We have over $1.5 trillion USD in circulation around the world but the government has only about $200 billion in gold.
I also said the US government had "the ability to tax, and collect taxes, the world's largest military and so forth".
Executive Order 6102, the Gold Reserve Act and measures such as this show how the US government has dealt with such things in the past.
Also I don't think gold has a magical quality - silver will do just as well, or platinum, or any commodity. Although obviously some commodities have the qualities that make a good currency, such as durability, uniformity, portability, divisibility and so forth.
I also would add tangential to this, that cryptocoin advocates seem desperate to find things which have a cost but no inherent utility or usability. They cast about, with almost nothing in the world to point to, until they come upon the dollar and euro. They point to it and say they are mystified as to why these things have a cost but no utility, and then say Bitcoins should have a price as well, because they're "just like" the dollar but "better". Of course, this all is a silly argument.
Bitcoins don't even have the value the dot bomb stocks like Pets.com and Webvan had. Bitcoins are completely worthless. Which means the cryptocoin market will inevitably crash, no matter the lofty rhetoric of Silicon Valley VCs. I mean, they spouted the same rhetoric about the dot bomb stocks as well, those VCs which were around way back then. The publication of the book "Dow 36000" back at the height of the dot bomb bubble, October 1999, by two American Enterprise Institute "scholars", saying that the Dow was undervalued, should have been a sign of such things. It's 17 years on and the Dow still has yet to hit that mark.
It kind of works if you have a place to run off too, but nobody in the federal government can just go take the gold and hide for a bit. The incentives are aligned so that the gov't does "the right thing" (stem the fall)
The worldwide gold standards (in any form, or even silver backed) were dead by WW1.
There’s no implicit backing of the dollar since then, at all, and convertibility was a (really terrible) relic of that period.
There's not a confusion between the Gold Window and the Gold Standard. It's just the Gold Window is the only real bottom line. There can be different types of gold standards, and some of them are abstractions of the Gold Window. The Gold Window is not abstract, it is an exchange of paper for gold.
> The worldwide gold standards (in any form, or even silver backed) were dead by WW1.
They were dead and what happened to Germany's currency? The Papiermark fell into complete worthlessness.
> There’s no implicit backing of the dollar since then, at all, and convertibility was a (really terrible) relic of that period.
If it was a "relic" it was something that existed because it needed to exist.
As I said in another post, I don't think gold has a magical commodity. It is a commodity which has good qualities for a currency, or backing a currency - it is uniform, divisible, durable, portable etc. An announcement that the gold window was open again would quickly stem any currency panic and would give government officials time to deal with it. There is no magic in a gold commodity, silver would work as well, as would platinum, as would any commodity (although the more currency properties the commodity had the better).
If there's no implicit backing of the dollar, then why does the US government, at great expense, store thousands of tons of gold at Fort Knox and elsewhere?
Why did Germany start repatriating hundreds of tons of gold from overseas five years ago if these gold reserves mean nothing? What are they for other than as an implicit backing of currency?
I know the US government would like to have a magic printing press that printed out hundred dollar bills and had them be worth something without any connection to anything. But things don't work like that.
Why did the price exchange of a Papiermark collapse after World War I if convertibility has no relevance to paper currencies?
Not at all.
Until 1971, a dollar bill was just a piece of paper. However, the US government would redeem it for gold. The US had thousands of tons of gold at Fort Knox. It held tons of gold elsewhere as well.
It also has and had the ability to tax, and collect taxes, the world's largest military and so forth.
In 1971, the gold window was shut. Dollar/commodity ratios did not immediately change much. Why? Because an announcement that the gold window was opening up again would end any problem.
The US still holds thousands of tons of gold at Fort Knox. Germany is repatriating its gold back to Germany. Why? Why spend so much guarding gold?
The answer is the gold implicitly backs the dollar. Any currency panic can be immediately stemmed by an announcement that the gold window is open.
I mean since 2008 there's been plenty of discussion of how the US financial sector grows not only by FDIC assurances, but the implicit assurance that when banks are in trouble, like the 1980s S&Ls, or the 2008 banks, that the taxpayer will bail out the banks. There has been a lot of literature on this, and you can read it if you want.
If banks are implicitly backed by the US government, as they obviously are, then dollar convertibility is even more backed by the US government, even if it is not official policy.
Otherwise, why does the taxpayer pay to guard tons of gold in Fort Knox?