Topic: People and opinions do change (me 3 years ago) - page 2. (Read 2209 times)

“If you're not a liberal at twenty you have no heart, if you're not a conservative at forty you have no brain.”

Regarding the main point, gold; the reason gold standard really bothers me is because I feel it would be way too similar to last year's oil spike: people hoard it, driving the cost of it up artificially. At least oil is renewable; gold is not quite as much. If gold were the currency standard, people hoarding gold would make its value go up. Food would cost less and less gold comparatively. That's deflation. Should the bubble pop, or another type of currency enter the market, the gold, having almost no utility value, would crash, and food would cost more and more gold. Inflation. We would essentially be in a perpetual cycle, driven by people not smart enough to realize what they're doing. Am I incorrect in understanding this? Also, our economy, and our population, has expanded exponentially in the last few decades. With a limited supply of gold, we would have less and less gold per person. Scarcity would again lead to deflation (price of money/gold going up). Even with banks using low reserve rates and re-loaning the money, I can't see something like gold growing fast enough to support this, can you?

"Modern" economy is different from 30's and 40's economy due to drastically increased speed and globalization. Gold production could ALMOST keep up with economic expansion in the 30's without causing too much deflation. I don't think that is the case now (considering The Wizard of Oz, it doesn't seem like it was back then, either).
Inflation "forces" the economy to move. Businesses rush to continue to invest, expand, and create ways of turning their value-losing cash into more cash in order to outpace inflation. Customers rush to buy goods and services, or to invest in businesses, to make sure their money does not lose value either. Deflation would mean people would have an incentive to hold on to their cash and watch it grow, rather than spend it. Deflation also runs the risk of self-feeding stagnation: people hold onto their money instead of buying things, economy slows and available cash declines, cash increases in value even more, people have even more incentive to hold onto their cash instead of grow it, and on and on (until we have a cash bubble, like the tulip mania in Netherlands). Both runaway inflation and runaway deflation are bad, but I believe low 2% to 3% inflation is better and safer than 2% to 3% deflation, and has a way lower risk for making things go really bad.
Also, why specifically "gold" for a standard? Why not silver, platinum, or tulips? I don't believe gold can increase in quantity rapidly enough to keep up with our economic expansion, so it would lead to severe deflation. Fiat currency allows us to more or less control inflationary and deflationary forces (start or stop the printers, so to speak). We can't control the amount of gold in mines. Also since we are globalized, and can easily buy other types of commodities or currencies, why even a "standard?" If you are worried about USD, you can buy precious metal ETFs, stocks, or even Euros/Yen. As I see it, due to much more globalized economy, extremely fast speed of transactions, and with way fewer barriers, we already have a somewhat free market for currency, one that competes against other forms of currency and valuables. The only barrier left is free immigration: we can't easily escape taxes by moving to another country.
-- Rassah  (3 years ago)