"Why Gold?" and other issues with fixed currency
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A simple view but ... If you wish to trade, you have to have something that has inherent value. If you work or offer a service, you want to be paid with something that has inherent value. Previously it was gold and silver (even salt got into the act at one time). But, as you suggest, it wasn't very convenient to carry gold or silver around. Of course, you can trade an egg for a carrot so this something could be either an egg or a carrot. But the problem there is that if you manufacture, for example, automobiles, payment in eggs or carrots is wholly unacceptable. So this "something" has to be a universally acceptable medium. Where possible, or feasible, the face value of this "something" should be exchangeable for gold or silver but the central bank does not carry that quantity of gold or silver. In fact, the amount of gold and silver ever mined is not enough. So we have a "something" with a perceived universal value - this something we call "money". Controlling the supply of this money is problematic. Thus the concept of fiat money.
Richard A. Abbott wrote:
Where possible, or feasible, the face value of this "something" should be exchangeable for gold or silver
But why? Why gold or silver? Why those particular metals? "Because that's how it was a hundred years ago" isn't a good argument, because the world has changed a great deal in the last century. Why does it have to be based on something physical? As long as everyone agrees on its value, it doesn't need metal behind it. If the US changed its policy from "The money supply will be adjusted to regulate the economy" to "The money supply is now 100% constant", wouldn't that have the same effect?
Proud to have finally moved to the A-Ark. Which one are you in?
Author of the Guardians Saga (Sci-Fi/Fantasy novels) -
Have to say an interesting subject. It even got me Google'ing the question about gold. According to one site that i've read. It states that Gold is used as an asset reserve rather than a commodity. but to be honest most of the article went over my head. Gold article as a commodity
Ian Shlasko wrote:
We can't print more currency
I believe when governments do that its called quantative easing but thats another subject that goes over my head, just heard it on the news during the recession in the UK
Marc Clifton wrote:
That has nothing to do with VB. - Oh crap. I just defended VB!
Simon_Whale wrote:
I believe when governments do that its called quantative easing
Exactly, but if we adopted a fixed-value currency, that would no longer be permitted. Only a fiat currency allows for that.
Proud to have finally moved to the A-Ark. Which one are you in?
Author of the Guardians Saga (Sci-Fi/Fantasy novels) -
Have to say an interesting subject. It even got me Google'ing the question about gold. According to one site that i've read. It states that Gold is used as an asset reserve rather than a commodity. but to be honest most of the article went over my head. Gold article as a commodity
Ian Shlasko wrote:
We can't print more currency
I believe when governments do that its called quantative easing but thats another subject that goes over my head, just heard it on the news during the recession in the UK
Marc Clifton wrote:
That has nothing to do with VB. - Oh crap. I just defended VB!
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Richard A. Abbott wrote:
Where possible, or feasible, the face value of this "something" should be exchangeable for gold or silver
But why? Why gold or silver? Why those particular metals? "Because that's how it was a hundred years ago" isn't a good argument, because the world has changed a great deal in the last century. Why does it have to be based on something physical? As long as everyone agrees on its value, it doesn't need metal behind it. If the US changed its policy from "The money supply will be adjusted to regulate the economy" to "The money supply is now 100% constant", wouldn't that have the same effect?
Proud to have finally moved to the A-Ark. Which one are you in?
Author of the Guardians Saga (Sci-Fi/Fantasy novels) -
Buy land, they aint making any more of it!
------------------------------------ I will never again mention that I was the poster of the One Millionth Lounge Post, nor that it was complete drivel. Dalek Dave
Are you sure about that[^]?
Proud to have finally moved to the A-Ark. Which one are you in?
Author of the Guardians Saga (Sci-Fi/Fantasy novels) -
Simon_Whale wrote:
I believe when governments do that its called quantative easing
Exactly, but if we adopted a fixed-value currency, that would no longer be permitted. Only a fiat currency allows for that.
Proud to have finally moved to the A-Ark. Which one are you in?
Author of the Guardians Saga (Sci-Fi/Fantasy novels) -
I contend that the money supply could be any elemental metal, but gold and silver has been used for millenia, so I'd say gold/silver is equally viable currently.
Josh Davis
Always looking for blackjack. Or maybe White Frank. One of the two.But again, why does it have to be metal? Do you consider the numbers in your savings account any less valuable than the $20 bills in your wallet? I think we've moved beyond the age where you need to hold something in your hand for it to have value.
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Author of the Guardians Saga (Sci-Fi/Fantasy novels) -
The core issue, to me, is lack of gold and silver to cover the currency. CSS says to just make gold prices skyrocket, but I don't see how that is good for anyone, except people with lots of gold.
Christian Graus Driven to the arms of OSX by Vista. Read my blog to find out how I've worked around bugs in Microsoft tools and frameworks.
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Which is the whole point. Get rid of the fiat currencies. It's just theft... qualitative easing indeed.
Josh Davis
Always looking for blackjack. Or maybe White Frank. One of the two.That's completely off-topic... See the original post.
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Author of the Guardians Saga (Sci-Fi/Fantasy novels) -
But again, why does it have to be metal? Do you consider the numbers in your savings account any less valuable than the $20 bills in your wallet? I think we've moved beyond the age where you need to hold something in your hand for it to have value.
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Author of the Guardians Saga (Sci-Fi/Fantasy novels) -
Just my point of view: qualitative easing is another word for inflation.
Josh Davis
Always looking for blackjack. Or maybe White Frank. One of the two.josda1000 wrote:
qualitative easing
Making things increasingly shoddily? Perhaps you mean Quantitative Easing. And it is not another word for inflation. It is a non-capital based increase in money supply, ex nihlo, for interbank rolling, eg LIBOR.(London InterBank Overnight Rate). It eases capital restriction on Holding Balances withing financial institutions, lessening the requirement for debt repayment in order to hold sufficient capital reserve. It can be inflationary, but it is not inflation. In fact it has occured in the past and shown to be stagflatory and non-eventful in inflationary terms.
------------------------------------ I will never again mention that I was the poster of the One Millionth Lounge Post, nor that it was complete drivel. Dalek Dave
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That's completely off-topic... See the original post.
Proud to have finally moved to the A-Ark. Which one are you in?
Author of the Guardians Saga (Sci-Fi/Fantasy novels) -
josda1000 wrote:
qualitative easing
Making things increasingly shoddily? Perhaps you mean Quantitative Easing. And it is not another word for inflation. It is a non-capital based increase in money supply, ex nihlo, for interbank rolling, eg LIBOR.(London InterBank Overnight Rate). It eases capital restriction on Holding Balances withing financial institutions, lessening the requirement for debt repayment in order to hold sufficient capital reserve. It can be inflationary, but it is not inflation. In fact it has occured in the past and shown to be stagflatory and non-eventful in inflationary terms.
------------------------------------ I will never again mention that I was the poster of the One Millionth Lounge Post, nor that it was complete drivel. Dalek Dave
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And I think we're beyond the age where we need a post office.
Josh Davis
Always looking for blackjack. Or maybe White Frank. One of the two.Weak analogy, Josh. Why does it have to be metal? If the Fed's ability to adjust the money supply was completely removed, that would effectively give us a fixed amount of currency.
Proud to have finally moved to the A-Ark. Which one are you in?
Author of the Guardians Saga (Sci-Fi/Fantasy novels) -
Are you sure about that[^]?
Proud to have finally moved to the A-Ark. Which one are you in?
Author of the Guardians Saga (Sci-Fi/Fantasy novels)There is still orogeny occuring, and that is causing loss of land, and anyway that airport is sinking! (Not to mention all that subduction in the Pacific rim.)
------------------------------------ I will never again mention that I was the poster of the One Millionth Lounge Post, nor that it was complete drivel. Dalek Dave
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I disagree. It's the inherent nature of fiat currency. Fiat-fake. Allows you to inflate/deflate the monetary supply at your will.
Josh Davis
Always looking for blackjack. Or maybe White Frank. One of the two.My point is I'm not trying to debate fiat versus fixed. I'm trying to debate the need for metal-backing under a fixed-rate currency. Fiat has nothing to do with this.
Proud to have finally moved to the A-Ark. Which one are you in?
Author of the Guardians Saga (Sci-Fi/Fantasy novels) -
I think this depends on your definition of inflation. But I won't debate that, I think we've been over this plenty before.
Josh Davis
Always looking for blackjack. Or maybe White Frank. One of the two.Happy not to discuss, but QE is Not Inflation.
------------------------------------ I will never again mention that I was the poster of the One Millionth Lounge Post, nor that it was complete drivel. Dalek Dave
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There is still orogeny occuring, and that is causing loss of land, and anyway that airport is sinking! (Not to mention all that subduction in the Pacific rim.)
------------------------------------ I will never again mention that I was the poster of the One Millionth Lounge Post, nor that it was complete drivel. Dalek Dave
:)
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Author of the Guardians Saga (Sci-Fi/Fantasy novels) -
It seems every debate we have tends to return to fixed vs. fiat currency, so let's try to have a civilized (aka non-CSS) discussion about that... (Note that I'm not advocating fixed currency - I'm just trying to better understand it, and to see if it's actually still feasible in the Internet age) First of all, Why gold and silver?
Why, in this age of complete connectivity, does it need to be based on metal? All of the arguments I've heard are that these have the perception of value. But then, so do diamonds. So does platinum. Hell, coal has value, plutonium has a lot of value, clean water has value... You understand what I'm getting at here. In the old days, gold and silver were great mediums of exchange, because no matter where you were, everyone knew that gold was worth something. Nowadays, if we wanted to adopt a fixed currency, we could just come right out and say "There are X dollars in circulation. This will no longer be increased, and we're modifying the laws to ensure that." (Speaking of dollar amounts, not physical currency). That would be just as effective, unless you think the government is going to cheat. Second, What about destruction of currency?
Let's assume, for the moment, that we're using gold/silver-backed currency. Now, regardless of what's behind it, we're not going to be carrying around hunks of gold and silver. The population is just never going to accept that they have to carry coins around for everything, now that we're all accustomed to easy-to-carry paper currency. Not to mention, we use a lot of electronic currency to make it even more portable. So what happens when that currency is lost? What happens when you accidentally throw your wallet in the washing machine? What happens when a declining balance card gets wiped out? The money is now gone, but the gold/silver backing it still exists somewhere. We can't just modify the exchange rate, because we're operating on fixed currency where $1 represents X ounces of gold (Obviously X is a small fraction in this case). We can't print more currency to replace the loss, because the treasury doesn't know for sure that the money isn't still out there. There are plenty more issues, but let's start with these... Note: CSS, I don't give a flying #%*& about the tired old "Dollar has lost X% of its value since 1913 wahhh wahhh socialist fascist tyrant eugenicist" argument. We're not talking about whether fixed is better or worse than fiat, so just stuff it. If you have something toA very good question, just hope the Back Room doesn't collapse from the increase in common sense. A number of years ago the Japanese market was back by proprity values so when property values collapsed as business moved abroad things snowballed. Japan still hasn't recovered. There isn't a simple answer these days so I guess we need a good mix of more complex ones.
Join the cool kids - Come fold with us[^]
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A very good question, just hope the Back Room doesn't collapse from the increase in common sense. A number of years ago the Japanese market was back by proprity values so when property values collapsed as business moved abroad things snowballed. Japan still hasn't recovered. There isn't a simple answer these days so I guess we need a good mix of more complex ones.
Join the cool kids - Come fold with us[^]
Yep, I'm trying to get some actual responses from the Libs, but so far they're mostly avoiding the issue and latching onto fixed vs fiat again.
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Author of the Guardians Saga (Sci-Fi/Fantasy novels)