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Politics : Dutch Central Bank Sale Announcement Imminent? -- Ignore unavailable to you. Want to Upgrade?

To: long-gone who wrote (6423)	6/15/1999 5:34:00 PM
From: Hawkmoon	Read Replies (2) \| Respond to of 81956

Richard, Quoting Ayn Rand to me isn't helping your case. By her very admission money should be the the proxy representative for an individual's work, not the available amount of gold available to compensate the individual for his work. It doesn't matter whether that currency is in the form of gold, silver, or paper backed by the full faith and credit of the nation to whom that worker pays his taxes and who's opportunity he enjoys. According to her theory, the amount of money that people can make is limited to the amount of gold available to back it one for one. So if someone isn't mining enough gold or that gold becomes more difficult to find in quantity, the economic resources needed to obtain that gold become overwhelming. Think about it. Here we have a gold standard of $35 to the ounce. So long as there is sufficient gold available you technically are permitted to print a certain amount of money. Should easily retrievable gold deposits become more scarce and the cost of mining and processing exceed $35/ounce, there is clearly an economic inefficiency. However, if one then decides to peg the dollar to whatever the current average cost of production is, in effect you have a devaluation of the dollar relative to each ounce of gold. What was once pegged at $35/ounce would have to be pegged at a price more representative to the actual cost of obtaining that gold. That why it seems foolish to peg currency to the availability of a particular precious metal susceptible to both shortages and regional conflict. What if S. Africa were to suddenly erupt into outright warfare?? What would that do to the true value of gold?? Demand would remain the same while the supply would become limited. Thus, more dollars would be necessary to obtain what gold was available. And that, at its heart would violate the principle of pegging paper currency forever at a certain conversion rate of gold. Either that or the shortage of gold would suddenly require VERY RESTRICTIVE monetary policy in order to once again find the point of convertible equilibrium at $35/ounce. Anything in the above you don't understand?? Ask away. Regards, Ron