Econ Duel: Fiat Money vs. the Gold Standard

Econ Duel: Fiat Money vs. the Gold Standard

♪ [music] ♪ – [Scott] With the onset
of the financial crisis and the Great Recession,
a lot of people have been re-examining
our monetary system. There was a lot of criticism
of the Federal Reserve’s role in particular. A lot of people feel
that the Federal Reserve printed too much fiat money
and they have too much discretion over the monetary system. They prefer a return
to something like the gold standard of the 19th century. At the same time, most economists,
including myself, are somewhat skeptical
of the gold standard for reasons having to do
with the Great Depression. So Larry, why has gold
gotten a bad rap? – [Larry] It’s gotten a bad rap
because people think the Great Depression was the result
of the gold standard. Whereas in fact, it’s the result
of central bank mismanagement of a system that was partly
gold standard, partly central bank discretion
in the interwar period. If you go back
to the classical gold standard, before there were central banks
in the U.S. and Canada and other countries,
or the central banks that existed were more playing
by the rules of the game, you don’t have an event
like the Great Depression. The classical gold standard
was characterized by periods of mild inflation followed
by periods of mild deflation, and really a pretty steady
price level over the long horizon. – Let’s take that example. So, I agree there was government
meddling during that period, but fundamentally the problem
of the Great Depression was a big global increase
in the demand for gold. Why is that bad? Because under gold standard,
the nominal price of gold is fixed. So when there’s more demand
for gold, its real value can only rise by the price
of everything else falling. And when you have
a lot of deflation, you tend to get high unemployment. Even if that was a mishandled
gold standard, the thing I worry about
is if we return to the gold standard,
there could be some global shock that creates a big increase
in demand for gold, such as a boom in Asia,
and that could be deflationary for the world economy. – Well, as you know,
the big increase in the demand for gold
during the Great Depression came from central banks. It didn’t come
from the private economy. And if we go
to the historical record and ask how big
were demand shocks for gold under the classical gold standard,
they weren’t that big. The biggest example I know of
was Germany decides to join the gold standard. So they’re buying a lot of gold
in order to make gold coins, and it has a very minor effect,
one that’s easily accommodated, it doesn’t cause
any great depression. – Just as there was a good
and bad period for the gold standard,
you could say under fiat money there was kind of a bad period
that was the ’60s through the early ’80s
with really high inflation, but then central banks switched
to targeting inflation. And basically inflation
has been pretty close to 2% in recent years. So, much of the pressure
to return to the gold standard is to prevent
this really high inflation; it’s an anchor for the price level. But couldn’t you say
that we’ve sort of solved the problem of high inflation
with our more recent fiat money system
and that takes the pressure off returning to the gold standard? – So the case for a gold standard is not just that the average
inflation rate would be lower, it’s also that the price level
would be more predictable. Because there is a commitment
and because there is an equilibrating mechanism
in the gold mining industry to bring the price level back
to a predictable path, you find errors in predicting
the future price level — this is kind of a subtle point — were smaller
under the gold standard. You could rely on where
the price level was going to be 10, 20,
30 years from now, whereas today,
there is a huge amount of drift. – Admitted. – So if you look
at financial markets, you found 50-year bonds
being issued under the gold standard,
you found 100-year bonds being issued. The British government refinanced
its debt with perpetual bonds. There is no market
for 100-year bonds, perpetual bonds, nowadays,
because nobody knows what the dollar’s going
to be worth when it’s paid back 50 years from now. So having that kind
of a credible anchor makes the financial system deeper. And it’s hard to quantify
how big a benefit that is, but it means
more long term planning, more long term investment
by lowering the cost of making those kind of commitments
with nominal contracts. – I guess in the end, I feel
that even a well-run gold standard, which I think did
a good job for people in the 19th century overall,
falls short of a well-run fiat money system. So I really think
that the argument that I think… – Have we had a well-run
fiat money system that you can point to? – I think that it
was pretty well run from the mid ’80s to the mid-2000s,
about 20-year period. Admittedly,
that’s a fairly short period. But in terms of inflation alone,
I think the monetary system has been pretty well run
since the mid ’80s. Now, the Great Recession
is a black mark on the Federal Reserve in my view,
but not because inflation got out of control, rather I think
they had the wrong target. They should have been targeting
nominal GDP rather than inflation. So, I see this as a process
of gradually learning. We did very poorly in the ’70s,
we adopted an inflation target that did much better
in the ’80s and ’90s. And the next iteration
would be even improving on that to avoid the sorts of mistakes
we made in the Great Recession. So I think there
is a trajectory here where we are hopefully learning
from our mistakes and going back to gold,
I don’t think is any sort of a shortcut to getting
to the right system. If we can’t really get
fiat money right, I don’t trust the government
to run the gold standard in the correct way. – So we need to pull back a little
and distinguish different kinds of fiat systems and different kinds
of gold standard systems. If you have a monetary policy rule
fastened on a central bank and you’re asking
why can’t that work just as well as a gold standard,
you still have a central bank. You still have the camel’s nose
under the tent and the central bank is going to do,
experience tells us, everything it can do to loosen
the constraints on itself. This is a point Milton Friedman
made in a lecture back in the ’80s. It’s not in their interest
to just be the Bureau of Weights and Measures
and to just follow some routine. They really think
that they can improve matters by timely intervention
and they’re always going to be looking for ways to do that. The genius of the gold standard
is that it doesn’t require a central bank. So, you’re right. Fastening a gold standard
on a central bank is just one rule among many we could fasten
on a central bank. But you could have a gold standard
without a central bank, you can have a gold standard
with free banking, meaning you decentralize
the issue of money. And then there’s nobody
who’s in a position to intervene, there’s nobody in a position
to make the huge kind of mistakes that central banks make,
either over expanding or over contracting
the supply of money. You have a more
self-correcting system where you’ve diversified
the risks of money supply errors. – Here’s my concern. I think that if you
sort of postulated the sort of political commitment
that we would need to not only go back
to the gold standard but to do it right — If we really
had that much willpower in our political system,
we could also do fiat money right. Fiat money has some advantages
that gold doesn’t have, the ability to offset changes
in demand for money more flexibly. – On the question
of velocity shocks, if you have a free banking system,
an increase in the demand to hold money is something
that banks will be happy to satisfy. It’s in their profit motive
interest to issue more claims on gold when people want
to hold more money. And so that problem solves itself. You don’t have to rely
on a central bank being alert to what’s happening to velocity
as the Fed was not. – Think of the challenges
of setting that up. I think you’ll agree
that to really make a gold standard work,
you need international cooperation. Because if only one country
adopts the gold standard, its exchange rate will move
up and down with the price of gold. – Having an international
conference as a way of getting back to a gold standard is, you know,
far off in the future because the political will
is certainly not there now. That’s one way to do it. Another way to do it
is have a large country like the United States
or the Euro Zone decide that that’s what they want to do,
and then trying to persuade the other major central banks:
the ECB, the Bank of Japan. That would be enough,
just those three central banks. But my concern is not so much
with the transition path, but with people understanding
how well the gold standard worked, and how it provides, at least,
a benchmark for what we should expect
from the Federal Reserve System. – I agree partly with that
in the sense that we should demand a rule in our monetary system. The gold standard was a rule. It perhaps was better
than some of the alternatives in the 19th century. But I would say
we’ve learned enough that we can do a fiat money rule
better than we can set up a gold standard rule. – On a blackboard, we can. – Right, but I think also
in reality, because… – I don’t think there’s
a fiat money system that has a track record. – Well, it’s certainly true
that any system, including fiat money system,
could be messed up. And it’s true that historically
governments can and have occasionally
done a poor job in running a fiat money system. – More than occasionally. – But I would say
the same about gold. There’s an ideal gold standard,
but in our modern world, governments like to intervene,
and I worry that they would intervene and mess up
the gold standard as well. So ultimately,
I think either system requires a certain amount
of government restraint and intelligence. – It’s a problem for any reform
that can be proposed that if the government’s
not going to live by the rules then we’ve got a problem. – [Narrator] What do you think? To see previous episodes
of Econ Duel, check out our playlist. Or if you want to read more
from Scott and Larry, check out our related resources. ♪ [music] ♪


  1. What about panics from bank runs? Wasn't that a major reason why the Federal Reserve was created? To mitigate those kinds of situations? What would happen if there was such a panic while under the gold standard in today's economy?

  2. my question for Mr. Sumner is, why work so hard on the prayer that an agency with the track record of the Federal Reserve might maybe possibly do it right in the future? Economic mirrors Public policy in the fact that, like government, the less central power the better. Our economy was, historically, vastly more stable with free banking and a gold standard. It was self regulating. Why trust that some people with power will do better when we know they can't?

  3. I honestly am still working on which side of the argument I side with more. But after watching this I am now more inclined to agree with the Gold Standard argument then I was before I watched this. Thanks Larry White!

  4. I vote for a fiat monetary system. The most seductive argument for the gold standard is that it is free from political manipulation, but as Scott mentions (and confirmed by my own readings), the gold standard has a history of being manipulated too. So accepting that either system could be manipulated, I'll take the one that has the better chance of matching the money supply with actual economic demand. Additionally, the gold standard fosters a belief that there can be and should be a stable "store of value". I've come to the conclusion that there is no such thing, and a fiat monetary system is less likely to perpetuate that idea.

  5. I know what Sumner means by a well-run fiat-money system. I understand NGDP level targeting, using market forecasts to guide central bank monetary actions so as to maintain a socially desirable level-path of NGDP.

    But, I do not understand what White is talking about when he talks about a well-run gold standard. Historical gold standards have had all sorts of problems, from debasements to bank runs to the great depression. White is probably right that central bank gold hoarding led to the great depression. But that still begs the question, what does a well-run gold standard actually look like? Is he referring to Selgin-style free banking? Or something else?

  6. I wish Scott had been more specific about the fiat regime he was advocating for. Larry was defending one specific commodity standard that existed for a short time in the 19th century, while Scott seemed to be defending all fiat regimes. If Scott had focused on his market driven fiat regime proposals, Larry wouldn't have had a point about central bank screw ups since Scott's regime would have had monetary policy set by the market and not by the central bank. Then he could have made other points about how fiat regimes can more effectively stabilize nominal output than the gold standard, and how gold standards require high degrees of international cooperation, while fiat systems do not.

  7. EconTalk had a great podcast in 2010 on how France started hoarding gold which could have been a factor leading into WW2. Search "Irwin on the Great Depression and the Gold Standard".

  8. Great debate.

    My question:
    In a Government money system do people want to hold more cash and equivalents in fearful times because they have too much faith in Government where in a free banking system people would want to get rid of bank issued money, buying real assets, in fearful times?

  9. Proponents of the gold standard often dislike inflation. I have a much different view. Inflation erases both previous victories and defeats. Inflation resets the playing field as time goes by. Deflation amplifies the past. If you are an optimist and believe the best times are ahead deflation should not appeal to you. Note when I say inflation I am referring to the change in the nominal value of goods not changes in the money supply.

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  11. Bitcoin tomorrow money today bye fiat paper money and bye gold standard end petrodollar world seigneuriage based on a mega Ponzi fraud scheme

  12. Interesting that Sumner claims that monetary policy was well run between the mid 80's and mid 2000's, yet doesn't touch on WHY the system failed during the financial crisis…I would argue it was brought about by monetary policy during the very period he claims it was "run well". (large deficit spending and loose monetary policy during that time that promoted bubble creation among other things that came to a head in 08'/financial/housing crisis)

    At least he concedes that in the history of fiat money, his claimed period of well run policy is comparatively short.

  13. This was quite disappointing. For the massive consensus on the superiority of fiat money vs. the gold standard, the actual arguments seemed weak. Maybe people could differ on which side actually "won" the debate, but it didn't seem that the gold standard was kicked to the curb. You would think that with such a consensus, it would be like arguing whether the earth is round. Instead it seemed to me that this was about which was a marginally better system which reasonable people could disagree about. Usually in matters like that you do see disagreement. i.e. exactly how high should taxes be.

    Why is there such massive consensus on fiat money when the arguments, when put in contest, seem so weak? Is there something I'm missing?

  14. According to Libertarians (Rothbardian Economists)

    1790 to 1860 was Capitalism (small gov't)
    1870 to 1920 was Crony Capitalism (medium gov't) — Robber Barons
    1930 to Present is Corporatism (big gov't

    To a libertarian during our period of small gov't we had the best period for money and when America was great again. Classical Period of Capitalism. States had more power than central gov't and there was competition in currency markets.

    What else did we have then — ZERO EQUALITY for Blacks-Women-Minorities and Poor White Men. If you didn't own land you were NOT voting. Slavery – Mass Genocide – Mass Democide — Reservationism would begin.

    During our Crony or Robber Baron period (1870 to 1920 and INTO the Great Depression) we had "freer" markets then we do now, far "freer" by libertarian standards. States were losing power and money was centralized (partially / mostly).

    What did we have then — Mass Lynchings — Prison Industrial Complex — However an end to Slavery — so great improvement. Less genocide against Natives but increased Reservationism. THE VOTE — for black men and then later for women. Also, Native Americans could vote — granted getting to the ballot box safely would take another 20 or 30 years of improvement. But most voted and most could get to ballots. Black Congressman during this period. Blacks and women entering into college though equal education still a long ways to go.

    Corporatism (Big Gov't) — the bane of libertarian existence! No freedom in the currency market (until recently with bitcoin) Most all the horrors visited upon blacks (save prison industrial complex and police brutality — though both of these are greatly improved today than 20 years ago and back) are absence — lynchings would end as a regular practice in the early 60's though it would continue until '81. Voting getting safer during this period by the 70's. REQUIRED a big gov't however to impose Civility (Civil Rights) — NOT EQUAL RIGHTS — just trying for some basic low level "civil" rights. WOMEN are gaining a place in the workforce and for the first time in 200K years of modern human history women can get out of abusive relationships and in the last 40 years to actually gain custody rights

    Soooooooooo — If gold standard means "going back" then that's not a good idea — The periods where states had greater power are periods of horror for minorities and women and the closer you get to the period of capitalism the greater the horrors.

  15. I guess I'm late here, but a quick comment. By "well functioning fiat money system", I am referring to one that leads to low and stable NGDP growth. By that criterion, I believe that the period from 1984 to 2016 in the US is superior to the period from 1879-1914. However I cannot be certain of that, as the NGDP data from the earlier period is not all that reliable.

    I also believe that a badly functioning fiat money system, such as 1966-82, is better than a badly functioning gold standard, such as 1918-33.

  16. Hello Economists, I have some questions about the gender pay gap:
    1) When economists state that occupation accounts for ~30% of the gender wage gap and industry accounts for another ~20% of the wage gap, what exactly are they measuring: differences between men’s and women’s occupations or differences between men and women within occupations? 2) Would you please explain the logic behind the occupational and industry estimates with a concrete example? 3) Since occupations are subsets of industries, is there double counting? How do you parse occupations and industry? 4) How do economists estimate the impact of occupation and industry variables on the wage gap? Thank you very much for your reply, Charles

  17. The question is not "fiat vs gold" The issue is criminal gangs chokeholding the entire world through monopolies on legal tender by means of private central banks = criminal cartels. We need to remonetize precious metals, monetize cryptocurrencies as well and deploy the means (payment gateways,etc) To have many payment methods and securitizable assets. The live or die fight is ENDING MONOPOLIES ON THE CREATION OF CURRENCY, forever so as NO ONE CAN EVER CONTROL THE ISSUANCE AND DISTRIBUTION OF MONEY/CURRENCY/LEGAL TENDER. We have the means to do this, failure to do so means humanity is doomed, that´s it. Don´t believe me? Just research WWI and WWII throughly and see it for yourself (specially the Churchill-Truman talks in Yalta, tell the whole story)

  18. Spot on balanced discussion. 21st century, yet human psychology has not evolved much from 4,800 years. Human history means current GLOBAL tensions, does NOT augur well. "I am NOT you, so why do unto others, someone has to be the slave" now economic slavery is the highest in recorded human history, on laws to free slaves. Ahhh human psychology and extreme ignorance. The world is unfolding exactly as it must since we learn from experience not taking without the wisdom of experience.

  19. So the best years of the fiat money were the Reagan/Bush years were most people wanted to return to gold standard? interesting.

  20. White has a weak point: He says that fiat-systems are not stable because of unhealthy interventions by central banks, which would become obsolete under a gold standard. But on the other hand he acknowledges that central banks caused the Great Depression by intervening in the gold standard system. That implies that even under a gold standards the institutions have to play by the rules (This is even true if you say that there are no central banks in Whites plan). But then why should this be more credible and feasible than institutions playing by the rules in a fiat-system like Sumner proposes?

  21. The main problem with fiat is that we trickle it in at the top. The wealthy will use new money to buy productive assets preferentially before they invest in creation of new capital. So, the wealth trickles upwards before employment and production rises.

  22. Currency backed by gold is honest,fair,democratic, orderly,fixed,universally understood, and appreciates in value. Fiat currency that has no value thins out in value the more it is created and requires arbitary control. Fiat currency since it is made by a corporate bank serves corporate tyranny over our government and unjust regime change in other countries costing lives.

  23. Sumner mentions deflation as a bad thing. I guess this draws on the argument of sticky wages. But why does this have to be the case? It seems that economics should be used to enlighten us, not trick us. Why don't we make the push to educate the masses that it is normal for wages to float in response to supply and demand and not simply to always be going up nominally? It seems that clear signals should be what we are after, not rigging the game to trick the masses to move toward our ends.

  24. sounds like banks and governments are the problem in our economic system… How do we eliminate their interference in our economy?

  25. Its easy to manipulate the gold standard. Because there is no way for the people to be able to keep an eye on what is actually there. Govt can claim any random number but not live up to it. This is why govts have abandoned the gold standard in the first place. Because they all defaulted when people tried to withdraw the gold the govt claimed to have.

  26. Govt had a hard hard time intervening under the gold standards because the govt would need to come with the gold to bail out failed banks. Its a lot harder to come up with gold than it is with fiat money. So the govt had no choice but to let failed banks drown. But this means communities would drown with them. Your local bank fails and you lose your entire life savings.

    Bank runs in the past under the gold standard is proof that the gold standard was manipulated even on the private level. They never had the gold.

  27. With the rise of Asia and how the US runs deficits, won't the gold just flow out of the US and into Asia? Then there will be no more gold. Then what? Sort of how the Brits ran out (or almost ran out) of silver buying stuff from China since the Chinese bought almost nothing from the British, in the 1800s. Then the Opium Wars came about to fix that.

  28. Fiat money, gold standard, the problem isn't which type of monetary system to use, but who gets to choose? Leave it to government, and the decision will be politically-based. Get the government out of the money business and allow free banking with market competition, and let people choose once again what type of money and monetary system that they prefer, instead of leaving it to politicians and bureacrats.

  29. You should do more of these head to head guest features. There are a lot of experts who could use a platform like this to plain-language communicate their ideas with context. Good series.

  30. The question becomes, what do you value more:

    1) Price stability?
    2) Low unemployment?

    Gold offers price stability at a cost. Gold is steady, but inflation and deflation cycle as the economy adjusts to new levels of demand. Higher demand means employment and lower demand means more unemployment.

    Conversely, fiat gives the government flexibility. Now, to this point, the US government has largely engaged in cyclical policy, meaning when things were going well the government increased spending and when things are going poorly the government cuts back. This is, IMO is the failure to leverage fiats greatest inherent advantage. The government creates dollars independent of taxes (despite claims to the contrary). If the government enacted a counter-cyclical policy where it spent more during bad times in order to maintain employment and cut back during the good times so that people would shift back into the privare sector, I think we'd see the full potential of fiat.

  31. Fiat only work because it depressiates… Why because 2 things makes human figure a way to make more money because of depression. And 2nd help people not save / board cash like they would gold and people spend and recycle the money…. The issue is that sooner or later it will be to low. And yes if silver and gold were the true standard it be harder to actually manipulated

  32. Going back to a gold standard would be great as long as it is governed by a free market system. Government intervention and a central bank has to be out of the equation.

  33. let's see I don't like the way Larry White discusses. A duel is not about interrupt the other side and avoid it express its ideas. Second gold standars CAN create economical crisis too. I'm pretty sure, as economist, he has lernt about the panic of 1873, the long depression 1873-79 which destroyed the 33% of USA economy, he surely know about 1882-85, 1890-91, and specially the 1907 panic which led the congress to create the Federal Reserve. So basicly he's lying.

  34. 5:25 "If we can't get the fiat money system right, I don't trust the government to run the gold system in the right way"

    Well that's nice, except our government hasn't been in control of our monetary system since the federal reserve act(way before we adopted a fiat system).

    Most if this video is irrelevant as the levers of our monetary system haven't been under government control for about a century.

    Without acknowledging the fact the the Fed reserve is privately controlled institution, wtf are these guys even talking about?

  35. My view on the subject…

    Here is my description of the fiat system. I am looking for someone to critique my ideas.

  36. In a system where we’re supposed to accept worthless paper as money, guess who holds all the real money? The bankers responsible for the fiat system.

  37. Libya in 2010 under Gaddafi was trying to make a gold standard currency called the Dinar, and it would replace the US Dollar in that region, at that time the US killed Gaddafi and established a central bank in Libya. If Europe went to gold standard the US would collapse because they’d lose their infinite credit card from the Petrodollar system.

  38. I think the argument that 'gold staandard brings predictability in prices' will be true only at the expense of growth. In order to have fixed prices (0% inflation) or a desired level of inflation; the amount of additional goods and services created should be proportional to the amount of additional monetary base created. With gold standard, we're limited to the rate at which new gold is created; if an economy is able to outperform that, there will be deflation since monetary base can not catch up with actual requirement of money. This will be a disincentive for further growth and economy will correct itself to a lower growth path to match monetary expansion.

  39. Gold standard can be manipulated through fractional reserve lending. Just lend ten times the amount of gold. Or 20 times or a 1000 times. It really doesnt matter. Fiat currency has no value. Never save in fiat money. Always get rid of it.

  40. All govts use fiat currencies. Fiat currencies strengthen the govt and the country. At the cost of the nation's savers and creditors. Unless the creditors can increase interest rates higher than the price of inflation.

  41. Govts are unable to print just right amount of money to match goods and services. Especially in a country that doesnt even produce goods.

  42. 6:18 "The genius of the gold standard is that it doesn't require a central bank." Um, you mean blockchain/cryptocurrencies, right?

  43. So far best video on both topic! More videos like this would be awesome in youtube! Conclusion: The problem is government. Over time government have temptation to "slack off" whether it is fiat or gold, first they start bending the rules (gold and silver standard was written in our constitution) then they start over using their power (create money out of thin air) result is always disaster… So is this never ending cycle? When we will learn from our mistakes? How can we transform the true wisdom to other generations?

  44. Fiat Currency is highly inflationary.
    Since 1850-1900, the currency got ONLY 8% in that 50 years period.
    Between 1968-2018, The fiat currency got 700% inflation in that 50 years period.

  45. The guy on the left said that in the 1800s there was moderate inflation and moderate deflation. This is not correct. Recently I saw a graph of value of dollars from very early 1800s until 2010. The source was the Fed.Res.Bank. It showed a Bank Panic =deflationary year every 2.5 years for the time from 1810 to 1913 and the creation of the Fed. Res. Bank. That was 39 deflationary years over the 103 year period. And they were not moderate, the deflation was often over 5% and sometimes 10%. And often they were 2 years in a row and thus added to each other.
    . . . Besides how can the US get back onto a gold standard? It has like $5T in gold and has issued $3T is cash and $21T in outstanding bonds. It can't default on the bonds without a terrible mess, and it can't tax $21T from the economy without creating a very deep Depression. Look at Europe now and imagine it with every nation doubling all taxes and not increasing any spending. Going bck onto a gold standard is IMPOSSIBLE.

  46. This is an Austrian school gold bug revisionist history not an objective debate. Going back on the gold standard would be a terrible idea to implement. Unemployment would skyrocket because their wouldn't be enough liquidity in the market. Not only would federal government be constrained by it's spending so would financial institutions and the average person. The fear about inflation is completely unreasonable in the US. US has been traversing under 2% inflation annually for nearly 10 years.

  47. maybe, just maybe private central banks are the issue. print the money out of thin air, and since it doesnt have to be backed by gold why have any reserves when they can just print more and more and heres the kicker, they loan it out at interest.

  48. The money supply on a gold standard isn’t fixed. In a free banking system some banks created more money than they could back with gold and became bankrupt .
    When the government stepped in and the fed handled the reserves, other countries began to pull their gold out of the US until the government stopped them from doing so.
    So what’s is it? Why do people pretend money was a fixed supply on the gold standard?

  49. No, Sumner, the gold standard (GS) didn't cause the Great Depression (GD). The GD was caused in part by Smoot-Hawley tariffs, tax-rate hikes, a Fed inversion of the yield curve, the Fed hoarding of gold, and two major governments going OFF the GS (Britain, Sep 1931 and US, Mar 1933). President-elect FDR's threats to go off gold (Nov 1932-Mar 1933) triggered a run on the banks, not because banks were distrusted but because FDR was (rightly) distrusted; people wanted their gold, not would-be FDR fiat money. Details:

  50. See also Nathan Lewis:

  51. I want a currency backed by something but I don't want price controls
    perhaps using coins made of precious metals with a face value equal or slightly greater than the value of the metal
    any other ideas?

  52. Currency is a public utility in a manner that the gold standard simply can't service. It's free market ideals taken to utopianism.

  53. The simplest way to explain our monetary system is this:

    1. The fed has a checking account with a balance of 0.00
    2. The US treasury sells bonds (loans) to the federal reserve
    3. The federal reserve writes a bad check (prints money) to pay for the bond
    4. The fed just essentially created the ONLY dollars that exist and expects to be paid back WITH INTEREST. See a problem yet?
    5. The US can not pay back those bonds because there doesn't exist enough currency to pay back anymore than the interest.
    6. The US sells MORE BONDS to the fed, like a 16 year old girl with daddy's credit card.
    7. Why does the fed allow this? Because it allows them to essentially own countries without ever accruing any assets. The assets simply come to them because they have been given power by the government.

    This isn't some conspiracy theory, it's not some crackpot story about lizard people and the moon being flat or whatever these hippies are on about these days. It's a simple ponzi scheme that has been going on for over a hundred years and accrued so much power and trust that it can not be dismantled easily.

    Ever heard of anyone that's written a bad check? Yeah? And they either got caught or got away with it right? Yeah? Well this is simply a case of somebody writing a very very large amount of bad checks and getting away with it, because everyday billions of people tell each other and believe that those checks are good!

    There are inherent flaws to this system, it will destroy itself the same way that every other fiat currency has, through the price discovery method (which basically means that people come to a realization of value based on scarcity and that dollar is as scarce as oxygen).

    Go read putting it simply, from the boston federal reserve. Straight from the horses mouth, they admit all of this stuff. They admit that a large amount of their transactions are not on their balance sheet, they just know that most people are too stupid to care or do anything about it.

  54. What gives gold value? We do. Just like a fiat currency. Gold doesn't have an inherent value. The only thing good about with regard to use as a medium of exchange and store of wealth is that it's scarce and can't be synthetically produced. But even that isn't a given. In the future, we'll be mining asteroids laden with gold. So what if you can exchange currency notes for a shiny metal? Who gives a crap? Rather than having paper currency that has an equivalent in gold in a value, let's just use gold coins. Does that make you feel better? You're at the same place as before. What are you going to back the gold with? Silver? And what do you back the silver up with? Chicken wings? At some point the backstop for whatever medium of exchange you use is the full faith and credit of the government that issues the currency. And we have that today. That's what backs the US Dollar right now. But the value of the dollar is determined by us. Just as we are the ones who give gold value, and sliver value, and chicken wings value.

  55. All civilizations have gone off the gold standard, then they collapsed. When you devalue money, you also devalue labor. The US is doing that now. Only trade with China and NAFTA have kept inflation low, not the Fed. Trump is about to F that up and throw a monkey wrench into the whole deal with his tariffs, too.

  56. The government artificially creates inflation and pushes for welfare systems to keep people poor. They want to keep you ignorant so they can keep your vote.

  57. So, Basically the compromise needs to be system which is an international, grassroots, politically independent, scarce, decentralized and trusted means of transacting and monetizing.
    Everyone say ! Bitcoin !
    😉 <3

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