Mike, if we decided to, and were able to, put the world on a gold standard tomorrow, the amount of gold is finite. Human production is not finite. At some point, the amount of gold would not be enough to back world gross production - assuming it even is. My understanding is that there are that there are roughly $1.3 trillion troy ounces of gold in the world today.
If we peg the world's currency to $1.3 trillion troy ounces of gold, then one of three things must happen. Either the amount of gold increases, or the world's supply of what you call backed money no longer increases, or the ratio of money to gold changes. If the world's supply of gold does not increase, and the ratio of money to gold increases, at some point in time there will no longer be what you call good backing for the currency.
If the world's supply of gold does not increase, and the ratio of money to gold does not increase, then the money supply will not increase. Is it really true that no matter how much work people do and how much value they add to the economy, there should only be the same amount of money? |
