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gozinsa

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23/03/19

12:16

Post #: 37861233
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Originally posted by Bullspike: ↑

A gold backed system would constrain the amount of debt issued by banks. This also relies on no bail out from mummy and daddy central bank.

Debt is not the problem. The amount of it is, and the fact central banks seek to control economic activity via money supply. These two issues are the fatal flaw.

In a gold backed system Bank A can only lend as much paper notes as they have gold. They also have to make sure they can redeem paper for gold as clients require. They can lend as they feel suitable for the economic climate. If they lend recklessly up to their maximum allowed by gold, to high risk clients, they will suffer defaults and go out of business. They have no more capacity to lend. If banks are constrained by free market consequences like this they would not lend recklessly. Also, the amount of debt remains healthily pegged to the production capacity vector of the economy which is the bigger issue.

Gold backed could easily exist with e-currency today with proper policy.

Read austrian economics, and the history of fiat systems and you'll be backing the truck up to the perth mint. Why gold? Humans have wanted it the last 5000 years for money. Modern money systems need to have tangible money, which is timeless and universal in it's value to roughly retain the production effort expended to obtain it. Consider economic collapse due social factors but the money still holds universal value. What we have now is economic busts and the money goes down with iy.

Sadly, no goverment will gracefully transition back to a gold backed system. They will be forced if history repeats, which it does.

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This has been explained to him 30 times on this forum, the conversation never progresses. He goes away, then comes back with the same old tired arguments. He is not here to learn or debate in good will. Just like the most of the other trolls.
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