Remind me; What was the argument AGAINST the gold standard in the USA?

BenBurch · 1st December 2007, 09:10 AM

And yes, I have heard Wm. Jennings Bryan's 1896 "cross of gold" speech. In his own words as there is a recording of him reading it at some later time, but not live at the convention. His argument seems to make no real sense to me. Its just an emotional appeal and not really an argument at all.

But eventually we did move the dollar out of being backed in precious metals or indeed anything at all.

But why?

What was the economic boon that was expected by this action, and can we see evidence that boon transpired and was more than temporary?

Relatives of mine lived through the hyperinflation of the Weimar Republic in Germany, and I know that could never have happened without fiat money, but what would have happened under the same conditions if the money were backed in a specific weight of a precious commodity? Would there have been a social and economic disaster of some other sort?

I am not an economist, though I have studied economics, but what I learned was more about how markets behave, not currencies.

Could somebody who knows this address it?

Thanks!

-Ben

Kerberos · 1st December 2007, 09:36 AM

Originally Posted by BenBurch

And yes, I have heard Wm. Jennings Bryan's 1896 "cross of gold" speech. In his own words as there is a recording of him reading it at some later time, but not live at the convention. His argument seems to make no real sense to me. Its just an emotional appeal and not really an argument at all.

But eventually we did move the dollar out of being backed in precious metals or indeed anything at all.

But why?

What was the economic boon that was expected by this action, and can we see evidence that boon transpired and was more than temporary?

Relatives of mine lived through the hyperinflation of the Weimar Republic in Germany, and I know that could never have happened without fiat money, but what would have happened under the same conditions if the money were backed in a specific weight of a precious commodity? Would there have been a social and economic disaster of some other sort?

I am not an economist, though I have studied economics, but what I learned was more about how markets behave, not currencies.

Could somebody who knows this address it?

Thanks!

-Ben

WEll the arguments agaisnt it depends a bit on what model of a gold standard you're using. Some have argued for a 100% backed gold standard with no fractional reserve banking. This would lead to a massive increase in the price of gold, which would encourage gold hoarding which would further inflate the price of gold. This leads to deflation and significant increases in the price of gold teeth for children who've been drinking to much Cola. Please think of the children!

UserGoogol · 1st December 2007, 09:58 AM

William Bryan Jenning's argument was slightly different. There was a lot of silver floating around being mined, and the populists wanted to be able to go onto a silver/gold standard so that this silver could be added to the money supply, thus causing inflation. This idea was popular among populists because one of the impacts of inflation is that it makes the real value of debt less, which would've been rather nice for many poor farmers who had lots of debt but their assets were in their land, which was largely inflation proof. Additionally, the economy at the time was somewhat deflationary, so expanding the money supply might've been a good idea anyway, although I don't have much economic training myself either. But the populists weren't opposing backing money with precious metals, they just thought that gold in particular wasn't working out too well for them.

gtc · 1st December 2007, 06:50 PM

Originally Posted by BenBurch

Relatives of mine lived through the hyperinflation of the Weimar Republic in Germany, and I know that could never have happened without fiat money, but what would have happened under the same conditions if the money were backed in a specific weight of a precious commodity? Would there have been a social and economic disaster of some other sort?

You can get dramatic inflations (and deflations) with the Gold Standard.

When the amount of gold increases (as happened during the Spanish conquest of South America) then the amount of money in the economy increases proportionally. There is still the same amount of goods, services and other assets so prices increase to balance supply and demand.

On the other hand, the government may decide to debase the currency by decreasing the amount of precious metal in the currency. This can lead to inflation in exactly the same way as increases in the amount of fiat money increase inflation.

Irrespective of whether you have a fiat or commodity currency, the government still has the ability to control the amount of currency by printing more money or altering the exchange rate between dollars and gold.

The only way to prevent an outbreak of inflation is to elect a government that can be trusted to avoid inflation by not printing lots of money or not debasing the currency.

If your government is not trustworty then it doesn't matter whether you have a fiat or commodity currency. If the government is trustworthy, then (in my opinion) there is nothing major to be gained from having a commodity currency.

Kerberos · 2nd December 2007, 12:19 AM

Originally Posted by gtc

The only way to prevent an outbreak of inflation is to elect a government that can be trusted to avoid inflation by not printing lots of money or not debasing the currency.

Or by creating an institution that decides on monetary policy and deliberatly insulating this institution from political preasure. We could even call this institution the Federal Reserve.

UnrepentantSinner · 2nd December 2007, 01:08 AM

I think our economy is largely a deck of cards, but the problem as I see it is credit, spending and per capita earnings (relative to GDP), not debt per se.

And how many depressions/panics were there before the Fed was instituted and how many have occured since?

Kerberos · 2nd December 2007, 02:31 AM

Originally Posted by UnrepentantSinner

I think our economy is largely a deck of cards, but the problem as I see it is credit, spending and per capita earnings (relative to GDP), not debt per se.

And how many depressions/panics were there before the Fed was instituted and how many have occured since?

I don't think that number would be very meaningful. The world and by extension the economy has changed a lot since the Fed has been instituted. TO attribute the number of recesions before and after the fed to the existence of non-existence of the Fed would be a rather enourmous correlation=causation falacy.

UnrepentantSinner · 2nd December 2007, 04:24 AM

Originally Posted by Kerberos

I don't think that number would be very meaningful. The world and by extension the economy has changed a lot since the Fed has been instituted. TO attribute the number of recesions before and after the fed to the existence of non-existence of the Fed would be a rather enourmous correlation=causation falacy.

That is a very valid objection but I think it's something worth considering. I realize that macroeconomics and monetary policy can't be reduced to a quip or singular observation, I mention it more for context because a lot of people are unaware of the crashes and panics that occured other than the Great Depression.

Bikewer · 2nd December 2007, 07:31 AM

I recall one wag saying that most of the gold reserves known are in Russia.....

Darth Rotor · 2nd December 2007, 07:09 PM

Originally Posted by Bikewer

I recall one wag saying that most of the gold reserves known are in Russia.....

Gee, and I thought they were hidden in some secret vaults of the family Rothschild.

Shows what I know.

DR

Lurker · 3rd December 2007, 05:49 AM

Does any country in the world have their currency on a gold standard? Or is the US the only country that "needs" to do this?

DaChew · 3rd December 2007, 05:54 AM

Originally Posted by Lurker

Does any country in the world have their currency on a gold standard? Or is the US the only country that "needs" to do this?

I believe the Swiss Franc is still backed by gold.

ETA: Nope, I'm wrong. Switzerland abolished its gold standard in 1999

Octavo · 3rd December 2007, 06:17 AM

Originally Posted by Lurker

Does any country in the world have their currency on a gold standard? Or is the US the only country that "needs" to do this?

Funny. I was certain that the south african Rand on a gold standard, but apparently that hasn't been the case since 1932.

Quote:

On 28 December 1932 a proclamation by Government ended the convertibility of South African banknotes into gold. This is still the case, as the gold standard has never been reintroduced in South Africa.

ServiceSoon · 3rd December 2007, 07:55 PM

[quote]Does any country in the world have their currency on a gold standard? Or is the US the only country that "needs" to do this?[quote]Poor argument that is.

UnrepentantSinner · 4th December 2007, 07:02 AM

Originally Posted by ServiceSoon

Poor argument that is.

And yet, despite some of the house of cards aspects to the U.S. economy, the world economy hums along with fiat currency and sound monetary policy as opposed to linking currency to precious metals.

dudalb · 4th December 2007, 12:44 PM

What is scary is how many of the Ron Paulistas support the Gold Standard simply because Paul supports it.

BenBurch · 4th December 2007, 01:17 PM

IIRC, the Soviets sold much of the Tzar's gold over years to finance foreign purchases since the Ruble had no external exchange value.

ServiceSoon · 4th December 2007, 04:34 PM

Quote:

And yet, despite some of the house of cards aspects to the U.S. economy, the world economy hums along with fiat currency and sound monetary policy as opposed to linking currency to precious metals.

And yet nothing...poor argument.

Quote:

What is scary is how many of the Ron Paulistas support the Gold Standard simply because Paul supports it.

I don't even want to know how you came to that conclusion.

UserGoogol · 4th December 2007, 05:08 PM

Originally Posted by dudalb

What is scary is how many of the Ron Paulistas support the Gold Standard simply because Paul supports it.

I don't know if that's the case. Maybe it is, I don't really follow the Ron Paul movement that closely, but I think it's just the same bunch of people who have been roaming the Internet defending the Austrian School of economics and/or Ayn Rand since before time began. (That is, since the 1970s, when the Internet first started to get wired together.) Ron Paul may helped people in the anti-war movement or whatever get drawn in by the seductive allure of praxeology, but to say it's just "THE GOLD STANDARD IS GOOD BECAUSE RON PAUL IS GOOD" seems unfair.

Checkmite · 5th December 2007, 01:30 PM

The problem is that there's only some two and a half trillion dollars' worth of gold in the entire world. That's why no country on earth uses the gold standard.

1st December 2007, 09:10 AM	#1
BenBurch Gatekeeper of The Left Join Date: Sep 2007 Location: The Universe 35.2 ms ahead of this one. Posts: 32,078	Remind me; What was the argument AGAINST the gold standard in the USA? And yes, I have heard Wm. Jennings Bryan's 1896 "cross of gold" speech. In his own words as there is a recording of him reading it at some later time, but not live at the convention. His argument seems to make no real sense to me. Its just an emotional appeal and not really an argument at all. But eventually we did move the dollar out of being backed in precious metals or indeed anything at all. But why? What was the economic boon that was expected by this action, and can we see evidence that boon transpired and was more than temporary? Relatives of mine lived through the hyperinflation of the Weimar Republic in Germany, and I know that could never have happened without fiat money, but what would have happened under the same conditions if the money were backed in a specific weight of a precious commodity? Would there have been a social and economic disaster of some other sort? I am not an economist, though I have studied economics, but what I learned was more about how markets behave, not currencies. Could somebody who knows this address it? Thanks! -Ben
	__________________ Are you IN? Join the IN crowd now!

1st December 2007, 09:36 AM	#2
Kerberos Illuminator Join Date: Aug 2003 Posts: 4,608	Originally Posted by BenBurch And yes, I have heard Wm. Jennings Bryan's 1896 "cross of gold" speech. In his own words as there is a recording of him reading it at some later time, but not live at the convention. His argument seems to make no real sense to me. Its just an emotional appeal and not really an argument at all. But eventually we did move the dollar out of being backed in precious metals or indeed anything at all. But why? What was the economic boon that was expected by this action, and can we see evidence that boon transpired and was more than temporary? Relatives of mine lived through the hyperinflation of the Weimar Republic in Germany, and I know that could never have happened without fiat money, but what would have happened under the same conditions if the money were backed in a specific weight of a precious commodity? Would there have been a social and economic disaster of some other sort? I am not an economist, though I have studied economics, but what I learned was more about how markets behave, not currencies. Could somebody who knows this address it? Thanks! -Ben WEll the arguments agaisnt it depends a bit on what model of a gold standard you're using. Some have argued for a 100% backed gold standard with no fractional reserve banking. This would lead to a massive increase in the price of gold, which would encourage gold hoarding which would further inflate the price of gold. This leads to deflation and significant increases in the price of gold teeth for children who've been drinking to much Cola. Please think of the children!
Kerberos Illuminator Join Date: Aug 2003 Posts: 4,608	__________________ Bible code: A method for obtaining hidden messages from texts that contains none, for the purpose of predicting events after they happen. "When the facts are on you side, but the law is against you, stress the facts. When the law is on your side, but the facts are against you stress the law. When both the facts and the law is against you, pound the table and yell like hell". Laywer maxim

1st December 2007, 09:58 AM	#3
UserGoogol Master Poster Join Date: Sep 2002 Posts: 2,074	William Bryan Jenning's argument was slightly different. There was a lot of silver floating around being mined, and the populists wanted to be able to go onto a silver/gold standard so that this silver could be added to the money supply, thus causing inflation. This idea was popular among populists because one of the impacts of inflation is that it makes the real value of debt less, which would've been rather nice for many poor farmers who had lots of debt but their assets were in their land, which was largely inflation proof. Additionally, the economy at the time was somewhat deflationary, so expanding the money supply might've been a good idea anyway, although I don't have much economic training myself either. But the populists weren't opposing backing money with precious metals, they just thought that gold in particular wasn't working out too well for them.
	__________________ Never attribute to malice that which can be adequately explained by stupidity. -- Hanlon's Razor Last edited by UserGoogol; 1st December 2007 at 10:08 AM.

2nd December 2007, 12:19 AM	#5
Kerberos Illuminator Join Date: Aug 2003 Posts: 4,608	Originally Posted by gtc The only way to prevent an outbreak of inflation is to elect a government that can be trusted to avoid inflation by not printing lots of money or not debasing the currency. Or by creating an institution that decides on monetary policy and deliberatly insulating this institution from political preasure. We could even call this institution the Federal Reserve.
Kerberos Illuminator Join Date: Aug 2003 Posts: 4,608	__________________ Bible code: A method for obtaining hidden messages from texts that contains none, for the purpose of predicting events after they happen. "When the facts are on you side, but the law is against you, stress the facts. When the law is on your side, but the facts are against you stress the law. When both the facts and the law is against you, pound the table and yell like hell". Laywer maxim

2nd December 2007, 01:08 AM	#6
UnrepentantSinner A post by Alan Smithee Join Date: Aug 2001 Location: USAian is not a word Posts: 26,349	I think our economy is largely a deck of cards, but the problem as I see it is credit, spending and per capita earnings (relative to GDP), not debt per se. And how many depressions/panics were there before the Fed was instituted and how many have occured since?
	__________________ I am an American citizen who is part of American society and briefly served in the American armed forces. I use American dollars and pay taxes that support the American government. And yes, despite the editorial decison to change American politics to the nonsensical "USA politics" subforum, I follow and comment on American politics.

1st December 2007, 06:50 PM	#4
gtc Philosopher Join Date: Feb 2005 Location: the downunderverse Posts: 7,114	Originally Posted by BenBurch Relatives of mine lived through the hyperinflation of the Weimar Republic in Germany, and I know that could never have happened without fiat money, but what would have happened under the same conditions if the money were backed in a specific weight of a precious commodity? Would there have been a social and economic disaster of some other sort? You can get dramatic inflations (and deflations) with the Gold Standard. When the amount of gold increases (as happened during the Spanish conquest of South America) then the amount of money in the economy increases proportionally. There is still the same amount of goods, services and other assets so prices increase to balance supply and demand. On the other hand, the government may decide to debase the currency by decreasing the amount of precious metal in the currency. This can lead to inflation in exactly the same way as increases in the amount of fiat money increase inflation. Irrespective of whether you have a fiat or commodity currency, the government still has the ability to control the amount of currency by printing more money or altering the exchange rate between dollars and gold. The only way to prevent an outbreak of inflation is to elect a government that can be trusted to avoid inflation by not printing lots of money or not debasing the currency. If your government is not trustworty then it doesn't matter whether you have a fiat or commodity currency. If the government is trustworthy, then (in my opinion) there is nothing major to be gained from having a commodity currency.

2nd December 2007, 02:31 AM	#7
Kerberos Illuminator Join Date: Aug 2003 Posts: 4,608	Originally Posted by UnrepentantSinner I think our economy is largely a deck of cards, but the problem as I see it is credit, spending and per capita earnings (relative to GDP), not debt per se. And how many depressions/panics were there before the Fed was instituted and how many have occured since? I don't think that number would be very meaningful. The world and by extension the economy has changed a lot since the Fed has been instituted. TO attribute the number of recesions before and after the fed to the existence of non-existence of the Fed would be a rather enourmous correlation=causation falacy.
Kerberos Illuminator Join Date: Aug 2003 Posts: 4,608	__________________ Bible code: A method for obtaining hidden messages from texts that contains none, for the purpose of predicting events after they happen. "When the facts are on you side, but the law is against you, stress the facts. When the law is on your side, but the facts are against you stress the law. When both the facts and the law is against you, pound the table and yell like hell". Laywer maxim

2nd December 2007, 04:24 AM	#8
UnrepentantSinner A post by Alan Smithee Join Date: Aug 2001 Location: USAian is not a word Posts: 26,349	Originally Posted by Kerberos I don't think that number would be very meaningful. The world and by extension the economy has changed a lot since the Fed has been instituted. TO attribute the number of recesions before and after the fed to the existence of non-existence of the Fed would be a rather enourmous correlation=causation falacy. That is a very valid objection but I think it's something worth considering. I realize that macroeconomics and monetary policy can't be reduced to a quip or singular observation, I mention it more for context because a lot of people are unaware of the crashes and panics that occured other than the Great Depression.
	__________________ I am an American citizen who is part of American society and briefly served in the American armed forces. I use American dollars and pay taxes that support the American government. And yes, despite the editorial decison to change American politics to the nonsensical "USA politics" subforum, I follow and comment on American politics. Last edited by UnrepentantSinner; 2nd December 2007 at 04:24 AM.

2nd December 2007, 07:31 AM	#9
Bikewer Philosopher Join Date: Sep 2003 Location: St. Louis, Mo. Posts: 9,517	I recall one wag saying that most of the gold reserves known are in Russia.....

2nd December 2007, 07:09 PM	#10
Darth Rotor Salted Sith Cynic Join Date: Aug 2006 Location: Rat cheer Posts: 34,225	Originally Posted by Bikewer I recall one wag saying that most of the gold reserves known are in Russia..... Gee, and I thought they were hidden in some secret vaults of the family Rothschild. Shows what I know. DR
	__________________ Helicopters don't so much fly as beat the air into submission. "Jesus wept, but did He laugh?"--F.H. Buckley____"There is one thing that was too great for God to show us when He walked upon our earth ... His mirth." --Chesterton__"If the barbarian in us is excised, so is our humanity."--D'rok__ "I only use my gun whenever kindness fails."-- Robert Earl Keen__"Sturgeon spares none.". -- The Marquis

3rd December 2007, 05:49 AM	#11
Lurker Illuminator Join Date: May 2002 Posts: 4,187	Does any country in the world have their currency on a gold standard? Or is the US the only country that "needs" to do this?
Lurker Illuminator Join Date: May 2002 Posts: 4,187

3rd December 2007, 05:54 AM	#12
DaChew Graduate Poster Join Date: Aug 2001 Posts: 1,043	Originally Posted by Lurker Does any country in the world have their currency on a gold standard? Or is the US the only country that "needs" to do this? I believe the Swiss Franc is still backed by gold. ETA: Nope, I'm wrong. Switzerland abolished its gold standard in 1999
DaChew Graduate Poster Join Date: Aug 2001 Posts: 1,043	__________________ I'm not as smart as I think I am. Most people aren't. Except me. Because I know I'm not. Last edited by DaChew; 3rd December 2007 at 06:00 AM.

3rd December 2007, 06:17 AM	#13
Octavo Available Join Date: Jun 2007 Location: Cape Town Posts: 841	Originally Posted by Lurker Does any country in the world have their currency on a gold standard? Or is the US the only country that "needs" to do this? Funny. I was certain that the south african Rand on a gold standard, but apparently that hasn't been the case since 1932. Quote: On 28 December 1932 a proclamation by Government ended the convertibility of South African banknotes into gold. This is still the case, as the gold standard has never been reintroduced in South Africa.

3rd December 2007, 07:55 PM	#14
ServiceSoon Muse Join Date: Oct 2007 Posts: 995	[quote]Does any country in the world have their currency on a gold standard? Or is the US the only country that "needs" to do this?[quote]Poor argument that is.
ServiceSoon Muse Join Date: Oct 2007 Posts: 995

4th December 2007, 07:02 AM	#15
UnrepentantSinner A post by Alan Smithee Join Date: Aug 2001 Location: USAian is not a word Posts: 26,349	Originally Posted by ServiceSoon Poor argument that is. And yet, despite some of the house of cards aspects to the U.S. economy, the world economy hums along with fiat currency and sound monetary policy as opposed to linking currency to precious metals.
	__________________ I am an American citizen who is part of American society and briefly served in the American armed forces. I use American dollars and pay taxes that support the American government. And yes, despite the editorial decison to change American politics to the nonsensical "USA politics" subforum, I follow and comment on American politics.

4th December 2007, 12:44 PM	#16
dudalb Penultimate Amazing Join Date: Aug 2007 Posts: 22,782	What is scary is how many of the Ron Paulistas support the Gold Standard simply because Paul supports it.

4th December 2007, 01:17 PM	#17
BenBurch Gatekeeper of The Left Join Date: Sep 2007 Location: The Universe 35.2 ms ahead of this one. Posts: 32,078	IIRC, the Soviets sold much of the Tzar's gold over years to finance foreign purchases since the Ruble had no external exchange value.
	__________________ Are you IN? Join the IN crowd now!

4th December 2007, 04:34 PM	#18
ServiceSoon Muse Join Date: Oct 2007 Posts: 995	Quote: And yet, despite some of the house of cards aspects to the U.S. economy, the world economy hums along with fiat currency and sound monetary policy as opposed to linking currency to precious metals. And yet nothing...poor argument. Quote: What is scary is how many of the Ron Paulistas support the Gold Standard simply because Paul supports it. I don't even want to know how you came to that conclusion.
ServiceSoon Muse Join Date: Oct 2007 Posts: 995

4th December 2007, 05:08 PM	#19
UserGoogol Master Poster Join Date: Sep 2002 Posts: 2,074	Originally Posted by dudalb What is scary is how many of the Ron Paulistas support the Gold Standard simply because Paul supports it. I don't know if that's the case. Maybe it is, I don't really follow the Ron Paul movement that closely, but I think it's just the same bunch of people who have been roaming the Internet defending the Austrian School of economics and/or Ayn Rand since before time began. (That is, since the 1970s, when the Internet first started to get wired together.) Ron Paul may helped people in the anti-war movement or whatever get drawn in by the seductive allure of praxeology, but to say it's just "THE GOLD STANDARD IS GOOD BECAUSE RON PAUL IS GOOD" seems unfair.
	__________________ Never attribute to malice that which can be adequately explained by stupidity. -- Hanlon's Razor Last edited by UserGoogol; 4th December 2007 at 05:13 PM.

5th December 2007, 01:30 PM	#20
Checkmite Skepticifimisticalationist Join Date: Jun 2002 Location: Third in line Posts: 14,875	The problem is that there's only some two and a half trillion dollars' worth of gold in the entire world. That's why no country on earth uses the gold standard.
	__________________ "¿WHAT KIND OF BIRD? ¿A PARANORMAL BIRD?" --- Carlos S., 2002