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Katie Porter - What Is Causing Inflation?

laughing dog

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Essentially you are arguing which part of the scissor does the most cutting.
It's not even about what does most cutting. It's about acknowledging that this part does substantial cutting. People like Porter cannot admit that, because then why was she supporting additional wanton fiscal stimulus? So they must pretend that government spending is not a major cause of THIS inflation. Because their pet spending bills (like the $3,500,000,000,000.00 B3) depend on it.
[/quote] There is no evidence to support the notion that fiscal and monetary policy provided most of the inflationary pressure. None.
Inflation is not some natural force - producers with some market power make deliberate choices about the prices they charge.
The economy is the sum of all the economic actors and the actions they take. As such, you can think of it as a natural force of sorts. It can be steered, as a raging stream can be, but it is not easy.
When US last had large inflation in the 70s, there was no easy fix for it. Even forcing companies to charge less would not have worked as price controls merely cause shortages (see Venezuela).
Almost all economists - distinguished or not - agree that firms with market power can exacerbate inflationary pressures.
[citation needed]
Read with comprehension any principles of economics textbook on monopoly, oligopoly and monopolistic competition. It is a well-known outcome that firms that are "price-makers" can pass on increases in costs and increase profits.
The notion that our current inflation is "due in large part to government largesse" is your opinion,
Not just mine. Take John Cochrane with the Hoover Institution and formerly of the University of Chicago.
Taking the opinion of someone from the Hoover Institution on economics is akin to believing Trump on election results.
and it is contradicted by the world wide inflation.
Other countries do not have governments that practiced fiscal stimulus?
Irrelevant. Policy stimulus in different countries at different levels would not cause inflation in each of those countries to jump so quickly at the same time. Discounting supply "shocks" as a major influence on this inflation is either incredibly ignorant or ideological madness.
 

Loren Pechtel

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What is the republican plan?
There is monetary inflation and there is also the fiscal inflation.

In the case of monetary inflation, Republicans like Ron Paul would tell you it is the fault of the fed. And that the constitution has no requirements for a private fed in the first place. Just who was it who slammed interest rates at or below zero for far too long.

Indeed, there is nothing in the constitution about needing a fed, or a global cabal of central banks and there are many other Republicans who feel the fed does far more harm than good.
No, they don't like it because they want to manipulate the economy for political gain--which is exactly why the Fed was set up with only limited government control: to prevent such manipulation.

The reality is that the economy has been much smoother sailing with the Fed than with specie currency.
 

laughing dog

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What is the republican plan?
There is monetary inflation and there is also the fiscal inflation.

In the case of monetary inflation, Republicans like Ron Paul would tell you it is the fault of the fed. And that the constitution has no requirements for a private fed in the first place. Just who was it who slammed interest rates at or below zero for far too long.

Indeed, there is nothing in the constitution about needing a fed, or a global cabal of central banks and there are many other Republicans who feel the fed does far more harm than good.
All true. There are many Republicans who think Biden did not win the 2020 election. The GOP has had control of both chambers and the Presidency before, and done nothing to abolish the Federal Reserve. Probably because they believe that the benefits it creates outweigh its costs.

Ever since there has been a central bank, there has been a debate about its place in a democracy. The debate is not new. Basically it boils down to does one prefer some unelected people to manage our supply of money or Congress or the private sector?
 

Swammerdami

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Serious question: What do the Abolish-the-Fed crowd want to use for money? Congress just prints money to suit its whims?

I suppose Google would answer this, but why waste a click when we have Abolitionists here. There were three major types of money used in the 20th century:
(a) gold
(b) central-bank money modeled after Bank of England or U.S. FedRes
(c) Zimbabwe-style paper money
I won't overlook the 21st century invention
(d) crypto-currency, presumably anonymously created a la Satoshi

Is one of these the Paul-QAnon-Libertarian model?
(e) none of the above.
 

Harry Bosch

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What is the republican plan?
There is monetary inflation and there is also the fiscal inflation.

In the case of monetary inflation, Republicans like Ron Paul would tell you it is the fault of the fed. And that the constitution has no requirements for a private fed in the first place. Just who was it who slammed interest rates at or below zero for far too long.

Indeed, there is nothing in the constitution about needing a fed, or a global cabal of central banks and there are many other Republicans who feel the fed does far more harm than good.
All true. There are many Republicans who think Biden did not win the 2020 election. The GOP has had control of both chambers and the Presidency before, and done nothing to abolish the Federal Reserve. Probably because they believe that the benefits it creates outweigh its costs.

Ever since there has been a central bank, there has been a debate about its place in a democracy. The debate is not new. Basically it boils down to does one prefer some unelected people to manage our supply of money or Congress or the private sector?
Well, you know more about the economy than I do. As an aside, I've never understood why the right hates the fed so much. But please correct me if I'm wrong, but if the fed were eliminated, wouldn't we have quicker recoveries, but much deeper recessions? The fed helps smooth out cycles. Less volatility.
 

laughing dog

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What is the republican plan?
There is monetary inflation and there is also the fiscal inflation.

In the case of monetary inflation, Republicans like Ron Paul would tell you it is the fault of the fed. And that the constitution has no requirements for a private fed in the first place. Just who was it who slammed interest rates at or below zero for far too long.

Indeed, there is nothing in the constitution about needing a fed, or a global cabal of central banks and there are many other Republicans who feel the fed does far more harm than good.
All true. There are many Republicans who think Biden did not win the 2020 election. The GOP has had control of both chambers and the Presidency before, and done nothing to abolish the Federal Reserve. Probably because they believe that the benefits it creates outweigh its costs.

Ever since there has been a central bank, there has been a debate about its place in a democracy. The debate is not new. Basically it boils down to does one prefer some unelected people to manage our supply of money or Congress or the private sector?
Well, you know more about the economy than I do. As an aside, I've never understood why the right hates the fed so much. But please correct me if I'm wrong, but if the fed were eliminated, wouldn't we have quicker recoveries, but much deeper recessions? The fed helps smooth out cycles. Less volatility.
I don't know whether we would have quicker recoveries. The general idea of a central bank is to ameliorate the effects of the ups and downs of economic activity (we used to say "business cycle" but that implied or presupposed some idea of regularity to the frequency of ups and downs). The central bank is also supposed to maintain financial stability (i.e. stem meltdowns in the financial sector), regulate banks and act as banker to banks.

There is a long history in the US of antipathy to the idea of a central bank, going back to before the time of Andrew Jackson (who eliminated the first central bank of the US). Some of it is due to rural vs urban world view. Some of it is suspiscion of centralized power. Some of it is due to the lack of democratic oversight. Some of it is due to financial naivete/ignorance. I suspect that some of it is also due to latent anti-semitism (the Jews are banker crapola). I am not sure that these sentiments (in whatever mixture) are found exclusively on the right.
 

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In the late 1800's the U.S. had a series of roller coaster boom and bust cycles. There were bank failures, runs on banks, and lost savings and it was obvious something had to be done by the government, and thus the Fed was born in 1913. The right hates the Fed for the same reason criminals hate the police. It regulates the American banking system. They hate regulation.
 

senor boogie woogie

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Maybe it is because Katie Porter's party has printed money to death to devalue the currency even more, plus the extremely high taxes in her state, plus the fact that her President decided to shut down the pipelines and drilling in America to jack up fuel prices even more which in turn makes shipping that much more expensive making everything we buy in the stores and supermarkets that much more expensive. Plus that her state has made creating and maintaining a business in her state so much more difficult and again, taxing them to death. Prices go up to cover the costs and someone has to pay for them.

Democrats hate job creators and businesses, and have no problem shipping jobs and industry overseas.
 

Harry Bosch

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Maybe it is because Katie Porter's party has printed money to death to devalue the currency even more, plus the extremely high taxes in her state, plus the fact that her President decided to shut down the pipelines and drilling in America to jack up fuel prices even more which in turn makes shipping that much more expensive making everything we buy in the stores and supermarkets that much more expensive. Plus that her state has made creating and maintaining a business in her state so much more difficult and again, taxing them to death. Prices go up to cover the costs and someone has to pay for them.

Democrats hate job creators and businesses, and have no problem shipping jobs and industry overseas.
Good heavens! Those democratic meanies shut down the pipelines and drilling? Those monsters. And yet, I heard that there is more US oil production now than ever. I downloaded the below from Hunter's laptop:


It shows very high oil production during the Biden days. What the hell is going on?????
 

Cheerful Charlie

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Maybe it is because Katie Porter's party has printed money to death to devalue the currency even more, plus the extremely high taxes in her state, plus the fact that her President decided to shut down the pipelines and drilling in America to jack up fuel prices even more which in turn makes shipping that much more expensive making everything we buy in the stores and supermarkets that much more expensive. Plus that her state has made creating and maintaining a business in her state so much more difficult and again, taxing them to death. Prices go up to cover the costs and someone has to pay for them.

Democrats hate job creators and businesses, and have no problem shipping jobs and industry overseas.

Trumpo the clown gave us $7.8 trillion in deficits. Massive deficits usually are followed by inflation. Meanwhile, big corporations are jacking up prices giving them record profits while gouging us all. The GOP cares more about Hunter Biden's laptop than that.
 

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Maybe it is because Katie Porter's party has printed money to death to devalue the currency even more, plus the extremely high taxes in her state, plus the fact that her President decided to shut down the pipelines and drilling in America to jack up fuel prices even more which in turn makes shipping that much more expensive making everything we buy in the stores and supermarkets that much more expensive. Plus that her state has made creating and maintaining a business in her state so much more difficult and again, taxing them to death. Prices go up to cover the costs and someone has to pay for them.

Democrats hate job creators and businesses, and have no problem shipping jobs and industry overseas.

All false and/or irrelevant
 

George S

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Milton Friedman had one explanation. Other economists have differing opinions. He made the claim that inflation IS the difference between collections -- taxes and fees -- and spending. Such excess spending introduces more "money" into the economy. More cash pursuing the same goods. Inflation.
What the Fed issues is not money, it is scrip. It has value only because it is accepted in payment of taxes and fees by the government. At one time there was a notice on Federal Reserve Notes: "May be exchanged for lawful money at any Federal Reserve Bank."
 

laughing dog

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Milton Friedman had one explanation. Other economists have differing opinions. He made the claim that inflation IS the difference between collections -- taxes and fees -- and spending. Such excess spending introduces more "money" into the economy. More cash pursuing the same goods. Inflation.
What the Fed issues is not money, it is scrip. It has value only because it is accepted in payment of taxes and fees by the government. At one time there was a notice on Federal Reserve Notes: "May be exchanged for lawful money at any Federal Reserve Bank."
Um, money of any type only have value either because it is accepted as payment or it has value in other uses.
 

George S

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Milton Friedman had one explanation. Other economists have differing opinions. He made the claim that inflation IS the difference between collections -- taxes and fees -- and spending. Such excess spending introduces more "money" into the economy. More cash pursuing the same goods. Inflation.
What the Fed issues is not money, it is scrip. It has value only because it is accepted in payment of taxes and fees by the government. At one time there was a notice on Federal Reserve Notes: "May be exchanged for lawful money at any Federal Reserve Bank."
Um, money of any type only have value either because it is accepted as payment or it has value in other uses.
Surely you know that wampum was legal tender, too. Nevertheless your response has no relevance to Friedman's thesis. Inflation IS excess government spending over funds collected.
"Under the Constitution, only gold and silver coins may be required to be used as legal tender (‘a tender in payment of debts’). Today in the United States, legal tender is statutorily defined as all coins and currency issued by the United States Treasury or the Federal Reserve System, including fiat money coins and notes."
The Constitution had it right: Gold and silver coin have intrinsic value. The Constitution should apply over statute.
 

laughing dog

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Milton Friedman had one explanation. Other economists have differing opinions. He made the claim that inflation IS the difference between collections -- taxes and fees -- and spending. Such excess spending introduces more "money" into the economy. More cash pursuing the same goods. Inflation.
What the Fed issues is not money, it is scrip. It has value only because it is accepted in payment of taxes and fees by the government. At one time there was a notice on Federal Reserve Notes: "May be exchanged for lawful money at any Federal Reserve Bank."
Um, money of any type only have value either because it is accepted as payment or it has value in other uses.
Surely you know that wampum was legal tender, too. Nevertheless your response has no relevance to Friedman's thesis. Inflation IS excess government spending over funds collected.
That is his thesis. His thesis is more applicable to reality over long periods of time.
"Under the Constitution, only gold and silver coins may be required to be used as legal tender (‘a tender in payment of debts’).
Quote the Article of the Constitution that says that.
Today in the United States, legal tender is statutorily defined as all coins and currency issued by the United States Treasury or the Federal Reserve System, including fiat money coins and notes."
The Constitution had it right: Gold and silver coin have intrinsic value. The Constitution should apply over statute.
Article I, Section 8 of the Constitution say Congress has the power to coin money and regulate its value. It says nothing about commodity vs fiat money. There are many reasons why almost every society has moved from exclusive commodity money to fiat money over time. The notion that commodity money's value is more stable is contradicted by the long historical record.
 

lpetrich

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Surely you know that wampum was legal tender, too. Nevertheless your response has no relevance to Friedman's thesis. Inflation IS excess government spending over funds collected.
"Under the Constitution, only gold and silver coins may be required to be used as legal tender (‘a tender in payment of debts’). Today in the United States, legal tender is statutorily defined as all coins and currency issued by the United States Treasury or the Federal Reserve System, including fiat money coins and notes."
The Constitution had it right: Gold and silver coin have intrinsic value. The Constitution should apply over statute.
I read the Constitution and nowhere does it state that the only legitimate form of money shall be gold and silver coins.
It has exactly one mention of gold and silver, and that is in Article I Section 10. It only refers to what states may do.
 

Worldtraveller

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Maybe it is because Katie Porter's party has printed money to death to devalue the currency even more, plus the extremely high taxes in her state, plus the fact that her President decided to shut down the pipelines and drilling in America to jack up fuel prices even more which in turn makes shipping that much more expensive making everything we buy in the stores and supermarkets that much more expensive. Plus that her state has made creating and maintaining a business in her state so much more difficult and again, taxing them to death. Prices go up to cover the costs and someone has to pay for them.

Democrats hate job creators and businesses, and have no problem shipping jobs and industry overseas.
You're like a walking caricature of wrong factoids from fox.
 

Elixir

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Democrats hate job creators and businesses, and have no problem shipping jobs and industry overseas.
I vote Democrat almost every time. In the las 15 years, I and two “lib'rul” partners started a business from nothing (my 3rd) grew it into an 8-figure concern, employed almost 30 people before we sold it to some Republicans …
SNW’s statement above is an insult born of ignorance, stupidity or a lame attempt at humor. Whichever it is, I bet SBW has never created a job or a business in his life.
 

George S

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Surely you know that wampum was legal tender, too. Nevertheless your response has no relevance to Friedman's thesis. Inflation IS excess government spending over funds collected.
"Under the Constitution, only gold and silver coins may be required to be used as legal tender (‘a tender in payment of debts’). Today in the United States, legal tender is statutorily defined as all coins and currency issued by the United States Treasury or the Federal Reserve System, including fiat money coins and notes."
The Constitution had it right: Gold and silver coin have intrinsic value. The Constitution should apply over statute.
I read the Constitution and nowhere does it state that the only legitimate form of money shall be gold and silver coins.
It has exactly one mention of gold and silver, and that is in Article I Section 10. It only refers to what states may do.
The Treasury is authorized to "coin" money. Nothing about issuing fiat.
 

George S

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Milton Friedman had one explanation. Other economists have differing opinions. He made the claim that inflation IS the difference between collections -- taxes and fees -- and spending. Such excess spending introduces more "money" into the economy. More cash pursuing the same goods. Inflation.
What the Fed issues is not money, it is scrip. It has value only because it is accepted in payment of taxes and fees by the government. At one time there was a notice on Federal Reserve Notes: "May be exchanged for lawful money at any Federal Reserve Bank."
Um, money of any type only have value either because it is accepted as payment or it has value in other uses.
Surely you know that wampum was legal tender, too. Nevertheless your response has no relevance to Friedman's thesis. Inflation IS excess government spending over funds collected.
That is his thesis. His thesis is more applicable to reality over long periods of time.
"Under the Constitution, only gold and silver coins may be required to be used as legal tender (‘a tender in payment of debts’).
Quote the Article of the Constitution that says that.
Today in the United States, legal tender is statutorily defined as all coins and currency issued by the United States Treasury or the Federal Reserve System, including fiat money coins and notes."
The Constitution had it right: Gold and silver coin have intrinsic value. The Constitution should apply over statute.
Article I, Section 8 of the Constitution say Congress has the power to coin money and regulate its value. It says nothing about commodity vs fiat money. There are many reasons why almost every society has moved from exclusive commodity money to fiat money over time. The notion that commodity money's value is more stable is contradicted by the long historical record.
If I might indulge in a little mind-reading: I think Mr. Friedman would disagree about that claim of "stability" of fiat currency. In the 40's a house was in the thousands. 80 years of inflation is not "stability" in my opinion. The Tresasury can "coin" money, not "print" money. At least according to the Article you quote.
 

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What the Fed issues is not money, it is scrip. It has value only because it is accepted in payment of taxes and fees by the government. At one time there was a notice on Federal Reserve Notes: "May be exchanged for lawful money at any Federal Reserve Bank."
I don't believe that was ever printed on money but it was cited in two court cases. But I could be wrong. And federal reserve notes are legal money.
 

bilby

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The Constitution had it right: Gold and silver coin have intrinsic value.
I don't care whether the Constitution says it, or anyone else; That's horseshit.

Nothing has "intrinsic value". Value is an entirely human psychological construct.

Gold is a shit basis for money; Silver is even worse.
 

laughing dog

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Milton Friedman had one explanation. Other economists have differing opinions. He made the claim that inflation IS the difference between collections -- taxes and fees -- and spending. Such excess spending introduces more "money" into the economy. More cash pursuing the same goods. Inflation.
What the Fed issues is not money, it is scrip. It has value only because it is accepted in payment of taxes and fees by the government. At one time there was a notice on Federal Reserve Notes: "May be exchanged for lawful money at any Federal Reserve Bank."
Um, money of any type only have value either because it is accepted as payment or it has value in other uses.
Surely you know that wampum was legal tender, too. Nevertheless your response has no relevance to Friedman's thesis. Inflation IS excess government spending over funds collected.
That is his thesis. His thesis is more applicable to reality over long periods of time.
"Under the Constitution, only gold and silver coins may be required to be used as legal tender (‘a tender in payment of debts’).
Quote the Article of the Constitution that says that.
Today in the United States, legal tender is statutorily defined as all coins and currency issued by the United States Treasury or the Federal Reserve System, including fiat money coins and notes."
The Constitution had it right: Gold and silver coin have intrinsic value. The Constitution should apply over statute.
Article I, Section 8 of the Constitution say Congress has the power to coin money and regulate its value. It says nothing about commodity vs fiat money. There are many reasons why almost every society has moved from exclusive commodity money to fiat money over time. The notion that commodity money's value is more stable is contradicted by the long historical record.
If I might indulge in a little mind-reading: I think Mr. Friedman would disagree about that claim of "stability" of fiat currency
I don't care what Mr. Friedman thought. His views on inflation were not reflected by the historical record over short periods of time. Measured over decades, he has a point. But he was dead wrong when it came to looking year to year.
. In the 40's a house was in the thousands. 80 years of inflation is not "stability" in my opinion. The Tresasury can "coin" money, not "print" money. At least according to the Article you quote.
I quoted no article. When the US was on the gold standard, it would have sometimes decades of inflation followed by decades of deflation.

In colonial America, the colonists complained about the lack of specie (gold coins) because the lack of money made commerce more difficult. It literally constrained their ability to invest and trade among themselves. Ancient China used paper money for centuries before the West for the same reason - to facilitate commerce. Commodity money was also prone to debasement by unscrupulous gov'ts.
 

laughing dog

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Surely you know that wampum was legal tender, too. Nevertheless your response has no relevance to Friedman's thesis. Inflation IS excess government spending over funds collected.
"Under the Constitution, only gold and silver coins may be required to be used as legal tender (‘a tender in payment of debts’). Today in the United States, legal tender is statutorily defined as all coins and currency issued by the United States Treasury or the Federal Reserve System, including fiat money coins and notes."
The Constitution had it right: Gold and silver coin have intrinsic value. The Constitution should apply over statute.
I read the Constitution and nowhere does it state that the only legitimate form of money shall be gold and silver coins.
It has exactly one mention of gold and silver, and that is in Article I Section 10. It only refers to what states may do.
The Treasury is authorized to "coin" money. Nothing about issuing fiat.
Coining money is issuing fiat money. Do you think a penny has a penny's worth of copper or a nickel has a nickel's worth of nickel?
 

George S

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What the Fed issues is not money, it is scrip. It has value only because it is accepted in payment of taxes and fees by the government. At one time there was a notice on Federal Reserve Notes: "May be exchanged for lawful money at any Federal Reserve Bank."
I don't believe that was ever printed on money but it was cited in two court cases. But I could be wrong. And federal reserve notes are legal money.
I remember it. There were also silver certificates ($1) and Treasury notes redeemable in Gold.
"Lawful money" is a term used in the Federal Reserve Act, the act that authorizes the Board of Governors of the Federal Reserve System to issue Federal Reserve notes. The Act states that Federal Reserve notes "shall be obligations of the United States and shall be receivable by all national and member banks and Federal reserve banks and for all taxes, customs, and other public dues. They shall be redeemed in lawful money on demand at the Treasury Department of the United States, in the city of Washington, District of Columbia, or at any Federal Reserve bank."
 

George S

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Surely you know that wampum was legal tender, too. Nevertheless your response has no relevance to Friedman's thesis. Inflation IS excess government spending over funds collected.
"Under the Constitution, only gold and silver coins may be required to be used as legal tender (‘a tender in payment of debts’). Today in the United States, legal tender is statutorily defined as all coins and currency issued by the United States Treasury or the Federal Reserve System, including fiat money coins and notes."
The Constitution had it right: Gold and silver coin have intrinsic value. The Constitution should apply over statute.
I read the Constitution and nowhere does it state that the only legitimate form of money shall be gold and silver coins.
It has exactly one mention of gold and silver, and that is in Article I Section 10. It only refers to what states may do.
The Treasury is authorized to "coin" money. Nothing about issuing fiat.
Coining money is issuing fiat money. Do you think a penny has a penny's worth of copper or a nickel has a nickel's worth of nickel?
There are, today, fiat coins. Coinage used be such that the silver dollar contained one dollar's worth of silver. Pre 1965 all coins had intrinsic value.
 

laughing dog

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Surely you know that wampum was legal tender, too. Nevertheless your response has no relevance to Friedman's thesis. Inflation IS excess government spending over funds collected.
"Under the Constitution, only gold and silver coins may be required to be used as legal tender (‘a tender in payment of debts’). Today in the United States, legal tender is statutorily defined as all coins and currency issued by the United States Treasury or the Federal Reserve System, including fiat money coins and notes."
The Constitution had it right: Gold and silver coin have intrinsic value. The Constitution should apply over statute.
I read the Constitution and nowhere does it state that the only legitimate form of money shall be gold and silver coins.
It has exactly one mention of gold and silver, and that is in Article I Section 10. It only refers to what states may do.
The Treasury is authorized to "coin" money. Nothing about issuing fiat.
Coining money is issuing fiat money. Do you think a penny has a penny's worth of copper or a nickel has a nickel's worth of nickel?
There are, today, fiat coins. Coinage used be such that the silver dollar contained one dollar's worth of silver. Pre 1965 all coins had intrinsic value.
All coins intrinsic value. But there is no Constitutional requirement that face value of of US coins equals the market value of the metal in the coin. The part of the Constitution I quoted to you gives Congress to coin money and REGULATE its value. That suggests Congress has the Constitutional authority to make fiat money (otherwise would it regulate the value of a coin). Or are you arguing the "regulate the value" means that Congress is only authorized to change the amount of metal in a silver dollar when the price of silver changed?
 

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Don't be a dick.
Surely you know that wampum was legal tender, too. Nevertheless your response has no relevance to Friedman's thesis. Inflation IS excess government spending over funds collected.
"Under the Constitution, only gold and silver coins may be required to be used as legal tender (‘a tender in payment of debts’). Today in the United States, legal tender is statutorily defined as all coins and currency issued by the United States Treasury or the Federal Reserve System, including fiat money coins and notes."
The Constitution had it right: Gold and silver coin have intrinsic value. The Constitution should apply over statute.
I read the Constitution and nowhere does it state that the only legitimate form of money shall be gold and silver coins.
It has exactly one mention of gold and silver, and that is in Article I Section 10. It only refers to what states may do.
The Treasury is authorized to "coin" money. Nothing about issuing fiat.
Coining money is issuing fiat money. Do you think a penny has a penny's worth of copper or a nickel has a nickel's worth of nickel?
There are, today, fiat coins. Coinage used be such that the silver dollar contained one dollar's worth of silver. Pre 1965 all coins had intrinsic value.
Who determined a silver dollar contained a dollar's worth of silver? What if a huge cache of silver was found and the price of silver dropped so far no one was interested in obtaining it?
 

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Surely you know that wampum was legal tender, too. Nevertheless your response has no relevance to Friedman's thesis. Inflation IS excess government spending over funds collected.
"Under the Constitution, only gold and silver coins may be required to be used as legal tender (‘a tender in payment of debts’). Today in the United States, legal tender is statutorily defined as all coins and currency issued by the United States Treasury or the Federal Reserve System, including fiat money coins and notes."
The Constitution had it right: Gold and silver coin have intrinsic value. The Constitution should apply over statute.
I read the Constitution and nowhere does it state that the only legitimate form of money shall be gold and silver coins.
It has exactly one mention of gold and silver, and that is in Article I Section 10. It only refers to what states may do.
The Treasury is authorized to "coin" money. Nothing about issuing fiat.
Coining money is issuing fiat money. Do you think a penny has a penny's worth of copper or a nickel has a nickel's worth of nickel?
There are, today, fiat coins. Coinage used be such that the silver dollar contained one dollar's worth of silver. Pre 1965 all coins had intrinsic value.
All coins intrinsic value. But there is no Constitutional requirement that face value of of US coins equals the market value of the metal in the coin. The part of the Constitution I quoted to you gives Congress to coin money and REGULATE its value. That suggests Congress has the Constitutional authority to make fiat money (otherwise would it regulate the value of a coin). Or are you arguing the "regulate the value" means that Congress is only authorized to change the amount of metal in a silver dollar when the price of silver changed?
By putting a given amount of silver in a silver dollar the Treasury has 'regulated'* (in that era 'regulate' meant 'make regular' or 'make the same') the value. The amount of silver in the coin established the value of the coin. Silver did not change price. Nor did gold. When I was young and all it was pegged to $40/oz of gold. So a $5 gold coin had 1/8 of an ounce exactly regulating/regularizing the value of both gold and the coin. Congress also had the right to regularize/regulate the value of foreign coin. At the time of penning the Constitution there was no idea of fiat currency. All that came later. The founders had it right -- only coin with intrinsic value was recognized as money.
* Another use in "regulated militia" was not about controlling regulation as we might use the word today. Originally it meant that the "regular" list of supplies, ranks, and so on were to be the same (regulated/regularized) in all militias.
 

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Surely you know that wampum was legal tender, too. Nevertheless your response has no relevance to Friedman's thesis. Inflation IS excess government spending over funds collected.
"Under the Constitution, only gold and silver coins may be required to be used as legal tender (‘a tender in payment of debts’). Today in the United States, legal tender is statutorily defined as all coins and currency issued by the United States Treasury or the Federal Reserve System, including fiat money coins and notes."
The Constitution had it right: Gold and silver coin have intrinsic value. The Constitution should apply over statute.
I read the Constitution and nowhere does it state that the only legitimate form of money shall be gold and silver coins.
It has exactly one mention of gold and silver, and that is in Article I Section 10. It only refers to what states may do.
The Treasury is authorized to "coin" money. Nothing about issuing fiat.
Coining money is issuing fiat money. Do you think a penny has a penny's worth of copper or a nickel has a nickel's worth of nickel?
There are, today, fiat coins. Coinage used be such that the silver dollar contained one dollar's worth of silver. Pre 1965 all coins had intrinsic value.
All coins intrinsic value. But there is no Constitutional requirement that face value of of US coins equals the market value of the metal in the coin. The part of the Constitution I quoted to you gives Congress to coin money and REGULATE its value. That suggests Congress has the Constitutional authority to make fiat money (otherwise would it regulate the value of a coin). Or are you arguing the "regulate the value" means that Congress is only authorized to change the amount of metal in a silver dollar when the price of silver changed?
By putting a given amount of silver in a silver dollar the Treasury has 'regulated'* (in that era 'regulate' meant 'make regular' or 'make the same') the value. The amount of silver in the coin established the value of the coin. Silver did not change price. Nor did gold. When I was young and all it was pegged to $40/oz of gold. So a $5 gold coin had 1/8 of an ounce exactly regulating/regularizing the value of both gold and the coin.
The price of silver was not constant. Do you have any evidence that the amount of silver in a dime changed so that a dime contained only a dime's worth of silver?

The problem with commodity money is that when the market price of the commodity changes, the commodity money changes in market value even though its face value remains the same. For example, when the price of silver increases, the value in the coins is higher than the face value of the coins - people trade for the coins to get the metal.

Congress also had the right to regularize/regulate the value of foreign coin. At the time of penning the Constitution there was no idea of fiat currency.
No idea of fiat currency? You are mistaken. One of the problems with Articles of Confederation is that each state issued its own fiat money which made trade between the states more difficult. Paper currency was used prior to the writing of the Constitution. Alexander Hamilton knew about fiat money. What do you think the United States Bank circulated?
All that came later. The founders had it right -- only coin with intrinsic value was recognized as money.
Except that was not true (see above). Moreover, banks floated their own money.
 

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One early American fiat money was the paper Continental dollar, issued during the revolutionary war. Later became almost worthless. Fiat money was with the USA from the beginning.
 

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By putting a given amount of silver in a silver dollar the Treasury has 'regulated'* (in that era 'regulate' meant 'make regular' or 'make the same') the value. The amount of silver in the coin established the value of the coin. Silver did not change price. Nor did gold. When I was young and all it was pegged to $40/oz of gold. So a $5 gold coin had 1/8 of an ounce exactly regulating/regularizing the value of both gold and the coin. Congress also had the right to regularize/regulate the value of foreign coin. At the time of penning the Constitution there was no idea of fiat currency. All that came later. The founders had it right -- only coin with intrinsic value was recognized as money.
* Another use in "regulated militia" was not about controlling regulation as we might use the word today. Originally it meant that the "regular" list of supplies, ranks, and so on were to be the same (regulated/regularized) in all militias.

The Constitution should apply over statute.
Maybe is is a lack of skill on my part or a quirk of my browser but I can't get the multi quote to behave. Anyway...

Gold had whatever dollar value Congress assigned to that ounce but that was still only worth as much as however much stuff anyone else wanted to exchange for that amount of dollars. There was no intrinsic anything that gave specific meaning to $40/ounce or any other assigned value.
 

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The GOP likes to prattle about repealing Obamacare, but they didn't do it when they had the chance. They knew such a repeal would cause chaos. They pretend they want to repeal Obamacare just to stir up QAnon and their other mentally-deficient constituents but they are smart enough to not actually do it.

Similarly, Senators Rand Paul and Ted Cruz, and in 2016 even Von Clownstick himself, have come out in support of a gold standard. But with Stupidism becoming more and more powerful a force in the U.S. even Republicans are backing away from a disastrous return to a gold standard. With QAnon now so powerful that lunatic agenda might become reality, Paul and Cruz have toned down their screeds. Even these cretins are smart enough to realize a gold standard is untenable today. Earlier in the thread I asked Jason and the other Ilkists how money would work when the FedRes is dissolved; they were smart enough not to attempt an answer! :)

But now our own George S calls for a return to the gold standard. Here is a defense of the gold standard in 2015 from The Country's Stupidest and most lie-filled major magazine. (As with N.Y. Times, the paywall of Stupidest Magazine can possibly be defeated just by disabling Javascript.) It would be a useless exercise in Whack-a-Mole to refute this ignorant article point by point, but here is a crux:
From 1775 to 1900, the U.S. money supply (technically known as “base money”) increased by 163 times, from $12 million to $1,954 million. During this time, the total aboveground gold supply increased by about 3.4x due to mining production.

163 is not the same as 3.4.

Gold-defined money in no way limits the supply of the measure that is money as much as it ensures as much as possible that the measure that is money will maintain its value in terms of something known for stability. As Lewis keeps pointing out, if market actors find a commodity that exhibits even greater stability than gold, he’ll migrate to said commodity.

Nonsense. During the heyday of precious-metal money, money actually WAS gold or silver. If I owed you £1000 and you demanded payment I'd fill a large chest with gold or silver coins or bullion and have it delivered to you. When paper money came into use, it held its value, if at all, because it could be redeemed into precious metal on demand. Consider the Panic of 1837:
The Panic of 1837 was a financial crisis in the United States that touched off a major depression, which lasted until the mid-1840s. Profits, prices, and wages went down, westward expansion was stalled, unemployment went up, and pessimism abounded.

The panic had both domestic and foreign origins. Speculative lending practices in the West, a sharp decline in cotton prices, a collapsing land bubble, international specie flows, and restrictive lending policies in Britain were all factors.[1][2] The lack of a central bank to regulate fiscal matters, which President Andrew Jackson had ensured by not extending the charter of the Second Bank of the United States, was also key. This ailing economy of early 1837 led investors to panic a bank run ensued giving the crisis its name. The run came to a head on May 10, 1837, when banks in New York City ran out of gold and silver. They suspended specie payments and would no longer redeem commercial paper in specie at full face value.[3] A significant economic collapse followed. Despite a brief recovery in 1838, the recession persisted for approximately seven years. Nearly half of all banks failed, businesses closed, prices declined, and there was mass unemployment. From 1837 to 1844 deflation in wages and prices was widespread.[4] The lack of deposit insurance deepened the Panic. By 1850 the economy was booming again, a result of increased specie flows from the California Gold Rush.

It sure sounds to me like that paper money didn't work very well without a strong central bank.

Simply put, there isn't enough gold to support the world economy unless PAPER is accepted as a substitute. Today the U.S. Paper Dollar is King. (Whines about the 2% average annual inflation display great ignorance.) By definition, return to a gold standard means that such paper can be redeemed for gold. Nixon did not take the world off the gold standard because he was some sort of hyper-modern monetarist. He did it simply because the U.S. Treasury was quickly running out of the gold needed to redeem paper dollars.

Money is a fascinating topic which most otherwise-intelligent people get wrong. Many don't even realize that money is created by private banks; and that the money FedRes creates is created with essentially the same mechanics as money created by private banks.

I've tried to explain money in other threads but get tired of the Whack-a-Mole. If anyone thinks I erred in my earlier discussions, or failed to answer a question, please inform me.

Let me nitpick a bit.
When I was young and all it was pegged to $40/oz of gold. So a $5 gold coin had 1/8 of an ounce exactly regulating/regularizing the value of both gold and the coin.
How old are you, George? Are you a 90 year-old who remembers holding a coin at age 1? The last gold coin minted for general circulation by the U.S. was minted before 1934, was pegged to $20.67/oz; and in 1934 it became illegal for U.S. citizens to own gold coins.

From the historical desk: The original U.S. Dollar was designed to have the same value (and shape?) as a Spanish Silver Peso (Piece of Eight); and were used alongside such Spanish money until the 1830's. (The average physical Piece-of-Eight circulating in the states was used to set the weight, so I think a freshly-minted Spanish peso had very slightly more silver than a freshly-minted U.S. Dollar.) The gold-to-silver price ratio was fixed by Congress at 15:1, implying a gold price of $19.39/ounce.

In 1835 the gold price was changed to $20.67, reflecting a new gold-to-silver price ratio of 16:1. The price was fixed at $35 in 1934, then (but only for certain accounting) $38 in 1972 and $42.22 in 1973. The FedRes's gold is still shown on the books as worth $42.22/oz.
 

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Further to the point of confusion, the intrinsic value of gold pales compared to that of silver. Most of gold’s “value” comes from people admiring its color and malleability, IOW, artistic value. Silver OTOH is extremely useful in too many practical applications to list. If I was going to invest in heavy metals, silver would be my choice.
 

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Also.... I have read that Russia is stockpiling gold, and has been doing so for years.
Imagine going onto a "gold standard" and suddenly Russia owns us...
 

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Further to the point of confusion, the intrinsic value of gold pales compared to that of silver. Most of gold’s “value” comes from people admiring its color and malleability, IOW, artistic value. Silver OTOH is extremely useful in too many practical applications to list. If I was going to invest in heavy metals, silver would be my choice.
That's not a bug, it's a feature.

Gold is used for money because people want it, but don't use it for anything very much.

Money that's useful for something other than being money is a problem; People don't want to have to choose between spending it and using it. Both gold and paper money have the benefit of being pretty much useless for anything other than money. Although I understand that during periods of hyperinflation, paper money has become a viable alternative to toilet paper, which is something that cannot be said of gold.

Money supply needs to keep pace with (or outstrip) the need for money in the economy. Agrarian subsistence economies can get away with using commodity money, simply because economic activity is fairly static in such societies, and that (mostly) ties in with a fairly static supply of precious metals.

Industrial economies exhibit fast and fairly volatile growth. Fiat money supply can be increased to track that growth (although despite the fact that it can be, it sometimes isn't); Commodity money supply is completely unrelated to economic activity levels, causing completely unavoidable wild fluctuations in the purchasing power of such money.

Wild fluctuations in the value of fiat money also occur, of course; But they are, at least in principle, avoidable or able to be mitigated, by adjusting (or not inappropriately adjusting) the money supply. We appear, in the West, to have largely succeeded in increasing money supply as needed to avoid deflation. Decreasing money supply to avoid inflation is politically more difficult - taking money out of the economy is always going to be unpopular with the people who imagine that money to be "theirs", while adding it in is always welcomed by whoever the new money is gifted to.

The appropriate response to inflation is increasing interest rates and increasing taxation. Neither is popular. Lowering interest rates and lowering taxes to defeat deflation is far more politically palatable.

So we observe that deflation has become rare, and inflation has been mostly fairly stable, since the abandonment of commodity money. With occasional inflation shocks when resource shortages (particularly in energy resources) happen faster than governments and/or central banks can or will respond.

It's difficult to see how a better system could be implemented in a representative democracy, but it's easy to see how a return to commodity money would be far, far, worse than the status quo.

But just because something would be economically disastrous and have no mitigating features whatsoever, doesn't mean that it can't be implemented. Just look at Brexit.
 

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Also.... I have read that Russia is stockpiling gold, and has been doing so for years.
Imagine going onto a "gold standard" and suddenly Russia owns us...
Threatening to flood the market with gold? Sort of like what the DeBeers cartel has long threatened to do about diamonds.

I remember this criticism of the gold standard: that it would put monetary policy in the hands of the gold miners.

 List of countries by gold production - a sizable list. Gold deposits formed in blocks of very old continental crust: "cratons" -- 2 to 3 billion years old. Our ancestors back then were one-celled organisms.


All that aside, I think that the gold standard has the attraction that one cannot print it on a whim, as one can do with paper money and electronic money.
 

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All that aside, I think that the gold standard has the attraction that one cannot print it on a whim, as one can do with paper money and electronic money.
That is more than offset by the problem that one also cannot print it when required, as one can do with paper money and electronic money.

It's possible to legislate to avoid whimsical adjustments to money supply. It's not possible to increase gold supply in a growing economy, no matter how obviously necessary it may become.
 

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In the late 60's, the U.S. started to run deficits. France held a large amount of U.S. dollars, redeemable for gold. France demanded the U.S. redeem their dollar holdings with gold. There was a bank run style crisis facing the U.S. If other nations holding dollars demanded redeeming dollars for gold, U.S. gold holdings would be wiped out. Nixon in response took the U.S. off the gold stamdard and that meant U.S. dollars could not be demanded by foreign governments. Libertarian types seem to not understand gold standard economic policies have some problems.
 

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How old are you, George? Are you a 90 year-old who remembers holding a coin at age 1? The last gold coin minted for general circulation by the U.S. was minted before 1934, was pegged to $20.67/oz; and in 1934 it became illegal for U.S. citizens to own gold coins.
Looking at historical gold prices... I apparently learned that $40 in 1950 when I was 7. I'm in my 80th year. Perhaps, I'm misremembering.
A currency does not have to be pegged to gold or silver coin, although that was a good one.
A currency could be pegged to any single commodity. That is, a government should control exactly 1 and only 1 commodity or service. Today our currency is backed due to minimum wage law by one hour of unskilled labor. Each time minimum wage is raised, that's inflation. If, instead, they passed a permanent minimum wage that could not be changed, and never price-controlled anything else, a stable currency would ensue.
 

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How old are you, George? Are you a 90 year-old who remembers holding a coin at age 1? The last gold coin minted for general circulation by the U.S. was minted before 1934, was pegged to $20.67/oz; and in 1934 it became illegal for U.S. citizens to own gold coins.
Looking at historical gold prices... I apparently learned that $40 in 1950 when I was 7. I'm in my 80th year. Perhaps, I'm misremembering.
A currency does not have to be pegged to gold or silver coin, although that was a good one.
A currency could be pegged to any single commodity. That is, a government should control exactly 1 and only 1 commodity or service. Today our currency is backed due to minimum wage law by one hour of unskilled labor. Each time minimum wage is raised, that's inflation. If, instead, they passed a permanent minimum wage that could not be changed, and never price-controlled anything else, a stable currency would ensue.
The Federal minimum wage has not been changed since July 24, 2009. Our currency has not been stable since 2009. Which suggests your proposal would not have your expected effects.

Pegging the value of currency to an item (commodity or service) only results in a stable currency if the value of the item in its other uses remains stable. I am unaware of such a commodity or service.
 

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How old are you, George? Are you a 90 year-old who remembers holding a coin at age 1? The last gold coin minted for general circulation by the U.S. was minted before 1934, was pegged to $20.67/oz; and in 1934 it became illegal for U.S. citizens to own gold coins.
Looking at historical gold prices... I apparently learned that $40 in 1950 when I was 7. I'm in my 80th year. Perhaps, I'm misremembering.
A currency does not have to be pegged to gold or silver coin, although that was a good one.
A currency could be pegged to any single commodity. That is, a government should control exactly 1 and only 1 commodity or service. Today our currency is backed due to minimum wage law by one hour of unskilled labor. Each time minimum wage is raised, that's inflation. If, instead, they passed a permanent minimum wage that could not be changed, and never price-controlled anything else, a stable currency would ensue.
The Federal minimum wage has not been changed since July 24, 2009. Our currency has not been stable since 2009. Which suggests your proposal would not have your expected effects.

Pegging the value of currency to an item (commodity or service) only results in a stable currency if the value of the item in its other uses remains stable. I am unaware of such a commodity or service.
They are controlling other goods and services -- perhaps you missed my saying it was necessary to NOT control anything else. AND make it permanent. The expectation is that the minimum will be raised. Same is true if a commodity is chosen -- it must be made permanent to work AND nothing else price-controlled.

It can be expected that other currencies might change in value relative to the stable dollar.
 

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How old are you, George? Are you a 90 year-old who remembers holding a coin at age 1? The last gold coin minted for general circulation by the U.S. was minted before 1934, was pegged to $20.67/oz; and in 1934 it became illegal for U.S. citizens to own gold coins.
Looking at historical gold prices... I apparently learned that $40 in 1950 when I was 7. I'm in my 80th year. Perhaps, I'm misremembering.
A currency does not have to be pegged to gold or silver coin, although that was a good one.
A currency could be pegged to any single commodity. That is, a government should control exactly 1 and only 1 commodity or service. Today our currency is backed due to minimum wage law by one hour of unskilled labor. Each time minimum wage is raised, that's inflation. If, instead, they passed a permanent minimum wage that could not be changed, and never price-controlled anything else, a stable currency would ensue.
The Federal minimum wage has not been changed since July 24, 2009. Our currency has not been stable since 2009. Which suggests your proposal would not have your expected effects.

Pegging the value of currency to an item (commodity or service) only results in a stable currency if the value of the item in its other uses remains stable. I am unaware of such a commodity or service.
They are controlling other goods and services -- perhaps you missed my saying it was necessary to NOT control anything else. AND make it permanent. The expectation is that the minimum will be raised. Same is true if a commodity is chosen -- it must be made permanent to work AND nothing else price-controlled.

It can be expected that other currencies might change in value relative to the stable dollar.
Nothing in life or commerce is permanent except death, so the requirement of permanence is literally unattainable. Moreover, as long as there is a government of any kind, something is going to be price-controlled (or limited). Your proposal is utopian in expectation and unrealistic in application. And that ignores the conceptual problems inherent in the proposal.
 

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That is, a government should control exactly 1 and only 1 commodity or service.
Why? Why not zero, as is currently the case with fiat money?

Today our currency is backed due to minimum wage law by one hour of unskilled labor. Each time minimum wage is raised, that's inflation.
That's nonsense. Every single part of that claim is incorrect in every possible way.
 

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Suppose the U.S. were on a gold standard with $1000 representing one troy ounce of gold. Could I go down to a gold shop and buy an ounce for $1000? (Or even $1020 or so, throwing in $20 or some small service charge?)

George, Is that how you envision your gold standard? Or would it be even more explicit, as it was — sometimes — in the 19th century where I could take $1000 in paper money to a bank and get my troy ounce directly from their vault? Is this what you envision?

Or would it be more like the U.S. between FDR and Nixon where the pegging was partially conceptual? In 1971 Americans could legally buy gold at a gold shop . . . but they would charge a substantial premium over the "official" price of $35.

George, did you read the longish excerpt about the Panic of 1837 that I posted? Simply put, there was more paper than gold and the financial system broke down when people lost faith in the paper. That Panic wasn't an isolated example. Review the MANY financial panics in the U.S. during the many decades with no Central Bank: The inability of banks to meet their gold obligations was almost always key to the panic. These panics were largely avoided when there was a large government-chartered central bank whose paper was widely accepted.

During the War of Secession, both the United States and the Confederate States paid their munitions suppliers with paper money — Paper that could be redeemed for gold ONLY at some undisclosed FUTURE date. It took $60+ dollars of the U.S. greenbacks, not $20.67, to actually buy an ounce of gold. In great triumph, the U.S.A. paper was eventually redeemable at the $20.67 statutory price. The C.S.A. paper fared less well.

Ponder these facts please, and explain your proposed gold standard in better detail.


The Federal minimum wage has not been changed since July 24, 2009. Our currency has not been stable since 2009. Which suggests your proposal would not have your expected effects.

Pegging the value of currency to an item (commodity or service) only results in a stable currency if the value of the item in its other uses remains stable. I am unaware of such a commodity or service.

Actually, there is a pegging that DOES make some sense. Rather than pegging the dollar to the value of a SINGLE item — bread, eggs, gasoline, clothing, housing, copper, glue, soap or iPhones — why not peg the dollar to a BASKET containing several dozens of such consumer items? The cost of eggs might soar while rubber plummets (or vice versa) but the large varied basket could stay fairly stable in average price. We'd have to think of a special name for the Basket, perhaps "Consumer Price Index" — does that have a nice ring to it?

That's, more or less, the price target the Federal Reserve system attempts to attain. $1 buys $1 worth of today's basket, or $0.98 of next year's basket, or $0.96 basket of the year after that.

Two complaints will arise:

(1) 2% annual inflation is deliberately built into the system. That's a feature not a bug It's really only people that keep their banknotes under their mattress that have a big problem with it, and termites might be a bigger concern for them. I and others have explained this over and over and over and over and over and over again.

(2) The past year's inflation is much more than 2%. True enough; and the causes and consequences of that inflation are topics of this thread. Causes include War in Europe and supply chain disruptions. Does anyone think these problems would magically disappear if the doors to Fort Knox were opened and a neon sign proclaimed "Come buy your gold at a statutory price here!!" ? (Spoiler alert: There's not enough gold in Fort Knox to redeem all the paper.)
 

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The big problem here is that Feinstein may run for re-election. And many others are eyeing her seat. Adam Schiff, Barbara Lee and others. It is going to be a tough election cycle.
 
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