Is The Gold Standard Really The Gold Standard? (January 18, 2010)

. . .

G          “We need to go back to the gold standard.”

M          “Why?”

G          “To stop the government from printing fiat money.”

M          “Why gold?  Why not some other metal or something else that also has some more practical use?”

G          “The government can’t print gold.”

M          “You can’t eat gold.  It does not keep you warm. Gold has been alluring through the ages and does have some practical uses, yet it is only as valuable as it is because we ascribe value to it.  Fiat gold is not much different than fiat money or fiat currency.”

G          “We can’t trust the government.  If the government cannot issue fiat money unless it has an equal amount of gold reserves, we would not have economic problems.”

M          “The gold supply is not connected in any way with or to the desirable money supply or level of economic activity.  What if the government tried to tie the amount of fiat money to the total quantity of goods produced and to be produced and services performed and to be performed?  The ‘goods and services standard.’”

G          “You can’t trust the government.  The government will simply print as much fiat paper as it wants.”

M          “There is not enough gold in existence today in the possession of the U.S. government to begin to back even a reasonable supply of money.  What is to stop the government you can’t trust from asserting that it has enough gold reserves to support whatever paper it puts into circulation?”

G          “That’s it.  You can’t trust the government, so you need the gold standard.”

M          “Advocating for a gold standard represents a yearning for governmental responsibility.  That is understandable.  I agree.  However, the gold standard is not the gold standard.  It is the fools gold standard.  We need a ‘goods and services standard.’  The fiat money supply must be tied to the goods and services in the economy with the goal of promoting price stability.”

. . .

Bumper stickers of the week:

The Gold Standard is not the Gold Standard.

The Au Standard is the FeS2 Standard.

Adopt the “Goods and Services Standard.”

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