01-15-2018, 10:41 AM
(01-15-2018, 12:11 AM)Galen Wrote:(01-14-2018, 06:22 PM)pbrower2a Wrote:(01-12-2018, 04:38 PM)Galen Wrote:(01-12-2018, 10:14 AM)Kinser79 Wrote: Yes. Both Galen and I have mentioned numerous times that the petrodollar can, will and eventually must end.
I would also add that it means the end of Pax Americana because it will no longer be possible to print or borrow enough money to cover the Federal Governments obligations. It remains to be seen if there will be a formal default since there wasn't one in 1971 even though that is effectively what Nixon did in terms of the Bretton-Woods agreement. Gary North refers to the upcoming event as the Great Default.
Resumption of the gold standard would imply a hyper-deflation. One would need a "new dollar" to reflect the current $1339.50 per ounce value of gold. That would require almost a 20-to-one revaluation to have a dollar 'worth' what it was in 1970 at the value of gold at the official exchange rate. That would make a mess of banking.
Gold fluctuates wildly in value, often reflecting political instability (people in political orders at risk of overthrow tend to invest in gold) and stability (people selling gold after the revolutions). Supply spikes are always possible.
Prices always fluctuate during political instability. So what?
Banking is already a mess which is hardly news. The current price in gold reflects the steady devaluation of the dollar since 1971. Nixon didn't want to fix the Federal Government budget then and now we have an even bigger problem than he had. In the end all fiat currencies revert to their intrinsic value which is zero and the dollar is well on its way.
Yes, things other than gold (like diamonds and real estate) can fluctuate in value as a response to political instability. But if gold is the only 'real money', then that adds real instability to economics... and enhances such political instability as there is. Reputedly much real estate in the San Francisco Bay Area has been bought by Pakistanis who fear a revolution that will destroy their class privilege in a thoroughly messed-up country.
Population growth itself practically makes deflation a certainty on a gold standard, even if productivity per capita remains high. Gold is a possible measure of wealth, but I can think of commodities like electrical power, fossil fuels, computer data, steel, wheat, and even sulfuric acid (you can touch gold safely, but not sulfuric acid, but sulfuric acid is much more useful in industry) more powerful in determining how strong an economy is.
If you think that gold stabilizes an economy -- remember that speculative bubbles (and the ensuing busts to which those bubbles invariably led) were commonplace before FDR took gold out of circulation. Maybe gold gave people a certainty not merited. Maybe gold gave an unjustifiable illusion of solidity in economics.
Gold limits a money supply so that it cannot respond to a worldwide improvement in productivity. A fixed or nearly-fixed gold supply ensures deflation of prices even when productivity matches population growth. One could use Old Master paintings as an illustration: such people as Leonardo and Rembrandt (or even Vincent!) aren't painting anymore, so if more people want those paintings, then those super-wealthy people who can buy them simply bid up the price. The common man who wants a painting must resort to an expanding number of contemporary 'starving artists', but you can be assured that anything that looks even like Leroy Neiman will be a worthless fake.
If gold is money, then people would have to resort to barter (which takes away the advantage of currency) to evade the deflation. Figuring that people might be trading things in different classifications for purposes of taxation... that messes up the system of taxation.
Of course I understand well your libertarian solution -- privatization, monopolization, and brutalization. People not in the Master Class will get to work to the limits of their abilities for the barest sustenance and be expendable when they are no longer 'adequate' in usefulness to the Master Class. What seems like the definitive freedom is only for elites, and for the rest, conditions deteriorate to those of slavery on a plantation. Libertarian ideology is as utopian as Marxism-Leninism.
The ideal subject of totalitarian rule is not the convinced Nazi or the dedicated Communist but instead the people for whom the distinction between fact and fiction, true and false, no longer exists -- Hannah Arendt.