@BowsacNoodle @shortstories @Tfmonkey @VeganMGTOW @white_male
China is a government, so they can do whatever they want, legal or not.
Yes, holding foreign currency is always a geopolitical vulnerability because you don't control it, as sanctions prove. But the primary effects would be the new country currency would go up like crazy against the other fiat currencies, what would make their purchasing power skyrocket in comparison. For China, it would be a boom too:
@BowsacNoodle @shortstories @Tfmonkey @VeganMGTOW @white_male
All their costs would be in Yuan but their wealth would go up along with the gold currency as a reserve and they would benefit from being paid in this currency too. Very similar to how the US vs the Yuan was in the 70s.
The small country would be new singapore/new switzerland.
@BowsacNoodle @shortstories @Tfmonkey @VeganMGTOW @white_male
In theory, maybe, assuming prices would never go down, which they would, as they had in US for decades in the 17-1800s. But I'll tell you what has happened historically. Never has one country or even an entire continent has been able to hoard all the gold in the world. And all nations have also used silver and copper alongside gold as their daily trading currency, that are much more abundant. Prices would be much lower than today too.
@BowsacNoodle @shortstories @Tfmonkey @VeganMGTOW @white_male
It's ok, if a country wants to hoard your currency, it's fine. First, they would not get access to your currency directly (swap lines) but to your bonds. Second, it would appreciate your gold currency every time they buy, making each purchase more expensive than the previous one. It would be politically suicidal too to put all your reserves in an external currency, as they can always simply sanction you or cancel your transactions.
@BowsacNoodle @shortstories @Tfmonkey @VeganMGTOW @white_male
To all your points, goldtopia has several drawbacks: it curtails government spending, it's very harsh on financial bubbles and it's not forgiving to debtors and failing businesses.
Also, you cannot have a welfare state while on the gold standard.
But the biggest drawback of all is, naturally, war! Since you can't simply print money, you gotta legit sell your bonds or tax your citizens heavily to fund your wars.
@BowsacNoodle @shortstories @Tfmonkey @VeganMGTOW @white_male
We kinda have an existing system like this today in Peru, where you can use the local soles or even withdraw dollars directly from atms (considered the harder currency). It works fine as long as you have a floating exchanging rate and can exchange one for the other at any bank.
Regarding your experiment, that's exactly how fiat money was created, by circulating gold IOUs along real gold coins, where the IOU was cheaper due to risk.
