Hauser's law

[schnurrbart]

So the solution is to do away with everything that seniors have and let the rest of you younger folks go on with your lives????  Clinton did things to keep this from happening and he caught loads of crap for it from you guys.  Yes 9/11 did play havoc with our economy but if that had been the only thing to happen, it wouldn't have been a mess we couldn't deal with.  The deal that happened that we couldn't/haven't been able to deal with is two wars, foreclosures, jobs being lost due to fear and greed in the markets, all leading to business failures which produced more fear and jobs lost which produce more fear and jobs lost.  And don't forget greed on Wall street.  Greed and emotion run our financial world.  You can start a RUMOR on the 'net today and half of wall street will collapse tomorrow.  Some on here advocate that the demise of the gold standard actually created the mess we are in now but in reality, it had to go away because the amount of gold EVER mined anywhere in the world is not enough to cover the money just in the US much less the entire world!  As for raising taxes, the idea of raising taxes only on the top earners and keeping the lower tax rate for all others will not cause our problems to increase but by not conceding this by the repubs will cause EVERYONE'S taxes to rise and THAT will cause problems.

[johnaa]

  Your criticism of the gold standard contains some popular but tired old lyrics based upon ignorance and/or lies.   

 A gold standard does not imply that all currency would be made from gold, silver for example has been used, so the argument that there is not enough gold does not stand.  With a gold standard other metals and commodities would be valued in relations to gold, so these other commodities would also back currency.  Do you know that a old copper penny contains 2 cents worth of copper and a nickel?  The nickel standard?  ---  The gold standard implies backing currency with non perishable commodities.   

  Secondly, the price of gold would most certainly skyrocket with increased demand, so there will be more investment in gold/silver mining, the increased values would increase investment in technology to increase production, reduce pollution, soon the supply of gold would increase until the market stabilized.

  The gold standard would take a lot of opportunity for banking crime, that would prevent these bubble scam rip-offs these crime organizations have used to take control of our government.

  Other than your rejection of real money, I don't find anything worth disagreeing with.

[johnaa]

 Left out the information that a nickel contains almost 5 cents worth of nickel, so are we on a nickel standard?  

[kraft-t]

What is your logic that determines that raising taxes on income over $250 k would exacerbate our problems.. Remember the Clinton years with that higher rate for everyone created high revenues and 22 million jobs. You are arguing with history and you are losing. Your claim is bullhockey but you still keep trying to sell it. A feeble excuse not to raise taxes.

[kraft-t]

Real money John? Gold is a commodity with some value as a metal with some uses. It is not a valuable commodity like something you can consume and refresh your body. It's real value is only what people put on it. Like shares in Lehman Brothers. People think it is worth something when it is really only valuable because people think it is.

$1200 or $1300 gols is only there because the specs have driven it there by marketing it as real money. When it gets mback to $300 will we still think it is real money? I doubt it.

[schnurrbart]

Maybe I don't understand it but prior to 1933, a person could get GOLD, not copper, not nickel not tin not silver or anything else but GOLD in exchange for certain paper money.  Same as when they issued silver certificate dollar bills.

[r3020]

There was a silver standard set up by JFK. There was money issued that was not federal reserve notes. The fed didn't like it. Wasn't long after that he was shot.

[schnurrbart]

An extensive essay on the gold standard on The Encyclopedia of Economics and Liberty defines the gold standard as "a commitment by participating countries to fix the prices of their domestic currencies in terms of a specified amount of gold. National money and other forms of money (bank deposits and notes) were freely converted into gold at the fixed price." A county under the gold standard would set a price for gold, say $100 an ounce and would buy and sell gold at that price. This effectively sets a value for the currency; in our fictional example $1 would be worth 1/100th of an ounce of gold. Other precious metals could be used to set a monetary standard; silver standards were common in the 1800s. A combination of the gold and silver standard is known as bimetallism. A Very Brief History of the Gold StandardIf you would like to learn about the history of money in detail, there is an excellent site called A Comparative Chronology of Money which details the important places and dates in monetary history. During most of the 1800s the United States was had a bimetallic system of money, however it was essentially on a gold standard as very little silver was traded. A true gold standard came to fruition in 1900 with the passage of the Gold Standard Act. The gold standard effectively came to an end in 1933 when President Franklin D. Roosevelt outlawed private gold ownership (except for the purposes of jewelery). The Bretton Woods System, enacted in 1946 created a system of fixed exchange rates that allowed governments to sell their gold to the United States treasury at the price of $35/ounce. "The Bretton Woods system ended on August 15, 1971, when President Richard Nixon ended trading of gold at the fixed price of $35/ounce. At that point for the first time in history, formal links between the major world currencies and real commodities were severed". The gold standard has not been used in any major economy since that time.What Do We Use Today?

Almost every country, including the United States, is on a system of fiat money, which the glossary defines as "money that is intrinsically useless; is used only as a medium of exchange". We saw in the article "Why Does Money Have Value" that the value of money is set by the supply and demand for money and the supply and demand for other goods and services in the economy. The prices for those goods and services, including gold and silver, are allowed to fluctuate based on market forces. Next we'll look at how the monetary system used can change other variables in the economy.

The main benefit of a gold standard is that it insures a relatively low level of inflation. In articles such as "What is the Demand for Money?" we've seen that inflation is caused by a combination of four factors:

1. The supply of money goes up.
2. The supply of goods goes down.
3. Demand for money goes down.
4. Demand for goods goes up.

So long as the supply of gold does not change too quickly, then the supply of money will stay relatively stable. The gold standard prevents a country from printing too much money. If the supply of money rises too fast, then people will exchange money (which has become less scarce) for gold (which has not). If this goes on too long, then the treasury will eventually run out of gold. A gold standard restricts the Federal Reserve from enacting policies which significantly alter the growth of the money supply which in turn limits the inflation rate of a country. The gold standard also changes the face of theforeign exchange market. If Canada is on the gold standard and has set the price of gold at $100 an ounce, and Mexico is also on the gold standard and set the price of gold at 5000 pesos an ounce, then 1 Canadian Dollar must be worth 50 pesos. The extensive use of gold standards implies a system of fixed exchange rates. If all countries are on a gold standard, there is then only one real currency, gold, from which all others derive their value. The stability the gold standard cause in the foreign exchange market is often cited as one of the benefits of the system.

The stability caused by the gold standard is also the biggest drawback in having one. Exchange rates are not allowed to respond to changing circumstances in countries. A gold standard severely limits the stabilization policies the Federal Reserve can use. Because of these factors, countries with gold standards tend to have severe economic shocks. Economist Michael D. Bordoexplains:

"Because economies under the gold standard were so vulnerable to real and monetary shocks, prices were highly unstable in the short run. A measure of short-term price instability is the coefficient of variation, which is the ratio of the standard deviation of annual percentage changes in the price level to the average annual percentage change. The higher the coefficient of variation, the greater the short-term instability. For the United States between 1879 and 1913, the coefficient was 17.0, which is quite high. Between 1946 and 1990 it was only 0.8.

Moreover, because the gold standard gives government very little discretion to use monetary policy, economies on the gold standard are less able to avoid or offset either monetary or real shocks. Real output, therefore, is more variable under the gold standard. The coefficient of variation for real output was 3.5 between 1879 and 1913, and only 1.5 between 1946 and 1990. Not coincidentally, since the government could not have discretion over monetary policy, unemployment was higher during the gold standard. It averaged 6.8 percent in the United States between 1879 and 1913 versus 5.6 percent between 1946 and 1990."

So it would appear that the major benefit to the gold standard is that it can prevent long-term inflation in a country. However, as Brad DeLong points out, "if you do not trust a central bank to keep inflation low, why should you trust it to remain on the gold standard for generations?" It does not look like the gold standard will make a return to the United States anytime in the foreseeable future.

[schnurrbart]

Whatever you say, Jerry.

[johnaa]

 More lyrics to the same old song.  What is money? A token of exchange, do you prefer using the tokens the banksters force us to use at the value they  set?   There is a great deal of history behind gold money which you seems to be ignoring: the gold money cioned centuries ago still retains quite a bit of value.  I understand you have political bias, which will change with the wind from your political camp, but claiming gold is not a valuable commodity is far fetched  and just political hot air..  

   Gold has many uses, industrial, artistic, and as bobbles. You will need to back your claim that gold is not useful, it may not be fuel ones body, but neither does a piece of paper.   

  I would prefer that money be backed by wheat myself, however it is perishable, not easily stored(too bulky) nor as easily tranfered as metal . 

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