The Gross National Debt

Wednesday, January 26, 2011

Not the gold standard!

The Gold Standard


A lot of people are saying the US should get back on the gold standard. IOW, link the value of the dollar to a certain amount of gold.

This will probably shock a lot of you who read my writings, but I am not in favor of this. I oppose it. Against it. Don’t like the idea. Bad news.

You are now asking why.

Several reasons:


LEGAL TENDER


Examine a dollar. You’ll see on it that it is “legal tender for all debts public and private.”

The fact that it can be used for private is what makes the dollar an accepted worldwide currency. (Never mind the fact that private debts can be handled in the US without using money).

The government MUST accept it for settling public debts.


THE VALUE OF A FREE MARKET

YOU at left. GOVERNMENT at right.


Right now, free market economics determine the value of the US dollar. (Leave the Federal Reserve System out of this discussion for the nonce. This column is predicated on the Fed not being able to print money any time it feels like it.)

This is called value, at least it’s value in the way I do economics.

Value is what something is worth.

Here’s the fulcrum of that statement. Anything is worth whatever someone is willing to give for it.

If you try to sell me something and I do not want or need it, the value of that item is pretty low.

If you have something I must have to live, well now. The value of that item has suddenly soared.

What is priceless to one person is worthless to another.

Gold is just a soft metal. It has no intrinsic value outside itself. A pound of gold is a dead weight.

What adds value to anything?

If you have a pound of gold and I don’t, then what do we have? Nothing yet.

Do I want the gold? If so, what am I willing to pay for it?

Better yet, do I have something you want? If so, how much gold are you willing to give me for it?

What if I’m not willing to take your gold? Then how much is your gold worth?

But this is an inherent problem in all forms of trade.


FLUCTUATIONS
An EKG, MRI, CAT Scan, Piezometer, Economy or scribbles on paper?

In my lifetime I have seen the value of gold as low as $250 an ounce and hit nearly $1,000 an ounce before tanking to around $250 and then back to nearly $2,000 an ounce.

While the value of the dollar wobbles, it has never seen such incredible shifts in such a short period of time, the value dropping or rising as much a 4x in two months.

The value of gold is far more unstable than the value of the dollar.


WHAT USE GOLD?
Somebody tell BA that L needs a gold mask facial


You can eat gold, but it has no nutritional value. A starving man would trade a pound of gold for a hamburger.

You can’t build anything substantial with it. Yes, the Georgia capital is covered with a thin sheet of Dahlonega gold, but it flakes off and is only there for decoration. Yes, it can be used in some electrical components because it doesn’t rust, but other metals will also work.


HOW MUCH?

How much gold will a dollar buy? Who decides this?

Congress.

Nuf Said

No action by a legislative body is permanent, except to disband.

Do you REALLY want Congress setting the value of a dollar? That’s what will happen.

If Congress does set the value of a dollar as equal to X amount of gold, what happens if the US needs to increase or decrease the value of the dollar?

All of sudden, thanks to a Congressional decision, your money is worth more (highly unlikely) or worth less (very likely).

Myself, I’d rather trust the free market economy across the globe to determine what a dollar is worth.

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