diametrics
in thinking about all the recent events politically in the US, in some sense, it comes down to two different themes. Centralism v. Federalism. ,Monetarists v. "Keynesians. So, on the second of those two themes, I was just curious where you all fall, simplistically.
Here's an easy poll.
Poll Monetarism v. Keynesians.
Comments appreciated.
Here's an easy poll.
Poll Monetarism v. Keynesians.
Comments appreciated.
uh... Better to stick to the classical definitions than to start making up new ones.
If you had picked 1970 instead of 1980, then owners of gold would have come out looking much better
Really? That seems a bit of a stretch. The number of people that bought in the 70s and who did not sell until at least 2006 is probably very small.
Every so often, every 50-100 years, rarely more, there is a crisis of paper currency and almost invariably, that paper ends up worthless.
True enough. That fact of life belies the monetarist premise that currency should be a store of wealth.
There is no major currency from more than a hundred years ago that still has anywhere near the value it had then. Except precious metals.
I guess. This is a function of using a commodity as a currency. A gold standard does not prevent the 50-100 year currency crises you speak of.
Only one currency is gaining in value. Gold.
That's just an issue of supply and demand. When the global currencies finish their decline, demand for them will go up, and the value of gold will go down.
The concept that Gold has no fundamental basis in currency, or its transactions, is a foundational element in Keynesianism.
I'm not sure what you mean by "foundational" here. Anything of value can be used to barter. If everyone agrees to use the same thing for bartering, that thing can become a currency. There is no requirement that currency have an underlying value.
The monetarist view that things of marginal value (like paper and coin) should not change in "value" is a silly one. The view that the world should be on the gold standard only creates a situation where the relative value of the gold backing for such a currency would be marginal with respect to the presumed value of the currency.
There's just not enough gold out there to back currency at anywhere near a 1:1 ratio.
Global gold reserves are worth on the order of $2T. Try running a $75T economy on $2T and you're not going to get very far, unless you back each dollar of currency by 2.5 cents.
Reply
Reply
Perhaps there are few individuals who managed to own gold from the time Nixon closed the gold window until now, but then again, I am sure there are some family, religious, and other types of trust funds that did it for sure. You aren't willing to say that the Ford Foundation has had a time in that 40 years when they didn't own some gold, in some form?
I don't disagree with anything else you say, actually. I dont say that gold shouldnt change in value, perhaps i am not a classical monetarist then. I DO say that currency, if it wants to be a more stable form of currency/exchange, should have more of a backing than just words from far away, that the medium of exchange should be connected in some way to something difficult to produce, limited in supply, and of value to many people. At the moment, and throughout history, that something has traditionally be gold. I think free-floating our currency is a problem now.
But then I also see it is true, if we had remained on a gold standard all the way back to when it mattered, FDR's time (cause Nixon's closing the gold window was aftermath), anyway, if we had kept our currency tied more directly to gold like the gold certificates from before FDR, then our economy would have grown MUCH MUCH slower, with much less of all the positives we accrued during that long period, particularly after the credit boom you reference. So now, we are going to have to pay for all that growth, imo, instead of having a much lesser percentage of it in the first place.
You talk directly about the issue, 2.5 cents "backing" to each current USD? That IS absurd. But that same USD, only 100 years ago however, was backed with approx. 1/20 an ounce of gold. Would we better or worse off if we had left it that way? I don't know, probably there would be far less consumables, the economy would be much smaller, many lives would be much different.
And I wouldnt know how to tie the USD to something tangible at this point, it is too late to try.
One thing I am saying. I would rather own precious metals (that have millenia of being useful currency) than pieces of paper that really only have a few centuries. And that is a different question than I originally posed.
Thanks, as always.
Reply
Given that value is subjective, fashion is whimsy, and needs are changing, stability will always be ephemeral. Sure you could back a dollar with a dollar's worth of gold. But what backs the gold? What guarantees that gold will remain stable and will neither become so scarce as to make backing impossible (as it has), or become so plentiful that it's value drops to less than water (all we need is a modern midas to perfect fusion).
In the end it doesn't matter if a currency is backed. It's just turtles all the way down.
"One thing I am saying. I would rather own precious metals (that have millenia of being useful currency) than pieces of paper that really only have a few centuries. And that is a different question than I originally posed."
True enough. That is not a monetarist position at all. In fact, it shows a rational distrust of the premise that currencies should be stable over the long term.
Reply
Leave a comment