51–60 of 144 posts
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My understanding is that most of that gold isn't the US's, but other countries' gold that the US is holding for them (because securing tons of gold isn't easy).
“ because securing tons of gold isn't easy” Why not?
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An increasing population wouldn’t need more gold, gold (and money backed by it) would just become more valuable, right? Or, in other words, prices would drop and there would be deflation, for better or for worse.
Which means people need to work harder for every hamburger or the like and a deflationary spiral could occur which is even more terrible than an inflationary one. I think the parent was referring to ‘to keep the commodity/cash stable’
I don't get what's so confusing about gold. It's limited because it was created by the universe and it can be easily stored. If we had some gold-backed system, a real one, then where's the inflation ? Where's the problem for the average person ?
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Pray tell why bitcoin is inevitable as opposed to the gold standard :)
I don't think it's inevitable, but bitcoin can be audited and transferred immensely more easily than gold. The fact that historically, foreign countries kept gold in vaults in the US, speaks to this. Also, gold gets mined at a faster rate when its value goes up. In that sense, bitcoin is a "harder" money. There's also the possibility of people mining gold from asteroids, which could destroy the scarcity and value of…
You know, for the time being, just until the astroid mining suddenly kicks in.
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That is not how it works. Even if you could usurp all the mining powers, the Coins are still owned by the keys. You only have the ability to censor future transactions. Mining controls the future, key holders control the past.
You control future transactions with majority computing power i.e. double spend coins
Here's how it goes, https://www.youtube.com/watch?v=CjyJhKpLUBU
There are real practical problems with gold and changing economies. What happens when your population goes up - you need more gold. Or economic growth. Similarly if gold is discovered like Spain's Latin American winnings it causes inflation.
It doesn't help that most modern day advocators of a gold standard have but a dim understanding of history and economics.
So, first: if the population in one country goes up, they can import more gold from elsewhere. It's a commodity after all.
Similar for one country digging up a lot of gold.
(The global economy wasn't quite as integrated back when Spain had their windfall from the new world. But even then, the long term impact on the price level in Spain compared to the rest of the world was rather modest compared to levels of inflation we see today.
Spain just imported more goods and services from the rest of Europe for a while than they exported; naturally losing gold in the process.)
So the real concern is about global population vs global gold stocks.
Similarly for economic growth: productivity increases under a gold standard lead to decrease in nominal prices. See https://news.ycombinator.com/item?id=26386115 for how this works (and worked in history).
The more important problem isn't so much population changes or economic growth; it's changes in demand for money balances!
Depending on the state of the economy, people want to hold on to different amounts of money vs other assets. That's true not only in nominal terms, but also in inflation adjusted real terms.
Those swings can be wild.
A central bank can print money (or take money out of circulation) to adapt to those swings in the desire for money balances. Look at the various measures of amount of money, like M1 or M2, change over time. Eg M2 for the US at https://fred.stlouisfed.org/graph/?g=MSEz
It is entirely fair and accurate to say that this would a disaster for an economy trying to run on gold coins.
Luckily, we have and had the technology to make the gold standard work: fractional reserve banking and privately issued bank notes. See https://www.alt-m.org/2015/07/29/there-was-no-place-like-can... for how that worked fabulously in Canada, and why it worked so much worse in the US.
There are real practical problems with gold and changing economies. What happens when your population goes up - you need more gold. Or economic growth. Similarly if gold is discovered like Spain's Latin American winnings it causes inflation.
The thought has crossed my mind that the answer is, it is impossible to have a long-term gold-backed system (or any other commodity), for all the various reasons that doesn't work, and it's impossible to have a long-term system not based on gold or some other set of commodities, because it is impossible for a government to be given the power to print arbitrarily without eventually using it, unto the death of that cur…
Why would the government need to be involved in your currency at all (commodity based or otherwise)?
Earlier quoted context omitted.
An increasing population wouldn’t need more gold, gold (and money backed by it) would just become more valuable, right? Or, in other words, prices would drop and there would be deflation, for better or for worse.
Which means people need to work harder for every hamburger or the like and a deflationary spiral could occur which is even more terrible than an inflationary one. I think the parent was referring to ‘to keep the commodity/cash stable’
The relative prices of hamburgers to labour don't need to be impacted by the price of gold, or do they?
What do you mean by deflationary spiral? A decrease in price level during a recession is bad news indeed; but a decrease in prices in some sector due to productivity growth is great for business. Just look at falling prices of electronics in the last few decades.
I don't get what's so confusing about gold. It's limited because it was created by the universe and it can be easily stored. If we had some gold-backed system, a real one, then where's the inflation ? Where's the problem for the average person ?
Gold isn't confusing, it just doesn't work so great for the economy as money. Money is more complicated than just being a token that you can own.
Money that's based on gold and redeemable into gold on demand worked fairly well in history.
(Do note, that different from using gold directly for all transactions. And also different from the interwar gold standard or Bretton Woods, were private individuals did not have the right to demand redemption.)
There are real practical problems with gold and changing economies. What happens when your population goes up - you need more gold. Or economic growth. Similarly if gold is discovered like Spain's Latin American winnings it causes inflation.
Yeah, a big thing that makes gold messy is that you can have massive supply shocks. Asteroid mining in the next few centuries are likely to make that worse. Gold being poorly divisible also makes it very impractical for day to day coinage of a growing population. Eventually, the coins start getting so tiny as to be impossible to work with. I believe that's a big reason why we started using silver and copper for small…