Quote from: pattu1 on November 07, 2014, 02:23:04 AM

Quote from: camponez on November 03, 2014, 09:01:25 PM

Does anyone have an idea on what happen if a country decide to go back to a Gold standard?

Imagine that there is no threat to this country come from the others. It's a middle sized economy.

Its economy would become strong. It would not be able to inflate there currency for obvious reason.

What are the pros and cons? A fly solo like this is even possible/imaginable?

I'm just curious to know what you guys think it might happens.

That country will be forced to store large amounts of unproductive gold.
Don't you think it would be better off selling its gold and using that to build its infrastructure?

NO.

The gold the country keep in reserve it is called savings. It is needed just in case something don't go as planned.
Your reasoning is like the people telling others like they should be lean and fit, like the people on a BodyBuilding magazine cover, the only problem being with too low fat you are at risk of a lot of physical/health problems.

If you had no savings, just spent everything you earn in consumption and investments, you have no way to pay easily if something go wrong: you must liquidate your investments at any price you can get i n a short time. If your check delay, if your refrigerator break and you food rot, and you have nothing in reserve, no money, no other reserve of food, etc. You must go out and sell that beautiful car just to eat. Or ask a loan to someone.
Sometimes others have extra capacity available and your loans will cost little more BUT think about the case you refrigerator stop working:
it was just your refrigerator or every refrigerator in the county?
Did your refrigerator fail or was the power lines?
In the first case you just go out and politely ask to your neighbour if he could loan you some bread and ham. But if was the power lines, your neighbours is in the same situation.
Then the idiot of a prepper (the one you called lunatics, paranoid, etc.) with autonomous power for his refrigerator can ask you and your neighbours to be paid to sell some of his 6 months reserve of food (payback time bitches).
Your neighbour have some money and can pay for the food immediately, a backup generators and fuel in the next few days, until thing improve some week later.
You, without savings available, can just liquidate what? What you have your prepper neighbour want? Your fine car? Now you must liquidate something worth 100 at 10 or less (food, a spare generator and enough fuel), because you would starve otherwise. Then the lack of savings will cost you ten times what would cost you to save something in a sensible form (like gold, silver, cash, bitcoin).

The same is true for countries.
When a recession come, all people will be short of cash, so all of them must liquidate what they have for what they can get to obtain what they need.
And it is not pretty.

A few weeks of savings often are a life saving. Few months savings are a real cushion in case of problems.
Wealthier you are, more saving you need.