At 01:27 AM 11/20/01 +0200, Sampo Syreeni wrote:
On Mon, 19 Nov 2001 georgemw@speakeasy.net wrote:
It's amazing how many people assert this, even though it's clearly wrong. A gold standard does NOT mean that the amount of currency in circulation equals the amount of gold in the vaults, it means that the currency is exchangeable for gold at a fixed rate. Obviously, there can be more gold in the vaults than you need to actually exchange every dollar for the correct amount of gold. Less obviously, there can be less.
Of course, the system also exposes the currency to fluctuations in world wide supply of gold. It's not sane policy to tie one's unit of currency to any particular good -- think about what it would mean if the chosen good was unrefined oil, a particular crop or electrical power. One'll get the picture fairly soon.
Yes, but what this thread has ignored is that gold (and other densely precious things) were valued *in and of themselves* and so using them as money was not symbolic. You traded your goat for a goat's worth of gold; if trust evaporated overnight the gold is still worth something. Similarly with barrels of oil. If you discover a lot of it under your topsoil, you get wealth because the substance itself has utility.
It's not really sane to opt for a tie-in to the supply of a particular currency, either -- that's actually even worse, since the people printing the bills can cause fluctuations in the exchange rate even easier than they could if they were just digging up precious metals up from the crust.
Hence, private, floating currency, which, again, is old news on the list.
Clearly stated.