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> However, today, we have more economic activity than we have gold. Don't want to engage in the broader debate, but you do realize that gold is fungible and ab

> However, today, we have more economic activity than we have gold. Don't want to engage in the broader debate, but you do realize that gold is fungible and able to broken down into very small pieces? Are you familiar with the term reserve banking? The gold standard doesn't mean you make transactions with actual physical pieces of gold. It means financial institutions have to hold physical gold reserves relative to the money they issue. Also that the base money supply (MO) is a very small fraction of the money used in the economy. https://en.wikipedia.org/wiki/Money_supply https://en.wikipedia.org/wiki/Money_supply

FredPret 5y ago
Whether we exchange gold or certificates representing gold is immaterial. Some quick googling tells me the total value of all gold on the planet is 187000 tons x 35273 fine ounces per ton x USD 1897.93 per fine ounce = 12.5e12, ie, USD 12000 Bn. Sounds great, that’s a lot of money. But it’s not annual production, it’s total amount mined so far in human history. However, according to [1] the global GDP last year was USD 84537 Bn. That’s annual economic activity. So there’s no hope in hell that we could produce enough gold every year to represent all the economic activity. [1] https://www.statista.com/statistics/268750/global-gross-domestic-product-gdp/ https://www.statista.com/statistics/268750/global-gross-dome...
- jpadkins 5y ago
  Did you read the link on money supply? Base money is not used in all transactions. https://en.wikipedia.org/wiki/Money_multiplier https://en.wikipedia.org/wiki/Money_multiplier is used to facilitate commercial transactions Your example of GDP is a flow. Gold in tons is a stock. Never compare a flow to a stock https://en.wikipedia.org/wiki/Stock_and_flow https://en.wikipedia.org/wiki/Stock_and_flow The next concept to learn is velocity of money. https://en.wikipedia.org/wiki/Velocity_of_money https://en.wikipedia.org/wiki/Velocity_of_money Your base gold supply + your extended money via credit can circulate an unlimited amount of times to support the transaction volume needs of the global economy.
  - FredPret 5y ago
    The whole concept of a gold standard is that you can trade your paper money in for real metal at any time. What you describe, base gold supply + credit, implies fractional reserve banking. As soon as you have a fractional reserve, the gold standard promise no longer holds. The question becomes - what level of fractionality is acceptable? And who decides that, the government? What stops them from decreeing that one ounce of gold now represents a billion dollars and letting the printing press fly? (In fact, this is precisely what did happen. Look up the historic value of the British Pound. Gradually got watered down over the centuries as I described.) If the government can make up the fraction they want to use, let’s just skip the extra steps and let them make up the amount of money they want to print directly. Ultimately you can’t get away from the fact that we’re creating a hell of a lot of economic value every year and we’ll never dig up gold at the same rate, probably ever.

FredPret 5y ago

Whether we exchange gold or certificates representing gold is immaterial. Some quick googling tells me the total value of all gold on the planet is 187000 tons x 35273 fine ounces per ton x USD 1897.93 per fine ounce = 12.5e12, ie, USD 12000 Bn. Sounds great, that’s a lot of money. But it’s not annual production, it’s total amount mined so far in human history. However, according to [1] the global GDP last year was USD 84537 Bn. That’s annual economic activity. So there’s no hope in hell that we could produce enough gold every year to represent all the economic activity. [1] https://www.statista.com/statistics/268750/global-gross-domestic-product-gdp/ https://www.statista.com/statistics/268750/global-gross-dome...

jpadkins 5y ago
Did you read the link on money supply? Base money is not used in all transactions. https://en.wikipedia.org/wiki/Money_multiplier https://en.wikipedia.org/wiki/Money_multiplier is used to facilitate commercial transactions Your example of GDP is a flow. Gold in tons is a stock. Never compare a flow to a stock https://en.wikipedia.org/wiki/Stock_and_flow https://en.wikipedia.org/wiki/Stock_and_flow The next concept to learn is velocity of money. https://en.wikipedia.org/wiki/Velocity_of_money https://en.wikipedia.org/wiki/Velocity_of_money Your base gold supply + your extended money via credit can circulate an unlimited amount of times to support the transaction volume needs of the global economy.
- FredPret 5y ago
  The whole concept of a gold standard is that you can trade your paper money in for real metal at any time. What you describe, base gold supply + credit, implies fractional reserve banking. As soon as you have a fractional reserve, the gold standard promise no longer holds. The question becomes - what level of fractionality is acceptable? And who decides that, the government? What stops them from decreeing that one ounce of gold now represents a billion dollars and letting the printing press fly? (In fact, this is precisely what did happen. Look up the historic value of the British Pound. Gradually got watered down over the centuries as I described.) If the government can make up the fraction they want to use, let’s just skip the extra steps and let them make up the amount of money they want to print directly. Ultimately you can’t get away from the fact that we’re creating a hell of a lot of economic value every year and we’ll never dig up gold at the same rate, probably ever.