The not gold standard

21 Replies to “The not gold standard”

1. The use of US dollars as the legal currency of the country could work to stabilize the currency provided they use actual US dollars. It works for Ecuador. Outside of that . . .

2. A gold standard can’t work if you want to maximize growth. The money supply has to be able to grow with demand. The modern fiat system creates money by bank lending, so money growth occurs automatically to support economic activity. It’s become all farked up because it’s never allowed to function the way it’s supposed to.

   1. you want to maximize growth

      For “growth” read INFLATION.

      The national economies did fairly well growing up to 1971 without a fiat mentality and the financialization of everything.

      The significant occasions governments went off gold was in time of war against other governments so they could steal the purchasing power of individuals to finance their military-industrial cronies .

      1. Exactly. Before I start I want to stress here that I’m not an expert, but it’s always seemed pretty obvious to me.

         First, addressing the ‘there’s not enough gold’ problem: Imagine a balance scale. The world’s wealth is on one side, gold (and other precious metals) are on the other. They are always equal. The amount of gold may not change, but the relative value does.

         This worked fairly well until the Industrial Revolution. But from the mid 19th century to the mid 20th century, industrialization caused wealth to explode so rapidly that balancing precious metals against it became almost impossible.

         I maintain that you could pull it off today with modern computing and machinery by using very very small increments of gold to back individual notes, but there is zero political will to do this, not when they can keep seizing your wealth by printing more money.

         1. I want to stress here that I’m not an expert

            You say that and yet you’ve explained the situation perfectly.

            The quantity of monetary gold at any given time is theoretically always optimal; all other things being equal, the price of gold will change according to the market availability of desired goods and services. If the size of a market economy grows, the price of monetary gold, if the quantity is unchanged, will slightly appreciate, meaning aggregate prices of goods and services go down slightly.

            The reason governments detest a commodity-based monetary standard is that they cannot control the cost of their national currencies, (i.e. interest rates), meaning they can’t influence financial transactions in their economies, and that they can’t borrow and spend without constraint by inflating their debts away.

            Banks hate a commodity-based monetary standard because financialization is much more difficult than with a fiat-based currency system, as consumption lending is normally impossible without prior production. In a gold standard, banks must also bid for customer deposits in terms of depositor interest rates before they can lend out those deposits. Long-term indebtedness is also more difficult in commodity monetary systems as purchasing power slowly increases relative to asset prices slowly depreciating.

            The fiat financialization system is essentially a ponzi, made possible only through a crony combine of banking and government interests. It is inherently unstable and will always end, given sufficient time, in the destruction of the national currency unit.

         2. Sorry, you don’t make any sense. Are you saying you would use a little bit of gold to back a currency? This is a fiat system where the little bit could be varied from 0.1% to 0.01% and so on. It’s the same as printing money.

            Or you would change the price of gold to balance the scale? This would favor countries with large natural supplies of gold – like China, Russia etc. and punish resource weak countries like Japan.

            The reason that gold is not used to back currencies is because it no longer works. A fiat currency system is like democracy. It’s a crappy system but it’s the best we have.

3. Will Zimbabwe end up being a colony of China?

   1. you mean a chinese colony like Canaduh? remember the empty hair sold off the Canuck gold reserves to China in month one.

4. Zimbabwe is using the US Dollar, not the Chinese Yuan, or the Russian Ruble.
   I think to myself, “Maybe the death of the US Dollar as a reserve currency is not a done deal?”
   Then I remember Joe Biden and Janet Yellen are still in charge.

5. Good old Zimbabwe…..run by Marxist lunatics.

   https://www.banknoteworld.com/images/product/zimbabwe-100-trillion-dollars-banknotes-aa-2008-p-91-unc-100-trillion-series.jpg

   They still haven’t learned….currently $100 Cdn will buy you almost $27000 Zim bucks. Wonder what it will be tomorrow…..or by tonight.

6. Zimbabwe was better off as Rhodesia.

   Africa would be better off today if colonialism never ended, but the White world lost their will and the Communist world saw opportunity.

   1. Once called the Breadbasket of Africa, now a world class basket case.

      1. I remember buying jam and honey imported from Rhodesia back in the 70’s here in Canada.
         It was very good.

   2. Whatever one may say about colonialism, one should simply follow the trajectory of the countries that overthrew it.

      India managed to stay afloat but African nations descended into violence, poverty and chaos.

      Hhmmm ….

      1. African nations

         one difference between sub-Saharan Africa and India, other than thousands of years of civilization, is that there were no African nations prior to conquest of the “dark continent”. The colonial line-drawing on maps was made without regard for existing tribal affinities. They were artificial constructs, and were never intended to be divorced from an imperial power.

7. It’s an issue of trust. The people who have to use the currency no longer trust those who issue the currency. Until the government reforms itself I wouldn’t expect much to change.

   1. When Zimbabwe prints money nobody cares. When America prints money the system starts to collapse. The next step will be the emergence of a basket of fiat currencies.

8. Zimbabwe was a thriving country under the Dutch rule.
   How many Commonwealth countries voted for home rule under Mugabe?

   1. British, not dutch.

      1. How about ‘Boers’ – were they not the original builders of that country?

         1. I think you’re thinking of Transvaal [South Africa].

            In the late 19th century, the territory north of the Transvaal was chartered to the British South Africa Company, led by Cecil Rhodes. Rhodes and his Pioneer Column marched north in 1890, acquiring a huge block of territory that the company would rule until the early 1920s. In 1923, the company’s charter was revoked, and Southern Rhodesia attained self-government and established a legislature. Between 1953 and 1963, Southern Rhodesia was joined with Northern Rhodesia and Nyasaland in the Federation of Rhodesia and Nyasaland.