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Politics : Dutch Central Bank Sale Announcement Imminent?
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To: sea_urchin who wrote (20784)4/26/2004 2:15:38 PM
From: The Vet  Read Replies (4) of 80940
 
The crash came about because people failed to recognize that share prices are measured in money terms and not in units of gold.

Wow Searle, I am surprised to see you bringing up that hoary old excuse that the gold standard caused the great depression.

First your statement is nonsense. Everybody knew that money was tied to gold at that time. To suggest otherwise is just elitism in hindsight, suggesting that you, here and now, knows something more than the people who lived at the time.

You then build on that false premise by suggesting that a gold standard requires the monetary unit to be fixed to a certain quantity of gold. The fact remains that individuals in business, banking and government due to self interest could not do what was required to stop the rot. Simply raising the gold price would have provided more than enough liquidity to cover the excess money that had been created.

The standard would work much better and would still work today if each national currency was convertible to gold and if that convertibility was flexible. Countries engaging in flagrant inflationary printing of money would still have their currency on a gold standard, but that weight of gold it could be converted to would reduce.

Other, more prudent countries could find that they could increase the weight of gold that their unit of currency was worth. There should be no absolutes, only relative values, much like the present system of floating exchange rates, but by linking all currencies independently to gold or some similar external measure the inequality created by the present system, where one country is allowed to produce unlimited and obscene quantities of the "world standard" currency at absolutely no cost or penalty, would be eliminated.
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