The Gold Standard, Breton Woods and The Nixon Shock

[kf7mjf]

Here is some good reading about the gold standard and a bunch of other fun financial concepts and monetary history. http://www.frumforum.com/what-really-we ... xon-shock/

Long story short... the gold standard of 1934-71 really was shitty, but not as shitty as the gold standard of 1873-1934, but the 1971-forward free floating dollar is really pretty much the best option out there.

[cycle61]

Tagged to read later.

[H2obouget]

Terrible logic.
It blames the precivil war money issues on the use of gold and silver as currency....not on the fact that there was no centralized banking for the US, and as a result there was a wide difference in lending rates and cost of goods.

It blames the huge monetary issues of the late 19th century on gold, when in fact it was a result of a massive depression following the civil war, reintegration sucks, followed by a massive boom in farming which caused prices on those goods to crash. This was followed in 1873 by a global restructuring after a major war overseas. In 1893 , after a bunch of railroads had already failed, the remaining railroads made a run on the banks and pulled out tons of gold. (See the issues with that in the other banking thread.)
Then we got a series of very questionable presidents, followed by personal taxation, a war, the dust bowl, then prohibition.

It blames the massive growth of the USA, and what many Americans consider our best years, on the Bretton Woods...which actually stabilized the world economy....keep the word stabilized in your mind...I'll get to it in a minute....yes it fixed the price of gold, yes ownership of gold was illegal, but paper money was directly backed by said gold.

Stabalization- when Nixon took us off the gold standard he turned US dollars, and gold into commodities. He in effect removed the safety catch that had been put in place to limit radical inflation, and radical fluxuation of our two new commodities...gold and cash.
For any socioeconomic system to prosper, it must be stable at it's core.
Prior to WW2 we had never had a truly stable core. The closest we came was prior to the civil war. After the civil war, banks and the government tried to use other goods and property to create a stable system which did not work....it created a bunch of jobs, and showed potential for huge amounts of money(read GOLD) to be made, but it was not really stable as it relied on fluxuation goods as a corner stone.
Along came WW1 and the government needed a stable source on money to build a war machine on...and gold became illegal...the government was using it as its foundation. WW1 ends, crops and property are not stable, so the government retains gold..WW2 rinse and repeat.
The allies all realize they have the same problem...stable money. Bretton Woods is born...the whole world sees economic success for the first time ever...at least for the next 30 years...then the US destabilized their money again.

What you should really be asking yourself is:

Who benefits from unstable commodities?

Personally, I'm fine with the idea that only governments trade in gold....however...had gold not been freed up in the 70s...I'm not sure we would have reached the computer age. The personal computer contains
https://techpageone.dell.com/tech-cultu ... computers/

10 troy ounces of gold (or about three-fifths of a pound) per ton of smartphones. Ten thousand phones weigh one ton. [With gold selling for about $1,580 per ounce, that would yield $15,800.]

How about a laptop?

Magann: Two hundred laptops would yield five troy ounces of gold.

How much is in an average desktop?

Magann: A PC circuit board, where the gold is, weighs about a pound. If you had a ton of those boards, you should have 5 troy ounces of gold.

Everything these days is a smart something. We have to have used up tons of gold to make those things. Gold that, had Bretton Woods stayed in effect...would have been illegal to own, hard for the computer makers to get, and it would not be worth the $1200 it is today.
So for every ounce of gold a government was sitting on, it has gone up significantly.

Hey Bob! I got an idea! What if I could take all that gold and make it, say, double in worth every two years?

Again I ask..Who benefits from unstable commodities?

[H2obouget]

BTW...that's about
=$81.6 Billion. (@$1200/oz)
=6.8 Million oz
=17,000 gold bars
=About 283K tonnes (if my math is right)

Just in cell phones


Edit:
What a coinidence.....This showed up on Drudge this morning.
http://www.independent.co.uk/news/world ... 87364.html
Electronic waste worth £34bn piling up in 'toxic mine', warns UN report

[kf7mjf]

Terrible logic.
It blames the precivil war money issues on the use of gold and silver as currency....not on the fact that there was no centralized banking for the US, and as a result there was a wide difference in lending rates and cost of goods.

He distinctly mentions the lack of a central bank.

It blames the huge monetary issues of the late 19th century on gold, when in fact it was a result of a massive depression following the civil war, reintegration sucks, followed by a massive boom in farming which caused prices on those goods to crash. This was followed in 1873 by a global restructuring after a major war overseas. In 1893 , after a bunch of railroads had already failed, the remaining railroads made a run on the banks and pulled out tons of gold. (See the issues with that in the other banking thread.)
Then we got a series of very questionable presidents, followed by personal taxation, a war, the dust bowl, then prohibition.

Lesse, Fisk and Gould cornered the gold marking causing a serious problem. However, by 1873, and being on the gold standard, with limited coining of silver, there was a serious lack of inflation. The money supply just couldn't grow fast enough to meet demands. The free coinage of silver to help inflate the money supply became a big political issue. Famously, William Jennings Bryan campaigned on the platform of inflationary free coinage of silver in 1896. However, around that time, the world gold supply started to increase, which eased pressure on the gold standard. South Africa, and then the Alaskan Gold Rush poured gold into the world economy and allowed for inflation.

It blames the massive growth of the USA, and what many Americans consider our best years, on the Bretton Woods...which actually stabilized the world economy....keep the word stabilized in your mind...I'll get to it in a minute....yes it fixed the price of gold, yes ownership of gold was illegal, but paper money was directly backed by said gold.

Which was all well and good, as long as nations played nice, didn't call in gold, and the amount of gold needed to back the currency grew with the economy. And that was a big part of the problem. It all came tumbling down if anyone called in their gold, and if you needed serious economic growth, the US could print more dollars, but if they pumped those onto the world market, and a country decided they didn't like all that paper running around, and called in the gold it was backed by... you see the problem?

Stabalization- when Nixon took us off the gold standard he turned US dollars, and gold into commodities. He in effect removed the safety catch that had been put in place to limit radical inflation, and radical fluxuation of our two new commodities...gold and cash.
For any socioeconomic system to prosper, it must be stable at it's core.
Prior to WW2 we had never had a truly stable core. The closest we came was prior to the civil war. After the civil war, banks and the government tried to use other goods and property to create a stable system which did not work....it created a bunch of jobs, and showed potential for huge amounts of money(read GOLD) to be made, but it was not really stable as it relied on fluxuation goods as a corner stone.
Along came WW1 and the government needed a stable source on money to build a war machine on...and gold became illegal...the government was using it as its foundation. WW1 ends, crops and property are not stable, so the government retains gold..WW2 rinse and repeat.
The allies all realize they have the same problem...stable money. Bretton Woods is born...the whole world sees economic success for the first time ever...at least for the next 30 years...then the US destabilized their money again.

Couple points. Gold was legal to hold until 1934. After 1934, it could be held in quantities suitable for art, jewelry, and limited amounts of coins for collectors, etc... WWI was largely funded through taxes and bond sales. Breton Woods helped stabilize a very unstable world, but it got to the point where if the US needed to grow it's economy and print more money, it needed the freedom to do so, without risking having all it's gold reserves called in. Remember, Breton Woods ultimately relied on nations accepting the value of gold and the US dollar as a stable influence, but any member nation could call in their dollars for gold, and you faced the risk of the whole house of cards tumbling down.

As for your other points on unstable commodities, the trade off is heavy government control, price fixing, and massive financial regulation. Which inevitably leads to people crying foul, both with and without cause, and setting off a storm of tinfoil hattery. As opposed to the current economic system which inevitably leads to people crying foul, both with and without cause, and setting off a storm of tinfoil hattery.

The fact is, no matter what you do with a money supply and system, there will always be people who think they are getting screwed, and that there are nefarious plots afoot. I for one prefer one with enough regulation to keep stupid shit like bubbles (which nobody ever fucking learns from) from happening, as opposed to the serious price controls and regulation of say Breton Woods. In the short run, Breton Woods did what it needed to do. It gave the world time to breath and rebuild. Once that was over, it was time to relax and make it in the world on their own.

I do not think modern day people could tolerate or accept the amount of government control that required Breton Woods to work, and I'm not sure we should. Or maybe we should, but it would require a massive truly global banking system, and while I might be inclined to trust the major, first world industrial powers with that, I'm not so ready to trust the other players.

[H2obouget]

Hate to be redundant, but....

Again I ask..Who benefits from unstable commodities?

[A Null]

consumer's do. the gov't shouldn't be in the job of pricing commodities. Subject to political manipulation as well as just plain getting the price wrong.

[kf7mjf]

Hate to be redundant, but....

Again I ask..Who benefits from unstable commodities?

Everybody.