Re: gold standard


conradeaton@xxxxxxxxxxx wrote:
I certainly am not qualified to question either the expertise nor the
integrity of such a luminary as Milton Friedman. Nonetheless, he was a
paid consultant to the government, was he not? One of the reasons I
quit the practice of engineering consulting was that I saw how
shamelessly professionals would prostitute themselves and distort the
principles of their "science" to support the issues of the paying side.
Yes, as someone asked, might deflation occur if the supply of gold does
not keep pace with the demand? It could,

Not "could", but "does". The historical evidence is there. Look it up.

but this seems to be
disadvantageous to entities with long term debt. Just think, with
deflation, your money in the bank has buying power that increases with
time, even if no interest is paid! This is a bad thing?

Yes it is. When deflation comes, people stop spending money, because
they wait and wait for it to gain more value, and this not spending
slows down the economy to a griding halt. Just look at what happened to
Japan.
http://en.wikipedia.org/wiki/Deflation_(economics)

I don't know,
but I understand that inflation is an advantage to long-term debtors,
the largest of which is the government. Wouldn't they therefore
welcome inflation?

A small level of inflation is certainly desirable; it's like the normal
heat generated by a properly working engine. But if inflation starts to
rise, specially above double digits, then it distorts supply and
demand. Prices are a signal to the market. A high price tells producers
to produce more, and a low price to produce less. When inflation, and
speciall HYPERINFLATION comes, then the signal cannot be read anymore,
and markets go haywire.

And no one has yet answered the question: why can
the government print money at will, but I can't?

You COULD, but who is going to take it? You have no authority, no
credibility, and no way to enforce its use with the ultimate threat of
deadly force.
Try this. Design on your computer some nifty conradollars, print them
out on your color printer, and go down to the store and try to buy
something with them. Yes, they will laugh at you :)


By the way, I believe
it was FDR who kicked us off the gpld standard around 1931 - not Nixon.

You can read the whole story here:
http://en.wikipedia.org/wiki/Bretton_Woods_system

.

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