GOP: Gold Standard?

[AZRedhawk44]

http://www.cnbc.com/id/48770752

The gold standard has returned to mainstream U.S. politics for the first time in 30 years, with a “gold commission” set to become part of official Republican party policy.


Drafts of the party platform, which it will adopt at a convention in Tampa Bay, Florida, next week, call for an audit of Federal Reserve monetary policy and a commission to look at restoring the link between the dollar and gold.

OK, cool.

Marsha Blackburn, a Republican congresswoman from Tennessee and co-chair of the platform committee, said the issues were not adopted merely to placate Paul and the delegates that he picked up during his campaign for the party’s nomination.

Sure.  Yep.  I totally believe that.  Less than a week before the RNC is going to face one of its most divisive and contentious gatherings ever... this comes out... and you want us to believe it's not about appeasing hostile delegates?  Come on.

[makattak]

I REALLY hope they don't start pushing a gold standard.

Commodity backed currency is not a cure-all. It simply has different problems than fiat currency.

My preference would be a Friedman-esque control of monetary policy where the money supply grows by a (small) set amount every year.

If that doesn't solve the issues, then we can talk about it as a transition to a commodity standard. I'm just afraid too many of those pushing the gold standard have a rosy view of what that would entail.

[AJ Dual]

I REALLY hope they don't start pushing a gold standard.

Commodity backed currency is not a cure-all. It simply has different problems than fiat currency.

My preference would be a Friedman-esque control of monetary policy where the money supply grows by a (small) set amount every year.

If that doesn't solve the issues, then we can talk about it as a transition to a commodity standard. I'm just afraid too many of those pushing the gold standard have a rosy view of what that would entail.

Maybe it's bunk, but what I'd like is to see both of these in parallel. Gold standard, and fiat running side by side, with the fiat running a controlled growth formula as stated above. The purpose of the Fed should be simply a STABLE dollar value, and be forcibly turned away from thinking they have responsibility over the economy, as brake or accelerator.

Both commodity and fiat have problems, but running together and managed properly, they could act as checks on each other.

[kgbsquirrel]

Hmm. Looking at the total U.S. (claimed*) gold reserves versus the current money supply, if we tied the U.S. dollar to gold right now it would be $38,141.00/TOz.


U.S. Gold: 8,133.5 Tonnes (261,498,100t oz)

Federal Reserve Monetary Supply, M2: $9,973.8 Billion


 1. M1 consists of (1) currency outside the U.S. Treasury, Federal Reserve Banks, and the vaults of depository institutions; (2) traveler's checks of
    nonbank issuers; (3) demand deposits at commercial banks (excluding those amounts held by depository institutions, the U.S. government, and
    foreign banks and official institutions) less cash items in the process of collection and Federal Reserve float; and (4) other checkable deposits
    (OCDs), consisting of negotiable order of withdrawal (NOW) and automatic transfer service (ATS) accounts at depository institutions, credit union
    share draft accounts, and demand deposits at thrift institutions.  Seasonally adjusted M1 is constructed by summing currency, traveler's checks,
    demand deposits, and OCDs, each seasonally adjusted separately.
 2. M2 consists of M1 plus (1) savings deposits (including money market deposit accounts); (2) small-denomination time deposits (time deposits in
    amounts of less than $100,000), less individual retirement account (IRA) and Keogh balances at depository institutions; and (3) balances in
    retail money market mutual funds, less IRA and Keogh balances at money market mutual funds.  Seasonally adjusted M2 is constructed by summing
    savings deposits, small-denomination time deposits, and retail money funds, each seasonally adjusted separately, and adding this result to
    seasonally adjusted M1.


*There has been some question concerning the integrity of the U.S. gold reserve as several U.S. mint stamped bars that were purchased and shipped to Germany and elsewhere were found to be gold-clad tungsten upon testing.

[longeyes]

Don't expect Bugsy Siegel to keep legal books.  That's rule one. 

Rule two is don't call him Bugsy.  He's just an ambitious American with plenty of opportunity.

[Perd Hapley]

http://www.cnbc.com/id/48770752

OK, cool.

Sure.  Yep.  I totally believe that.  Less than a week before the RNC is going to face one of its most divisive and contentious gatherings ever... this comes out... and you want us to believe it's not about appeasing hostile delegates?  Come on.

Weird. Why would she deny that the party is responding to the opinions of some of its members?

[MicroBalrog]

My preference would be a Friedman-esque control of monetary policy where the money supply grows by a (small) set amount every year.

If that doesn't solve the issues, then we can talk about it as a transition to a commodity standard. I'm just afraid too many of those pushing the gold standard have a rosy view of what that would entail.

Friedman advocated these only as a moderate alternative towards abolishing the Fed.

Of course, Ron Paul isn't quite pushing a classic gold standard. He's pushing currency competition.

[longeyes]

If The Fed is abolished it will only be to build a Super-Fed.  Let's get real.  You don't remove this kind of power with ordinary political reforms.

[MicroBalrog]

If The Fed is abolished it will only be to build a Super-Fed.  Let's get real.  You don't remove this kind of power with ordinary political reforms.

CHALLENGE ACCEPTED.

[zahc]

Free banking is the only real solution. All centrally-planned alternatives, no matter how clever, are doomed to be at least sub-optima, by my reckoning.

[just Warren]

Yup.

Coercive monopolies that can force you to use their product or service and force you to pay for it will always provide sub-optimal results due to the lack of discipline that a competitive market brings. The people involved have no reason to care because you cannot shift to another provider and regardless of their performance they still get paid.

It would be irrational of them to even try to pro-actively improve as it would be a waste of their time. Which isn't to say they don't say they are trying but it's mere talk. Also there may well be people in the monopoly that want to do better but the system is stacked against them. So the results of reformers are usually indistinct and temporary. Improvements do happen, of course but only after it is politically impossible not to change.

This applies to more than the provision of currency of course....

[RoadKingLarry]

Hmm. Looking at the total U.S. (claimed*) gold reserves versus the current money supply, if we tied the U.S. dollar to gold right now it would be $38,141.00/TOz.

That's easy to fix. Just declare gold has a specified (much lower than current) value in the US and then confiscate all private held gold and pay at that value

[Northwoods]

That's easy to fix. Just declare gold has a specified (much lower than current) value in the US and then confiscate all private held gold and pay at that value

Channeling FDR again?

[AZRedhawk44]

Free banking is the only real solution. All centrally-planned alternatives, no matter how clever, are doomed to be at least sub-optima, by my reckoning.

Racist.

[Blakenzy]

The Gold Standard has a lot of pitfalls, specially if your nation doesn't hold enough gold to begin with.

Supposedly fiat money can be a valuable tool if it is debt-free and issued as a service by the government, not as a for-profit enterprise (usury as we have it today). This must be accompanied by modification of current legal tender laws to allow people and communities to create their own currencies in parallel and trade freely in the markets using as a means of exchange whatever money, coin or commodity they desire.

The idea goes that the government fiat money should be issued into the markets and population not through banks as loans but by the government itself as direct payment for infrastructure and services it has has built/enlisted/hired. What gives this fiat money value is not that it's backed by any commodity, but that it is the only accepted form of payment for taxes. That in and of itself will make it valuable, so long as the government in question retains any semblance of control and legitimacy. But at the same time people must be allowed to decide whatever they want to use for private transactions and storage of wealth.

This allows a Nation to remain out of deficit and debt as it can issue whatever amount is necessary to cover costs of national infrastructure and services, and it gives a lot of flexibility as the government has effective control over the volume and value of the currency by decreasing supply through taxes or increasing the supply of money through spending on useful (hopefully) projects.

[just Warren]

The Gold Standard has a lot of pitfalls, specially if your nation doesn't hold enough gold to begin with.

The amount of gold is only relevant in two cases:

1. It is a full gold coin standard in which, of course, the coins need to be gold. However prices would adjust to the gold in circulation.

2. You have an on-demand redeem-ability system where a person could walk into any bank and trade their notes or ledger-money for gold and you expect this to happen enough you need a large store of gold. Of course prices would adjust as in case #1.

If you don't have  redeemable  notes then all you need is to peg your currency value to the price of gold. Say 1000 ASPies per ounce and keep the value within two percentage  points of that either high or low. So if the currency value drops below 980 that means there is not enough currency in the system and so some has to be released via calling bonds or buying gold (and that works on two levels) which puts more currency in the economy. And if goes above 1020 there is too much currency in the system then the monetary authority sells bonds or gold to subtract currency from the economy.

So all you need is the price of gold, not actual physical gold.

Now with Free Banking all of this happens automatically via the competition between banks without any one person needing to pay attention to the gold price or the amount of currency extant. And so there is no central, politicized agency that can be used for populist/electoral ends.

[Jamisjockey]

Fixing the system we're currently under will require some level of suck. 

[Waitone]

Fixing the system we're currently under will require some level of suck.

Suck is headed our way whether or not we fix or attempt to fix the system.  The irreducible first step is drawing a bead on a fractional reserve central bank.  That is what Andrew Jackson did in his war on the central bank.  Fascinating reading because the parallels with today are numerous.  Jackson's efforts kept the central bank in a crypt for 70+ years in spite of the efforts of the same banking interest to resurrect it.  Tip of the hat to Ron Paul because questioning a central bank or discussion of the gold standard is a result of his lifetime's effort to influence public policy.

[longeyes]

Gold per se isn't the issue; the trend is toward tangible productive assets that conduce to survival.  That means arable land, oil and other energy resources, water, housing, and, secondarily, weapons.  What is evaporating are financial instruments backed by the faith and promise of known liars.