What would happen if the US went back on a gold standard?

Question

And suppose the IRS was abolished. Separate questions.

Answer 1

a) for starters, a new national economic equilibrium would need to be established, which would, for lack of better words, be bad.....

How?....lets say that hypothetically one ounce of gold equals one us. dollar. lets also say that this standard is established right now, this very moment. well..... taking into consideration the govt setting gold standards for every dollar issued.....and knowing...the value of the us. dollar, value being what is backed by promise of the federal government as guarantee of repayment for goods and services and being that the dollar has no real or intrinsic value, then two problems would arise. the first being, if every dollar in circulation was set against a gold standard, backed by the federal govt, inevitably massive inflation would take place as the amount of dollars required to make purchases would escalate through the roof.

Why? well think of it this way.. the government is in all reality a publicly traded company who issues stock in the form of currency. like the value of any stock, a stocks price is not based on what it is worth now, rather it is presently valued to its projected potential or future value. currency in the gold standard would be like having to buy stock in a company at its present value with conditions of solvency, meaning that if its stock were sold today..or tomorrow..or whenever...then every share of stock you had received/bought, would be entitled to an equivalent proportion of the historical equity share of the stock that was purchased. this would work out relatively fine if you only bought into companies that were not in or ever were going to be in debt. ***the government however is in debt, and with a gold standard established, we would see the per share value (dollar buying power) of the us.'s stock (currency) fall as the government's debt increased. this weakening of the buying power would initiate inflation.

Why would this happen? because the government under gold standards would still issue dollars, be responsible for redemption of dollars, and ultimately, the most important factor, be responsible for responsible fiscal budgeting as not to diminish the value of dollars in circulation which they back....***since a financial product is worth only as much as the company that backs it. since the last of these responsibilities would be nearly impossible to perform, and in order to compensate for the arising economic dis-equilibrium, more dollars would continuously be needed to purchase goods and services. before we know it, a gallon of gas would cost one hundred dollars. remember, we are talking about a gold standard....which would be established through the global laws of supply and demand. the only way to protect a standard once established is to preserve the status quo. that would require elimination of fiscal deficit growth.

So what would happen internationally? for starters, we would begin to export more and more than we import, since our dollar is weaker and products and services cost comparably less to other nations. here is the contradiction most people don't realize, with an increase in net exports...which is exports - imports.....comes less sources of domestic investment from foreign nations by way of selling them goods. less imports equates to a reduction in industrialized growth. when we export we sell a good, the proceeds return as capital, and then the other nation consumes it. when we import we get to consume the good, the nation that we bought from receives the capital in American currency, then typically invest the American currency back into us. firms. in other words it is more beneficial to import goods, which can be used in the factors of production....while at the same time having the foreign nation providing capital for us. investment and expansion......caused by a deficit in our net exports........

WHY ALL OF THIS NET EXPORT INFO??? it all comes back to the value of the dollar in our hypothetical gold standard scenario. when the dollar becomes weak, our exports tend to rise as foreign nations spot the opportunity to buy goods at cheaper prices. this is called the depreciation of the domestic currency relative to the foreign currency an exchange rate term that coincides directly with net export status, either a deficit or surplus. with our weaker dollar....we tend to import less since goods cost comparatively more, net exports surplus. but remember......when we import more we not only get the product, but we also have the buying nation reinvesting their American dollars back into our economy, stimulating growth. in short, as we lose strength in our dollar, we end up running into a net export surplus which stifles domestic economic growth.....which generates less revenue for the government through taxes.....which causes the federal budget deficit to increase....which cause a weakening of the dollar. now true.....the fed can play around with interest rates and loans, however their effect is short term, nominal, and does not effect long term growth.

CONCLUSION: our national fiscal policy has developed into a credit based financial system. think of our economic situation as a necessary invention to create things that no amount of gold could have possibly accomplished. the reason for our economic growth lies in the reality that a body, the fed, can print paper, give it a number, and make people work their whole lives to get more of it. to try to limit the value of a currency by assigning it a standard would be back stepping. remember.....America is a company....currency is stock...and America has tons of assets to say the least. so just go along with the game......even though we both know money isn't real...and enjoy what it has provided.

b) it would get sucked up by walmart.

Answer 2

There would be a lot less US currency around, as right now the US dollar is backed by the faith of the US govt.

And if the irs was abolished, there would need to be some other way to raise revenue to operate the govt. So, we'd end up with some other govt organization to collect govt revenues.

Answer 3

Gold would be severely de-valued.

Since taxes still need to be collected, the IRS would have to be replaced with another operation with the same function. Given the size, it would probably be manned with the same personnel so little would change.

Answer 4

The international bangsters would never let that happen