“You cannot legislate the poor into freedom by legislating the rich out of freedom. What one person receives without working for, another person must work for without receiving.

The government cannot give to anybody anything the government does not first take from somebody else. When half of the people get the idea that they do not have to work because the the other half is going to take care of them, and when the other half gets the idea that it does no good to work because somebody else is going to get what they work for, that, my dear friend, is about the end of any nation.

You cannot multiply the wealth by dividing it.”

If you limit the money supply by strictly adhering to the amount of precious metals available, doesn’t that limit the amount of capital available in the market?

Actually, in a way yes, but in all reality not at all.Let’s say I have 120 carrots and you have 80 beets. Between the two of us we have 40 dollars. Suppose all of this was trade stock (non of it set aside for savings) so you might expect a beet to sell at 50¢ and a carrot for 33¢. Now imagine there was zero inflation in this small economy, but somehow we find out ways to produce more carrots and beets. Thus, this economy has grown, that is a growth in REAL output, a growth in PRODUCTION. It is a fallacy to think that a money supply has to increase to experience growth. Anyway, after the growth, I produce 200 carrots and you produce 160 beets. Now a beet sells for 25¢ and a carrot for 20¢. Oh no! We’re hurting! We can’t sell our stuff for as much as we could before! Well in fact it’s all relative, so with the same money we can really get MORE beets or MORE carrots according to our desires, so we are BOTH better off! The deflation is not something to be shunned in an inflation-less economy.

The cost of capital would skyrocket, wouldn’t it? Anyone care to guess what the implications of that would be?

In fact, as I showed, the cost of “capital” (the dollars) would be more expensive in terms of carrots or beets. But in fact, you would need LESS dollars to achieve the same ends as before, so it all evens out. The price of capital goes up precisely because the capital is actually worth more (that is it really goes farther, so you need less of it).

It depends on what you consider “modern”. Switzerland only gave it up in 2000.
Look at this article by Jean-Marc Berthoud PRIOR to the abandoning of the gold standard by Switzerland. (you’ll have to get past the first several paragraphs which discuss some then current event issues with worldwide Jewish organizations and Swiss banking.

A few things about the gold standard:

1) If we never put more gold into Ft Knox, then yes. It only means we would have deflation. Not as a negative economic issue, but as a sign of economic growth. It also means we can have a cash shortage (as the one just prior to the great depression).

2) We CAN get more gold. It doesn’t have to be gold. It just has to be something that is difficult to get, is easily tested for purity, is widely held as valuable & rare, etc. That way an economy has to discipline itself in order to issue more money. We couldn’t have the kind of free-for-all mass printing of money that we have now.

3) If we just increase circulation of funds then the economy CAN grow without increasing the backing or cash supply. This means goods and services are the backing for the increase in the economy. The greater the PRODUCTION, the better and stronger the economy.

As I understand it, the value of money would increase over time (rather than decrease, as in an inflationary system). A fixed amount of money would grow in its purchasing power. Many people would say this is a good thing.

If you limit the money supply by strictly adhering to the amount of precious metals available, doesn’t that limit the amount of capital available in the market? The cost of capital would skyrocket, wouldn’t it? Anyone care to guess what the implications of that would be?

Second, why is there no modern example of the gold standard? Why doesn’t any economy in the world use it?

I’ve read up a little since my post. It appears that different sources disagree whether these you mention were actual depressions or merely recessions/panics. All except for the one in 1837 (is that the right date?) That one everyone seems to agree was a depression. But it was still not as bad as the 1930s.

I guess it’s not surprising since no CLEAR definition of a depression is commonly accepted.

Dima,

I don’t believe it is possible to soft land onto a gold standard. Too many people in power love this system and won’t allow the population to take it away. Only a tremendous shift in power, political, or economic situation would cause the nation to re-think it’s financial system.

But any way you look at it, I think we’re about to see it in our lifetime.

Now I think it would take some pain. Lots of pain really. Heavens, if someone like Ron Paul (sole Presidential promoter of free banking) had by some miracle won the Presidency and somehow got congress to go along, it would be beyond a miracle to have the government stand still as the financial structure of the US came crashing down around us and for the people to actually let it happen. The tendency is obviously for the people to demand the government intervene–or for the government to demand that the government intervene. So we are talking about a huge, ugly, devastating crash here. And really all at once if we were to really just step aside and let it happen. If we had done that–our economy would be in shambles right now. (Yes, I know, like it isn’t in shambles or on its way there right now.)

Ok, so instead our government has intervened…again. We have once again delayed facing a growing (‘growing’ is much too mild) problem. But is there any path to a free banking system that wouldn’t just tear our guts out economically and financially?

I guess my line of thinking is this: Is there a nice way to get there or could a Free Banking/Gold Standard, etc only come after a complete collapse of our current system, and only then if people smart up enough to realize the the system itself is at the heart of the problem?

And I know I’m taking some liberties here–not all of you believe in a Free Banking system. It just seems so entirely obvious to me when you look at our current system which has destroyed and stolen so much wealth through inflation, a system which IS NOT stable or immune from boom and busts, which has unfairly forced down other countries’ economies by our exporting our inflation to them…it’s just ridiculous. It’s sad. It’s enslaving. For freedom to prevail, this system has got to go.

Actually, some people DO sit on gold for security. But because of federal law prohibiting individual ownership of gold bullion, they have to pay through the nose for “medallions”.

Also, thanks to the industrialization of the public school system, most of the population cannot discern real gold from a brass lead alloy. Even those who can, find it difficult to determine the purity.

And it appears to me that we have large swings in the economy WITH the fiat money system (c.f. the great depression and the current one). Are you saying they would be even greater if we were on a gold/silver standard? Did we have depressions on the scale of the great depression before the Fed took over? Honestly, did we? I haven’t heard of one.

I’m not sure how this follows. Perhaps you could explain? It seems to me that economies without fiat money have, by and large, been more stable. That is, as long as they haven’t fallen prey to fractional-reserve banking.

There has to be a sound means of money that the Lord approves of. It certainly is not a fiat money system.

I think it is completely applicable. When you work with your head or your hands, you deserve to earn your living. If you are just going to be speculative about it, you don’t deserve what you earn and therefore should not miss what you lose. . . because you didn’t earn it.

To Marc’s point, so long as we have fiat money, it is a Ponzi scheme. I don’t think any of us debate that. But, without this system, where would you even get a shovel?

Without the fiat money system, we would have much larger swings in the economy as it grew. I don’t know if you’d be up for that either. Don’t believe me? Why doesn’t anyone hold gold as their store of wealth? It’s completely possible to sit on bullion and liquidate it as you need. I imagine the transaction costs and liquidity of gold make the costs prohibitively high.

So the scheme is really just theft on a grand scale. It is gadiantonism refined and magnified on a scale only Kishkumen could enviously dream of. (If only he had access to computers and printing presses he might have been able to pull it off, darn silver currency!)

The bottom line here: You cant lend that which you dont possess! I cant lend you my shovel if I dont own one! Right?

I believe that if people would realize that it really is wrong to earn thier living in any other way except through laboring for thier own support, then many of the societal ills would be done away with.

In formal financial language, there are differences between growth, interest, dividends and so forth. Each has its own merits and conditions.

And I’m not sure if Adrien subscibes to the Moody work/money philosophy. And I don’t want to put words into his mouth. That was me. Not him.