05-22-2016, 09:29 PM
(05-22-2016, 10:32 AM)Mikebert Wrote: There is a reason why there is no longer a gold standard. The supply of gold is limited. It expands at a slow rate. The world output of goods and services (GDP) grows at a much faster rate than the supply of gold (S). If gold was used as money, its value would be directly related to the ratio of GDP to S. This means gold sitting in a safe draws a return and anyone would has more gold than they need to pay for living expenses would hang on it to. This would reduce S and increase the value of gold further. Thus by not using gold for purposes other than paying for consumption (i.e. investing) owners of gold would maximize their returns.
This is its virtue because it protects from the arbitrary inflation we are subject to now. Yes, we would get a mild deflation of about one to two percent as a consequence of increased. This would make it much easier to save for retirement because in the days before the Federal Reserve this did happen. In most cases this was simply deferred consumption and that gold would later be spent. Bank deposits were loaned out for capital expansion which gave savers a return much greater than the passive return of one or two percent inflation.
Keep in mind that under the gold standard and laissez-faire the US has some of the greatest economic growth and increase in living standards ever. People were living better than they ever had before even if it doesn't seem like that by current standards.
Democracy is the theory that the common people know what they want, and deserve to get it good and hard. -- H.L. Mencken
If one rejects laissez faire on account of man's fallibility and moral weakness, one must for the same reason also reject every kind of government action. -- Ludwig von Mises
If one rejects laissez faire on account of man's fallibility and moral weakness, one must for the same reason also reject every kind of government action. -- Ludwig von Mises