Should we go back to a gold standard?

People blame the use of paper money for inflation and economic losses. When we had only gold,bronze and silver coins(gold specie standard); the value of the coins were contingent upon their weight and not the government's monetary or fiscal policies.

The other two kinds of gold standard are gold exchange standard(mainly Metal coin + paper currency) and gold bullion standard(paper currency that can be exchanged for gold bullion)

Today's coins are not the same as the coins used when the gold standard was in effect. The face value of the modern coin is always greater than the value of metal used to make it. This stops people from melting their coins when inflation hits.

All the Yes points:

All the No points:

Should we go back to a gold standard?
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Should we go back to a gold standard?
No because...

The fundamental flaw in the analysis is the axion that gold is inflation-insensitive

Axiom*

The assumption is that Gold has a fixed or forever increasing monetary value. This is equivalent to the mistake that was in the center of the sub0prime mortgage housing bubble burst. The assumption was that housing prices will forever rise because the demand for a place to live is constant and populations are increasing in most countries (in some countries people are having fewer children and efforts are being made to get a higher birth replacement rate.)

The bubble was burst when housing prices fell because of depleting demand generated by the fact that houses were no longer affordable to most people. The thing about Gold is that Gold prices rise and fall with vicissitudes in demand as well. The value of gold goes up and down just like the value of paper money. [[http://tribune.com.pk/story/30807/rupee-shows-stability-while-gold-prices-fall/]] [[http://www.youtube.com/watch?v=MzDCy8VBRMI]]

Yes because...

Yet gold is still more reliable and stable than a currency that represents Gold. After all the piece of paper we call money is just an indicator of the amount of gold in a country's coffers.

[[http://chestofbooks.com/finance/banking/Chinese-Currency-And-Banking/Gold-Standard.html]]

Should we go back to a gold standard?
No because...

minerals; precious metals are heavy and thus not as portable as paper/plastic money or checks

Imagine carrying gold worth a 100 or more GDP in your purse. It's not very easy to carry around say relative to a 100 pound note or a check.

Counterargument:
As asserted earlier, gold is not actually stable; the money we use today is fiat and does not really represent the value of Gold in a country's reserve but the amount of money supply being floated around by the FED(federal reserve) or central bank.

Fiat money(petty cash) does represent Gold per se and its value is set by the government. You could say money value is in great part represented by GNP which is the value of the number of goods and services exchanged in an economy during a calender/financial year plus factor payments from abroad minus factor payments to abroad but the real value of money is essentially controlled by the central bank or an equivalent authority.

[[http://answers.yahoo.com/question/index?qid=20101005160816AAN3r6e]]]

Yes because...

In the case of the gold Bullian standard most recently in place in the U.S ,carrying heavy metal coins was not required to make monetary transactions. The Gold Bullian was like a stock investment with greater stability(lower risk) because Gold is thought to be a store of value rather than a capricious stock with unpredictable highs and lows.

The value of Gold does not go up and down 'with' the value of money; during inflation gold prices tend to rise like those of other commodities. And your paper money represents less gold than it did in the past.
[[http://www.gold-eagle.com/greenspan011098.html]]

Should we go back to a gold standard?
No because...

Goldline, ARY gold and other such companies bilk the average investor by playing on irrational fear

Fact is Gold is just as stable as any other commodity. Gold is not valued the same around the world; there are different types of Gold and the problems associated with using the Gold standard are not very different from those related to reverting to the barter system(exchanging goods for other goods; not a very efficient system as prices were/are not easy to determine; I want this you want that; exchange this for that but uh oh that is actually more valuable than this). [[http://weiner.house.gov/reports/5%2017%2010%20Goldline%20Report.pdf]]
The stability of paper/fiat money used today is ensured by the government/FED/central-bank so that it is more stable than any commodity or service.

Yes because...

People invest in commodities when they fear price rises because the price of commodities, rises during inflation.

Prominent Economists have predicted both immediate hyperinflation and deflation(which can lead to hyperinflation [[http://2020speculator.wordpress.com/2010/09/04/deflation-is-a-necessary-precursor-to-hyperinflation/]]) in the not so far off future. The average investor makes investments depending on which model/theory s/he relies on. Point is, no one can really tell if the fear is irrational or rational.

The best thing to do is ti diversify one's stock portfolio so that it includes enough paper money and commodities/stock so as to create/strike a balance that will not make much of a difference on your financial position no matter which way the economy will go.
[[http://dailycapitalist.com/2010/06/27/will-we-have-inflation-deflation-or-hyperinflation-part-3/]] [[http://2020speculator.wordpress.com/2010/09/04/deflation-is-a-necessary-precursor-to-hyperinflation/]]



Should we go back to a gold standard?

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1 Comment on "Should we go back to a gold standard?"


Dave
June 29, 2016 10:07 am

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