Why is the gold and silver standard better than the "fiat" money system?

[imaginethat]

What happens when you need more money than the budget allows then?

 

[Ididn'tdoitt]

For some bizarre reason the myth of the currency pegged to the gold or silver price just refuses to die, although there is no rational economic argument to support the gold or any other commodity backed currency!

The fundamental problem with the gold standard is the Liquidity Problem: there has to be an increase of the money supply as the economy grows. The money supply should roughly grow at the same pace as the general economy grows. The Bretton Woods currency system, which was the last remnant of the gold standard, collapsed in the 1970s because there was simply no reliable mechanism to increase the available gold reserves to keep pace with the growing world economy.

A return to the gold standard, advocated by some kitchen-table-economists left behind by time and reality, would throw the economy into cardiac arrest, into persistent deflation and a recession far worse than what the world has seen so far.

 

[Meg]

Only gold bugs think it is better. Because modern economies grow faster than the supply of gold, the gold standard produces persistent deflation which slows economic growth. Only people who hold financial asset gain from deflation in the short term, and the long term no one does. When governments have a budget deficit, responsible ones borrow from the private sector and irresponsible governments print more money to cover the short fall and if they are on the Gold Standard like Germany was before WWI they just abandon it and then print the money.

 

[veritasunitascaritas]

no monetary system is just.
money is a waste of time.
would you walk around the block to go next door?
then why is everyone chasing money?
no one wants or needs money. they need what it gets them.
so why walk around the block?
why not work and provide goods and services for others who work and supply goods and services?
that is how the economy should work.
however, we have a twisted sense of value.
we place value on things we pay money for, when infact, the things we spend money on can be replaced at anytime, thus, no value.
the things we overlook, and got for free, our souls family friends, the love for eachother, hopes dreams. all free.
all cannot be replaced.
money is there to keep people under control.
its not real backed by the faith and credit of the people, or by gold or silver. still fake.
still worthless.
a man can be wiped out, and rebuild his fortune over and over again.
once you lose something of REAL value, its gone forever.

besides, since the fed came into being, the value of the dollar has dropped 98%.
why would anyone support a system that destroyed everything they had?

 

[BoredGoblin]

gold is better b/c supply of it is limited (or rather b/c it cannot be increased fast)

when the demand for money exceeds supply of gold, deflation happens, which makes business less profitable than holding cash.

 

[JohnM]

It's not better. There are a lot of people out there trying to argue against fiat money. There are lots of problems associated with being on any other system yet devised. The problem with economies using the fiat system is the fiat system, its the people who elect their government leaders who manage the economy through misguided or inept fiscal policy. America loves the quarter-Keynesian. They have the deficit spending part about half right, and they have none of the "and when things get better we pay down the debt" part right.