Australian Politics Forum - backing a currency with gold

thegreatdivide

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Re: backing a currency with gold
Reply #30 - Apr 5^th, 2024 at 2:21pm

freediver wrote on Mar 28^th, 2024 at 10:23am:

thegreatdivide wrote on Mar 22^nd, 2024 at 10:29am:

freediver wrote on Mar 21^st, 2024 at 9:16am:

thegreatdivide wrote on Mar 21^st, 2024 at 9:07am:

freediver wrote on Mar 19^th, 2024 at 9:26am:

Suppose I give you US$1,000,000 in exchange for Euros. Then you give me the Euros back in exchange for US$. And we repeat a million times. How much gold would be required to account for all of those transactions?

None.

Next question?

Why did you post this?

Quote:

No, because there isn't sufficient gold in the world to account for '90% of foreign exchange transactions'

Because that's what Nixon concluded: the US didn't have enough gold if US trading partners lost faith in the US dollar and demanded payment in gold.

"Nixon publicly stated his intention to resume direct convertibility of the dollar after reforms to the Bretton Woods system had been implemented, (but) all attempts at reform proved unsuccessful".

What does the 90% of foreign exchange transactions bit mean? That there was enough gold to cover 10% of all foreign exchange transactions?

It means Nixon realized the US didn't have enough gold if
foreigners demanded payment for their exports in gold.

(By the 1970s, the US had changed from being the biggest creditor nation post WW2, on the way to becoming the biggest debtor nation today.:

google

" The U.S. status as the one of world's largest debtor nations is due to the central position that the U.S. plays in the world's monetary and financial systems. The U.S. dollar is the world's primary reserve currency and medium of exchange for settling international trade.

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freediver

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Re: backing a currency with gold
Reply #31 - Apr 5^th, 2024 at 2:59pm

thegreatdivide wrote on Apr 5^th, 2024 at 2:21pm:

freediver wrote on Mar 28^th, 2024 at 10:23am:

thegreatdivide wrote on Mar 22^nd, 2024 at 10:29am:

freediver wrote on Mar 21^st, 2024 at 9:16am:

thegreatdivide wrote on Mar 21^st, 2024 at 9:07am:

freediver wrote on Mar 19^th, 2024 at 9:26am:

Suppose I give you US$1,000,000 in exchange for Euros. Then you give me the Euros back in exchange for US$. And we repeat a million times. How much gold would be required to account for all of those transactions?

None.

Next question?

Why did you post this?

Quote:

No, because there isn't sufficient gold in the world to account for '90% of foreign exchange transactions'

Because that's what Nixon concluded: the US didn't have enough gold if US trading partners lost faith in the US dollar and demanded payment in gold.

"Nixon publicly stated his intention to resume direct convertibility of the dollar after reforms to the Bretton Woods system had been implemented, (but) all attempts at reform proved unsuccessful".

What does the 90% of foreign exchange transactions bit mean? That there was enough gold to cover 10% of all foreign exchange transactions?

It means Nixon realized the US didn't have enough gold if
foreigners demanded payment for their exports in gold.

You mean literally shipping goods one way (into the US) and shipping gold the other (out of the other)?

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People who can't distinguish between etymology and entomology bug me in ways I cannot put into words.

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thegreatdivide

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Re: backing a currency with gold
Reply #32 - Apr 29^th, 2024 at 3:44pm

freediver wrote on Apr 5^th, 2024 at 2:59pm:

thegreatdivide wrote on Apr 5^th, 2024 at 2:21pm:

freediver wrote on Mar 28^th, 2024 at 10:23am:

thegreatdivide wrote on Mar 22^nd, 2024 at 10:29am:

freediver wrote on Mar 21^st, 2024 at 9:16am:

thegreatdivide wrote on Mar 21^st, 2024 at 9:07am:

freediver wrote on Mar 19^th, 2024 at 9:26am:

Suppose I give you US$1,000,000 in exchange for Euros. Then you give me the Euros back in exchange for US$. And we repeat a million times. How much gold would be required to account for all of those transactions?

None.

Next question?

Why did you post this?

Quote:

No, because there isn't sufficient gold in the world to account for '90% of foreign exchange transactions'

Because that's what Nixon concluded: the US didn't have enough gold if US trading partners lost faith in the US dollar and demanded payment in gold.

"Nixon publicly stated his intention to resume direct convertibility of the dollar after reforms to the Bretton Woods system had been implemented, (but) all attempts at reform proved unsuccessful".

What does the 90% of foreign exchange transactions bit mean? That there was enough gold to cover 10% of all foreign exchange transactions?

It means Nixon realized the US didn't have enough gold if
foreigners demanded payment for their exports in gold.

You mean literally shipping goods one way (into the US) and shipping gold the other (out of the other)?

On demand by an exporting country, yes. Nixon didn't like the possibility...

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freediver Gold Member Offline www.ozpolitic.com Posts: 53248 At my desk.	Re: backing a currency with gold Reply #33 - Apr 29^th, 2024 at 6:53pm People would just start shipping gold back into the US, as it would very soon be worth more in the US than in other countries. Or they would just be smart enough to not physically ship huge amounts of gold back and forth around the world. I think you are very confused about what Nixon was actually thinking.
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thegreatdivide

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Re: backing a currency with gold
Reply #34 - May 3^rd, 2024 at 1:44pm

freediver wrote on Apr 29^th, 2024 at 6:53pm:

People would just start shipping gold back into the US, as it would very soon be worth more in the US than in other countries.

Or they would just be smart enough to not physically ship huge amounts of gold back and forth around the world.

I think you are very confused about what Nixon was actually thinking.

Er.....Nixon and all his advisors - fully intended to reinstate the gold standard, but he discovered it was impossible.

https://www.investopedia.com/terms/n/nixon-shock.asp

"Nixon cited tax cuts and a 90-day hold on prices and wages as the best options for boosting the job market and tamping down inflation. As for speculative behavior toward the U.S. dollar (USD), Nixon supported suspending the dollar’s convertibility into gold.

..meant to be a tempory suspension, but proved impossible to return to the gold standard later.

And earlier (re quantity of physical gold) :

" However, a global dollar surplus imperiled the system in the 1960s. At the time, the U.S. did not have enough gold to cover the volume of dollars circulating throughout the world. That led to an overvaluation of the dollar.

Office of the Historian. "Nixon and the End of the Bretton Woods System, 1971–1973."

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« Last Edit: May 3^rd, 2024 at 1:57pm by thegreatdivide »

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Bobby.

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Re: backing a currency with gold
Reply #35 - May 3^rd, 2024 at 3:04pm

From what I read once -
the USA has printed so much money that the true price of an ounce of Gold
would be about US$120,000 per ounce not $2,300 per ounce
if we went back to the Gold Standard.

In other words -
the USA has printed 52 times more money than the equivalent Gold Standard.
The printing presses have been running hot -
24 hours a day -
the US Govt. is now in $33 trillion of debt.

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thegreatdivide

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Re: backing a currency with gold
Reply #36 - May 4^th, 2024 at 12:55pm

Bobby. wrote on May 3^rd, 2024 at 3:04pm:

From what I read once -
the USA has printed so much money that the true price of an ounce of Gold
would be about US$120,000 per ounce not $2,300 per ounce
if we went back to the Gold Standard.

In other words -
the USA has printed 52 times more money than the equivalent Gold Standard.
The printing presses have been running hot -
24 hours a day -
the US Govt. is now in $33 trillion of debt.

Yes, but you are drawing the wrong conclusions

Despite the $33 trillion of debt, post-covid inflation is falling:

https://www.faithfulcitizensnetwork.org/inflation-drops-for-holidays?gad_source=...

The US inflation rate fell to 3.2% in October 2023, marking the first time it has been below 4% since December 2022. This is down from 4.2% in September and 7.1% in March, the highest level in 40 years.

The decline in inflation was driven by a drop in energy prices, which fell 4.6% in October. Food prices also fell slightly, by 0.2%.

The decline in inflation is a welcome relief for consumers, who have been struggling to keep up with rising prices. The Federal Reserve has been raising interest rates in an effort to bring inflation under control, and the recent decline suggests that its efforts are starting to pay off.

Also, G7 countries (except Japan) with lower debt than the US have lower GDP growth than the US. Japan has a higher debt to GDP ratio, but Japan's inflation rate is low - proving your concerns re "money printing", and debt and inflation, are unfounded.

The important thing is: who are the beneficiaries of the "money printing". In the current Friedmanite monetary orthodoxy, private sector money lenders benefit, while currency-issuing governments are subjected to 'austerity'** which hurts the less well-off.

** because governments are forced to sell interest bearing bonds to rich people aka "money printing"(when the central bank sell bonds).

Also government debt is merely the result of taxing less back from taxpayers than the government spent; as MMT shows, the government's debt is the private sector's savings (mostly in the hands of rich people).

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« Last Edit: May 4^th, 2024 at 1:11pm by thegreatdivide »

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Frank

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Re: backing a currency with gold
Reply #37 - May 4^th, 2024 at 1:39pm

This financial year the US is on track to spend about $US870bn on interest, which is equivalent to 17 per cent of tax revenues, the highest since the 1980s. That’s already more than the defence budget, and soon will eclipse even social security as the single biggest government expense.

Unprecedented central bank money creation during the Covid-19 pandemic has cast doubt on the long-term stability of financial systems, not to mention economic experts who failed comprehensively to predict the return of high inflation.

More and more people are avoiding saving in cash and bank deposits to avoid a sudden collapse in their purchasing power.

Soaring asset prices throughout rich countries (where similar if not quite so bad economic policies have been introduced) could reflect a decline in value of fiat currencies used to buy them as much as a genuine increase in asset values for fundamental reasons. In terms of gold or bitcoin, they haven’t gone up at all.

The lesson of the past few years for politicians should have been caution, but instead the pandemic has fuelled hubris and a return to artificially complex, vast subsidy schemes that would make the planners of generations ago proud.

Whoever wins the presidential election in November could well inherit an economic disaster. Far from cutting taxes again, as he did in his first term, a re-elected Donald Trump might have to increase them significantly to restore faith in US economic policy.
https://www.theaustralian.com.au/inquirer/bidenomics-hits-the-skids-as-costly-po...

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Estragon: I can’t go on like this.
Vladimir: That’s what you think.

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thegreatdivide

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Re: backing a currency with gold
Reply #38 - May 4^th, 2024 at 2:35pm

Frank wrote on May 4^th, 2024 at 1:39pm:

This financial year the US is on track to spend about $US870bn on interest, which is equivalent to 17 per cent of tax revenues, the highest since the 1980s. That’s already more than the defence budget, and soon will eclipse even social security as the single biggest government expense.

Yes, but who is the recipient of that interest payment?

Answer: the private sector bond holders. They love it.

Quote:

Unprecedented central bank money creation during the Covid-19 pandemic has cast doubt on the long-term stability of financial systems, not to mention economic experts who failed comprehensively to predict the return of high inflation.

Appealing to "experts" in that paragraph is laughable.

The government's debt is the private sector's savings - use your brain to work it out: debt means the government taxed-back less than it spent, creating the debt (and re inflation, see below)

Quote:

More and more people are avoiding saving in cash and bank deposits to avoid a sudden collapse in their purchasing power.

A sudden collapse? High inflation (eg 8-9% post covid) lasted less than a year, it's now down to c.4%.

Quote:

Soaring asset prices throughout rich countries (where similar if not quite so bad economic policies have been introduced) could reflect a decline in value of fiat currencies used to buy them as much as a genuine increase in asset values for fundamental reasons. In terms of gold or bitcoin, they haven’t gone up at all.

Nonsense: supply chain disruptions (and poorly designed government covid-rescue packages) caused the post covid inflation, not decline in fiat currency value.

And in terms of Bitcoin? Bitcoin value collapsed last year, not much stability there....

Quote:

The lesson of the past few years for politicians should have been caution, but instead the pandemic has fuelled hubris and a return to artificially complex, vast subsidy schemes that would make the planners of generations ago proud.

Er...the US government was determined not to repeat the mistakes of the GFC, where 'fiscal rectitude' and monetary timidity resulted in a decade long recession (and Obama losing cotrol of Congress) .

Quote:

Whoever wins the presidential election in November could well inherit an economic disaster.

An ignorant statement from an economic ignoramus: the US government can't run out of money.

Quote:

Far from cutting taxes again, as he did in his first term, a re-elected Donald Trump might have to increase them significantly to restore faith in US economic policy.

Trump latched onto the MMT story back in 2017, namely "everyone knows government debt doesn't matter", as reported by Ross Limbaugh (of all people!) back then.

Trust the OZ to print garbage....

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« Last Edit: May 4^th, 2024 at 2:40pm by thegreatdivide »

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Bobby.

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Re: backing a currency with gold
Reply #39 - May 4^th, 2024 at 3:04pm

TGD,
Quote:

Also government debt is merely the result of taxing less back from taxpayers than the government spent;
as MMT shows, the government's debt is the private sector's savings (mostly in the hands of rich people).

That's obvious.
I think Govts should have to balance their books like everyone else -
they should borrow money only in emergencies and
when there is a plan for more taxes to pay it off.

It's out of control everywhere we look:
https://www.ozpolitic.com/forum/YaBB.pl?num=1714798277/0#1

Politicians have a thought bubble -
and the next thing there goes another $200 billion on some idea
and no one knows how it will ever be paid for.

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Bobby. Gold Member Online Australian Politics Posts: 120702 Melbourne Gender:	Re: backing a currency with gold Reply #40 - May 4^th, 2024 at 8:07pm None of our Labor politicians have any plan other than to borrow more money. WTF?
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thegreatdivide

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Re: backing a currency with gold
Reply #41 - May 5^th, 2024 at 2:30pm

Bobby. wrote on May 4^th, 2024 at 3:04pm:

That's obvious.
I think Govts should have to balance their books like everyone else -
they should borrow money only in emergencies and
when there is a plan for more taxes to pay it off.

I used to think that too, until I learnt about the currency-issuing capacity of sovereign governments - which makes their budgetary constraints ("balancing their books") completely different "to everyone else", ie, you and me, who have to earn or borrow money.

I'm offering no taxes, no government borrowing, zero central bank interest rates, and price controls to manage inflation....a pity you reject it.....

Quote:

Politicians have a thought bubble -
and the next thing there goes another $200 billion on some idea
and no one knows how it will ever be paid for.

In short: if the government has the resources to build/service it (the "thought bubble") , the government can pay for it - for free, ie, via keystrokes on computers in the Department of Treasury.

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Bobby.

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Re: backing a currency with gold
Reply #42 - May 5^th, 2024 at 2:55pm

thegreatdivide wrote on May 5^th, 2024 at 2:30pm:

Bobby. wrote on May 4^th, 2024 at 3:04pm:

That's obvious.
I think Govts should have to balance their books like everyone else -
they should borrow money only in emergencies and
when there is a plan for more taxes to pay it off.

I used to think that too, until I learnt about the currency-issuing capacity of sovereign governments - which makes their budgetary constraints ("balancing their books") completely different "to everyone else", ie, you and me, who have to earn or borrow money.

I'm offering no taxes, no government borrowing, zero central bank interest rates, and price controls to manage inflation....a pity you reject it.....

Quote:

Politicians have a thought bubble -
and the next thing there goes another $200 billion on some idea
and no one knows how it will ever be paid for.

In short: if the government has the resources to build/service it (the "thought bubble") , the government can pay for it - for free, ie, via keystrokes on computers in the Department of Treasury.

No - you're wrong -
every dollar they print causes inflation.
It robs people with savings -
it's taxing people with savings - an indirect tax.

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thegreatdivide

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Re: backing a currency with gold
Reply #43 - May 5^th, 2024 at 3:50pm

Bobby. wrote on May 5^th, 2024 at 2:55pm:

thegreatdivide wrote on May 5^th, 2024 at 2:30pm:

Bobby. wrote on May 4^th, 2024 at 3:04pm:

That's obvious.
I think Govts should have to balance their books like everyone else -
they should borrow money only in emergencies and
when there is a plan for more taxes to pay it off.

I used to think that too, until I learnt about the currency-issuing capacity of sovereign governments - which makes their budgetary constraints ("balancing their books") completely different "to everyone else", ie, you and me, who have to earn or borrow money.

I'm offering no taxes, no government borrowing, zero central bank interest rates, and price controls to manage inflation....a pity you reject it.....

Quote:

Politicians have a thought bubble -
and the next thing there goes another $200 billion on some idea
and no one knows how it will ever be paid for.

In short: if the government has the resources to build/service it (the "thought bubble") , the government can pay for it - for free, ie, via keystrokes on computers in the Department of Treasury.

No - you're wrong -
every dollar they print causes inflation.

I'm offering no taxes and no inflation. You?

Quote:

It robs people with savings -
it's taxing people with savings - an indirect tax.

See above.

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Bobby. Gold Member Online Australian Politics Posts: 120702 Melbourne Gender:	Re: backing a currency with gold Reply #44 - May 5^th, 2024 at 4:45pm Dear TGD, your ideas are based on fallacies. Study the Weimar republic and the Zimbabwe catastrophe. You needed one of these to buy a loaf of bread:
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