mick silver
1st May 2011, 09:06 AM
http://www.forbes.com/2011/04/28/gold-standard-purpose.html ... Even its adherents have an imprecise grasp on why we need gold-defined money.
What is the purpose of a gold standard system?
If you ask the typical academic Keynesian economist this question, he would probably say that there was no purpose at all. People used gold just because it is shiny and beguiling, and therefore attractive to superstitious, primitive people.
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If you ask the typical gold standard advocate this question, he would probably respond with some vague platitudes like "gold is honest money," or perhaps would argue that a gold standard prevents government debt issuance, or some such thing. They have, I would say, only an imprecise grasp of the purpose of a gold standard system.
And what of the typical lay person, with an interest in these matters? From one side she hears that there is no purpose at all, and from the other side she hears a somewhat disjointed collection of vagaries, which gives rise to the thought that perhaps the first side has a point.
A gold standard system has a very specific purpose. If you don't understand the purpose, then of course it wouldn't seem to make much sense. If you didn't know that the purpose of an airplane was air travel, then you might think it was a rather badly designed movie theater.
The purpose of a gold standard system is to produce a currency of stable value.
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The gold standard must eliminate the creation of currency by bankers. It is as simple as that. The world's monetary scheme is a supreme fraud where bankers control governments, and have designed a
Read All Comments (6)Post a CommentNow we can say what a gold standard does not do: It does not prevent panics, crashes, depressions and so forth, caused by various factors unrelated to currency value. It does not prevent government debt issuance--historically, governments favored gold standard systems because they make issuing debt easier--although it does prevent printing-press finance of government expenditures. It does not cause some sort of "balanced trade"; in fact it tends to facilitate international capital flows, which go by the confusing term of a "trade imbalance."
A gold standard system does not put some sort of artificial limit on the supply of money. You can have as much currency as your economy needs, within the constraint that the currency must be stable in value. In other words, you cannot over-issue money to the point that it loses value. A gold standard system does not inhibit any of the various financial tools common today, such as credit cards, bank transfers, derivatives or other instruments. All of that could be just the same as today, denominated in a currency of stable value.
A gold standard system does not exclude central banking of the 19th century variety--the "lender of last resort," an important element for financial system stability in those times. Of course, it would disallow the sort of currency fiddling common to central banks today. The world's greatest gold standard institution and the world's first central bank were in fact the same bank--the Bank of England.
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What is the purpose of a gold standard system?
If you ask the typical academic Keynesian economist this question, he would probably say that there was no purpose at all. People used gold just because it is shiny and beguiling, and therefore attractive to superstitious, primitive people.
Article Controls
reprint
newsletter
comments (6)
share
del.icio.us
Digg It!
yahoo
rss
If you ask the typical gold standard advocate this question, he would probably respond with some vague platitudes like "gold is honest money," or perhaps would argue that a gold standard prevents government debt issuance, or some such thing. They have, I would say, only an imprecise grasp of the purpose of a gold standard system.
And what of the typical lay person, with an interest in these matters? From one side she hears that there is no purpose at all, and from the other side she hears a somewhat disjointed collection of vagaries, which gives rise to the thought that perhaps the first side has a point.
A gold standard system has a very specific purpose. If you don't understand the purpose, then of course it wouldn't seem to make much sense. If you didn't know that the purpose of an airplane was air travel, then you might think it was a rather badly designed movie theater.
The purpose of a gold standard system is to produce a currency of stable value.
Related Stories
Addressing The Notion Of 'Different' Gold Standards
A Currency Board Linked To Gold
A Strong Focus On The Concept Of Currency Value
Why the Gold Standard Still Matters Today
The Astonishing Genius Of Men In Tights
Related VideosOvercoming The Debt SupercycleEconomists Reduce Economy By Billions of DollarsTD Ameritrade's Trade ArchitectTax Deadline: Making Last-Minute MovesTaming The Taxman: The Elusive Goal Of Reform
StoriesVideosRate This Story
Your Rating Overall Rating Reader Comments
The gold standard must eliminate the creation of currency by bankers. It is as simple as that. The world's monetary scheme is a supreme fraud where bankers control governments, and have designed a
Read All Comments (6)Post a CommentNow we can say what a gold standard does not do: It does not prevent panics, crashes, depressions and so forth, caused by various factors unrelated to currency value. It does not prevent government debt issuance--historically, governments favored gold standard systems because they make issuing debt easier--although it does prevent printing-press finance of government expenditures. It does not cause some sort of "balanced trade"; in fact it tends to facilitate international capital flows, which go by the confusing term of a "trade imbalance."
A gold standard system does not put some sort of artificial limit on the supply of money. You can have as much currency as your economy needs, within the constraint that the currency must be stable in value. In other words, you cannot over-issue money to the point that it loses value. A gold standard system does not inhibit any of the various financial tools common today, such as credit cards, bank transfers, derivatives or other instruments. All of that could be just the same as today, denominated in a currency of stable value.
A gold standard system does not exclude central banking of the 19th century variety--the "lender of last resort," an important element for financial system stability in those times. Of course, it would disallow the sort of currency fiddling common to central banks today. The world's greatest gold standard institution and the world's first central bank were in fact the same bank--the Bank of England.
Page:12 Next