Replies to post #42260 on Short Term Trading Member Forum

[JLS]

golfin,

the idea of using gold, or even silver, as a standard for currency is dead. It will never come back for good reasons. So forget about it.

Now let’s say that for example, and for the sake of golfin, the whole world goes back to a gold standard (even though we know that the whole world was never unified on a gold standard; and when some countries were on a gold standard, they frequently went off the standard so that they could pay for justifiable expenditures, such as fighting the Napoleonic wars, WWI, and WWII, and other national disasters).

Now that we are on golfin’s gold standard, it is reasonable golfin stand up for what he believes and that golfin address each of the problems listed below:

1) How do countries without any gold function? Can they be trusted to base their currencies on gold when they have no gold?

2) I know of no country with sufficient gold to cover their existing currency; how do they function?

3) For a gold standard to work, other central banks must be allowed to exchange their currency for the gold of another country -- that’s what a gold standard is all about. How does one prevent a country with foreign exchange surplus from hoarding gold, thereby putting other countries in the position of not having enough gold reserves to guarantee their currency?

4) What process is followed in order to create new money as population grows -- so that wealth can at least remain constant on a per-capita basis over the entire world?

5) What process is followed in order to create new money as wealth grows -- so that a few don’t become very wealthy at the expense of everyone else becoming very poor? Clearly, new money must be created in order for the wealth of everyone to increase. To not do so invites revolution. So now we have a situation where the money supply must increase as population increases and as wealth increases. Each cause, by itself, is exponential.

6) During a situation of national emergency whereby wealth is destroyed -- such as severe weather damage (hurricanes, floods, tidal waves, earth quakes, etc.) -- how is the extra money acquired for the purpose of rebuilding the society and taking care of the sick and dying?

7) In Item 6 above, should money be destroyed as material wealth is destroyed (by national disaster) so that the wealth/money relationship remains constant?

8) How are wars of national protection paid for, particularly when the war is caused by the desire of another country to steal the wealth of the invaded country? This, by the way, as history has shown, is the unavoidable evil that results from basing a currency on any shiny object of lust that can be carried off; such as gold, silver, or rare gems. This is the Greed, or Raven, Spirit which is found in folklore over the entire world.

It appears that the only way to solve the above problems while on a gold standard is to allow the money supply to increase even as the amount of gold remains constant. But that would require that the value of gold change (in terms of number of dollars per ounce of gold). Ah, but that’s not a gold standard at all.

You might want to know that the only reason that Great Britain allowed the settling of the New World was so that the settlers could gather all the wealth of the New World and ship it back to Great Britain. The same can be said of the French and of the Spanish. In other words, they were running out of gold to finance their life styles. They were living the Raven Spirit of greed.