Text 30382, 102 rader
Skriven 2009-03-28 10:44:17 av Roy Witt (1:397/22)
  Kommentar till text 30341 av Robert Bashe (2:2448/44)
Ärende: Gold
============
27 Mar 09 20:42, Robert Bashe wrote to Roy Witt:

 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
 RB>>> the States.

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

 RB> That is not true

Ahhh, but it is...the gold standard broke down during World War I, as
major belligerents resorted to inflationary finance, and was briefly
reinstated from 1925 to 1931 as the Gold Exchange Standard.

Under that standard, countries could hold gold or dollars or pounds as
reserves, except for the United States and the United Kingdom, which held
reserves only in gold.

Eventually this version broke down in 1931 following Britain's departure
from gold in the face of massive gold and capital outflows.

The rest is history as FDR tried to fix things by dropping the Gold
Standard in 1933.

 RB>  any more than the present recession/depression is
 RB> due to fiat currency. There were, and are various reasons for
 RB> financial panics. Read up on the failure of the Knickerbocker Trust
 RB> sometime to see how such things happened.

I'd advise that you take a step back and read: The Concise Encyclopedia of
Economics Gold Standard
by Michael D. Bordo

That should open your eyes.

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

 RB> No depressions, no bank runs?

That's precisely what I was referring to.

 RB> You have a short memory, my friend.
 RB> They just don't call them "depressions" anymore, but the more polite
 RB> "recession", and bank runs (usually) don't occur because the FDIC and
 RB> the FED force insolvent banks into mergers with larger ones nowadays.
 RB> That's a legal change that has nothing to do with the gold standard.

Wrong. That is because of the gold standard failure and the switch to
paper backed money.

 RB> The only problem with a metal standard, be it gold, silver or
 RB> platinum, is that the supply of money can't be modified to meet
 RB> growth and the current economic situation - it's not flexible enough

It wasn't flexable enough ever. Since 1834 to 1900, the price of gold was
fixed by the US and the UK at $20...Then they adjusted that in 1900 or so
to $35...inflation?

 RB> for the kind of world we live in. Unfortunately, the "paper standard"
 RB> also lends itself marvelously to planned inflation, which is one of
 RB> the reasons you can't buy a big chocolate bar for five cents anymore.

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

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

You can get any amount of them in Vegas for $1 (at a time)...

                R\%/itt




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