Policy Idea: Return to the Gold Standard

[james.hendrickson]

I'm posting this in the "everything else" finance forum because its policy related.

What does the forum's think about a return to the gold standard?

Economic news has been terrible, and a return to a dollar back by gold might help restore public confidence.

Per Britannica, the advantages are:

1. It limits governments ability to create inflation by putting brakes on central banks ability to increase the money supply.

2. It creates certainty in international trade by providing fixed patterns of exchange rates


Image: A gold-standard 1928 one-dollar bill., source Wikipedia.

[amarowsky]

I don't think we could with all the money we "created" with FIAT currency.... Did some quick math on the 190,000 Metric tons (roughLY) outstanding worth of gold in the world (according to how much has been mined by the World Gold Council). At $1800 per ounce this comes out to like $92 million per metric ton x 190,000 metric tons = $17.5 billion & change.

While I think this would have been much safer for our economy. It kinda seems like the genie is out of the bottle. US economy has (according to search result) $1.5 trillion in currency floating around the world. So we could re-do the currency possibly.... that is a TON of gold to secure. But our overall economy is like $22 trillion in GDP. So we could not represent our whole economic wealth in gold anymore (not sure if we could have back in the day).

It seems like we're too far gone. But I must admit, some of the details are not soo intuitive to me. I don't know exactly how much Gold we would need to support. In "theory" I would love this... because the USD index is steadily falling against global currencies. And once Petroleum is replaced by something else as the primary Fuel, and it only has value as a raw material.... When that point happens, and the Petrodollar is not as valuable anymore.... Then I think we'll be in some trouble as far as our $ purchasing power. (I've upped my gold/silver hedges after having all this information synthesized to me).

I'd love someone who has stronger economic and monetary policy understanding. I think the Fed is screwing up kinda big here.... We need to promote savings and raise interest rates. But with everyone burrowing TO DEATH, if we up the interest rate, a TON of companies & individuals will feel some tough strain.

[james.hendrickson]

amarowsky - I'm with you there. I also don't know much about the mechanics of how a Gold Standard would work, but I like the idea of restoring confidence in the economy. Its been a rough year.