At 02:55 AM 1/7/2003 -0500, Robert S.Z. wrote:
Don't know much about book money. I know there's MZM, M1, M2, M3, etc. and it makes my eyes glaze over. I tried to choose a figure that represents "the stuff that would be backed in a gold standard."Does this figure of 650 Billion include both, paper and book money? I mean, how exactly would they calculate the book money in "circulation" when billions are zipping around globe every second?
http://research.stlouisfed.org/publications/usfd/page2.pdf
The exact figures aren't that important. In any proposed US dollar gold standard, you have to come up with two numbers: the total number of dollars D, and the total number of gold grams in reserve G.
My point is that D is very large and G is very small. So if you pledge to redeem all D dollars for all the gold G on demand, the price of gold at the Fed window is going to be way too high by current market standards.
I just arbitrarily picked D = 650 billion using the Adjusted Monetary Base figure from the St. Louis Fed because it was the best I could do for free.
I scrounged up the G = 8 billion figure in a really messy way, looking at an old Fed balance sheet from 1996 included in Jim Ewart's "Money" book. They value their gold at $42.2222 / oz on the books, and they show a total value of $11 billion. That's a little over 8 billion grams (about 8000 metric tons). I don't think you can count all the stolen gold in Ft. Knox because a lot of that has probably already been paid to other countries. Too late. No reparations. Tough shit. History is written by the victors. That kind of thing.
So D/G gives you a redemption price at the Fed window of $81.25 per gram, about $2500 per oz. That's over seven times the current market price. So if the Fed instituted this gold standard today and the market price remained at $350, nobody in his right mind would ever redeem gold at the Fed window for $2500 per oz.! That gold standard would be totally meaningless and would not fly.
A more informed analyst than I will almost certainly say that the actual figures are much worse than I suggest. Perhaps D is more like 1000 billion if you include all the fractional reserve stuff, and G is much lower because the Fed could only muster a 4 billion gram reserve at best.So, I'd say that the real and perceived volumes of dollars in circulation [ie. notes and book] is likely to be well of above the trillion mark.
I'm just pulling those figures out of the air for the sake of example, but that would give you a D/G of 250. That means $250 per gram, or almost $7800 per oz. So there's another gold standard that won't work.
The point is, I believe that using any reasonable numbers for D and G, the redemption price of gold D/G is way too high compared to the market price. A Fed window redemption price of $81.25 or $250 per gram won't fly if the market price is only $11.25. Hell, people bitch enough already about paying $10 for a Norfed one ounce silver piece.
But who knows? That's just a static analysis. Maybe if the Fed declared a gold standard at $81.25 per gram and all the central banks and bullion banks around the world stopped playing games with the gold market, the market price of gold would rise to $81.25 per gram and that would be that. But that presupposes that a large group of powerful but amoral people suddenly acquire a measure of integrity.
You see, as Todd Boyle once pointed out to me, a gold standard cannot impose rectitude and integrity on a people. A gold standard is a symptom of integrity, not a cause of it.
I concur with Jim Davidson. My personal motto is "Don't wait for the State, it's way too late." Let's face it: the Fed, FDR, some other Skull and Bones Master-of-the-Universe types, and an ignorant, gullible, and cowering public permanently ruined the integrity of the U.S. dollar. Pandora is free, the cat's out of the bag, and "whoooo let the dogs out?" Now the free market, also known as "Chaos," must reign.
-- Patrick
http://fexl.com
"Life is full of risk. If you let fear of the government hold you back you won't contribute one useful thing to the world." -- David Mueller <http://www.goldmountainexchange.com>
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