Economics - Gold standard

So I'm pretty ignorant on the subject of Macro-Economics and would like to know,is having a resource-based economy or gold-standard an effective monetary system?

The gold standard is something tinfoils love to circle jerk about, because it is opposed to "unreal" fiat money.

The gold standard creates constant deflationary pressure. That means, a government owning a fixed amount of gold can't expand the amount of money in circulation as easily. So if the amount of goods in circulation increases, there is less money corresponding to each good, therefore triggering deflation. Deflation, money becoming more valuable and prices falling, sounds good, but it is NOT.

In the US, there is a long practice of printing money that is backed by petroleum, as it's sold in dollars. The US would be worse off without the gold standard.

>deflation is NOT good.

Not an argument.

the whole point of "The Gold Standard," in theory is to curtail inflation with a solid backing of gold so that your cash value is tied to the value of gold since gold is a finite resource.

Fiat Currency is where your currency is held based on the intrinsic value of your nations current economic out put.

Both have their pros and cons.

There are currently about 364 million pounds of gold in the world circulation.

there are about 7.4 billion people in the world.

this means each person could have 5/100ths of a pound of gold, which is equal to 1/20th of a pound.

1/20th of a standard pound is equal to .73 troy ounces. Gold is currently worth $1310 per troy ounce so each human on earth could have gold worth $956.

since $956 won't buy you groceries and a house for a month in most developed nations, the idea is impossible.

there simply isn't enough gold in the world to sustain any economy, the price would have to be artificially inflated by several orders of magnitude. Which would create a fiat currency without gold backing. Defeating the purpose of the gold standard.

shut up you dumb faggot america was on the gold standard until the 1960s

between 1933 and 1974 it was illegal for private citizens to own gold in the US. Because we didn't have enough on hand to back our currency.

so in reality we went off the gold standard in 1933. We just didn't admit it until 31 years later. Probably abandoned it even earlier, we didn't mint gold coins for most of the early 1900's.

Why do you take the arbitrary dollar price of gold? When we use a gold standard, the dollar price will basically be infinate, and the price of everything real will just adapt to the existing gold.

It is also no problem to use currency with a gold standard, or phone payment, card, or whatever.

And deflation is a good thing. Why would anyone want higher prices? Are people fucking stupid. You go to the store and think, damn, everything is too cheap, we need higher prices so i can buy less.

And some fag mentioned that today, the amount of currency adjusts to growth, just check the fed money printing graph, unless the US economy grew by 200℅ the last few years, you are wrong.

>And deflation is a good thing.
Are you serious?
Japan is doing everything possible and impossible to avoid deflation, cause its catastrophic. Just think a bit further than lower prices.

>ITT "I've read a few Wikipedia articles so here's my opinion on economics"

...

I use the arbitrary dollar value as a reference point people can understand. This is what an ounce of gold buys (X dollars worth of goods).

The value of gold in purchasing power has remained pretty constant throughout our history, the number of dollars it buys has changed is all.

and as you say, we can decide what it buys, but then we've created an artificial value rather than a real one. The value is tied to government control rather than markets. That is a fiat currency and not a gold standard.

the entire idea of the gold standard is that the currency has value determined by a marketable commodity. As soon as you artificially increase the value you don't have the backing of the commodity anymore, you just have fiat currency made of rare metal that's actually worth a fraction of what it says it is.

which we already have.

Bruh, don't try to argue actual economics in a gold standard thread.

Gold is a meme
currency can only be backed by law, not resources or debt like it is now

>captcha select store fronts
>cash 4 gold

Look at what happened to the Romans. They removed themselves gradually from the gold standard and minted coins with increasingly less gold until there was zero gold in those coins right before the empire collapsed.

Fun fact: During FDR's presidency, he arbitrarily pegged the price of gold at $21/oz. When he was asked why he chose $21 as the value, he replied that 7 was a lucky number so he tripled it.

Even currency backed by gold can be manipulated.

(source: Thomas Sowell)

post hoc ergo propter hoc

>Even currency backed by gold can be manipulated.
that often backfires on the manipulator though.

examples being when the US went bimetallic because we mined so much silver in Colorado the dollar became worthless.

or when FDR pegged the price of gold at an arbitrary value and years later people melted their coins down and sold them on the open market because the gold was worth more than the coins said.

You need currency to represent new goods and services created in the economy. Unless you can infinitely mine gold there's going to be deflation. Fiat currency solves this problem and also allows counter-cyclical monetary policy that helps the economy in crisis.

This guy gets it.

MV=PQ

May I ask why deflation is catastrophic? Trying to puzzle it out but I don't know a huge amount about economics.

Lets say a deflation spiral is beginning, when deflation happens you want to hold onto your currency in hopes of it gaining value as it buys more goods. Everyone saves they're money under the matress and empties the banks, no one buys any goods.

This leads to businesses not selling goods, having to close and lay people off, banks not having capital to loan people out or even pay back deposits. Basically everyone falls for a prisoner dilemma where they want their money to be really worth it, but it ends up crashing the demand side of the economy.

Suppose you owe $100 on a loan, and this amount is fixed by contract. During inflation, more money is in circulation so the value of that $100 goes down because it is a fixed amount. During a deflation, the opposite happens. Less money is circulating, so both wages and prices fall. The value of that $100 goes up, but your wages have fallen, so it becomes harder than before to pay back $100. It will feel as if you are paying back, say, $150.

Both inflation and deflation are harmful, but they affect different people differently, but i would say that deflation is more harmful because it is more unpredictable by it's very nature. long run Inflation is also a bad thing if it is also unpredictable. However, is inflation remained at a steady rate year in and year out, then it is not necessarily as harmful because people can plan that into contracts. So if you know for certain that inflation will be 20% per year for the next 5 years, then any financial arrangements you make can take this into account and plan accordingly.

The gold standard is not a good system
Gold is still a good basis for a monetary system
But not at a fixed price

The Euro has introduced the new system
i dont care if you understand or believe

ITT gold shills

Go to class and you'll understand why gold is a fucking joke.

Thanks very much you two. Makes total sense.

This is nonsense. Some very patient individuals will, yes, perhaps do this. But you cannot put off the purchase of, for example, a new laptop if your current one is broken. People are driven by wants and desires, they are not robots who can simply shut down when they want, only to boot up later again. Time is a scarce resource.

Gold doesn't lead to price stability.

It's a constant hopping between double digit inflation and deflation.

Cause that's what did it. Not the rampaging barbarian hordes or anything.

Books you'd recommend to get a wider knowledge of how economy works?

>fiat money
>good
Of course, it had to be a german flag

Yeah I'm loving the replies here, I could also use some book/resource recommendations.

So if an actual declation spiral begins I'd stop buying food in order to save money? I'd not buy a new computer if the old one breaks? I'd not buy clothes if I need new ones?

King, J. E. 2012. The Elgar Companion to Post Keynesian Economics

Ask gaddafi how it worked out for him.

There is no need for a gold standard. Instead,
>repeal income tax
>legally define money as anything parties to a transaction agree to exchange
>enforce contracts based on legally defined money
>watch as a the best cooperative electronic tally stick system with nominal tranaction costs becomes the standard

Thank you anons!

Have you seen Stefan Molyeneux's video on the fall of Rome? By the time they start getting into those fights, Rome is already pretty much dead. The runaway inflation was causing the economy to tank, and their currency at one point basically became worthless.

One of the big reasons that being a Roman citizen was good was because their currency was good throughout the empire, which made trade easy. Once the economy fell, there was no reason to stay a Roman, especially since they were just screwing everyone over with insane inflation. The economy tends to be the cause of most wars.

I actually meant to tag

with my post. Whoops.

There is nothing inherently wrong about deflation especially if it's predictable by economic actors. The goldern standard is great because it reduces uncertainty about prices and interest rates. Under the goldern standard nominal prices in America stayed contant for 70 years.

OC

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