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"What seems astonishing today could become conventional wisdom in a short period of time," says...

"What seems astonishing today could become conventional wisdom in a short period of time," says Steve Forbes, who sees a likely return to the gold standard within 5 years. Forbes is encouraged legislators other than Ron Paul have begun warming to the idea.
Comments (19)
  • Tom B
    , contributor
    Comments (3624) | Send Message
     
    Ron Paul = very, very poor understudy of Ayn Rand = crackpots
    11 May 2011, 08:00 AM Reply Like
  • User 353732
    , contributor
    Comments (4861) | Send Message
     
    All fiat currencies turn to vapor and vanish.

     

    The US dollar will no longer be a global reserve currency within 5 years and will be worthless scrip in 10 ; replaced by some new medium of exchange and store of value.

     

    Whatever emerges will be based on real assets that no Regime or small group of Regimes can debase and is devised by private innovation and experiments, not central bankers.

     

    The US dollar is but one of thousands of currencies in economic history that were onve real money, then debased into claims without the wealth to support these claims, then mere scrip and finally not even a memory.
    11 May 2011, 08:11 AM Reply Like
  • Tack
    , contributor
    Comments (13269) | Send Message
     
    Rather than just offer unsupported diatribe, it night be worthwhile to refer to some actual facts. The modern Japanese Yen has existed since 1871, and the modern British Pound since 1694. Apparently, they aren't vaporizing very quickly.

     

    Also, the idea that any new system of currency pegs couldn't be manipulated by the same politicians that created it is near laughable. Even every incidence of previous attempts to peg to gold was undermined by governments changing conversion prices or even limiting or abolishing conversion rights altogether, all to serve their perceived interests.

     

    Those that make these kinds of hysterical predictions and, even worse, make relatively short-term investment decisions based on this kind of thinking, are very likely to make very poor ones.
    11 May 2011, 08:28 AM Reply Like
  • ehempel
    , contributor
    Comments (106) | Send Message
     
    The Yen was silver backed at its creation and subsequently changed to gold backed in 1897. In WWII the Yen was devalued (funny how governments like to print during war), then afterwards pegged to the USD until the early 1970s. Only since then has it truly been a floating (and fully fiat) currency. Your post is intellectually dishonest to insinuate that they Yen was fiat since 1871.

     

    Same thing for the British Pound. Gold standard up till 1914, pegged to USD at varying rates from 1940 -1971. I do not see how this can be used as an example of a long-lived fiat currency either.
    11 May 2011, 08:57 AM Reply Like
  • WMARKW
    , contributor
    Comments (10324) | Send Message
     
    For nearly 800 years, British subjects were using money that was silver or gold. Japan has used metal coins as well since 2nd century BC. Like the rest of the world, they have abandoned any backing of their currency by metal. And like the rest of the world who uses fiat currency, they too will ultimately crater their currency. That's a fact that is irrefutable based on the history of fiat currencies. 100% failure rate. It's just a matter of time.
    11 May 2011, 12:29 PM Reply Like
  • OptionManiac
    , contributor
    Comments (3327) | Send Message
     
    Not enough gold in the world to cover all transactions. If all transactions were gold based, there could be no real growth. We no longer live in a medieval world.
    11 May 2011, 08:28 AM Reply Like
  • ehempel
    , contributor
    Comments (106) | Send Message
     
    > Not enough gold in the world to cover all transactions.

     

    Come on, surely you aren't so economically illiterate to believe this? Gold's value would adjust such that it will cover all transactions in which it is used.
    11 May 2011, 08:44 AM Reply Like
  • Jolly_Rancher
    , contributor
    Comments (550) | Send Message
     
    If gold "adjusts" then it sounds like fiat. How would it "adjust?" There's a very limited amount of gold. If the US did go on the gold standard, you can bet the government would confiscate all privately held gold including gold coin, and all gold held by GLD, CEF etc. It's been done before and can easily be done again. Though calling it a gold standard would be a serious misnomer. It would simply be a massive one time tax.
    11 May 2011, 09:15 AM Reply Like
  • Tack
    , contributor
    Comments (13269) | Send Message
     
    eh:

     

    Let's take your premise a bit further and see where it leads us.

     

    If gold merely adjusted its price versus everything else, based on supply and demand (and I agree it would), then, as goods and services attempted to expand, based on wants and needs, they would likely be attempting to grow in greater supply than "scarce" gold. That means, relatively, gold would get perpetually more expensive, i.e., increase in value, and the goods would, therefore, get perpetually cheaper.

     

    As one might imagine, any such system, being, by definition, price deflationary, would act as a disincentive to produce and own goods or to buy services today, as both would soon be perceived as being cheaper tomorrow. Capital would get incentivized to be hoarded in currency (gold), which would be seen as constantly increasing in value, rather than used for productive enterprise (goods and services), which would be seen as constantly losing value.

     

    This is why any such system -- which, by design or accident, causes the medium of exchange to be seen as more valuable than that which it purchases-- is counterproductive to growth and expanding enterprise.
    11 May 2011, 09:36 AM Reply Like
  • WMARKW
    , contributor
    Comments (10324) | Send Message
     
    The world seemed to get along pretty well with a bi-metal standard, for example in Britain and the US, etc. prior to the 1930's. We used gold and silver. And....you fail to remember that the option to carrying around gold coins and silver coins was that the currency was gold and silver backed....you could take it and exchange if for gold or silver any time you wanted. Currency may be "handier", but there is no problem with it being gold or silver backed and handling all the transactions in the world. It's a matter of how many $$, Yen, etc will be converted into an ounce of gold. Suppose it was $1000. It could be $10,000 etc.
    11 May 2011, 12:38 PM Reply Like
  • WMARKW
    , contributor
    Comments (10324) | Send Message
     
    Yep...if gold adjusts willy nilly to the whims of the politicians because they just so happen to spend an extra 500 billion or so they don't have. That's the barometer feature of a gold backed currency....we all know what happened when the prices went up after the government snuck 500 billion extra in the pipeline. Then we have the option to say BS on the government and take our $10,000 in savings and go buy some gold or silver instead. In real terms, the gold used to flow through the banking system to settle debts across country lines....when it all started flowing out....then governments decided to change the rules.
    11 May 2011, 12:42 PM Reply Like
  • OptionManiac
    , contributor
    Comments (3327) | Send Message
     
    So we have a few billion more people walking around, we'll need a few more billion coins. Throw in inflation and growing wealth, make that a few more trillion coins. At one time, it was thought that a loaf of bread's worth could be pegged to a stable equivalent of gold. Inflation made the dollar value go up, but not the gold value. Well, Wonder pumps out more loaves in a year than our grand-pappys did the first few thousand years of coin usage.
    11 May 2011, 01:23 PM Reply Like
  • WMARKW
    , contributor
    Comments (10324) | Send Message
     
    Do you not think we have billions of coins floating around today. Gosh, I have thousands of worthless clad coins in my piggy bank at home.

     

    The question is what is the value of the coins you have floating around in the system. If they are denominated in Gold and Silver then you can certainly divide ounces in to 1/2s, 1/4s, 1/10, etc. You could even make coins that had much smaller amounts of gold or silver in them. Gold is sold by the gram in many countries.
    So...the mechanics of the system are not without historical precedent....

     

    The problem with the system is that it unmasks the politicians and governments who spend more than they have in tax receipts. Fiat currencies are a simple mechanism to facilitate deficit spending, and wealth transfer to the debt mongers.
    11 May 2011, 05:13 PM Reply Like
  • Tack
    , contributor
    Comments (13269) | Send Message
     
    wm:

     

    If paper dollars can be revalued based on relative supply and gold likewise, what's the difference in the end? Each item is revalued against the other items they purchase based on their total supply. In each case, the real issue isn't what the value of each currency market is --whether it be a piece of paper or a gold nugget. The real issue is who has the paper dollars or gold nuggets, and that issue can be, has been and forever will be at the pleasure of the issuing government.

     

    The notion that gold-based currencies are somehow immutable and not subject to manipulation by governments is instantly demonstrated by history to be pure folly. Gold-based systems have routinely had their conversion rates (i.e., price pegs) altered; they've had the amounts of currency convertible into gold arbitrarily limited, or even suspended; they've had prohibitions instituted on the export of gold, making its use as a currency in international trade rendered null and void; they've even made possession of the very item underlying the currency, gold, illegal.

     

    There is no medium of exchange invulnerable to government manipulation. Governments can and do take actions, correct or otherwise, that they alone deem in their interest, and no denominator of that currency value can escape their capriciousness.
    11 May 2011, 06:38 PM Reply Like
  • ehempel
    , contributor
    Comments (106) | Send Message
     
    In this I agree with you. Still, I'd like the (at least temporary) advantages of a stable currency with a hard backing ... perhaps we could keep it ... perhaps not.
    11 May 2011, 07:07 PM Reply Like
  • WMARKW
    , contributor
    Comments (10324) | Send Message
     
    The answer to the question is what is driving the revaluation. In the case of a gold/silver backed system, the valuations are being driven by the assets in the system.

     

    In the case of the fiat system, the valuations are being driven by the quantity of fiat currency in the system.

     

    In either case a house is a house. In the case of the gold/silver backed system there would never be an inflationary adjustment leading to a theft by taxes upon sale like you find today in the fiat system.
    12 May 2011, 09:09 AM Reply Like
  • OptionManiac
    , contributor
    Comments (3327) | Send Message
     
    The valuations are also being driven by traders and speculators. (and yes, so are dollars) In a panic, traders will buy as much gold and silver as they can driving down the price of widgets. Gold is horded and deflation occurs. No matter how you look at a currency, we humans are in the midst of it, screwing with it, so we won't get some magic stabilization of the economy. The Fed was created because of a number of recessions during the 1800's. Gold was the coin and didn't help.
    12 May 2011, 09:56 AM Reply Like
  • Ohrama
    , contributor
    Comments (512) | Send Message
     
    When I consider all the technological advances and the needs (that they created or fulfilled) in the last 100 years, I feel that none of the tools of the yesteryears are going to be good. 1) We all (or most of us) realize that the politician / bureaucrat based fiat currencies are no good. 2) The old relic of silver / gold won't be good either since it favors few countries (that has the most deposits), few mine owners, and the few workers that produce them.
    So, perhaps the elite and entrepreneurial ones might (or could or should?) create a barter like system (a matrix of products with cross values among them that keeps changing dynamically) or a sort of dynamic currency system where nothing is permanent. Should only products that are well defined (like there is only one definition for 100% pure gold) or loosely defined products (like the subjective definition for say diamonds and their quality) be part of that group is a matter for discussion. We have all the technologies for this to be feasible (if you add nuclear weapons in that basket and make sure that only few countries would have it, then we can take my concept from pure technological / economical level to the political level).
    Let me offer an example from the technology. We all use the well defined MP3 music players now. A number of competing data compression techniques were researched and floated for years by the elite before the standards committee came and settled for one that would be universal. That needs to happen in this more important field of preserving the individuals hard earned wealth.
    11 May 2011, 02:53 PM Reply Like
  • OptionManiac
    , contributor
    Comments (3327) | Send Message
     
    Wow. Great comments. Some of the best inventions were never even conceived of a few years before their discovery. We have tried to offset the fewer worker per widget problem by coming out with new and different widgets (Example - when I went to college in the '70's, all the widgets I needed fit in a suitcase and a cardboard box. Now, a minivan is needed to hold all the widgets for college living). Somehow a new currency is needed to dovetail the new economy that is barreling down on us.
    12 May 2011, 09:04 AM Reply Like
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