Why Not Go Back to the Gold Standard?

[libertybele]

We would feel the initial pinch, but this eventually would resolve our debt(s) and force a balanced budget??

This is a bit dated, and I disagree, but Powell has made it clear that he does not agree with going back to the gold standard.

Fed’s Powell explains why a return to the gold standard would be so damaging to the economy

Federal Reserve Chairman Jerome Powell told Congress on Wednesday that he doesn’t think a return to the gold standard in the U.S. would be a good idea.

“You’ve assigned us the job of two direct, real economy objectives: maximum employment, stable prices. If you assigned us [to] stabilize the dollar price of gold, monetary policy could do that, but the other things would fluctuate, and we wouldn’t care,” Powell said from Capitol Hill. “We wouldn’t care if unemployment went up or down. That wouldn’t be our job anymore.”

“There have been plenty of times in fairly recent history where the price of gold has sent a signal that would be quite negative for either of those goals,” he said. “No other country uses it,” he added. The Fed is tasked and overseen by Congress to maximize employment and keep prices stable.

Though Powell was quick to distance himself from the Fed nomination process, his comments on the gold standard put him at odds with the writings of Judy Shelton, a current Fed nominee and advocate for monetary policy reforms.

Shelton, who was tapped last week by President Donald Trump to join the Fed’s board, has written that a return to the gold standard affords the U.S. “an opportunity to secure continued prominence in global monetary affairs.”...............

Top 20 countries with largest gold reserves [Q3 2023]

#1 United States of America    
#2 Germany    
#3 Italy    
#4 France    
#5 Russian Federation    
#6 China    
#7 Switzerland
#8 Japan    
#9 India    
#10 Netherlands    
#11 Turkey    
#12 Taiwan
#13 Uzbekistan    
#14 Portugal    
#15 Poland    
#16 Saudi Arabia
#17 United Kingdom
#18 Kazakhstan    
#19 Lebanon
#20 Spain    

https://www.cnbc.com/2019/07/10/feds-powell-explains-why-a-return-to-the-gold-standard-would-be-so-damaging-to-the-economy.html

https://www.forbesindia.com/article/explainers/gold-reserves-by-country/90127/1

[Free Vulcan]

After the reboot maybe.

[libertybele]

After the reboot maybe.

Perhaps it would save us from economic collapse, and with holding the most gold, we would remain at having an advantage?

Notice that China and Russia really are not that far behind. I was surprised at how little gold the UK holds in comparison.

[Timber Rattler]

Because there's not enough gold in U.S. reserves to cover all the paper dollars out there.

Fort Knox Is Why We Don't Have A Gold Standard

https://www.forbes.com/sites/briandomitrovic/2018/05/01/fort-knox-is-why-we-dont-have-a-gold-standard/?sh=143976c24cc9

[libertybele]

Politically manipulated money; lowering interest rates, etc., causes inflation. Inflation in turn produces financial bubbles and wobbles of instability. With gold it is just the opposite. With gold 'stable' the supply of goods grows and in turn gold tends to be worth more and more over time.

Right now our currency continues to lose buying power as inflation continues to soar. The monetary printing press is full steam ahead.

 So, why not go back to the gold standard now rather than later??

[libertybele]

Because there's not enough gold in U.S. reserves to cover all the paper dollars out there.

Fort Knox Is Why We Don't Have A Gold Standard

https://www.forbes.com/sites/briandomitrovic/2018/05/01/fort-knox-is-why-we-dont-have-a-gold-standard/?sh=143976c24cc9

In the same light, banks only have to keep a fractional amount in reserves that they have on 'deposit' (rumor has had it that they can hold '0.00'. Obviously, they lend more than they have on deposit .... so we live in a hypothetical false currency. I'd rather have a tangible asset; primarily gold and silver.

We are only printing more money while continuing to increase our debt.

[roamer_1]

Not so easy without a supremely strong dollar... The problem with going back is that while inflation weakens the value, fiat currency is also a multiplier.In the current state of things, there is no where near enough gold to cover that multiplier. Not by an order or two of magnitude.

Now, a massive crash would also do - But one way or the other. The way it is now, returning to the gold dollar would be nearly impossible.

[catfish1957]

Plus a show of hands who believe that we have the amount of gold our government is telling us.

Not that our government would ever lie to us.   

[libertybele]

Not so easy without a supremely strong dollar... The problem with going back is that while inflation weakens the value, fiat currency is also a multiplier.In the current state of things, there is no where near enough gold to cover that multiplier. Not by an order or two of magnitude.

Now, a massive crash would also do - But one way or the other. The way it is now, returning to the gold dollar would be nearly impossible.

When ALL fails, economies crumble and dollars evaporate; gold will return to being king?  How long can we continue to sustain our debt?  How long can people continue to afford putting food on the table at today's costs with a dwindling dollar before our economy crashes.  So, then would the gold standard be feasible?

With a global economic collapse things would be a disaster but to continue on with a fiat system rather than a gold standard I think would be silly.  We'd son be right back where we started, would we not??

[libertybele]

Plus a show of hands who believe that we have the amount of gold our government is telling us.

Not that our government would ever lie to us.   

Well, honestly, that is something I hadn't thought about.   

[berdie]

Plus a show of hands who believe that we have the amount of gold our government is telling us.

Not that our government would ever lie to us.   

I have read that our gold reserve has been severely depleted.

[roamer_1]

When ALL fails, economies crumble and dollars evaporate; gold will return to being king?  How long can we continue to sustain our debt?  How long can people continue to afford putting food on the table at today's costs with a dwindling dollar before our economy crashes.  So, then would the gold standard be feasible?

With a global economic collapse things would be a disaster but to continue on with a fiat system rather than a gold standard I think would be silly.  We'd son be right back where we started, would we not??

In a nutshell - YES. Name one fiat currency that has stood the test of time. Fiat currency ALWAYS fails.

But just switching back is not possible either - You're in this room now, and the passage back is closed...
It's a hard, hard move. Way harder than a government suddenly adopting an austere stance, which would, by the way, solve a lot of the problem. we CAN pay down our debt, and at the same time, manage inflation in order to build a stronger dollar.... All of that simultaneously, and relatively without pain...

But that would require grownups walking the halls of power... Which ain't gonna happen.

[mountaineer]

Speaking of gold ...

Gold Could Soar to $3K, Oil to $100: Citi Analysts
By Lee Barney    |   Tuesday, 20 February 2024 11:47 AM EST

Central banks’ purchases of gold, a recession and continued conflict in the Middle East could drive gold up to $3,000 an ounce and oil to $100 per barrel, according to Citi analysts.

Gold, currently at $2,016 an ounce, could surge by 50%, particularly if there is a global recession, Akash Doshi, Citi’s head of North America commodities research, told CNBC.

“The most likely wildcard path to $3,000/oz. gold is a rapid acceleration of an existing but slow-moving trend: de-dollarization across emerging markets and central banks that in turn leads to a crisis of confidence in the U.S. dollar,” Doshi wrote in a recent note. ...

Newsmax

[The_Reader_David]

Perhaps it would save us from economic collapse, and with holding the most gold, we would remain at having an advantage?

Notice that China and Russia really are not that far behind. I was surprised at how little gold the UK holds in comparison.

Does the UK have serious silver reserves?  After all, back in the day, their currency was referred to as the "Pound Sterling".

[The_Reader_David]

Of course, we've inflated the currency so much since going off the gold standard, perhaps bimetallism (or even polymetallism to coin a word) would be the way to go:  back the dollar with gold and silver (or gold, silver, platinum, palladium,...)

[Smokin Joe]

Plus a show of hands who believe that we have the amount of gold our government is telling us.

Not that our government would ever lie to us.   

Sure we do. It's wrapped around all the tungsten bars the Clinton Administration bought. Imagine the tungsten saved just in light bulb filaments alone.

[catfish1957]

Sometimes we lose site that the general value of Gold is constant.  How it floats against the Dollar, Pound, Euro, uan, etc.  is indicative of how good or crappy (sound)of each specific country's currency.

[roamer_1]

You COULD do it, I suppose... A coin with an actual bit of gold, circulated alongside greenbacks.
Or a distinctive gold note... Circulated also... Alongside.

Eventually replacing the fiat cash.

Maybe.

[jmyrlefuller]

As much as I am a believer in the idea of a stable dollar... there is one particular reason why gold is a really bad reference point.

Prior to 1933, the U.S. minted gold coins. The $20 coin, the double eagle, contained approximately 1 ounce of gold. Keep that in mind.
Now, since the U.S. was on the gold standard prior to 1933, the value of the dollar was, on the whole, relatively stable. So I'll pick exactly 100 years ago—January 1924—as a reference point.

That $20 gold coin would purchase the equivalent of $356 today. (source: Bureau of Labor Statistics Consumer Price Index calculator) Now, given that 1920s tech was quite a bit different from 2020s household tech, it's not an apple-to-orange comparison, but that's why CPI is kind of complicated.

How much is that $20 one-ounce gold coin worth in gold alone in 2024?

More or less... $2000.

In other words, $2000 worth of gold would be worth $356 worth of consumer goods—an alarming 82% loss of purchasing power.

[jmyrlefuller]

Just for fun, I did the same math for silver, since we continued to use silver coin all the way into the 1960s and our standard of living was closer to what we have now.

The amount of silver in $1 worth of silver coin—ten Mercury dimes, four pre-'65 Washington quarters, two Ben Franklin 50-cent pieces or a Peace Dollar—has a spot price of around $16. (source: Coinflation, though this was a few days ago and their calculator is down now). Now, keep in mind, by 1964, the price of silver had appreciated to be higher than the coin's face value, hence why they took it out and switched it to copper/nickel clad.

From 1964 to 2024, the dollar lost 90% of its value to inflation. In other words, $20 in 1964 would buy what the equivalent of $200 would buy today.

Silver has tracked much more remarkably well to inflation and purchasing power compared to gold. I believe Ron Paul once used it as an example. You can still buy a gallon of gas for 20¢ a gallon today—if that 20¢ is paid in two silver dimes.

[DefiantMassRINO]

US went off gold standard in 1973 at same time OPEC countries implemented an oil embrago against the West to protest support for Israel during 1973 Yom Kippur War.

They needed to get off the gold standard so they could increase the supply (numbers) of dollars in circulation to offset the dollars being taken out of the money supply to purchase oil.  Basically, if the US did not get off the gold standard, OPEC would have more dollars than America.

America would have suffered a 2008-like delfationary death spiral in the value of dollar-denominated assets that would cause a financial collapse on top of the energy shortages.

Also, going back on the gold standard might reduce the Fed's power over the M2 money supply and the economy.

[libertybele]

As much as I am a believer in the idea of a stable dollar... there is one particular reason why gold is a really bad reference point.

Prior to 1933, the U.S. minted gold coins. The $20 coin, the double eagle, contained approximately 1 ounce of gold. Keep that in mind.
Now, since the U.S. was on the gold standard prior to 1933, the value of the dollar was, on the whole, relatively stable. So I'll pick exactly 100 years ago—January 1924—as a reference point.

That $20 gold coin would purchase the equivalent of $356 today. (source: Bureau of Labor Statistics Consumer Price Index calculator) Now, given that 1920s tech was quite a bit different from 2020s household tech, it's not an apple-to-orange comparison, but that's why CPI is kind of complicated.

How much is that $20 one-ounce gold coin worth in gold alone in 2024?

More or less... $2000.

In other words, $2000 worth of gold would be worth $356 worth of consumer goods—an alarming 82% loss of purchasing power.

Maybe I'm missing something here (probably); the CPI is adjusted for inflation.  Gold isn't adjusted for inflation. Gold to an extent holds it's value or is worth something whereas the dollar has declined over time or it's purchasing power due to inflation has declined.  Yes gold fluctuates in value also, but not to the degree that the dollar has.

Investment wise, gold is a hedge against inflation. 

Silver hasn't increased in value like gold has but I think it will soon sharply increase in value.

Inflation is the real enemy here.  Inflation creates financial bubbles; remember back in the 1990's the NASDQ bubble -- profits equating to appx. $145 billion were lost in a single year ...not to mention trillions lost in paper/stock values. The housing bubble is another example; many wound up upside down on their mortgages, etc. 

My only point in asking the question of should we go back to the gold standard is the dollar/paper money loses value and our economy and others could easily collapse.  Gold will always have value. (Yes, what I didn't think about and what someone pointed out is that the chances of our govt lying as to how much gold the U.S. holds is probable).

I read an interesting article; and whether there is any validity to the article I'm not sure, but the article claims that silver supplies will be depleted by 2025.

https://www.401krollover.com/worldwide-silver-supplies-will-be-depleted-by-2025/

I am definitely not a financial guru, it was a thought that I have had for awhile; going back to the gold standard.  Yes we'd feel the pinch without a doubt but once the dust settled, our economy would be backed by gold.  No inflation.  Prices would go down.

I realize it's never going to happen at least anytime soon.

[libertybele]

US went off gold standard in 1973 at same time OPEC countries implemented an oil embrago against the West to protest support for Israel during 1973 Yom Kippur War.

They needed to get off the gold standard so they could increase the supply (numbers) of dollars in circulation to offset the dollars being taken out of the money supply to purchase oil.  Basically, if the US did not get off the gold standard, OPEC would have more dollars than America.

America would have suffered a 2008-like delfationary death spiral in the value of dollar-denominated assets that would cause a financial collapse on top of the energy shortages.

Also, going back on the gold standard might reduce the Fed's power over the M2 money supply and the economy.

Thanks for the enlightenment. I had not heard of doing away with the gold standard because of oil.

Doing away with the gold standard has been done a couple of times; most recently Nixon; though I thought his reasoning was more to do with the expense of the Vietnam war.

https://history.state.gov/milestones/1969-1976/nixon-shock

[Hoodat]

Fort Knox Is Why We Don't Have A Gold Standard

Our politicians' addiction to spending money is why we don't have a gold standard.  Can you imagine if federal spending was limited to dollars already in existence, but held by other people?

[jmyrlefuller]

Let me put it this way:

Think of the CPI, our measure of inflation, as this "breadbasket" of everything we spend money on. When inflation goes up, the CPI goes up (obviously).

Silver has gone up in price at roughly the same pace as everything else. But gold has risen in price five times as fast as everything else, largely because speculators, goldbugs and investors have turned it into an investment instrument, taken it out of circulation and driven up the price.

The sheer scarcity of gold would mean a return to the gold standard would shrink our money supply to a fifth of what it is, basically making it five times harder to buy anything. All of a sudden, a $4 gallon of milk would cost the same amount of your paycheck as if it cost $20. That goes for everything else.

That's more than a pinch, that would be a complete and total economic crash that would make the Great Depression look like a brief downturn.