Greetings from a newb!
I am a strong proponent of the gold standard, however, I've gotten in discussions with others that say other countries with much larger gold reserves, China for example, would have an economic advantage over us and would be able to manipulate our currency in such a system. Anybody have a good rebuttle?
There would be only two ways to "manipulate" the currency:
The Chinese might be able to mine more gold than the US but I can't see them mining so much as to cause any significant inflation (that is precisely gold's strength)... so scratch number one from the list.
As for deflation, the only way the Chinese could keep gold off the US market would be by simultaneously selling them lots of stuff and not buying anything from them. Inevitably the longer they maintained this policy the less they would have to accept for the products that they kept sending, so all this would really serve is to shoot their own foot. Eventually exporters, who's costs were incurred domestically and who's incomes were dependent on US sales would no doubt go out of business and so the end game would be the complete cessation of trade between the two countries. I'm wondering exactly how your friend might explain the benefits and motivations of the hypothetical Chinese engaging in such a policy.
these seem like superficially plausable concerns. but i think that rather than going trough the trouble of outlining of theoretically complete defense of free market money and the gold standard from first principles down the line to corrolaries and rebuttals of anticipated complaints, it would be best to attack the doubters on their concerns.
ask them what specific exmaples of manipulation are they imagining?, and what the damaging effects would be? and see if they can offer anything more substantial in their critique
Where there is no property there is no justice; a proposition as certain as any demonstration in Euclid
Fools! not to see that what they madly desire would be a calamity to them as no hands but their own could bring
Conspiracy theories notwitstanding, the United States has far greater gold reserves than any other country (though Europe combined has more)
China has 600 tonnes of gold to the US's 8,133 tonnes and the Eurozone's 10,900 tonnes.
Granny36:China for example, would have an economic advantage over us and would be able to manipulate our currency in such a system.
If that were true why couldn't they do exactly the same thing with dollars? They've got plenty of those too.
In the short-term they may be able to drive prices up by increased consumption. This would be a boom to our exports of course. Domestically, production would eventually expand or become more efficient to meet the demand. In the long term, China would be building American manufacturing infrastructure that would result in lower prices and higher wages for Americans. Could this be a bad thing?
Economics is all about buying and selling.
If the USA has something to sell, even if we have no gold at all, we are rich. China will buy our stuff, and if the world is on a gold standard, will either pay for it in gold, or by giving us some goodies of theirs that we want. In either case, we are in excellent shape, no matter how much gold China has.
If the USA has nothing worth selling, even if it has all the gold in the world, we will soon spend it all, buying our TVs and whatever from China. They will insist on gold, because we have nothing else to offer.
Even now, when we are NOT on a gold standard, it is the exact same thing. The only difference is that the Chinese are now acting stupidly. Instead of telling us "Give us gold or goodies for our TV sets", they are content to accept our [soon to be worthless] paper money.
My humble blog
It's easy to refute an argument if you first misrepresent it. William Keizer