Ron -
newaus.com.au
"...Most economists cannot stomach the idea of a gold standard because, it is argued, there is not enough gold to serve the modern world. Without an adequate supply of money, it is held, the world will fall into a deflationary spiral. While increases in the supply of goods and services raise benefits to human beings, more money only undermines real wealth generation. Consequently any given amount of money is adequate to provide services of medium of exchange. In a free market a general fall in prices in response to rising real wealth is a mechanism through which wealth expansion permeates throughout the economy. With falling prices and a rising purchasing power of money people can now secure for themselves a greater amount of goods and services.
Money is often said, should function as a yardstick, and therefore its value should be stabilized and fixed. However, money is not some kind an abstract unit of account, detached from concrete goods. It is a commodity demanded mainly as a medium of exchange. Like all commodities, its price in terms of other goods is determined by the interaction of supply and demand.
It would seem, therefore that the chaotic state of world financial markets can only get worse, unless gold, which was chosen by the democratic process of the market, is allowed to assume its monetary role. Allowing gold to assert market wishes implies that there cannot be any role for the central bank.
In a truly free market the most marketable commodity that serves as the medium of exchange must be completely free. No institution is required to regulate the supply of money in a free market."
Regards, Don
|
