I don't want to put you down because I like you but it wouldn't work. Just assume that it was fixed at a Trillion an ounce. Now there would be a lot of Trillionaires out there. They would sell their gold for a Trillion spend it and then the price of goods would rise.
Americans are in debt to the eyeballs with mortgage, 2nd mortgage, 3rd mortgage, 3 leased cars, 60K credit card debts, 100K college debts. Hyperinflation would actually help them. That 1 trillion dollar check will wipe out all those debts you have. Pay your mortgage etc.. Then you can buy your 500 dollar loaf of breads with cash left over
So let me ask you this...If gold did go to 5 trillion per ounce, would you sell me your house & car for 5 billion dollars or 1/1000th of an ounce of gold? Do you see how high gold prices would equal inflation now? Basically if you went out and panned for gold in any random stream, all you have to do is find a tiny bit of gold that weighs 1/10th of 1 gram (which pretty much anyone can find in about 3 hours time) and that would give you 16 billion dollars. Would you sell me everything you own for some work I did that only took me 3 hours to get?
FYI: This tactic was essentially addressed in great detail by the MMTers (Modern Monetary Theory practitioners) in the debate leading up to raising the debt ceiling back in early August. Here is the background on that debate: <a href="http://johnsville.blogspot.com/2011/07/debt-watch-coin-trick-trillion-dollar.html">Debt Watch / Coin Trick: the Trillion Dollar Coin</a> The MMT tactic for reducing the debt involves using "coin seigniorage." This is the "right of the lord to coin money," or the right of the U.S. government to mint and make a profit on its money. The U.S. Treasury has the legal right to mint a trillion, or 5 trillion, or 15 trillion dollar platinum coin. Seigniorage also refers to this profit a lord or government makes on its coinage. Obviously a coin stamped with a trillion dollar denomination did not cost 1 trillion to make. This is the MMT "trillion dollar coin" scenario: 1. The Treasury mints a $1 trillion coin, or whatever amount is desired. 2. The Treasury deposits the coin into the Treasuryâs account at the Fed. 3. The Treasury buys back bonds 4. The retirement of bonds is an asset swap, no different from QE2 5. The increase in reserve balances is not inflationary, as Credit Easing 1.0, QE 1.0, and QE 2.0 already have shown. 6. These operations by the Treasury create no new net financial assets for the non-government sector 7. The debt ceiling crisis is averted This tactic could, I guess, be used to pay down the debt at any time. You are welcome to argue against this tactic: its inflationary, or its monetizing the debt, etc, etc... However, you have to refute the arguments of dozens of MMT economists and the hundreds if not thousands of their followers and disciples. Trust me, they have the supporting data and the academic chops to slap down anyone that I've read so far on this thread. Noted MMTers: <a href="http://bilbo.economicoutlook.net/blog/">Bill Mitchell â billy blog</a> <a href="http://moslereconomics.com/">The Center of the Universe - Warren Mosler</a> <a href="http://rodgermmitchell.wordpress.com/">Monetary Sovereignty â Mitchell</a> <a href="http://neweconomicperspectives.blogspot.com/">New Economic Perspectives</a> for reference: <a href="http://moslereconomics.com/2011/08/04/mmt-history-and-overview/">MMT history and overview</a> And please don't shoot the messenger. I'm just saying...