It is becoming increasingly common these days to hear people calling for a return to the gold standard. We are living in a period of economic and financial instability and are seeing increasingly extreme monetary policy from central banks around the world as they try to stave off a global depression. In response to the spectacle of unprecedented sums of money being created out of thin air, it is completely understandable that we would question our existing monetary system. And, for those looking for alternatives, gold is appealing due to its singular position as the dominant monetary standard throughout human history.
Do you consider large, multinational corporations to also be contributors to the reduction in money velocity? How many times does money exchange hands before it ends up in Amazon’s bank account where it will virtually sit, untouched for all eternity? It can’t even be taxed out of existence because Amazon doesn’t pay taxes lol
Monetary history is happening in the present! Namely the rise of crypto currencies. How does this fit into your theories? Can you imagine a world dominated by crypto, completely free from the control of any single government? Crypto has a built in mechanism for depreciation since each bitcoin has a date that is was mined associated with it. Crypto also would obviate the need for vaults and theft protection, since it cannot be stolen. The extreme volatility, which at present, prevents crypto from actually becoming a widely used currency, may be a 'birth pang' and may smooth out as ownership of crypto becomes more widespread.
I don't pretend to know the answer but the US getting off gold in the 1970's to settle international trade imbalances was not a good step. Settling these imbalances in dollars removed all discipline from the shoulders of the US financial system and the US government. As a result the US is allowed to purchase any amount of foreign goods, some of it paid for by US exports and the rest of it paid for with dollar IOU's. At present there is roughly $20 trillion of these IOU's outstanding, with the number growing at a rate of 0.7 trillion dollars per year, and that number is increasing rapidly, especially with the now declining rate of shale oil production which means we have to import more and more oil in the years ahead. Meanwhile our overall production capacity has dropped sharply because of offshoring our manufacturing. So if other countries decide they want to spend these IOU's on goods from the US, we don't have the capacity to produce them. The whole system is based on confidence in the US dollar. That confidence is why foreign institutions have been willing to hold these dollars. With the US behaving terribly on the international scene and threatening to go to war with anyone and everyone, how long will that confidence last? The eventual likely sequence of events is that the dollar will get badly trashed, and we won't be able to purchase international goods at current prices. The standard of living in the US will take an extreme decline.
Do you consider large, multinational corporations to also be contributors to the reduction in money velocity? How many times does money exchange hands before it ends up in Amazon’s bank account where it will virtually sit, untouched for all eternity? It can’t even be taxed out of existence because Amazon doesn’t pay taxes lol
Monetary history is happening in the present! Namely the rise of crypto currencies. How does this fit into your theories? Can you imagine a world dominated by crypto, completely free from the control of any single government? Crypto has a built in mechanism for depreciation since each bitcoin has a date that is was mined associated with it. Crypto also would obviate the need for vaults and theft protection, since it cannot be stolen. The extreme volatility, which at present, prevents crypto from actually becoming a widely used currency, may be a 'birth pang' and may smooth out as ownership of crypto becomes more widespread.
I don't pretend to know the answer but the US getting off gold in the 1970's to settle international trade imbalances was not a good step. Settling these imbalances in dollars removed all discipline from the shoulders of the US financial system and the US government. As a result the US is allowed to purchase any amount of foreign goods, some of it paid for by US exports and the rest of it paid for with dollar IOU's. At present there is roughly $20 trillion of these IOU's outstanding, with the number growing at a rate of 0.7 trillion dollars per year, and that number is increasing rapidly, especially with the now declining rate of shale oil production which means we have to import more and more oil in the years ahead. Meanwhile our overall production capacity has dropped sharply because of offshoring our manufacturing. So if other countries decide they want to spend these IOU's on goods from the US, we don't have the capacity to produce them. The whole system is based on confidence in the US dollar. That confidence is why foreign institutions have been willing to hold these dollars. With the US behaving terribly on the international scene and threatening to go to war with anyone and everyone, how long will that confidence last? The eventual likely sequence of events is that the dollar will get badly trashed, and we won't be able to purchase international goods at current prices. The standard of living in the US will take an extreme decline.