From: dave@bradley.bradley.edu (David Vessell)
Subject: Re: gold standard
Organization: Bradley University
Date: Wed, 30 Sep 92 21:12:09 GMT

tcox@ssrl01.slac.stanford.edu (Tony Cox - (415)926-3105) writes:

>I've read this thread with much interest, and I should add, some degree
>of amusement. I agree that Gold and other precious metals are rather
>pretty, but to base a currency upon it would seem to me to be the height
>of folly in modern times.
>
>Just suppose that some bright individual comes up with a process to
>concentrate Gold from seawater economically. Biotechnology might hold
>the key to this. There are, after all, organisms which concentrate
>Vanadium, and it is not inconceivable that one could be 'engineered' to
>remove the 1.5 tons of gold from each cubic mile of ocean.

Oh please.  I had an argument with my dad last month about this.  What is
more likely within the next 200 years....cheap abundant gold or the
stability of the U.S. economy?  I sure wouldn't want to bet on the latter.
After all, if the U.S. ceases to exist sometime down the road, a lump of
gold will buy more than paper currency.  


>Such a development would make Gold no longer precious, and if currencies
>were tied to Gold, then severe disruption of the world financial markets
>would be the result. Either that, or a swift retreat from the gold
>standard for any currencies tied to it.

That seems to be the most logical thing to me: switch to another commodity
like platinum or something.  Tradable things have value.  Currency has no
inherent value in and of itself.


>Surely the KEY requirement for an acceptable currency should be
>predictability in value. It doesn't really matter if the currency is
>being deflated, reflated, or held static compared to things it can be
>exchanged for, as long as the RATE of change can be predicted with some
>certainty in the future.

I'll agree with this.  But something has to give it value.  The currency
has to stand for or mean something.  The word of politicians doesn't cut it
with me.


>Of course, practical considerations call for an increase of money supply
>roughly in line with the increasing size of the economy - that way, if
>you receive $20,000 (= for example, one car), you can hold the currency
>for one day, one year or one century with reasonable confidence that you
>can retrieve your 'car' whenever you choose.

A day, okay.  A year?  That's pushing it but ideally, yes.  A century?  Who
cares?  Most of the time changes in commodity-based currency values are so
slow that you need only be concerned in terms of decades, and I think
you'll find that the case if you study history.  As others have described,
there would be deflation but it would be over such a long period of time
that it would not impede economic growth.

>
>Insofar that this nice practicality is subverted by governments, the
>market responds in various ways - interest bearing checking accounts, or
>weekly inflating employment contracts (as in Brazil, with 4000% inflation).
>As long as exchange controls are not in affect, and domestic currencies
>can be freely exchanged for practical items, no great harm is done (a
>big if, I'll admit). The beneficiaries are the accountants and the
>calculator manufacturers, (and in countries without capital gain
>indexation, those damn governments again).
>
>Do I trust governments to institute such an agreeable system? Of course
>not. The temptations of fiddling with the money supply for political
>reasons are too great. Even the benign, and (to many) seemingly
>acceptable Keyensian monetary expansions contain hidden value judgements
>- in the case in point, that it is inherently GOOD that people turn
>their money over fast to increase the `velocity of circulation' and
>economic activity.
>
>My ideal currency would be managed and controlled by omniscient,
>disinterested and trustworthy aliens, providing uncounterfitable,
>robust notes and a predictably expanding money supply.
>
>Since these aliens havn't shown up yet, autonomous central banks run by
>countries with a proven stability are probably the best bet, backed with
>sufficient resources to lend confidence to the system.
>
>By the way, do Libertarians have an alternative to public resources as
>the ultimate guarantee of confidence here?
>
>It is interesting to note the correlation between central bank autonomy
>and currency stability - this was detailed rather nicely in an
>_Economist_ article last year. The ranking of central bank autonomy
>(Germany, France, US/UK, Italy) tracks closely the robustness of these
>currencies over recent times.
>
>Just my (inflation adjusted) $0.02.
>
>
>Tony Cox, Stanford, CA
> "Keep the currency and the courts, and let the rabble have the rest".
-- 
=========*davE*.....making the world safe for intelligent dance music.=========
                           Think twice you people!!
--------------------------{dave@bradley.bradley.edu}---------------------------
Newsgroups: alt.individualism