I'm a bit of a soft-core libertarian, and an economist in particular.
A lot of reading and discussion I have read has let me with a number of questions regarding the worshipped "gold standard."
1) Gresham's law states that "bad" easy currency will crowd out "good" hard currency by default and market mechanics. A gold standard couldn't prevent this unless EVERY other currency became tied to the gold dollar.
2) Monometalic gold currency became a stepping stone to fiat money when the Brits took down the concurrent silver standard that kept them alligned properly - so a pure gold standard wouldn't be enough.
3) Why stop there? why not fixing copper? why not iron? or lead? EVERY good inflates fluctuates on a market. gold included. if you fix EVERYTHING, then nothing inflates. Multimetalic or Panmetalic currency standards should be even more stable than anything else!
4) Why stop at metals? why not link currency to aggregate production? though central planning is impossible on a human level, tracking aggregate production is getting easier by the day with computers - VIOLA! instant currency control. end to inflation - track market prices and adjust!
5) It still boggles me that Austrians pass such negative judgement on ALL forms of currency "inflation," however light - in a gold standard, printing more dollars only devalues them if the total amount exceeds stores of gold. So "inflation" where more money is printed to keep up with aggregate production ISN'T inflation, by the same token.
6) A General Question: What happens when technology and automation/robotics eliminates most productive work? agriculture after the industrial revolution and robotic assembly lines are good examples of how this could happen.
1) answered above. Gresham's Law is a variation on shortages that always arise when the government restricts the movement of prices. Murray Rothbard covers this in his 1984 video.
2) I don't know what you mean by this, but I can tell you that the market is best to decide which monies will be best for the market. Those monies which are accepted most widely will be the most useful. This has a tendency of eliminating the number of competing currencies as it is inconvenient to carry around various different monies, or have to have bank accounts backed by different commodities.
3) Price fixing is a sure way to ensure that those monies (commodities) which are under valued are hoarded and bartered (at melt value if exchanged at all) and those which are over valued remain in circulation. This is the fundamental problem with bimetallism when that means that the ratio is fixed by government and not allowed to fluctuate in response to the market's change in valuation.
4) Once you solve the problem of calculation of your aggregate production, you can sign up with every socialist country in the world to fix their information problems too. Sorry, but a handful of economists and technocrats can not amass the knowledge necessary to plan an economy or even a currency. In your current knowledge deficient state, the best you can hope for is to cause a bunch of business cycles as you attempt to find the right combination of factors to include in your estimate of aggregate production. You will constantly be wrong and like the army, fighting the last war, or in this case the last business cycle.
5) Aggregate production, should you figure some way to measure it, is not orthogonal to your monetary injections. Since you will have a certain percentage of positive growth in aggregate production (at least your measurement thereof) for every injection of money, you will constantly have the "proof" that more money is needed. This will encourage monetary injections above the real increase in the aggregate production and business cycles will commence. I don't see much difference between your aggregate production targeting and price level targeting of the Fed in the 1920s. It is a disaster waiting to happen. Hayek and Mises warned against attempts to maintain price stability, for this can only be obtained through inflation which results in changes in the relative price levels between various goods. Your aggregate production measurements will see this relative price movement and be as confounded by it as the Fed was in the 1920s, totally oblivious to the mounting malinvestment.
6) What happened to the horse whip and buggy makers after the automobile? I think they went into producing things that people actually want. No amount of robotic automatons or technological advancement will eliminate the needs for entrepreneurial action in determining the present and future wants of their potential consumers and arranging the factors of production to bring these goods to market. Until we are all in the garden of eden, there will be scarcity (certain things will be scarce even there) and the need for human action. Even in a world of superabundance due to mechanization, there are certain scarce resources which will need to be allocated rationally. Examples include standing room, and land in general, the use of every human's body, the waste products of production (most fundamentally, entropy). These and many others will prove to provide opportunity for plenty of human action and opportunity for productive work even when most goods are as free as country air. Be happy that the more roundabout production processes involving automation have been financed by saving in the past, for this has increased the real wealth of everyone in society, even the assembly line worker who is looking for a new line of work. Restrictions on the mobility of labor and restrictions on the movement of wages are what cause the most consternation when production processes are lengthened in a growing economy (or shortened in a shrinking economy).
Thank you. I appreciate your forward and thorough post.
Igor83185:I actually, among others, read that article - that's what I am talking about: government money: the "good" Gold standard Dollar vs. other "bad" non-commodity backed monies from other countries.
Sigh. No, monies have to have the same face values but different market values. For example, silver dimes no longer circulate now that non-silver dimes exist.
A US Dollar and a Canadian Dollar do not have the same face value and are not covered by the same legal tender laws, so neither will ever drive the other out. In a free market not ruled by legal tender laws, like international exchange, good money drives out bad; which is why the US dollar is the international Reserve Curreny and not the Zimbabwe Dollar.
Igor83185: . JonBostwick:Are you for real? Marx was worried about this a century and a half ago. And how many of you are factory workers or are engaged in manual labor? The majority of modern production of physical goods is done through automation. Marx was worried a century and a half ago and look what happened to factories - he was right - Tremendous efficiencies are gained through automation at the cost of no-longer-necessary jobs. So yes. I am for real. So was Marx. Though I am far from a Marxist.
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JonBostwick:Are you for real? Marx was worried about this a century and a half ago.
And how many of you are factory workers or are engaged in manual labor? The majority of modern production of physical goods is done through automation. Marx was worried a century and a half ago and look what happened to factories - he was right - Tremendous efficiencies are gained through automation at the cost of no-longer-necessary jobs.
So yes. I am for real. So was Marx. Though I am far from a Marxist.
He was right? So there are fewer jobs today then there was back then? Ha!
Igor83185:On the contrary - whenever I use money, I am redeeming a dollar for it's worth in aggregate production. That's the entire point of currency. Additionally, the government [any government?] 'owns' a fair amount of other capital, land, resources, you name it. All of these would be capable backing a currency, would they not? why limit it to gold? That is the essence of my question - why not open it to much broader and therefore more stable standard?
Again, your questions demonstrate a lack of understanding of the issue.
When you spend a dollar you are engaging in an exchange, but no person has an obligation to accept your dollar. A gold backed dollar would create a contractual obligation for the government to exchange it for gold on demand. A dollar then becomes a warehouse receipt, where by people exchange ownership of gold with having to actually have it in their possession.
Peace
JonBostwick:He was right? So there are fewer jobs today then there was back then? Ha!
I didn't say fewer jobs. I said fewer jobs that produce goods directly - Marx was dealing with an economy where the vast majority of production was done by hand. Automation eleminates individual production with a more efficient system. There are MUCH fewer agriculture and factory jobs per capita than back in Marx's time. What happens when technological efficiency outpaces job growth?
Basically, is 'Entrepreneur' or 'Inventor' of 'Consultant' - jobs with no direct production - going to become the majority of job titles in the future due to technology?
I said fewer jobs that produce goods directly - Marx was dealing with an economy where the vast majority of production was done by hand.
February 17 - 1600 - Giordano Bruno is burnt alive by the catholic church. Aquinas : "much more reason is there for heretics, as soon as they are convicted of heresy, to be not only excommunicated but even put to death."
I was asking a question: why ONLY gold? why not ALL governent assets, if you are considering gold to be one?
Perhaps I was a bit abrupt earlier, so I am going to take a different approach. Why do you believe the above? It has nothing to do with what governments do or do not own. It has to do with what individuals value.
Freedom of markets is positively correlated with the degree of evolution in any society...
I don't know about "entrepreneur", as that is one of the most vital roles in the market economy, but sure, perhaps most future employment will be service sector or highly skilled manufacturing jobs.
Igor83185: JonBostwick:He was right? So there are fewer jobs today then there was back then? Ha! I didn't say fewer jobs. I said fewer jobs that produce goods directly - Marx was dealing with an economy where the vast majority of production was done by hand. Automation eleminates individual production with a more efficient system. There are MUCH fewer agriculture and factory jobs per capita than back in Marx's time. What happens when technological efficiency outpaces job growth? Basically, is 'Entrepreneur' or 'Inventor' of 'Consultant' - jobs with no direct production - going to become the majority of job titles in the future due to technology?
You are getting ahead of yourself.
Marx feared that increases in automation would cause an increase in unemployment. Well, today we have that increase in automation and it hasn't caused an increase in unemployment. So Marx's fear was unfounded. And you are just as wrong as he was.
Igor83185:What happens when technological efficiency outpaces job growth?
Labor saving can not outpace job growth. The demand for labor is unlimited. What happens when labor savings comes into existence is that production increase. The only reason that labor saving technology would cause a reduction in jobs would be if production was static, but production is not static; there is no reason to believe it is static. Production today is vastly higher than it was a hundred years ago.
Igor83185:Basically, is 'Entrepreneur' or 'Inventor' of 'Consultant' - jobs with no direct production - going to become the majority of job titles in the future due to technology?
You viewing two separate phenomenons and believing they are the same thing. Most factory jobs that have left the US have not disappeared, they have moved over seas.
Americans are being employed increasing in "non-productive" jobs because America is able to buy imports by exporting nothing more than dollars. When the petro-dollar system fails Americans will be forced to produce for themselves and will return to the factories.