Corpania Ideas

CAVEAT! I'm an amateur philosopher and idea-generator. I am NOT an investment professional. Don't take any of my advice before consulting with an attorney and also a duly licensed authority on finance. Seriously, this my personal blog of random ideas only for entertainment purposes. Don't be an idiot.

Monday, March 07, 2011

Switch to the gold standard? But U.S. Net Worth is 6x that of all the gold in the world!

How can we switch to the gold standard when US Wealth is 6x that of all the gold in the world? Seriously, explain that to me! What am I missing?

Some ignorant people genuinely want the US Dollar to return to the Gold Standard, meaning every dollar would be exchangeable for a fixed amount of gold.

But there are under 6 billion ounces of gold in existence. Amount of gold (<6 Billion) x Price of Gold ($1400) = $8.4 Trillion is the maximum total value of all the gold in the world!

>>> But the total Net Worth of U.S. Households and Nonprofit Organizations is over $50 Trillion. http://en.wikipedia.org/wiki/File:Graphic.png
So how can every U.S. dollar be exchangeable for gold?

The Net Worth of the entire U.S. would have to drop by over 80% or the price of gold would have to skyrocket to over $8000 an ounce just to make the arithmetic work.

Even worse, the gold standard doesn't allow for the viable & desirable concept that we could (and can and should) "grow the size of the pie".

We can make (and have made) more stuff that people want and therefore there can be more wealth in existence. With a fairly static amount of gold then that would de facto limit the growth of the economy (otherwise the price of gold would have to go up increasing the wealth of gold-owners regardless of their productivity/"contribution to pie growing").

Ok, the above was just my personal but random rants on the subject. You're better off learning serious facts about it. So...

EDUCATE YOURSELF...

1) Here's one fun NPR "PLANET MONEY" podcast explaining the origin & evolutionary advantage of gold (historically).
http://www.npr.org/blogs/money/2011/02/07/131363098/the-tuesday-podcast-why-gold

2) Here's an NPR "PLANET MONEY" podcast featuring an advocate for the Gold Standard...
http://www.npr.org/blogs/money/2011/02/15/133781593/the-tuesday-podcast-the-gold-standard

3) And here's an excellent NPR "PLANET MONEY" podcast destroying The Gold Standard...

The Friday Podcast: Gold Standard, R.I.P.


http://www.npr.org/blogs/money/2011/02/18/133874462/the-friday-podcast-gold-standard-r-i-p

Blog Archive