Tuesday, September 4, 2012

Gold standard

A little bit over my head for casual reading. I need to think through the ramifications--anyway, I thought it might interest you.


But the essence of a gold standard is that the units used in the above graph would become the units in which wages and prices would get reported and negotiated. Under a gold standard, a dollar always means the same thing in terms of ounces of gold that it would buy. So for example, if the dollar price of gold today was the same as it was in January 2000 ($283/ounce), and if the real value of gold had changed as much as it has since then, the dollar wage that an average worker received would need to have fallen from $13.75/hour in 2000 to $3.45/hour in 2012.

And the problem with that is, for a host of reasons ranging from minimum wage legislation, bargaining agreements and contracts, institutions, and human nature, it is very, very hard to get workers to accept a cut in their wage from $13.75/hour to $3.45/hour. The only way it could possibly happen is with an enormously high unemployment rate for a very long period of time. This strikes most of us as a pretty crazy policy proposal.

[snip: discussion showing that gold demand is not U.S.-driven, and thus that a gold standard for the dollar would not have prevented this depreciation]


Hahahahaaaa!!! That is ME laughing at YOU, cruel world.
    -Jordan Rixon

I could not love thee, dear, so much,
Loved I not Honour more.

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