Two articles (the one in the Atlantic has a link to a more extensive background piece) on why this is nuts are worth reading, if you don't already see the problem.
The real problem is not mentioned in either of the articles, though both are fine as far as they go. Today, there is so much commerce that there is not nearly enough gold to support it. This has been a problem even in the past when economic life was much more restricted.
But in a world of 8 billion people, most of whom get most of their income from commerce and not personal production, there just isn't enough gold to give each one a doubloon.
UPDATE: I see Krugman has joined in.
The interesting question is what will happen to monetary policy if a Republican wins next year’s election. As best as I can tell, most economists believe that it’s all talk, that once in the White House someone like Mr. Rubio or even Mr. Cruz would return to Bush-style monetary pragmatism. Financial markets seem to believe the same. At any rate, there’s no sign in current asset prices that investors see a significant chance of the catastrophe that would follow a return to gold.But I wouldn’t be so sure. True, a new president who looked at the evidence and listened to the experts wouldn’t go down that path. But evidence and expertise have a well-known liberal bias.
Ummm. There's a good reason that wasn't mentioned in either of the articles. Having a gold standard doesn't mean we'd actually carry gold around with us. It just means the banknotes (i.e. dollars) represent some quantity of gold.
ReplyDeleteYou've clearly shown you have no idea what you're talking about on this particular subject.
(For the record, I don't support going to a gold standard either)
Is 1% enough? These birds also tend to believe (or say they believe) that Ft. Knox is empty.
ReplyDeleteThe amount of gold mined so far is said to equal about a cubic mile. Split 8 billion ways (or, 800 billion if you're serious about trade at current flows), that is about enough to give everybody some "gold-filled" coins, n'est-ce pas?
There really have been times when there wasn't enough physical gold available to keep trade going. This is one of those times.
I buy and sell gold every day, so I deal with people who really don't trust banks and financial systems. It provides a baseline to think about how much gold would be required to go back to a gold currency.
ReplyDeleteHow much gold would be required to give the notes credibility?
30%? 10%?
People who use gold as money stores bring us typically 3 to 30 grams of 14K, but (infrequently) 600 g of .9999 gold.
None of this would be sufficient to buy, say, a new midsize Chevy.
The amount of physical gold necessary to make it meaningful in the world economy is enormous. Way more than there is.