Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Pastimes : Clown-Free Zone... sorry, no clowns allowed -- Ignore unavailable to you. Want to Upgrade?

To: Zeev Hed who wrote (75136)	3/3/2001 10:57:38 PM
From: brightness00	Read Replies (1) \| Respond to of 436258

Zeev, The more recent Gold Standard models (since the mid-70's at the least) do not recommend holding significant amount of cold in reserve at all. You do not have to have 20% in reserve at all as your previous post suggested; a tiny amount of gold would suffice if you have rapidly responding interest rate mechanism in place. As soon as gold market shows upward price bias, you raise interest, and vice versa. Think of it this way, if you want more gold, you can put down X bars of bullion down payment to put together a digging operation to get more gold, or you can sell X bars of bullion for cash to start whatever other business in return for future stream of cash which you can turn back into gold, or you can let the money earn interest to buy more gold in the future. The simplified FED only have to make sure that the last course of action will be a wash with the previous two, therefore there will be no advantage in holding gold or cash. That's precisely what a successful monetary regime should be: money supply keep apace with the growth of the economy, no more, no less; zero inflation. Why gold specificly? because the likelihood of a sudden huge easy supply is extremely unlikely, and the metal itself is of very limitted use so a sudden surge in demand is also unlikely unless there is inflation threat (which the monetary response would immediately move to curb in this regime). The cost of labor and technology of digging gold will reflect the growth of the economy and its growing ability to extract resources from the nature itself; i.e. the most likely candidate to make sure the afore mentioned first course of action and the second course of action would be naturally balanced, without dependence on government statistics that are prone to rigging. A good place to read up on the "reserveless gold standard" can be found at polyconomics.com Jim

To: Zeev Hed who wrote (75136)	3/3/2001 11:55:17 PM
From: Don Lloyd	Read Replies (1) \| Respond to of 436258

Zeev - ...The exact numbers may not be right, but the principle is the same, tying the world monetary system to gold will put the world economy in a straight jacket or bring on permanent inflation. I have yet to see an argument, apart of an emotional argument, negating these cold facts. ... This depends on your stated assumption that the quantity of gold must grow in lockstep with the economy. I don't believe this is true. The economy is primarily a set of indirect exchanges of one good or service for another. The actual exchange only ties up a medium of exchange such as gold until the exchange is completed. The quantity of gold required (in a 100% gold, trusted gold certificate, and token gold economy) is at most the sum of the gold involved in uncompleted transactions and that required by the sum of the desires of all the economic participants to actually hold gold as part of their wealth. This will be a small part of total wealth, being essentially dead money, and will also be a small part of the value of all economic transactions, as it is not used up by such transactions. The value of gold will only be meaningful in terms of how many ounces a gold holder is willing to exchange for a specific quantity of other goods, a loaf of bread, for example. But this is something which no two people will agree on, nor will a single person be consistent over time and circumstance. For example, the economic law of diminishing subjective marginal utility implies that, for all else equal, a given individual will bid an increasing quantity of gold for a loaf of bread as his holdings of gold increase and diminish its subjective marginal utility. In general, the exchange rate of gold for all other goods will automatically adjust to the aggregation of the desires of gold holders to hold or exchange gold at the margin. While an increase in the quantity of gold would tend to decrease its exchange value, it is not the quantity of gold that is uniquely determinant, but also its distribution. If each and every ounce of gold suddenly and publicly turns into two in place, it is likely that the monetary exchange value of gold would tend to halve. If, on the other hand, the quantity of gold is suddenly doubled and the new gold is hidden in your basement without anyone's knowledge it will not affect the exchange value of gold. If you alone know about the new gold, then the value of gold will only decrease to the extent that your bids of gold for other goods and services will reflect more ounces of gold for each good. It may decrease further to the extent that speculators believe and act on the belief that more gold may be available to the market. Regards, Don