount of gold in a dollar has to go down. Neither event stops inflation.”

Under a gold standard the value of gold would increase, that causes price deflation. Not inflation.

Here’s a thought experiment…

The total gold in the economy is 10 ounces. Demand for those 10 ounces of gold would generally tend to increase as society grew, more people buying more stuff generated from more production. This is not inflation. This is because the gold supply did not increase in quantity, it increased in value.

Inflation is defined as the increase in money supply (money and arguably credit). Gold is not able to be increased arbitrarily, and in fact can only be increased through production. How much gold is in the market is dependent upon productive capacity of mining. As gold increased in value over the years it would be profitable to obtain more gold.

It helps to think of gold as just another good in the economy. A good that is used in half of every single transaction.

It’s also important to not that there is no social benefit to doubling the money supply. If everyone has $20 in the bank when they went to sleep, and then they woke up and everyone had $40, there would be no net benefit, even though they all have more money.

Fiat money could be utilized to work exactly like a gold standard in theory. Although, in practice I believe it will always lead to mischief because of it’s ability to be inflated without any difficulty and without 99.99% of the population realizing it.

Even worse, the people who get that newly created money first are the politically well connected and wall street. The politically well connected get it first through huge contracts, handouts, and government industries. Business gets it first through fractional reserve lending and also from those who got it directly from government. The people who get that money last are the working class, the people who work get paid and then spend their money. The welfare class also gets the money first, although they spend the money on consumption.

This may not seem like a big deal initially but it has a horribly sinister effect.

The people who get the new money first benefit from the higher buying power of that money. Rephrased: They are able to benefit from the lower cost of goods. By the time that money makes it’s way to the last group of people the cost of goods are now higher and they receive no benefit and we’re actually harmed because they were paying the higher cost for goods the entire time. Even worse, the poorest people are encouraged to borrow money and then pay it back with devalued money, meanwhile the people who benefited most from that borrowing is the wealthy business man.

Inflation is a hidden tax on the poorest members of society. The poorer you are, the more likely it is that your getting screwed hard by the inflation tax. The more wealthy you are, the more likely it is that you’re benefiting from the inflation tax.

This is one of the many reasons our current monetary system is evil and also inherently unstable. The gold standard would eliminate this sinister problem by eliminating the governments ability to arbitrarily increase the supply of money.

All of this answer your question?

DA says:

#67, bobbo

“The unstated assumption seems to be that under a gold standard it is more difficult to deficit spend?”

Yes, it is much more difficult, it forces government to spend wisely, government operations would cost much less, and be run more efficiently, because they’d have no choice. Revenue could only be obtained through direct taxation and you can only do so much direct taxation. Problems with their programs would have to be solved rather than “papered over”. They could still borrow money for emergencies like wars or have a temporary fiat money in case of war. Lincoln did this during the civil war, and we returned to the gold standard within a couple short years. It was a non-issue, a mere blip. Our government would no longer be an empire trying to impose our ideals on others through force of arms, it just wouldn’t be possible or at least exceedingly difficult without fiat money.

I think the welfare state could be run much better if it weren’t for fiat money.

“The government does what? It must borrow money or increase taxes if it wants to hire more troops to fight a war?”

The only wars we should be fighting are wars that are in response to an attack, that is, wars in retaliation. These wars can be justified and it’s not a problem to rally the people for this type of war.

“How was WW1 fought, all that debt run up, while still on the gold standard?”

The combination of Fractional reserve banking and central banking.

“I find it hard to believe that money supply imposed by one nation on itself would “prevent” it from going to War, to the Moon, to universal Health Care?”

It wouldn’t prevent anything from happening, it would just make it more difficult and less profitable to go around the world bombing peasants and slaying dragons. These are unpopular wars, and have always been unpopular. Without the support of massive deficit spending or the support of the people, we would no longer be able to fight these types of wars. I see that as a good thing. We should set a good example and maybe other countries might then try and replicate us. I would imagine we’d be much more popular if we weren’t “the bully”.

“I guess it all comes down to the rules that are actually enforced?”

Precisely.

“I’m sorry, I don’t know enough to discuss this issue. Questions is all I have.”

This has been one of the single most civil, intelligent and interesting discussions I’ve ever had on the Internet. I’ve thought of and considered things in many different ways, probably because your questions are much better than most.

“But I have an article of faith: everything has pro’s and con’s. What con’s to the gold standard are there that cause nations to go off it? Surely its not greed and avarice in all cases?”

From what I’ve read there are 3 main reasons throughout history for government intervention into banking and money in all it’s various forms.

Greed, ignorance, and war.

These are the rule, rather than the exception. The specific reasons from examples throughout history are extremely varied, and usually involve a combination of the 3.

You could say there’s a 4th reason, and that would be the “idea of a better way”, and there very well could be a better way, but so far I file this 4th reason under ignorance. At the same time I keep an open-mind, because if there is a better way, I don’t want to be stuck with something less than ideal because I was too blinded by my own thoughts to see a better way. I hate being wrong, so I try not to be so blinded by my own ideas that I don’t recognize truth, that’s a lot easier said than done.

If there is one single market that the government should never be allowed to interfere with, it’s the money market with exception of punishing fraud, protecting rights and possibly during times of war if necessary.

Giving politicians a source of “endless” money is like hiring an alcoholic to serve alcohol at an open bar.

Inquiring minds may want to read “End The Fed” by Ron Paul. I just finished reading it today, a very well written, interesting and easy read. It accurately summarizes my viewpoint, without the technical jargon that clutters so many economics books. The book was literally just released about 2 weeks ago.

DA says:

#69 bobbo,

“I have to admit that every time I have listened to Ron Paul, he has been interesting for 2 minutes but then he goes off the tracks.”

Heh, yea he does do that. His writing is much more clear and concise. His speaking tends to be riddled with a lot of tangents.

So no, I don’t think it was you. I’ve heard a lot of people say similar things.

“The notion that if the world was on a gold standard that some 3rd world country becomes wealthy overnight because they did up gold from the ground has always struck me as nonsensical.”

I could see how that could happen, a sort of windfall from a change in policy from major nations.

Changes in gold mining output and supply of gold hasn’t historically had any huge or far-reaching or extended implications.

“MONEY!!!! Who isn’t interested in that? I’ll have to read up—right after I finish this porn magazine.”

It’s all about priorities. 🙂

“Thanks for hanging in there, I look forward to learning more about this thing called gold.”

Always more than happy to talk to those who listen and even to those who don’t! 😛

Thanks for listening.

The end?

*roll credits*

DA says:

bobbo,

1. Vaccines
Against forced vaccinations.

2. Death Penalty
Strongly opposed. Justice system isn’t perfect.

3. Home Schooling
Freedom to choose. I have a lot of different ideas on schooling in general. Open to ideas, though.

4. Repub Base off base?
Way off base, more and more republicans are criticizing republican leaders. It’s about damn time.

5. OH===Healthcare Changes
Current system is awful. Needs reform. Not the kind of reform we’re getting though. I have a very very informed view of this issue, but whenever I voice it I usually get shouted down by Obama rhetoric. 😛

6. Overseas Misadventures?
Bring the troops home. ASAP.

7. Capture of Wealth by Top 1%
Annoys me severely, I think this issue is highly related to the issue of our banking system. 😛

There’s a preview of my views, I’m fairly libertarian in my views and I have fairly strong and informed opinions on all of these. Admittedly, none of them are as informed as my opinion on banking and money.

I’m sure there will be plenty of opportunities to insult, ridicule and otherwise pummel each other senseless. 🙂

Been lurking Dvorak for a couple years. So, I’m fairly knowledgeable of your views and opinions.

Gonna be pretty damn busy the rest of the week. So, it’ll have to wait for another thread, at a date yet to be determined.