# US Money...



## jks9199 (Jan 3, 2009)

OK... I know we've got a couple folks with the background to answer this reasonably knowledgeably.

Currently, the US dollar is basically worth what other folks believe it to be worth.  It's not tied to gold or silver or fairy dust or donkey tails or anything else...  (Yes, I know... That's oversimplifying the issue.  But it's accurate enough, as I understand it for my question.)

Let's say Obama does something really radical on January 21, 2009.  He puts the US back on the gold standard, or the chick pea standard or whatever medium you choose.  I'll continue to use gold for the moment to stand in for that medium...  'cause it's easy.  (And shiny!)  He sets the dollar as being equal to a given amount of gold. (or sneakers, or the letter Q...)

What effect would that have on both the US and the world economy?


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## Bob Hubbard (Jan 3, 2009)

Everyone with paper money starts trading it in for whatever that is, lets say gold.  All the gold leaves the US as the majority of US paper is outside the country.

We go boom even faster.


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## terryl965 (Jan 3, 2009)

Well I believe it will cause more trouble than it is worth, so he will not do any of that and leave it alone and concetrate on getting the economy back to some level playing field.


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## Sukerkin (Jan 3, 2009)

I've talked about this here a couple of times in the past year or so, *JKS*. 

I don't know if a dabble with the Search function would turn up an answer for you or not. If it doesn't, then I'll have a go at giving an assessment of what would happen (the briefest of precise' being that, in my opinion, it's a necessary step for the whole world to take but in order for it to work then all the developed nations need to do it in-step).

EDIT:  The 'nightmare scenario' that Cap'n Bob laid out can easily be avoided by appropriate framing of the legislative change.


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## Bob Hubbard (Jan 3, 2009)

Our legislature botched several bailouts, sold up down the river to the banking cartels in the last one....you really think we can trust them to safeguard our wealth?
Well, 432nd time's the charm right?

They could put us back on the gold standard, make it illegal (again) for a US Citizen to own gold, still wouldn't stop gold from leaving the country.


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## arnisador (Jan 3, 2009)

A Zimbabwean 100 billion dollar note:


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## Big Don (Jan 3, 2009)

arnisador said:


> A Zimbabwean 100 billion dollar note:


Seeing this:





> Media reports in the country say the countrys central bank has introduced the 10 billion dollar note which is worth $20 on the black market.


 Really makes me want a few of those...
Picture this:
"I'll give you TEN BILLION dollars for that..."
Hilarity ensues


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## Cruentus (Jan 3, 2009)

He would never do it, and if he did, it would mean that we are really in trouble. This is because you don't get anything out of the gold standard that you didn't bring with you. If your currency is credibly backed by your assets, then you don't need a gold standard. If it isn't, then you are screwed anyway, even if you go to a gold standard.

Your screwed because your currency will still fluctuate relative to other countries anyway, because none of whom we viably trade with are on the gold standard. Their currency will fluctuate accordingly, and therefore we will not be shielded from export/import fluctuations. Furthermore, simply by going to such a standard you are basically conceding to the marketplace that your assets cannot credibly back your currency; this is a all too perfect set up for more of a crash, as investors will not want to deal with you in any capacity. 

The idea of going to such a standard is reliant on the idea that commodities are somehow more stable then currencies, of which they are not. Gold fluctuates like any other market, and therefore your dollar backed by that commodity will also fluctuate not just according to the currency market, but to that commodities market as well. You have just added another layer of risk without any real benefit. 

This could only work if the rest of the 1st world also went to the same standard; yet this would have to be governed by a world organization that would further remove countries individuality (think 'new world order' type stuff). Not really a good scenario for anyone in the long run.

Then there are some of the scenarios that Bob has painted; those things might happen to a degree enough to effect the marketplace and further take money out of circulation. 

So, in short, going to a gold standard would probably be a bad thing...


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## Bob Hubbard (Jan 3, 2009)

It would be incredibly bad.
It would take some seriously short sighted and self serving idiots to pass that.
It would probably really **** us up bad.

Oh ****.
Congress will authorize this won't they?

We're so boned!


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## Bob Hubbard (Jan 3, 2009)

arnisador said:


> A Zimbabwean 100 billion dollar note:





Big Don said:


> Seeing this: Really makes me want a few of those...
> Picture this:
> "I'll give you TEN BILLION dollars for that..."
> Hilarity ensues



Ditto!


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## Cruentus (Jan 3, 2009)

Interesting contrarian view on my last post though:

http://www.usagold.com/gildedopinion/greenspan.html

I think he makes a lot of good points. The thing is, it would be good to go to such a standard if the Euro, the Yen, and other major viable currencies we traded with also went to a standard of commodity backed currency. But since they won't, problems are created. In order to coax them into it, we would need a worldwide regulatory organization, therefore eliminating our individuality.

When one thinks about it though, choosing gold, or any commodity for that matter, as a standard is arbitrary. It all boils down to other factors like GDP and assets that make up the valuation of your currency anyway, and attaching it to a commodity isn't going to change that at all.


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## Makalakumu (Jan 3, 2009)

Cruentus said:


> He would never do it, and if he did, it would mean that we are really in trouble. This is because you don't get anything out of the gold standard that you didn't bring with you. If your currency is credibly backed by your assets, then you don't need a gold standard. If it isn't, then you are screwed anyway, even if you go to a gold standard.
> 
> Your screwed because your currency will still fluctuate relative to other countries anyway, because none of whom we viably trade with are on the gold standard. Their currency will fluctuate accordingly, and therefore we will not be shielded from export/import fluctuations. Furthermore, simply by going to such a standard you are basically conceding to the marketplace that your assets cannot credibly back your currency; this is a all too perfect set up for more of a crash, as investors will not want to deal with you in any capacity.
> 
> ...



I disagree, Paul.  The gold standard would be a good thing to do for our country in the long run.  We NEED to end fractional reserve banking and fiat money creation in order to have sound money and wealth creation.  With the current system, the bankers can control the entire country, they can move all of our assets around, they can control the very direction that society moves.

Also, gold doesn't fluctuate in value.  The dollar fluctuates in value based on the amount in circulation.  A dollar that is backed by gold is trustworthy and a FAR more valuable trade medium.  Having a dollar that is worth a known value now and in the future will actually DRAW business into our country.  

Lastly, I think it needs to be said, going to commodity money is not going to be an easy sell to the powers that be.  We very well could see a world war perpetrated upon us for this very thing.  Every country that has a central bank and fiat currency is secretly run by financial interests.  The power to create money is the power to control everything.  

Going to a gold standard takes the power away from the banks and puts it into the hands of people.  When value is measured in gold, people accumulate gold in order to have wealth.  When wealth is created from nothing, the people who create the wealth control the whole game.

If the US went to a gold standard, the entire world would turn against us...

...for a short time.  Then they would want to trade and the US would find a completely different society.  A society that is more in line with what the Framers of the Constitution had in mind.


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## Makalakumu (Jan 3, 2009)

Here is a thread specifically about the gold standard.

http://www.martialtalk.com/forum/showthread.php?t=69301&highlight=gold+standard


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## Makalakumu (Jan 3, 2009)

Cruentus said:


> When one thinks about it though, choosing gold, or any commodity for that matter, as a standard is arbitrary. It all boils down to other factors like GDP and assets that make up the valuation of your currency anyway, and attaching it to a commodity isn't going to change that at all.



You are right, it is arbitrary.  The Gold Standard is one solution to the problems that face our economy and have faced our economy since we started printing fiat money and allowing banks to fractionally create money.

The Gold Standard limits the amount of dollars in circulation.  The Gold Standard encourages the accumulation of wealth by pinning paper to something of real value.

There are a lot of other ways that this can be accomplished.  I personally like the method suggested in this video.  Government takes control of the creation of money and it is created by investments in our country.  Politics are dominated by a governments ability to control the rate of inflation.  The people have a choice in the matter through the ballot box.

Anyway, we are slaves to the banks with the current system.  Willing slaves.


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## Big Don (Jan 4, 2009)

maunakumu said:


> Also, gold doesn't fluctuate in value.








If it didn't fluctuate, shouldn't the redline be FLAT?


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## Bob Hubbard (Jan 4, 2009)

Actually Don, that's not a good comparison, since the value of the Dollar is all over the place.  I think we need to look in a different direction.

How many ounces of gold = how many carets of diamonds = how much oil = how many tires for your car, etc.

Someone said to me once that it takes the same amount of gold today to buy 4 tires for a car, as it did 100 years ago.  Don't know how accurate that is though.


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## Cruentus (Jan 4, 2009)

maunakumu said:


> I disagree, Paul.



Cool. I can see your points and points on the other side of the argument, and to be honest, I am not completely sold on my side of the debate. I am open to the idea of the gold standard, and realize that I could be wrong. However, I see some problems that haven't allowed me to move over to your side of the debate. In interest of time, I have broken up your post to subsequently respond (something I usually don't do, apologize in advance). 



> The gold standard would be a good thing to do for our country in the long run.  We NEED to end fractional reserve banking and fiat money creation in order to have sound money and wealth creation.  With the current system, the bankers can control the entire country, they can move all of our assets around, they can control the very direction that society moves.


What I see here is common with those in support of the gold standard; that is a distrust of the banking system and the appearance of no check/balance regarding our current banking environment. I can understand the distrust, however, the banking system is not just arbitrarily deciding how our currency is valued.

Currency is valued basically by goods and services, and is by itself a separate marketplace. This marketplace is regulated by governments monetary policies and production, of which countries are directly in competition with each other. This competition in and of itself acts as the check/balance system based on capitalistic principles. Going to a single standard worldwide, such as gold, would essentially create a worldwide currency, thus removing competition (the check and balance system) where whoever decides the valuation of gold and the currency to gold relationship would decide the value of currency. At best, it will only complicate the marketplace slightly; at worst it would lead to even more of a lack of check and balances then we currently have in the global markets.



> Also, gold doesn't fluctuate in value.  The dollar fluctuates in value based on the amount in circulation.  A dollar that is backed by gold is trustworthy and a FAR more valuable trade medium.  Having a dollar that is worth a known value now and in the future will actually DRAW business into our country.


Sorry man, but the idea that gold doesn't fluctuate is false. Gold is a commodity. Like Oil or wheat, it fluctuates due to supply/demand just as anthing else. Check this chart out:

http://www.financialsense.com/editorials/griess/2005/1202.html

This shows a gold index vs. the value of the dollar. Gold has fluctuated just as much as the dollar and has mirrored the dollar for the most part. Over a longer period of time you will find just about as much fluctuation in the gold market as our currency.



> Lastly, I think it needs to be said, going to commodity money is not going to be an easy sell to the powers that be.  We very well could see a world war perpetrated upon us for this very thing.  Every country that has a central bank and fiat currency is secretly run by financial interests.  The power to create money is the power to control everything.


Well, again, this "secret" stuff implies that there is some sort of sinister plan running our currency markets; a bold assumption that requires proof. This stuff isn't arbitrarily decided by evil rich people and banks; currencies are a function of production and assets, and there is a currency market where capitalistic competition becomes the regulator (or check/balance) system. 



> Going to a gold standard takes the power away from the banks and puts it into the hands of people.  When value is measured in gold, people accumulate gold in order to have wealth.  When wealth is created from nothing, the people who create the wealth control the whole game.


Our currency market determines wealth in a much fairer way then it would if the market went to a gold standard. Think of it like this; what if we went to an oil standard instead? Then those that could mine the most oil (middle eastern countries) would all of a sudden be the richest countries, despite their lower GDP. Fair? Not so much. At least this way our currencies are determined by a marketplace based on production and assets rather than an arbitrary commodity. The erroneous idea here is that wealth is created from "nothing," when it is in fact determined by assets and production values.

Also, if the worry is a small few deciding the valuation of currency and therefore "creating wealth," then basing currency off a commodity proposes a real problem. Because, who decides the value of gold?  And who decides how much the dollar, yen, euro, dinar, or whatever is worth in relationship to whatever unit of gold? A small few perhaps? Yet, with a unified standard based off a commodity rather then assets and production, we might remove the capitalistic competition that is the very thing that protects the markets from being run by a small tyrannical few.



> If the US went to a gold standard, the entire world would turn against us...
> 
> ...for a short time.  Then they would want to trade and the US would find a completely different society.  A society that is more in line with what the Framers of the Constitution had in mind.


The framers of the constitution had the protection provided by capitalistic competition in mind, I would think. Yet, during their time period, a global marketplace as it exists today could not have been imagined. Those of us with a free society in mind understands that power shouldn't lie with a small few, and therefore healthy competition and diversity creates the proper checks and balances needed. Moving to a commodity based currency in favor of a currency based off production and assets might remove the competition needed to prevent a globalized facist takeover.

Also, there are countries that have "turned against us" now, and have in the past but now trade with us. This will continue to occur because the USD is still the default currency, and we are still the richest country in the world. If another country were to take that role over, hatred and reluctant trading would simply be redirected towards them.

*conclusion:* The push towards the gold standard in some circles has recently occured due to the dip in the US markets (all of them, currency, stocks, realestate, etc.), and where people see that the valuation of gold is now greater then the USD. This is a common occurence, and a fear response. When things are bad, we say, "Wow, we need to do something different... how 'bout this?" Keep in mind, we hit the great depression on the "gold standard," so this is no magic solution. Gold fluctuates like ANY market. Furthermore, just because gold is up, that doesn't mean that by equating our dollar to gold would mean our dollar would be more stable, or go up in relation to other currencies. Our dollar would be valued in accordance to a unit of gold, which would be based on our assets and production in relationship to other currencies. If gold was down instead, our dollar would simply be worth a higher amount of gold then if it was up. It arbitrarily accomplishes nothing because the valuation equates to assets and production anyway.

Right now, due to the backing of the Euro and the chinese currency, the dollar is down and people are scared. However, the USD is still the default currency for trade. But because it is down and gold is up, people think that the gold standard would help, and are willing to write about it. If the USD index was worth more then the gold index right now, then we wouldn't be having this discussion, most likely.

The bottom line is this: the case isn't compelling enough for me yet to agree with moving to a gold standard to determine USD value, rather then determining it based on assets/production in relationship to other countries/currencies. I don't like the current state of the US economy either, however I am not going to support a change simply because of that. The case has to be compelling enough to prove itself better; the gold standard has yet to do that, in my opinion.

Thanks for the stimulating discussion...


C.


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## Makalakumu (Jan 4, 2009)

Big Don said:


> If it didn't fluctuate, shouldn't the redline be FLAT?



What is value, Don?  How do you extract the value of gold from the value of the USD?


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## Makalakumu (Jan 4, 2009)

The hard part about this is that the case can already be made so compelling thing with a simple google search of Ron Paul and Gold Standard or even just the Gold Standard.  

Look, Paul, even wondering where money comes from is like looking at the rabbit hole.  

Here's a great book that will trace the History of Banking.

You may or may not agree with his Jeffersonian/Libertarian viewpoint that he is taking, but I think that ANYONE can learn a thing or two about banking from this book.

Paul, I'm going to tell you this, the framers of our constitution felt so strongly that our money should be backed by something of real value that they wrote it into out constitution.  

Check some of the stuff that has already been posted on MT and some of the stuff that I've cross linked into this thread.  It'll change your mind.  Or at least help you understand where money really comes from.


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## Sukerkin (Jan 4, 2009)

With regard to the fluctuation of 'gold' noted above, just for clarity, you have to distingish between Gold, the real, yellow, shiny stuff and what is traded on the commodities markets. That difference is why Stock Market Gold was not the safe haven people thought it would be when the current crisis bit.


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## Brian R. VanCise (Jan 4, 2009)

I think the cat is out of the bag.  There is no way to go back without some catastrophic world situations.


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## GBlues (Jan 4, 2009)

Well, to begin with, there are right now, an elite few that run everything. THey make the decisions on who were going to war with, how much our money's worth etc, etc. If you truly believe that the president or congress, or any other office in government has any real power then in my mind your crazy. That being said. The gold standard is not a bad way to go. IT does give value to your dollar. THe commodities, the manufacturing and such, is not so good. Look at America how, much manufacturing are we actually doing, as compared to the 1940's? Nowhere near as much. So placing a dollar amount to your services is ok....but if I don't think that your services are worth 100 bucks I'm not going to use your services. I'll buy them for 20 yen, or pesos, from the guy that will do it cheaper. RIght? 
So it's a way to keep the dollar in constant flux with the commodities standard. Countries don't make any money if they aren't making anything. 

Now, the founders of the constitution did not want us to have a separate centralized bank. The reason being is that he who makes the gold makes the rules. THey are then able to basically hold the government hostage, and get there way. Kind of like these bailouts that are going on now. If wer had let them fall, yeah, we'd of had really hard times. But businesses that go bankrupt do the same things that they always did before they went bankrupt, and that is nothing. SOmeone always steps in to fill there shoes. What we need is an American Currency,  that is printed on our own presses. THe Federal Reserve is not apart of the Federal Government. It is it's own separate entity. It prints it's own money, but it has nothing to be backed up with, not gold, not commodities not anything. THey print, and they print, more and more money. That is why the value of the dollar keeps dropping. PErsonal Opinion. That's what I think. Get rid of the Federal Reserve and print our own National money. Then we would have control of our government again. Until then the rich and elite will always have it, because of greed. Because they control basically whether you eat or not, pay your bills or not, cause they control the MONEY. It's actually very sad when you begin to think about it.


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## arnisador (Jan 4, 2009)

Gold: The Zimbabwean example shows the extreme case of printing money without backing for it. The finance minister there has explicitly threatened to keep printing money until his country pulls out because of it or sanctions against the country are dropped.

In theory the gold (or similar) standard protects against that. In practice...how much gold would we need to have to _literally _back up every dollar?


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## Sukerkin (Jan 4, 2009)

Brian R. VanCise said:


> I think the cat is out of the bag. There is no way to go back without some catastrophic world situations.


 
There is a lot of truth in that, *Brian*.  

That is why it would have to be a global decision by the developed world and one in which the governments take back the power of the money supply away from the financial system that has held them hostage for nearly a century.

America on her own probably couldn't do it because, as I've said before, a lot of her 'wealth' is illusion because it is actually debt, the servicing of the majority of which is held by other countries.  The 'Most Powerful Country In The World' (TM) has been on borrowed time, pun intended, for quite a while.  This makes it well nigh impossible for her to leverage her economic weight to push a change through.

In the end tho', it will come to a decision between which is the least painful was to get through economic collapse and build a more sustainable future.


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## Makalakumu (Jan 4, 2009)

Sukerkin said:


> With regard to the fluctuation of 'gold' noted above, just for clarity, you have to distingish between Gold, the real, yellow, shiny stuff and what is traded on the commodities markets. That difference is why Stock Market Gold was not the safe haven people thought it would be when the current crisis bit.



Absolutely, the value of the shiny stuff is distinct and real.  The "stuff" that gets traded on the stock market most likely doesn't even exist.  The Comex Gold market is paper based.  When you buy it, you are buying gold that exists in the future.  It's more paper.

People who put money into the market to buy gold are throwing it imaginary gold.  Gold in hand is the best.

The interesting thing about all of this is that the market for REAL gold is very tight.  You can hardly get it at all.  In fact, in October, the presses that made real gold coins all over the world had to shut down because they didn't have any left.  

The "real" price of gold is probably two to three times what it is traded for on the market.  It's interesting how once you know the difference between gold and paper, you can see how the market forces really know the difference.


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## Makalakumu (Jan 4, 2009)

arnisador said:


> Gold: The Zimbabwean example shows the extreme case of printing money without backing for it. The finance minister there has explicitly threatened to keep printing money until his country pulls out because of it or sanctions against the country are dropped.
> 
> In theory the gold (or similar) standard protects against that. In practice...how much gold would we need to have to _literally _back up every dollar?



Any amount is fine.  The question isn't how much gold, it's how much value.  Right now we have NOTHING of value backing our currency and we are creating it as fast as we possibly can.

When you assign "value" to currency, you limit the amount that can exist and thus stabilize the currency.  This eventually stabilizes the economy if the government leaves the amount of value alone.


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## arnisador (Jan 4, 2009)

This appeared in my local paper a few days ago and has been on my mind as I read this thread:

*ARTHUR FOULKES: Message to the Fed: Printing money doesn&#8217;t create lasting economic growth*



> When the Fed creates large new quantities of money to push down interest rates, this leads to an artificial boom in economic activity. However, because the is boom is based on printed money and not actual savings, the boom must eventually end in a bust. In this way, government monetary policy is responsible for the familiar boom-bust cycle we all have come to see as &#8220;normal.&#8221;
> 
> In a free market with commodity money, such as gold, only increases in real savings would drive down interest rates. When interest rates are driven down artificially, it creates the illusion that consumers are saving more than they are.


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## Sukerkin (Jan 4, 2009)

arnisador said:


> In theory the gold (or similar) standard protects against that. In practice...how much gold would we need to have to _literally _back up every dollar?


 
Well, an estimated range is that there are something like five to ten billion ounces of gold that have been mined so far in the world.

The amount of paper/electronic dollars there are has never been published to my knowledge - that's telling to me as an economist in and of itself .

So that makes it hard to do an actual equivalence calculation.

The point is that going to a Gold Standard type of system would involve an arbitrary re-setting of the fiscal clock rather than trying to weld the old system to the new.

The real problem has always been the fractional reserve method of fictional money creation (especially married to currency speculation) - it's only conclusion can be falling/wildly fluctuating currency values and inflationary/deflationary spirals.

If the money supply does not bear some concrete relation to the value of goods and services, in the end, in the words of the song "there may be trouble ahead".

EDIT: *Arni* posted a link to nice, clear, newspaper article on the matter whilst I was posting.

Fractional Reserve EDIT {:lol:}:  Here's a link with some relevance to Arni's question - http://www.dailyreckoning.com.au/dollars-gold/2006/12/04/


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## Makalakumu (Jan 4, 2009)

Sukerkin said:


> There is a lot of truth in that, *Brian*.
> 
> That is why it would have to be a global decision by the developed world and one in which the governments take back the power of the money supply away from the financial system that has held them hostage for nearly a century.
> 
> ...



The one good thing about this nations military is that if we assumed a "defensive" posture, we could probably pull off converting to the gold standard.  Other countries would have to follow suit because Americans would literally be able to buy up anything of value in their nations.  It would piss off the financial interests and I'm sure they would call in all of their proxies within the nation and throughout the world to throw down any government that decided to do this, but I think a well informed public could defend against that.

The interesting thing about all of this is the parallel between the UK 100 years ago and the US today.  The Bank of England had inflated the Pound so much so the British could maintain their empire that they were facing an extreme depression and possible breakdown of society.  Thus, the BOE worked through its proxy central banks around the world and inflated the rest of the worlds currencies FASTER then the pound which transferred the wealth of those nations to the BOE.  The same thing is happening now except that the BOE and the Federal Reserve have formed an incestuous relationship.  By controlling the money supply, a small group of elite hope to maintain anglo-american dominance on the rest of the world.

All of this is prevented by the Gold Standard.  All of this was made possible in 1913 when the Federal Reserve Act was passed and our government forced its people to accept banker's paper instead of items of real value for trade.

That's the real purpose of legal tender laws.


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## Rich Parsons (Jan 4, 2009)

Brian R. VanCise said:


> I think the cat is out of the bag. There is no way to go back without some catastrophic world situations.


 

The USD has been off the Gold Standard since the Nixon Administration.

The Euro standardized itself when it came out against the USD, and then trading and markerts went from there based upon economies GNP, import versus Export rations.


The Chinese Yuan, is worth the value the Chinese Government says it is worth. They choose a value against the USD and have set their value. 


I am not sure any country could go back to a "Gold Standard". It is just too intertwined into the World Economy, unless we all (* all countries *) go back together.  Read Social Contract. As we have a social contract today with the existing currancies, we would have to have one as well with any new form.


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## Brian R. VanCise (Jan 4, 2009)

Rich Parsons said:


> The USD has been off the Gold Standard since the Nixon Administration.
> 
> The Euro standardized itself when it came out against the USD, and then trading and markerts went from there based upon economies GNP, import versus Export rations.
> 
> ...



That is why I think it is out of the bag and undesirable at this point.  


I will ask an interesting question right now?  What current economic powerhouse is on the gold standard?


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## arnisador (Jan 4, 2009)

Sukerkin said:


> Well, an estimated range is that there are something like five to ten billion ounces of gold that have been mined so far in the world.



This number and your link are what I was looking for! I was going to make the comparison like this: Round up the price of gold to $1000 per ounce for convenience. At ten billion ounces of gold above ground, that would mean that if the U.S. owned all the gold in the world and wanted to keep the dollar initially at its current value, there could be only 10 million dollars in circulation--bad news for Bill Gates.

From the link:


> What does this mean? We don't know, exactly. But our guess is that the *incremental dollar could be worth less* than people think... and the *incremental ounce of gold a bit more*.



Apropos of nothing, a Yugoslavian 10 billion note:


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## arnisador (Jan 4, 2009)

Ah, I finally found the WSJ article I have been searching for:

*Mackerel Economics in Prison Leads to Appreciation for Oily Fillets *

*Packs of Fish Catch On as Currency, Former Inmates Say; Officials Carp*



> When Larry Levine helped prepare divorce papers for a client a few years ago, he got paid in mackerel. Once the case ended, he says, "I had a stack of macks."
> 
> Mr. Levine and his client were prisoners in California's Lompoc Federal Correctional Complex. Like other federal inmates around the country, they found a can of mackerel -- the "mack" in prison lingo -- was the standard currency.
> 
> "It's the coin of the realm," says Mark Bailey, who paid Mr. Levine in fish.


Another site mentioned:



> The word "salary," and the expression "being worth one's salt," derive from the word "salt," which was once a commodity form of money.


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## Makalakumu (Jan 4, 2009)

arnisador said:


> This number and your link are what I was looking for! I was going to make the comparison like this: Round up the price of gold to $1000 per ounce for convenience. At ten billion ounces of gold above ground, that would mean that if the U.S. owned all the gold in the world and wanted to keep the dollar initially at its current value, there could be only 10 million dollars in circulation--bad news for Bill Gates.
> 
> From the link:
> 
> ...



You could set the ratio of dollars to gold at just about anything.  The point is to create a fixed amount of currency based on the value of real items.  This would end the boom and bust economics that we currently experience as money is created and destroyed from nothing to nothing.

The only advantage that fiat money gives is the ability for people in power to control the economy...to a limited degree.

Bill Gates could keep his money on the gold standard.  He would have to earn more in a more conservative fashion, however.  The days of sitting around and doing nothing and literally making billions would be over.


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## Makalakumu (Jan 4, 2009)

BTW - I love the fact that Tesla is on the 10,000,000,000 note.  He was one of the first to actually realize that our concept of economic value was tied to energy.  Let me see if I can find what he wrote about that.  It's interesting because it links physics and economics.


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## arnisador (Jan 4, 2009)

I didn't know that he addressed economics, even if only tangentially!


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## Makalakumu (Jan 4, 2009)

This was one of the major ways he and JP Morgan crossed swords.  He wanted to set up a system that would allow anyone with an antenna to obtain electricity.  And he correctly predicted that Bankers would resist this because...

a.  You can't put a meter on that.

b.  It would undermine the value of any paper currency.

He wrote that value was based on energy and he noted that all paper had a hidden exchange rate in joules.  By giving people easy access to nearly free energy, he correctly predicted that everyone around the world would be enriched.  This was one of the reasons why he kept so many secrets from his financial backers.  He work would take away their power.


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## Cruentus (Jan 4, 2009)

maunakumu said:


> The hard part about this is that the case can already be made so compelling thing with a simple google search of Ron Paul and Gold Standard or even just the Gold Standard.
> 
> Look, Paul, even wondering where money comes from is like looking at the rabbit hole.
> 
> ...



lol... Let's not assume that I 'don't know' where money comes from or that I don't understand the financial markets because I don't think the case is compelling enough to warrant a switch to the gold standard.  At least, I haven't been convinced yet that this is the solution to our problem.

And I do realize that there are some people that have tried to make the argument, particularly Ron Paul who received some popularity in the last primary. However, I simply don't find these arguments compelling, and Ron Paul in particular seems to take an overly simplistic view on the economy.

Thanks for the book link though, and I will continue reading responses and learning more about the subject.



> I am not sure any country could go back to a "Gold Standard". It is just too intertwined into the World Economy, unless we all (* all countries *) go back together. Read Social Contract.



I believe Rich's comment is correct. I am generally more libertarian leaning myself, which ironically is exactly why I am not compelled to believe the gold standard is something we should try to do. This is Ironic because many libertarians want a gold standard due to a general distrust of government regulating bodies, like a central bank. While I understand and have similar concerns, the alternative of moving back to a commodity based system would create the sort of social contracts that percisely violate my libertarian values.

Right now we have a system based on a mixture off capitalism (not just the banking system, but a financial marketplace where things can be bought and sold through the markets, albiet commodities, currencies, stocks, or what have you) and government regulation through the federal reserve/central banking system. The marriage of the two acts as a check and balance that would prevent total corruption or economic instability.

Currency is not just arbitrarily printed, but is done so based on an 'elastic currency' principle where printing is decided based in goals of financial stability, employment, stable prices, moderate long term interest rates, and stable growth. Printing is regulated based on reserve requirements, trade, GDP, and many other factors.

It is a complex system that the everyday joe doesn't understand. But because joe doesn't understand it, that doesn't mean that there isn't a check and balanced method in place to regulate the printing and worth of money. And it certainly doesn't mean that an evil illuminati is sinisterly using the FR/CB system to plot for their own interests at our expense.

Our system is not perfect right now, and there is potential for problems. These might be solved through a review of the Federal Reserve and Central Banking System and our systems and policies. However, our system, as it stands right now is still better then the "social contract" that would be required for all countries to move to a gold standard, and USD moving to that standard would be a push in that direction. That direction is that of an unchecked World Market ran by governments (read worldwide socialism) where countries lose their individuality, setting the stage for a "New World Order" scenario based on curruption and lose of financial and civil liberties. I personally would take our current system over that, despite our existing problems. 

One final thing, Brian asked an excellent question, and Arnisador brought up the interesting point re: Zimbabway: 



> I will ask an interesting question right now?  What current economic powerhouse is on the gold standard?





> Gold: The Zimbabwean example shows the extreme case of printing money without backing for it.



There is NO GOVERNMENT that currently uses the gold standard; all use a Fiat currency. The active examples of a gold standard we have might be some private investments that might be backed by a commodity, but these don't provide a model of the standard to be used in todays currency markets.

The Fiat system can pose a huge problem for 3rd world countries that don't or aren't allowed to trade in the world marketplace, like with the Zimbabway example. Without regulation, a currupt government can decide to arbitrarily print money that has no intrinsic value. We, however, are not a 3rd world country. Therefore, we do have a formula and a regulatory body that controls the printing and backing of the USD that is checked/balanced by the economy and the free markets in which trade occurs.

Interesting discussion, and interesting things to think about on all sides.

C.

PS. On a lighter note, I would be an advocate of going to a weapons/munitions standard to back our money. Then I could better justify my recent weapons purchases as investments!


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## Cruentus (Jan 4, 2009)

Wikipedia answers Arnisador's question earlier re: how much gold vs. dollar:

http://en.wikipedia.org/wiki/Gold_standard#External_links
_The total amount of gold that has ever been mined has been estimated at around 142,000 tons.[12] Assuming a gold price of US$1,000 per ounce, or $32,500 per kilogram, the total value of all the gold ever mined would be around $4.5 trillion. This is less than the value of circulating money in the U.S. alone, where more than $7.6 trillion is in circulation or in deposit (although international banking currently practices fractional reserves).[13]
_ 
This is a good article that I came across on the topic as well:
http://www.pkarchive.org/cranks/goldbug.html


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## arnisador (Jan 4, 2009)

arnisador said:


> there could be only 10 million dollars in circulation



Oops, of course that's 10 _*trillion *_dollars--but the point is, compared to the U.S. annual budget or national debt or stock market total value or real estate total value, that's not that much money. It would mean an effective devaluing of people's holdings--which is of course the point!

EDIT: Ah, I see that *Cruentus *has already posted a more accurate value! Since he has financial training, I defer to him.


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## Sukerkin (Jan 4, 2009)

Ah, I see that *Crue* is on-line at present. Excellent. I just wanted to ask what financial background you have as it is clear that you speak from an informed point of view?

For myself, I'm a qualified economist who (ever so briefly) worked in the sector before deciding that the whole corrupt kit-and-kaboodle was on a one way ticket to eternal boom-and-bust.

It is of interest {yeah, economics based pun attack } that we appear to hold almost entirely opposite views on this, admittedly heinously complicated, subject.

EDIT after re-reading and seeing that my words could be misinterpreted:  
Just to be absolutely clear, all I'm asking here is what it is that you encountered in your background and study that has lead you down the 'other' fork in this economic road.  I'm not attempting to begin any kind of 'my expertise is bigger than yours' contest :lol:.


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## Cruentus (Jan 4, 2009)

Sukerkin,

If you are a qualified economist in that you have academic (undergrad or grad) or professional credentials (CFA, CIPM, CFP, etc.) then you are a step ahead of me. I have degree(s), but not in finance. My background up against a highly credentialed economist would be akin to putting my background in mathmatics against arnisadors (a mathmatician) because I tutered and taught high school mathmatics while in college. lol... in a nutshell I would metaphorically get my *** kicked in the long run if there were some sort of competition. However, as you know, credentials are just that; and opinions have to be backed by solid argument and proof regardless. 

I simply worked in the industry for a couple years at what was at the time the worlds largest private bank. I was looking at getting credentialed and working on the analyst side of things, which would have required a relocation and some sacrifices that I was not willing to make at that time. So I instead worked on the financial planning and investment banking side. Beyond Series 7, 63, and insurance licenses, I don't have any additional credentials. I was interested at one time in taking it further, but I was not really satisfied with the whole thing and left the industry.

It was a good experience, however. I got to spend about a month and a half in NYC working and training. I got to rub elbows with some very brilliant analysts (both tech and fund.), and got access to good research that the ordinary person would have to pay for and I read up. I got a lot of good experience because our client focus was those with no less then 1 million (USD) of investible assets. I was really an investment banker rather then just a "stock brooker" or "insurance salesman" pawning off the latest annuity. I got experience diversifying assets in many different markets such as art, real estate, commodities, and currencies, as well as the normal stuff (stocks, bonds, mutual funds, etc.). I was not an expert on all of these topics; but I had the direct line of experts all over the world that I would tap into when a client needed something particular.

It was a rewarding experience, and I learned a lot. I would never go back to it, however. I work for the government now (hence you will notice I don't put a lot of quantitative personal details on the net anymore because I am limited in that regard due to my current job), and I am much more satisfied with my current work. 

Sorry for the long answer, but you asked!  No offense taken either; Though people should be respected for them, we both know that by itself, credentials don't make the argument.

That said, from what I have read and seen, people who look into this stuff (both the armchair economist and well credentialed one alike) tend to fall into 2 categories: those that want to move back to a commodity based monetary system, and those that feel that doing so would cause more harm then good.

Those that want to see currency backed by a commodity feel that would make currency more stable, and less corruptable. I tend to be more of an anarchist on this subject, and I start asking tough questions that get to the heart of the matter. So we go to a gold standard, but then 'who' decides how much the dollar, yen, yuan, peso, etc. is worth in relationship to gold, and by what standard? And why gold, and not moon rocks or poop of an endangered species? And so on, and so on. And I know that there are  answers to these questions (I've looked them up myself), but the point is what it ends up boiling down too is that tieing currency to a commodity of an assessed value (with supply/demand of that commodity now in the picture) ends up being more arbitrary then even our current system. A countries wealth boils  down to goods and services; a country is only as weathy as the quality/quantity of these. The value of currency is proportional to this, and remains so in our current fiat system where many economic factors can be not only considered, but can be traded in a marketplace; guided by the 'invisible hand,' yet controlled by a process. More complicated? Perhaps. But this is certianly is better then having a currency tied to a commodity that rises in falls with trends of supply and demand (like mining trends and practical usage) that have nothing to do with real socio-economic factors like employment rates, debt, or GDP. That, plus the added problems of rigidly fixed exchange rates and no way to adjust for risk, panic, and the rise and fall of various markets easily makes me wonder why we would even consider going back to a commodity based system again. Then there is the inevitable introduction to a social contract that would have to further regulate this process, and I am now nervous by the proposal.

The fact is, gold is just a metal. Paper is just thing as well. Neither matters any more or is worth any more then what the collective 'we' thinks it is worth. And that is based on the goods and services that we provide and trade. And backing a currency by a commodity doesn't change the fact that it is still only as viable as our traded goods and services; we accomplish only adding another variable into the mix. And that variable has its own set of problems. 

People need to remember that we had major financial crisises while on the gold standard as well (in fact, ones that are worse then the current situation); and there is a reason why we moved to our current system in the first place.

But that is just my opinion; both agreed and disagreed with by people with much higher credentials then I!


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## Makalakumu (Jan 5, 2009)

Here's how I understand it.  The key to understanding the matter lies in understanding the nature of value.  Right now, our money doesn't have a fixed value.  It fluctuates based on the decisions of an oligarchy.  This has massive implications to how economies function.  The whole concept of "elastic currency" is an apologetic term.

So, what is value?  Why does gold have value?  Why does anything have value?  Is value fixed?  What items have a stable value?

My guess is that value is measurable in joules.  I've been thinking about this a lot and it seems to make sense.  The higher energy expended on both the supply and demand sides, the higher the value.  Thus a rare commodity has more value because of the energy expended to get it out of the ground and because of the energy expended by those that need it.


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## Bob Hubbard (Jan 5, 2009)

Last time a US President tried to shut down the Fed, and put the US back on a metal standard, he went to Dallas in a car, and came back in a bag.

I can't see now being any different than then.

Executive Order 11110 - Was It Good Night for the Federal Reserve?


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## Makalakumu (Jan 5, 2009)

Bob Hubbard said:


> Last time a US President tried to shut down the Fed, and put the US back on a metal standard, he went to Dallas in a car, and came back in a bag.
> 
> I can't see now being any different than then.
> 
> Executive Order 11110 - Was It Good Night for the Federal Reserve?



Wow, just wow.  I never knew about that.  I knew that Kennedy was opposed to the Fed loaning the government money at interest, but I never knew that he took action against it.


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## Cruentus (Jan 5, 2009)

Bob Hubbard said:


> Last time a US President tried to shut down the Fed, and put the US back on a metal standard, he went to Dallas in a car, and came back in a bag.
> 
> I can't see now being any different than then.
> 
> Executive Order 11110 - Was It Good Night for the Federal Reserve?



lol... interesting. However, I don't think his assassination was "orchestrated" by anyone but the lone shooter, but I guess that's a whole 'nother topic!


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## Bob Hubbard (Jan 5, 2009)

Cruentus said:


> lol... interesting. However, I don't think his assassination was "orchestrated" by anyone but the lone shooter, but I guess that's a whole 'nother topic!


That ones floating around here too a page or 2 back I think.


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## Sukerkin (Jan 5, 2009)

Thanks *Crue* for your excellent post earlier in response to my query :tup:.  If I'd had to bet on your background, I would have said it was in banking as your comments on how the system worked were very solid :rei:.

I'm, as you referred to, an Economics graduate and so I tend to look at the fiscal machine as just one part of the whole 'engine', allbeit a very important one.  

You're quite right too that there is a sharp division of opinion amongst economists as to which would be the best course of action on 'money'.  

For me, the most pivotal point is that money has to bear a relation to the actual 'worth' of the pool of goods and services in an economy.  With the present fiat currency system, this is just not the case.  Yes there are some checks and balances in place but these give the 'form' of regulation without the 'function'.  Some banks just prior to the crunch were running absurdly low ratios of fractional reserve (1-30 or more in some cases the news reported).  

This means that attempts to control the economy via monetary manipulation are doomed from the start - in essence the 'lever' is too unbalanced and induces huge effects in interest and inflation rates.  These in turn destabalise the system and prevent a semblance of stable equilibrium being reached.  Even Milton Friedman, the economist who 'invented' Monetarism, admitted that it just doesn't work (I linked to this in an earlier discussion).

Of course, decades ago, we had other problems too when we attempted to use demand-side measures (Keynsian economics).  It's almost as if we should just leave the darned thing alone and let the seven-year cycles play themselves out as they will .

The big problems with the current international financial system are ridiculous fractional reserve figures, currency speculation and fiat money.  What the calls for a Gold Standard type of money supply are trying to address is the latter but really its the first two that need calming down.  They are the ones that cause the tidal surges and retreats in the fortunes of an economy and, for my money {yeah, fiscal pun attack !} are directly responsible for our current woes.


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## dancingalone (Jan 5, 2009)

jks9199 said:


> Let's say Obama does something really radical on January 21, 2009.  He puts the US back on the gold standard, or the chick pea standard or whatever medium you choose.  I'll continue to use gold for the moment to stand in for that medium...  'cause it's easy.  (And shiny!)  He sets the dollar as being equal to a given amount of gold. (or sneakers, or the letter Q...)
> 
> What effect would that have on both the US and the world economy?



I haven't had time to read this thread, but it's a situation that will never happen.  The US doesn't have enough reserves to go back to the gold standard, and with all the deficit spending we're going through right now with the bailouts, it just becames less likely each day.


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## Makalakumu (Jan 5, 2009)

Cruentus said:


> lol... interesting. However, I don't think his assassination was "orchestrated" by anyone but the lone shooter, but I guess that's a whole 'nother topic!



Not to derail this thread, but there is so much forensic evidence out there that clearly shows there was more then one shooter it becomes an effort in disbelief to think that LHO was the "lone nutter" the government claims he was.  There's a good thread on the Kennedy Assassination floating around in the Study.  Check it out!

Now, back to your regularly scheduled programming.


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## Cruentus (Jan 5, 2009)

maunakumu said:


> Not to derail this thread, but there is so much forensic evidence out there that clearly shows there was more then one shooter it becomes an effort in disbelief to think that LHO was the "lone nutter" the government claims he was.  There's a good thread on the Kennedy Assassination floating around in the Study.  Check it out!
> 
> Now, back to your regularly scheduled programming.



Oh boy... :lol: I'll find one of the old threads on this and post some info if I have the time (if I didn't already years ago). 

Sukerkin,

Awesome last post; you explained the problems with our current system very well!


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