Why a Gold Standard is a Bad Idea

Good essay. Before WW2 the majority of Americans lived in poverty. Half of one's life energy went to getting enough calories to stay alive. When the world was on a gold standard only the rich people had any gold.

 

I do not believe the gold standard would work today for a number of reasons, including some of those mentioned; e.g. not enough gold. The economy has grown beyond what gold can back. Fiat currency is not an intrinsically bad thing. Anything, even gold, only has the value we all collectively agree it has. If we all agreed that green glass bottles had monetary value and gave the government or a central bank the power to manufacture them, they could be used as legal tender (albeit a very inconvenient one).

 

I propose replacing cash money with a 100% electronic transfer system with coins up to $20, not enough to bribe anyone over 16. Only 2% of US money is in the form of cash and half of that is out of the country. It is mostly used for bribes, gambling, doping, and tax cheating.

 

{personal attack deleted}

 

Read someplace that govt owns about 1 oz of gold per capita, say 4 oz per family. At $1000/oz that would be sufficient to "print," generate enough money to meet the monthly paycheck of every family.

Financial advisors say that every family should have at least 3 months pay in liquid savings. Now the price to generate sufficient money is $4000/oz.

Credit card "money" would have to be backed by gold. Half the families have an $8000 balance. Now the price is $5000/oz.

Maybe half the families are making payments on a house for which they paid not more than 5 times their annual income if they have any smarts. Would the money the banks loaned them be backed by gold. Would that not put us up to maybe $50,000/oz?

BOTTOM LINE: How high would the price have to go before my trash neighbors in the next block would kill me for the gold caps on my teeth?

 

Do not worry, we will soon find out what a dollar is really worth. The BRIC countries will soon use a commodity based currency sometime next year.

 

>Do not worry, we will soon find out what a dollar is really worth.

The average opinion of the money traders is probably close to correct and is posted on the financial pages.

 

You are missing the point here. A gold standard would practically eliminate inflation. The value of goods is relative to the value of other goods.

You could live on $100 a month if a house was $3,000, a car was $400, milk was 5 cents a quart, etc. etc.

A Gold standard would also readjust the inflated prices of everything today. Gold is not more expensive now than 50 years ago when you consider it's purchasing power. Actually gold is the only commodity that has retained its value. An ounce of gold would buy today about the same amount of 'stuff' it did half a century ago. What has happened is the DEVALUATION of your fiat currency.

 

Dollar, schmollar, only thing matters is how many hours does it take to buy stuff.

Federal Minimum Wage Rates, 1955–2009

Value of the
minimum wage Value of the
minimum wage Year Current
dollars Constant
(1996)
dollars1 Year Current
dollars Constant
(1996)
dollars1 1955 $0.75 $4.39 1983 3.35 5.28 1956 1.00 5.77 1984 3.35 5.06 1957 1.00 5.58 1985 3.35 4.88 1958 1.00 5.43 1986 3.35 4.80 1959 1.00 5.39 1987 3.35 4.63 1960 1.00 5.30 1988 3.35 4.44 1961 1.15 6.03 1989 3.35 4.24 1962 1.15 5.97 1990 3.80 4.56 1963 1.25 6.41 1991 4.25 4.90 1964 1.25 6.33 1992 4.25 4.75 1965 1.25 6.23 1993 4.25 4.61 1966 1.25 6.05 1994 $4.25 $4.50 1967 1.40 6.58 1995 4.25 4.38 1968 $1.60 $7.21 1996 4.75 4.75 1969 1.60 6.84 1997 5.15 5.03 1970 1.60 6.47 1998 5.15 4.96 1971 1.60 6.20 1999 5.15 4.85 1972 1.60 6.01 2000 5.15 4.69 1973 1.60 5.65 2001 5.15 4.56 1974 2.00 6.37 2002 5.15 4.49 1975 2.10 6.12 2003 5.15 4.39 1976 2.30 6.34 2004 5.15 4.28 1977 2.30 5.95 2005 5.15 4.14 1978 2.65 6.38 2006 5.15 4.04 1979 2.90 6.27 2007 5.85 4.41 1980 3.10 5.90 2008 6.55
1981 $3.35 $5.78 2009 7.25
1982 $3.35 $5.78


So in equivalent dollars the minimum wage in 2007 was about the same as in 1955. but the buying power maxed in 1974 and the worker has been losing ground ever since. The reason is that after WW2 the worker was getting, thanks to the unions, about 80% of the increased productivity but in the last half only 20% of the increased productivity.

from http://www.topix.com/forum/city/hugo-ok/TFIKPQBVM44NFMNG5

"In 1957, the average income of America’s 44 million families (according to the United States Commerce Department) was $5,000. There were actually 4 million families whose income was over $10,000. There were also 6.5 million families whose annual income was under $2,000. The vast majority of American families, 33 ½ million of them, had annual income between $2,000 and $10,000. In 2006, the average income for an American family was $48,000. In fifty years the average income had increased tenfold. The main difference between 1957 and 2006 is that most families need two incomes to reach the $48,000 figure whereas fifty years ago only the father usually worked. Logic dictates that if annual income has risen tenfold in fifty years, then the cost of most items has probably risen about the same. This logic is correct in many categories, but horribly flawed in one huge area."

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But in 1955 most people were happy to have a 1000 sq ft house, a car that turned 100,000 miles was reported in the papers, TV sets had an 8 inch black and white screen . . . .

The Main point that no one remembers is in the hundreds when gold was the standard 80% of the people were working poor and didn't have any gold. Half didn't central heat, indoor plumbing electricity, and spent half their pay on food. Now we spend 5% on food and half of that is not cooked at home.

 

Sorry, lost formatting. three columns were years, minimum wage, adjusted dollars.