The Gold Standard

When we were on the gold standard, the price of gold was fixed by law. I seem to remember that, when I was a kid, it was $32 an ounce, but I think they raised it at least once after that. When they raised the price of gold, what they were really doing was devaluing the currency. If the price of gold is $32 an ounce, it means that a dollar is worth 1/32 of an ounce of gold. If they raise the price of gold to $64 an ounce, then the dollar is only worth 1/64 of an ounce of gold. That's inflation of the currency. If gold is being used directly as money, which it was in some places during the California Gold Rush because there just wasn't enough money in the mining camps to support all the transactions that were going on, then every new gold strike inflated the supply of gold, causing the  price of things to go up. Supply and demand still affected the price of things, but an increase in the local supply of gold would usually trigger a spike in prices as well.

When we were on the gold standard, private citizens were not allowed to own gold bullion. They could own gold jewelry and things like that, but they couldn't own raw gold in bulk quantities. When we went off the gold standard, this prohibition was lifted and the price of gold was allowed to respond to market demands. Last I heard, it was running around $300 an ounce, but it goes up and down every day like the stock market. Now gold is just a commodity like corn and crude oil. The value of the dollar in relation to other currencies goes up and down the same way which, I guess, makes money just a commodity as well.

I don't think that we ever were on a silver standard, although there was failed movement to put us on both a gold and silver standard in the late 19th century. William Jennings Brian ran for president on this platform, which made him famous as a public speaker, but he lost the election. There was something back in the day about silver, though. I remember when the one dollar bill used to have these words on it: "Silver certificate - Payable in silver to the bearer on demand." There was a kid at Sawyer Elementary who once presented a dollar bill to a bank teller and demanded his silver, just to be a smart aleck. Without hesitation, the teller took his dollar and gave him four quarters in return. They stopped making coins out of silver sometime in the 60s, years before they went off the gold standard and, I think that's about the time they stopped promising to trade dollar bills for silver. The old silver coins and silver certificates remained in circulation for awhile and were valued the same as the new currency, but they didn't make any more of them.

A guaranteed annual income is not a new idea. George McGovern promised to implement it when he was running for president in 1972, and I believe that it was $1000 a month just like Uncle Ken's proposal. I don't think that many people took it seriously at the time and, of course, McGovern lost the election, but maybe it's an idea whose time has come.