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To: Ilaine who wrote (113)	3/29/2001 12:53:18 AM
From: Thomas M.	Respond to of 443

The point I was getting to is that unless every dollar is 100% gold backed at all times then when there is a run on the bank it can't be satisfied. Assume that everyone in the country loses faith in gold-backs and decides to convert them to gold. Unless they are 100% backed then the only thing maintaining the value is misplaced faith. I agree with this. In any fractional reserve system, a run on the banking system would result in problems, regardless of whether the gold standard is used or not. But, it is still important to distinguish the dependent variable (the Dollar) from the independent variable (gold). If every dollar must be backed by .048 ounces of gold then the number of dollars can't increase until new gold comes into the system. And, of course, the amount of gold (and its value in real terms but not in Dollar terms) can still fluctuate wildly, regardless of what happens at the U.S. Treasuries printing office. Tom