Ecnomics
I can't find any ecnomics forumn or any good answer on internet , the question is what if instead of any form of currency gold was used , is it better or worse ??
Lets see what would happen if gold is used instead of current token currency:
-> Gold is expensive and a non-abundant metal
-> There will therefore be many forgeries
-> Value of gold is too much for cheap things like a bar of chocolate. Therefore, even a single coin of gold will be too much for it. You hence, would have to buy more than one of it
-> There could be a possibility of shortage of gold
-> Losing even a coin of gold would be a major loss
-> There are chances of getting ripped off of your gold i.e. when you exchange the gold
-> Work hours of people would increase
-> Poor people would become more poor
-> Farmers would have to farm more, the money they'd get wouldn't be worth the effort
-> Homeless/Jobless people can forget living in a very proper way
-> Unemployment would be disastrous
-> There would be an increase in the number of machines used, as labour is an expensive resource
-> Many countries would suffer from deindustrialisation
The advantages are very few compared to these. Therefore, I'd say it'll be worse.
Edit: Added more points
-> Gold is expensive and a non-abundant metal
-> There will therefore be many forgeries
-> Value of gold is too much for cheap things like a bar of chocolate. Therefore, even a single coin of gold will be too much for it. You hence, would have to buy more than one of it
-> There could be a possibility of shortage of gold
-> Losing even a coin of gold would be a major loss
-> There are chances of getting ripped off of your gold i.e. when you exchange the gold
-> Work hours of people would increase
-> Poor people would become more poor
-> Farmers would have to farm more, the money they'd get wouldn't be worth the effort
-> Homeless/Jobless people can forget living in a very proper way
-> Unemployment would be disastrous
-> There would be an increase in the number of machines used, as labour is an expensive resource
-> Many countries would suffer from deindustrialisation
The advantages are very few compared to these. Therefore, I'd say it'll be worse.
Edit: Added more points
Last edited on
If suddenly overnight the world somehow changed so only gold was usable as currency, the entire world economy would collapse immediately. Almost all money is stored in electronic form and suddenly nearly all the money would be gone. I can see this going no other way than both international and civil wars starting immediately everywhere.
If we slowly phased in gold, it would also be an absolutely terrible idea. Not only would we see a whole lot of wars from the developed countries on less developed countries with gold, but gold is used extensively in the electronics industry, which would probably become practically shutdown. Life as we know it now would change drastically, very much for the worse.
If we slowly phased in gold, it would also be an absolutely terrible idea. Not only would we see a whole lot of wars from the developed countries on less developed countries with gold, but gold is used extensively in the electronics industry, which would probably become practically shutdown. Life as we know it now would change drastically, very much for the worse.
Also, very important thing is that money, while not perfect, allow us to have economics; The country that has best industry is the wealthiest one. If we changed currency for gold, the country with highest gold reserves and natural lodes of gold.
And Stormboy pretty much covered most of downsides of gold as currency. Personally I'd add imporant note - gold's really heavy, so it'd hard to transport or hide.
And Stormboy pretty much covered most of downsides of gold as currency. Personally I'd add imporant note - gold's really heavy, so it'd hard to transport or hide.
its not compulsory that a gold coin should be 100% pure... we can have as cheap metal as 0.1$ and a pure form can worth 1000$ .. it sure can result in economic stability. what we can buy today can buy tomorrow with the same quantity of gold unlike paper.
And there are others ways for a country to absorb the wealth except war.
people pay to get technology and food etc..
if a country does not have any gold he can trade his resources for gold not for paper.
So you can say the same for the countries having petroleum
And there are others ways for a country to absorb the wealth except war.
people pay to get technology and food etc..
if a country does not have any gold he can trade his resources for gold not for paper.
So you can say the same for the countries having petroleum
| And there are others ways for a country to absorb the wealth except war. |
Its not that easy as you think it is :P.
| its not compulsory that a gold coin should be 100% pure... we can have as cheap metal as 0.1$ and a pure form can worth 1000$ .. |
That's the main problem that I've mentioned in the first place. A normal person can't judge the purity of gold. Therefore, there will be rip-offs.
| it sure can result in economic stability |
Actually, you've got it the other way around. It would result in an unstable economy.
| if a country does not have any gold he can trade his resources for gold not for paper. |
Whats wrong with having paper as a currency then? We have a token currency at the moment because it is accepted as a currency. The paper itself used to make money doesn't have any value. A $5 note and a $100 note is made from the same paper. Its value is the number printed on it.
Last edited on
The biggest problem with using any physical thing to "back" your currency is that it will always tapper out at a maximum level. There is only so much gold in the world and once it's all dug up your economy stagnates, and after stagnation comes collapse.
This idea of stabilizing costs is just wonderfully naive. It's not just you OP, all "metal-backers" have a similar notion so you're really not to blame. The reason inflation exists isn't because of fiat money, it's because there are hundreds of unavoidable push and pull factors in the market that make it happen. Let's look at one simple example, say I want to buy a house that is valued at $50,000. Another person also wants this house and has the money to buy it as well. But I want this house so bad that I am willing to pay $60,000 for it. How much is this house worth now? Who do you think the owner is going to sell the house to now? Did my money suddenly fall in value? Do you think that 20 years later I'll want to sell the house for the original $50,000 that it was worth or will I want to put it up for the $60,000 I paid for it? What just happened to the value of that house?
Let's have another example, one that doesn't cause a market bubble this time. Let's say Johnny gets a job working at an office when he is a kid. As Johnny get's older he decides he wants a family but he can't afford it on his current wage. So he goes to his boss and asks for a raise. The boss likes Johnny, he doesn't want to say no and risk Johnny leaving the company because then he would have to spend days going through resumes and interviews and weeks training someone to replace Johnny all the while hoping that the new guy he hires doesn't prove to be some kind of retard and even then it will be years before that person is as good at the job as Johnny. Now for one or two employees this wouldn't be an issue, but as time goes on more and more people require raises and the boss decides that his team works too well together to risk replacing any of them. So now he has to recoup the increased cost in labor by increasing the price of his goods\services just a little bit. None of the products he offers are any less useful or valuable, the money is still money he just requires more of it.
You should notice that none of the factors in either example here are fringe cases, nor do they have anything to do with what type of currency is being used so it would happen with a gold standard, a fiat standard or a silver one.
This idea of stabilizing costs is just wonderfully naive. It's not just you OP, all "metal-backers" have a similar notion so you're really not to blame. The reason inflation exists isn't because of fiat money, it's because there are hundreds of unavoidable push and pull factors in the market that make it happen. Let's look at one simple example, say I want to buy a house that is valued at $50,000. Another person also wants this house and has the money to buy it as well. But I want this house so bad that I am willing to pay $60,000 for it. How much is this house worth now? Who do you think the owner is going to sell the house to now? Did my money suddenly fall in value? Do you think that 20 years later I'll want to sell the house for the original $50,000 that it was worth or will I want to put it up for the $60,000 I paid for it? What just happened to the value of that house?
Let's have another example, one that doesn't cause a market bubble this time. Let's say Johnny gets a job working at an office when he is a kid. As Johnny get's older he decides he wants a family but he can't afford it on his current wage. So he goes to his boss and asks for a raise. The boss likes Johnny, he doesn't want to say no and risk Johnny leaving the company because then he would have to spend days going through resumes and interviews and weeks training someone to replace Johnny all the while hoping that the new guy he hires doesn't prove to be some kind of retard and even then it will be years before that person is as good at the job as Johnny. Now for one or two employees this wouldn't be an issue, but as time goes on more and more people require raises and the boss decides that his team works too well together to risk replacing any of them. So now he has to recoup the increased cost in labor by increasing the price of his goods\services just a little bit. None of the products he offers are any less useful or valuable, the money is still money he just requires more of it.
You should notice that none of the factors in either example here are fringe cases, nor do they have anything to do with what type of currency is being used so it would happen with a gold standard, a fiat standard or a silver one.
| That's the main problem that I've mentioned in the first place. A normal person can't judge the purity of gold. Therefore, there will be rip-offs. |
There can be some particular symbols on judging either its original or not. How do you know if a Dollar note is original or not an ordinary person cant even judge a $ but because of the punishment of trading in fake notes is severe that's why its maintained up to some level.
| Whats wrong with having paper as a currency then? We have a token currency at the moment because it is accepted as a currency. The paper itself used to make money doesn't have any value. A $5 note and a $100 note is made from the same paper. Its value is the number printed on it. |
Yes that means you agree with me paper has no worth, if you trade resources for paper and then tell me who got the most benefit out of the trade.
they can print more paper but not gold or silver resulting in transfer of power with resources.
| they can print more paper but not gold or silver resulting in |
That's what you should have written there. Why the hell would countries like the US for example, hang around being poor while they have a massive military and weak countries with gold reserves to attack? I mean, they already do it over oil... It's just that if gold became the only currency, they extent to which these kind of wars would happen would increase immensely.
Last edited on
@ OP: Wait a minute, you're arguing that we should be using physical gold coins? That's completely idiotic. Even when the US had a metal backed standard no one carried silver coins around, we still used "paper" (it's denim by the way) money for day-to-day transactions.
| The biggest problem with using any physical thing to "back" your currency is that it will always tapper out at a maximum level. There is only so much gold in the world and once it's all dug up your economy stagnates, and after stagnation comes collapse. |
I agree with you that there's particular quantity of gold that's why its a precious metal. it wont result in economic collapse if all is gold is dug up but will result in stability and distribution of power. All power wont belong to government but to people of the state will have the power within there hands. Actually we heir presidents and government servants how can all money power belong to them!
| This idea of stabilizing costs is just wonderfully naive. It's not just you OP, all "metal-backers" have a similar notion so you're really not to blame. The reason inflation exists isn't because of fiat money, it's because there are hundreds of unavoidable push and pull factors in the market that make it happen. Let's look at one simple example, say I want to buy a house that is valued at $50,000. Another person also wants this house and has the money to buy it as well. But I want this house so bad that I am willing to pay $60,000 for it. How much is this house worth now? Who do you think the owner is going to sell the house to now? Did my money suddenly fall in value? Do you think that 20 years later I'll want to sell the house for the original $50,000 that it was worth or will I want to put it up for the $60,000 I paid for it? What just happened to the value of that house? |
Any thing value increases with demand and supply with time population also increases so you will get more gold for your property,resources etc.
| Let's have another example, one that doesn't cause a market bubble this time. Let's say Johnny gets a job working at an office when he is a kid. As Johnny get's older he decides he wants a family but he can't afford it on his current wage. So he goes to his boss and asks for a raise. The boss likes Johnny, he doesn't want to say no and risk Johnny leaving the company because then he would have to spend days going through resumes and interviews and weeks training someone to replace Johnny all the while hoping that the new guy he hires doesn't prove to be some kind of retard and even then it will be years before that person is as good at the job as Johnny. Now for one or two employees this wouldn't be an issue, but as time goes on more and more people require raises and the boss decides that his team works too well together to risk replacing any of them. So now he has to recoup the increased cost in labor by increasing the price of his goods\services just a little bit. None of the products he offers are any less useful or valuable, the money is still money he just requires more of it. |
jonny sure can get an increase in pay but don't you see the values of materials increasing day by day while using paper money so he spends more with time.
previously while men used gold as a currency people would get pay according to there tendency just as we do with paper.
jonny wants increase in pay due to prices increased with time!
and he will be paid according to his tendency either in paper or gold.
Sir with due respect i state "I don't see the point in your examples " i am very sorry if it sounds harsh.
Last edited on
| if you trade resources for paper and then tell me who got the most benefit out of the trade. |
Seriously? Everyone has accepted paper as a form of money. For example, the cost of production of a laptop is say $600. A 600 dollar note would then be equivalent to the value of the laptop i.e. the resources used to make it is worth that value. As I said we see the 'value' printed on the note. We have accepted the form.
A trade goes this way (assuming that no profit is made as price = cost):
You have the $600 note.
Firm has the laptop.
Firm gives you laptop.
You give it money.
You got what you wanted, firm got what it wanted. Therefore, both got the benefit. Just because the firm got a piece of paper with 600 printed on it doesn't mean it was the firm's loss. That $600 would be accepted anywhere for things equivalent to the value of $600, not equivalent to the value of the piece of paper used to make the note.
Mathematically:
that laptop = $600
(Note the equality sign)
| How do you know if a Dollar note is original or not an ordinary person cant even judge a $ but because of the punishment of trading in fake notes is severe that's why its maintained up to some level. |
Dollar notes are signed using special magnetic ink. Here we are talking about metallic coins. Brass, copper or steel aren't very expensive. So if they forge some coins using copper to make $5 ($1+$1+$1+$1+$1 coins), they wouldn't be in much benefit. However, if there were gold coins and the forger made 5 coins using iron sulfide (a.k.a pyrite or fool's gold), he would clearly be in a lot of benefit. You can't have symbols on coins, as forged coins can have symbol on them too. Forging: Cloning an original item using a cheap material than the original.
The punishment for forging money is severe but people still do it (the number is less however). Having gold as currency would just increase it.
BTW, is this your first year studying Economics? Your concepts of a country's economy seems dim.
Last edited on
| jonny sure can get an increase in pay but don't you see the values of materials increasing day by day while using paper money. |
Yes, and my point is that it will happen even with a metal standard because the forces that cause this increase in price have nothing to do with what we trade to keep track of wealth.
| Any thing value increases with demand and with time population also increases so you will get more gold for your property,resources etc. |
This is a direct contradiction to your claim that using gold would stabilize prices.
You have a lot of incorrect notions about how economies work. The only reason gold and silver were used as currency to begin with is because of their scarcity and difficulty to obtain. Otherwise they are too soft to make into tools, they are too heavy to build anything useful out of them and better metals for most tasks including jewelry are more readily available. The value of gold exists for the same reason the value of fiat currency exists, because that is what we agree that it is worth.
Last edited on
| Difference between paper currency and gold currency http://i61.tinypic.com/2prbgi9.png |
I never said that they isn't any advantages. There ARE, as I've mentioned before:
| The advantages are very few compared to these. |
But if you compare the advantages to disadvantages, the disadvantages would outweigh the advantages. Therefore, it wouldn't be suitable to change the currency just because there are a *few* advantages.
Topic archived. No new replies allowed.