[picapp align=”center” wrap=”false” link=”term=locomotive&iid=6581016″ src=”c/6/d/9/Welsh_Steam_Train_434b.jpg?adImageId=9327913&imageId=6581016″ width=”380″ height=”253″ /]
Have you ever realized this: If we had a true gold standard and some dude in Cabarrus County, North Carolina, say, had accidentaly found a dozen tons of gold in his backyard, we would automatically have worldwide inflation! Why? Because the money supply would have increased!
It is true that gold was used for a long time as currency because it is a scarce resource and therefore almost guarantees that it will not hyperinflate its value away, as paper money can do. But what a gold standard does is it substitutes planned inflation (paper money) with “accidental” inflation, as shown by my example above. History shows us that because of irregular successes in gold mining led to decade-long trends of either inflation or deflation. Sometimes they were lucky and found enough gold to increase the money supply, which then led to worldwide inflation, as it happened in the 1890s and 1900s. And sometimes they digged unsuccessfully, leading to deflation periods like 1870-1890.
The gold standard was just a very crude and simple kind of monetary regime, but it was somehow effective. In other words, it was a second best solution to the governments in the 19th century, who lacked the knowledge and ability to implement a more sophisticated monetary regime. IMHO today we should expect more from our modern societies than reverting to something as sophisticated as a steam locomotive.
Under a gold standard, the world economy would sooner or later look like this:
[picapp align=”center” wrap=”false” link=”term=locomotive&iid=751165″ src=”d/a/a/5/Freight_Train_Derailment_d6ba.jpg?adImageId=9327961&imageId=751165″ width=”380″ height=”242″ /]
Don’t get me wrong. I think that the current fiat money regimes can be incredibly dangerous, too, though they work nice in theory. But in reality, they are often abused for political purposes. So, the fiat regimes are like racing cars:
[picapp align=”center” wrap=”false” link=”term=drinking+driving&iid=4699427″ src=”8/0/d/a/Lipton_Tea_250_fb68.jpg?adImageId=9328127&imageId=4699427″ width=”380″ height=”253″ /]
Fast, effective, adjustable. But, if the wrong driver sits behind the steering wheel… well:
[picapp align=”center” wrap=”false” link=”term=drinking+driving&iid=6115917″ src=”2/a/9/a/Food_City_250_76fd.jpg?adImageId=9328122&imageId=6115917″ width=”380″ height=”253″ /]
What we need is an modern airplane: like the car it should be fast, adjustable, and effective. But above all, it should have an autopilot with anti-collision and terrain-following radar:
[picapp align=”center” wrap=”false” link=”term=dreamliner&iid=7396659″ src=”0/a/4/c/Boeing_Dreamliner_takes_7096.JPG?adImageId=9328245&imageId=7396659″ width=”380″ height=”253″ /]
Got any suggestions?