What was your favorite part of the Republican debate?

[MTAtech]

What is the difference in basing the value on a metal and any other means. Both are subject to the laws of supply and demand but instead of being able to devalue currency simply by printing more of it it woud be backed by something.

I think that you are saying that it doesn't matter if currency is fiat or backed by gold. That just is wrong.

Economist Paul Samuelson put it, money is a "social contrivance" whose value is more or less conjured out of thin air.

If the value of the dollar is based upon gold, then the metal's wild price movements, up to $1,600 an oz. and then down to $1,200, would cause wild fluctuations in prices and inflation and deflation. It would also prevent the Fed from expanding its balance sheet many times over without inflation. That would essentially put chains on the Fed's ability to deal with recessions.

Green pieces of paper have no intrinsic value, except that I accept green paper from you because I am confident that I can turn over the paper to someone else in exchange for what I want. There's nothing to prevent that process of monetary circulation from going on forever. But gold also has no intrinsic value. It is valuable because we accept it is valuable.

Thus, it boils down to gold constricts what governments can do to manage their economies and fiat money frees governments to manage economies. That is why the 100 years preceding the creation of the Fed are marked by wild hyperinflation and deflation that was absent the 100 years after the Fed's creation.

 

[Sabanist]

I think that you are saying that it doesn't matter if currency is fiat or backed by gold. That just is wrong.

Economist Paul Samuelson put it, money is a "social contrivance" whose value is more or less conjured out of thin air.

If the value of the dollar is based upon gold, then the metal's wild price movements, up to $1,600 an oz. and then down to $1,200, would cause wild fluctuations in prices and inflation and deflation. It would also prevent the Fed from expanding its balance sheet many times over without inflation. That would essentially put chains on the Fed's ability to deal with recessions.

Green pieces of paper have no intrinsic value, except that I accept green paper from you because I am confident that I can turn over the paper to someone else in exchange for what I want. There's nothing to prevent that process of monetary circulation from going on forever. But gold also has no intrinsic value. It is valuable because we accept it is valuable.

Thus, it boils down to gold constricts what governments can do to manage their economies and fiat money frees governments to manage economies. That is why the 100 years preceding the creation of the Fed are marked by wild hyperinflation and deflation that was absent the 100 years after the Fed's creation.

1) there is an incredible history of people naturally using gold as money for thousands of years across the entire globe, 2) the gold standard puts physical limits on the rate of money creation thereby limiting a government's ability to abuse its population with inflation, 3) the process of people mining gold for a profit has a natural price stabilizing effect.

There are also cons of moving to a gold standard

the three main problems I see with the gold standard are 1) transitioning back to the gold standard is challenging, 2) Gold is theoretically disconnected from our standard of living which can result in undesirable wild swings in the purchasing power of money and 3) it is an extremely inefficient allocation of resources to mine gold and stick it in vaults.

I can see both sides of the argument, as can many other economists.

 

[MTAtech]

1) there is an incredible history of people naturally using gold as money for thousands of years across the entire globe, 2) the gold standard puts physical limits on the rate of money creation thereby limiting a government's ability to abuse its population with inflation, 3) the process of people mining gold for a profit has a natural price stabilizing effect.

There are also cons of moving to a gold standard

the three main problems I see with the gold standard are 1) transitioning back to the gold standard is challenging, 2) Gold is theoretically disconnected from our standard of living which can result in undesirable wild swings in the purchasing power of money and 3) it is an extremely inefficient allocation of resources to mine gold and stick it in vaults.

I can see both sides of the argument, as can many other economists.

The major impediment to implementing a gold standard is that the rest of the world needs to go along with it.