So how about that gold standard?
OK, I think most of us now realize that going back to the gold standard is a ridiculous idea. IIRC our economy is $56T and our gold reserves are around a half trillion. So gold at $2000/oz would have to worth $200,000/oz to have a gold standard.
So now the argument is that we should never have gone off the gold standard because fiat money is fake. Sorry Ron Paul, I do like you but I think it doesn't take much reflection to see that is a ridiculous concept as well. The claim is that with a fixed amount of gold we cannot continue to create more money, which is devalued by deflation. There are two implications in this.
1) We cannot have a trade deficit or we will completely deplete the economy of money.
2) The amount of money in the economy is fixed assuming our trade deficit and foreign spending is zero.
Number 1 dictates that our economy could have never enjoyed the riches of low priced labor throughout the world. Maybe that's not a bad thing for American workers. And the effect of this is debatable with no resolution, so let's ignore it.
Number 2 dictates that as the population grows and the economy gets larger that more people much share the same fixed amount of money. This means that gold effectively grows in value as the economy gets larger. Twice as many people with twice as many houses and cars are still worth a fixed value of gold. We know the population and amount of products created will grow. But how will the value of gold grow?
The answer is... it can't. One day someone will offer you 1 oz of gold for your $200,000 house and no one will take it. Gold will because a fiat currency by virtue of the govt demanding you take it. Therefore the value of gold will be fake, just like paper money. Who would find 1/2oz of gold more valuable than their $100,000 Lamborghini? Would you trade your Wakeboard boat for a 1/4oz of gold?
People need to understand using gold to prevent the govt from printing too much money is no magic solution. It's a phony as fiat money when you try to use is to control the money supply.
Think about it.
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