"Why Gold?" and other issues with fixed currency
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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.
Proud to have finally moved to the A-Ark. Which one are you in?
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.
Proud to have finally moved to the A-Ark. Which one are you in?
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.
Proud to have finally moved to the A-Ark. Which one are you in?
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
:)
Proud to have finally moved to the A-Ark. Which one are you in?
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.
Proud to have finally moved to the A-Ark. Which one are you in?
Author of the Guardians Saga (Sci-Fi/Fantasy novels) -
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)I've already described why it has to be metal. It's an inherent unit of measure. It won't be destroyed, and can not be created by man. It's elemental (gold is an element, silver, copper, NOT steel, so do not use steel...),it's as far broken down as it can go. It's a medium of exchange (we all agree here.) It can not be inflated by the government, therefore you can't be stolen from. Taxes, according to a guy like me, are defacto theft. Inflation is the worst tax (when talking in terms of the Austrian), because it will eventually seep into the system (whether quickly through people's whims of the day or eventual price adjustment, which is the Keynesian view of inflation). It can not be deflated, meaning it can't be destroyed. Wheat can be destroyed. Paper can be destroyed. Elemental metal can not just burn or get wet and lose its value. Even if you were to eat it, you'll crap it out later, or when you decay in death, it'll still retain its worth (a little gross, but true nonetheless.)
Josh Davis
Always looking for blackjack. Or maybe White Frank. One of the two. -
There's not enough gold or silver, so that's why economies these days are based on how much your country con produce, it's way more complicated, but lets keep it simple. If we were using gold which country would be the richest? the one that has the biggest reserves and is able to dig it out, but what happens with countries with little gold? do they deserve to be poor because they can't have enough? according to wikipedia, South Africa is the largest producer of gold, Spain and France produce none or very little. More questions come if we use gold, if we only have 10,000 dollars/pesos/euros/ worth of gold, how can we increase the wealth of a nation or person if we are limited to the amount of gold in hand?, what happens when more people starts working and there's not enough gold to pay them for their work?, because you right now have only 10,000 available, how to distribute those 10,000? over the time you will produce more gold, but will it be enough to support your demands? what happens with all the uses gold has besides currency? if your production is limited on how much gold is available to purchase your goods, will it matter if you produce 1 or 100,000 pieces of your product? How can you compete if your sales are limited to how much can be purchased that month/day with the available gold? you produce products worth 1,000,000 gold dollars, that means you will have to wait 100 months/days to produce again?, and that's IF you are able to sell them in 100 months/days What about credit? isn't giving credit something that will destroy the gold dollars? how can you support 10,000 gold dollars in credit plus your 10,000 gold dollars if you only have 10,000 available? Economies won't work that way these days
I want to die like my grandfather- asleep, not like the passengers in his car, screaming!
:thumbsup: I was going to write something similar. You’re absolutely right; the fixed currency will not be able to catch up with the growing economy, hence a huge deflation and inevitable economical collapse.
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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)If this is true, then you're talking about certificates? like silver certificates? I'm down with that. It's fixed. The only problem is that eventually, we'd become the creditor nation of the world again, and this was the breakdown of the Bretton Woods system.
Josh Davis
Always looking for blackjack. Or maybe White Frank. One of the two. -
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.
Proud to have finally moved to the A-Ark. Which one are you in?
Author of the Guardians Saga (Sci-Fi/Fantasy novels)I didn't realize that you were asking about backing up the currency with gold/silver. Because it sounded like you were asking about using water/grain/paper or something directly.
Josh Davis
Always looking for blackjack. Or maybe White Frank. One of the two. -
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)Ian Shlasko wrote:
"Because that's how it was a hundred years ago"
Great traditions that have stood the test of time are hard to give up. But when we give them up, they can fall either quickly or slowly. This being dependent upon their managed demise.
Ian Shlasko wrote:
Why does it have to be based on something physical?
It doesn't. But whatever value it attracts has to be of inherent value. Regulating the value attached to such a "something" requires intervention by some centralised authority otherwise the value of this "something" will mean different things to different people and this something can wildly vary. Defining something as 100% constant is dependent on who or what this constant is. If a constant does not change, how can the variability of the value of goods and labour change. All peoples whether they are individual wage earners or companies wish to acquire more of that something. And as the change in such requirements, so the something becomes that much more scarce so the 100% constant in many ways is a meaningless value. To retain that 100% constant in that scenario would require deflationary pressures to counter the effect of changing prices and changing workers earnings.
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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 toIan Shlasko wrote:
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.
Gold and silver is in limited supply and requires a bit of work to mine, which keeps inflation in check. Diamonds are too abundant and can't be used in decimal denominations. As population increases and the economy grows, gold and silver increase in value. The increase in value makes it even more profitable to mine, so tedious mining procedures and new mining technologies that might have been too expensive to be profitable become profitable.
Ian Shlasko wrote:
"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.
The problem with this is that the government will always debase the currency. History proves it. The only way to keep government currency manipulation in check is to use something real like gold and silver.
Ian Shlasko wrote:
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.
There is no reason why checks, and debit/credit cards can't be used with a gold and silver currency. Also, people typically have some change in their pockets, since gold and silver is so valuable, a couple ounces of silver coin would be around 50 bucks in today's dollar. A cellphone weighs more than that. Gold is even more valuable.
Ian Shlasko wrote:
So what happens when that currency is lost?
When the coin is lost, it is out of circulation. When currency is out of circulation, the value of that lost coin is transferred to all of the other coins in circulation.