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I partially agree; that's why what I meant would be a total metal reliance, e.g. 1oz silver/gold eagles etc. where the amount of gold/silver is guaranteed and c

• sethg 17y ago
  Guaranteed by whom? If in 2009 the government guarantees that its mint's coins will be at least 99% gold, and then in 2010 it guarantees that they will be at least 90% gold, what are you going to do—assay each coin that comes into your hand before you put it in your wallet? (The Israel Museum once had an exhibit on money which included a series of ancient coins, struck from exactly the same mold over a number of years. The oldest one was something like 90% gold and the most recent was something like 1%.)
  • jeromec 17y ago
    The metal is just the tool. Like the Constitution or anything else, it's up to the people to hold the govt. to the standard. Unlike non-backed currency, with metals any shaving of value can be detected obviously (more obviously than taxation via inflation) and quantified.
    • sethg 17y ago
      The only “value” of currency that matters to me is my ability to give it up in exchange for the things that I want and take it in exchange for the things I have. In this sense, if I don’t trust government-provided statistics, all I need to detect changes in the “value” of currency is to keep a budget. If my currency-denominated expenses have gone up and my standard of living has remained constant, that’s an obvious sign of inflation. By contrast, if a supermarket cashier gives me a handful of coins in change and I want to know which are 90% gold, which are 95%, and which are 99%, what am I supposed to do? Carry an analytic balance into the grocery store? That would make me real popular with everyone standing behind me in line....
      • jeromec 17y ago
        Will a dime buy you a gallon of gas today, as it would in the early 1900s? It would if it were a silver dime, which is roughly worth $3 now. People don't notice loss of value as easily as when it's obviously measurable, as in loss of metal. The law (hypothetically) would decree coins had that amount of metal, and discrepancies would make the news. I'm not arguing for metal, so much as pointing out its contrast with non-backed currency.
        • evgen 17y ago
          A silver Barber dime minted in 1900 was 2.5 grams and 90% silver. That gives you $1.40 as of the close of market today, so you could basically buy half as much gasoline now as you could then.
          • jeromec 17y ago
            Thanks for the correction. I thought silver would've kept up with gold, but it still illustrates loss of value.
        • sethg 17y ago
          I am just barely old enough to remember the late 1970s, when US inflation went over 15% per year. People certainly noticed the inflation; it is one of the major reasons that Jimmy Carter was voted out of office. The chairman of the Federal Reserve dealt with the problem not by returning the country to the gold standard, but with the orthodox Keynesian technique of hiking interest rates, and it worked.
          • dpatru 17y ago
            The reason banks can lend money at low interest even when nobody is saving is because they can create new money. A hike in interest rates means a reduction in the production of new money. If you define inflation as the increase of the money supply, then obviously a hike in interest rate, or equivalently, a reduction in the production of new money solves the problem of inflation. A gold standard also solves inflation, but fundamentally and non-policically, by limiting money to the supply of gold. The purpose of the Fed is to inflate the money supply for the benefit of the government, the banks, and borrowers who want artificially low interest rates at the expense of everyone else who uses money. If the Fed did not inflate, it would be no different from a gold standard, and in fact, when the Fed corrects inflation, it does so by reducing the production of new money as under a gold standard.
  • krakensden 17y ago
    Good point- this was a serious problem in the later stages of the Roman Empire