Monetary Question

Post » Sat Jul 30, 2011 3:30 am

Usually I find the answer to stupid question being "If you have one keep it to yourself" however this one has been bugging me lately. This is for the business savvy people out there that deal with money and such. What would it take for a country to switch its entire monetary system from a gold standard to a platinum standard? Also what effects would it have on other countries that are gold based?
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Kayla Oatney
 
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Post » Fri Jul 29, 2011 7:14 pm

I don't know, but there are also monetary questions that bug me. Why does printing money and buying government bonds with it causes inflation? I know it increases the money supply, but what exactly is the money supply? And does economic theory have definite answers for this or just different opinions from different economists?
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Gill Mackin
 
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Post » Sat Jul 30, 2011 6:25 am

It will take a stupid move. I will answer with my few knowledge of geologist and a basic of economic geology.

First the country will have to create a reserve of platinium equal to the amount of money existing in its economy. The question is: is there enough mined platinium worldwide to do this for example for USA ? The answer is no. If a country will try to do this, it will attract a huge amount of platinium to be melt in ingots for making their reserves. What will happen to the car and chemical industry which is using the bulk of platinium ? From a geological point of view, it is totally stupid move because platinium is produced in less countries than gold. So, it will put this country in the hand of the big platinium producers: South Africa and Russia. To a lower extent, USA and Canada are producing a bit of platinium as well. One gram of platinium is costing around 50-60 $. Imagine the volume we will need to sustain an economy like USA.

However, there are no countries (to my knowledge) which are using the gold as the standard. Before US$ was 1.5 g of gold, this was a fix standard. USA left it first during WW1 and then progressively during the great depression in the 30's and the convertibility of US$ in gold was ended in 1971. The last country to drop gold convertibility was Switzerland.
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Frank Firefly
 
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Post » Fri Jul 29, 2011 10:08 pm

I don't know, but there are also monetary questions that bug me. Why does printing money and buying government bonds with it causes inflation? I know it increases the money supply, but what exactly is the money supply? And does economic theory have definite answers for this or just different opinions from different economists?


Sounds like my economics essay for my last 4 credits in economics. :P Too long and I'm too lazy to post why. Read about the money supply and if you can understand curves learn about IS-LM anolysis.
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Ella Loapaga
 
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