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Path: utzoo!laura
From: laura@utzoo.UUCP (Laura Creighton)
Newsgroups: net.politics.theory
Subject: Re: The gold standard.
Message-ID: <5029@utzoo.UUCP>
Date: Thu, 7-Feb-85 02:56:48 EST
Article-I.D.: utzoo.5029
Posted: Thu Feb  7 02:56:48 1985
Date-Received: Thu, 7-Feb-85 02:56:48 EST
References: <613@ukma.UUCP>
Organization: U of Toronto Zoology
Lines: 22

I have a question. Assume that we do away with the Fed, and say that it
cannot muck with the money supply any more. The Fed was supposed to protect
solvant banks from buckling if there was a run on banks -- now the
existing agreements between the banks can do this.

Assume that we are on a gold standard, and that there is a fixed
ratio between the amount of paper dollars and the amount of gold.

Wealth increases. The money supply doesn't. The prices of goods fall.
I can now buy more stuff with the same salary I was making last year.
I am happier. This is called deflation, and is supposed to be a very
bad thing. At some point it may be desirable to increase the money
supply (say when newspapers cost .8 cents each) but is there any good
reason to tie the growth in wealth with a growth in the money supply
as a matter of course? Milton Friedman seems to think so, but I have
yet to read him explain why, and I would rather see the growth in
wealth passed onto me than passed onto either the government or the
banks through an increase in the money supply.

Laura Creighton
utzoo!laura