Economics question... - AnabolicMinds.com

Economics question...

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    Economics question...


    Hypothetical of course...

    Let's say tomorrow morning the powers that be in Washington decide that they change from the fiat system back to the gold standard.

    Discuss the effects it would have.

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    the worst part is that in the constitution WE (the people) give the government power and if they do a poor job it is our responsibility to establish a new gov't that IS better for the well being of our country...i don't think people remember that part.
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    That would be impossible. We're too far in debt and our dollar would be worth a **** if we did it. Basically, the U$D would drop much much further into the ****ter than it is now. Foreign govts would have to switch their reserves from the USD to gold which would be a disaster for us and them. Probably talking about a major global depression. THe USD is only held up by the perceived strength and creditworthiness of the US economy. If we pegged it against anything tangible, we'd be screwed.

    Ron Paul keeps talking the idea up. But, it's not realistic.

    http://blogs.tnr.com/tnr/blogs/the_p.../19/90716.aspx
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    Quote Originally Posted by roids1 View Post
    THe USD is only held up by the perceived strength and creditworthiness of the US economy. If we pegged it against anything tangible, we'd be screwed.
    but if people lost faith in our strength and creditworthiness, wouldn't we also be screwed? say for example, if the UAE decided tomorrow that oil would be priced by euro rather than the dollar, our dollar on a global level would drop by 20% overnight.

    currently, this is one of the factors holding the dollar afloat on the international scene.
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    That's true, but too many foreign govts are so heavily invested in the USD, that they have a stake in keeping it afloat right now. Any switch to a different global reserve currency would probably take decades. A sudden switch would have a horrible reverberating effect throughout global financial markets.

    Another benefit is creditworthiness. The US govt is the only entity in the world that has never defaulted on a debt (yet). Basically, it's still the safest investment for foreign govt reserves and individual investors. That could change though.
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    i agree. there was a time we were the biggest creditor nation. now we're the biggest debtor nation. we need to stop building debt, and get back in a position of giving out loans.
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    If they just did it with the snap of their fingers there would be one, final, massive inflation and an influx of gold into the US that would tear the world a new *******. A switch back to a commodity money is more than realistic, but it requires an acknowledgement of what has been done to the supply of fiat notes via monetary imperialism over the last many decades. The supply of dollars would have to be reigned in severely and their worth in gold reset to a more realistic value. Every plan to switch back involves those two steps and then usually some policy minutia to try and ease the economic pains that would be inevitable.
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