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US Gold Reserve Act

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Re: US Gold Reserve Act

#21

Post by AnimalMuppet »

david927 wrote: post #16
AnimalMuppet wrote: post #12

Earlier quoted context omitted.

A major economy defaulting is possible (I put no limits on the ability of Congress to bungle things). But why do you think that the response would be going back to the gold standard? (Even if you think that's the answer, why do you think Congress will think it's the answer?)

Because the economies are interlinked and so a major economy defaulting starts a domino process where almost all debt goes into default. The currency of any country is legal note that says that country will pay that. What happens when the country can't? And other countries are in a similar situation? Let's say that you're wealthy and bought three houses for three families and they all owe you that money. You don't wa…

So? If someone can't pay me, it doesn't matter how much I want my value back, I'm not going to get it. That's what happens with bad investments - you lose your money.

And if a country can't pay me in fiat currency, how in the world are they going to be able to pay me in gold?

Re: US Gold Reserve Act

#22

Post by rsj_hn »

dragonwriter wrote: post #14
david927 wrote: post #2

I used to be Keynesian and thought that inflation was a free tax that was also good for investment and growth. Now I understand that it leads inexorably to ruin. It creates a situation where you have to invest in markets, which removes the link to value, e.g. "the market always goes up." Growth investing is an oxymoron and just a variation of a Ponzi Scheme. We're at a watershed moment in modern history. In the comin…

> In the coming months and years, countries will have to return to a gold standard and when they do, they will have to either limit gold sales, deeply penalize it, or just like in 1934, confiscate it. All of those things happened as the gold standard was breaking down to and countries were trying to escape its constraints, as part of the process of getting to fiat and the control of money supply it allows. > This has…

The US suspended convertibility during the civil war and then fought the resulting inflation by reintroducing it later (see https://en.wikipedia.org/wiki/History_of_monetary_policy_in_...)

European nations dropped the gold standard during WW1 and then mostly returned to the gold standard afterward[2]:

"During World War I, most major countries abandoned the gold standard in order to use fiat currency to fund the war effort. As a result, those nations experienced high rates of inflation. The desire to bring inflation under control and restore monetary stability led most countries to plan on returning to the gold standard at some point after the war. Unfortunately, many of the international monetary difficulties of the late 1920s can be traced to decisions regarding the resumption of the gold standard in the mid-1920s. "

There is an interesting history here[1]:

"Britain had left the gold standard in 1914 and responded by increasing the supply of money to stimulate the economy. Production was limited due to substantial decreases in working hours agreed at the end of the war. In 1919 increased consumer demand caused inflation and a price boom.

By early 1920 the Government was more concerned with a desire to return to the gold standard and with the high rates of inflation than with unemployment. In December 1919 the Cunliffe Committee on Currency and Foreign Exchange Rates recommended an early return to the gold standard. The overall objective was to restore pre-war British predominance in international trade, which depended on stabilising the value of sterling around the pre-war dollar exchange rate. This required equilibrium in the balance of payments and the reduction of the money in circulation..."

[1] https://www.nationalarchives.gov.uk/cabinetpapers/themes/eco...

[2] https://cpb-us-e1.wpmucdn.com/sites.dartmouth.edu/dist/c/199...

Re: US Gold Reserve Act

#23

Post by perrygeo »

ChrisLomont wrote: post #18
david927 wrote: post #2

I used to be Keynesian and thought that inflation was a free tax that was also good for investment and growth. Now I understand that it leads inexorably to ruin. It creates a situation where you have to invest in markets, which removes the link to value, e.g. "the market always goes up." Growth investing is an oxymoron and just a variation of a Ponzi Scheme. We're at a watershed moment in modern history. In the comin…

>countries will have to return to a gold standard and when they do Every single one of the 200+ countries left the gold standard since the evidence on how bad economies fared tied to the rate you can dig up gold became irrefutable. Hopefully no major countries get dumb enough to revisit that fiasco. For example, read the academic work showing that trying to stay on the gold gold standard during the great depression l…

Tying our economy to digging up fossil carbon is not working out much better.

Re: US Gold Reserve Act

#24

Post by jesussaves »

david927 wrote: post #2

I used to be Keynesian and thought that inflation was a free tax that was also good for investment and growth. Now I understand that it leads inexorably to ruin. It creates a situation where you have to invest in markets, which removes the link to value, e.g. "the market always goes up." Growth investing is an oxymoron and just a variation of a Ponzi Scheme. We're at a watershed moment in modern history. In the comin…

Funny how in a post about government action taken because of problems with the gold standard you confidently say the gold standard will return. This hasn't all happened before and quite frankly your confidence is totally wild compared to the ignorant things you are saying.

Re: US Gold Reserve Act

#25

Post by david927 »

ChrisLomont wrote: post #18
david927 wrote: post #2

I used to be Keynesian and thought that inflation was a free tax that was also good for investment and growth. Now I understand that it leads inexorably to ruin. It creates a situation where you have to invest in markets, which removes the link to value, e.g. "the market always goes up." Growth investing is an oxymoron and just a variation of a Ponzi Scheme. We're at a watershed moment in modern history. In the comin…

>countries will have to return to a gold standard and when they do Every single one of the 200+ countries left the gold standard since the evidence on how bad economies fared tied to the rate you can dig up gold became irrefutable. Hopefully no major countries get dumb enough to revisit that fiasco. For example, read the academic work showing that trying to stay on the gold gold standard during the great depression l…

First, there are fewer than 200 countries.

Second, they've only left it since the 1970's in the current era and that was because the US could use its dominant position to do so (the Petro-dollar).

Third, it doesn't matter if it's a "rock" or not, as long as it's scarce. In this case, this rock has all of human history recognizing its use in this capacity. You have to remember that the monetization of a scarce material, such as precious metals, is a Nash equilibrium. It's the long-term answer, by definition. The markets don't actually always go up, but gold stays gold.

> read the academic work showing that trying to stay on the gold standard

Like Bernanke's PhD dissertation? Sure. Or I can just wait. Because since his tenure we went from $3 trillion to $28 trillion before the Federal Reserve stopped reporting money supply.

Or just compare the US to Germany in the same time period with its hyperinflation. Which fared better?

Re: US Gold Reserve Act

#26

Post by david927 »

dragonwriter wrote: post #19
david927 wrote: post #15

Earlier quoted context omitted.

> a return to the gold standard after its general global rejection has not happened before But only because a general global rejection didn't happen before. Remember that the "general global rejection" only started with the Nixon Shock in the US in 1971.

> But only because a general global rejection didn't happen before. The “only” part is speculative, but even if that is entirely true, it is still sufficient to show that “this has all happened before” is false.

Someone cleverer than I answered you above. “This has all happened before” is true.

Re: US Gold Reserve Act

#27

Post by david927 »

AnimalMuppet wrote: post #21
david927 wrote: post #16

Earlier quoted context omitted.

Because the economies are interlinked and so a major economy defaulting starts a domino process where almost all debt goes into default. The currency of any country is legal note that says that country will pay that. What happens when the country can't? And other countries are in a similar situation? Let's say that you're wealthy and bought three houses for three families and they all owe you that money. You don't wa…

So? If someone can't pay me, it doesn't matter how much I want my value back, I'm not going to get it. That's what happens with bad investments - you lose your money. And if a country can't pay me in fiat currency, how in the world are they going to be able to pay me in gold?

The assets don't disappear. Gold doesn't disappear. People will still want to trade. They'll have assets and want different assets. Barter stinks. Countries will have surplus grain but want, say, tech. They can use a stable currency, say the Swiss Franc. Or they can use a scarce resource with a historical use as a currency, like gold.

And defaulting doesn't mean you get off, scott free. When you default and go bankrupt, there's an effort to recoup losses. Germany was encumbered with huge debt from World War One and went into full hyperinflation and eventually paid it off... in 2010.

Please, read that essay. It's fascinating and talks about things much better than I can.

Re: US Gold Reserve Act

#28

Post by dragonwriter »

david927 wrote: post #26
dragonwriter wrote: post #19

Earlier quoted context omitted.

> But only because a general global rejection didn't happen before. The “only” part is speculative, but even if that is entirely true, it is still sufficient to show that “this has all happened before” is false.

Someone cleverer than I answered you above. “This has all happened before” is true.

> This has all happened before” is true.

No, it isn't. Individual countries or small groups temporarily suspending the gold standard for a particular emergency and returning to it thereafter has happened (particularly in the final century of the general dominance of the standard).

Very much not the same thing.

Re: US Gold Reserve Act

#29

Post by david927 »

dragonwriter wrote: post #28
david927 wrote: post #26

Earlier quoted context omitted.

Someone cleverer than I answered you above. “This has all happened before” is true.

> This has all happened before” is true. No, it isn't. Individual countries or small groups temporarily suspending the gold standard for a particular emergency and returning to it thereafter has happened (particularly in the final century of the general dominance of the standard). Very much not the same thing.

Are we just supposed to leave out that many empires simply collapsed, like the Roman Empire? So that it didn't go back to a gold standard because it no longer existed?

I mean, maybe you have a point. Few that become heavy meth users ever go back to being healthy.

"Since those dim beginnings in the forests of the Stone Age, governments have been perpetually rediscovering first the splendors and later the woes of inflation. Each new government discoverer of the splendors seems to believe that no one has ever beheld such splendors before. Each new discoverer of the woes professes not to understand any connection with the earlier splendors. In the thousands of years of inflation's history, there has been nothing really new about inflation, and there still is not." -- Jens O. Parson

https://recision.files.wordpress.com/2010/12/jens-parsson-dy...

Re: US Gold Reserve Act

#30

Post by quickthrowman »

AnimalMuppet wrote: post #5
david927 wrote: post #2

I used to be Keynesian and thought that inflation was a free tax that was also good for investment and growth. Now I understand that it leads inexorably to ruin. It creates a situation where you have to invest in markets, which removes the link to value, e.g. "the market always goes up." Growth investing is an oxymoron and just a variation of a Ponzi Scheme. We're at a watershed moment in modern history. In the comin…

> In the coming months and years, countries will have to return to a gold standard... Care to put a number of years on that? I asked you for a concrete prediction, so I'll give you mine. On January 1, 2040, the number of countries that have adopted the gold standard since 2021 will be either 0 or 1.

I agree, I’m willing to bet the OP all of my current savings, as well as all of my future savings over the next 20 years that it will be 0 or 1 countries on the gold standard in 2040.

There is no way any government is going to let the value of their currency be tied to how much metal is extracted from the ground, let’s be real.

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