Re: Amero Hint?


"Harold and Susan Vordos" <vordos@xxxxxxx> wrote in message
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"Ed Huntress" <huntres23@xxxxxxxxxxxxx> wrote in message
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snip------

What is it you're suggesting? That you can have a free market for gold
and still have gold convertibility?

No, I was implying that the very fact that the US treasury was being raped
is the reason government made a clean break from gold as a backing for our
currency. gold became a commodity and was (and is) traded much the same
as a bushel of wheat.

The harsh reality is that gold price varies by the minute.

Harold

Well, yeah, like all other commodities. When you have a gold standard with
convertibility, you have to fix an official exchange rate, or it doesn't
work. (Today, it probably wouldn't work no matter what rate you fix, for
reasons we've discussed elsewhere.) Somebody will clean you out of gold,
either quickly, if your rate is unrealistic, or more slowly, if they play
arbitrage games with you. It would be the same if US currency was backed
with pork bellies. We be out of bacon, mon, in no time.

The history of gold standards and convertibility is very complex. We really
only had a full, official convertibility regime (a "gold specie" regime) for
29 years, from 1900 to 1929, and it was based on a fixed exchange rate. We
never had a market-set rate and guaranteed convertibility. When it didn't
work in the treasury's favor, they suspended convertibility. And the
1900-1929 regime only worked because we were on the winning side in WWI,
without suffering any damage to our industry.

In the realm of real-world economics, this discussion really is an old joke.
The reasons it won't work are many, and they're well-known. The reason it
keeps coming up is twofold: Right-wing book authors, and now websites, have
taken the Austrian School of economics to their bosoms, mostly because it's
a useful tool in their argument against anything that isn't a throwback to
their imagined glory days that never were. The second reason is that the
libertarians of recent decades have come to think that it sounds like a
swell thing for a libertarian to believe in, for reasons similar to those of
the right-wingers. You'll notice that the people who promote it, sometimes
with the full academic arguments, usually have no understanding at all of
mainstream economics. They've focused on this one thing, and it's all they
know. It's like knowing all about making adjustable boring bars for turning
machines, but without knowing a thing about how a lathe works.

The fact is that there is only one significant coven of Austrian School
economists left in the world, and they're on the staff of George Mason
University in Virginia. The Chicago minarchist school has long abandoned
Austrian School orthodoxy. When gold standards are mentioned among serious
economists it's with a kind of wistfulness about simpler times, or as an
anchor against which to measure other ideas. And here's a key point: When
they talk about it, they aren't talking about gold convertibility for
ordinary citizens. They're talking about a tokenized system like the one we
had under Bretton Woods, when only state treasuries or central banks could
actually trade gold without a jeweler's trading license.

In many ways, what we have now is a lot freer and more market-oriented than
any gold-based system you could imagine. You're free to buy and trade gold
all you want, and you can use any currency to pay for it. We have greater
freedom in that regard than we had with a gold standard, and, in fact, we
have a more stable economy than we ever had when gold was convertible at
fixed rates.

--
Ed Huntress






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