General Question

SquirrelEStuff's avatar

What would be the advantages and disadvantages if President Obama was to issue gold or silver backed certificates instead of injecting trillions into the economy?

Asked by SquirrelEStuff (6752 points ) March 9th, 2009

Our money will stay as is, but will now include gold or silver backed money as well. I’m not sure how much gold and silver the US is holding, but why not back some money by it rather than adding a crap load of debt? If it is going to turn out to be a good investment, what do we have to worry about?

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38 Answers

SeventhSense's avatar

There is not enough gold or silver available unless their value was extremely inflated.

Ownage's avatar

The whole purpose of the Fractional Reserve System (our current system) is so the economy can grow off of credit.

This is what it basically is:
Lets say our money was still backed by gold. The supply of gold isin’t increasing by much so therefore the supply of money would be very small and concentrated or gold prices would have to be inflated (which would be untrue to the real market for gold and our money would have no faith). Business and entrepenuers can not get the capital they need, because it simply dosen’t exist.

With the magic of fractional reserve banking we don’t need real gold anymore for money. We can just print it!! A lot of it. Then everyone realizes our money is worth jack shit and our economy sinks deeper into the shitter.

If everyone has $1,000,000 how much is $1,000,000 really worth?

I think we really should go back to some real backing. We obviously can not be trusted to print money. Real backing, although it inhibits growth it keeps us in check. Where do you think this bailout money is coming from?? Not an increase in real GDP or wealth, just the printing presses.

But then again as SeventhSense posted, there simply isin’t enough gold anymore. This isin’t 1800

SeventhSense's avatar

Yes the governments like it that way. Who among us could operate on a trillion dollar deficit.

SquirrelEStuff's avatar

How much gold and silver does the US actually hold?

Im not saying that we have to be strictly on a gold or silver standard. Im asking about instead of injecting trillions of dollars of fiat currency into the economy, just adding gold and silver currency into the economy so we are not building up more debt than we already have. They can be exchanged as dollars, but will not be federal reserve notes(debt).

SeventhSense's avatar

The US government is the only nation on earth that holds its debt in the currency it creates. Do you think they want to change that? The charge will have to be led by a concerted effort of other nations. The EU may want to do that but we are all too interdependent. The whole sytem is going to have to be changed because we all will go down with the ship. But if we are all millionares on paper and are content perhaps we can then get on with doing what each one of us does best and be value producers instead of instruments to discharge debt. The praxis needs to be a different one.

Ownage's avatar

@chris6137 Well that woulden’t do anything. Our money is still backed by “US Dollars” Injecting 100 US Dollars worth of gold is the same thing as injecting 100 US Dollars worth of paper.

SeventhSense got it right. The whole system has to be changed. You have to change what the backing of the money is. Mad lurve!!

Didn’t the US go through the same thing before?
Colonial money became not worth shit after a while, greenbacks became not worth shit after a while, Civil War money became not worth shit after a while, whatever we had before the great depression obviously became not worth shit anymore.

Our current US Dollars are so inflated right now. I guess time to change it up again. Gold? Silver? Marijuana seeds?

SeventhSense's avatar

There has to be tangible assets-comodities. Historically it was things like tea, coffee, cocoa, gold, silver, platinum, wood, and on and on. Ultimately it’s like what really has intrinsic value? Wood for a house, fire, metal to make tools, food, water and if worldwide tragedy ensues we find what really has value once again. People during the depression sold and recycled metals, grew vegetables and made things like socks and clothing. It’s all very simple but we have just bought into a sytem that does not serve us but serves a limited few who manipulate the many through deceipt.

jessturtle23's avatar

They already did that and people lost their asses on silver certificates.

wundayatta's avatar

Money is merely a metaphor for value. It makes exchange pretty easy. I don’t have to haggle over whether a guitar is worth a mixer.

Value is a fluid concept, since it depends on what people believe is valuable, and how valuable it is compared to all other things.

The amount of stuff in the world is the amount of stuff. It can grow, or it can decline. Right now, it’s not growing, and is in decline, but the decline is not nearly as much as the decline in the stock market.

Essentially, all the stuff in the world is still here. But we think it is worth a whole lot less than it was a year ago. So we have to inject a lot of cash into the market, in order to let the monetary value of stuff to rise back to where it was. We’ve got to nearly double the money supply.

Now, unfortunately, we aren’t printing money. We are actually borrowing it, which is of no help at all. It means we have to pay it back, and it means we are transferring a lot of value to our creditors, mainly the Chinese. Now, in a way this is good, because the Chinese would never foreclose on us. They’d lose too much. For the same reason, they can’t fight us.

In any case, if we printed money, we have much more money chasing goods that have devalued horrendously. The printed money would push the value back up, and encourage companies to start producing again. That’s what the stimulus will do, too, but at the cost of mortgaging our future to the Chinese.

artificialard's avatar

Tangible assets mean a variety of different things to different people (an asset might be a building, intellectual property, etc.) those all have various market values. If it’s implied we should peg our currency against tangible natural resources like precious minerals it restricts the government’s ability to facilitate market commerce and control the flow of credit.

If we’re talking about trading made items directly, growing our own food, that’s moving towards an agrarian-barter system of commerce instead of liberal capital markets. Whatever the merits maybe of that, it’s not very realistic.

Virtually all other countries in the world have used a model (if differing in practice) to the US market capitalist system and have been able to prosper. It’s not any system of market, currency, or exchange that’s the problem – it was the lack of governance of the American economy that caused the problem.

SeventhSense's avatar

Some of you REALLY JUST LIKE TO HEAR YOURSELF f**#&N TALK

SquirrelEStuff's avatar

@seventhsense
Who’s that directed at?
It seems all the posts here are very informative. What’s with the sudden attitude?

SeventhSense's avatar

This stament defies description-
“Virtually all other countries in the world have used a model (if differing in practice) to the US market capitalist system and have been able to prosper.”

So I guess that is why every economy on earth is affected by the current crisis?

artificialard's avatar

Sorry, I have a problem with using more words than necessary especially with these kinds of things. I’ll also mention I don’t have any academic credentials about this stuff.

But in my opinion, a ‘tangible asset’ based system, that is a market currency pegged to a natural resource wouldn’t have prevented the cascading global depression. That’s primarily due to globalisation of the markets, not the markets themselves.

I think it’s fairly obvious that while the entire world is being effected by this crisis other countries will recover faster and have a significant advantage compared to the states for decades to come due to the national debt download.

wundayatta's avatar

@artificialard: you may want to do some research about your opinion before you state it. Frankly, as it stands now, I have no idea what you are talking about. It sounds like you are slinging jargon without really knowing what the words mean.

SeventhSense's avatar

@artificialard
At this stage if we don’t recover, the world does not recover. American debt was sold as prime which was anything but prime. The WHOLE WORLD bought it and as a result massive loss occured including entire communities and cities whose budgets were created around foreign investments in American Markets. The way this could occur was because a market driven economy due to greed pushed through loans and pressured ratings companies to assign packaged debt higher ratings. They could then sell these portfolios as “A” to foreign investors looking for secure investments. This is only possible in a market economy driven by a “fiat” currency. The ENTIRE WORLD runs on fiat currencies- or at least all the major players. You may find herders and Arab Traders using gold or some commodity but all the major countries have nothing backing their dollar but their word. Our word(USA) is shit in the world for the most part but without our oversight there is no WORLD BANK. And behind us is England (or us behind them depending on what your history books told you). And England has owned the world for a long time.

To give you a concrete example, imagine you have a small house and at the end of the block on 20 acres is a Mansion on a golf course. And every week the owner asks you to borrow one of your tools until he empties your garage, your house and he never returns any of them. But you mow his lawn every 2 weeks and he pays you to do it. And then he starts saying that he will pay you every 2 months. At what point has what he borrowed fom you far outweighed what you can earn back from him and is it worth the headache. And oh yes he has missiles in your back yard. Guess who is the USA in this illustration?

Every nation on earth wants dollars including the Arab Traders. At one point though someone- say maybe a handful of “ARAB TERRORISTS” will attempt to change the balance and China and Russia will be more than happy to make an alliance and tip the scales East. But you can guess, like the (majority of the wars we started), the face won’t be a familar Russian or Chinese one. This way they can still do business with us.

laureth's avatar

The latest US Treasury reserve position press release will tell you how much gold we have in reserve: 261.499 million troy ounces. As I write this, gold is worth US$895.05 per ounce. That means, if we used all of it, that we could issue $234,054,679,950 backed by gold. Of course, fluctuations in price happen with gold pretty often anymore, so it would be a pretty volatile currency.

However, when you look at how much cash outstanding there is ($8,244,000,000,000 in January 2009, including things like bank accounts and traveller’s cheques), you’ll see that any addition of gold-backed currency is really a drop in the bucket, so to speak, and even moreso if gold goes back down to some not-crazy-panicked-economy level.

SeventhSense's avatar

@laureth
Bravo with the figures…it’s crazy seeing 8 trillion in numerical form.

artificialard's avatar

OK, my response was to an an earlier one that suggested we should barter and produce our own goods, instead of getting items through markets. I’m trying to say that it wouldn’t be realistic for anyone at this point and that the global nature of the crisis is due to globalism and that this isn’t a failure of capitalism as other free market countries haven’t yet experienced this same crisis. I didn’t mean to imply that other countries haven’t been affected by the crisis.

And my thoughts that other countries will recover faster and or benefit from this is the (distant) future is I think it’s definitely not a sure fact but still a valid one. Here’s some other supporting opinions:

“No country will benefit economically from the financial crisis over the coming year, but a few states—most notably China—will achieve a stronger relative global position.”
-Foreign Affairs Jan/Feb 09

“China looks set to be the first major economy to recover from the current global meltdown…”
-Bloomberg.com quoting a Merrill Lynch analyst

“Newsweek has a piece on China headlined “Crisis Winners: Why China Works,” which argues that China is uniquely situated to ride out the global economic storm”
-Blog post from the Washington Post

“China is the only major economy that is likely to show significant growth this year”
-Newsweek

My thoughts on ‘pegging’ items to natural resources for our currency markets used completely wrong terminology, I apologise.

laureth's avatar

@artificialard – re: “other free market countries haven’t yet experienced this same crisis”

Which country hasn’t been affected yet? Some are worse off than others, true, and it might depend on your definition of “free market,” but I can’t think of one that hasn’t been affected.

artificialard's avatar

I didn’t clarify ‘crisis’ properly. The subprime mortgage crisis and the issues of liquidity that prompted the start of the entire economic crisis were uniquely American. I’m not saying other countries aren’t affected, but other countries were affected because of the failure of the US economy, not due to the reasons that the US economy failed in the first place.

There are notable exceptions, like Iceland which was it’s own bubble but generally the cascading failure originated in the US.

laureth's avatar

Okay, yeah. Agreement here, then. :)

artificialard's avatar

Yaaaaay! =)

Darbio16's avatar

Power in the world has many forms. The most exploited source of power being money. In America we use the dollar. On each dollar, you will also see the term “Federal Reserve Note”. It is important to note that the Federal Reserve is the source of our money. Meaning, they print our money. Under the Constitution, Congress has the only right to print and issue money. To clarify, the Federal Reserve is not the Congress. In fact, no one on the board of the Federal Reserve is even democratically elected. Nonetheless, Congress does not, as directed under the Constitution, print our money.

Instead, in 1913 under the Woodrow Wilson administration, Congress enacted the Federal Reserve Act. The act was voted on during Christmas break when most congressman were at home with their families. At the time of the enacting of this bill, American dollars displayed text reading “Redeemable for Gold”. As it were, America had been on a Gold Standard. The paper we all flaunt today, was then nothing more than a receipt for the real money…gold. Our money now states “This note is legal tender for all debts, public and private”. We are no longer on a gold standard. The whole reason behind the idea of the Federal Reserve was to create stability in the markets and protect against inflation. How cunning though that an institution publicly stating the contrary would be the source of inflation. Inflation is a fancy term for the devaluing of the dollar. Did you ever wonder why your grandfather paid only a nickel for a candy bar while now you pay a dollar or more some places? The reason is simple.

The Federal Reserve, now in charge of printing and issuing our currency in place Congress, loans the money to the Treasury. As with most loans there is also interest on the loan. That is the very source of inflation. It creates a debt based society. Simply put, if you follow the flow of money, it get very depressing. First, the Federal Reserve prints the money. Then, with a hefty amount of interest attached upwards of over 30%, it is loaned to our nation. Say, for example, we are loaned 1 Trillion dollars. Unknown to most of the public, that interest must be paid back. 30% of a Trillion is approximately 3.33 Billion dollars. That is the amount that must be paid back on top of what has been borrowed. Totaling to 1.333 trillion dollars. Here is where is really messed with your mind. If there were only 1 Trillion printed, how could we possibly pay back 1.333 trillion, it just doesn’t exist. The answer is, you can’t pay it back, ever. When the loan is finally called in we are forced to pay all that we have and then borrow more to cover interest payment and living expenses.

To guarantee themselves interest payments, along side the Federal Reserve Act was the Income Tax law know as the 16th Amendment to the Constitution. Prior to 1913 there was no such thing as an income tax. The sole purpose of this tax was to make payments to the Federal Reserve to the issuance of our currency. But here is another real brain buster. The money that the Federal Reserve Loans us doesn’t even exist. They have a printer, not a stockroom of gold and cash. The money comes out of thin air. That style of banking is known as “fractional reserve lending”. Break down that statement and it becomes clear. Fractional Reserve lending is easy to understand. Let’s say you start a bank, and you have your self 10 million dollars that you could begin to loan out. Fractional reserve banking enables you to loan out more money than you actually have. I have 50 million in my bank, but under our current system I could loan out 400 million or more. Sounds ridiculous but it is more than true, its scary. The banking industry learned long ago that most people would not come to the bank and withdraw all of there money. The whole system would fall apart if even 10% of Americans would withdraw all money from all of their accounts. Evidence of this was during the Great Depression. When the stock market crashed, people began surging to their banks to withdraw their funds only to have the doors of the bank locked when they arrived. The reason the bank doors were locked was because the money doesn’t exist. Ever see the classic movie starring Jimmy Stewart. During the bank run scene, people were demanding their money but of course it wasn’t there. At the same time, businesses were desperately selling all they could to get money. In that movie “Potter” was the evil banker that sought to own all in the town. He began buying up all the towns financial institutions. That actually happened during the real great depression as well.

It was, in fact, the Federal Reserve that created the depression in the first place. For an institution like the Fed, its an easy feat. First they just made credit readily available. Once enough currency was in circulation, they cut off all credit, called in all old loans and refused new ones.

It makes alot of sense when you look at it from the point of view of the bankers. These days money transactions are not handled by exchanges of tangible money, but through computer transaction. This makes our current corruption possible. I can loan out way more money than I have and begin collecting interest payments on money that doesn’t even exist, let alone belong to me. Ever wonder why Congress has no problem spending all the money they want, with out regard. It is because you can fund anything you want when you have a money printing machine

I could go on all day about it, but to better explain the situation we are in, you should watch “America: Freedom To Fascism”. You can find it on youtube. This documentary will blow your mind. Hopefully it was also open up your mind to the possibility that all is not as it would seem.

SeventhSense's avatar

@Darbio16
It truly is mind boggling the extent of the sham we live in and of which we are are so ignorant. Lawyers and experts in commercial code dictate the course of our government. The idea of a government “of the people and by the people” is now only a quaint notion. The Federal Reserve is the greatest threat to freedom, not terrorism.

Darbio16's avatar

Finally, someone that friggin agrees. Kudos to you seventh sense.

wundayatta's avatar

Wow! 30%? What on earth are you talking about, @Darbio16. Are you talking about the discount rate? Since 1990, the discount rate hasn’t been over 7%, based on a cursory look at these data.

Just curious. What do you think money is? I sure hope you don’t think it’s anything real.

Darbio16's avatar

that’s exactly what the hell im talking about. Its just a bunch of 1’s and 0’s on a computer. So when they want a crash….we crash. When they want prosperity… the presses are up and running.

Darbio16's avatar

The bankers are afraid of a gold backing. That’s why they had FDR round up all the nations gold, only for us to later hand Fort Knox over to the federal reserve as collateral.

I’m not going to argue that fiat money gives us all the means necessary for man to realize all of his dreams. Ben Franklin once said this. “The use of money is all the advantage there is in having it.” These guys want a global monetary system that is controlled solely by them. During the time of the American revolution we were using a government backed paper fiat money called “colonial scrip”. Nearly exactly like we have today. When the King said they weren’t allowed to print their own money, boom, we had ourselves a brawl. The only difference is that in those times people were informed and knew how to handle money and therefore did not need to entrust the issuance of currency to a private institution.

Check out this quote from Thomas Jefferson. You gotta wonder, if it all started then, how has it grown since?

“I hope we shall crush in its birth the aristocracy of our moneyed corporations which dare already to challenge our government to a trial by strength, and bid defiance to the laws of our country.”

The Rothschild banking dynasty that had totally taken over Europe had begun its assault on America. We won the revolution, we won the war of 1812. If the Rothschild banks hadn’t insisted on Britain fighting a two front war between America and Napoleon we may not have won. Then they bring a financial assault to us.

During Andrew Jackson’s administration there were around 12,000 federal employees. He fired over 2,000 of them for having connections with the Rothschild s . They even tried to assassinate him, but both the assassins guns jammed and Jackson kicked his ass. I don’t really give a shit what fucking system we use. Seashells, horse dung, gold or whatever. Just as long as it’s out of the hands of these banker pricks.

wundayatta's avatar

@Darbio16 Sounds to me like you feel powerless about this. You seem to truly believe that the economy is being controlled by a small cabal—a kind of New World Order fantasy, I guess.

Well, the answer is right in your comment: “Seashells, horse dung, gold or whatever.”

That’s exactly it. Money is just a metaphor for value—the value of goods and services existing in the world. So let me ask you, does the amount of goods and services in the world change when there is more or less money in the system?

Obviously not. So what changes when bankers mess with the money supply? It’s another intangible: confidence. What bankers are really manipulating is confidence. But here’s the weird thing—they can’t really control confidence. If they could do that, it means they would be controlling every single person’s personal life.

The relationship between money supply and the goods and services existing in our world is all about confidence. Do we believe that the relationship is accurate?

But even that hides so much more that is going on. People get overconfident. They believe that the value of things is growing quickly, and then our reach exceeds our grasp. We borrow more than there are goods and services to match up with. Our work is not enough to support the amount of value we think the world holds.

Confidence suddenly disappears, and everyone hides in their holes. We pull in and protect ourselves until we think that things have balanced out again—that is, that confidence and goods and services are in balance again.

Bankers may manipulate money, but they can’t manipulate confidence. No one can. Confidence is made up of millions or billions of people around the world believing there is balance in the world or there isn’t. Bankers are as much victims of it as anyone else. Sure they mess around with the metaphor for value, but that metaphor means nothing without confidence.

Confidence is based on beliefs about the ethics of other people. When there is a major amount of dishonesty unleashed on the world, such as resulted from the deregulation pursued by several administrations (both Dems and Reps), no one should be surprised when unethical people take advantage. No one should be surprised when the dishonesty is caught out, and the confidence of a world is shaken.

The only way to build confidence is through transparency. I need to be able to verify your word. You need to verify mine. Obviously, you feel that government is non-transparent. You can’t verify their word. Further, it sounds like you feel there is a conspiracy of people hiding their true agendas.

I guess I don’t see how that view helps you. If we make our way through life without trusting others, we can never build confidence, and the economy will stay in the shithouse. At some point, you have to trust, or you can’t make an agreement with anyone. You simply can’t do business.

It reminds me of something similar in academia. Academics are forever gathering information that has to be the truth. In order to get people to tell the truth, they promise anonymity. No one will ever be able to track answers back to an individual.

If the information is to be of any use, then when one researcher gathers information, they have to make it available to other researchers. But how can they maintain confidentiality?

What they do is they make other researchers jump through hoops that basically serve to make them understand the gravity with which they should treat the confidentiality of the information. They sign user agreements. They set up separate computers that are not attached to the internet, so the information can’t get out. They have other people watch the researchers to make sure that no unauthorized copies of the data get made.

But you know what? There is no real way to assure confidentiality. If someone wants to let the information get out, or steal it, they will be able to no matter how vigilantly you watch them. The only way this works is if you trust the other researchers. They have to honor their word. They have to understand that if they let the information out, it will become impossible to collect any other information.

Without trust, no one can do anything. There is no possible way to verify everything. If you do that, you end up with a police state. You kill freedom, and then you kill creativity, and then you kill the economy.

We have no choice but to rely on other people to verify that others are telling the truth. We have to trust that our elected officials are watching over the experts who manage the money supply. We have to trust that they are keeping the right amount of regulation and oversight in place. And when they fuck up, we have to throw them out, and get new legislators who will do a better job.

If you can’t trust that process, then you have to buy property away in the mountains, build yourself a bomb shelter, and pack it with food. You have to go off the grid, and become entirely self-sufficient. That is nearly impossible to do. That’s why we have built a network of people trusting each other, and that’s why we use money as a metaphor for value. It’s all about trust, and we really have no other option. Trust, but verify. Trust, but verify.

SeventhSense's avatar

The fact of the matter is that the system exponentially assists a tiny minority of the population at the detriment if necessary of the vast majority. The World Bank, the Federal Reserve were designed for one thing and one thing only. To manipulate the means and distribution of money. Those who understood and precipitated this legal sleight of hands continue to assure that wealth stays in those hands.

You can take the blue pill. As for me I’ll take the red pill and follow Alice down the rabbit hole.

wundayatta's avatar

@SeventhSense And the fact of the matter is that most people are perfectly happy with the oligarchy of expertise. It seems, they appear to believe, to treat them well enough.

Darbio16's avatar

Trust but verify, exactly. We have trusted the Fed, but now it is indeed time to verify. Call your congress man and tell them to vote yes on HR. 1207, the Audit the Fed bill. What good is trust and verify if all they ever ask is for us to trust them and we never receive verification?

SeventhSense's avatar

Just drink the Kool Aid…God help us.

Darbio16's avatar

@SeventhSense , “It’s all very simple but we have just bought into a sytem that does not serve us but serves a limited few who manipulate the many through deceipt.” Your words buddy.

You want some Kool Aid?

SeventhSense's avatar

I wasn’t referring to your statement. Just the opposite. I agree with you.
do I always have to use tildes~?

Darbio16's avatar

Sorry bro, I’m just tired of people denouncing whats so very apparent.

SeventhSense's avatar

You gotta laugh at the absurdity of it all sometimes. At face value if we were told that we will be replacing your system of trust on a fictitious system that we decide is better because it serves a minority, people would be outraged, but that is exactly what has occurred.
On all fronts we are confronted with a system that rewards debt and punishes thrift. Before the 1950’s-60’s, no one bought anything on credit and now it actually determines your “worth”. American Industry was once the benchmark of value from automobiles to toys and it was based on quality. Now we export debt and depression abroad.

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