Ron Paul: The Gold Standard

Henry Ford once said, “It is well that the people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning.”

If our money was backed by gold, people couldn't just start to create new money. They would have to  trade with someone else that actually has gold with them. Essentially, they would have to  to find a suitable spot to build a gold mine, then actually do some work and dig up the gold. 
"Not something I can imagine our “money elves” at the Fed getting down to whenever they feel like playing God with the economy." - Ron Paul

There is one answer to America's inflation problem, and that is too stop making money from nothing. But we’re already so stuck, that the one way to really effect our money supply is to higher interest rates so that people pay back their loans quicker and borrow less money from the banks, which would essentially lower the amount of money in the country. 
"However, higher interest rates might very well crash the economy. So the Fed’s current “solution” to overcoming inflation is… creating even more of it." - Ron Paul

Gold prices and the US economy

Gold prices indicate to us how good our economy really is doing. When the prices are high, that means are economy isn't doing too well. But other wise when the price of gold is low, that means our economy is doing very well. This is mostly due to the reason that most investors aren't investing with gold anymore, but mostly stocks,bonds, CD's, and etc.

In a bear market, gold's price shoot up, but when gold price's shoot up how does help determine the US GDP. In Japan, They took away the Gold standard in order to use their GDP to determine their value as a country. More recently, America not using the Gold standard also allows them to use the GDP as an indicator of their value. But I believe Gold can determine their value much more efficiently and beneficial.

Can gold stop inflation?

You can't inflate the price of gold. Unless there was a sudden inflation in gold,and  begin to sell it. This would drop the price, but goods would accommodate with the new prices.

"Gold is an inflation hedge because is it an ancient yardstick of the value of durable goods- an ounce of gold now will purchase about the same quantity of goods as it did in ancient times. No matter what numbers you may apply to it, an ounce of gold reputedly can purchase about the same number of loaves of bread as it could in biblical times" -Rogers

The 1980 Republican party announced ''the severing of the dollar's link with real commodities in the 1960s and 1970s,'' was then blamed for inflation. ''One of the most urgent tasks in the period ahead will be the restoration of a dependable monetary standard,'' they added

Gold can very much stop inflation and bring back the stability of our country. Which also, with the major debt problems the US is in, it could very much help us and bring us out of it. 

Foreign Exchange with Gold

In 1933 the US dropped Gold standard also with many other during the '30s. Switzerland was one of the last countries to drop the gold standard  in 1999.
As much as I would love the US to go back on the gold standard, no other country would recognize our currency, because no other country recognizes gold. 

"But wait, our dollar is the world reserve currency and we are boss, so therefore what we say goes because we will see how long other countries can go without corn if they do not recognize our gold currency. Also, Under a gold standard, the dollar would be valued at a certain number of grams of gold, and the government would be ready to buy or sell gold to anyone based on that value." -Ron Paul 

But other countries were very unsuccessful when trying to go back to the gold standard. 

"There was no reason for the gold standard because we could just back the dollar by the GDP like Japan do. The Gold Standard would destroy the government's ability to exert control over the economy."  -Ron Paul; Blogger

 

Synthesis and Plan

I have been researching how Gold works and is valued in our society today, and also in the past. A fact I have discovered is, The gold standard regulated the growth rate of a country's Money Supply. The gold standard was also an international standard determining the value of a country’s currency in terms of other countries’ currencies. Gold has many responsibilities for countries, gold can either make or break a country.

From research I have discovered, The suspension of the gold standard in America was considered temporary by many in markets and in the government at the time, but restoring the standard was considered a low priority to dealing with other issues, and in fact america never ended up restoring the gold standard. Till this day America's currency is not backed up by gold. 


Questions:

• What countries still use the gold standard?
• Why did the U.S stop using the gold standard?
• Did Gold discoveries have major impact on the value of gold, or the gold standard?
• How was gold initially valued?

How the Gold standard worked

The gold standard basically identifies the countries GDP. The gold standard is a international standard in determining a countries wealth or value. But as more and more gold discoveries happened,  price levels of gold began to become very unstable in the short run.
The California gold discovery in 1848 is an example of how unstable gold became in the short run. The newly discovered gold increased the U.S. money supply,  and, more so, the price level. The increase in  price level had the United States exports valued higher for America’s traders. 

In the trading partners, the money supply increased, raising domestic expenditures, nominal incomes, and, ultimately, the price level. (Bordo) 

Article:Gold Standard
Author: Michael D. Bordo
Publisher:Library of Economics and Liberty

How is Gold valued?

The Egyptian dynasties were noted in history as some of the first to use the gold standard. The Egyptians also found creative and sophisticated ways in making fine jewelry. Gold has now been valued at $54.98 for simply a gram. I wonder how they came up with such a number, and if it was anywhere near the same value in the Egyptian dynasties.

Source: http://www.onlygold.com/tutorialpages/value_of_gold.asp: The Value of Gold

How is gold used?

The gold standard uses money backed up by gold. Ancient business used goods as a way of exchange. As trades grew, metals were also used as a way of trade because they were much easier to exchange. Gold was the best and looked up an as the "GOD" metal. The making of coins, made it even easier to exchange. The use of silver and gold coins spread across the trading world, and even till today. That's how the Gold standard was created

Source: World of Scientific Discovery; Gold

Intro

Gold is a precious metal. It has become famous for it's qualities. It is a beautiful color, and comes in many forms. It is durable and tough. All this made it the metal of choice for Jewelry and art. Gold has also been the standard of wealth for seven thousand years, all the way from ancient Egypt. Gold has also become the standard of currencies.

Source: History of World Trade Since 1450 , 2006; Gold standard