Before the US House of Representatives, February 15, 2006

[matis]

Campers, people keep talking about a fiat currency.... Clue-bat: Gold is a fiat currency. It doesn't matter; it's just a means of compact exchange. Rather than taking 100 chickens to buy your new stereo, you take a half-ounce of gold.
 
A currency doesn't need backing. It needs use. When I take a coupla bucks to the store, I don't want $2 worth of gold. I want $2 worth of hamburger. And I get that.

Bogie, gold is NOT a fiat money because you can not print or counterfeit it.

It is a means of exchange or backing for that.

"Use" is NOT all that's necessary for a sound currency.

You're missing the point.

True you cannot eat gold any more than you can eat fiat paper currency backed by nothing more than the promise of politicians.

But gold stabilizes the currency because the currency must have a backing.

Gold is accepted by agreement, like any backing would be -- AND whose supply cannot be increased just by running the printing presses.



In China in the 1920's and in Germany between the wars, it was NOT gold that filled the wheel barrows taken to the store to get a loaf of bread.  It was paper fiat money.



matis

[280plus]

FWIW The definition of "fiat money" as looked up in my unabridged Webster's is (in a nutshell): "Currency NOT backed up by bullion"

[Werewolf]

Exactly...

What makes gold worth anything?

Its supply is limited and controlled. Anything in short suppy that people want has value.

Before the modern era it was shiny, didn't corrode and anything made of it essentially lasted forever AND it was in short supply and access to it was controlled.

In modern times the above still holds true but in addition gold has many, many industrial uses which adds to the value.

The problem is determining what that value is. For Face to face transactions that can be a problem. At the macro level things just tend to settle to an agreed upon level that everyone just understands and can intenally quantify.

Money developed because the guy who wanted chickens only had wheat to trade but the chicken guy didn't want wheat he wanted wood so the guy who wanted chickens had to find someone with wood who wanted wheat to get his chickens. What a pain in the arse.
Thus money. It cuts the number of transactions from potentially very high to one!

[Antibubba]

Gold has value because society has the idea that gold is valuable.  Why do people think that?  Because everyone else has put value on it...

I am not going to dismiss the value of having gold on hand in hard times, because someone is going to value it.  I don't smoke, but I'll have tobacco and seeds on hand, because others will want it.  For that matter, a certain segment of society will trade in porno mags, at least until they fall apart.

[The Rabbi]

Operative words are, for this discusion, "The Congress shall have power ...To coin money, regulate the value thereof, and of foreign coin,...""

Except that that power, (just like the power to collect taxes), which is NOT delegatable or assignable, isn't being exercised by Congress.  New scrip, which is NOT money  - only coinage in precious metal is actually money- is distributed by the Treasury Department - part of the Executive branch, not the legislative. Its actually printed by the Federal Reserve, which isn't even part of ANY branch of the governemt - its about as "Federal" as Federal Express!  Money is precious metal, or something that can be exchanged for some, like the old "silver certificates".  Federal Reserve Notes, which we mistakenly call "money", aren't anything of value, even indirectly.  They are, in fact, a DEBT INSTRUMENT - just like a check.  If you examine one, you will see it has everything a check has, the bank its drawn on (Federal Reserve System), a number (serial), two signatures (Treasurer of the United States/Secretary of Treasury), an amount in both numbers and written out,  and account name (Department of Treasury).  They are, in essence, rubber checks.

1) Who says the power is not delegatable?  On that reasoning there are no valid US patents because the patent office grants them, not Congress.
2) Money is defined as a medium of exchange.  Cash is a medium of exchange.  Ergo cash is money.  Cash is not a debt instrument.  It's physical appearance is irrelevant.

[richyoung]

1) Who says the power is not delegatable?

The U.S. Constitution.  The power to coin money, just like the power ot pass legislation, raise taxes, and declare war, is assigned to, and ONLY to, COngress.  Since no provision is made to delegate this power to another branch, whether that be Executive, (where it is now) or Judicial, it must be done by Congress.  This is not to say Senator Kennedy has to personally run the press, but that the Congress retain direct supervision and control of the process, much like the Library of Congress is run.  We don't hav ethat now - and its a violation of the Constitution.

On that reasoning there are no valid US patents because the patent office grants them, not Congress.

Congress isn't specifically required to GRANT patents - its required to PROTECT them by passing necessary laws.  Although that is perilously close to splitting hairs, I know...

2) Money is defined as a medium of exchange.  Cash is a medium of exchange.  Ergo cash is money.  Cash is not a debt instrument.  It's physical appearance is irrelevant.

Federal Reserve Notes are NOT money - in fact, ther series issued before 1963 had the words on them that they could be ..."exchanged for lawful money at any Federal Reserve Bank".  If it coud be EXCHANGED for "lawful money", then it never was, or will be, lawful money.  It may be "legal tender", (by dubious act of congress", but under the Constitution, it can NEVER be money.  Only DOLLARS can be money.


POP QUIZ - what is a dollar?

[Werewolf]

POP QUIZ - what is a dollar?

A generally accepted measure of wealth. Another way of saying the same thing is that it is a recognized measure of buying power.

[The Rabbi]

1) Who says the power is not delegatable?

The U.S. Constitution.  The power to coin money, just like the power ot pass legislation, raise taxes, and declare war, is assigned to, and ONLY to, COngress.  Since no provision is made to delegate this power to another branch, whether that be Executive, (where it is now) or Judicial, it must be done by Congress.  This is not to say Senator Kennedy has to personally run the press, but that the Congress retain direct supervision and control of the process, much like the Library of Congress is run.  We don't hav ethat now - and its a violation of the Constitution.

Go write your congressmen and complain.

[richyoung]

POP QUIZ - what is a dollar?

A generally accepted measure of wealth. Another way of saying the same thing is that it is a recognized measure of buying power.

WRONG - and here's a hint - the U.S. COnstitution refers to dollars, long before any U.S. dollar existed - in the part where it guarantees a trial before a jury for any matter "exceeding twenty dollars" - so the dollar existed BEFORE the U.S. government, and was common enough to have a generally accepted meaning at that time.

The FIRST "dollar" was coined by a German - Joachim Thaller - and the coins he minted came to be refered to as "Thallers".  IN the 1400's Spain reformed their currency, and based their new currency on a thing called a "real".  Since a "thaller" was (approximately) a one ounce coin of .999 fine silver, and since a "real" was 1/8 of an ounce, Spain introduced an 8 real coin, with one side having lines dividing it into 8 equal parts, with one part, or "bit", equal to one real - so that if necessay, one could make change by cutting up the coin with an axe or sharp knife.  This "Spanish Dollar" was also known as a "piece of eight" ("two bits, four bits, six bits - a dollar...), from which the modern word "peso" was derived.  Since the spanish government inflated their currency by putting less and less silver in it, the new American government weighed existing issues of the Spanish Dollar, and derived a figure of slightly more than 371 grains of .999 silver as a "dollar", with an equivalent weight of gold being worth 15 dollars.  That, and ONLY that is "lawful money" - despite the fact that various debt instruments, such as Federal Reserve notes, are, by legislative fiat, "legal tender", (which is NOT the same thing...)

[The Rabbi]

Do you make this stuff up as you go along?
The U.S. dollar does not pre-date the US government, which is not the same thing as the US Constitution.  And whatever meaning the word may have had once, it is only of historic interest today.
Measures are established by the NIST, which was authorized by Congress but is part of the Commerce Dept, and thus part of the executive branch.  The term "yard" had a specific meaning under Edward I in the 13th century.  But that isn't the standard we use today.  Does that make our yards invalid or wrong?  No, I don't think so.  Dollar is no different.

[Sindawe]

Do you make this stuff up as you go along?

richyoung does not, but I have my doubts about you....

Dollars are commented on twice in the U.S. Constitution, and were recognized as a form of currency among the several States before the final radification of the U.S. Constitution in 1788, taking effect in 1789. This is a result of the wide circulation of the Spanish dollar in the then Colonies and later States. The government established under the Article of Confederation set the value of the U.S dollar as "... dollar should contain 375-64/100 grains of fine silver."1

The later government which was established by the U.S. Constitution then set its own value for the U.S  dollar in 1792 with the Mint Act.

The Mint Act of April 2, 1792

1.  Authorized coinage of the silver dollar (of the value of Spanish milled dollar) against the deposit of silver and fixed its weight at 371-4/16 grains of pure silver or 416 grains of standard silver;

2.  fixed the standard for silver coins as 1485/1664 (.8924) fine;

3.  fixed the coinage ratio of gold and silver as 1 to 15;

4.  provided for free coinage; and

5.  declared silver dollars (and all other coins authorized) lawful tender. 2

It is important to note that these two governments were distinctly different in structure and authority over the States. They are NOT the same politcal entity. The former has been defunct for 217 years. The latter has been with us since 1789.


1. http://www.usmint.gov/about_the_mint/mint_history/index.cfm?action=silver_dollar_1700s

2. Ibid

[The Rabbi]

Do you make this stuff up as you go along?

richyoung does not, but I have my doubts about you....

Dollars are commented on twice in the U.S. Constitution, and were recognized as a form of currency among the several States before the final radification of the U.S. Constitution in 1788, taking effect in 1789. This is a result of the wide circulation of the Spanish dollar in the then Colonies and later States. The government established under the Article of Confederation set the value of the U.S dollar as "... dollar should contain 375-64/100 grains of fine silver."1

The later government which was established by the U.S. Constitution then set its own value for the U.S  dollar in 1792 with the Mint Act.

The Mint Act of April 2, 1792

1.  Authorized coinage of the silver dollar (of the value of Spanish milled dollar) against the deposit of silver and fixed its weight at 371-4/16 grains of pure silver or 416 grains of standard silver;

2.  fixed the standard for silver coins as 1485/1664 (.8924) fine;

3.  fixed the coinage ratio of gold and silver as 1 to 15;

4.  provided for free coinage; and

5.  declared silver dollars (and all other coins authorized) lawful tender. 2

It is important to note that these two governments were distinctly different in structure and authority over the States. They are NOT the same politcal entity. The former has been defunct for 217 years. The latter has been with us since 1789.


1. http://www.usmint.gov/about_the_mint/mint_history/index.cfm?action=silver_dollar_1700s

2. Ibid

So what?

[richyoung]

So what?

THink for a minute what restrictions are on a government that HAS to , by law, issue and use a hard currency - where even the paper money can be redeemed on demand for actual gold or silver.  Such a government can't inflate or deflate the currency - it can't spend more than it has by simply printing more paper, thus is forced to actually reaise taxes to increase spending, instead of the the stealth method of raising taxes by simply devalueing the currency holdings of its citizens by cranking the presees to have more "pretty paper" chasing the same pol of goods and services.  Such a government is what we USED to have, and BY SUPREME LAW, are still supposed to have.  What we now have are instruments of indebtedness masquerading as money, inflation constantly eroding savings, booms and busts, and a national debt in the trillions.  And it's happening because the bulk of the people are too ignorant, too lazy, or too indifferent to hold their elected representatives accountable for their failures to abide by the Constitution - which is kind of how the 2nd Amnd. got gutted...

[auschip]

THink for a minute what restrictions are on a government that HAS to , by law, issue and use a hard currency - where even the paper money can be redeemed on demand for actual gold or silver.  Such a government can't inflate or deflate the currency - it can't spend more than it has by simply printing more paper

I'm not so sure about that.  They could have a float the same as any bank with federal reserve dollars.  All that would be affected, is that the float would probably be slightly smaller then what currently occurs.  They know that not every person who held hard currency notes would try to redeem them in one day.  Additionally, it would open up the US to severe inflation or deflation based on the availability of said commodity/hard currency.

[Sindawe]

(What happened to the "polite" part of this forum? Let me know if you can disagree in a civil manner henceforth, or if you need a nudge towards a different forum. OV)

[The Rabbi]

So what?

THink for a minute what restrictions are on a government that HAS to , by law, issue and use a hard currency - where even the paper money can be redeemed on demand for actual gold or silver.  Such a government can't inflate or deflate the currency - it can't spend more than it has by simply printing more paper, thus is forced to actually reaise taxes to increase spending, instead of the the stealth method of raising taxes by simply devalueing the currency holdings of its citizens by cranking the presees to have more "pretty paper" chasing the same pol of goods and services.  Such a government is what we USED to have, and BY SUPREME LAW, are still supposed to have.  What we now have are instruments of indebtedness masquerading as money, inflation constantly eroding savings, booms and busts, and a national debt in the trillions.  And it's happening because the bulk of the people are too ignorant, too lazy, or too indifferent to hold their elected representatives accountable for their failures to abide by the Constitution - which is kind of how the 2nd Amnd. got gutted...

Well, let's see.  The reason governments (and that's all of them) abandoned the gold standard was that it didnt work very well.  It tended to create deflation.  When an economy expands it needs more money and the gold standard will not allow that.  We see the same phenom when South American countries tried pegging their currencies to the dollar.  They invariably abandoned the scheme because they were effectively hostage to outside forces.
Before Roosevelt shut the gold window the country experience many severe depressions, the one in the 1930s was only the largest.  Since that time we have had recessions but no depressions on the scale of the great depression or even the one of 1893.
Further, at what price do you peg the dollar?  The old standard was $35 an ounce.  At that rate the country's gold reserves would be gone in an instant.  What about $600/oz?  Countries can re-value their currency in terms of gold, which is no improvement on today.

[The Rabbi]

ARRRRGGGHHH!!!!!

So what?

Translation: "Whatever, I do what I want!"
http://liverpooldfk.pwp.blueyonder.co.uk/cartman_ch.gif

Several of your fellow APSers have lead you to the water, though we CANNOT make you drink.  For one who labels himself a Learned Man, the depth of your willful ignorance is stupefying.

And willful ignorance is something I cannot abide.  May you find your wallow hospitable, for I leave you to it.

Does that mean you're shutting up?  leaving the board?  Please?

[richyoung]

Well, let's see.  The reason governments (and that's all of them) abandoned the gold standard was that it didnt work very well.

This would be news to South Africa, whose Krugerrand, released in 1967 (one ounce gold coin) dominated the international bullion market for 20 years, and is stil the most widely held gold coin in the world.  If gold and silver are such a problem, why did foriegn nations and individuals redeem their dollars for gold and silver - (when they still could, that is...).

It tended to create deflation.

It doesn't have to - like all systems it must be managed.  Anyway, inflation is much worse.

When an economy expands it needs more money and the gold standard will not allow that.

I would argue it doesn't allow the GOVERNMENT to create "money" out of thin air.  Fractional reserve banking still expands the money supply. Any number of solutions to gold shortage are available, including using foriegn currency if suitably backed, and private currency.  Major banks used to issue their own bank notes - see the "Titanic exhibit", & you will find a wide variety of paper money from the U.S.  ALso the "Liberty Dollar" is but one of over 40 private currencies ALREADY in use in the United States.

We see the same phenom when South American countries tried pegging their currencies to the dollar.  They invariably abandoned the scheme because they were effectively hostage to outside forces.

translation..hostage to the Federal Reserve printing presses and the resulting inflation caused by the funny money

Before Roosevelt shut the gold window

...remind me again what part of the constitution gives the President the power or authority to do that...

the country experience many severe depressions, the one in the 1930s was only the largest.

The Great Depression was largely a response to rampant inflation, brought on by artificial "wealth" generated by buying stocks on rediculously small margins, and spending the gains.  Like all pyramids, this had to collapse.  The resulting margin calls, rather than any gold shortage, caused the collapse.  Of course, the Fed had already had its hooks in us for twenty years by that time...

Since that time we have had recessions but no depressions on the scale of the great depression or even the one of 1893.

True.  We also haven't had bubonic plague.  Correlation does not equal causation - and with solid, lawful money, such boom and bust cycles are even less likely.

Further, at what price do you peg the dollar?  The old standard was $35 an ounce.

No - the old standard was 1 ounce of silver was one dollar.

At that rate the country's gold reserves would be gone in an instant.  What about $600/oz?  Countries can re-value their currency in terms of gold, which is no improvement on today.

Establish the silver to gold ratio, (whatever is appropriate today) and issue new currency at $1 per ounce of silver, with real silver coinage - old currency to exchanged at whatever effective ratio applies on the date of conversion.

[The Rabbi]

Well, let's see.  The reason governments (and that's all of them) abandoned the gold standard was that it didnt work very well.

This would be news to South Africa, whose Krugerrand, released in 1967 (one ounce gold coin) dominated the international bullion market for 20 years, and is stil the most widely held gold coin in the world.  If gold and silver are such a problem, why did foriegn nations and individuals redeem their dollars for gold and silver - (when they still could, that is...).

It tended to create deflation.

It doesn't have to - like all systems it must be managed.  Anyway, inflation is much worse.
.

Well, I think we are reaching closure.  The Rand is not convertible into gold.  Not at any rate.  The Krugerrand does not carry a denomination into any currency but only states its gold content (and I own several).  It is a bullion coin.  You cannot use it to buy goods in South Africa without first selling it for rand currency.  If you don;'t know the difference between a bullion coin and a coin of currency then the discussion is pretty much over.
As for deflation, ask the Japanese which they'd prefer.
Your description of the causes of the Great Depression are, charitably, incomplete.
And I stick by my report that the standard was $35/oz.  The conversion window remained open for governments until Nixon shut it in the early 1970s.  So the US had some sort of gold standard even that late.
As far as authority to do so, I dont recall anyone challenging that succesfully, if at all.

[Guest]

I advise members to listen to richyoung (and Ron Paul) on this topic.

Also, remember, gold's value as a store of wealth has never gone to zero but all paper currencies but the "dollar" have and it is headed that way. It has lost about 95% of its purchasing power since 1913. IMO the US has gone bankrupt twice already. And I am not comforted that the dollar survives on military might. I know what I think of bullies.

[The Rabbi]

I advise members to listen to richyoung (and Ron Paul) on this topic.

Also, remember, gold's value as a store of wealth has never gone to zero but all paper currencies but the "dollar" have and it is headed that way. It has lost about 95% of its purchasing power since 1913. IMO the US has gone bankrupt twice already. And I am not comforted that the dollar survives on military might. I know what I think of bullies.

So if they listen to them, what are they supposed to do?  Surrencer their dollar bills?  I'll stand in line to take them.

The value of fertilizer has never gone to zero either.  But I wouldn't stockpile it. And for a currency that has "lost" 95% of its value (whatever that means) a lot of people really want it.  And the Euro has not gone to zero value.  Neither did the Deutschmark.

[richyoung]

So if they listen to them, what are they supposed to do?

When the Constitution is ignored in one area - the whole thing weakens: just like gangrene in a toe can kill you, even if the rest of the body is "well"  When you ignore things like who should coin the money and set its value, where federal trials, by law, are supposed to take place, what constitutes "interstate commerce", and who can declare war - then ignoring the Second Ammendmant is no big deal any longer.  Vote for, and back with your almost-money, politicians who interpet the Constituion rigorously, and will enforce it as the ultimate law of hte land.  Demand real currency be issued.  Use alternatives, like the Liberty Dollar, when you can.  Keep a portion of your portfolio in precious metals - whether that's bullion, old silver U.S. currency - whatever.  In a crisis, the coins, bulllion or otherwis, will rise in value, just when the "dollar" is falling.  Say you are fleeing Katrina, and you need a tank of fuel to get you, your trailer, and your family out of harm's way....only one tank left at the station.  Who gets it?  The mook with the credit card, the guy with a fist full of pretty paper, or you, with a handful of one-ounce silver coins?

Surrencer their dollar bills?  I'll stand in line to take them.

This is the part you are failing to grasp - everytime the Federal Reserve creates a "dollar: out of nothing, the fractionalreserve banking system turns it into 7 to 9 dollars worth of purchasing power.  When that first "dollar" is created out of thin air, and not backed by any tangible asset, you inevitably get politicians avoiding the pain of raising taxes by just "creating" more money to spend.  Since the same pool of goods and services exists, the law of supply and demand means that each unit of the "money" now has less buying power.  The government has taken the money from you - they just didn't reach into your billfold for the actual paper - they did it by making your paper buy less stuff.  If you are smart enough to get your pay raised to compensate, then they put you in ahigher tax bracket - even though your buying power remains the same!  To add insult to injury, the government then gets to pay its debts off with inflated dollars that buy less - allowing them to virtually "welch" on part of their debt.  Same net effect on you - its called inflation.  By the way, if a fiat currency is so wonderful, why do we have ANY inflation at all?

The value of fertilizer has never gone to zero either.  But I wouldn't stockpile it.

Neither would I - unless I were a farmer.  The reason things like gold, silver, platinum, gems, pearls, and to a lesser extent copper, brass, and semi-precious gemstones like opals, turquois, amber, etc. are used as a store of wealth and often backing for a currrency, is that they are: small, (in relation to their value), verifiable by a few basic tests, in scarce supply in relation to demand - (all gold that has EVER been discovered or mined would fit in one nedium-sized building!), are desirable for jewelry. (which was originally a form of portable wealth!) and intrinsically useful for non-jewelry processes - electronics, photography, drill bits, lasers, etc.

And for a currency that has "lost" 95% of its value (whatever that means) a lot of people really want it.

It "means" that what a nickle used to buy now takes a dollar.  This varies slightly by commodity, but here's an example - "What this country needs is a good five cent cigar" was a legitimate statement when first said.  Try to buy a good cigar for a dollar.  When a "dollar" was an ounce of silver, ten dimes would get you an ounce of silver - already stamped as a coin.  The current bulk commodity price of silver is almost $10 an ounce - WITHOUT being stamped as a coin - bullion or otherwise.  That means to get a dollars worth of silver now requires ten "dollars" - this despite demand for silver falling as photographic processes increasingly convert to digital imaging - which doesn't require silver based photo paper.

And the Euro has not gone to zero value.  Neither did the Deutschmark.

But German currency HAS effectively gone to zero.  When the World War I Kaiser government quit backing its marks in gold, and then lost the war, hyperinflation resulted.  People were burning bundles of money in their stoes because it was cheaper than buying wood.  Eventually, the Germans had to issue a new currency that was backed by tangible wealth - the rentenmark. The German government promised that the new currency could be converted on demand into a bond having a certain value in gold. Proponents of the standard answer argue that the guarantee of convertibility is properly viewed as a promise to cease the rapid issue of money.  At the time of conversion, it took ONE TRILLION, (not million or billion) marks to buy one "rentenmark". (In comparison, it "only" took ten reichsmarks to get a deutsche mark the SECOND time the mark collaped...) Is that close enough to zero for you?  Hungary experienced the same thing - and don't get me started on Italy or countries in South America.  If a "paper money" hasn't gone to zero, or so close to it that it doesn't matter, it's going to.

[The Rabbi]

And for a currency that has "lost" 95% of its value (whatever that means) a lot of people really want it.

It "means" that what a nickle used to buy now takes a dollar.  This varies slightly by commodity, but here's an example - "What this country needs is a good five cent cigar" was a legitimate statement when first said.  Try to buy a good cigar for a dollar.

And when that statement was made people regularly worked for $5 a day.  There are two sides to the equation.  Until the big inflation of the early 1970s this wasnt a problem.  The issue came when prices rose substantially faster than wages.

And the Euro has not gone to zero value.  Neither did the Deutschmark.

But German currency HAS effectively gone to zero.  When the World War I Kaiser government quit backing its marks in gold, and then lost the war, hyperinflation resulted.  People were burning bundles of money in their stoes because it was cheaper than buying wood.  Eventually, the Germans had to issue a new currency that was backed by tangible wealth - the rentenmark. The German government promised that the new currency could be converted on demand into a bond having a certain value in gold. Proponents of the standard answer argue that the guarantee of convertibility is properly viewed as a promise to cease the rapid issue of money.  At the time of conversion, it took ONE TRILLION, (not million or billion) marks to buy one "rentenmark". (In comparison, it "only" took ten reichsmarks to get a deutsche mark the SECOND time the mark collaped...) Is that close enough to zero for you?  Hungary experienced the same thing - and don't get me started on Italy or countries in South America.  If a "paper money" hasn't gone to zero, or so close to it that it doesn't matter, it's going to.

I wrote "the Deutschmark."  You are speaking of Reichmarks.  Not the same currency.  I'll also mention the pound has not gone to zero either, despite having a several hundred year history.
So I have provided several counter examples to your blanket statement, all of them showing your statement to be false.
But let's go further: we neglected to mention Milton Friedman's theory that the Depression was caused by a contraction in the money supply.  The gold standard did not help that situation.  Actually it exacerbated it.  That was one reason Roosevelt ended it.  Any other gold standard will have similar issues, tending to contract the money supply and limiting growth.
So there is no Constitutional requirement for a gold standard.  Every other country has abandoned it, including South Africa.  The economic history of the US overall shows that the country has fared better with a Federal Reserve and no gold standard than without them.  The standard is unworkable in any case. Your posts have failed on facts and failed on theory.  QED.

[richyoung]

And when that statement was made people regularly worked for $5 a day.

...and were able to buy what it takes working for $100 a day now.  Thanks for making my point for me....

There are two sides to the equation.  Until the big inflation of the early 1970s this wasnt a problem.  The issue came when prices rose substantially faster than wages.

...and the big inflation of thet '70s was only made possible by taking the dollar off of the last vestige of the silver standard.  Again, you prove my point for me...

I wrote "the Deutschmark."  You are speaking of Reichmarks.  Not the same currency.

Why was the Deutsche Mark (DM) necessary?  The Reichsmark, without any gold or silver to back it, had become worthless.  What was the DM pegged to?  The dollar - which was still convertable to silver, making the DM (indirectly) backed by precious metal.  This was the SECOND time that German currency had effectively become valueless - due to the VERY PROBLEMS I cite about fiat currency.  EACH TIME it was replaced by a new currency that was, in theory, backed by precious metal.  So far, every time but the last, the backing has been pulled, and inflation has resulted.  The clock is ticking on the Euro....

I'll also mention the pound has not gone to zero either, despite having a several hundred year history.

For someone who's handle means "teacher", you sure are a slow learner.  For most of the pound's history, it was backed by WHAT?  (Here's a hint, its full name is "pound sterling" - as in "Sterling silver" - GET IT?)

So I have provided several counter examples to your blanket statement, all of them showing your statement to be false.

Sayin' don't make it so....

But let's go further: we neglected to mention Milton Friedman's theory that the Depression was caused by a contraction in the money supply.  The gold standard did not help that situation.  Actually it exacerbated it.  That was one reason Roosevelt ended it.

The traitor FDR ended the gold standard because confiscating privately held gold was the only way he could redeam foreign dollar holdings in the gold demanded - as the Federal Reserve, who had been running things for 20 years by this time, had already inflated the money supply beyond what the US had in reserve.

Any other gold standard will have similar issues, tending to contract the money supply and limiting growth.

..which beats the heck out of inflating the money supply and robbing from everyone.

So there is no Constitutional requirement for a gold standard.

Article !, Section 8: "To coin Money, regulate the Value thereof, and of foreign Coin, and fix the
Standard of Weights and Measures;

To provide for the Punishment of counterfeiting the Securities and current Coin of the United States;"  - these clearly state that ONLY coins are money.

Article 1, setion 10: "Section 10
No State shall enter into any Treaty, Alliance, or Confederation; grant Letters
of Marque and Reprisal; coin Money; emit Bills of Credit; make any Thing but
gold and silver Coin a Tender in Payment of Debts; pass any Bill of Attainder,
ex post facto Law, or Law impairing the Obligation of Contracts, or grant any
Title of Nobility."

..see that line about "make anything except gold and silver coin..."  You are, once again, simply wrong.

Every other country has abandoned it, including South Africa.

Wrong.  Even the US makes gold and silver coins with a face value - they choose not to call them money, but under the law, they are the ONLY legal money created by the government.

The economic history of the US overall shows that the country has fared better with a Federal Reserve and no gold standard than without them.

Bullpucky. " When business in the United States underwent a mild contraction in 1927, the Federal Reserve created more paper reserves in the hope of forestalling any possible bank reserve shortage. More disastrous, however, was the Federal Reserve's attempt to assist Great Britain who had been losing gold to us because the Bank of England refused to allow interest rates to rise when market forces dictated (it was politically unpalatable). The reasoning of the authorities involved was as follows: if the Federal Reserve pumped excessive paper reserves into American banks, interest rates in the United States would fall to a level comparable with those in Great Britain; this would act to stop Britain's gold loss and avoid the political embarrassment of having to raise interest rates. The "Fed" succeeded; it stopped the gold loss, but it nearly destroyed the economies of the world, in the process. The excess credit which the Fed pumped into the economy spilled over into the stock market-triggering a fantastic speculative boom. Belatedly, Federal Reserve officials attempted to sop up the excess reserves and finally succeeded in braking the boom. But it was too late: by 1929 the speculative imbalances had become so overwhelming that the attempt precipitated a sharp retrenching and a consequent demoralizing of business confidence. As a result, the American economy collapsed. Great Britain fared even worse, and rather than absorb the full consequences of her previous folly, she abandoned the gold standard completely in 1931, tearing asunder what remained of the fabric of confidence and inducing a world-wide series of bank failures. The world economies plunged into the Great Depression of the 1930's."  Who says so - ALAN GREENSPAN!

The standard is unworkable in any case.

You DO know that many top economists, including Alan Greenspan before he was chairman of the Federal Reserve, not only think its workable, but have advocated going to it, right? from the man hisseff:

"In the absence of the gold standard, there is no way to protect savings from confiscation through inflation. There is no safe store of value. If there were, the government would have to make its holding illegal, as was done in the case of gold. If everyone decided, for example, to convert all his bank deposits to silver or copper or any other good, and thereafter declined to accept checks as payment for goods, bank deposits would lose their purchasing power and government-created bank credit would be worthless as a claim on goods. The financial policy of the welfare state requires that there be no way for the owners of wealth to protect themselves.

This is the shabby secret of the welfare statists' tirades against gold. Deficit spending is simply a scheme for the confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights. If one grasps this, one has no difficulty in understanding the statists' antagonism toward the gold standard."

Your posts have failed on facts and failed on theory.  QED.

Sayin' definately don't make it so....

[Dannyboy]

From  Capitalism and Freedom by Milton Friedman
My conclusion is that an automatic commodity standard is neither a feasible nor a desirable solution to the problem of establishing monetary arrangements for a free society.  It is not desirable because it would involve a large cost in the form of resources used to produce the monetary commodity.  It is not feasible because the mythology and beliefs required to make it effective do not exist.


He hasn't changed his mind since he wrote that 40+ years ago and I think he's got a pretty good grasp of the situation.  The problem, I think, isn't so much the lack of a gold standard, but the very existence of the Federal Reserve.