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Kuros
Joined: 27 Apr 2004
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 Posted: Wed Apr 11, 2012 5:36 am Post subject: Economists agree: Lower Tariffs good; Gold Standard bad |
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4 Politically Controversial Issues Where All Economists Agree
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The benefits of free trade and NAFTA far outweigh the costs
None of the economists surveyed disagreed that the gains to freer trade are much larger than any costs. And only two economists even said that the answer is uncertain. In a space for additional comments, MIT's Richard Schmalensee declared "If that's not right, almost all of economics is wrong".
The Gold Standard is a Terrible Idea
This is an issue that has returned to a certain prominence in the last few years. But despite it's popularity among some on the right -- and Ron Paul fans in particular -- economists overwhelmingly agree that the gold standard is a bad idea. In this sample of leading economists, 100% of disagreed with the claim that returning to a gold standard would improve price-stability or employment outcomes. Nobody even answered uncertain, because this question really isn't up for debate anymore.
Some Other Things Economists Agree On
Rent control is bad, congestion pricing is good, eliminating tax deductions and lowering rates is efficient, and the tax deductibility of healthcare creates consequential distortions. |
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comm
Joined: 22 Jun 2010
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| Posted: Wed Apr 11, 2012 6:12 am Post subject: |
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Obviously the establishment of a competing, gold-backed currency is a better solution than 100% transition to the Gold Standard. Also, the question wasn't "Would returning to the Gold Standard be bad?", it was "If the US replaced its discretionary monetary policy regime with a gold standard, defining a "dollar" as a specific number of ounces of gold, the price-stability and employment outcomes would be better for the average American."
If one prioritizes debt limitation and macroeconomic stability, a Gold Standard becomes much more attractive. Here's 2011 Nobel laureate Thomas Sargent:
| Thomas Sargent wrote: |
| Remember that under the gold standard, there was no law that restricted your debt-GDP ratio or deficit-GDP ratio. Feasibility and credit markets did the job. If a country wanted to be on the gold standard, it had to balance its budget in a present-value sense. If you didn�t run a balanced budget in the present-value sense, you were going to have a run on your currency sooner or later, and probably sooner. So, what induced one major Western country after another to run a more-or-less balanced budget in the 19th century and early 20th century before World War I was their decision to adhere to the gold standard. |
I'd recommend reading the entire article. He explains how the Eurozone attempted to establish an "artificial Gold Standard" that could force countries to balance their budgets and how that failed. As we can see from the Euro, monetizing debt helps maintain short-term employment at the cost of long-term stability. |
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Dave Chance
Joined: 30 May 2011
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| Posted: Wed Apr 11, 2012 7:05 am Post subject: Re: Economists agree: Lower Tariffs good; Gold Standard bad |
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[quote="Kuros"]4 Politically Controversial Issues Where All Economists Agree
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[b]The benefits of free trade and NAFTA far outweigh the costs
None of the economists surveyed disagreed that the gains to freer trade are much larger than any costs. And only two economists even said that the answer is uncertain. In a space for additional comments, MIT's Richard Schmalensee declared "If that's not right, almost all of economics is wrong".[/b]
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Duh, these agreements are always good- for the US 
As suggested by Disbell to u in the Off-Topic Forum, try reading Chang Ha-joon's book, u "might find a new perspective". |
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Kuros
Joined: 27 Apr 2004
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| Posted: Wed Apr 11, 2012 7:39 am Post subject: Re: Economists agree: Lower Tariffs good; Gold Standard bad |
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| Dave Chance wrote: |
Duh, these agreements are always good- for the US
As suggested by Disbell to u in the Off-Topic Forum, try reading Chang Ha-joon's book, u "might find a new perspective". |
The WTO has provisions and special protections for sincerely developing economies, and its well understood that undeveloped nations cannot enter free trade agreements with the most developed economies. But that doesn't really alter the thesis: lower tariffs are good.
The world is filled with developed and somewhat developed countries that have outgrown their high tariffs. France and Brazil are excellent examples of this. |
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visitorq
Joined: 11 Jan 2008
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| Posted: Wed Apr 11, 2012 9:05 am Post subject: |
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| comm wrote: |
| Obviously the establishment of a competing, gold-backed currency is a better solution than 100% transition to the Gold Standard. Also, the question wasn't "Would returning to the Gold Standard be bad?", it was "If the US replaced its discretionary monetary policy regime with a gold standard, defining a "dollar" as a specific number of ounces of gold, the price-stability and employment outcomes would be better for the average American." |
This.
I hate it when the mainstream media a) calls Ron Paul and his supporters "right wing" and b) grossly misinterprets the views he and his supporters hold. Nobody is saying we should force all currency to be backed by gold. We're saying that gold really is money and that competing currencies should be allowed to exist (most of which would end up being backed by gold or silver anyway, since that what the market dictates). The real issue is taking away the power of one institution to hold a monopoly on the creation of money, especially when it's inflationary by nature. |
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eat_yeot
Joined: 11 Dec 2009
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| Posted: Wed Apr 11, 2012 6:15 pm Post subject: |
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| visitorq wrote: |
| We're saying that gold really is money and that competing currencies should be allowed to exist (most of which would end up being backed by gold or silver anyway, since that what the market dictates). |
Really? So why don't any other countries back their currency with gold or silver? If the market preferred it, why doesn't it exist? |
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Kuros
Joined: 27 Apr 2004
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| Posted: Wed Apr 11, 2012 6:54 pm Post subject: |
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| visitorq wrote: |
I hate it when the mainstream media a) calls Ron Paul and his supporters "right wing" and b) grossly misinterprets the views he and his supporters hold. Nobody is saying we should force all currency to be backed by gold. |
The post didn't attribute the gold standard idea to Ron Paul, but to some of his fans.
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| But despite it's popularity among some on the right -- and Ron Paul fans in particular -- economists overwhelmingly agree that the gold standard is a bad idea. |
Yes, there are Ron Paul fans who promote the gold standard. |
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visitorq
Joined: 11 Jan 2008
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| Posted: Wed Apr 11, 2012 8:30 pm Post subject: |
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| eat_yeot wrote: |
| visitorq wrote: |
| We're saying that gold really is money and that competing currencies should be allowed to exist (most of which would end up being backed by gold or silver anyway, since that what the market dictates). |
Really? So why don't any other countries back their currency with gold or silver? If the market preferred it, why doesn't it exist? |
Because central banking (ie. state sanctioned monopoly on the creation of legal tender) is imposed at the barrel of a gun. It has nothing to do with what the market prefers (the market obviously preferred gold which is why Nixon took the dollar off the gold standard altogether in the 70s). The fact that gold is up several hundred percent against all fiat currencies since a few years ago, and continues to rise, pretty much says it all though.
No doubt the Chinese et al would dump their US reserves in exchange for gold in a heartbeat, but the vast majority of the world's gold reserves (over 80%) are safely tucked away in Western bank vaults. |
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eat_yeot
Joined: 11 Dec 2009
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| Posted: Wed Apr 11, 2012 10:45 pm Post subject: |
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| visitorq wrote: |
| Because central banking (ie. state sanctioned monopoly on the creation of legal tender) is imposed at the barrel of a gun. |
Really? So who forced every single country in the world off the gold standard?
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| It has nothing to do with what the market prefers (the market obviously preferred gold which is why Nixon took the dollar off the gold standard altogether in the 70s). |
Either that, or a fixed currency to gold exchange rate was unfeasible.
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| The fact that gold is up several hundred percent against all fiat currencies since a few years ago, and continues to rise, pretty much says it all though. |
So has oil. Does that mean we should switch to an oil-based currency?
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| No doubt the Chinese et al would dump their US reserves in exchange for gold in a heartbeat, but the vast majority of the world's gold reserves (over 80%) are safely tucked away in Western bank vaults. |
They could buy gold with their excess US dollars as it is. Or is someone forcing them to buy US treasuries? |
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visitorq
Joined: 11 Jan 2008
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| Posted: Wed Apr 11, 2012 11:12 pm Post subject: |
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| eat_yeot wrote: |
| visitorq wrote: |
| Because central banking (ie. state sanctioned monopoly on the creation of legal tender) is imposed at the barrel of a gun. |
Really? So who forced every single country in the world off the gold standard? |
Ever heard of the Bretton-Woods system? Look it up. Then look up the "Nixon Shock", and get back to me.
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| It has nothing to do with what the market prefers (the market obviously preferred gold which is why Nixon took the dollar off the gold standard altogether in the 70s). |
Either that, or a fixed currency to gold exchange rate was unfeasible. |
Yeah, unfeasible when the government spends far more than it receives in revenue, thereby debasing the currency.
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| The fact that gold is up several hundred percent against all fiat currencies since a few years ago, and continues to rise, pretty much says it all though. |
So has oil. Does that mean we should switch to an oil-based currency? |
Could do, theoretically. But oil is not really a good thing to use as money obviously, since oil is consumed... The whole point of having money (ie. gold) is that it is both permanent, and relatively scarce.
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| No doubt the Chinese et al would dump their US reserves in exchange for gold in a heartbeat, but the vast majority of the world's gold reserves (over 80%) are safely tucked away in Western bank vaults. |
They could buy gold with their excess US dollars as it is. Or is someone forcing them to buy US treasuries? |
Obviously. In the first place, no, they can't just go ahead and buy gold since there is not enough gold on the market to replace their dollar reserves. Second, the minute the Chinese started selling off mass amounts of dollars, it would destroy the value of the dollar, thereby destroying China's own (dollar denominated) savings, upon which China's own currency is pegged. Therefore the Chinese are stuck, and must keep the house of cards from tumbling down by continually refinancing American debt and keeping the ponzi scheme going. This is why China is a captive market. |
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eat_yeot
Joined: 11 Dec 2009
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| Posted: Fri Apr 13, 2012 5:01 am Post subject: |
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| visitorq wrote: |
| eat_yeot wrote: |
| visitorq wrote: |
| Because central banking (ie. state sanctioned monopoly on the creation of legal tender) is imposed at the barrel of a gun. |
Really? So who forced every single country in the world off the gold standard? |
Ever heard of the Bretton-Woods system? Look it up. Then look up the "Nixon Shock", and get back to me. |
So who forced every single country in the world (at the barrel of a gun) off the gold standard? It's a simple question. Name names.
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| Quote: |
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| It has nothing to do with what the market prefers (the market obviously preferred gold which is why Nixon took the dollar off the gold standard altogether in the 70s). |
Either that, or a fixed currency to gold exchange rate was unfeasible. |
Yeah, unfeasible when the government spends far more than it receives in revenue, thereby debasing the currency. |
While long-term massive deficit spending is bad, having the ability to spend over and beyond is sometimes good, no? Or shouldn't countries be able to finance wars against invading armies? Shouldn't countries be able to stimulate their economies with excessive spending?
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| The fact that gold is up several hundred percent against all fiat currencies since a few years ago, and continues to rise, pretty much says it all though. |
So has oil. Does that mean we should switch to an oil-based currency? |
Could do, theoretically. But oil is not really a good thing to use as money obviously, since oil is consumed... The whole point of having money (ie. gold) is that it is both permanent, and relatively scarce. |
But oil has intrinsic value. Gold has some, but not much, intrinsic value. Why would I want to hold something that only has perceived value. I'd just as soon own art, baseball cards, or fine wine.
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| No doubt the Chinese et al would dump their US reserves in exchange for gold in a heartbeat, but the vast majority of the world's gold reserves (over 80%) are safely tucked away in Western bank vaults. |
They could buy gold with their excess US dollars as it is. Or is someone forcing them to buy US treasuries? |
Obviously. In the first place, no, they can't just go ahead and buy gold since there is not enough gold on the market to replace their dollar reserves. Second, the minute the Chinese started selling off mass amounts of dollars, it would destroy the value of the dollar, thereby destroying China's own (dollar denominated) savings, upon which China's own currency is pegged. Therefore the Chinese are stuck, and must keep the house of cards from tumbling down by continually refinancing American debt and keeping the ponzi scheme going. This is why China is a captive market. |
So the availability of gold hasn't kept pace with world growth? Sounds like a good reason to not have the gold standard. |
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comm
Joined: 22 Jun 2010
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| Posted: Fri Apr 13, 2012 7:10 am Post subject: |
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eat_yeot: I'm glad you're actively looking at this topic. Most people don't explore monetary policy beyond the contents of their own wallets.
As to why every country had to abandon the gold standard once some did: Those nations off the gold standard could buy gold from those on the gold standard. Then they simply print more to buy more gold. Yes, the value of each dollar they print would be worth less than the last, but they would still end up with all of the gold. You should note that the vast majority of the world's gold is held by Western nations... Do you think there's a reason for that?
| eat_yeot wrote: |
| While long-term massive deficit spending is bad, having the ability to spend over and beyond is sometimes good, no? Or shouldn't countries be able to finance wars against invading armies? Shouldn't countries be able to stimulate their economies with excessive spending? |
Absolutely. Were we unable to do that before 1971?
Since then, haven't nations maxed out their debt in peacetime (or near-peacetime)? But nations aren't kept fiscally sound by the goodwill of their politicians, only by the market. The forces of international banking and the power of vote-buying make deficit spending similar to giving a 12 year old a credit card with no limit. If our house were fiscally in order as it should have been before the current economic crisis, we'd be able to spend TRILLIONS toward recovery, but the endless debt and debasing of currency due to modern monetary policy has eliminated that option for us. |
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visitorq
Joined: 11 Jan 2008
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| Posted: Fri Apr 13, 2012 2:00 pm Post subject: |
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| eat_yeot wrote: |
| visitorq wrote: |
| eat_yeot wrote: |
| visitorq wrote: |
| Because central banking (ie. state sanctioned monopoly on the creation of legal tender) is imposed at the barrel of a gun. |
Really? So who forced every single country in the world off the gold standard? |
Ever heard of the Bretton-Woods system? Look it up. Then look up the "Nixon Shock", and get back to me. |
So who forced every single country in the world (at the barrel of a gun) off the gold standard? It's a simple question. Name names. |
I gave you the answer. The US government forced the world off the gold standard by taking the worlds' reserve currency (the USD) off the gold standard (and note that the majority of the world's gold reserves are held in the US). As for the "barrel of a gun" bit, that refers to each country imposing a legal tender on its citizens. It also refers to the US going around the world and blowing up anyone that goes against its hegemony.
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| While long-term massive deficit spending is bad, having the ability to spend over and beyond is sometimes good, no? Or shouldn't countries be able to finance wars against invading armies? Shouldn't countries be able to stimulate their economies with excessive spending? |
Credit is fine (and in fact, completely necessary for individuals and organizations alike), but this is not the same as running a ponzi scheme. A currency that is fixed to an asset like gold is a permanent money system, but this in no way inhibits the issuance of credit. But the USD as it is today is created entirely as debt that can only be refinanced by creating more debt. It is an unsustainable model that only benefits the banks (and fortune 500 companies they control) and government, at the expense of the rest of us.
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| But oil has intrinsic value. Gold has some, but not much, intrinsic value. Why would I want to hold something that only has perceived value. I'd just as soon own art, baseball cards, or fine wine. |
Gold's value is derived from its relative scarcity. Scarcity is important, but it must also be infinitely divisible (or it would not be a suitable medium for exchanging goods/services in the overall economy). Gold and silver can be divided up in small amounts to fulfill the liquidity requirements in the market, and they are also permanent (unlike baseball cards or wine etc. which are not readily divisible and do not last forever). Money could also be shells, feathers, or whatever else people are willing to use as a medium for exchange, so long as they are scarce. But gold and silver are more suitable for obvious reasons. They are also difficult to counterfeit.
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| No doubt the Chinese et al would dump their US reserves in exchange for gold in a heartbeat, but the vast majority of the world's gold reserves (over 80%) are safely tucked away in Western bank vaults. |
They could buy gold with their excess US dollars as it is. Or is someone forcing them to buy US treasuries? |
No, they cannot buy gold. There is not nearly enough gold on the market to replace all the fiat currency in circulation (which, if you include derivatives etc., is in the quadrillions). The currencies would have to be drastically devalued first (to the point that they would be essentially worthless). This is the big scam at its essence. If dollars were backed by gold, then they would all have to be redeemable for gold. As it stands they are only redeemable for more dollars. This is why China has trillions in dollar assets saved up. Those assets could be wiped out overnight if the dollar were to hyperinflate (which could even be caused by the Chinese refusing to buy bonds or dumping too much US currency), whereas gold never loses its value (except in a very minor sense if more gold deposits are discovered and mined around the world, increasing the gold supply).
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| So the availability of gold hasn't kept pace with world growth? Sounds like a good reason to not have the gold standard. |
Availability of gold was not an issue until the (US and other) governments started spending massively beyond their means.
Moreover, the principle you are favoring above is basically fraud. Forcing people to use paper money that is constantly being devalued is a form of theft. |
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eat_yeot
Joined: 11 Dec 2009
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| Posted: Fri Apr 13, 2012 5:16 pm Post subject: |
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| comm wrote: |
| eat_yeot wrote: |
| While long-term massive deficit spending is bad, having the ability to spend over and beyond is sometimes good, no? Or shouldn't countries be able to finance wars against invading armies? Shouldn't countries be able to stimulate their economies with excessive spending? |
Absolutely. Were we unable to do that before 1971? |
Pretty much. Which is why most countries have gone off the gold standard in times of war and depression.
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| Since then, haven't nations maxed out their debt in peacetime (or near-peacetime)? But nations aren't kept fiscally sound by the goodwill of their politicians, only by the market. |
Well, the market does keep lending money to the US and most other developed nations. |
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Spartacist
Joined: 18 Feb 2012
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| Posted: Fri Apr 13, 2012 5:28 pm Post subject: Re: Economists agree: Lower Tariffs good; Gold Standard bad |
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| Kuros wrote: |
| The world is filled with developed and somewhat developed countries that have outgrown their high tariffs. France and Brazil are excellent examples of this. |
Who says? |
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