MattNC

Returning to a Gold Standard Is a Bad Idea

Couple of questions for you:
1) Are you saying that money - as a means of facilitating the exchange of goods and services - should be backed by nothing other than an empty promise?
2) Why is getting rid of fractional reserve banking so radical in your opinion? It's essentially the same thing as creating money out of thin air.

I think your reasoning is flawed where you state that returning to a gold standard "would mean a drastic shrinking of world GDP " - if money is returned to a note that is redeemable as some real commodity (gold, oil, or anything with a limited supply) - then the value of the commodity goes up, certainly, but that doesn't diminish the reality of the items being exchanged with those notes.

And I think you make a good case for returning to a gold standard - albeit unwittingly - the Roman empire lost a good chunk of its gold when it was invaded, and it was invaded BECAUSE it was a militaristic empire. Forcing a powerful nation to be restricted to a gold standard does two things: 1) it minimizes its ability to fund aggression through fiat currency, and 2) it forces a nation to be wiser in its foreign relations and focus on its defensive capabilities rather than its offensive capabilities.

When the Roman empire suffered a credit crunch, that may have been bad for the Romans, but it was probably a relief to the rest of the known world which had a short breather from Roman imperialism. Of course, the Romans, due to their militaristic imperialism, probably responded by starting up new campaigns to loot the gold from less powerful nations. Hmm...I wonder if there could be some parallels in this for our times...