squirrels
Master Don Juan
- Joined
- Apr 15, 2003
- Messages
- 6,627
- Reaction score
- 178
- Age
- 45
See, a lot of you guys are looking at this from a finance point-of-view. I'm looking at it economically, at money and gold's role with "everything else", rather than as a contained system. That's just how I look at it. Sometimes it just feels like people who live and work in finance don't really look at how "Wall Street" interacts with "Main Street"...it's just all reduced to balance sheets and textbooks.
I also think that the love for the "gold standard" is based a lot on history...what's NOT accounted for is that the world has changed a lot. The gold standard worked back in its time, and worked VERY, VERY well. But financial heads should know that past performance is not always indicative of future results.
Again, you can argue that we shouldn't be growing, or even encouraging growth, that outpaces our supply of gold...that's a valid argument. If you want to go back to living in log cabins and doing your homework on the back of a shovel by candle-light, then yes, we could go back to the gold standard.
The only way we could ever get back to anything RESEMBLING a "gold standard" is if we reduced consumption enough that we didn't need as much currency and held the economy at a constant level of production and consumption.
In other words, our population doesn't grow, our economy doesn't grow, our technology doesn't grow...everything remains constant, limited by the number of shiny bricks in a fort somewhere.
As soon as something happens to make either consumption grow (i.e. population increase) or production grow (i.e. improvements in technology or manufacturing, resource discoveries, etc), the amount of money in the system is insufficient to accommodate both THAT growth AND the day-to-day operations of the economy. Because gold is now rarer relative to the value of the goods and services in the economy, and the paper money is tied to the amount of gold, your paper money becomes worth more in relation to the products, but the supply of it is less. This is DEFLATION. Right?
You can absorb a little of this...or you can mine more gold, assuming there's still gold out there to be mined. But if a LOT of this sh!t takes off, then you're going to have a currency pinch...and a lot of this stuff will barely get off the ground before it crashes due to lack of funding.
Or what if your population doubles over like, 20 years? If the money is still tied to gold, you won't have any MORE of it to go around, so how are 200 million people supposed to operate on a money supply meant for 100 million? 100 million people are going to be able to buy goods and services, the other 100 million won't? Or do you half the price of goods and services to accommodate the population (money demand) vs. money supply, devaluing the entire economy relative to gold-based money?
I'm not advocating reckless printing of fiat currency. But a fixed standard based on a limited commodity, not accounting for other commodities or goods and services of value in an economy, and not accounting for population growth and consumption growth, will eventually FORCE an equilibrium, choking out growth ENTIRELY, much like a predator-prey model.
That's what we're headed for...and that's what the governments are trying to avoid by going into debt and printing currency based on it...the point where we exhaust our credit and our people start suffering, our population starts shrinking as money is no longer available to support their consumption of even the most basic goods...or worse yet, our country stops growing technologically and economically because there isn't enough currency to support corporate growth and innovation.
And you're right. It's not a good solution. But it's the only one we have.
Unless one of these two things happens:
1) Population growth and/or consumption is reduced
2) The value our economy provides to the world become sufficient to back and eventually pay off the debt we've incurred, making our currency worth something to other countries.
What would it be worth? The ability to purchase American goods and services. In the PRESENT, instead of a FUTURE promise of value that may not be realized.
America isn't trying to do this sh!t for control. It's trying to SURVIVE. Our country on a WHOLE has been "set up for failure by society" and virtually leveraged into non-existence.
But it's only PART the responsibility of the government...it's PART responsibility of the people who elect these representatives. The ones who continue to increase consumption without increasing production. The ones who rely on an influx of debt-backed currency to continue living their lives.
The government has no choice. As far as the people are concerned, the government has NO right to "cut them off", to tell them that they aren't ENTITLED to "something for nothing"...and if they did, they would get voted out of office.
So we play this game where we continue to run America into the ground to support the fat lazy slobs who live in it.
And many of US are bred into that system...and thus, like the country that begot us, set up for failure.
Like a friend of mine used to say, "People tell their kids they're entitled to whatever they want in life. They never tell them that they have to WORK for it."
This whole system sucks, I agree. I agree that it's "vaporware" and eventually it'll collapse on top of us. But the "Gold Standard" is not the answer, it's the other extreme. It won't work for us...we can't go backwards. We need to find a solution that works for us now, today, in the post-modern world.
I also think that the love for the "gold standard" is based a lot on history...what's NOT accounted for is that the world has changed a lot. The gold standard worked back in its time, and worked VERY, VERY well. But financial heads should know that past performance is not always indicative of future results.
Again, you can argue that we shouldn't be growing, or even encouraging growth, that outpaces our supply of gold...that's a valid argument. If you want to go back to living in log cabins and doing your homework on the back of a shovel by candle-light, then yes, we could go back to the gold standard.
The only way we could ever get back to anything RESEMBLING a "gold standard" is if we reduced consumption enough that we didn't need as much currency and held the economy at a constant level of production and consumption.
In other words, our population doesn't grow, our economy doesn't grow, our technology doesn't grow...everything remains constant, limited by the number of shiny bricks in a fort somewhere.
As soon as something happens to make either consumption grow (i.e. population increase) or production grow (i.e. improvements in technology or manufacturing, resource discoveries, etc), the amount of money in the system is insufficient to accommodate both THAT growth AND the day-to-day operations of the economy. Because gold is now rarer relative to the value of the goods and services in the economy, and the paper money is tied to the amount of gold, your paper money becomes worth more in relation to the products, but the supply of it is less. This is DEFLATION. Right?
You can absorb a little of this...or you can mine more gold, assuming there's still gold out there to be mined. But if a LOT of this sh!t takes off, then you're going to have a currency pinch...and a lot of this stuff will barely get off the ground before it crashes due to lack of funding.
Or what if your population doubles over like, 20 years? If the money is still tied to gold, you won't have any MORE of it to go around, so how are 200 million people supposed to operate on a money supply meant for 100 million? 100 million people are going to be able to buy goods and services, the other 100 million won't? Or do you half the price of goods and services to accommodate the population (money demand) vs. money supply, devaluing the entire economy relative to gold-based money?
I'm not advocating reckless printing of fiat currency. But a fixed standard based on a limited commodity, not accounting for other commodities or goods and services of value in an economy, and not accounting for population growth and consumption growth, will eventually FORCE an equilibrium, choking out growth ENTIRELY, much like a predator-prey model.
That's what we're headed for...and that's what the governments are trying to avoid by going into debt and printing currency based on it...the point where we exhaust our credit and our people start suffering, our population starts shrinking as money is no longer available to support their consumption of even the most basic goods...or worse yet, our country stops growing technologically and economically because there isn't enough currency to support corporate growth and innovation.
And you're right. It's not a good solution. But it's the only one we have.
Unless one of these two things happens:
1) Population growth and/or consumption is reduced
2) The value our economy provides to the world become sufficient to back and eventually pay off the debt we've incurred, making our currency worth something to other countries.
What would it be worth? The ability to purchase American goods and services. In the PRESENT, instead of a FUTURE promise of value that may not be realized.
America isn't trying to do this sh!t for control. It's trying to SURVIVE. Our country on a WHOLE has been "set up for failure by society" and virtually leveraged into non-existence.
But it's only PART the responsibility of the government...it's PART responsibility of the people who elect these representatives. The ones who continue to increase consumption without increasing production. The ones who rely on an influx of debt-backed currency to continue living their lives.
The government has no choice. As far as the people are concerned, the government has NO right to "cut them off", to tell them that they aren't ENTITLED to "something for nothing"...and if they did, they would get voted out of office.
So we play this game where we continue to run America into the ground to support the fat lazy slobs who live in it.
And many of US are bred into that system...and thus, like the country that begot us, set up for failure.
Like a friend of mine used to say, "People tell their kids they're entitled to whatever they want in life. They never tell them that they have to WORK for it."
This whole system sucks, I agree. I agree that it's "vaporware" and eventually it'll collapse on top of us. But the "Gold Standard" is not the answer, it's the other extreme. It won't work for us...we can't go backwards. We need to find a solution that works for us now, today, in the post-modern world.
