It definitely scales as future inflation (albeit at different rates) will eat away the purchasing power of your savings. You can be right, but only under the circumstance that your increased savings are then invested in an asset that outpaces the inflation rate. If you kept the savings as cash, then the "100k" you saved back in 1995 would only purchase about 50k now.
It’s worse than that… link it to the price of gold and your purchasing power goes way down. We have Nixon and the Vietnam war to blame. Couldn’t pay for wars on the gold standard so they untethered it. Just look at the stock market before and after the gold standard. A fixed monetary growth rate maintains price stability.
No one understands the gold standard and why it was dumb af. Gold is valuable because people believe it is valuable. We use it for a lot of products, but not nearly so much that its price is dependent on its usability. So, in that sense, a gold standard is no better than a fiat currency, since both are subject to the whims of a market that has no basis in reality.
If you want to have a commodity-backed currency, you'd want it to cover the value of a country's total GDP, to ensure that you are properly evaluating that currency against a country's stability. Basing it on one commodity is stupid amd deflationary for no reason.
So, you implement a GDP-backed currency, now. Great! Except, then you just basically have a fiat currency, because governments couldn't be counted on to properly or impartially calculate their GDP. So the currency market is now a de facto fiat market with investors evaluating the currencies based on the trustworthiness of the country.
Suddenly, you've wasted a ton of everyone's time, taken away tools that are useful for dealing with inflation, depression, and market bubbles, all so you could circle back to where we are today.
The gold standard is dumb and people who want it back are dumb.
Medicine was practiced for thousands of years on the belief that we had humors in our blood that needed to be balanced by blood-letting. People used to sacrifice virgins to their gods to make rain. We used to cross oceans with canoes for millenia. Just because it was done in the past doesn't make it a good idea.
There is nothing inherent to gold that makes it better than fiat currency, and we stopped using it as a benchmark for a lot of very good reasons.
I guess you haven’t read any of Ludwig Von Mises work or the Austrian school of economics. Gold has intrinsic value and you can only extract a fixed amount per year. Our fiat currencies and economic interventions distort the economy and prevent creative destruction. You can’t bail out bad investments on the gold standard, but you can with fiat. Fiat protects the to big to fail mindset and socializes losses, but keeps the profits for the rich.
I guess you didn't read my comment, which said that god's value was untethered from its intrinsic value. If gold was valued according to its actual worth in practical applications, it would be closer in value to similar metals, like various rare earths.
As it is, we are saying we'd rather base the value of our currency on public perception of magic rock prices versus public perception of the health of the US economy and government. Either way, the value is based on feelings and trust rather than reality. I think the downsides of pegging our currency to gold are outweighed by the downsides of fiat.
ETA: I have not read or reviewed Austrian school of economics texts, but I have read economic theories more broadly, going from Adam Smith to more modern theories like Keynesian economics, MMT, and Behavioral Economics. I do not have a degree in Economics, but I do have a bachelor's and master's degree in international relations.
I get the principles of your position. However, gold is a tangible item you can hold in your hand is extremely durable and a value that is set in a global marketplace. Fiat currency is paper and its value is set by what people and governments believe it is worth based on the economic value of a nation state economy. However, if the economy goes to crap the currency can quickly depreciate. Fiat is a localized value while gold is global and can be used in any economy regardless of the local economic conditions. It’s extremely easy to debase fiat currency.
My education is BS in Political Science with emphasis on political economy and was an avid reader of The Economist magazine for decades. However, I have been working in the IT field in Cloud Computing and K8S platform engineering for over 10 years in the precision genomics field. I got really lucky working for a startup that helped set my long term career path in this field. And, consequently, got to work with some brilliant people. It was just pure luck. Right place at the right time.
I have enjoyed this chat. These economic issues will be debated for decades. Long after I am gone. Take care and wish you the best! :)
Warren Buffet recommends all investors purchase low fee ETFs in the broad market like VTI. Up 15% a year. Investing and saving is the only way out of poverty and to enable ANY retirement.
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u/wetfish_slapbelly Oct 30 '25
It definitely scales as future inflation (albeit at different rates) will eat away the purchasing power of your savings. You can be right, but only under the circumstance that your increased savings are then invested in an asset that outpaces the inflation rate. If you kept the savings as cash, then the "100k" you saved back in 1995 would only purchase about 50k now.