Is a gold standard feasable in a globalized world?

Here are several good discussions of the pros and cons of placing the dollar on the gold standard.

It contains a number of statements both for and against the gold standard.

"As far as the value of fiat being more stable than that of gold, of course that is completely wrong. The US Dollar has lost 98% of its value in the last 100 years, and 86% of its value since 1971. It is hard to imagine anything much worse. Certainly, gold has been much more stable than that."

"Is a gold standard feasable in a globalized world? Yes, absolutely - that is if a country is willing to maintain dual currencies: 1) a domestic currency based upon the gold standard; and, 2) an international trade currency which is not. In certain critical respects, the U.S. is positioned to make this transition - for the time being - in an orderly fashion."

"What do you do when you stand by principle and refuse to weaken your currency, but everyone else around you does and your exports are no longer competitive?

By way of analogy, if you are a farmer and all the other farmers decide to sell their goods at half price, this allows you to buy their produce cheaply, but this only lasts as long as you have money. Once you run out of money, which you will quickly because you can't sell your goods, then what do you do?"

"Yes, in a free market world with open global borders and no exchange rate trickery, businesses compete solely on quality and price However, we don't live in that world. We live in a world full of tariffs and trade restrictions along with multiple floating currencies, which is a world where other countries are eager to steal your lunch. They do so by robbing their own people of wealth through inflation, but this temporarily allows them to take your lunch because their goods are cheaper than yours."

"The reason devaluations do not work is that the decline in the currency's value is offset by an increase in that country's relative rate of inflation. For example, Mexico devalued the peso by 50% right after NAFTA went into effect. But, prices in pesos doubled relative to the dollar over the next three years, erasing any promised benefit but causing enormous disruption to the Mexican economy while erasing half of the value of the Mexican people's savings held in pesos, depriving that country of much needed domestic capital."

"Even if this money label only stands for a set weight of gold, if this weight is overseen by government and government retains a monopoly on the system used to exchange this marker of weight, then it still retains the capacity to arbitrarily redefine the weight as the US did to the dollar after confiscating the gold holdings of American citizens.

Thus we need a weight that is respected and defined independently of a government label, as in grams or ounces, and a system independent of government through which to trade it. The question is, how would such a money function? "

"You (the US) once failed that because that was solution hard to maintain. In order for dollar to be used as world currency, the US had run trade deficit every year to provide international markets with money. In the same time, to be able to provide convertability you should had not to run such deficits, because it was endangering your ability to maintain your promise."

 

There isn't enough gold in reserves to sustain the amount of economic activity that happens in the world today. Returning to a full gold standard would result in chaos

 

In what world does gold as a currency prevent basic fundamentals of supply and demand?

People's infatuation to that useless metal is embarrassing. It is the 21st century, the 1800s are long gone!

 

Malaysia uses gold. And their economy has been better off for a decade.

 

Lol, Malaysia has a $15,000 per capita GDP and has a freely floating currency that is not backed by gold.

 

and there isnt chaos currently? the 1800s looked a lot more stable then compaired to today.

 

I take it you've never been to Malaysia

What was GDP per capita 10 years ago before they started using the Islamic Gold Dinar and the Malaysian Kijang Emas? Find out and report back. I'll wait, but not for long.

The Bank of Malaysia offers these gold coins. If you give them 200 RM they will give you an once of gold.

 

I think the Internet makes people crazy!! So crazy that they think we are worse off now than the 1800s.

Put the computer down, step out of your bomb shelter, get some fresh air, and enjoy life a little bit!

 

no the world is not trade and barter it has militaries which protects each civilizations use of currencies..

gold only makes value from speculation and this only benefits rich people who buy gold for their jewelry

 

there wasnt much inflation between
http://www.cyberussr.com/hcunn/gold-std.html

that alone should be a reason to back it with gold

 

No because globalization is from the bankers themeselves. They want all the gold for themselves. They would like a digital currency based on carbon taxes, basically....making the air we breath the substitute for any real standard like gold or silver.

They want us to pay them for breathing.

 

No, it's $15k as of 2011. Not 10 years ago.

And the bank exchanging their floating currency for gold, does not mean you are on the gold standard. That would be no different than you trading gold for USD.

 

I wanted to know what it was 10 years ago.

In the US we trade USD for Gold or Gold stocks from Gold Retailers. Malaysia it's different. Gold is actually used in common transactions. The State Governments and the Banks give you Gold or a Gold Note in exchange for RM. If that's not the Gold Standard I don't know what is.

 

The gold standard is currency backed by gold. As in this $1 is worth "x" ounces of gold and can be exchanged. Malaysia doesn't have that, it's almost a reverse gold standard, where they trade their freely floating currency for gold and vice versa. As in their currency creates the price for gold, the gold doesn't create the price for their currency.

And the fact we are comparing Malaysia's economy to the United States is embarrassing.

 

It does have that. You can trade in 1 Islamic Gold Dinar which is about 0.12Oz and trade it to a State Government or Bank for a Fixed Price of almost $200.

You still never told me what their GDP for Capita was before 2001.

I'm just telling you that you should take the time to visit other countries. You seem pretty ignorant about what the rest of the world is actually like.

 

And yet gold has outperformed the DOW MASSIVELY since mid 1999....approximately 600+% to about 1%.

 

Thanks for sharing, akphidelt.

This part was very sacry!

""Even if this money label only stands for a set weight of gold, if this weight is overseen by government and government retains a monopoly on the system used to exchange this marker of weight, then it still retains the capacity to arbitrarily redefine the weight as the US did to the dollar after confiscating the gold holdings of American citizens."

 

The gold bubble is about to collapse.

Maybe not, but it's heading for a 20% correction or more. I'm getting ready to reinvest my capital gains in lead, my portfolio is overweighted with hollow point tranches!

 

Sorry but, that's extremely doubtful considering there isn't any Centralized Government propping up the cost of Gold. Also Gold isn't increasing in value in the Marketplace it's the value of US Dollars that is decreasing and I don't see in the near future a raise of the US Dollar considering the path it's going. So your entire post is null until you find some way to prove that the US Dollar is going to stop being devalued.

 

Lol, gold will drop like a rock the second people realize they are holding on to a stupid piece of metal.

The second the economy picks up, and people are scrambling for dollars, gold will go back under 1000. That is of course if China and other emerging markets stop driving up the price with their mass purchases.

 

I believe you are mistaken, Small_government_caligula.

The Chinese are dumping their U.S. dollar holdings and buying gold. These decisions and similar decisions by the Japanese are the primary drivers for the tear the price of gold has been on.

Until the Chinese reverse their policy, the price of gold will contine to increase.

 

You make no factual assertion that you're correct at all and I could simply replace the words in your Post with Dollar + Paper. Where is this emerging Economy? Is it more Stimulus money? How does a artificial growth with no long term positive effects really provide a better Economy?

 

But of course, over that period of time, gold has been *far* more volatile.

They tried the fixed exchange rates system until the 1970s. It failed.

You stop buying their goods.

 

Due in large part because the US wasn't able to payback their debts Gold so they chose printing more Dollars to remedy every possible problem.

 

Lol, I have no clue what you mean by artificial growth. You mean people producing and consuming things? What is artificial about that?

And there is a strong correlation behind gold prices and the economy. When the private sector runs dry and people look to park their money elsewhere, they put it in commodities, treasuries, or real estate.

The second the economy picks up people will liquidate their gold holdings, and start investing in the private sector. Gold isn't special, it is cyclical in nature just like every thing else.

Only the fools will be left with their precious gold pieces when all is said and done.