How will it work, I'm not an advocate of it, but just wondering how it actually fits in, Today for example if I walk up to a house auction with a million Australian dollars in cash for a million dollar a house, for this discussion we won't get into conveyancing and title transfer, I can pay and both parties will accept. If I walked up to the same house with US dollars we would have to talk about fees and exchange rate. Now with gold would the value be set ie 1kilo bar is worth $50,000 (or what ever) or would it be 1kilo = whatever it is in spot, much like us dollars. Or would we be discussing the house value in kilos?
Maybe we don't actually walk around with physical gold, but with promissory notes. Ie like Bank of England will exchange this piece of paper for 1kilo of gold?
My understanding (probably wrong) is that having a gold standard means the paper currency is fixed to a rate in gold, and the rate could be anything. Once fixed however, currency supply cannot increase unless a corresponding amount of physical gold is purchased by the government, hence constraining inflation. However, it would also affect international trade because, once fixed to gold, the currency wouldn't float. Or something.
I don't think it would happen, and I don't think it would work in today's world. The only way we'd go close would be a complete collapse of fiat, a reversion to PMs as currency and then recreate banking from there with promissory notes etc (just like historical progression of "money" but in "fast forward") The whole argument for "sound money" is really about there being a finite amount of it and that governments don't just print more to finance their irresponsible spending. Even on a gold standard you have gold miners effectively adding to the "money supply" every time they pull something out of the ground. What is really needed is sound money enshrined in law (ideally via the constitution) that states that the government can not print money, or can only print to a fixed amount every year (maybe 1% ?) and not introduce massive amounts of new money. Also, an end to the fractional reserve banking to prevent monetary expansion via the back door. For free markets to function well, we do need floating currencies and floating commodity prices. The key to sound money is just making sure money is worth something and can be trusted. It needs to be stable and not inflated, devalued or otherwise trashed by irresponsible government policy.
It would cause a constant state of deflation and/or lower standard of living. That is why it will never happen.
I should add, that as ridiculous as it sounds - Bitcoin may be closer to sound money than our current fiat. Only problem at the moment is it's not stable or trusted. But it is finite and it does have a fixed limit on its own "monetary expansion".
After I wrote Bank of England, I laughed becuase that would create another wave conspiracy theorist saying do they have enough gold etc. Which ever i think about it, I can see how it will work, in these day and age.
Yes, I have heard such things. I find it highly amusing because no doubt they will steal the idea and bastardize it to suit themselves. You can bet that any bank-crypto won't be anonymous and they will maintain control of it's expansion. I wouldn't trust the banks with it.
It basically means that the government sets (and fixes) the price of gold. Say 5000 aussie bucks per ounce. They then can't just print more money as they can now without digging up more gold.
AFAIK, at this stage, ONLY the Chinese could contemplate it, even at a price of US$10,000 an ounce. A move to make the Yuan the world's reserve currency is the only reason why they would be willing to do that. ..and I doubt they would offer 'convertibility' to the deal. JMO OC
It been years since I read the content of this thread (and I don't know if my views are still aligned), but it may help your thinking. How to return to a gold standard (sound money)
Yeah, but that's the way it works. You can't really have gold as a free market commodity and use it as a useful standard backing for paper currency.
I seem to remember something about this. I'd guess it's more about using the blockchain tech to verify interbank transactions, not necessarily using it to make a new currency.
Thing about bit coins though it is so cumbersome. it would need more computing power than the miners who mine bitcoins to keep verify and record all the trillion transactions per minute
I haven't read all of it, but seems like it is Shuffling value, like changing the value of gold to fit whatever it is needed, to restart gold standard. Which I concede has to be done to go back to gold standard. But Why make gold $10,000 an ounce, be easier for the Feds to lower all national debt by 100 so 14 trillion becomes 140 billion. Lower all prices 100 times cheaper and create some smaller fractional denominations, like 100th of cent Than gold can be set at worth $14 an ounce. Would have to nationalise all mines too, becuase making gold $10,000 over night will create a boom in gold mining so that would be inflationary. But making 14 an ounce it will stop that.
There's lots of contracts that are specified in nominal prices (and the current prices are what everyone is used to) so it'd be far easier to simply change the price of gold. Yes, a mining boom would happen, but the great thing about gold compared to, say, silver, is that the above ground stocks are very large compared to what would/could be incrementally mined. Making gold $14/oz wouldn't help because it's relative prices that matter and the remonetisation of gold increases its relative worth.
Ok I concede it is easier to leave the prices As is since we know milk is $1 a litre, bread is $3 a loaf etc. Potentially the social upheaval it would create is significant at some level, but not too many people would have 100 ounces of gold to become over night millionaires, even in this forum. Of course some will be better of and some will be worse off but the numbers people effected wouldn't be that great. Though to go gold standard I would think they might have to set silver prices as well, and unlike gold it would have to at near current prices. I mean if silver was set at $1000 an ounce, all industry using silver would stop over night, huge mining boom would erupt, plus it's not that rare for precious metal, and looter and scavengers would go looting all solar panels etc. recall people were looting copper wire and scrap metal for much less. As for industries that use gold, they would change to copper, most just use it for tarnish minimisation and amount of gold in a circuit board isn't that much. Interesting topic but after reading a little on gold standard, I don't think is feasible until after a major depression such as after a ww3.
It's feasible at any time. It's more whether the vested interests would let it happen without a fiat currency crisis. One of the critical vested interests at the moment is any government running a deficit.
