Back to the gold standard

[iheartaaron4life]

Hi there everyone.
I'm trying to folow what's going on in the American election debate(as a European),so some of our newspapers indicate that some peaple in the Republican party would like to go back to the gold standard.
I think that's before Richard Nixon.
What's your idea about this ???
Some economists in Europe claim it would mean doomsday for the us economy.
Is this serius???
Your opinion pleas !!!!!

 

[TheeObserver]

There isn't enough gold. There, simple answer.

The Bear.

 

[emilioe]

There isn't enough to back up all the money we're printing either, so it's a win win for the U.S.! I say we go to the Nuclear Armament Standard : P.

I think the guy the OP is talking about is Ron Paul, he's the only one I've heard talk about going back to the gold standard. You're WAY behind on following the current state of politics/election if that's the stuff you're reading.

 

[butterflygirl]

The Republicans are indeed talking about a Gold Standard, although as mentioned before the origin of this argument started with Ron Paul.
America has huge debts as do all of the Western world, and this is due to "Fiat" money, which is money not backed by anything, and the problem is that you can print as much of it as you want, and politicians do just that.
this will give you some ideas
How does the Global Financial Crisis End? - Michael Maloney explains - wesayuk.com - YouTube

also Google Jim Rogers and Marc Faber

 

[siane]

No you can't print as much as you want, and as the entire economy is based on partial reserve banking we are stuck with it.

 

[virginia]

Problem is government interfering and propping up failed ventures, because of whose friends with who.

Market's would work much better if governments didn't get involved.
Like the US govt propping up GM recently and Chrysler back in the day. Silly decisions.

 

[fratu]

I'm afraid you can, and it becomes worthless like in Germany in the 30's.it's usually referred to as "fractional" reserve banking......so now a lot of folks are talking about this, and the powers that be are trying to keep the price of the metals down.

 

[publikvu]

Ah the great lie. No the problem is that the market should not be allowed to decide anything. The people should determine the shape and form of society including commerce, government and law. If you leave these things to market forces you place all power in to the hands of the most ruthless and you get the perpetual bang and bust cycles. Modern politicians do not represent the people who elected them. They represent the people who funded them. Who are the major donors. Big Business. Who wants less laws controlling business. Big Business. Why does the media keep telling you that government interference destroys the economy, well, because it is owned by Big Business. Big Business is only looking out for the interests of it's shareholders. It doesn't care about society, human rights or environment. It cares about it's stock price and how happy it's shareholders are and quite rightly too. However, you don't want to allow that view to shape the rest of your society because business is not life. In fact the way we are doing business now it fundamentally anti-life.

The Bear.

 

[meereemak]

I'm in complete agreement with what Polar Bear said, but I'd add one further point: the way that we do business isn't just anti-life, it's anti-business.

The boom-bust cycle perpetuated by the stock market is more damaging for small businesses than it is for the big public companies. Small businesses actually employ more people than big businesses (in this country, at least) and they provide local jobs. They don't tend to make everyone redundant because they decide to outsource their operations abroad where wages are lower. And they don't get destabilised by takeover rumours genereated by stockbrokers who sense the chance to make a quick killing.

The stock market has served it's purpose. Get rid of it and we could create a more stable and prosperous economy, where enterprise could actually thrive.

 

[CoolazHale]

Agree Johnno, start with ending the stock market or atleast force long term investments. Rather than the million trades per second super computers. At the moment the stock market is just a big gambling machine rather than a source of investment for new invention as it was originally intended.

The Bear.

 

[8307c4]

Companies could still issue bonds to gain longer-term investment, so there would still be a marketplace for things like bonds, but that wouldn't have the destabilising effect that fluctuating share prices can have. And you'd do away with hostile takeovers.

 

[NatalieC]

Ok lets base our posts on economic facts.

Name me one society where free market forces have been allowed to do their own thing and the above has happened.

Yea ill keep waiting.

Ok now lets look at Hong Kong, now excuse whilst I quote Milton Friedman, one because he knows what hes talking about and 2 because he says it better than I can.

Quote,
HONG KONG AND BRITAIN
The difference in the economic policies followed by Hong Kong and Britain was a pure accident. The colonial office in Britain happened to send John Cowper-thwaite to Hong Kong to serve as its financial secretary. Cowperthwaite was a Scotsman and very much a disciple of Adam Smith. At the time, while Britain was moving to a socialist and welfare state, Cowperthwaite insisted that Hong Kong practice laissez-faire. He refused to impose any tariffs. He insisted on keeping taxes down.

I first visited Hong Kong in 1955, shortly after the initial inflow of refugees. It was a miserable place for most of its inhabitants. The temporary dwellings that the government had thrown up to house the refugees were one-room cells in a multistory building that was open in the front: one family, one room. The fact that people would accept such miserable living quarters testified to the intensity of their desire to leave Red China.

I met Cowperthwaite in 1963 on my next visit to Hong Kong. I remember asking him about the paucity of statistics. He answered, “If I let them compute those statistics, they’ll want to use them for planning.’’ How wise!

Nonetheless, there are some statistics, and in 1960, the earliest date for which I have been able to get them, the average per capita income in Hong Kong was 28 percent of that in Great Britain; by 1996, it had risen to 137 percent of that in Britain. In short, from 1960 to 1996, Hong Kong’s per capita income rose from about one-quarter of Britain’s to more than a third larger than Britain’s. It’s easy to state these figures. It is more difficult to realize their significance. Compare Britain—the birthplace of the Industrial Revolution, the nineteenth-century economic superpower on whose empire the sun never set—with Hong Kong, a spit of land, overcrowded, with no resources except for a great harbor. Yet within four decades the residents of this spit of overcrowded land had achieved a level of income one-third higher than that enjoyed by the residents of its former mother country.

I believe that the only plausible explanation for the different rates of growth is socialism in Britain, free enterprise and free markets in Hong Kong. Has anybody got a better explanation?"

End Quote

Governments should be responsible for only a few things, IMHO

Defence and foreign affairs.
Legislating for justice
Defence of the vulnerable and mentally incapable.


Raz

 

[LoliaF]

The boom and bust cycle is caused by Keynsian economics, which all the political parties support, it basically encourages debt . The Austrian school of economics believes in sound money i.e. a gold standard.
Look at what has happened in recent years.
Gordon Brown said that he had ended the boom and bust cycle and then we had the greatest one ever with the failure of the banks and what did he do , in an act of corporate fascism he bailed them out, recently we have had the LIBOR scandal, an act of fraud, but nobody went to gaol. It seems that not only are the companies too big to fail, but also too big to gaol. Now look what governments in the Western World are doing Quantative easing i.e printing more money, and who benefits? the banks of course they get to borrow money cheaply and keep on doing their ponzi schemes. When you have a gold standard you can't do that, because money is based on gold, not on printing presses.
This will all end badly. The Chinese are buying gold in huge quantities and notice how the central banks are as well. The end of the petro-dollar as the world's reserve currencey is coming, what will replace it? well it could be a gold backed Yuan

 

[xRikku]

Yes I agree eventually the dollar will die, kind of hoping also but thats just me

Great depression= Direct result of failed monetary policy, not the free markets.

On the gold standard well, it wouldn't work these days it can't work.
The gold was supposed to control what was issued by the fed, the fed was supposed to control what was released by the high street banks.

This was supposed to give banks control of borrowing,with business.
The Gold standard wrecked the economies of Britain and the USA in 1920-30's. Though this was a result of the failed monetary, this continued for Britain un till 1931.

This made people think that free market capitalisim practise had failed then you have the birth of John Maynard Keynes school of thought.

He found the Great Dep such a paradox. Then he offered his way out, the quantity of money printing doesn;t matter , but spending is the main tool was his theory, mainly deficit spending by government.
Politicians liked this theory thats why it gets such a great support.

It gave governments such a great get out system. Look at the boom of government spending since then, no one minds spending money as long as its not their own which is what the governments do.

Its amazing what we allow the government to do on our behalf as a collective which we would not do on our own as individuals.

Raz

 

[clevergirle]

If you think that Britain is, or ever was, a socialist state then you are seriously deluded.

 

[emie]

I would argue that Britain has been on and off socialist, depending on the government of the time.

the Labour Party under Clement Attlee won a landslide victory over war Winston Churchill in the 1945 general election, and implemented their social democratic programme. They established the National Health Service, nationalised some industries (for instance, coal mining), and created a welfare state.

This is in no way free market economics. Now im not going to say that it's been 100% socialism, but to deny that their have been socialist policy's implemented in the UK would admit you of the "seriously deluded" charge your accusing me.

Its why we are called a Social Democracy.

Raz

 

[TheChair]

Two points:

1. The Republicans don't actually intend on going to the gold standard. It's a ploy to entice supporters of Dr. Paul who make up a part of the party that could easily vote Democrat this election. Most Paul supporters (not the Tea Party nuts who have no idea what he's really saying) are extremely socially liberal, so if they don't see any economic difference worth it, they may just decide that they've put up with enough of the religious 'stuff'. (EDIT: It probably would be a very savvy move as well, as it would force the Republican party's hand into going even further in their direction.)




2. I'm not sure why non-professionals think they understand the financial markets. Most people don't believe they understand, say, the operation and organization of an automotive plant or the current standard method of removing a tumor, but everyone seems to 'understand' the markets enough to comment on them. They're invariably wrong.

I've thought about this for a while and I think I know where most people go wrong: I think there's an idea that financial markets are zero-sum, a 'gambling machine' as you (and many others) put it. This isn't accurate. They are positive sum. Second-order effects need to be counted. Also, most people don't understand that agents in the market operate on different time frames, and those time frames are pretty much non-overlapping magisteria.

Those '...million trades per second super computers' do not decrease the profits of long term investors. The 'boxes' those profits are coming from, in each case, are not the same.
(EDIT: And, actually, they increase long term investor profits. What is often termed 'high-frequency trading' is best thought of as a market utility.)

Oh, and:



Here's a good article which touches on the reasons the markets are important: http://www.cnbc.com/id/48707047

 

[polkmniop]

There is a world of difference between implementing some reforms which benefit working people and creating a 'socialist state' - whatever your definition of that might be. The tories also implemented the occasional reform (e.g. the 1878 Education Act) but it doesn't make them a 'socialist' party.

We are a country with a capitalist economy. The fact that there is a degree of regulation of the market doesn't change that, any more than does the fact that we have some public services such as the NHS.

 

[SummerSweetheartPreteen]

No wer not, true capitalism has not been allowed to exist in the United Kingdom, not in the last 200 years.

And I think there is a lot to be discussed and read before you say "benefit working people", as if things were in a dire state and had no hope at all. As if it wasn't for the mess that is the welfare state is that we would not of got anywhere.

This is like saying if governments don't tell car companies to put seat belts on cars people won't buy the ones with seat belts.

Funnily enough people are keen on living and normally do actions (one could be pedantic here and say ... people take drugs .. but I think we are above this ) to sustain life, hence we are still here.

I think its important to understand that an economist can tell you how to have a successful economy but the policys of such might not sit well at home.

I would really welcome an example of government intervention, which is a socialist notion.
Were the economy has continued to thrive, and government debt is lower than those of free market economics.

I am keen to keep this thread about economics... though its not possible to completely separate politics and economics it is possible in the discussion sense.

i.e the gold standard, an economic policy.

If it could work these days id be all for it, you know why it cant? Government spending compared to the

 

[theojudjr]

I have considerable experience in financial markets. It's been a long time since my uni days, so I'm not so good at the macro stuff, but if anyone has any questions about markets, I'll do my best. I would really like for people to understand what's going on, because there's a load of people out there now trying to break their own economy to spite their nose, to mix a metaphor.