OT-Economy-Gold Standard

[Bridger158]

Could someone please explain to me the benefits of the gold standard vs. our system now? If I am not mistaken, as of now our money is simply paper and has no real value whereas on the gold standard cash represents gold. Correct? Also, would gas prices go down if we were back on the standard? Will we ever go back? Enlighten me, please.

[piller]

The Gold Standard meant that there was gold enough in the Federal Treasury to take up all of the paper Federal Reserve Notes and replace them with gold. The paper now has only the value assigned to it by the economy. With the size of today's economy, there probably isn't enough gold available to go back to the Gold Standard.

[Ysabel Kid]

The Gold Standard meant that there was gold enough in the Federal Treasury to take up all of the paper Federal Reserve Notes and replace them with gold. The paper now has only the value assigned to it by the economy. With the size of today's economy, there probably isn't enough gold available to go back to the Gold Standard.

Exactly. While having a country's paper currency based on a tangible commodity of value (gold, silver, even oil would do), those commodities also fluctuate in value quite a bit. As piller noted, with our multi-trillion dollar GDP/economy, there simply isn't enough gold to base on currency upon accurately.

[Bridger158]

Thanks guys. So, is there any kind of system that would keep the Dollar from going down in value? Keep the discussion going, please. I am trying to get a better grasp on all this stuff.

[Old Ironsights]

Thanks guys. So, is there any kind of system that would keep the Dollar from going down in value? Keep the discussion going, please. I am trying to get a better grasp on all this stuff.

Yes. Eliminate the Fed and the "coining" of specie and go back to comodity-value Hard Currency.

You don't trade in some arbitrary "dollar" (pound, franc, whatever) but in Ounces of Gold/Silver/Platinum/Copper/whatever.

Larger sums would be traded in Certificats of Holding - like Silver Certificates used to be or Bearer Bonds are now.

Read Rothbard et al.

[mescalero1]

Now is a good time to have the mineral rights to 40 acres of a good gold producer

[Ysabel Kid]

In very basic terms, the dollar's value is impacted by supply and demand. When the fed restricts the availability of the dollar, if demand is high, than it's value goes up. The US dollar for decades was the currency of choice globally because of it's relative stability - especially to other currencies.

When costs escalate (inflation), the dollar's value will decrease, as it purchases less and less. The converse would be true in deflation, though that rarely happens.

Without a firm energy policy, our economy will continue to sputter, teattering on the edge of recession repeatedly. The dollar will continue to have problems in this environment. Add to that the issues with sub-prime loans and defaults, and a decreasing housing market (resulting in reduced value of all homes), and the blow to the dollar is compounded.

The worse thing the government can do is exactly what they are considering doing - bailing out those in foreclosure or near it, and continuing to bicker about energy without actually doing anything to improve supply. Want to see the dollar's value increase dramatically? All Congress needs to do is let the market correct itself from a housing standpoint (painful, but the best way to achieve correction that lasts and doesn't destroy value), and allow oil companies to access ANWR and continental shelf reserves - while increasing refining capacity, LPG terminals, nuclear power generation, clean coal - as well as encouraging energy efficiency/conservation and alternative fuels research.

[adirondakjack]

No, we can't keep the dollar from fluctuating.

The dollar represents that VALUE TO OTHERS in the world of our money. Think of the world economy like a big ole country auction. Imagine that every day they start out and say "I got a bundle of Dollars here, who will give me $100 Euros for em? How about $90? Anybody give me $80? until a deal is struck.

Next they "auction" Yen, then Euros, etc. Here's the problem. When we (the US) buys a bunch of stuff from others (and we buy like the candy store is gonna close forever), every swinging Richard on the planet is awash in dollars, so they ain't worth as much as when we used to SELL STUFF we made to the world and import less than we sold (making dollars scarce in the world markets, and therefore valuable).

Two major threats to the value of the dollar have been the creation of the Euro (which bound many currencies together, instead of them seemingly fighting among each other for value), and the HUGE export output of China to the US. China may well be DUMPING dollars in a sense, and they definitely are buying lots of our real estate mortgages in bank "package deals" (helping to raise property values a bunch because they got money to burn (ours).

The only way the WORLD sees more currency stability is to go to a "world currency" and stop this nonsense of trading in currency like it was a "valuable commodity" like say corn or oil or gold. it's not valuable, it's only a "ticket" to buy stuff at an uncertain price. That uncertainlty is the worst threat to our economy in the short run, because it causes consumer paralysis. Not only are we getting hammered at the grocery and the gas station, but the pace of change means we can't predict and don't wanna risk as much.

My wife's "car fund" can't seem to grow as fast as car prices increase, which is to say her "buying power" melts down even as she saves for the next car.

My fuel oil contract (a set price) is about to run out, and I can't begin to imagine HOW MUCH it will go up next winter. So, no new guns, not even gonna put tires ($600) on my truck till they are bald, and just keep banking money toward the uncertainty. This causes even more issues as sals decline, but waddaya gonna do?

[Bridger158]

Thanks. Next question-can just the average joe buy himself some gold as an investment? Literally, just buy a pound or two of gold and keep it in a safe at his house? I know the price for even a pound would be around I'm guessing $1000 an ounce, but could it be done? And where?

[Old Ironsights]

Thanks. Next question-can just the average joe buy himself some gold as an investment? Literally, just buy a pound or two of gold and keep it in a safe at his house? I know the price for even a pound would be around I'm guessing $1000 an ounce, but could it be done? And where?

Ingotized gold? No. Gold Coins? Yes, but their valuation is more than the spot price of gold.

The BEST way to buy and keep gold/silver for an EOTWAWKI scenerio is to order simple heavy gold chain from a reputable maker.

Make each link = 1/10 oz fine and you have an immediately assayable form of comoditized precious metal.

[mescalero1]

As I take mine out of the ground it 99.8% pure, and yes you can aquire it if you want.
You can buy 1 ounce ingots and get up to the amount you feel comfortable with,
but you are near the top of a run up.
I do not think it will come down untill other unstable elements stabilize; if they ever will

[adirondakjack]

Some of the best investments in gold are in oddball coins nobody cares about. Mexican gold pesos can be bought for just about scrap value (or less) at common country auctions when they show up. Some of the other coins like the 1/4 ounce or 1/10 ounce eagle coins can be bought pretty cheap too. OTOH old US coins in good shape draw COIN COLLECTOR prices, not gold value prices.

Oh, another source is gold pocket watches in poor condition. The gold case is still worth (drumroll please) it's weight in gold

[mescalero1]

I wish you had not said that about gold pesos, that was the sleeper in the equation, you have no idea what that set of cuff links are worth

[ole pizen slinger]

With regard to the gold pocket watch cases, they are gold filled and are partially brass. I have a Hamilton 950 that I carried on the railroad for years and the gold has worn off on an edge or two.
ole pizen slinger

[DixieBoy]

Hey, great thread here. So far I agree with everything you've been told but I'd like to add my 2 1/2 cents worth.

Thank the creation of the Federal Reserve in 1913 for the mess we're in today. If you want to learn more about this fascinating and important topic I suggest that you google up Ron Paul, or go to www.lewrockwell.com and read all that you want of his archived articles. This man was the only presidential candidate (with the possible exception of Romney) of the recent primary season who has a clue about financial matters. Paul is a proponent of "hard currency" or "specie," as they used to call it.

I'm a little bit of a gold bug, but more of a silver bug (yes, we actually call ourselves that) since silver is the "poor man's gold." I'm learning, and far from an expert, so I'll stick to what I know with certainty.

This country became the greatest nation on earth under the gold standard. Any country which has detached itself from the gold standard has begun its own demise, us included. No other country in the world has ever gotten away with debasing its currency through the issuance of "fiat money." That action is typically the beginning of the end.

The problem is basically this: governments love to spend more money than they have in their cookie jar, so to speak. It's been that way for thousands of years. We all like to spend more money than we have, but when you and I write checks for items without the money in our account to cover those checks, men with guns come to put us in jail. If you're the government, you simply set up a system that lets you do this - and con the folks into believing it's a good thing. We got conned in America in 1913.

When I was a kid (I'm 54 now) we still had Silver Certificates floating around. You can find them at coin shows now, for sale, but always for more than their face value. Gold Certificates had been phased out before I was born. When you read the writing on those old bills, it clearly states that "there is on deposit in the Treasury of the United States One Dollar in Silver." You could actually go to a bank and get that dollar in silver if you wanted it. Up until 1964 our quarters were still 90% silver, then in 1965 the "sandwich" quarters came out and put an end to any precious metals being in our coins. Our paper money had already been made value-less.

The government used to be restricted to issuing only so much paper money as it had actual backing for, in silver and gold. And this, of course, limited their ability to spend. The acceptance in this country of "fiat" money, which is another word for "decree" money, freed the government to spend as much as it wants to. The game has lasted as long as it has because so many other countries thought it was a cool game, too. But...the United States government has been printing money like there's no tomorrow, and the perception that we're doing this has drastically reduced the desirability of the dollar.

Neither you nor I can print our way out of debt, or print our way into having money we want to spend to buy whatever we want. The government can get away with printing worthless money longer than we can, but eventually, when literally mountains of money are being printed at ever-increasing rates, confidence in the dollar falls. That's why the brand new Euro (also a worthless, created-out-of-thin-air currency) has surpassed the U.S. Dollar in perceived value. The perception that the European Union has at least exercised some restraint in the printing of Euros led to the devaluation of the dollar vs. the Euro just last year. This is another good reason to buy gold and silver.

One thing I was cautioned about by some folks much wiser than myself, when I first became interested in this stuff about 6 or 7 years ago: you don't buy gold or silver to make a profit. You buy gold or silver as a hedge against inflation. This is another reason that governments hate gold and silver. They are like a mirror being held up to the government's face. If inflation - caused, in large part, by flooding the country with valueless paper dollars - rises, things that used to cost one dollar will end up costing two dollars, and so on. They say that we have lost 97% of the purchasing power of the dollar since the 1940's.

Here's another something to chew on: back in the 1800's a single ounce of gold was valued at $20. This lasted for a long time. When Franklin Roosevelt had privately owned gold confiscated in 1933, he turned around and decreed that the new "value" of gold was $35 an ounce. Okay, people accepted that, because most folks were convinced that those folks in Washington were smarter than us hicks, and if that's what they needed to do to get us out of the Great Depression, then, okay.

However, if you've noticed lately, gold is around $880 an ounce now, and it shot up to over $1,000 an ounce a couple months back. Silver, which used to be valued at roughly 1/20th the value of gold has been treated badly, but it is now hanging at around $16.70 an ounce. And it, too, was up over $20 an ounce when gold was zooming up there.

There are lots of variables involved in what determines the day-to-day price of gold and silver. Way too many to get into here. And today, the banks which are tied at the hip to the Federal Reserve system are fighting tooth and nail to keep gold and silver prices down. You see, growing confidence in the value of precious metals like gold and silver reflects lack of confidence in the paper fiat dollar.

You can educate yourself online about this stuff, and definitely read all you can by guys like Murray Rothbard and Ron Paul. There are many others. Go to a coin show in your area and see who's who. Most are honest dealers, and you'll also notice that a significant number are gun guys too. No big surprise there. We were all former boy scouts (be prepared, remember?).

When you buy silver or gold, I'd avoid the exotic stuff and stick with American Gold Eagles, Krugerrands, or in silver, U.S. Silver Eagles, Canadian Maple Leafs, or Engelhard bars or Prospector coins. You'll learn alot along the way, and have fun too. Once you figure you've got a nice little amount of precious metal squirreled away you might want to consider a safe deposit box, or a good safe. The best way to minimize risk of theft is to avoid the temptation of telling people about your stash. No need to invite trouble to your door. I'd definitely buy bullion coins rather than stocks. In the event of a catastrophe, you have something physical in your hands if you've bought bullion. If there is a meltdown, and you call about your stocks, all you are likely to have is a dial tone at the end of an unanswered phone.

There's lot's more to this subject, but I've gone on for a good while here as it is. Read all you can about this stuff before you buy and your learning curve will be shorter and pain free. Have fun. - DixieBoy

[AJMD429]

Lots of good and thought provoking info on the economy and economics here:

http://www.mises.org/

[PaperPatch]

The benefit of the gold standard is...a stable economy.

Specifically, the gold supply can only increase approximately 3% per year. Thus, inflation follows accordingly. When you couple this with normal human population growth...stability is a given.

The 3% number is an average...and represents the mechanical ability to extract this truly rare material from the earth.

Were we to return to the gold standard...prices would change, yes. Keep it in perspective though....a new rifle may cost $15.00. That number though, may represent a months wages.

If you can find or locate some Federal Reserve Notes from the 1930's...it reads; This note is legal tender for all debts public and private, and is redeemable in lawful money at the US Treasury, or the nearest Federal Reserve Bank. That means...in those days you could go to the bank with your paper currency; and ask for you money back! Our currency doesn't read that way anymore.

Our nations link to the gold standard has been fractionaly reduced until Nixon closed it in the early 70's.

Will we ever go back to the gold standard as a currency base? Probably not.

You've opened up a can of worms...and should you study it further, prepare to be disappointed. Our currency is indeed printed upon paper...and represents a promise to repay. Faith in that ability to repay those debts is being questioned.



Change is coming...nobody can say when though.

Good luck in your pursuit of knowledge...it is the key to all prosperity.



http://www.mises.org/

http://www.federalreserve.gov/

[DixieBoy]

Well, here I am again. One thing I'd caution you against. If you want gold or silver, buy coins. If you ever need to "cash out" of a little of what you've bought, you will be insulted if you try this with jewelry or pocket watches. Also, for reasons that have more to do with snobbery than actual values, I'd avoid Mexican gold or silver coins. They are truly beautiful coins, but I've sold a few of both when I needed cash, and I was lucky to get "spot" for them, or even a couple dollars below spot. "Spot" is the name given for the daily price of gold and silver (and platinum, and palladium, etc.).

Some gold coins are pure gold, meaning that they are .999 pure gold. This is fine if it's it what you want, but remember, truly pure gold is very soft, you can nick it easily. A nicked coin will bring you less money if you need to sell it. Canadian Gold Maples are pure gold (.9999 pure), as are some of the Australian coins, and some others as well. A U.S. Gold Eagle coin of one ounce (one Troy ounce, which is 31 grams and change) contains one pure ounce of .999 gold, mixed with other metals for hardness. This makes the coin more durable, but it still contains one pure ounce of gold. This coin will weigh 33 grams and change. The South African Krugerrand is the same way: one ounce of pure gold, mixed with 9% copper, for strength. These coins mar or scratch less easily than a Canadian Maple Leaf. They will still scratch if you treat them badly, but they won't dent or scratch nearly as easily as a Canadian Maple Leaf. If you drop one of those, you've damaged it.

I'd stay away from numismatic coins (coins judged to have collector value beyond the metal content, based on rarity) until you really know what you're doing. If the ka-ka ever hits the fan, and you need your coins for survival purposes or bartering, no one is going to care about the rarity of your coins, they will want easily recognizable bullion coins like U.S. Eagles or South African Krugerrands, for the most part. With silver, one exception is the very popular and well known Engelhard and Johnson-Mathey bars and coins. These sell for very little over spot (you will always pay a little over spot for any coin or bar), and you will get slightly less than you would for a U.S. Silver Eagle if you want to sell 'em, but you'll pay less up front, and these bars and the Engelhard Prospector pure silver coins are very well known and respected.

There are definitely exceptions, but these are good general rules. - DixieBoy

[bunklocoempire]

"Give me control of a nation's money, and I care not who makes its laws."
attributed to Mayer Rothschild

Could someone please explain to me the benefits of the gold standard vs. our system now?

#1 The gold standard would be Constitutional, our system now is UN-Constitutional. Simple answer, gold standard is good for Liberty, their system destroys Liberty.

ARTICLE 1, SECTION 8 OF THE CONSTITUTION STATES THAT CONGRESS SHALL HAVE THE POWER TO COIN (CREATE) MONEY AND REGULATE THE VALUE THEREOF.

The paper is NOT assigned a value by the economy, the paper is assigned its value by a group of private banks that try to control the economy.
The private banks and our government use nice words like "stabilize the economy". And come Monday (6-2) they will try for more control.

Thanks to a True Patriot Lever Gunner this has seen the light:

(from the New York Times March 29, 2008)..."The Treasury Department will propose on Monday that Congress give the Federal Reserve broad new authority
to oversee financial market stability, in effect allowing it to send SWAT teams into any corner of the industry or any institution that might pose a risk to the overall system."

The "overall system" is of course, their system, it is NOT the system stated in our Constitution. Their system does NOT promote Liberty.

Just as UN-Constitutional "gun laws" are a ploy to "keep us safe", from violence,

the UN-Constitutional Federal Reserve is a ploy to "keep us safe" from an unstable economy.

Liberty:
1 The condition of being free from restriction or control.

2 The right and power to act, believe, or express oneself in a manner of one's own choosing.

3 The condition of being physically and legally free from confinement, servitude, or forced labor.


by the by, the central bank can be killed, by a willing president.
Andrew Jackson helped abolish a central bank in his time because
it was/is unconstitutional;
it concentrated an excessive amount of the nation's financial strength into a single institution;
it exposed the government to control by "foreign interests";
it exercised too much control over members of Congress;
it favors Northeastern states over Southern and Western states.

Which candidate still running wants to abolish the Federal Reserve?
And why does that same republican candidate happen to decry the Iraq War, and policing the world? mmm...occupation, Federal Reserve....occupation...Federal Reserve....
Which other candidates want to abolish the Federal Reserve...NONE.
The "terror business" is good for the Federal Reserve and vice versa.

Someday I'll tell ya all how I really feel about the Federal Reserve.

Bunkloco

[CJM]

For those who think a "gold standard" would be good for the economy, good for common people, keep the economy stable or prevent inflation - look to the history of this country.

The "Free Silver" movement of the second half of the 18th century was all about getting AWAY from the gold standard and the reasons were all of the above, that the gold standard was bad for the economy, bad for common people and caused the economy to swing between depression and inflation. It limited the supply of money i.e. go to the bank for a loan and get told he can't loan you any money because they don't have it to loan. This is very bad for common people, and good for the rich. Who do you think the banks loaned money to so they could start businesses or buy a house or farmland, someone with lots of money in the bank, or someone with little to no money in the bank. This is very bad for the common people, and great for the rich. If you think the gold standard keeps the economy stable, then why did the U.S. have depressions in the 1820's (Andrew Jackson got elected mostly because of a depression), and the 1890's. We were on the gold standard when the Great Depression started in 1929, it certainly didn't prevent that one. Other depressions could be blamed on the War with Mexico and the after-effects of the Civil War, but not those three. As far as preventing inflation, the gold rushes to Georgia, California and Alaska all CAUSED inflation. The sudden injection of a large amount of gold meant more money, but the same or fewer goods so prices of everything climbed. Yes, these inflationary cycles all ended depressions, but it is not a good thing to keep having the economy swinging between recession and inflation.

One of the best things for this country was when Greenspan et al on the Federal Reserve board figured out that controlling the interest rate to the banks could serve as a break on the economy. It allowed them to break the boom/bust cycles by slowing down the boom. Yes, it took a while for them to get good at doing this, and was one factor that cost George Bush #1 the election and gave us Clinton instead. It's unfortunate that they thought (and still worse some still think this) it could also serve to accelerate the economy to avoid the bust, it obviously can't. Someone might not buy a new house or expand a business because while business is good, interest rates are too high. But no one ever says business is bad, but the interest rate is so good lets buy a second house or build another factory anyway. It would be great if there is something that could serve as well and as easily to accelerate an economy that is slowing down, but no one has found it yet.

[BAGTIC]

Ignore the gold bugs. They are delusional. They don't have history on their side. What they have is an appalling lack of historical perspective. History shows that there has always been inflation even in the 'good old days' when we were on the gold standard.

[ole pizen slinger]

Fellows,
I'm going to show my ignorance. We all want to make a decent living. That is understandable. In making that living we all want pay raises. Seems to me that every pay raise I've ever received was always taken up by higher prices for the goods I needed. Here's the ignorant question: Why can't everything just stay the same? No pay raises--no price increases.
ole pizen slinger

[Old Ironsights]

Ignore the gold bugs. They are delusional. They don't have history on their side. What they have is an appalling lack of historical perspective. History shows that there has always been inflation even in the 'good old days' when we were on the gold standard.

And that is because from the time Hamilton got his claws into Washington, with really only the Jacksonian exception, the Mercantilist US Gooberment has been manipulating the economy with its unconstitutional Central Banks.

[ben dover]

There is lots of good discussion on money vs value here. One thing I wrestle with is the prospect of selling gold. If you own gold / silver / any other commodity as a protection against bad times, and times get really bad, who is going to be able to buy the gold ? Are you going to sell the gold for paper dollars ? Why would you trade your valuable gold for the currency you were trying to protect against ?
Under a metallic standard the paper currency is valued against the metal. Unless the store of metal grows, the economy cant grow. The Federal Reserve System changes this by allowing banks to lend at a percentage of deposits. If a bank holds 100 $ in deposit it can lend 80% of that to others providing money for purchases or venture capital. When the loan is repaid the economy has provided more services or goods. It gets real bad when lots of loans dont get repaid.
If the Fed allows more money to be loaned there is more available to buy goods / services. If too many dollars chase too few goods we get inflation or actually a decrease in purchasing power, as it takes more dollars to buy the same commodity. The Fed, not the metal, controls the potential for economic expansion.
Now throw in government's penchant for waging wars, having a space exploration, paying for lots of welfare entitlements and the myriad other expansion programs and you see why they cant afford to remain on metals. As we buy more from others and they buy less from us we create a trade imbalance. Other countries hold our dollars; we have their goods and services. If we were on metals, they could demand metal as payment and we'd buy back the paper. They would deplete the Treasury because they dont trust the govt to maintain dollar value. It will remain this way until we are able to sell more than we buy.
So, metals holders, for what will you trade your gold ? If not for paper, then what ? Maybe hard goods like tools or food or the means of protection become attractive.
Money in any form is a tool. Holders of the tool will either spend it on goods, save and invest it, or use it to profit from the manufacture of goods or services others want. Those who want to hold money must sell their labor or ideas to get it. They then hold the power of their wealth. Commerce requires buyers and sellers. Money makes the transaction fluid. Do you really want to go back to bartering and haggling for all your needs ?
By the way, 22 cal ammo might be something to buy. Ben

[mescalero1]

I think I resent being called a goldbug, I get mine by mining for it.
It requires only "labor" from me and provides me purchasing power.
An arraingement does not get any simpler than that.
I never once advocated going back to a gold standard, but I am passionate about the right of citizens to own gold.

[DixieBoy]

Oh boy...this thread has gotten interesting. I'm going to avoid calling names, but I would like to say that I am a gold bug, and I am not delusional. I study history for fun, and for a living. You are welcome to ignore history, but please don't claim that those of us who do not buy your argument are delusional.

That said, there have always been "ups and downs" in markets. They are often called "corrections", and, if left to sort themselves out, they always do. What the Federal Reserve was designed to do, and the National Bank that Hamilton had championed during the days of the founding, was to try to stabilize - or control to an extent - the national economy. In this, they have failed miserably.

Ups and downs happen whenever there is "exuberance" in a sector of the economy, and this sector is big enough to influence the general economy. When the federal government itself creates this exuberance, as they did in the years immediately before the Great Depression, and with the recent housing bubble and subsequent burst, the effects are ALWAYS more severe, and more long lasting.

The gold standard was not to blame for the Great Depression, excessive low interest credit and out-of-control margin buying were the culprits there. And, as much as I disagree with the hardcore libertarian crowd on many issues, they are exactly right in their assessment of that event. Heck, even Bernake admitted this, in a recent appearance before the Mises group.

The "Free Silver" movement was not a movement to get rid of gold, or the gold standard, but to introduce much more silver into circulation, following the huge silver strikes of the latter half of the 1800's. This led to a system which we adopted for a time called "Bimetallism."

In truth, bimetallism had existed since the time of the Romans, and probably before. Remember the gold pieces which your great grandparents had? The $20 gold pieces? This was one ounce of gold. And the silver dollars were one ounce of silver. Well, if you had 20 silver dollars you had the equivalent of that gold piece. The scarcity of gold relative to silver has been known for millenia, hence, the 20 to 1 ratio.

The Spanish gold escudo and the Spanish silver reale were the most popular "coins of the realm" in the British colonies in America for many years, and it upset the Brits off something fierce, but the truth was, that there was simply so much gold and silver being mined by the Spanish for so many years, that these coins were the most prolific coins in the western world. The Spanish used a 16 to 1 ratio in figuring the value of silver to gold. And so, Spanish silver dollars, which they called Reales, required a total of 16 to equal a Spanish ounce of gold, which they called Escudos. By the way, the practice of physically cutting silver coins into sections to make change for smaller items is where we got the term for quarters which was popular right up until I was a kid: "Two Bits." Two Bits was two one-eighth slices of a Spanish silver reale. A quarter, or Two Bits.

Want to know who had the most stable currency in our hemisphere for the longest period of time? Well, you might be surprised to know that this was Mexico. Yeah, Mexico. The Spanish established this stability with their coins being minted right there in Mexico, and Mexico attempted to continue it. So, why is Mexico broke now, and why has it been broke for much of the last century? Well, Mexico wanted to do alot of things that its government could not afford. Wars, mostly, but there were other things too. So, little by little, during the early 20th century, Mexico began debasing its currency by including less and less silver in its peso. Get yourself a coin book and you can see the steadily decreasing percentage of silver in the Mexican peso, until for the last forty years or so, it has included little or none at all.

For this country's first 150 years "hard currency", as Jackson called it, did pretty well. Yes, there were ups and downs, but nothing like the hammer blows this country took once the Fed got involved in things.

In Andrew Jackson's time, he fought bitterly with Nicholas Biddle, who was the champion of the National Bank. Jackson won his fight with Biddle, got rid of the National Bank, and was the ONLY president to ever completely pay off the national debt.

So, what bankrupts a country faster than anything else? Wars. Ask the British about this one. They "won" two world wars in the last century, but broke the piggy-bank in doing it. Borrowing money, once the piggy-bank is empty just makes things worse.

Some people like to point to the anomolies or aberrations. Lately, we see Brazil being used as an example, promoting certain policies which we should emulate. I'm sorry, but I don't buy it. When Brazil went belly-up with its debts, what did the government there do? They defaulted. Yeah, that's right. They said, "we're broke, and we're not going to pay any of you." When Germany was in tatters after World War One, and people were using Deutschmarks for furnace fuel (it took BILLIONS to equal one dollar from 1919-1923) it was the United States who bailed them out.

I don't see anybody bailing out America if we screwed the pooch financially in this country. At least not with us maintaining any type of freedom or sovereignty. Maintaining a stable economy depends on maintaining a stable monetary system. The Gold Standard worked. What we kid ourselves into thinking works now is really a huge sham. We can delay paying the piper, and that's what's happened so far. But we can't put off the inevitable forever. When our "bill" comes due it is going to be an awful time. Sorry, but that is the reality of it. You're welcome to reject it, but that doesn't change the truth of things.

These topics can get really involved, and there are roaring disagreements even among "gold bugs" who reject the omnipotent wisdom of the central planners of our national economy. We're all free to agree or disagree. For myself, I believe that if we have the experiences in this country which my parents' generation went through, or people in other countries have gone through, and we see things break down in our own time, well, I believe it would be extremely foolish to be without some REAL money. And that would be gold and silver coins. If the events which many of us are concerned about come to pass, our own government will be printing money so fast that it will be quickly be seen as a joke. Again, read up on post-World War One Germany and you'll know what I mean.

We have a tendency to think that we're immune in this country from any of the grief which has befallen other countries. I hope we never see any of the worst possibilities come to pass. In that case, the little bit of gold and silver I own will just be the wonderful little inflation beater that it is. But if TSHTF, then at least I won't be the first one crying for the government to come wipe my tears away. That's reason enough for me. - DixieBoy

[DixieBoy]

Ben just raised some really good points and asked some good questions while I was writing and editing my last little post.

Actually, too many to get into here without requiring more bandwidth.

A gold standard definitely favors a producing nation. Trade deficits and all that. I sometimes get a headache when I read about Bretton Woods, and try to figure out what these guys were really thinking.

I think that we could continue to grow as an economic power, like we did during the years 1800-1950 (or thereabouts), and all it would take would be an acknowledgement of the greater perceived "value" of gold and silver. The problem that we face now is a problem of perception. The perception among the oil-producers, to use one example, is that we are printing so much paper money (because we're not held to printing money that we actually have backing for), that the producers say, "okay, we'll still take your worthless paper, but now we want a bunch more of it." This is, admittedly, a simplification, but the point is accurate.

What's important to remember is that we - the U.S. of A. - BECAME a great nation during the years in which we abided by a gold standard. The Brits managed to do the same thing, though they brought in much more of their wealth through the exploitation of numerous colonies. America PRODUCED it's wealth.

As for there being so little gold and silver to allow for loans to poorer people, well, my Dad's father was a farmer in Ohio who owned 80 acres of land and leased another 80 acres when his sons were all young and worked the farm with him. Grandpa got loans each year, like almost all farmers did, and lived on a fairly small margin of profit. Again, like most farmers. Somehow he and Grandma managed to raise five kids and feed them through adulthood.

I don't pretend to be an economist, and I am still very early in my own learning curve. But there is one thing that I noticed a couple decades back that has always bothered me: When I first heard someone say that we were destined to become the handlers of information, rather than the producers of goods and services, it worried me. I always wondered if this was not a temporary house of cards we were setting up for ourselves. I know this much, we became great when we cared enough not only to build goods, but we built the BEST goods in the world.

I'm only 54, but I remember when "Made in Japan" was a joke. It was synonomous (spelling?) with poor quality. I think we got way too big for our britches about 15 or 20 years back. Some may say it started before that; they could be right. I was born into a world in which America was the great producer, and we were also the creditor nation to the world. Now, we are the debtor nation, going around with our tin cup to the Chinese and anybody we think will loan us a dime. And you wonder why I have zero confidence in the Federal Reserve? Weren't those the guys who were created to stablize America and her economy?

As for "what do we do with our gold or silver if TSHTF ?" Well, we will have a time of determining values of goods and services, that's for sure. I don't know how things would work if we have a breakdown of the system here. I do know that it will be a time when firearms will have value beyond our craziest dreams, and that gold and silver will be right up there too. Our printed Federal Reserve notes? I don't think they'd be held to quite the same high esteem.

Again, I think that holding a bit of gold and silver comes under the heading of "Be Prepared." Like we learned in the scouts as kids. One thing is for sure, as long as you don't allow yourself to panic when the banks fight to hold down the price of gold and silver (as they're doing intensely right now), and just accumulate a little as you can, you will be in much better shape in the future - breakdown or not. - D ixieBoy

[Bridger158]

Thanks, yall. Extremely interesting thread.