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Valyooo (99.81)

Printing metals

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October 04, 2010 – Comments (11)

I am bullish on silver and gold.  But one of the major criticisms of fiat is that it can just be easily printed.  If we went to a gold standard or silver standard, then you could just mine money.  Not all of the silver/gold in the world is mined, so that would cause inflation too, wouldn't it?

Also, as more people are born, more stuff is produced, so wouldn't there eventually be very little precious metals compared to the amount of items out there?

For example lets say there are 10 people on the planet and 10 silver coins.  The income is set at 1 coin per person

But if the amount of people double, theres too high a demand for silver money.  Would prices just have to keep deflating as stuff was made more efficiently?

 Not to mention it would be a pain to have to carry around so many coins with you...I hate change, I would much rather use my debit card.

Still bullish on metals, but a a less manipulated currency makes more sense to me than precious metals as currency.  I think money should be printed, just not as much as is currently being printed.  Anybody who knows the IS and LM curves should understand why money is not zero sum.

11 Comments – Post Your Own

#1) On October 04, 2010 at 1:34 AM, BillyTG (32.42) wrote:

Your example almost sounds like what Peter Schiff talks about in his book How Economies Grow and Why They Crash.

From what I've read, annual gold production is around 2,000 tons, which is something like a 1% increase to the total. Mining that gold takes enormous energy and costs.  If TMFSinch sees your post, he can hopefully cite some more specific figures.

Gold's annual production holds pretty steady compared to the Federal Reserve's arbitrary printing press.

There's no reason you can't use a debit card, credit card, and paper money on a gold standard.  That's what the "gold standard" is---the dollar is equal to a fixed amount of gold. No one needs to carry around silver and gold coins.  In the future, unless the world as we know it totally collapse, all formal transactions will be electronic---in the US, we're a big part of the way there (who writes checks anymore? How many of your bills are paid online?). But whatever currency is used still needs to be backed by something of value. Right now, the dollar is not backed by anything, unless you count oil, which is traded in dollars, but is mostly produced outside the US.

In your scenario, deflation would happen and deflation is perfectly fine. It's actually a good thing that should happen naturally as production and inventions make society more efficient. Read Schiff's book. It sounds like your ideas are nearly already in line with his anyways!

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#2) On October 04, 2010 at 2:07 AM, Valyooo (99.81) wrote:

Great, thanks for the suggestion!

My main problem with gold backing the dollar though, is that almost nobody would actually take physical claim for it.  So this could easily lead to the government lying about the amount of gold it has....speaking of which, isn't that a big rumor going around anyway?

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#3) On October 04, 2010 at 2:23 AM, BillyTG (32.42) wrote:

Yep, Ron Paul is leading the effort for an audit of the US gold inventory. Don't hold your breath that it will happen. The last thing the US (and global) economy needs is for more exposure that the dollar is in shambles.

As for your being worried about taking physical claim of gold, when we were on the gold standard, there is plenty of evidence that other countries and private citizens did plenty of exchanges for physical gold, right up until the US pretty much recognized that they didn't have enough gold to pay off their overprinted dollars, and then permanently severed the gold standard.

So, as you can see the problem is not gold, it's not a gold standard, it's not paper money. The problem is paper money not tied to gold or anything else of value (fiat currency) that is controlled by corrupt politicians and banks that have their own and corporate interests in mind. Our system is broken.

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#4) On October 04, 2010 at 2:32 AM, Valyooo (99.81) wrote:

I'm with you.

BTW, I never noticed you around here before about a week ago (maybe you used to be inactive, or maybe just because I have only been active for a few months and still don't know everybody), but I appreciate your comments on my blogs because they are helpful and I respect your opinion.

 

P.s. I just purchased that book on ebay.  I have about 15 books I need to read before that, but over Christmas break when I have more time I should be able to catch up on them all.

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#5) On October 04, 2010 at 3:01 AM, BillyTG (32.42) wrote:

Yeah, I've been following MF forever, but my participation is intermittent.

Schiff's book is an easy read with lots of pictures! Best of all, it makes sense. Maybe you can blog a book report on it. I'm telling ya, you'll probably be nodding your head in agreement while reading because your thoughts already align with his.

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#6) On October 04, 2010 at 3:09 AM, Valyooo (99.81) wrote:

Check back for that book report right around new years.

I never knew much about Ron Paul.  Everybody always calls him crazy, but I recently saw a few videos of him and would like to read further into his politics.

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#7) On October 04, 2010 at 3:44 AM, BillyTG (32.42) wrote:

I don't agree with a lot of his politics, but he's one of a VERY FEW politicians that I trust to look out for the public's interest above his own, that believes in the constiution, that doesn't endorse or write legislation that costs taxpayers dollars, that understands Austrian economics, that isn't a total crooked fraud.He's a medical doctor and served in the military, but his views are scary to those in power.

The corporate-funded mainstream media calls him crazy which is why the public thinks he's crazy. There's nothing crazy about him. Power fears him which is why they've tried, and mostly succeeded, at marginalizing him. As you learn about him, you'll notice that his large cultish following is almost all grass-roots, underground.  He doesn't enjoy the popular support that mainstreamers like Palin, Romney, Clinton, and others get from the media.

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#8) On October 04, 2010 at 3:54 AM, BillyTG (32.42) wrote:

Here's his last news appearance on Fox (Youtube vid) where he coincidentally talks about many of the issues mentioned in your blog. Paper money, gold standard, etc.

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#9) On October 04, 2010 at 11:36 AM, Griffin416 (99.98) wrote:

As it is in my caps profile, Schiff is the man. He turned me on the gold back when it was $650. A double in 3.5 years. Sometimes he is overly bearish though. When I listen to him to much, he makes me want to live in another country.

He has weekly blogs about 8 minutes each, which kdakota360 has on his blog when they show up. It is worth a listen.

Gold gets mined about 1% per year. The US population grows about 1% per year...I don't know about the rest of the world.

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#10) On October 04, 2010 at 6:40 PM, Earendil (< 20) wrote:

The most general criticisim of the gold standard is that the supply of gold does not grow fast enough to support a growing economy and/or a growing population with sufficient money supply.  This can lead to endemic deflation, which is generally regarded as problematic.

 All in all, this is probably the most cogent arguement against a gold standard.

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#11) On October 04, 2010 at 9:21 PM, BillyTG (32.42) wrote:

@Earendil, why is deflation "problematic"? As those favoring Austrian economics have noted, the idea that deflation is bad is one of the most impressive work of propaganda of all time. This just shows how far we are from sound understanding and responsible running of an economy.

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