[rrc]

I do believe governments and central banks would like to suppress its use, though I wouldn't claim that's the only reason it isn't used in transactions today. It's in their interests to suppress its use because it's one way to spend more than they take in as revenue by issuing new currency. I think we're seeing the results of that globally today.

As to gold being impractical for use in everyday transactions, I don't think that's true anymore. You can look at companies like Goldmoney for a real world example of what is possible. Any trusted third party can hold the physical gold, while allowing electronic transactions of said gold in whatever increments, without any physical exchange taking place. In fact, this is generally how the dollar worked before it went off the gold standard.

I'm not sure why you think fiat money is better. The history of fiat money has been one of short lifespans and dramatic failures, while gold's history of use as money spans over 6,000 years.

[carsongross]

@Locke1689

Would it? Gold has gone up nearly an order of magnitude in a decade. Has this caused your computers cost to go up dramatically? Are there industrial alternatives to gold? Would stability of the value of your currency be worth an increase in the cost of consumer electronics?

I know no right thinking person, especially with an elite education, would consider a gold standard.

All the more reason to consider it carefully.

[Locke1689]

Where are you getting your information? Gold in 2000 was about $400 inflation-adjusted dollars. Gold in 2010 is a little over $1500. That's not even close to an order of magnitude.

However, if you know that there are about 140,000 tons of gold in existence and somewhere around $9(M2) trillion in US money supply in existence, you do the math on how much gold would be worth.

The main point of my post was that this is such an obvious point that is not addressed, meaning that even the idea of moving to a gold standard is not well-thought out. Poor analysis is enough for me to dismiss the idea without a second thought -- only idiots play roulette with a nation's entire money supply.

[carsongross]

I've done the math and invested accordingly.

I'm being a bit hyperbolic, but $2000 gold is around the corner, and the bottom in the early 2000's was well under $400, depending on the market you look at. The move in gold has been hyperbolic. Have you seen that pass through to consumer electronics? Are there alternatives to gold for these industrial uses?

I agree entirely that only idiots play roulette with the nations's entire money supply, which is precisely why we should take the roulette wheel out of the hands of the money printers at the privately owned Federal Reserve.

[nhaehnle]

In your scheme, you are simply trading assets that are reflected by a liability of the organisation that runs the system, so you are not actually using gold for everyday transactions. It's the same as the difference between using gold itself and a gold-backed currency.

As to the question of what is better, my answer to that is two-fold.

First of all, history paints a misleading picture of the strength of gold-backed currencies. After all, when things go seriously wrong economically under gold-backed currencies, ending convertibility is usually one of the first things that governments do. Then the final death of the currency happens after it has become a fiat currency, but of course the failure is ultimately one of a gold-backed currency. Generally, whether a currency fails is not related to whether it is fiat or gold-backed anyway (such as with the failure of the Weimar mark, which happened to be fiat money; but both the move away from gold convertibility and the hyperinflation were caused by the First World War).

Second, while it is obvious that fiat money can be rejected totally, and gold will always retain at least some minimum value based on its use in jewellery and industrial production, this is not a useful measure to decide which system is better.

I claim that the real measure should be: How well does the economy fare, how well does it serve society, under a modern fiat money system vs. older systems.

Here, there is a great amount of evidence in favour of modern fiat money arrangements. Compare the cycle of booms and busts in the 19th century with the relative calm of the second half of the 20th century. In fact, that period was so calm that economists even claimed that the business cycle had been tamed! (They called it the Great Moderation.) Of course, this was hubris as the current crisis has demonstrated, but it should give you a taste of just how successful the combination of modern central banking with fiat money has been.

(I do not think this calmness was purely due to using fiat money, but I would claim that using fiat money certainly helped. The correlation is obvious, one can debate over the causal link of course.)

[Locke1689]

For one, we use gold in a whole lot of things (like the computer you're typing this on). A gold standard would cause a massive increase in the price of gold, crippling those uses.