Gold standard. What if?

[whittington2308]

I could probably just google it but i thought i would see the forums opinion.  But what if the gold standard had not been leveraged? 

If the gold standard was say 80pc plus backed. Then there would not have been a run and had to come off the gold standard. Would 80pc gold standard of worked? (As opposed to 20pc i think?)

And who decided to start leveraging the reserves? 

In my mind business would have been harder for a countries economy but it was at least a true reflection of the real worth of that country. Or does it all comedown to faith. That as long as everyone belived they would be paid back eventually with gold it was all fine. Which it wasnt. Now we have faith the banks will give us paper when whenever we want. Which it wont. 

Many thanks for any thoughts ill enjoy any links references  and ideas.

 

 

[PansPurse]

Essentially, fractional reserve banking. This video series gives a pretty good overview of the what and why

[KDave]

The problem with low leveraged gold standard is encouragement of economic expansion, you need flex to lend future wealth that doesn't exist to bring it into reality. The trouble as ever is human nature, people are occassionally greedy and stupid, they over leverage, lend on rubbish subprime equivalents and make bad loans. The problems under the historical gold standard are not unique to it as a system. We have the same issues today amplified by the lack of any real base, which is why past recessions and depressions are going to look like a walk in the park when this system blows up. 

[Martlet]

The trouble with shunning leverage/fractional reserve system is that you remove much of the economy.  You can only invest and build based on cash in hand, so severely restrict the capacity of the economy to grow.  Arguably the Renaissance and industrial revolution would not occur which insufficient money available to tie up in exploration, art, science, art and factories etc.  We can say its gone too far, but rolling all the back wouldn't be a good idea either.

[whittington2308]

But if everyone was paying in gold and silver coins say. The money would indeed run out. But it would go somewhere else. And they would have more. It feels like having your cake and eating it. If we couldnt fund something as a nation we would borrow from allies. Instead we just.... made it up?

[Norskgeld]

In depth conversation on the Gold Standard.

 

[PansPurse]

9 minutes ago, Norskgeld said:

In depth conversation on the Gold Standard.

 

I knew I shouldn't have expressed an opinion 

[KDave]

2 hours ago, whittington2308 said:

But if everyone was paying in gold and silver coins say. The money would indeed run out. But it would go somewhere else. And they would have more. It feels like having your cake and eating it. If we couldnt fund something as a nation we would borrow from allies. Instead we just.... made it up?

You raise a good point - It wasn't the coinage that made the gold standard last time, it was the convertibility of the dollar which was supposed to be fixed to a set amount of gold in the vault. The issue was that the dollar was not really fixed to a set amount, the US printed far too many in terms of their gold reserves and in effect devalued the dollar. That is the problem, you can have whatever standard you want but unless the people running the show are accountable in some irrefutable way, it is going to fail, every single time. It is human nature. 

A gold standard today would need something to act in circulation. Just as before, you would need receipts for the gold and silver rather than using the metals themselves, though it would be possible to have both. The issue is keeping the system straight, whether you have a gold standard or something else backing your currency. The government don't want to be kept honest, the whole system is dishonest, theft of your purchasing power is a target set at 2% a year that should tell you what you need to know about returning to honest money. At the moment the dollar holds it position through having the largest military on earth and forcing oil to be traded in dollars, those that step out of line you know what happens, we have seen the result a lot in recent history in the Middle East and Africa when certain people decided not to play along any more. 

In summary yes you can use gold and silver coinage if you wish, but they would need to revalued upwards rather excessively to cover at least some of the existing leverage. It doesn't have to be 100% gold standard with no leverage, it could be as high or as low as you want, so long as it had a limit that was monitored and stuck to (good luck) it would work. Crypto currency may have some of the answers to the human problem, in combination with gold it could be very powerful, but I can't see it being taken well by the powers that be when the current system relies so much on ignorance and dishonesty to function. 

[whittington2308]

Cant say crypto will keep me warm in bed at night knowing my money is safe. Saying that i lost a sizable amount to crypto which i feel pretty damn embarrassed about. But by the by. What sparked my line of thought on this was i always thought the gold standard was 100pc and was always confused that it went so wrong. It was only today i realised how much it had been leveraged. But i think the GS is a system where everyone has to play fair. I bet the gov/banks loved the idea of printing free ious. Was we the first? Was it always leveraged ever since iou's? What would the economic world look like? My guess is a hell of a lot different. 

[whittington2308]

41 minutes ago, KDave said:

 you can have whatever standard you want but unless the people running the show are accountable in some irrefutable way, it is going to fail, every single time. It is human nature. 

 

So if we went back to gold and silver. You could make up anything you want but if the gold aint there it aint there. You would have to place faith in the owner personally. Oh wait... think we just went full circle!

[KDave]

Yes if you think about it we have theoretical limits on the currencies we use today, in terms of faith, confidence and purchasing power. If the country prints too much, all is well until that printing manifests in some way in the economy, normally via inflation and the rapid destruction of peoples purchasing power. If this happens, or enough people get scared of such happening (because of said printing) then they will start buying gold and the price rises. This is what happened following QE. Historically, a bank run was nothing more than a flight to gold. Nothing much has changed for those who study history and know what money is, it is those who don't, the majority that suffer the constant gradual erosion of their wealth, earnings and savings measured in currency. 

[HawkHybrid]

I'm of the opinion that we should not go back to a gold standard

as it was in history. paper currency is a good advancement over

the previous gold standard. currency is designed for trade and

trade 'only'. people should be educated to this fact and don't

save in paper currency. there are people who accept money

(gold, silver) for their goods and services. this is limited because

it is limited to the amount people can put aside as savings.

people are unwilling to accept gold/silver for all of their income

because they need much of that income to be paid in currency so

that they can pay their immediate bills/taxes. the gold standard

have it's pros and cons. currently purchasing power is taken away

from peoples currency via inflation. if we successfully limit this

with the use of a gold standard then taxes will have to be raised

elsewhere to make up for the shortfall. governments have budgets

to balance and it all comes out of taxes one way or another. I

agree with peter schiff when he says an improvements should be

focussed on smaller and more efficient governments.

 

HH

[whittington2308]

Also i guess, private individuals could get richer than government with finite gold. No? Has this happened. Must of?

[Lowlow]

I don't think we should hope that currency reverts to being backed by gold, because ... I don't ... don't think we should share .. the precious .. **runs hands through coins**

If everyone wanted the precious there would be less for us to have.

Joking around aside (not really) I think it is really the best of all worlds for silver stackers and gold bugs, because the world can go about running on stacks of paper, and only people who go out of their way to become educated about precious metals actually go to the trouble of purchasing them.  This is a good thing.  It means everybody can go around believing in the power of fiat money, and stock certificates held in street name, and unicorns and stuff, and only a small percentage of people have stacks of actual precious metal.  It's a pretty good world the way that it works, like a world where most people are happy hearing stories about food, while others hoard up all those useless real chocolate bars.

If you were a banker in the 19th century with a vault full of silver and gold, and someone told you that in the future average people would be perfectly okay storing all of their wealth in paper, and that they would do that even when they had the option of swapping it in for silver and gold ... but that they DID NOT DO THAT and that it kept the price of silver and gold really low ... I bet you'd think the future was pretty exciting.

It reminds me of a story, "A bird was on a branch and fell and froze and a bear took a *&^% on it and it got warm and started to sing and a tiger heard it and dug it out of the &^%$ and ate it.  Moral of the story, Not everyone who &^%$s on you is your enemy, and not everyone who gets you out of &^%$ is your friend, and when you are warm and happy you should keep your mouth shut".  This is that "warm and happy keep your mouth shut" moment when gold and silver is cheap and you can buy as much of it as you want and nobody will try to stop you moment, be happy we live in such times.