[quote author="IrvineRenter" date=1227833046]One other thing that has been on my mind:
Let's say we were on a gold standard right now. What would the FED be doing differently? The bank losses are causing the destruction of real money, reducing the money supply, and causing deflation. Wouldn't the FED be printing money anyway. Wouldn't such printed money still be backed by the available quantity of gold?
Also, since the total amount of bank losses is still a mystery (or at least the extent of it is being hidden from the general public,) how do we accurately measure the money supply? It doesn't appear as if we have an accurate measure of money destruction buried in the SIVs of various lenders and hedge funds. If we cannot accurately measure money supply, how could we know if we are matching the money supply to the amount of gold?</blockquote>
Sorry, I am not positive I know what you are asking, but I will do my best.
The issue is not really a gold standard. The issue is the entity controlling the money supply and whether that entity "prints" money for it's or some other entities benefit. The reason folks think gold is a better money is because no one can print more gold. This may seem counter-intuitive, but historically, societies with a fixed money supply, usually gold, prosper to a much greater degree than societies with an expanding money supply. In a true gold standard, as opposed to using actual gold currency, the money supply would be fixed to the amount of gold in that society.
So the Fed would not be in the position it is in now. The money supply would not decrease. There would still be a business cycle, but since interest rates would be free market with a stable money supply, interest rates would not fluctuate greatly or maybe not at all, the the highs and lows of the business cycle are greatly diminished. And there would be no central bank. There is no need for a central bank. A central bank's purpose is to control the money supply for those who wish to control it. The USA has not always had a central bank. The Federal Reserve is the third central bank for the US.
I am very unfamiliar with all the details of a gold standard and how the "receipt" money is produced and accounted for. I am only familiar with the principles of a fixed money supply. If the money supply is fixed, my guess is that there is little to no reason to measure it, except to keep the issuers accountable.
If you read the history and reasoning behind Article 1, Section 10, Clause 1 of the Constitution
<em>No State shall enter into any Treaty, Alliance, or Confederation; grant Letters of Marque and Reprisal; coin Money; emit Bills of Credit; make any Thing but gold and silver Coin a Tender in Payment of Debts; pass any Bill of Attainder, ex post facto Law, or Law impairing the Obligation of Contracts, or grant any Title of Nobility</em>,
you realize that our present circumstance is nothing new and a fixed money supply based on precious metal was the founder's solution. And it worked well for the general populace. It did not work well for the banking elite, because they could not control or inflate the money supply for their enrichment. Do you know who wrote the legislation chartering the Federal Reserve? And how that legislation was passed? Consider this: It is almost impossible to fund a war with a fixed money supply without the financial support of the populace in a democratic republic.
An increase in money supply is not necessary for an increase in wealth. An increase in productivity is. We need more oranges to increase wealth, not pieces of paper.
"Paper is poverty,... it is only the ghost of money, and not money itself." --Thomas Jefferson to Edward Carrington
"That we are overdone with banking institutions which have banished the precious metals and substituted a more fluctuating and unsafe medium, that these have withdrawn capital from useful improvements and employments to nourish idleness, that the wars of the world have swollen our commerce beyond the wholesome limits of exchanging our own productions for our own wants, and that, for the emolument of a small proportion of our society who prefer these demoralizing pursuits to labors useful to the whole, the peace of the whole is endangered and all our present difficulties produced, are evils more easily to be deplored than remedied." --Thomas Jefferson to Abbe Salimankis
"The system of banking have... ever reprobated. I contemplate it as a blot left in all our Constitutions, which, if not covered, will end in their destruction, which is already hit by the gamblers in corruption, and is sweeping away in its progress the fortunes and morals of our citizens." --Thomas Jefferson to John Taylor
"I sincerely believe... that banking establishments are more dangerous than standing armies, and that the principle of spending money to be paid by posterity under the name of funding is but swindling futurity on a large scale." --Thomas Jefferson to John Taylor
"Everything predicted by the enemies of banks, in the beginning, is now coming to pass. We are to be ruined now by the deluge of bank paper. It is cruel that such revolutions in private fortunes should be at the mercy of avaricious adventurers, who, instead of employing their capital, if any they have, in manufactures, commerce, and other useful pursuits, make it an instrument to burden all the interchanges of property with their swindling profits, profits which are the price of no useful industry of theirs." --Thomas Jefferson to Thomas Cooper
"Certainly no nation ever before abandoned to the avarice and jugglings of private individuals to regulate according to their own interests, the quantum of circulating medium for the nation -- to inflate, by deluges of paper, the nominal prices of property, and then to buy up that property at 1s. in the pound, having first withdrawn the floating medium which might endanger a competition in purchase. Yet this is what has been done, and will be done, unless stayed by the protecting hand of the legislature. The evil has been produced by the error of their sanction of this ruinous machinery of banks; and justice, wisdom, duty, all require that they should interpose and arrest it before the schemes of plunder and spoilation desolate the country." --Thomas Jefferson to William C. Rives
"If the American people ever allow private banks to control the issue of their money, first by inflation and then by deflation, the banks and corporations that will grow up around them (around the banks), will deprive the people of their property until their children will wake up homeless on the continent their fathers conquered."
As you can see, our present situation is nothing new. It seems our generation thinks things are so much different now. We have so much more technology and we are so much smarter. I propose our technology has not changed the concept and principles of money and human nature, and we are less educated about money presently. I think we are about to learn a very difficult lesson and we may become a bit wiser.
