Understanding Money& Banking Pt. 5: Inflation, Gold Standard

Inflation, the Gold Standard, and Fractional Reserve Banking: Part 5 of a multi-part series by lawyer Paul McKeever that explains the nature of money and banking as it has never been explained to you before.

ERRATA - Apparently, I accidentally gave Ron Paul a raise in this video: from Congressman to Senator. Must have been his bid for the Republican presidential nomination that got me writing "Senator". Thanks to EdgeMugga for pointing it out.

Category:

News & Politics

Tags:

• inflation
• gold
• standard
• fractional
• one
• hundred
• percente
• 100%
• reserve
• banking
• credit
• Ayn
• Rand
• Objectivism
• Objectivist

[Civsuccess2]

In the ancient time, Gold is not a common used currency. Silver and Copper are more common.

Gold Standard collapsed by itself. Please see "FDR Ends Gold Standard in 1933" on youtube.

[PaulMcKeever]

FDR made the ownership of gold illegal. It did not "collapse by itself". The government stole it.

[PaulMcKeever]

I did not refuse to answer your question, cfc. It is simply the case that I have a business to run, and I offer up these videos largely for free. You are already getting more than you pay for.

Again: money would end up in the hands of those who earn it. Period. Any system in which the money supply is allowed to increase is a system in which wealth is stolen by the person who increases the money supply. (cont'd).

[rjbabao1987]

@giorgioxyzb Interest is a value above the currency. With limited supply of currency and credit, application of interest wouldn't be sustainable.

[tothemax01]

Hence, because all banks are held in check by the threat of being unable to meet liabilities due to other banks (created when customers from different banks write checks/transfer funds to each other), outstanding credit (and thus reserve ratios) remain relatively stable - it does not simply balloon. Combined with a stable money supply (gold), this means no inflation, and normally mild deflation due to increasing transaction volumes caused by economic growth.

[tothemax01]

It is a common misconception that the banks can simply create as much 'money' (actually 'credit') as they want. The banks are limited in their expansion of credit by interbank transactions. Whilst people withdraw little of their money at any time, banks constantly demand money from other banks due to customer interbank transactions. If a bank gets out of line by extending too much credit - the other banks blow it up.

[thinkfree41]

You are correct to say that banks should not have the right to create money, but this is only because it is morally wrong for a private institution to control the creation money 'in the name of' the state - effectively using the state's identity and rights for their own profit-seeking purposes.

[MrSmackdown100]

@krislouis5 Tes ,The price of growth would increase and it would impede growth since competition for

reserves would exclude those whose projects could not support the interest rates being asked.

For example ,if the bank pays you 7% to use your money it may lend at 12%. to a business. Some businesses would not be able to afford that 12% rate and so their projects would be abandoned.

[krislouis5]

Hi Paul, Great video!

Please answer this question: If there is 100% reserve requirement, won't it hamper speed of growth for the country?

[coreyclamp]

@charronfamilyconnect

If gold is unobtainable, then it would lose it's value as a medium of exchange. If the scenario you describe were to happen, our society would inevitably switch to another medium of exchange. This could be anything - whatever it is, it needs to be somewhat rare. Imagine using 2 tons of lead to pay for a $1000 TV @ $0.25 per lb. The same TV could be purchased for less than an ounce of gold @ ~1450 per oz. If you want a more detailed explanation please reply.

[coreyclamp]

@CymroGoch

The short answer is no - paper money can be created from little more than a printing press, paper, and ink. When this happens it devalues every other piece of paper money already in existence; this is inflation. Gold cannot be created by man, even from other materials (at least until alchemy is a reality).

For a more in-depth explanation read 'Gold and Economic Freedom' by Alan Greenspan

[CymroGoch]

Isn't gold just as fake as paper money? I know it's relatively rare and a useful substance, but what relevance does that have in and of itself? How is gold anymore 'real' than paper money to a fisherman who goes into a shop to buy a fishing rod, whose owner then uses the cash to purchase services for home improvement. None of these people specifically need gold for any of this.