For those interested in the mechanics of a gold standard versus a fiat currency.
The author thinks it won't happen in a developed country for political reasons but that it could be introduced in an emerging country and catch on due to its success. That seems to overlook the reality of the sectoral balance approach and demand leakage to saving. Without a mercantilist economy, such an experiment could not be successful, and developed countries are not going to allow emerging economies to take them to the cleaners without political push back backed with military might.
A View from the Trenches
The mechanics of transitioning to the gold standard…and why it won’t happen!
Martin Sibileau
(h/t Zero Hedge)
The mechanics of transitioning to the gold standard…and why it won’t happen!
Martin Sibileau
(h/t Zero Hedge)
11 comments:
The author seems to conflate a 100% reserve requirement with the need for a commodity money and budget surpluses. But that's absurd. The reserves could be new fiat (Greenbacks) just given to the entire population equally (similar to Steve Keen's "A Modern Debt Jubilee"). And if we wished to do it while keeping the total money (reserves + credit) from growing too rapidly then the universal bailout could be combined with a ban on further credit creation and metered to just replace existing credit as it is repaid plus a little more if desired.
So we don't need gold or budget surpluses or price inflation risk or even trade surpluses to move to a system where deposits are 100% backed by reserves. What we do need is a ban on further thieving by the banks and restitution for its victims, the entire population.
And the process would take 15 to 20 years or less, not 50, I would bet.
Just who exactly is allegedly proposing a "return" to "the gold standard"?
Bob,
Ron Paul for one...
Bob, I don't know that anyone that counts has actually proposed a return to the gold standard, but it is being discussed now, e.g., in Very Serious places like The Financial Times. That's a sufficient reason for an admittedly "fictional" article like this.
Ron Paul for one..
Ron Paul has only proposed abolishing all laws against and taxes on alternative free market forms of money and abolishing legal tender laws in favor of funny money. There is no proposal for a "gold standard".
Personally, I'd abolish funny money a lot sooner.
Reference to history clears away the confusion of present-day politics, by showing beyond cavil that the "dollar" is a specific coin, containing 371.25 grains (troy) of fine silver, and nothing else.
http://www.fame.org/HTM/Vieira_Edwin_What_is_a_Dollar_EV-002.HTM
So, a dollar is a specific silver coin and we can run out of dollars.
Was this your favorite lullaby bob?
http://www.youtube.com/watch?v=azcj749wMIU
Ron Paul thinks that only gold and silver should be legal tender.
A dollar is not a specific silver coin, though there was once a specific silver coin in circulation called a dollar.
There is not enough gold to represent the assets already in the USA.
Therefore, we'll have to upend and taken down so many buildings, streets, real estate, and send to the dump just to make an odd shaped hold fit into a square peg.
"Ron Paul has only proposed abolishing all laws against... free market forms of money"
Wrong again. Ron Paul wants to outlaw deposit money (bank money), which is a free market form of money.
Ron Paul wants to impose gold and silver as the only forms of legal tender.
Bob,
here's a real nightmare image for you:
http://i.imgur.com/XaiUx.gif
;) just kidding friend ... hang in there Bob!
rsp,
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