The Gold standard has returned to be a mainstream discussion, with a "gold commission" set to become part of official US Republican party policy.
Our opinion is that a return to a fixed money supply would also remove the central bank’s ability to offset demand shocks by varying interest rates. That could mean a more volatile economy and higher unemployment. What is your opinion on this issue? Please share your thoughts by making comments on this discussion.
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While there is bound to be re-structuring chaos, in the long run the system will right itself and we will have a more stable monetary system when it is (again) based on a tangible asset...be it gold or another commodity. This enforces fiscal discipline into a credit system run amok...
The medicine may be painful but the cure should be worth it. Kristi is right in pointing out the advantage of removing political manipulations (i.e. the US $) when working with a hard asset base. One man's poison is another man's poison, and no longer will countries be able to manipulate the economy of another by unilaterally either supporting or devaluing their currency (the US & China come to mind recently but it's been done before), nor will speculators (a la George Soros and the fall of the British pound) be able to devalue or escalate a currency for their own profiteering.
We have had a discussion on this in FRX Community: http://lnkd.in/xzPRwH. We concluded that:
* Some sort of anchor to money supply would be needed because currently the monetary base is changing too randomly
* Gold, even though it has the advantage of not being controlled by a single country in a way USD is, is not a good base
* The idea is to have an anchor which is commonly agreed on, defined and unchangeable, just like weight or time measures (grams, kilos, seconds, etc.)
* Money supply should not be increased or decreased in order to change the economy. Other way round: the economic activity should lead to an increase or decrease of the money available