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Pastimes : Clown-Free Zone... sorry, no clowns allowed
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To: Zeev Hed who wrote (75158)3/4/2001 3:25:53 AM
From: Don Lloyd  Read Replies (2) of 436258
 
Zeev -

...If gold production does not grow at twice GWP, economies will slow (for lack of monetary instruments), or the price of gold will creep up to allow for the increase in the money base (thus perpetual inflation). ...

You assert this, and it may once have been true, but it seems unlikely that it is still true.

Assume that my employer pays me 4 real ounces of gold per week and that I then pay all my bills using that gold. In this case my economic participation requires the real existence of that 4 ounces of gold.

Alternately, now assume that my employer makes an electronic transfer of the rights to 4 ounces of gold from his payroll account to my checking account. Also assume that I pay all my bills by means of a credit card that promises payment in gold and that I make all the credit payments within the 25 day grace period from my gold rights checking account by electronic payment. In this case, there is now a requirement for 4 less ounces of gold than before without any loss of economic activity. Effectively, the gold has been replaced by an increase in the money supply by an extension of credit by a risk taking private concern. The government is only involved here to enforce contracts.

The point is that any possible historical tie between the quantity of gold and the level of economic activity has been forever broken without major problems and there is no fiat currency requirement.

Regards, Don
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