QuakerOats;1839448 wrote:"Sweet. So I assume you oppose the current workers paying into Social Security, then."
Thanks for the recognizing the ponzi scheme for what it is.
Certainly.
gut;1839469 wrote:It's also a disadvantage. You don't understand that such rigidity is not good for a fluid and fast economy.
Rest assured, I'm not suggesting that it's a perfect system. Complete rigidity (which a backed currency wouldn't actually produce) certainly does have its drawbacks. But what you lose in flexibility, you gain in stability.
And while you can fire up the proverbial printer (or keyboard, for the current era) to suit your needs, doing so undermines the retention of value within any savings.
A lower ceiling with a higher floor.
Beyond this, there's obviously the question of which commodity to use, as commodity values are independent of one another. Even still, the fixed amount of it makes it less volatile than the arbitrariness of the current system.
And then, of course, you have the ease with which counterfeiting takes place. Counterfeiting a Kruggerand is easier than a dollar bill, of course. But you still have to find the gold (assuming we're going with gold, though I'd prefer a metal with a lower unit value ... copper, maybe), and because the quantity of unaccounted-for gold is fixed ... and relatively small ... the potential for counterfeit is limited as well.
gut;1839469 wrote:The problem with a commodity based currency is your money supply growth, to quote Bernanke again, is based on "how much metal you dig out of one hole to put in another".
The problem with the alternative is that the parameters for manipulation to react to the inflation game become entirely subjective. An increase in the number of dollars isn't categorically good if their value isn't retained, at least in part.
Beyond this, while Bernanke may have had a distaste for a commodity-backed currency, Greenspan suggested more recently that it would force more responsibility in an otherwise unchecked ability to adjust interest rates to fit short-sighted initiatives at the federal level.
The notion that the gold comes out of a hole and goes into one is nothing more than a play on words, because he ignores the distinction in possession. The former is an absence of possession. The latter is a presence of it.
gut;1839469 wrote:Go read some actual economists to see how stupid an idea the gold standard is.
Would you consider Greenspan an economist? I would submit he has a very similar pedigree to Bernanke.
I know George Mason has two faculty members in the Economics department who have won the Nobel Prize (both in Econ Sciences, I believe), both of whom I believe espouse a commodity-backed currency. Do they count?
That isn't to say that there aren't of course brilliant economists who object to it as well. But certainly, it seems silly to write of either theory as "stupid," unless we put ourselves on a level to argue with the best minds to espouse the views.
gut;1839469 wrote:Not to mention there's a misconception about what the gold standard would actually fix and how. You change leverage and reserve requirements and your money supply is no longer fixed, anyway. The entire concept is just selective nostalgia at best.
Given how few people have experienced the full gold standard in today's era (not just the pre-Nixon variety), particularly people who were born after its effects were gone, it seems unlikely that it's just nostalgia.
When it comes to a return to a commodity-backed standard, I think it's a moot discussion. The toothpaste is out of the tube, and I think trying to amass a singular commodity in reserve would be difficult to impossible. Beyond this, it doesn't fix the deficit problem as it exists today. Returning to it with the current views on spending at the federal level could leave us looking like pre-2000 Russia ... which did have a fixed currency, as I recall reading.
gut;1839469 wrote:It's not just the dominance of USD, either. Price stability is pretty consistent in almost every developed economy with a disciplined central bank. That's what Bernanke was referring to.
The notion of a "disciplined" central bank, though, is even subjective. Moreover, you solidify an institution in hopes that the banks will always be so disciplined, but that's certainly not the sort of thing we can predict with any level of assurance.
Also, "ethical" would have to come into play. Discipline does little good without scruples.
It's not without its comparison to branches of government. Many Democrats were creaming themselves at the idea that Obama had the right to sign the executive orders he did, and now, they're horrified that Trump has the same ability. Regardless of whether or not either of them were/are actually responsible with their use of that right, if we view it through the Democrats' perception, they laid the groundwork for misuse by assuming that the office would always be "disciplined" or responsible with such use.
And back to a prior point, Bernanke's notion still fails to address the devaluation of money in holdings. Sure, adding dollars to the market doesn't necessarily harm the market as a whole (provided we can assume that the perception of the dollar remains fairly constant ... which IS still a requirement for this system to work), but they do diminish the value of portions of money within the market, because the portions represent a diminishing portion of the whole.
I make no bones about the fact that there are advantages to a fiat system. Moreover, I concede that there are drawbacks to a backed currency system. I simply think that, based on the attitude toward spending at the federal level, the safety and stability of forced restrain is preferable to the spending power of a flexible currency.
As a side note, I find Bernanke's (or was it Quince's?) points about "discipline" a little funny, given his connections to the whole AIG thing.
