Something for you to ponder.

[Midnight Man]

What you are suggesting is exactly what the very first post addresses, the move to electronic money.....your choice would be gold...but it could just as easily be any other tangible good....

Actually, to my reading, the answer provided my Martin Armstrong seems to suggest a new - completely fiat - and completely electronic currency (as opposed to money).

I personally hope this won't be the case - fiat currencies that can be, and are, created out of thin air got us to where we are today.

I would argue that where we are today is actually in a worse position from many points of view than any economy has ever been over the documented course of human history.

Moving to a system as noted by Martin Armstrong would not, in my opinion, solve anything - all it may possibly do is "reset the shot clock" - or, put another way, buy us another 40 odd years before the next reset will be required.

I would hope that mankind - at least in the short term, might use this recent history to learn from, and demand a better monetary system.

With regard to that, I'd be very open to suggestions of what could replace gold

I think mankind has tried stones, seashells and a few other things over a period of time - unfortunately, they didn't seem to work out too well.

I think gold is the ultimate solution for this - it's divisible, it's fungible, it's scarce, a very limited amount can be gained each year, it's recognisable... it meets all the criteria (not all listed here) of a sound monetary system. If there's something else, an alternative, I'd be all ears!

On a side note, I would challenge Mr Armstrong's text - he specifically states "The value of gold still rose and fell with discoveries". A quick reference to the yearly average price of gold at Kitco's site from 1833 to 1999 (the chart I used, middle of the page of historical charts and data) shows an incredibly stable price for gold, which makes sense, because the price was fixed by decree.

 

[Phiber]

I would hope that mankind - at least in the short term, might use this recent history to learn from, and demand a better monetary system.

Don't get your hopes too high on that!

 

[tolly_67]

What you are suggesting is exactly what the very first post addresses, the move to electronic money.....your choice would be gold...but it could just as easily be any other tangible good....

Actually, to my reading, the answer provided my Martin Armstrong seems to suggest a new - completely fiat - and completely electronic currency (as opposed to money).

I personally hope this won't be the case - fiat currencies that can be, and are, created out of thin air got us to where we are today.

I would argue that where we are today is actually in a worse position from many points of view than any economy has ever been over the documented course of human history.

Moving to a system as noted by Martin Armstrong would not, in my opinion, solve anything - all it may possibly do is "reset the shot clock" - or, put another way, buy us another 40 odd years before the next reset will be required.

I would hope that mankind - at least in the short term, might use this recent history to learn from, and demand a better monetary system.

With regard to that, I'd be very open to suggestions of what could replace gold

I think mankind has tried stones, seashells and a few other things over a period of time - unfortunately, they didn't seem to work out too well.

I think gold is the ultimate solution for this - it's divisible, it's fungible, it's scarce, a very limited amount can be gained each year, it's recognisable... it meets all the criteria (not all listed here) of a sound monetary system. If there's something else, an alternative, I'd be all ears!

On a side note, I would challenge Mr Armstrong's text - he specifically states "The value of gold still rose and fell with discoveries". A quick reference to the yearly average price of gold at Kitco's site from 1833 to 1999 (the chart I used, middle of the page of historical charts and data) shows an incredibly stable price for gold, which makes sense, because the price was fixed by decree.

This is true....the price of gold was fixed but what the gold could buy is what changed....the gold rush of california and australia put a lot of new gold into the market and as a consequence the gold would not buy as much...this what he means by the value rose and fell....not the price....there is a difference.. and the same thing would happen again....

 

[ArgentaLupa]

Gold does not provide for a stable monetary system and that is why Bretton Woods collapsed.

Complete and utter nonsense.

 

[volrathy]

lol gold provided a stable monetary system and bretton woods was put on hold temporarily while they printed money for war

 

[ArgentaLupa]

lol gold provided a stable monetary system and bretton woods was put on hold temporarily while they printed money for war

Yep. It's like getting yourself in to a drug habit costing $100,000 a year, whilst only earning $75,000 a year and claiming that the problem is that your wages are insufficient, so you need to be able to counterfeit your own money......erm, no. The problem is that you developed an unsustainable drug habit and are spending way beyond your legitimate means

 

[bordsilver]

+1 to basically everything Midnight man said.
-1 to the opening post and basically everything tolly said except his point about the deleterious role of government forcing fiat onto us and their desire to keep doing so. This is why the government needs to be wound back/abolished.

 

[tolly_67]

oooooooh that hurts....I only got a - 1 for my posts.....
If I was playing golf that would be alright...
Understand I am not actively supporting or against the original article......
The issue of gold price versus gold value during the 1800's could be a good place to start...
According to armstrong the price as we all know did not change but the value (i.e. what it could be exchanged for) altered.
Instead of simply criticising, perhaps someone should do some of their own investigation to prove or disprove...or confuse further....what we are talking about. Newspaper articles etc would be a good place to start.
I am open to new thoughts....not a good idea to get married to a position.

 

[bordsilver]

Let's start with his assertion that:

The whole argument is a gold standard inhibited growth and created massive deflation the 26 year Long Depression of the late 19th century.

Since he does say, it is the whole argument.

The Long Depression is actually a myth. It is true that it was a period of huge change and turmoil but when you look at the real outcomes (rather than the price outcomes) people's living standards improved very considerably as a result of massive industrial progress.

Murray Rothbard wrote a comprehensive book of the period.

Unfortunately, most historians and economists are conditioned to believe that steadily and sharply falling prices must result in depression: hence their amazement at the obvious prosperity and economic growth during this era. For they have overlooked the fact that in the natural course of events, when government and the banking system do not increase the money supply very rapidly, freemarket capitalism will result in an increase of production and economic growth so great as to swamp the increase of money supply. Prices will fall, and the consequences will be not depression or stagnation, but prosperity (since costs are falling, too) economic growth, and the spread of the increased living standard to all the consumers.

As summarised HERE

Accompanying the overall growth in real prosperity was a marked shift in consumption from necessities to luxuries: by 1885, 'more houses were being built, twice as much tea was being consumed, and even the working classes were eating imported meat, oranges, and dairy produce in quantities unprecedented'. The change in working class incomes and tastes was symbolised by 'the spectacular development of the department store and the chain store'. In short, the Great Depression of 1873-96, considered as a depression of anything except the price level, appears to be a myth:

Prices certainly fell, but almost every other index of economic activity - output of coal and pig iron, tonnage of ships built, consumption of raw wool and cotton, import and export figures, shipping entries and clearances, railway freight clearances, joint-stock company formations, trading profits, consumption per head of wheat, meat, tea, beer, and tobacco - all of these showed an upward trend.

 

[bordsilver]

Gold was money during the 19th century. The value of gold still rose and fell with discoveries. It did NOT provide anything tangible and stable.. Just look at the Inflation Index for that period.

Wow. So volatile. Up and down by 50-100% over decades (mostly down - ie purchasing power increase) as opposed to one way direction up of 500% loss in purchasing power in the last half of the 20th century. Clearly gold couldn't serve as both a store of value AND as currency

Source

 

[tolly_67]

Of course this is all true, the technological advancements of the 19th century is what made this all possible...nobody doubts this
but this does not address the issue of gold price versus gold value when considering the affects of the gold rush.....this is the issue....how stable is gold really as a currency? It is a question I want an answer to also....this is not a question that can be answered easily by a few lines on silver stackers....

 

[bordsilver]

Of course this is all true, the technological advancements of the 19th century is what made this all possible...nobody doubts this
but this does not address the issue of gold price versus gold value when considering the affects of the gold rush.....this is the issue....how stable is gold really as a currency? It is a question I want an answer to also....this is not a question that can be answered easily by a few lines on silver stackers....

??? See the graph. Doesn't that answer your question?

What do you really mean by "stable as a currency"? This can be a very misleading concept so we should ensure we're on the same page.

 

[tolly_67]

Gold was money during the 19th century. The value of gold still rose and fell with discoveries. It did NOT provide anything tangible and stable.. Just look at the Inflation Index for that period.

http://forums.silverstackers.com/uploads/6824_inflation_1800_to_2005.png

Wow. So volatile. Up and down by 50-100% over decades (mostly down - ie purchasing power increase) as opposed to one way direction up of 500% loss in purchasing power in the last half of the 20th century. Clearly gold couldn't serve as both a store of value AND as currency

Source

 

[fiatphoney]

Of course this is all true, the technological advancements of the 19th century is what made this all possible...nobody doubts this
but this does not address the issue of gold price versus gold value when considering the affects of the gold rush.....this is the issue....how stable is gold really as a currency? It is a question I want an answer to also....this is not a question that can be answered easily by a few lines on silver stackers....

Yes there are so many 30gram/t mother lodes that would disrupt supply dynamics just waiting to be found these days.

 

[tolly_67]

That is a problem...what if the economy triples in size and the gold quantity has not kept up near to this? Do you raise the fixed value of the gold?

 

[bordsilver]

That is a problem...what if the economy triples in size and the gold quantity has not kept up near to this? Do you raise the fixed value of the gold?

Why would gold have a fixed value? It's natural unit is ounces. The longer term purchasing power per ounce would increase, simple. In the absence of shocks like war, it's day to day price/purchasing power would remain constant - just like an A$ does now.

Over the course of a year or few years, producers and retailers would adjust their prices based on the amount and demand for currency versus a store of wealth - just as they do now. In the case of XAU the price trend would be a fall (like you see with computers, telecommunications, cars etc except across a much wider range of commodities and services). In the case of A$ the price trend is basically always up as the rate of creation of new A$ is faster than the underlying growth in real good and services.

This means that XAU can act as both a day to day currency as well as a savings plan, whereas the A$ acts as currency but is a disincentive to using it to save and indeed encourages bringing forward consumption via debt.

 

[bordsilver]

Gold was money during the 19th century. The value of gold still rose and fell with discoveries. It did NOT provide anything tangible and stable.. Just look at the Inflation Index for that period.

http://forums.silverstackers.com/uploads/6824_inflation_1800_to_2005.png

Wow. So volatile. Up and down by 50-100% over decades (mostly down - ie purchasing power increase) as opposed to one way direction up of 500% loss in purchasing power in the last half of the 20th century. Clearly gold couldn't serve as both a store of value AND as currency

Source

 

[fiatphoney]

That is a problem...what if the economy triples in size and the gold quantity has not kept up near to this? Do you raise the fixed value of the gold?

No an ounce remains an ounce, sub-economic mines become profitable. Plenty of gold out there at 0.1gram per tonne at the right price. What don't you understand about simple free market supply/demand microeconomics, and your deluded need to allow stealing of purchasing power through centralised systems.

 

[tolly_67]

This does not address the issue. It will not take the billionaires much time to work out that by hoarding the gold you remove currency from the market and if it cannot be replaced, it leads to deflation which increases the purchasing price of the gold......this will happen because without enough gold, how do you bid up the price of a good or a service....gold as a currency becomes a very good investment....so much so that it would create a spiral....the more that is hoarded, the more it will buy.....

 

[fiatphoney]

if it cannot be replaced, it leads to deflation

Think about what you said. So billionaires with diversified assets want deflation in parts of their portfolio to gain inflation in gold. Furthermore their customers can now buy products at deflated prices, which destroys their businesses. If they hoard too much gold, monetary substitutes will be procured as in any market ie silver. You really are beating a dead horse, this is really basic High School economics here. Building wealth is much more achievable under an honest money system.