After catching up to the posts in this thread, I have to offer at least a bit of a dispute to something said here earlier.
@Thales750 - you have claimed that rather than being on the gold standard, we are on the oil standard. I have to at least question that. Oil is of no value unless you actually use it. Otherwise it might as well be a lump or gold or a lump of sandstone. You don't consume either of those two substances. But using oil consumes it and thus diminishes its supply, which in an otherwise constant demand environment will increase its price. Gold ISN'T consumed and yet the agreed-upon price still goes up. The demand is more or less the same and gold is being mined so supply should be going up, which means price should be going down - unless the whole thing is based on speculative pricing. When you deal in speculative pricing, you are now
gambling on future demand. I firmly believe that US currency is a fiat currency and both gold and oil are at best pseudo-bases for currency value. Both float because there IS no absolute reference for the value of either one. The ability to speculate (the polite term for gambling at that level) causes short-term and longer-term instability. (See also the movie
Trading Places.)
If I recall correctly, the problem with being on a standardized currency of ANY kind is that the ratio of currency in circulation to whatever is its backing forces you to limit the money supply, which leads to spiraling interest rates as supply remains fixed but demand goes up so prices go up, which leads to a depression and high unemployment. That is one of the reasons we
had to get off the gold standard. Having a floating currency occurs - at least to some degree - because the demand for currency grows as populations and businesses grow, and inflation is an inevitable result of demand outpacing supply in a non-based currency. The trick is to predict the demand for currency to start your next project.
I remember reading a long time ago that the only REAL basis of value is the amount of work put into something. Whether we are talking about a lump of gold or a lump of coal or a circuit board or a house, its value starts based on the work it took to get it ready for sale. After that, it is a matter of who can out-bid their competitors for that thing you are selling, whatever it is. And the purchase price of the work is determined by the cost of raw materials plus the salaries of all contractors combined. It's almost (but not quite completely) a closed system in that wages control prices which control demand which depends on the ability to pay (i.e. wages) which then feeds back to prices in an interconnected system of commerce. Monetary value hasn't been on a standard for years, so like a multi-variate Simplex Optimization algorithm, we continue to play the child's game of Whack-a-Mole to try to keep inflation down but monetary supply up despite what else pops up now and then.
