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The Question of Gold Money: Is There Enough? (by Republicae)

The most commonly held misconception is that the supply of gold, either globally or in U.S. reserve, is insufficient to serve as money. One of the common adages pertaining to gold is that there is not enough flexibility in the money supply to sustain the growing needs of either the U.S. or global economy, thus the only option is fiat.

Of course, the ones that hold such misconceptions are the very ones who support, most whole-heartedly, the fiat system and the power it allows both the government and central bankers of the world. Another claim, among many, is that a gold monetary system would make it difficult for a country to isolate itself from the economic woes of the rest of the world. Strange, but it appears that the fiat monetary system is much more problematic in such terms. Yet another claim is that a gold monetary system does not permit wide exchange rate changes and is resistant to government controls over both domestic and international trade and the payment of that trade. That of course, is true, but such restrictions on the ability of government to place such controls only allows for a freer market. All of such claims are usually found in those circles of people who are either centralists or globalists or both.

Factually of course, none of the criticisms about a free market gold monetary system are true, they are fabricated either intentionally or held out of a stance of complete ignorance of monetary mechanics. Gold cannot be easily regimented by governments or, for that matter banks and it does not lend itself therefore, very well to regimented economies.

Because of the nature of gold money, it also tends to thwart government controls over international trade, making true free trade without government intervention and regimentation, a real possibility. In fact, gold money makes it difficult for governments, including our own, not only to intervene in the economy, but it makes it far more difficult for governments to control the citizens of their countries.

The fact is, contrary to the popular opinion, there is absolutely no shortage of gold which can be used as money, nor would the supply of gold impeded economic growth to any degree because it is not the supply of money that creates economic growth, but the creation of capital wealth which utilizes the exchange nature of gold money that creates economic growth. I wonder why people who advocate the “short supply” issue never consider that the vast majority of gold that has been mined from the earth over the last 5 to 10 thousand years is still in use today, it can still be accounted for. That is an amazing fact about gold and begs several questions for those who hold the view that there is not enough gold to serve as money in the modern economy. What has all that gold done throughout the millennia? It has been traded in one form or another, but it all remains. Gold is perhaps one of the most guarded metals of all times, valued and retained in some type of circulation despite all the efforts of governments and banks to hoard it and restrict its movement.

Like the economic policies we contend with today, the monetary policies are simply a product of ideas, which have, for the most part, been popularized and thus accepted as factually true. It constantly amazes me that so many people rarely question anything they are told, but accept it at face value despite proofs to the contrary. Even the entire organization of the modern economy is based upon popularized ideas, accepted without much question, especially today.

The entire concept that there are monetary requirements within the economy that somehow exceed the supply of gold, hence there must not be enough gold to serve such an economy and maintain or expand its growth. So many seem to accept this concept without further inquiry. How odd it is that governments and their economists promote such concepts, well perhaps it is not odd at all, but should be expected since governments hate the limitations of gold upon their centralized planning. Of course, most people appear eager to accept such axioms and accept, again without questioning, the idea that the function of government is both to issue and therefore regulate the value of money through central bank planning and policy. Many are most dogmatic in such beliefs that any departure from the idea that there is simply not enough gold to serve the economy is heresy or perhaps worse, that it is nothing more than a fantasy.

The fact is that under a gold monetary system there is no need to regulate or manage the money supply, the market does that perfectly well itself. The free market determines both the demand for and hence, the supply of money circulating within the free economy. An expanded money supply, as with the fiat monetary system, does not, I repeat, it does not equate to greater wealth or overall prosperity in a country; the opposite is true about the expanded supply of fiat money. Perhaps one of the greatest reasons that the expansion of fiat money does not equate to greater prosperity is that as it expands its purchase value declines. Fiat money eventually develops an impotent utility, whether it is issued by a central bank or directly by a government, the results are the same. Fiat currencies always tend to generate economic booms and it will always, without exception benefit debtors since it gives the illusion of wealth and affluence, but these benefits are short-lived as economic distortions, so prevalent in managed economies, present themselves and expose the true nature of the so-called wealth created through fiat monetary expansion.

Without such monetary inflation the government would be limited, unable to employ vast hoards of bureaucrats, new programs, agencies and the accumulation of hard assets throughout the country. Fiat money is a favorite tool of politicians, it allows them to easily reward their supporters and assure their constituents remain faithful to their political cause.

As Mises and Rothbard stated, correctly I might add, the increase of the fiat money supply confers no actual benefit whatsoever. The real problem with such increases is that it simply redistributes both income and actual wealth. It is also responsible for numerous economic disruptions, mal-investments and the misallocation of economic production.

The fact is that even the expansion of a gold monetary supply will not directly impart a social benefit; only the expansion of the use of gold money imparts a social and therefore economic benefit to society. Thus, in an actual free market economy where gold is money, the total stock of money is irrelevant as long as there is no government intervention in the market or government regimentation of the gold supply. The market will always, without exception, determine the proper supply of gold money to the demand of the market.

Perhaps one of the most amazing qualities of gold money is that any given quantity will render full utility as a medium of exchange within a healthy free market economy. Remember, it is not the quantity of money that imparts social benefit, but the quality of that money and the exchange fungibility of that money that imparts the social benefit. We are so accustom to thinking quantity that it is difficult for most people to grasp the concept. Free market economics, without government intrusion, will regulate the purchase value of the money as it is utilized. Thus if the stock of gold money is large the purchasing power will adjust downward; conversely, it the stock of gold money is small the purchasing power of the money will adjust upward.

While we tend to “fear” inflation and deflation today, the fact is that a degree of both inflation and deflation in a free market economy is not only to be expected, but welcomed since it is a correcting factor within a free market to bring about equilibrium. Contrary to the opinions of those who support a fiat currency system, there is absolutely no wealth that can be neither created, nor economic growth achieved simply by changing (i.e. expanding) the supply of money within the economy; in other words expanding that supply. That is not the way wealth or economic growth is created. Gold money is simply the means of exchange upon which growth and wealth become mobile within the economy. Amazingly, so many people, especially those in our government, actually believe that it is necessary to expand the money supply to create prosperity when the fact is that the expansion of the fiat money supply, along with the myriad of ancillary policies, only serve to depress prosperity.

Money is only the medium of exchange, nothing more. Adding to the supply only dilutes the purchase value of the individual units of money causing an impotency of exchange. The fact is that the only thing that actually enhances prosperity is when money of full purchase value, such as the asset value of gold, is used as a medium of exchange in the production of both consumer and capital goods within the economy.

Factually, there is more than enough gold in existence to use as a medium of exchange without ever mining another ounce. It should also be noted that even when gold is used as money, it does not, nor has it ever consumed the supply of commodity gold in the hands of people around the world. No one melted his or her gold jewelry when gold was used as money. Why? Perhaps because the supply of gold money, at least under a free market system, was ample to generate wealth in society. The only thing that mining gold does is enhancing the commercial use of gold, not the monetary use of gold.

It is important to understand that both gold money and fiat money adhere to the economic principle known as the “law of costs”. As such, gold has always retained its relative value opposed to paper fiat money which will always, without exception, eventually revert to the value of the commodity it is made from: paper! Economists, at least orthodox economists such as of the Austrian School, recognize this long standing law which declares: “over the long-term, the market price of freely reproducible goods tends to equal the costs of production.” The “law of cost” is equally applicable to gold money as it is to paper money; neither is immune to this economic law. The dangerous propensity that paper fiat money has is that its exchange or purchase value must be artificially maintained far above the costs of manufacturing it otherwise it will be exposed for what it really is: worthless paper. The problem, of course, is that governments cannot restrain themselves or their expansion to keep paper fiat money at a consistent or high purchase value, thus fiat currencies always fail and the economies built upon such systems collapse.

There are always those who raise the question about the proper supply of money and are quick to question if the supply of gold is sufficient for a massive economy. Amazingly, they cannot place a realistic or objective factor that could determine the demand for money; therefore it is impossible to determine the proper supply of money. There is no economist, no central banker or politician who has either the power or the ability to determine the proper supply of money, either fiat or gold money for that matter. Only the free market can make such a determination and it is powerful enough to manage it without government or central banking influences. The simplistic view held by so many people is that the supply of money must be massive or must be able to be expanded to meet the ever-expanding needs of the economy, thus the importance of government and central banking regulatory power to ensure that the money supply is well-managed. Of course, demand for money, at least in a free market, is based upon value judgments, not objective facts that can be qualified by a central bank or politician.

Perhaps the greatest illusion created through the fiat monetary system is that of face value. Most people today look at the face value of money and equate that face value with actual value, or purchase value when that is completely false. Yet, such illusions only serve the political and elite class, not the prosperity or freedom of the People.

In a sound monetary system working within a free market, the demand for money is completely connected to the purchase value or quality of that money. That is not the case in a fiat monetary system since very few people understand that the face value of such a monetary system always conceals the true value of the currency.

Economically, the nature of gold money is such that, even with savers and investors, in every transaction the buyer of a product or service reduces his monetary holdings while the seller of a product or services increases his monetary holdings, which, in real terms means that the money stock has remained unchanged through the myriad of economic transactions taking place at any given moment. The production of wealth therefore, is not dependent upon the supply of money, but upon the actions of those who use that money to produce and the actions of those who purchase those products. As such, all potential buyers and sellers are guided by their subjective valuation they place on the economic benefit allowed by the medium of exchange (i.e. money). Thus, all economic expansion, at least in a free market gold monetary economy, is not dependent upon an expansion of the money supply, but only the quality of that supply and the use of that supply as transactions take place within the economy.

After all, look at the current economic condition of this country; if the expansion of the money supply actually created wealth then every person in this country would be genuinely wealthy. Unfortunately, that is not the case, and it is particularly not true of fiat money, no matter how expansive the supply may be.

To Be Continued…



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Coined money.

It was for lack of gold that the Constitution established a bimetal system of money.
Congress is to regulate weights and measures but instead of doing so they pegged gold to silver at 20-1. They should instead have stuck to regulating weights and allow each to compete with each other on the market.
Personally I believe that if there isn't enough gold for circulation that silver, platinum and palladium should be included in the basket. But the system should be based on coined money and not printed paper or electronic money, only when there is a corresponding amount of coins on deposit.
In order of availability in the earth's crust.
Palladium is the rarest, with roughly 1 ounce to every 1.8 ounces of gold.
Platinum is next in line with roughly 1 ounce to every 1.1 ounces of gold.
Finally Silver is about 68 times more available more common than gold.
This would even be an advantage for the government since it retains most of the mining rights in our country and hold most land titles.
grant

Thanks for your research, Grant.

Here is a little more research to share:

The original Silver to Gold ratio was 15 parts Silver to one part Gold in Silver dollars. 20 of these contained about .7737 to .7736 of an ounce of silver.

A $10 Gold piece varied by Gold content to weight but was accepted in trade as 1/2 ounce of Gold.

Source: Coin Prices magazine:

The original Silver dollars were about 90% Silver { it varied slightly } but the total over all weight was a little over 3/4 of an ounce. .7737 of an ounce from 1794 to 1840, then .7736 from 1840 to 1935, when they were discontinued.

The American Silver dollar re-appeared in 1986 containing .9993 Silver and weighing a full 1 ounce.

However, the letters one-dollar are clearly stamped on the coin. So when Silver has and is valued at way over one dollar per ounce, essentially making it a collectors item only.

I'm pretty sure we can thank Ron Paul and Jesse Helms for their hard work on the U.S. Gold commission for re-instating the current American Silver Eagle and Gold Eagle issues of Congressional approved Silver/Gold coins.

beesting

That's where the

That's where the Constitution comes into play. Congress can create a new money using gold and silver and it doesn't have to be named U.S. dollar. The Constitution says nothing about dollars, that is a generic term. The money could just as easily be named gold and silver.

I agree.

It could be valued by weight in grams, ounces or fractions of ounces, or grains. { 480 grains to an ounce }

beesting

Important is gold and silver not the dollar.

Exactly, the important thing is the content. Silver could be used for smaller transactions and gold for larger transactions. The important thing is not to link one to the other but to allow them to trade freely on the market.

Republicae's picture

Actually Grant, it was not

Actually Grant, it was not the lack of gold that caused the Founders to establish the coinage of money in gold and silver, or for that matter the use of cooper in cent pieces. It was a matter of practicality and was based on the fact that well before the Revolution that coinage from all different countries was used and accepted through the colonies and then the States. In fact, foreign coinage was not prohibited by the Constitution and was in use until 1858 in this country as money along side U.S. denominated coins.

If you read the Congressional Record as far back as 1828 you will see that while the weight of the coin was regulated the price value of the coin was not, nor did the Congress advise to regulate the actual pricing of gold or silver coin, hence it was left to the market to regulate the pricing value, in other words the purchase value of gold and silver.

Now, you say that you do no believe there is enough gold for circulation, what do you base that belief upon? You must have some basis for such an opinion and that opinion must be validated beyond actual belief into some foundation of theory, otherwise it is simply a belief system that you have formed. So, first you must give us an understanding of why you believe there to be a lack of gold supply to serve as a circulating monetary exchange within the economy.

Then you must show, if your belief is to be considered based on substantial evidence, that an additional supply of gold is necessary to perform an actual social and economic benefit than the supply in existence today. Additionally, you must be capable of showing that the nature of money and exchange depends on quantity of supply and not on monetary and economic principles based on the fungibility of money in an economic environment. Thus, without such “proofs” you are simply basing your opinion on what most people do and that is conditioned by years of anti-gold sentiment promoted by the fiat inflationist over the last 100 or so years.

Once again, I offer you the writings of David Hume from the 1700s as to the nature of gold money in circulation, he studied the phenomenon for decades and arrived at some very surprising conclusions regarding either the increase or decrease of gold money supply in an economy.

Additionally, if you read about the various gold rushes that almost doubled the amount of gold money in circulation in this county you will see the natural principles of economics taking effect shortly after those increases and eventual balances to a consistent level of growth return to what could be considered normal. The same thing would happen if there was a sudden decrease in the supply of gold money, only in reverse.

Rothbard stated the obvious when he said:

"Apart from questions of distribution, an increase of consumer goods, or of productive resources, clearly confers a net social benefit. For consumer goods are consumed, used up, in the process of consumption, while capital and natural resources are used up in the process of production. Overall, then, the more consumer goods or capital goods or natural resources the better.

But money is uniquely different. For money is never used up,
in consumption or production, despite the fact that it is indispensable to the production and exchange of goods. Money is simply transferred from one person’s assets to another.

Unlike consumer or capital goods, we cannot say that the more money in circulation the better. In fact, since money only performs an
exchange function, we can assert with the Ricardians and with
Ludwig von Mises that anysupply of money will be equally optimal with any other. In short, it doesn’t matter what the money supply may be; every M will be just as good as any other for performing its cash balance exchange function."

Essentially, the money supply does not matter!

By all means, please read Rothbard's The Mystery of Banking. You can download it free at the site below:

http://mises.org/Books/mysteryofbanking.pdf

http://www.1776solution.blogspot.com

“There is danger from all men. The only maxim of a free government ought to be to trust no man living with power to endanger the public liberty.”-Adams

http://militantjeffersonian.com

"We are not a nation, but a union, a confederacy of equal and sovereign States" John C. Calhoun

Ludwig von Mises was a free

Ludwig von Mises was a free market advocate and therefore an advocate in favor of the free market generation of money, as long as the money is real, ie gold or silver in the case of our Constitution.
What I mean is that if the Constitution allows for only gold and silver to be coined as money, then in order for the Constitution to be compatible with the theory of free market, then it must not be illegal for individuals to turn their gold and silver into coined money. If not than the creation of money lies in the hands of the government (bankers) and "not" we the people for which the Constitution, and the Declaration of Independence, establishes as authorities above the government.
grant

Using the logic of the free

Using the logic of the free silver movement, since current U.S. coins are made of copper alloy, we should be able to turn in copper of equal weight to be minted into coins and pay off our debt. It would certainly be more just than the system of printing paper that we have today and would serve the needs of the people and not the needs of the bankers.
grant

Free silver coinage.

Where's the debate on this issue?
Why weren't American's allowed to turn their silver into coined money as per the Constitution? It would have saved a lot of small farmers their property.
grant

True foreign coins were not

True foreign coins were not prohibited but they were regulated, meaning that you could not pay the government with foreign coins without going through the money changers. A foreign coin, to be recognized by the government would have to be turned into the government and based on it's content of gold to be minted into U.S. coins at a cost.
Article I, Section 8, Clause 5. The Congress shall have Power…To coin Money, regulate the Value thereof, and of foreign Coin, and fix the Standard of Weights and Measures.
In the case of copper coins this was nothing more than a debasing of the money, since copper is much cheaper and more available.
As for silver it was accepted for trade, but was not accepted by the government such as was gold for "free coinage of silver".
For this reason the government could mint silver coins at 20-1 ratio, making a profit from the relatively cheaper silver metal.
This lead to the Free silver movement by farmers, prospectors and industrialist, who wanted a more open ended monetary system.
http://en.wikipedia.org/wiki/Free_Silver
This would have hurt creditors such as banks, leaseholders, and landlords, making it easier for payment.
grant

Republicae's picture

As far as copper usage, the

As far as copper usage, the Coinage Act of 1792, passed by Congress, signed by President Washington on May 8, 1792 allowed for the use of copper in small cents. One reason was the shear volume of small cents in use in the country, another reason was the durability of the coins. The Act authorized " "the director of the mint... be authorized to contract for and purchase a quantity of copper, not exceeding one hundred and fifty tons... to be coined at the mint into cents and half-cents... and be paid into the treasury of the United States, thence to issue into circulation....no copper coins or pieces whatsoever except the said cents and half-cents, shall pass current as money, or shall be paid, or offered to be paid or received in payment for any debt, demand, claims, matter or thing whatsoever."

When the Act was created it defined the value in a proportional manner with the proportional value of gold an silver being 15 units of pure silver to one unit of pure gold. At the time of the Act, any person could bring either gold or silver or copper to the Mint to be coined without any costs or they could simply exchange their bullion for a small fee in exchange for coin.

Thus, the system was much more liberal in terms of control by Congress, than it certainly is today. The fact is that in terms of competing currencies, I see no reason why such a system would not work as well today as it did from 1792 to 1858 when foreign coins were regularly used along side U.S. currencies and was based on a proportional value of weight. Again, if the government would ever allow individuals or companies to have their bullion minted into coin as it once did then that would be a very important step forward in restoring this Republic and the economic markets which have been effectively nullified by the Fiat Monetary Monopoly System.

http://www.1776solution.blogspot.com

“There is danger from all men. The only maxim of a free government ought to be to trust no man living with power to endanger the public liberty.”-Adams

http://militantjeffersonian.com

"We are not a nation, but a union, a confederacy of equal and sovereign States" John C. Calhoun

Need closer study.

That isn't totally true.
There was never an open ended government purchase of silver for coins or copper for coins as there was for gold. There were limited purchases of silver and copper made by the government to mint silver and copper coins, but never unlimited purchases as was the case for gold.
Actually Washington's signing of the 1792 act to mint copper pennies was the first debasing of the monetary system. Copper in no way compares to the value of silver or gold. Compare the price of copper to silver today, what is it about 300 to 1? The reason for copper pennies was because it was cheaper to mint copper cents then silver cents, and a profit for the government. There actually were silver cents minted, and that should have been sufficient if those in Congress of those days were to hold up the Constitution. We have to understand that money has been the root of all American governments evil since the beginning.

Republicae's picture

By all means, please read

By all means, please read the United States Mint Reports from the year 1790 to 1892. In them you will find the accurate information concerning the actual purchases and the reasons behind the manner in which gold, silver and copper was used by the government, how they arrived at the conclusions concerning such coinage.

In a report to the Senate, communicated on 14 December, 1795 the following was reported:

"I am now free to say, that the mint, even on its present contracted scale, if regularly supplied with the precious metals, of the legal standard, will be adequate to the coinage of 1,500,000 dollars, annually, in silver, and as much in gold; and, that a small increase of the labor and expense, will produce as much of the copper coinage, as will be requisite for the use of this country." HENRY WM. DE SAUSSURE.

It should be obvious from that segment of the report that there was actually a balanced purchase and usage of gold, silver and copper by the Mint. You will also find an rather exacting count of actual coinage in the various metals.

Another interesting report can be found issued on 20 December, 1796. You will find that one problem confronting the Mint was substandard bullion, particularly silver bullion. In that year, the Mint issued $149,445.00 in gold coin compared to $443,032.00. Obviously, if what you say is true concerning the disparity between gold and silver, silver according to you, being "neglected" by the Mint, then something must be wrong with the Mint Reports. The dollar value of copper coins minted that year was approximately $21,697.00.

A report issued 13 February, 1797 stated some extremely interesting facts about the purchase of coinable metals.

"That, by the act for the establishment of the mint, which was passed in April, 1792, no provision was made for purchasing gold and silver bullion, in behalf of the public, and replacing the capital that might be employed for that purpose, by the coins that might be produced from it, excepting that, in one case, it was provided that it should be optional for the depositors and the director of the mint to exchange coins of the United States for standard bullion, with a deduction of one half per cent. from the weight of the pure gold and silver that might be contained in the bullion, as an indemnification to the public for the loss that would be sustained by advancing the money for the time that would be necessarily required for coining it, and the Secretary of the Treasury was authorized to make the necessary advances for this purpose, whenever the state of the treasury would admit of it; but the great and continual demands upon the treasury for disbursements on other accounts, and the loss that would arise to the public by the delay that would frequently take place in coining, may be fairly assigned as the reasons why this provision in the law has never produced any effect, similar to that of purchasing bullion at its market price, and coining it in behalf of the public." Mr. Havens

Of course, there is a huge amount of relevant information contained in the Mint Reports. Aside from our assumptions, that information can not only provide us with degree of accuracy lacking in our assumptions, but with other information that can prove invaluable regarding the intend of the early leadership of this country regarding monetary usage.

http://www.1776solution.blogspot.com

“There is danger from all men. The only maxim of a free government ought to be to trust no man living with power to endanger the public liberty.”-Adams

http://militantjeffersonian.com

"We are not a nation, but a union, a confederacy of equal and sovereign States" John C. Calhoun

If You Want It Made Simple

Irwin Schiff's classic cartoon book, "The Kingdom of Moltz" is a good primer about paper unbacked money. Irwin is the tax protestor patriot who is in prison (Terre Haute) and the father of Peter Schiff. I was his appellate attorney and he was railroaded by judges who would make Inquisitors appear mild-mannered, receiving the most unfair trial I have ever known.

Sheldon Waxman
sheldonw72@gmail.com
www.independentcontractor.info

Repeal Legal Tender Laws

That's the only way, except Revolution. Baron Edmund de Rothschild said: "Let me own the money and you can have everything else". The Fed. owns our money. And I firmly believe, although there is no proof, that Kennedy was killed because of his opposition to making FRN's the exclusive money. This occurred within months of his death.

Sheldon Waxman
sheldonw72@gmail.com
www.independentcontractor.info

A thread has been started on this very subject.

It will take an effort similar to the H.R. 1207 by we the people to repeal this unconstitutional law.

http://www.dailypaul.com/node/97508

beesting

gold deposits

if a local bank opened up using gold to back deposits i would start a checking account there.

You deposit gold and trade the paper reciepts?

What an interesting concept. What if the bank prints more reciepts than it has gold?

Republicae's picture

That is basically what

That is basically what happened with the Bank of England back in the early 1800s. An interesting read is called Paper Money verses Gold, written by William Cobbett and published in 1828. The volume goes very deep not only into the gold and paper receipt issue, but also into the creation of the Bank of England and the various mysterious dealings of that bank. Cobbett considered Paper Fiat Money to be fatally flawed and a harbinger of social miseries.

Of course we know the history of the FED in the early 20s and the issuance of FRNs in excess of deposited gold reserves. However, if a bank, under the forces of the free market, was restrained by that market to provide good business practices then then there should be no problem as long as their feet are held to the fire of responsibility to their clients. The problem however, is when you get government involved in the market and the allowances that occur under a fiat fraction reserve system.

http://www.1776solution.blogspot.com

“There is danger from all men. The only maxim of a free government ought to be to trust no man living with power to endanger the public liberty.”-Adams

http://militantjeffersonian.com

"We are not a nation, but a union, a confederacy of equal and sovereign States" John C. Calhoun

Can you say it in less words?

Republicae, I'm happy to see you write on this topic. I have one criticism: It's too long. Much of your article attacks fiat money instead of explaining why particular denomonations of money do not matter.

Republicae's picture

Canada, the older I get the

Canada, the older I get the longer winded I become...it is a natural progression of decades of information, most of which is completely useless I assure you.

http://www.1776solution.blogspot.com

“There is danger from all men. The only maxim of a free government ought to be to trust no man living with power to endanger the public liberty.”-Adams

http://militantjeffersonian.com

"We are not a nation, but a union, a confederacy of equal and sovereign States" John C. Calhoun

supply and demand.

of course there is enough. just take it back from the criminals who have it right now. the same amount of gold that was here before, is here now. but i prefer silver. there is clearly enough to go around.

Does this question even need to be answered?

Gold itself is not required for sound money. Any tangible asset with intrinsic value will do. In fact, a basket of assets may be preferable.

Republicae's picture

While it is true that

While it is true that various commodities or assets have been used as money throughout history, gold, in particular has had a very, very long and successful track record as an enduring monetary unit. Additionally, since the value of money is a market phenomenon, what we consider the "intrinsic value"of gold as a commodity only adds to the utility of the metal when used as a monetary medium of exchange. Gold also serves as a double asset unlike fiat currency which serves as a double liability. As such, the economic value and thus calculation of gold money tends to increase the overall economic capital production within a country since it is, indeed, a double asset.

http://www.1776solution.blogspot.com

“There is danger from all men. The only maxim of a free government ought to be to trust no man living with power to endanger the public liberty.”-Adams

http://militantjeffersonian.com

"We are not a nation, but a union, a confederacy of equal and sovereign States" John C. Calhoun

To all Honest Money Opponents

For all the arguments for or against Commodity backed money, for all the arguments for government control of the money supply and issuance thereof,

I say let us run an experiment, let the best money prevail, repeal all laws against private money, so called legal tender laws.

Allow the issuance of gold coins, silver coins, gold certificates, silver certificates, anything goes, caveat emptor, laissez faire, Laissez le bon temps rouler.

We will have an answer pretty quick. The scientific experimental method in action.

And as far as "we Must Protect the people" are we not adults or are we all incompetent to handle our own affairs?

As Ernest Hancock says Freedom is the answer what is the question.
( for those who do not know he had a hand in creating the 'love' in revolution logo) See Freedoms Phoenix http://www.freedomsphoenix.com/

The question is left unanswered.

My friend, though I share your enthusiasm about gold, your essay doesn't answer the question you pose. You generally expound on how all the opponents of gold have hidden agendas, etc, etc, but you never actually address the issue of the supply of gold being able to expand as the net worth of the economy expands. You say:

"Factually, there is more than enough gold in existence to use as a medium of exchange without ever mining another ounce."

But you provide no evidence. No references. No economic discussion, really. Sorry, but I need a better answer!

Republicae's picture

Actually, the question was

Actually, the question was adequately addressed by the nature of monetary exchange and the utilitarian value of monetary exchange.

The supply question was actually answered back in the 1700s by the great social economist David Hume, who studied the supply and demand for gold money for decades, not only on a national scale, but internationally as well and provided ample proofs regarding the working of economic markets which automatically adjust to the monetary supply.The fungibility of money performs a social benefit no matter what the supply of money is in circulation. Now, we are speaking about sound money, not fiat money.

I naturally assumed that those readers here on the DP would be familiar with the various writings of Hume, Mises, Rothbard, Reisman, deSoto. All of these prominent economic minds provide more than enough access to such information.

http://www.1776solution.blogspot.com

“There is danger from all men. The only maxim of a free government ought to be to trust no man living with power to endanger the public liberty.”-Adams

http://militantjeffersonian.com

"We are not a nation, but a union, a confederacy of equal and sovereign States" John C. Calhoun

why ask why? try bud dry

Um you need to cast off the old paper money thought pattern. The money supply doesn't have to increase as the net worth of the economy does. Yes the gold standard would have (most likely) a perpetual deflationary effect. But! The average increase in the supply of gold world wide is about 3% a year, which is a pretty healthy rate of inflation considering 3% gdp growth is what they usually target.

That increase in the money supply doesn't come from a printing press. It comes from hard work done by a lot of smart people and big machines (in the developed world that is). Therefor its counterfeit proof money supply.

Basically forget everything you have learned about how an economy and a money supply have to be managed. They are all lies and complete propaganda made to make you into a serf. Think of it as a pure market exchange or barter.

lets take an example from a deflating market. Its been while since I have kept up to date on tech, but here goes.

Suppose you were building a bank of computers to run calculations and analysis on how fast the dollar is going to drop. In January, Pentium announces a brand new chip set, likewise AMD makes a similar announcement.

You say to yourself I am just going to wait until the price on these new processor comes down a little and the bugs have been proven to be worked out. So you wait and buy your chips for your network of processing units until march.

Realistically you could expect to see at least a 15% price drop from January to March on the same chip. In fact I believe you would have already heard about some of the models in the new line ups already being scheduled for discontinuation. Lets just say you spent 500 dollars on each chip from New egg.com. Now lets move 2 years down the road and you need new processors (because for some reason you need to do more than 3 billion calculations per second). You will get a chip that has more performance (maybe even double) and more than likely pay less for it. Even though the dollar has lost purchasing power. See prices don't always have to move with the money supply, nor does the net worth of the money supply have to expand with the economy.

When you go to buy the chip you are selling your dollars for something you value more highly than the FRN. Same would be true if you were using gold, however the prices would look alien to you. Pentium 7's for 1/2 ounce or .499 ounces of gold probably. This barter system would actually be very useful, safe, and stable. As the demand for gold increases you money would just buy more stuff. There won't be a gold mania the falling prices on consumer goods would be gradual.

Deflation gets a bad rap, but when its slow and gradual...it helps your average worker by ensuring he doesn't get screwed b/c the wage doesn't have to catch up to rising prices. Because when you work you are prostituting out your services for inflated currency, would you rather be a prostitute getting money that is guaranteed to hold value or loose value?

There is plenty on mises.org about this...please go there and educate yourself. Also check out C4L.

http://www.campaignforliberty.com/edu/sound-money.php

http://mises.org:88/Gold08_Klein

http://mises.org:88/Gold08_Woods

http://mises.org:88/Houston2009_Rockwell

http://mises.org:88/Gold08_Hulsmann

http://mises.org/MultiMedia/video/Salerno/Salerno10.wmv

http://mises.org:88/Paul-Partee

Did you just read..........

...."What Has Government Done to Our Money?" by Rothbard? :)