Text 30341, 61 rader
Skriven 2009-03-27 20:42:48 av Robert Bashe (2:2448/44)
  Kommentar till text 30277 av Roy Witt (1:397/22)
Ärende: Gold
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Roy Witt wrote to Robert Bashe on Wednesday March 25 2009 at 14:35:

RB>> When the entire world effectively left the gold standard in the
RB>> 1930s, there was still at least the theory that "part" of the paper
RB>> (fiat) currency was backed by gold reserves. I seem to remember
RB>> reading somewhere that the "part" was supposed to be about 25% in the
RB>> States.

RW> Which was all a crock of s**t...Gold standards were the cause of bank
RW> runs and depressions in the late 19th and early 20th centuries.

That is not true any more than the present recession/depression is due to fiat
currency. There were, and are various reasons for financial panics. Read up on
the failure of the Knickerbocker Trust sometime to see how such things
happened.

RW> In the last 60+ plus years that didn't happen because the gold
RW> standard was abandoned.

No depressions, no bank runs? You have a short memory, my friend. They just
don't call them "depressions" anymore, but the more polite "recession", and
bank runs (usually) don't occur because the FDIC and the FED force insolvent
banks into mergers with larger ones nowadays. That's a legal change that has
nothing to do with the gold standard.

The only problem with a metal standard, be it gold, silver or platinum, is that
the supply of money can't be modified to meet growth and the current economic
situation - it's not flexible enough for the kind of world we live in.
Unfortunately, the "paper standard" also lends itself marvelously to planned
inflation, which is one of the reasons you can't buy a big chocolate bar for
five cents anymore.

There is just no really "perfect" way out of this quandry, and we have to take
the bitter with the sweet. But it's always a good idea to keep a tight reign on
our political "friends" to make sure they don't succumb to the popular device
of inflating the currency to pay for their political hobbies. That was also
done when we had metal standards, but was more obvious to the general
population (lower precious metal content and the like), and was therefore
"somewhat" less prevalent than nowadays.

RB>> But since 1974, I'm not sure anymore. As far as I know, paper
RB>> currency everywhere is presently backed with - well, nothing in
RB>> paricular except the pertinent economy,

RW> That's true, although the US dollar used to have 'silver certificate'
RW> printed on it. They're a collector's item now.

Silver certificates were redeemable in silver dollars at the bank, which I did
until I left the country in 1966. After that, there was a real run on silver,
leading the government to first complicate the redemption: instead of silver
dollars, you got a plastic packet of silver dust. Then, in 1974, all pretences
were dropped and the silver certificates were withdrawn, along with the promise
to pay silver on demand. Now there's none of this "pay on demand" in anything
on the green-seal notes. And a genuine US silver dollar (they were last minted
in 1935) costs around $35 in paper dollars nowadays. Makes you think a bit,
doesn't it?

Cheers, Bob

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