Golden Thoughts

Posted Aug 9, 2010
Blayne:
Which is also why I do not advocate a gold standard. I advocate a free market on currency. This is also not what is being advocated even by those who want a pure gold standard.

JJ
If I recall on our last discussion on this you were for a strict gold standard so it appears your views have changed somewhat.

Actually then we seem to be close to the system you advocate as one can now turn his fiat money into gold silver, copper or whatever and then exchange that for what he wants. There are many merchants on the internet now that accept gold and silver for merchandise.

I support your competing money idea to a degree, but think we need a universal money system that is accepted by all. Without this we could have a thousand currencies all having different exchange rates making normal transactions a nightmare. This was one of the problems we had with early currencies that would be exacerbated in this age.

Today we have a general currency and still have the freedom to exchange in gold and silver. This is good. To his we could allow people to experiment with other paper currencies, which are now illegal. These currencies could be backed by a number of different commodities or services and if one or two prove successful it would force the government to adjust its own currency to make it more desirable and stable.

Blayne
As I have said the safest IMO to simply repeal legal tender laws, end the monopoly, and let the market decide if it wants sound money or fiat currency.

JJ
I think we need to keep the law making the main currency legal but loosen the laws to allow citizens to print their own money to compete with it.

Blayne:
If the US did go on a gold standard and the rest of the world did not, we would soon be the economic powerhouse and more we once were as all the nations of earth would store their wealth with us and invest with us because they know the stability it would bring.

JJ
It looks to me that the opposite would happen. If China, Japan, Saudi Arabia, Taiwan etc could redeem their dollars for gold then all our gold would be gone in about two days and then there would be no gold standard for us because there would be no gold.

Blayne;
what is that scripture where all the nations of the earth would bring their gold and silver up to Zion or something to that effect?

JJ
But we want the nations to bring us their gold, not cart all our gold away. This can only happen when prosperity and unlimited expansion is produced. Just as the universe itself expands in nature even so must our creations have the power to expand with an expanding money supply, not a contracting one. This statement does not support the current system of excessive debt, however.

JJ Quote If a true adjustment was made then the price of gold would be so high that a $20 gold piece might be as small as a grain of sand like I said.

Blayne Only in terms of the current astronomically inflated currency but not necessarily.

JJ
The current inflation has no bearing on this whatsoever. $20 worth of goods and services is what it is. If you buy a watch for $20 then it is worth what it is. If we switched to gold, all things being equal the watch still maintains it’s value and if gold coinage were adjusted to the demand of goods and services you could then buy the watch for a very small piece of gold. This would happen because a universal gold standard would make the price of gold artificially high.

JJ If we somehow agreed that a $20 gold piece would be equal to one ounce of gold then in the adjusted world you could buy a car for $20. How would you go about buying an ice cream cone in such a system?

Blayne That is what you have silver, copper, and nickel etc for.

JJ
Then we’d have the problem of taking valuable metals out of the manufacturing system creating shortages and causing metal prices to artificially skyrocket.. Carrying around tiny metal coins to use in all exchanges does not sound practical to me.

Blayne:
I forgot to address this part. It is still apples and oranges, why does the current fiat bubble have to be the measuring rod?

JJ
That is the only one available. There is no other. We have to deal with reality and use what is, not what is not. Despite its flaws the value of the current monetary system still depends on goods and services which does have intrinsic value.

Blayne
The answer is it doesn’t it is irrelevant to what gold is worth today in terms of inflated fiat currency.

JJ
Why??? I see no reasoning here, just a declaration of belief..

Blayne
The real price is probably 5-10 thousand an ounce due to manipulation of the metals markets.

JJ
If we had a crash this could happen but I see no evidence that your statement applies in today’s market. The value of gold is determined by supply and demand. There is always some manipulation in all money throughout all history.

Blayne:
If we wanted to use puca shells for a currency we could and they would be more stable then fiat money because they can’t be printed, then how would you measure the value in terms of current fiat money? You can’t because there is no value assigned to in current fiat currency. Point is the idea we have to adhere to the current illusions of price and wealth and equal it even scaled down somehow is not necessarily so.

JJ
And how would you assign a value to the puca shells? If you did this and then the production suddenly doubled that value would go out the window.

lwk
A person could live very well on $2400 a year if that currency was a “hard currency” and had sufficient purchasing power.

JJ
But I was talking about $2400 in the value today’s dollars so your point is moot.

lwk
Again purchasing power is not some magical number but the objective result of supply and demand. The “supply” of currency represents the total demand and if somehow we could wipe out 90% of the currency the demand would not change – rather the purchasing power of every dollar would increase to balance the supply/demand equation.

JJ
Agreed. This supports my point that switching to a 100% gold standard, (or several metals) would change the value of gold so $20 of current purchasing power may only require a piece of gold the size of a grain of sand making it impractical to use as gold coins and causing technology that uses gold, silver and copper to rise to obscene prices.
Copyright 2010 by J J Dewey