Is it right that when the US had a system where $20=1oz gold that this was a gold exchange standard and not a gold standard?
Does the Austrian school advocate this sort of system, where you would pay $1 for a loaf of bread, or a system where you would pay 0.034oz of gold for an item?
Such small denominations could be done in the modern world by credit card, where the cardholder has a "vault" of gold and the balance of payments could be remedied should he wish to withdraw his money
It advocates a system where individuals can choose to deal in any medium of exchange they will avail themselves of, which most likely will be a commodity standard of some sort. So yes, you'd pay in gold, but in all likelihood it'd be with notes (or perhaps a debit card) representing a quantity of gold.
Freedom of markets is positively correlated with the degree of evolution in any society...
A gold exchange standard is when a national currency can be exchanged for gold. America had this until 1933, when FDR decided to not make the USD exchangable for gold to the average person. A gold standard is when, for whatever reason, people use gold or gold certificates for exchange. Most Austrians advocate a completely free market in banking and currency. In other words, mints and banks should be allowed to make whatever currency they want to, and this currency should be accepted or rejected by consumers and producers based on the merits of these competing currencies.
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Peter Lodge: Is it right that when the US had a system where $20=1oz gold that this was a gold exchange standard and not a gold standard? Does the Austrian school advocate this sort of system, where you would pay $1 for a loaf of bread, or a system where you would pay 0.034oz of gold for an item? Such small denominations could be done in the modern world by credit card, where the cardholder has a "vault" of gold and the balance of payments could be remedied should he wish to withdraw his money
What you're saying is not necessarily a gold-exchange standard simply because a note represents a quantity of a physical amount of gold. When the United States, for example, had a somewhat classical gold coin standard notes were still used to represent quantities of gold even though the actual coins were used frequently. The gold-exchange system you're speaking of was used in the 1920s with the dollar and pound sterling as the "key currencies" and after 1933 with the dollar as the only key currency. After Bretton Woods was implemented in 1945 the dollar was also the only key currency. To give you an idea of what the gold-exchange standard is let's pick out one period for convenience, say 1945-1971 under the Bretton Woods agreement. The dollar was based on gold at $35/oz. and was redeemable in bullion ONLY from foreign governments and central banks. The other countries would base their reserves not on gold, but on the dollar, which was linked to gold. As you can see, what happened here was that the US would create an inverted pyramid of dollars on top of gold and the other countries would then pyramid their currencies on top of dollars. When somebody would redeem their national currency in another country they could not redeem it for gold but rather only dollars. As countries finally began to wake up and realize the US pritned way too many dollars at the end of the 1960s and early 1970s they began to call on the US Government to give them gold for their dollars and the US lost a massive amount of gold which then lead to the Smithsonian agreement (pointless, fixed exchange rates) and then since 1973 all we've had and still have are floating exchange rates of fiat money.
As far as using gold in very small denominations like what you described the market would find a solution. Such possibilities of course include using other monetary metals such as silver and/or copper along with gold. However, to avoid the consequences of Gresham's Law (bad money drives out good) it is essential that we allow floating exchange rates between the different metals in circulation lest we wind up overvaluing or undervaluing some at the expense of others. Like you said, debit cards could be used and so could personal checks, etc. Those debit cards of course would be drawing on a 100% reserve account with gold or silver in it :) Hope that helps!
In liberty,
Chris
Of course it has been noted before that Austrian economics does endorse any one form of curreny, but instead leaves it up to market forces. However, it must be noted that one could propse that a political perseptive derived from Austrian economics would much prefer a loaf of bread being 0.034oz of gold rather than $ 1 (assuming that the dollar is 1 U.S.D. tied to the American governement) because it divorces the currency from the government thus preventing any government meddling with the currency.
Abstract liberty, like other mere abstractions, is not to be found.
- Edmund Burke