This need to control and regulate manmade inflation simply wasn't necessary when we were welded to a gold standard, which, given inherent intrinsic value or worth, self regulated through the power of the supply and demand market!

So something worth 500 ounces of gold in 1950, (a three bedroom house on a quarter acre block) would still be worth 500 ounces or less, given organic depreciation, today!

This did not suit our cadre of would be rockefellers, who need inflation to transfer the wealth of the masses by entirely unearned means to the privileged few!

Let me explain, one buys a house with a minimum deposit, then puts tenants in who pay rent, which eventually becomes far more than the mortgage payments and ever more desirable as the city expands.

This simple strategy can be repeated over and over on the periphery of any expanding area of more than 100,000 souls. The magic number that all but guarantees the area will never go backwards!?

Even so and given a minimum deposit of say $30,000.00, the only and the total capital investment over the life of an investment which today hits the market as a ruin with a roof and a 3 million dollar price tag, the privileged class wanted more.

And wanted other less sophisticated taxpayers to offset their depreciation and cost of subsequent repairs as well? [And we wonder why housing affordability has become a dominant issue?]

All doable by the opaque nature of the alluded to new gold free, highly manipulated to create inflation, monetary system.

While this greed is good explaination is made simple in the example, it's one the average six year old can understand as a concept, even though the need for it? Remains a money for nothing mystery?

But particularly for all those wealthy folk now permanently occupying a six by four plot of their very own in an upmarket graveyard!
Alan B.

Alan B: There's simply not enough gold in the world for the world to return to the gold standard.

To single significant digit precision, the total amount of gold in the world is about 200,000,000kg with about 10,000,000,000 people to share it between. The value of all the worlds current money in circulation (using a broad definition including coins, notes, and money at bank accounts such a savings, etc.) is about $100,000,000,000,000US.

If all money was to be backed by gold then a single small piece of jewellery such as a wedding-band would be more than a year's wages for the majority of the planet's people.

Thinkabit: we've never ever had enough actual gold to back our currency, which was even so, deployed as our standard, when we were the third wealthiest nation on the planet and a creditor one at that!

I know it is hard to tolerate that burning smell emanating from previously unused cerebral circuits, when you think a bit, Thinkabit? But is it possible that older wiser heads got it right way back when?
Alan B.

Look, the chinese yuan is pegged to the USD, and that operates as their standard even if they don't own enough dollars or American bank bonds to actually cover their currency requirements!

The US has a very large gold reserve in fort knox, which even when they were on the gold standard, and just after the second world war when they were going through period of unprecedented prosperity, they still retained a gold standard briefly; but to this day, retain the billions of appreciating bullion in fort knox.

If we returned to the gold standard and automatically pegged our currency to the value, up and down to the price of gold, we'd still have a floating currency for internal domestic purposes, while retaining an export market paid for in USD. Which would also serve to moderate and or control inflation and the price to us of fully imported energy, or what we are paid for when we export ours.

The original intent of currency was to represent so many units of energy; and applicable to anything!

Take wheat as the example and you know it takes so much energy to plow the ground, plant the wheat, water the crop, harvest the crop, transport and mill it, put bread on supermarket shelves etc. Whereas the actual creation of gold in the alchemist's furnace of former suns, requires the transformation of much more energy and an exact measurable amount; and as such beautifully represented the concept!

And while our currency was pegged to the value of gold, we had little or no inflation and arguably the very reason the money for nothing crowd wanted it gone!? Today we pay millions to the alluded to financial experts for the privilege!?
Alan B.

The gold standard was a catastrophic policy that resulted in hyperinflation in countries that kept their currency set above market value for too long, and huge foreign debts and economic stagnation as countries prioritised maintaining the currency value rather than what people really needed. Good riddance! The current market based system where problems are self correcting is far superior.

As for David Leyonhjelm's article, I agree the RBA shouldn't've borrowed US dollars. It's not Australia's job to maintain US dollar hegemony, and doing so is not in Australia's interest. In the long term it benefits nobody; not even the USA.

However I disagree with him about changing the law to ensure the RBA targets inflation. Keeping inflation under control is one of the RBA's functions, but maintaining economic growth is equally important. There's a significant danger that a legislative change would promote the former at the expense of the latter.

Gold has no "intrinsic" value. It's worth as much as some one else is prepared to offer. To me it is of little value as it's primary purpose is making inconsequential pretty items. It has little real world/industrial applications.

If you really want some, I have this fabulous hole in the ground.....

regards
dkit