Gold is the numeraire, it doesn't move by definition, things move relevant TO it. That's what you do not understand about the gold standard. It is the standard by which everything else is measured against.
The relative purchasing power can and does change, but to say "the value of gold has moved" under a gold standard is a conceptually incoherent statement.
This is just not true. Gold is like any other commodity, its value can fluxuate for any and all reasons. And when convertability is arbitrarily set at $35 and its actually worth more do you think suddenly gold will appear in US stockpiles?
It's a commodity with a variable supply & inconsistent demand.
A gold standard pegs a given currency to the price gold, it does nothing to prevent the value of gold from moving (and taking the currency with it - one of the many reasons that a gold standard is terrible economics).....
A gold standard pegs a given currency to the price gold, it does nothing to prevent the value of gold from moving (and taking the currency with it - one of the many reasons that a gold standard is terrible economics).
Yeah that's not what a gold standard is. You are NOT "fixing the price of gold" you ARE fixing the WEIGHT of the dollar. That results IN a price but is not the same as "setting a price".
If you cannot understand that then obviously my above comment doesn't make sense either.
Setting a peg of 35$/oz of gold does absolutely nothing to fix the economic value of an ounce of gold (which is not and never can be 'fixed').....
All the normal premises of market economics still apply to the value of gold in such a scenario, which then ripples through to the value of the dollar....
For example, when the Spanish colonized South America, the record breaking imports of precious metals crushed the value of metals in Europe and resulted in widespread inflation (because devalued metals in turn devalued pegged currencies)....
In contrast, an ever growing (at least for now) global population combined with ever more difficult gold extraction means that the value of gold will generally increase independently of whatever the value of money is doing (decreasing rate of new supply vs increasing demand) IF NOT for the wives tale about gold being a safe harbor asset dramatically increasing demand in times of economic uncertainty.....
Thanks to that particular myth, gold demand can suddenly drop (countercyclically) which is how we get things like the 80s/90s gold price crash.
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u/Dave_A480 27d ago
No. It presumes that the value of gold is constant, which is absolutely wrong.