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Community Voice Responses (09/25/12)

From the August 31th Numismatic e-newsletter: Do you think calling for a return to a gold standard is a winning political issue?? Here are some answers sent from our e-newsletter readers to Editor Dave Harper.
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From the August 31th Numismatic e-newsletter: Do you think calling for a return to a gold standard is a winning political issue? Here are some answers sent from our e-newsletter readers to Editor Dave Harper.

I feel it is extremely important to put the money back on the gold or silver (some precious metal) standard.
Currently our dollar is nothing but fiat money, printed freely by the Fed with nothing to back it. Ultimately, at the rate we are going, our dollar will be worthless and our economy is ready to collapse just like Greece.
Jack Iaci
Spring Hill, Fla.

Get back to a 16-to-1 silver-to-gold ratio by having the people in power stop suppressing the price of silver. Freeze the price of gold and the ratio internationally. If gold ends up at $1,600 per ounce, then $1 can be redeemed at 1/1600 of an ounce and 1/100 ounce for silver. Other countries’ currency can be redeemed in similar fashion. Quite a complex political maneuver. Good luck with that.
Horst Seeley
Palm Coast, Fla.

Whether it is a true winning political issue or not, I couldn’t say. I do think it would be great to again be on the gold standard because then maybe the federal government wouldn’t print money it doesn’t have and wouldn’t spend money it doesn’t have, and thus our national debt wouldn’t be what it is. Maybe then politicians would be fiscally constrained as they would have to have the gold to back what money is produced and/or spent. Government has been on a spending binge since we went completely off the gold standard during the Nixon administration.
Bryan New
Columbia, Ky.

I am definitely in favor of a return to the gold standard. Aside from being a coin collector going back to my childhood in the early 1980s, I’m also a longtime student of economic history. The defects and problems with a fiat paper currency are well documented and obvious.
Although no monetary system has proven entirely perfect, a metallic standard of some sort is clearly superior in the long term and across multiple cultures and historical epochs. Whether the USA returns to a gold standard or not, history suggests that ascending economic systems and blocs will do so themselves, with or without us joining them.
Ed Hertzog
Philadelphia, Pa.

It’s a non-issue. It would never happen. There are better ways to prevent overprinting of the (paper) coin of the realm.
Samuel Donovan
Pittsford, N.Y.

Going back on the gold standard sounds like a good idea. But there are a couple of considerations that would cause problems. One is that mining companies and a few nondemocratic governments now control the gold supply. There are enough gold mining companies that no one company, or even government can corner the market on gold. But in the early 1890s, a major cause of the “panic” was a change in the ratio of gold value to the value of silver. The market had been flooded with silver to the point that, at times, the silver content in a silver dollar was worth less than a dollar during the minting of the Trade dollar. Supply factors in the gold supply would have an influence on monetary policy unless the government fixes the price of gold like they did in the 1930s and ban private individuals from holding gold, which would at least stabilize the price and demand for gold.
But I don’t think any of us want to give up our gold again, or see gold bullion coins melted down again. Then, for today’s supply of gold to be enough to finance the world economy, a cent would have to be worth about what it was in the 1830s (ever seen a large cent?). For that reason, it won’t happen unless our backs are against the wall, i.e., we are about to default on our debt and experiencing hyperinflation.
But there is still the issue of the year to year change in gold supply due to external factors. And the fact that we rely on some undemocratic governments for our supply of gold (China is the world’s largest miner of gold now). That would give them a lot of economic power.
On that same topic, China has made no secret that they want to own the largest gold reserves in the world. Before, they were quietly buying gold on the open market and causing price distortions. Now they’ve gotten smarter and are buying gold mines and reserves. That still influences supply and takes gold off the market.
No, I don’t think that it will work because of those reasons. Things will get very bad before we are willing to subject ourselves to the will of gold miners, mainly government-owned miners who mine enough gold to influence supply. It may happen. But I believe that it will be a temporary period while prudence is restored to both government’s budget and countries’ trade accounts. But I agree that the present situation is unsustainable. Everyone should have some hard assets as a part of their portfolio. I don’t think that a gold standard bill could ever pass Congress unless the situation is extremely dire, as it was the last time that it was passed.
Sam Pyeatte
Siloam Springs, Ark.

Michel Prieur
Paris, France

A return to the gold standard is a bogus political issue. Using gold as the standard of value for currency is an arbitrary and whimsical policy that should not be promoted.
The amount of gold in existence is paltry compared to total world wealth. There isn’t enough gold to back the world’s currencies.
Putting us back on the gold standard would stifle the expansion of the money supply as production of new gold cannot keep up with the need to add currency. As an economy expands, the money supply has to expand to keep up with the growth.
Overexpansion of the money supply leads to inflation. Underexpansion leads to economic stagnation. The economy should not be limited by our ability to mine for gold.
The gold standard was the economic policy of the 19th century. It was abandoned because it became obsolete. Economists realized that we don’t need gold to have a prosperous economy.
Monetizing gold will not stop inflation. The way to stop inflation is to balance government budgets so that excess money isn’t printed in order to keep the country solvent.
Gold is an excellent store of wealth because of its intrinsic value. Its role in society has already been established in its present uses. Gold is a scarce commodity that has sufficient demand. There is no advantage to reintroducing gold into the monetary system.
Bruce Frohman
Address withheld

Sounds great to me. I pray it happens, however, what percent of the people do not understand the concept of real money? What percent of people who do not have any gold? Then then what percent of people just don’t care? My question is where will the U.S. get the gold?
Douglas Ivey
McAlester, Okla.

Restoration of the gold standard not only is a winning political move, but would also restore the integrity of our currency.
Dave Keller
Address withheld

Going back to the gold standard is a swell idea. So is mercantilism. We should also get rid of indoor plumbing. We could even bring back drawing and quartering.
If we can monetize gold, we can monetize any other commodity. How about corn? Soybeans? Virginia used to use tobacco. I recommend belly fat. Then America would still be the richest nation on earth.
William Eckberg
Address withheld

We would have to suddenly balance our budget to go to the gold standard and this would cause a deep depression. Ron Paul went to Fort Knox to see if the physical gold was there – it was, but I wonder if China or the Fed Reserve has a lien on all our gold reserves.
John Blair
Palm Beach, Fla.

Yes, all in favor of the gold standard.
Compare Britain from 1817 until the Great War 1914-1918 and 1932 up to now.
Chester Brett
United Kingdom

I’m not really sure what going back to the gold standard would do for our economy, but having said that, I’m sure it would change the price of gold bullion per ounce. And I just happen to have some very nice U.S.-minted gold coins in my collection, which I think would go rather well under the gold standard.
Larry W. Young
Tyrone, Ga.

Politicians and news pundits may think so, but I think that they all are behind the curve. More and more folks are discovering what a crock our paper fiat money system actually is. I am sure any party now talking about returning to some form of dollar/gold money may on the surface seem political, but in the end the average guy will turn away from any money that gets so abused that it ceases to preform as a store of “credit” value and instead loses value/purchasing power. The level and swiftness that people will turn away from the Federal Reserve Notes as a fraud and a Ponzi scheme will shock many, but it’s coming.
Politically, a party cannot go halfway to embracing a return to some form of gold standard. Once they open the door, then all the truths about real money must be discussed, fully. That will get ugly ’cause gold doesn’t lie and is real. The fact that we’ve all been lied to concerning FRNs (fiat paper currencies) as a honest source of currency will not be taken well by citizens.
Mark Allen
Corona, Calif.

Bob Kirby
Newport Coast, Calif.

The Nixon administration did not make a national platform to destroy the gold standard by removing that measure of metrics from our financial scene. Why does the political scene make it a national platform cry to invoke it again? Kind of stupid if you ask me.
Just because it is a sound method to guide our future, it does not have to be a major platform focus point. The masses don’t know, don’t care and don’t understand the entire need.
If I take my car to a mechanic and he says it needs a tune-up, like our USA financial status does, I don’t ask him to explain the firing order of the engine and the exact size plugs and wires he will use to get the engine doing its work correctly. Do you?
Let me see, is it cylinder No. 1 that fires with No. 6 and No. 2 that fires with No. 5 or No. 4? Now which is it? Who cares as long as the professional is doing his work?
The way I see it, the professionals are not doing their work. I don’t think they know the financial firing order these days at all. We do need a financial knowledgeable person at the lead, but we need Congress to get the work done for the nation not doing sanctioned insider trading like they do.
Name withheld

At one time, I thought the gold standard was a better way for this country to go in order to get its fiscal house in order. However, after thinking about the ramifications in the real world, I realized that it would now cause more problems than it is worth. The biggest problem is that it does not recognize the value of products produced by human labor and their contribution to the overall wealth of the country.
As a mental example, I dreamed up a mythical country called Goldland that had 100 inhabitants, an even mix of men and women, and each person has five gold coins. That is the total wealth of the country, 500 gold coins. Basically, people buy things, and the gold coins all get swapped around in commerce (person goes to doctor and pays a gold coin. Doctor buys a loaf of bread and pays a gold coin, etc., etc.). Now, the big problem is that being human, these citizens start producing children.
So after 16 years or so, you now have a population of perhaps 140 working people all producing (the number might have been 160, but people do die). The problem is, there are only 500 gold coins to go around.
Suddenly one sees deflation occurring because the money has to start getting spread around to more and more people. If we have to share 500 gold coins amongst 140 people, the buying power of each individual is less than it was when there were only 100 people. As such, prices will have to fall in order for individuals to buy the items they need.
Of course, the system we have in place now allows the money supply to grow. Unfortunately, rather than representing the incremental increase in productivity and wealth of the country, the government is running the printing presses 24/7 creating money out of thin air that does not represent any real added value. So where 40 years ago we had a paper dollar that we will say had a benchmark value of $1, the enormous increase in the money supply now makes that dollar worth perhaps 40 cents.
How the gold standard would fix that is beyond me unless a hybrid system were created where a fraction of a dollar was based on gold and could never be worth less than a base value.
Robert G. Schaffrath
Address withheld