Prof. Lawrence H. White: The Gold Standard, Explained
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- Опубликовано: 5 май 2013
- Before 1974, U.S. dollars were backed by a gold standard. This meant that the federal government could not print more money than it could redeem for gold. While this constrained the federal government, it also provided citizens with a relatively stable purchasing power for goods and services. Today's paper currency has no intrinsic value. It is not based on the value of gold or anything else. Under a gold standard, inflation was really limited. With floating value, or fiat, currency, however, some countries have seen inflation reach extremely high levels-sometimes enough to lead to economic collapse. Gold standards have historically provided more stable currencies with lower inflation than fiat currency. Should the United States return to a gold standard?
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Wow! I actually learned something cool: The British Pound is called the "Pound" because of the Silver Standard! No, seriously, these sorts of videos are awesome!
my mom worked at a post office and saved silver coins worried dollars were only paper. We laughed at her socks full of silver coins and then copper pennies before 1982 I think. She passed, we ain't laughing now.
Same here
Silver dimes , quarters , half dollars , and silver dollars minted BEFORE 1965 .
1964 and EARLIER .
A father and son traveling along the south in the early 1960’s - dad left his wallet home ; they were almost out of gas . He went in his ashtray and found a quarter- he bought a gallon of gas and got back home .
That SAME 1964 quarter buys a gallon of gas today …
Early 1960’s minimum wage was about $1.50 an hour .
The same (6) quarters are well over minimum wage today !
( approximately $18.00 )
$25.00 in the 1920’s bought a 1 ounce gold bullion .
A man could buy a real NICE suit , a hat , a pair of shoes , and take a lady out to a “swanky” restaurant .
TODAY - same coin , buys a real nice suit , a pair of shoes , and can take a lady out to eat at a nice restaurant .
That same $25.00 fiat cash from 1920’s could maybe get a couple of combo - metals at McDonald’s ..,
BAM 💥 😊
i know right,cool just cool
I always wondered pound sterling is a very odd name, until now, which actually makes a lot of sense.
In a nutshell: gold/silver standards limit the power of governments and banks by holding them responsible for the currency they print. We can't have that now, can we?
Didn’t help during the Great Depression!
@@sommerray5600 Actually, it helped a lot. That's why the government abolished it and robbed the people of their gold at below market value to sell it to others at an inflated price.
@@sommerray5600
Margin lending caused the Great Depression, so fiat but with less liquidity
Buy physical silver it's happening soon
Technically governments don't print the fiat currency, the central banks do. Governments borrow money from the central banks and the bank prints it out of thin air. The Federal Reserve bank isn't a government entity. The illuminate bastards Rockefellers and Rothchild's came up with the central banking scam in 1913 to control the people. Central banks control governments, governments control people.
I never viewed metals as an investment, but I always saw it as a great way to save your cash & retain the value from when you bought it. It’s not hard to turn it to liquid cash, and it beats letting inflation destroy your savings.
You are in for a nasty surprise, my friend. Gold is often hailed as a hedge against inflation-increasing in value as the purchasing power of the dollar declines. However, government bonds are more secure and have shown to pay higher rates when inflation rises, and Treasury TIPS provide built-in inflation protection.
I think having an investment advisor is the way to go. I've been with one because I lack the expertise for the market. I made over $490K during the recent dip, highlighting that there's more to the market than we average folks know.
That does make a lot of sense, unlike us, you seem to have the Market figured out. Who is this fiduciary??
“SONYA LEE MITCHELL” is the licensed advisor I use. Just research the name. You’d find necessary details to work with a correspondence to set up an appointment.
I copied her whole name and pasted it into my browser; her website appeared immediately, and her qualifications are excellent; thank you for sharing.
School always taught me the gold standard was bad, but it always felt right to me. Having a theoretically infinite amount of money for the government to print scares the hell out of me. Also stripping power from the federal government is a very large bonus in a super low inflation rate
Gold standard is bad, because it leads to deflation which is worse than inflation and because controlling money supply is very important for the economy and is impossible with gold
@@locybapsi174 are you trolling?
@@austinbevis4266 No that's true
@@locybapsi174 I’ve had the same wage for a year now and from the start of my job to now my purchasing power has decreased substantially. How is that a good thing? And that applies to everyone that doesn’t have employers that give inflation based raises. Maybe you’re happy that the economy has more liquidity when there’s more money, but that’s not really a huge benefit when it comes at such a large cost.
@@austinbevis4266 Well obviously, that's not a good thing (for you), but it's not the fault of inflation, it's the fault of your employer and slightly your own for not fighting harder for it. Generally and on average salaries increase along inflation, that's the rule, they even on average increase above it, if overall economy keeps rising. So inflation is not the problem here, as you said it, the problem are employers who do not raise salaries.
The Fact we are not on the Gold standard is reason enough for Revolution
james murphy that was where we failed and everyone went to sleep. I get so angry having to listen to all the bullshit; gender studies, welfare, affordable care, climate change, cultural sensitivity. All this bullshit because we allowed the left to have a voice and didn’t stand up to Roosevelt and Wilson. They should have been publicly executed. But people in a temporary moment of discomfort couldn’t remember how their grandparents did just fine with very little decided it would be wisdom to bend over and let the government insert its “solution.”
yea but most americans are delusional and sheeple. thats not likely is it now..
Toasty Volvo I still penny pinch like my grandpa did in 1942. If more people learned how to live poor, we would do much better with our finances.
@@brad349miller The pollution on the environment is a big issue , if you don't believe me just take a big sip of oil , a bite of coal or a huff of natural gas and see how it will make you sick ( these fuels are underground not on top where 97% of life lives on ) that is what we are doing to our water, ocean etc etc .
Making a 20 dollar bill cost the same to make a one dollar bill 😂 what’s crazy is it’s probably more expensive making a penny
Soooo we’re going to let Woodrow Wilson off the hook by signing the fed reserve into law in 1917?
Nobody is "off the hook" history will record the acts of the traitors.
Don't forget Richard Nixon getting rid of the Gold Standard with the help of LBJ.
1913
Woodrow Wilson's a peice of crap
Nobody teaches about Woodrow Wilson or the fed reserve in school. Your question might be: Soooo we’re going to let the people who write the school books off the hook by signing the fed reserve into law in 1917? xD
In my high school economics class in they taught me that a stable inflation rate of 2% is good and that the main reason for taking us off the gold standard was because there wasn't enough gold to equate the dollars. So you can see where the train of thought starts.
Lol, schools are doing their job dumbing down the population
As long as there aren't more cents than gold atoms there isn't such a thing as not enough gold. The price just needs to get reevaluates.
If X amount of circulating dollars result the price to be $20/ounce then doubling the supply should result in gold costing $40/ounce rather than "ups. No more gold"
I'm not saying this as in you are serious
Stupid. I bet you know it yourself. But it was a interesting comment to reply to
Inflation isn't really the issue. Inflation decreases the value of the dollar, so more money can exist at the same total value.
But the second point is correct. There isn't enough gold to back the world's growing real value in currency supply. The supply of gold is disconnected from how much real value we need for currency. There is no correlation. The market forces dictating its value don't correlate to how much money we need.
Besides, when we actually break it down, gold is fiat. You want it because you believe other people will accept it. They accept it because they assume yet more people will accept it, and they will. But none of the people involved can actually use it except to give to the next. It's industrial uses only take a small portion of production, so 90% of its value is just us thinking it has value.
@@unigaming9921but at least gold is not based on thin air. It based on something tangible which you can hold in your hand.
@SharukhSaifi faith isn't thin air. It's very real and is the reason people accept your money. Meanwhile gold has no actual relation to the desired value of all money, making it worse than "thin air"
An additional advantage is that it provides stability when adopted internationally. Take a look at history, the Romans debased themselves into an implosion while the Byzantines after stayed stable for almost 1000 years due to stable currency.
Did you get that from Bitcoin standard?
The gold standard could be one of the best tools to increase the middle class, stable purchasing power as essential for savings and wages to be useful in growing wealth over generations.
This is exactly one of the reasons why the US government stopped it, also for world economic dominance at the sacrifice of all citizens and country that’s why the federal reserve and the elite are so corrupt and evil and hold all the wealth
No No No. We can't have a secure middle class. The elites should control and own everything while the rest of us are drowning in debt and dependent on the elites.
@@abdirahmanidris290 so true! You have opened my eyes to the wisdom of Reaganism!!!
@@lukepeterson9342 you're welcome. I think we should give a round of applause to the generous politicians that don't allow us to own or inherit something without a tax. We wouldn't be able to handle the responsibility without those kind hearted, totally uncorrupt elites
They dont want generational wealth.....except for themselves. They are continually making laws to tax people out of inheritance and even home ownership.
The gold standard was controlled by a group of countries headed by the US and England they kept the price of gold artificially low to "increase" the value of their currency. When the gold standard was in effect there were strict limits on the amount of gold private individuals could own.
Finally, a simple comprehensive description of the gold standard. This video nailed fiat currency on the head, just a handful of political appointees deciding the inflation rate.
Ben Bernanke is one of those pompous asses that tries to say that inflation is necessary to stabilizing the economy. When in actuality inflation destabilizes the market.
@You can eat in class!! true I guess its fine if we have controlled inflation of 1% - 3%, so the price is stable enough that people can get used to mild inflation and calculate that into their investments and businesses. But the issue is that over time the central banks always lose control of inflation, because something unpredictable happens like war or pandemic which requires reaction. Which means the inflation is going to be all over the place which makes it impossible for markets and people to price things accurately because you can't even predict the value of currency in 3 months, much less in 10 years. How are you going to make any long term investments?
@@sten260 I think you're getting to the heart of this issue here! Currency isn't some magical entity with inherent value, it's actually a method of changing behaviour. Mainly it was used to allow people who don't trust each other to still engage in mutually beneficial trade, bypassing their distrust of one another for their own inherent trust in gold.
Fiat money encourages spending. Not a specific type of spending, just spending. As you rightly point out it doesn't encourage longer term planning, which is often less profitable, but better for stability and other benefits that are not economic in nature. I think the 2008 crash is actually an inevitability of fiat currency, because it doesn't have a self restraining force to make both individuals and governments plan long term.
And cheapens the standard of living
That's incorrect. The political appointee's are the board of governors in the central who are different than the committee members from each regional bank. The private sector determines monetary policy. This guy is a quack.
Am I the only one to dare question why the Fed has so many dual citizenship Jews in control of our government?
Getting rid of gold standard and not coming up with something similar was the WORST decision made in modern history
BTC.
The two movements I would look into is the Farmer's Alliance of the late 1800s and Shay's Rebellion, after the Revolutionary War. Both of these movements were the strongest popular struggles against gold currency and gives you sort of an idea how destabilizing such currency actually is.
This is so much helpful. Helps grads build proper foundation reg. the economy as a whole - since - at end - all gets valued in terms of USD and many of us did not know what USD was based upon. (In past - Gold, now - thin air) Such videos are rare on basics, but has huge value, Thank you!
i need this for my history class..i searched for hours for a good german explanation bc i am german, then i search in english once and boom- i understand it better than 2 hours of german videos and dokus
The great thing about commodity-based currency 's that it doesn't even have to be gold or silver, it can be literally anything of value. There could be a banking market for labor ensured currency, land ensured, stock ensured, etc. Assuming the removal of a central bank and any gov't involvement with the monetary system that is.
Too complicated. That's not what money is for, to have different values on it. Its suppose to be standard value for any and all transactions . Otherwise it's a pain to use. Even if you live your life behind s computer and think it's no trouble at all. It is.
These are awesome videos, congrats. Also kudos for great production quality.
Btw do you know where I can find graphs supporting the gold standard stability, I need it for a school project.
Poo
Look up "What happened in 1971"
You guys each make seemingly good points however I believe you guys are looking different sides of the same coin to fix an issue inwhich that very coin is responsible for our issues.
The solution to our current econ problems are actually rather simple. Friedrich Hayek championed two basic ideas.
1) A gov should have no control on a free market.
2) The only manner to truly insure stable market is via competing currencies.
One person here mentioned the fact that the gov and world banks set the rates for gold just as they do for the US Dollar. This is very true. However, if there are competing currencies if the gov decides to inflate currency "A" the public would simply utilize currency "B" or "C" based on the rates and fairness of the companies responsible for the different currencies. I must admit, I love seeing how many people are willing to admit they don't know much on this subject yet are eager to ask questions and continue their journey of discovery. I wish more americans had that drive.
we can have an financial revolution through cryptocurrency
Crypto kills governments
@Patrik Neudler The comment was made in 2013 loooooool
Worked out really cool during the great depression... This is one very one-sided video. The problem is not whether gold standard or fiat money, the problem is systematic corruption. Capitalism is ok, but the rules should apply
@@balazshorvath3860 you forget that Great Depression market crash was created by the expansion of credit by the fed and was even more exacerbated the Hoover’s tariffs and wage control.
We don't need a "gold standard". What we need is the freedom to use whatever we want for money. My bet is that the overwhelming choice would be gold, silver and copper, sound familiar? What we don't need is a bunch of politicians or their political appointees setting an arbitrary ratio between the three metals or determining the "value" of money. Let the market place determine the weight and purity of each coin. Personally I would prefer if each coin was simply marked with its weight in ounces or whatever, no need to add an arbitrary "dollar" value. Banks would be free to print money substitutes equal to the amount of metal in their vaults and other assets (verifiable equity). These money substitutes (bank notes) and copper coins would be redeemable on demand in gold or silver as stated on each gold or silver note.
agreed.
That is done in many cases.
The first currency (and writing) was actually debt tablets. Debt and credit existed long before the gold standard or even coinage.
I bet that would be the first choice. Farmer jack would give butcher John some corn because he knows that butcher John will give him some steaks when he slaughters the cow.
My only thing against the Gold Standard is that a lot of economist say there just isn't enough of it and therefore would limit economic growth and lead to possible deflation.
there are some avenues to consider. in the far future we could mine asteroids for their precious metals. in the short term we could simply create new smaller denominations of money. The US used to have a half-penny
The Panic of 1893 led to a run on Gold and US Gold reserves were depleted. Nixon took us OFF the Gold Standard BECAUSE of inflation in the 1970s. We only had a Gold Standard for about 100 years. We in USA were on a Silver during the period of another Gold shock he refers to. Videos like this have an agenda.
@@chronic_corpse4638 so this begs the question why not digitize gold? a supply of 32 million coins that can be fractionalized infinitely… why not try backing a currency on bitcoin
Not true. Digital gold is there. Also inflation would be lower so GDP won't grow like today. But isn't that the point? Most of the growth for last 5 centuries have not trickled down to common people who have gotten poorer
If someone ever says there’s not enough gold for a Gold Standard system to work they don’t understand the Gold Standard.
Gold standard makes sense to me
Then you need to reevaluate everything that makes sense to you....
@@williamatchison5230 actually, you need to reevaluate. As the video explains, gold standards have been very stable, and a stable currency is good for the economy. A fiat standard, where currency value is determined by the amount of money in circulation and the government has control of the amount of money is circulation, is very unstable and bad for the economy.
It’s a matter of practicality. I don’t know what I was intending when I wrote the comment 10 months ago, but I may have intended it to be in reference to going back to the gold standard, in which case the defensibility of the statement is pretty self evident.
Either way, both gold standard and fiat have their stability and instability.... gold is a seemingly more stable answer to inflation, fiat is a more stable answer to deflation...
Although the extent to which is debatable, it is universally understood that the usage of the gold standard contributed to the greatest worldwide economic disaster, the Great Depression. Both in cause (by way of contraction of the money supply) and in prevention of recovery.
The most detailed and enlightening arguments I can think of for this were proposed by the famous juggernaut libertarian economist Milton Friedman, if you wanna check him out.
Whether the gold standard could have continued to work, is to me and many others, unlikely. However the idea it could ever be implemented again is near economic suicide.
But perhaps I’m wrong. I do appreciate the reply though, I haven’t talked about this in a long time.....I guess ten months at least lol.
@@williamatchison5230 Thought the Fed caused the GD.
@@soullesseater9327 yeah ur right.
Let me put it another way. If you make $50k/yr and spend $50k/yr, there are different ways to increase your spending. 1) Acquire debt to start a business that increases your income. In addition to your $50k/yr salary you buy a business that costs you $25k/yr in interest to bank, but makes you $50k/yr in profit (net $25k). You now have $75k/yr to spend. 2) Borrow $25k/yr to spend it. In both cases you have $75k/yr to spend, but in one you truly have it to spend, in the other you're acquiring debt
"The Gold Standard Debunked" by; StopTheRobbery2
Has a great counter argument. Only 10 minutes long.
Very good explanation, thanks for making this video
How about ending the "federal" reserve.
They have bought all our politicians it will never happen ron paul tried it.
@Christianity Boxing Mafia Trump is not ending the federal reserve.
I'm so glad I found this channel
Even in Adam Smith's time when people used silver coins in European countries, states and princes often cheated their way out of debt by creating diluted silver coins to pay back.
What a scandal. It ruined bunch lenders and worth of coins because their diluted silver coins didn't have as much silver.
But what about the hyperinflation in Spain after it started to ship massive amounts of silver from Argentina?
Also, a health inflation rate is 2%, not 0.5%. That's practically deflationary.
***** It also means your wages will drop.
A healthy inflation rate is 0%. It is true that 2% inflation is better than 2% deflation. But 0% would be ideal. Why would wages drop? What do you mean by that?
Interesting how I never heard the word “deflation” once in this video
But how was the initial value determined. I cannot understand this. How was it determined an oz was 20.76. Like before paper was issued. How did people determine the exchange value of an oz of the metal
No, the real question is which system provides more stable currency value AND more stable economic growth. You left out the main reason the US switched to a fiat system, which was the belief that the gold standard was limiting economic growth.
How do you plan to finance wars when you have gold standard and cant print more money?
Military is a fraction of federal government budget. Taxpayers could afford it if we didn't have multi-trillion dollar liabilities such as social security and welfare
If you finance your war by printing more money, your currency will suffer as if you had declared against it. Inflation will drastically increase by just printing more money. Its that simple. The reason for high inflation is printing more money (extremely simply put)
GREAT GREAT GREAT PRESENTATION. I COMMEND YOU SIRS!~
Economic growth as measured by what? GDP? If so, then you're seeing the effects of expansion in debt. Credit is necessary for entrepreneurs, but what we've seen is credit used for consumption instead of wealth generation. It gives us the illusion of a growing economy, but in reality, we're just spending money we don't have.
A nicely made video that convincingly makes its points.
What about the frequently cited counterargument that during the Great Depression, the countries that left the gold standard sooner were the ones that returned to prosperity faster?
My biggest question about the gold standard is what happens when your money exceeds your gold in value. In other words what would happen if, hypothetically the world had $50 billion dollars of gold and $100 billion dollars of fiat/paper money. The only thing I can think of is to artificially redefine the value of the money and/or gold as needed, but if we do that then the value of money and/or gold doesn't mean anything because then the value could just be redefined and changed on a whim and we could run into problems trying to keep up with dramatically shifting values for both money and gold. I hope my question makes sense and doesn't just seem like incoherent nonsense.
whenever someone deposits gold, mint the gold into bars and rounds with a serial number pressed into them and issue then notes and tokens with the same serial numbers printed/pressed upon them and only redeem notes and tokens for specie imprinted with the same serial number.
The problem that is often ignored by people who want the gold standard....is that there is not enough gold in the world to cover the current value of currency already....
And if, like the original poster said, you altered the value of gold to be increased for compensation of this problem....then you would not only need governments to enforce its arbitrary value (which defeats the purpose) but you would also DEVASTATE the industries that use gold.... possibly causing a major collapse in electronic technology, surely devastating the jewellery market as every bit of jewellery would be worth astronomical prices...
It's...just....fucking.....crazy...
If the world had 100 million units of dollars and 50,000 kilos of gold, then each dollar would be worth 0.5 grams of gold.
If the world then produced only 100 million units of widgets then each widget would be worth $1 or 0.5 grams of gold.
If overnight, the widgets suddenly doubled, then each widget will then be worth $0.50 or 0.25 grams of gold.
And if the supply of widgets suddenly declined to 50 million units, then its price would increase to $2 or 1 gram of gold.
In a fiat scenario, the dollars can suddenly increase to 200 million or 300 million units, making the same 100 million widgets worth $2 or $3 from the original $1, making inflation a norm because the production of dollars becomes arbitrary and instantaneous.
White addresses this in one of his lectures. It's actually common knowledge among academic gold standard proponents.
ruclips.net/video/99dTApHQhmE/видео.html#t=56m40s
No monetary system in modern world history (post-Renaissance) has backed 100% of demand deposits and currency with gold. The closest I know of is the 1844 British Peel Act required monopoly Bank of England notes to be 100% backed by either government securities or gold, but not demand deposits which were much higher. This rule in and of itself caused multiple banking panics where Parliament was forced to suspend the 100% backing rule on four occasions. Gold has never backed 100% of banking money instruments, ever, in U.S. history.
So if you simply replace today's system "required reserves" with the equivalent market value of U.S. gold holdings, there's plenty of gold. Required reserves were gold during the classical and Fed gold standards as well, not 100% backing of all M1 or M2 instruments.
Today in the Covid-crisis required reserves are set at 0% of bank liabilities, but they will probably return to 10% when the crisis ends. Thus there have been many many multiyear windows in the last few decades where the market price of gold was more than sufficient to replace fiat required reserves with gold reserves, and at a far higher reserve ratio than 10%.
It's simple, you don't make more dollars than the amount of gold you have. Dollars are suppose to be a convinient temporary replacement for carrying gold around with you so you can easily trade.
Question: In which economic times do governments think money-printing is a good idea? Answer: All economic times.
The practical question is not, "Which system better limits inflation," but rather, which system provides for a better functioning economy and is more conducive to long-run economic growth and ultimately boosts living standards the most. This video is completely factually accurate (and very well done) but neglects the significant risks posed by deflationary economic environments and the resulting economic trauma it can inflict (in both the short and long run).
Very solid arguments: inflation is worst with Fiat money. JP MORGAN said:
Gold is money. The rest is credit. Right Sir.
what about deflation?
Deflation is good and is the cure
Based on the comments below, someone really needs to tackle deflation, which apparently is considered as bad as nuclear annihilation. So many underlying assumptions and irrational fears to work through.
You can kind of see why...what with the giant economic problems deflation has caused...
economic collapse with excessive wars and massive government spending especially on fiat money brings in collapse. Roman Empire = U.S.
Deflation is great...if you are debt free. Even better if you're a creditor.
@@yuki-sakurakawa You have to understand the circumstances in which people and businesses go into debt. How many people today take on debt because they know that inflation will minimize it?
Otherwise, deflation is great if you are retired on a fixed income, or if you're just a worker living from paycheck to paycheck. You would know that you could buy more, even if you don't get a nominal raise in income. And your savings won't be eroded away by inflation. Deflation doesn't cause economic problems, things like massive, unsustainable debt cause economic problems.
The USD does have a free market effect to rein it in. You can sell it for other currency. Inflation is also more complicated than just the printing/debasing of money.
Great vid, Larry! When's the Free Banking video coming out?
Who here from andrew mf tate
Me bro😂
How you gone call us out like that 😂
Simply saying other countries using gold standard are stupid!
pt 2 - It seems that Keynes didn't account for a perpetual and inescapable debt spiral when money is lent into creation, and the debt always out-paces the ability to repay the debt.
If I had a small country and we had a gold standard, what would stop a foreign country from hoarding my currency then exchanging it for my gold which will then lower the amount of gold in my bank?
I liked the Gold standard more than worthless fiat money
One thing he doesn't mention is that the 'glory days' of the gold standard coincided with the period of gunboat diplomacy by the British empire and the coincidence that the production of gold roughly equaled the need for more currency. Going back to the gold standard as a way of making economies stable and people prosperous again is an appealing fantasy. The American nostalgia for the good time of the 50s and 60s wasn't because of the adherence to the gold standard. Promoting it now as some sort of great solution is just dealing in dreams in times of desperation, and that can turn out very badly.
it’s true, a lot of us are quick to forget the importance of increasing the money supply.
Well-said.
well, russia has all the world against them economically in the form of sanctions, the ruble was crashing, then, they backed the ruble to gold, and now its worth more than it was before they invaded ukraine. Seems to have worked there.
When did they back ruble to gold?
@@CodeLab98 after all the sanctions took their toll
I love these videos thank you for the great work
Gold has no intrinsic value. Its just moving the illusion of money one step back.
It is scarce and can't be created. If people could create gold, the gold standard wouldn't work, we'd still get inflation.
gold standard has a big drawback though, people tend to attack neighbouring countries for their gold when their own runs out
Although that is a draw back but that's not actually a draw back within the range of economy per se, which is the point of the video.
It's hard to take a video seriously when the lighting is so awful.
That makes no sense and is irrational thought at its finest. Regardless of the video, the point say via radio is the same. In other words, the video is irrelevant.
It's hard to take a person seriously who judges a video about economics by it's lighting
QED
🎯 Key Takeaways for quick navigation:
00:00 🌐 *Introduction to the Gold Standard*
- Explanation of the gold standard.
- Definition of the monetary unit in terms of gold.
- Overview of the international gold standard before World War I.
00:31 💰 *Gold Standard Mechanics*
- Definition of the U.S. dollar in relation to gold.
- Comparison with the silver standard.
- Role of private mints and commercial banks in providing gold-denominated money.
01:25 🏦 *Redemption and Stability in the Gold Standard*
- Explanation of the obligation to redeem in gold.
- Contrast with the unbacked, fiat dollar standard.
- Historical stability of the purchasing power of gold.
02:20 📜 *U.S. Departure from the Gold Standard*
- Overview of the two majorsteps in leaving the gold standard.
- Impact of President Franklin Roosevelt's actions in the 1930s.
- Nixon's decision to end the redeemability of dollars in 1971.
03:18 🔄 *Stability Comparison: Gold Standard vs. Fiat*
- Addressing objections related to random shocks in the supply and demand for gold.
- Historical example of stability post the California gold rush.
- Comparison of money supply decisions under the gold standard and the fiat system.
03:43 📉 *Historical Performance: Gold/Silver Standards vs. Fiat*
- Evaluation of the historical record.
- Comparison of inflation levels between gold/silver standards and fiat standards.
- Assertion of gold and silver standards' superior performance in providing stable, low-inflation currency.
Made with HARPA AI
Nice. Loving the channel so far
Gold is just another form of currency that can't be printed. Instead, your money supply is determined by some dude with a pick axe in Chile. I like competitive currencies better. Just let the market accept whatever it wants as payment.
+xxCCBBxx The market didn't chose whatever it wants as a payment. It was imposed by governments for political reasons.
You can have both.
The Guy in Chile , needs water , food , shelter , Gas and supplies thus create value ..... “Competitive currencies” are made with a click of a “mouse”.
"Today's paper currency has no intrinsic value."
NOR DOES GOLD MONEY. Gold is only valuable because people assign value to it. A sack of potatoes and a keg of purified water has intrinsic value to humans than gold does as both will keep you alive. If gold was more common we would use it for pipes and to roof our houses.
Gold was adopted for currency by pre-industrial civilizations when the world had a population in the tens of millions, many of which outside the cash economy, even in civilized areas. In the middle ages most people did not use currency in day to day transactions much, your average peasant produced most of what he/she used. Then the Industrial Revolution happened, the population increased and more people worked for wages. Humanity's economic output, the real thing of value, grew faster than our supply of gold did. This led to deflation of value, which was great for the rich and sucked for everyone else. There is a reason why NOBODY used the gold standard anymore.
To the Libertarians and other magpieish Reactionaries: YOU SHALL NOT CRUCIFY MANKIND UPON A CROSS OF GOLD.
Main-stream economics tries to hide the distinction between use value and exchange value. So you are partly right. But Adam Smith discovered that the value of a commodity is determined by the amount of human labor required for its production. People need water and corn to live, not gold. But an ounce of gold costs much more labor time to produce than a bushel of corn or a tank of drinking water.
Grey Norton An important reason why gold is the prefered universal equivalent, is that, despite all the technological advances in mining, the labor time required to produce it has hardly changed over the centuries.
ImperatorZor lol well said!
ImperatorZor If by "intrinsic value" you mean "1oz of gold is actually worth 800(roughly) loafs of bread," then technically speaking you're right. Gold doesn't technically have an intrinsic value in that sense. But in another serious sense, it does have a lot of value; you can't legitimately inflate gold because there is a limited supply of gold in this world. What this means is that gold doesn't hold value in itself, but because of its limited supply (that it is limited IS a vital trait to real money, as opposed to fiat currency) and (fairly universal) desire for possession (because shiny rock; I know, it's a silly reason) this means that gold is highly valuable as a STORE of value-- the value created by human industry, human labour.
We need some kind of universal trade tool. I'd sooner trade in a universal tool that can't be inflated under political whims than a trade tool that can be inflated under political whims, if I were given the choice. It's not that gold is some magical entity, or anything. It's just that we need a tool to deem "money" that we might obtain the things we need to live. Think pure trade would work? Suppose you make tables and chairs, and other furniture. You can only give it to the local farmers in exchange for food for so long before they literally do not need anymore. Then what're you going to do? Give it to the blacksmith for food? He's only going to get so much off of the tools he gives to the farmers too. To deny the value of money as a tool is to suggest that we should have never become more than farmers at best, hunter/gatherers at worst.
And if you think the deflation of the value of gold by default leads to the rich becoming inordinately wealthy all on its own, I would implore you to think again. Part of the issue is with monopolies, for one thing. Another part of the issue is that during the Industrial Revolution, the jobs workers were put on were legitimately worth dirt, and today would be much better handled by machinery because nobody would dare work for so little. Plus, if you think that inflation is good for the poor, you've got another thing coming; look at the ever-widening gap between the rich and the poor all thanks to paper currency.
Yes you need some form of money, but gold is a VERY poor thing for it in the modern age. Between 2010 and 2013 the Gross World Product increased from 60 trillion USD to 75 trillion USD, or an increase by twenty percent. The global supply of mined gold in 2010 increased from 162,500 tonnes to 165,000 tonnes. Since there have been no headlines about major gold discoveries since then lets say that the world's gold production has increased by 7,500 tonnes since then. That's less than a twentieth increase. Gold production does not correlate to the economic output of the world. As such it is a bad system to have for economic prosperity.
You know that quote of mine? That was from William Jennings Bryan who gained a lot of support in the 19th century by challenging the Gold Standard, which was rightly seen as being an unnecessary constraint on the cash supply and sucked for poor rural people. There is a reason why gold has been so thoroughly rejected as the base of currency in the 20th century. Deflation can be as bad as inflation if not worse.
Also "the value of currency can be directly controlled" is an argument FOR fiat currency as opposed to currency hooked to some arbitrary substance due to magpieish tendancies who's uncontrolled shifts in value can cause massive damage or leave an economy languishing.
3:49 The more important question is, which system is inherently more susceptible to manipulation, which I suppose is the point he may be trying to make about inflation.
There are three things that make "good money":
1- Store of value
2- Unit of account
3- Medium of exchange
Fiat currencies (not backed by gold or silver) only serve two of those three functions. Commodity currencies (backed by PMs) serve all three functions.
Whos here from andrew tate?
here from the adin live😂
Actually Gold Standard is nuts. The problem is that today gold supply grows too slowly in comparaison to our economy or gdp, so having a gold standard causes deflation which is much worse since hampers economic growth.
Francis Lecuak prevents hyperinflation.
When the dollar surfers Inflation its value decreases. This means it takes more dollars to purchase the same amount of goods it did before the inflation. Your paycheck however will not change with inflation, instead it will decrease in value and you will have less purchasing power over all.
When the dollar surfers deflation its value increases. This means it takes less dollars to purchase the same amount of goods it did before the deflation.Your paycheck however will not change with deflation, instead it will increase in value and you will have more purchasing power over all.
To say that deflation is worse than inflation when the dollar has lost 98% of its value through inflation is just ignorant. We need radical deflation just to come out to par. Then we lock in the value by going back on the gold standard. Put simple, Inflation takes from the people, Deflation gives to the people.
Deflation does not "give to the people"....*sigh*...
Just because (hyper)inflation has side effects does not mean deflation doesn't.... in fact, the side effects of deflation are far more serious and problematic....
Deflation DEVASTATES ECONOMIES....this is basic economics....
The Great Depression was CAUSED by deflation....not inflation....
This is what you get when economic principles become politically charged....you get people supporting or condemning them without any knowledge in economics at all..
Here's a quick excerpt from "Investopedia", as it explains it quite well:
"Deflation is a general decline in prices, often caused by a reduction in the supply of money or credit. Deflation can also be caused by a decrease in government, personal or investment spending. The opposite of inflation, deflation has the side effect of increased unemployment since there is a lower level of demand in the economy, which can lead to an economic depression.
Declining prices, if they persist, generally create a vicious spiral of negatives such as falling profits, closing factories, shrinking employment and incomes, and increasing defaults on loans by companies and individuals. To counter deflation, the Federal Reserve (the Fed) can use monetary policy to increase the money supply and deliberately induce rising prices, causing inflation. Rising prices provide an essential lubricant for any sustained recovery because businesses increase profits and take some of the depressive pressures off wages and debtors of every kind.
This is the opposite of inflation, which is characterized by rising prices (do not confuse deflation with disinflation, which is simply a slowing of inflation). To many economists, deflation is more serious than inflation because deflation is more difficult to control.
Equity prices begin to decline as people sell off their investments, which are no longer offering good returns, and bonds temporarily become more attractive"
And this is "giving to the people"?....
I mean...that whole comment about it being "ignorant" to say that deflation is worse than inflation is hilariously ironic...
Very informative. Thank you!
The price level isn't simply determined by the quantity of money, it's determined by the velocity of money and the amount of money in circulation. This is why inflation has been relatively low in the past few years (by just about every accepted index you look at) because although the quantity of money in circulation has sharply increased, the velocity of money has actually decreased significantly.
This is purposely misleading. There are 10.5 Trillion dollars in circulation The US Treasury has 147 million ozs of gold. That's $71,000 an ounce . A $100 coin would weigh .0014 ounces. How much would grandma's earrings be worth?
He also fails to mention central governments can simply devalue there currency by changing its value in relation to gold.
Of course, a gold standard also stifles economies.
Mr. Quindazzi gold is 71k an ounc? lol which country do you live in so i can sell all my gold.. last time i checked gold wass 1300 an ounc
You're missing his point. He's saying that gold would have to be worth 71k an ounce for the 147 million ozs of gold the US govt. has to allow there to be 10.5 trillion dollars in circulation.
Have u seen the gold?
Which nations in the world today utilize the gold standard? NONE. Why did every country in the world leave the gold standard? Because it lead to an inadequate money supply, meaning if you wanted to buy property or start a business there was no capital available for you to borrow. The consequence was economic stagnation. And yes, stagnation does a wonderful job constraining inflation.
The gold standard also delayed recovery from the world wide depression of the 1930s. Other countries that had left the gold standard recovered more quickly.
+David J Gill "...there was no capital available for your to borrow."
This entire line of reasoning makes no sense. There was still plenty of capital to borrow, it's just that you would have to borrow a hell of a lot less money because the existing money would be worth a hell of a lot more.
+LawlessNate The value of the money would also be a hell of a lot less stable. so the money you borrow could end up costing you a lot more than you predicted. this was a common cause of the many recessions and panics before the gold standard was scrapped, including even the great depression.
source: www.theatlantic.com/business/archive/2012/08/why-the-gold-standard-is-the-worlds-worst-economic-idea-in-2-charts/261552/
Dan Cosme No, the value of money would be stable as a rock under the gold standard. I've absolutely no fucking idea how you could think that money would be *less* stable when it's value is tied into a certain amount of gold. Money can't just become worthless if a dollar can always be traded in for x amount of gold. It will, at very least, be worth whatever amount of gold it can be traded for.
It wasn't until after the gold standard was abandoned that the massive inflation of the dollar began.
Well, If you checked the source I linked, it would become clear to you why that is. I could link more if you're still not convinced.LawlessNate
Dan Cosme I could link you to website that says the world is flat.
If there is a downward pressure on all prices, we can assume that, generally, widget parts prices will fall by the same percentage as the final product. If the final product's price goes down 25%, then we can expect widget parts to decrease in price by about 25% as well. Usually input costs decrease before consumer goods prices do, as businesses have no incentive to reduce price until their competitors do. A business will lower the price to gain market share in response to decreasing input cost.
Other countries were going to call the notes, backed in gold to be paid in the early 70’s. Nixon, through executive order, basically made our money fiat status, and gold would no longer be an obligation to other countries. The shell game that we basically did a Houdini Act and other countries just had to live with the end of Bretton Woods.
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pt 1 - An important component of Keynesian economics is the idea of increasing the supply of fiat to spur the economy. Like a lot of simple ideas applied to complex system, it seemed to work, at first.
But as time went on, the stimulative effect of further "printing" became less and less... Until it crossed the zero-line and actually became a negative correlation... Now, the best we can hope for with more printing is just to postpone the inevitable crash.
The problem was the monetary policy was set independently (federal reserve), but not the fiscal policy. An independent agency that sets tax rates within the bounds set by Congress would make sense. Only half of keynesian policies are being followed: lower taxes and spend more. This was only supposed to be the policy for bad times. In good times, the policy was supposed to be raise taxes and cut spending, but no politician has the guts to raise taxes. Hence the federal tax commission.
Where can I get the cool background music for all of your videos?!
My question is how do we go back to a gold standard, what problems might there be if we do go to one, and how do we address those problems?
Good question! The answer is simple: don't print too much redeemable currency. Then no one can take all of your gold. As Mr. White explained, the US printed too much redeemable currency, and then had to close the gold window.
It's happened historically when there's been an artificial shortage of money supply, but an imposed gold standard who's supply cannot grow at the same rate as the economy by definition is stretched thinner to represent a greater amount of value created per ounce of gold. Thus, deflation.
That is assuming all parts of the economy readjust at the same time and to the same degree. If widget prices drop by $10, but widget parts only drop $5, then I lose $5 in profit.
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I just have a question, what about the Great Depression where years before fdr took us away from the gold standard we were already having money supply and inflation problems due to low interest rates?
Jonathan Mcneil Do you mean deflation?
yes
Interesting information, thanks for sharing!
How would a gold standard fare today given the demand of gold in things like electronics?
There are several problems with what you are saying, the one of which is that the gov. doesn't "print" money (except to replace bills in circulation). Another is that ability of banks to lend money was RESTRICTED by the amount of gold available. Even if they thought it was a sound investment, not enough gold = no ability to lend. Hence, gold standard holding the economy back. End gold standard, free up new monetary policy options, allow banks to lend money to into more sound investments
A lady that works at the Fed in Denver told me that a gold standard wouldn't be logical these days be because we wouldn't have enough gold to back every citizen's money. What would you guys say to that? Thanks.
There was also deflation during the industrial revolution. the gold standard existed long before the great depression but the federal reserve was founded only around 20 years prior."Although there have been instances where deflation and depression have come hand-in-hand, there are far more instances where nations have enjoyed economic growth along with deflation, as well growth and depression with inflation." Andrew Atkeson The Federal Reserve Bank of Minneapolis January 2004
Wouldn't the limited money supply because of the gold standard prevent the fed from giving below market level interest rates which caused banks to keep borrowing without control and yet that didn't happen?, is there something I missing?
However the FED was also behaved insanely at several periods throughout the depression. They tightened the monetary base during a DEPRESSION out of fears that (non existent) inflation would occur in a period of record deflation. This raised interest rates and lead to even more bank failures.
To my knowledge, Switzerland was the last country to drop off of the gold standard, which it did in 1999. So far, inflation values have been relatively low, but that can still be attributed to the initial after effects of a gold standard, those being high savings rates, a stable currency, and an overpowering work ethic.
Switzerland is an economically liberal country so government spending aren't High and it doesn't have inflation
beautiful productions
Thanks for answer , when making chicken soup first catch chicken, when reducing debt first stop borrowing (or printing) Lest ye will know the European term "enforced austerity.
I believe that the good/bad credit standard took over a gold & silver standard in the 🇺🇸. To prevent a financial crisis. Money has a value on paper but those who control from the top truly know what it’s really worth. I also believe the U.S. & other countries are the main ones to rely on the original standards. That’s why other countries requested they’re gold from Federal Reserve banks.
I'm not even sure what you're argument was. I was simply clarifying my statement and drawing parallels. You see the embargo was about the war. It was, I agree.
The only thing that I wander is what happens when the amount of wealth generated by the marketplace exceeds the total value of gold available
It is not possible that the amount of wealth on the market is more than the gold because they are always equal. If productivity increases, the prices go down - if wealth in the market decreases, prices go up.
Isn't there a way to combine both the gold standard and the fiat system?
Danny B the gold standard makes the fiat actual worth something, but it would be better if the Federal Reserve could get abolished.
The FED holds on to material gold (a shit ton) specifically for this reason....
Wait, wouldn't a limited amount of gold have problems with an infinity growing economy?
I'm not sure I see where I confused the two in my posts. GDP is total economic activity over time (typically a 1 yr period) and GDP growth is the first derivative of GDP as a function of time (since you evidently want to get pedantic here).
Our GDP growth per year in dollars is lower than our deficit per year in dollars. What this means is that absent govt deficit spending, we would be in a recession. In other words, the only way we're avoiding recession is by spending money we don't have.
I just have one question: isn't it an economical consensus that a 2% inflation rate is beneficial for the government and lower than that can harm it?
The inflation rate of the gold standard seems low, so why is this better still than fiat money?
because you can't over print it
Again, well said. The Fed system should work. It just needs reform - more transparency - and MOST important - it needs to STOP printing money for a while.
The problem was the monetary policy was set independently (federal reserve), but not the fiscal policy. An independent agency that sets tax rates within the bounds set by Congress would make sense. Only half of keynesian policies are being followed: lower taxes and spend more. This was only supposed to be the policy for bad times. In good times, the policy was supposed to be raise taxes and cut spending, but no politician has the guts to raise taxes. Hence the federal tax commission.
Though I disagree with your statement (a one ounce gold coin still obtains a watch, shirt and a nice suit as it always has), I would say this: The value of gold is only as high as the demand. With the prevalence of fiat currency, demand has dropped dramatically. A return to a gold standard would see demand soar.
I have heard a lot about inflation, but what happens if there are not enough money to match the increasing production of goods and services? How do you know that the economy needs more money? What happens if there is a deficit of money?
Excellent video explanation of what the Gold Standard is and is not. Funky darkness to the visual part of the video though.
what he specifically said is he supports a currency backed by a basket of commodities, and no longer just simply gold alone. It's on wikipedia in the article: "Gold Standard", subheading "advocates of a renewed gold standard." Milton Friedman, as a rule, is against bailouts, and his solution is a set yearly increase in the money supply that doesn't change from year to year in order to stave off uncertainty.
Historically banks never had enough gold to pay all obligations and would crash, zeroing out your account balance. Compared to inflation nibbling away 2% each year.