NSG Senate Chamber [NSG Senate]

[Living Freedom Land]

The fatal flaw is to couple it with socialist governments who bribe the electorate with ever higher spending. But really a gold standard would not stop them, they would still borrow money.

A gold standard would certainly reduce the ability of the government to borrow money.

A law mandating the borrowing of money only during wartime and disasters/emergencies would do it a lot more effectively.

[Lemanrussland]

Gold is not a suitable basis for a currency scheme.

The only advantage it offers is taking all discretionary power away from a central bank. It does not lead to price stability, it does not lead to financial stability.

(Image)

While gold's value is relatively stable in the long term, it can be incredible unstable in the short term. This is because gold's supply (and thus the money supply, which would be tied to gold in any gold standard) is inelastic, it cannot adapt to changing circumstances in the macroeconomy. There will not only be a slow, grinding deflation which will put a damper on growth in normal conditions (since the growth of the economy outstrips the growth of the money supply, typically), but bouts of severe deflation and inflation, which can exacerbate or even trigger financial shocks and recessions, and which confuse price signals.

Many gold standard supporters are concerned about the "value of the dollar", that is, the effects of inflation in the long term. Even with relatively low inflation (3 percent), the value of currency can be eroded in the long term, which can eat at the value of savings. The solution to this is to allow people to invest into or buy things on their own as a hedge against inflation, instead of imposing a volatile monetary order onto the entire economy. The benefits of short and medium term price stability and the ability to react to financial panics and shocks outweigh any long term price stability.

This does not address the critical flaw of fiat systems: dependency on debt. The fatal flaw of any fiat currency is the enormous debt required to pay for the economic stimulus and intervention. This will surely wreck our economy in the long run.

Not necessarily.

One only needs to push down interest rates and increase the money supply to counter a deflationary shock, and boost interest rates and decrease the money supply to control inflation. Most central banks have three quantitative tools which allow them to do this. They can change the rate of interest they change for loans they make to commercial banks, they can change the reserve requirements of banks (that is, they can change the amount of money banks are legally obligated to hold as a reserve), and they can perform open market operations, where they buy and sell government bonds on the open market. All of these tools can be used to increase or decrease the money supply.

As far as a central banks lender of last resort function goes, that doesn't really cost money either. A central bank lends money out when there is a shortage of liquidity in the financial system, typically during a financial panic. These loans are normally only to solvent banks, which can put up illiquid assets as collateral. For example, the US Federal Reserve's loans to the financial institutions during the 2008-2009 financial crisis can stand as a good example.

The Federal Reserve loaned approximately 1.2 trillion dollars to financial institutions from 2007 to 2010. Not one of these loans were defaulted upon, and the majority of them have been repaid. The Fed has been making around 80 billion in profit each year from these investments, and has been returning the profits to the US Treasury.

The Fed also makes short term loans to banks and other financial institutions, to act as a buffer for fluctuations in deposits or unexpected, large withdrawals. They charge interest for these loans (the discount rate), which was mentioned previously. By doing this, the central bank mitigates the daily or seasonal fluctuations in reserve demand and supply, which contributes to the stability of the banking system, alleviates pressure in the reserves market and reduces the extent of unexpected movements in the interest rates. All in all, this basically makes interest rates and lending activities more stable in the short and medium term.

I don't see how any of these activities necessitates that the government takes on excess debt.

[The Grand Republic of Hannover]

This does not address the critical flaw of fiat systems: dependency on debt. The fatal flaw of any fiat currency is the enormous debt required to pay for the economic stimulus and intervention. This will surely wreck our economy in the long run.

Not necessarily.

One only needs to push down interest rates and increase the money supply to counter a deflationary shock, and boost interest rates and decrease the money supply to control inflation. Most central banks have three quantitative tools which allow them to do this. They can change the rate of interest they change for loans they make to commercial banks, they can change the reserve requirements of banks (that is, they can change the amount of money banks are legally obligated to hold as a reserve), and they can perform open market operations, where they buy and sell government bonds on the open market. All of these tools can be used to increase or decrease the money supply.

As far as a central banks lender of last resort function goes, that doesn't really cost money either. A central bank lends money out when there is a shortage of liquidity in the financial system, typically during a financial panic. These loans are normally only to solvent banks, which can put up illiquid assets as collateral. For example, the US Federal Reserve's loans to the financial institutions during the 2008-2009 financial crisis can stand as a good example.

The Federal Reserve loaned approximately 1.2 trillion dollars to financial institutions from 2007 to 2010. Not one of these loans were defaulted upon, and the majority of them have been repaid. The Fed has been making around 80 billion in profit each year from these investments, and has been returning the profits to the US Treasury.

The Fed also makes short term loans to banks and other financial institutions, to act as a buffer for fluctuations in deposits or unexpected, large withdrawals. They charge interest for these loans (the discount rate), which was mentioned previously. By doing this, the central bank mitigates the daily or seasonal fluctuations in reserve demand and supply, which contributes to the stability of the banking system, alleviates pressure in the reserves market and reduces the extent of unexpected movements in the interest rates. All in all, this basically makes interest rates and lending activities more stable in the short and medium term.

I don't see how any of these activities necessitates that the government takes on excess debt.

Very true. We cannot eliminate the Central Bank; any modern economy has one. It is just a very influential and essential part of the economy

[Lemanrussland]

A gold standard would certainly reduce the ability of the government to borrow money.

Why do we need to borrow money (or a lot of it) anyway? We should be having a budget that is balanced, in the first place. This proposal will only be the gateway to a huge debt and more economic problems

The problem with that is that it exacerbates the swings of the business cycle. There are two types of government deficits, cyclical and structural. Cyclical deficits occur when the economy expands and contracts through the business cycle. During the low point of this cycle, there are lower levels of business activity, higher levels of unemployment, and less private spending, which causes less taxes to be collected and expenditures on social security programs to increase.

Cutting government expenditures to match this causes unnecessary fluctuations in the government's budget, and creates a situation where government spending falls whenever the economy is doing poorly, which causes the economy to do even more poorer than it otherwise would, which increases fiscal pressures even more. The second type, a structural deficit, is the one you should be concerned about. Structural deficits exist regardless of which point of the business cycle the economy is in, and are the an actually good indicator of the sustainability of any fiscal policy. If someone could write a law which sets down rules which require the government to maintain a sustainable structural component for their budgets, I would back it.

[Byzantium Imperial]

What bill are we debating and why?

[The Grand Republic of Hannover]

Why do we need to borrow money (or a lot of it) anyway? We should be having a budget that is balanced, in the first place. This proposal will only be the gateway to a huge debt and more economic problems

The problem with that is that it exacerbates the swings of the business cycle. There are two types of government deficits, cyclical and structural. Cyclical deficits occur when the economy expands and contracts through the business cycle. During the low point of this cycle, there are lower levels of business activity, higher levels of unemployment, and less private spending, which causes less taxes to be collected and expenditures on social security programs to increase.

Cutting government expenditures to match this causes unnecessary fluctuations in the government's budget, and creates a situation where government spending falls whenever the economy is doing poorly, which causes the economy to do even more poorer than it otherwise would, which increases fiscal pressures even more. The second type, a structural deficit, is the one you should be concerned about. Structural deficits exist regardless of which point of the business cycle the economy is in, and are the an actually good indicator of the sustainability of any fiscal policy. If someone could write a law which sets down rules which require the government to maintain a sustainable structural component for their budgets, I would back it.

Do we have a budget anyway?

[Lemanrussland]

The problem with that is that it exacerbates the swings of the business cycle. There are two types of government deficits, cyclical and structural. Cyclical deficits occur when the economy expands and contracts through the business cycle. During the low point of this cycle, there are lower levels of business activity, higher levels of unemployment, and less private spending, which causes less taxes to be collected and expenditures on social security programs to increase.

Cutting government expenditures to match this causes unnecessary fluctuations in the government's budget, and creates a situation where government spending falls whenever the economy is doing poorly, which causes the economy to do even more poorer than it otherwise would, which increases fiscal pressures even more. The second type, a structural deficit, is the one you should be concerned about. Structural deficits exist regardless of which point of the business cycle the economy is in, and are the an actually good indicator of the sustainability of any fiscal policy. If someone could write a law which sets down rules which require the government to maintain a sustainable structural component for their budgets, I would back it.

Do we have a budget anyway?

Not really, no. It would be a little bit difficult to realistically simulate it. I think I saw one bill which proposes various percentages to each top level government department, but which doesn't mention specific quantities of money.

We would need a pretty detailed description of the Aurentine economy to be able to make a semi-realistic budget. It would also have to be updated every once in a while too, to account for economic growth, demographic changes and so on.

[The Grand Republic of Hannover]

Do we have a budget anyway?

Not really, no. It would be a little bit difficult to realistically simulate it. I think I saw one bill which proposes various percentages to each top level government department, but which doesn't mention specific quantities of money.

We would need a pretty detailed description of the Aurentine economy to be able to make a semi-realistic budget. It would also have to be updated every once in a while too, to account for economic growth, demographic changes and so on.

Yea that's true. Not to forget that certain policies applied by the government will also affect the economy positively/negatively; which would be difficult, in terms of bias. I think we should pick an European Nation (small), and make our economy similar to the country's economy that we chose.

[Byzantium Imperial]

Not really, no. It would be a little bit difficult to realistically simulate it. I think I saw one bill which proposes various percentages to each top level government department, but which doesn't mention specific quantities of money.

We would need a pretty detailed description of the Aurentine economy to be able to make a semi-realistic budget. It would also have to be updated every once in a while too, to account for economic growth, demographic changes and so on.

Yea that's true. Not to forget that certain policies applied by the government will also affect the economy positively/negatively; which would be difficult, in terms of bias. I think we should pick an European Nation (small), and make our economy similar to the country's economy that we chose.

For the base we can take our gdp per capita and round out tax income that way. It would be muh easiar if we had flat taxes

[The Grand Republic of Hannover]

Yea that's true. Not to forget that certain policies applied by the government will also affect the economy positively/negatively; which would be difficult, in terms of bias. I think we should pick an European Nation (small), and make our economy similar to the country's economy that we chose.

For the base we can take our gdp per capita and round out tax income that way. It would be muh easiar if we had flat taxes

True. But not that many people will like flat taxes (even though it will make this whole issue a lot easier to solve). How many citizens does this nation have?

[Free South Califas]

Seems like Ron Paul's wet dream.

If you support economic tyranny, senator, then by all means vote against the bill.

The tactics you use among those in your thrall will not work here in the Senate. We tend to frown on such brazen attempts at intimidation here. Please mind your legal commitment to the Senate Ethics Act.

as it will be backed by something of worth: bullion.

Make that "opposed" to a "oh god please no".

That's why CP has a one line whip against it. Ye gawdz.

[Wolfmanne]

Supporters of Keynesian, Monetarism and New Classical Macroeconomics, unite against the monster that is the Gold Standard!

[Yanalia]

Supporters of Keynesian, Monetarism and New Classical Macroeconomics, unite against the monster that is the Gold Standard!

Hey Wolf, could you help me out with crime levels for the RCA?

[Rumostan]

I find it slightly suspicious that we are debating this and all of the ads on the page are suddenly about buying gold bullion.

[The Grand Republic of Hannover]

What's the population of this nation?!?!

Geez, sorry, but man, we aren't getting anywhere debating about whose economic theory is the best

[Wolfmanne]

Supporters of Keynesian, Monetarism and New Classical Macroeconomics, unite against the monster that is the Gold Standard!

Hey Wolf, could you help me out with crime levels for the RCA?

Sure, give me a rundown first.

[Ainin]

What's the population of this nation?!?!

Geez, sorry, but man, we aren't getting anywhere debating about whose economic theory is the best

40M

[The Grand Republic of Hannover]

I find it slightly suspicious that we are debating this and all of the ads on the page are suddenly about buying gold bullion.

Haha. That is weird, actually

[Ainin]

Supporters of Keynesian, Monetarism and New Classical Macroeconomics, unite against the monster that is the Gold Standard!

Hear, hear!

[The Grand Republic of Hannover]

What's the population of this nation?!?!

Geez, sorry, but man, we aren't getting anywhere debating about whose economic theory is the best

40M

What's the GDP of the country? Have we decided yet?

[Rumostan]

Supporters of Keynesian, Monetarism and New Classical Macroeconomics, unite against the monster that is the Gold Standard!

Hear, hear!

Aye to the Senator!

[Wolfmanne]

40M

What's the GDP of the country? Have we decided yet?

GDP per capita is $49,000, population is 40,000,000, you do the maths because I can't be fucked.

[Ainin]

This is also part of the omnibus.

[Yanalia]

Hey Wolf, could you help me out with crime levels for the RCA?

Sure, give me a rundown first.

I need to decide what kind of crime tax evasion, false reporting, and abuse of power should be. viewtopic.php?p=15155126#p15155126: The Act.

[Rumostan]

What's the GDP of the country? Have we decided yet?

GDP per capita is $49,000, population is 40,000,000, you do the maths because I can't be fucked.

$1,960,000,000,000