Silver at $40 an ounce.

[Pliny]

Nope, that was just an assumption, they may have been sold out. I just asked if they had any for sale and they said no.

I was just doing some reading and indicators are that this is indeed a correction and commodities are slated to rebound. The US dollar is not expected to do well in the future.

I think they believe what they are doing is right, they are keynesians.

Of course. Keynesians believe they are doing right and they convinced politicians of that long ago, even before Keynes published his general theory in 1933. Keynes only served to convince them that their banking practices were valid - perhaps in a fascist society but not in a free society.

Edited May 11, 2011 by Pliny

[maple_leafs182]

I was just doing some reading and indicators are that this is indeed a correction and commodities are slated to rebound. The dollar is not expected to dowel linthe future.

I don't understand what that last sentence means.

The dollar is going to be rejected at some point, people and countries are already starting to diversify away from the dollar. At some point the Fed will be forced to buy up US bonds because nobody else will. I really can't see the US government or the Fed will allow the US to default on its debt, do you? I really do see silver going over one hundred USD's at some point, probably even higher.

Of course. Keynesians believe they are doing right and they convinced politicians of that long ago, even before Keynes published his general theory in 1933. Keynes only served to convince them that their banking practices were valid - perhaps in a fascist society but not in a free society.

I don't want to sound like a conspiracy theorist but at some level the Fed and the banks have to know what they are doing right? Central Banks had to of been installed to solely benefit big corporations because they clearly don't benefit the people.

Edited May 11, 2011 by maple_leafs182

[Pliny]

I don't understand what that last sentence means.

Took me a while to figure out what I meant too. It was a matter of spacing and I made the corrections.

I don't want to sound like a conspiracy theorist but at some level the Fed and the banks have to know what they are doing right? Central Banks had to of been installed to solely benefit big corporations because they clearly don't benefit the people.

Well, the Central bank idea was a plan. The men who made the plan thought they could best serve society by preventing the devastating effects that bank failures had on people and the economy. Unfortuantely, in their glee, they neglected to address what the real problem was in banking and chose to try and meet any demands upon a banks reserves by being able to centrally hold reserves and shift them according to need. The real problem was of course issuing too many receipts in relation to deposits - the fractional reserve system which, if they didn't have, made banking a simple warehousing operation with simple profits. The fractional reserve system made banking a very profitable business - except when there was a loss of confidence in a bank that started a run. Very few banks had reserves that could survive a run on deposits.

What the central bank system offerred was an all around solution. The bankers could still make huge profits on issuing receipts or lending money they didn't have and the problem of bank runs was solved.

Governments endorsed the plan, of course. Keynes put the macromanaging of the economy altogether in his general theory. The use of interest rates, the manipulation of the money supply, price controls, tariffs and taxes and all those tools that could be used to stabilize an economy.

The whole idea was a stabilization of the economy, a policy of economic growth and limited inflation. The objectives were all honourable indeed - they were "good intentions". Because a few men had incidentally concentrated that power in their hands was just a small benefit to them. The whole society, the concern for the common good, was the bigger consideration - at least that was the justification.

The biggest mistake, besides not correcting ill-conceived banking practices, was ignoring human nature which is motivated to take advantage of any opportunity to improve one's position, individually or collectively. That these men, or any that followed, believed they would never abuse their privileged position by creating winners or losers in an economy was the major miscalculation. Today they can't escape what they have wrought. There is such an imbalance in the economy, and it is held up so artifically, that the necessary correction would be a devastation to, mostly government and those who have become dependent upon government or are paid out of the public purse, society as a whole.

The choices are clear, continue with business as usual and face inevitable collapse, make the hard choices and economically change course abandoning artificial manipulation of the economy, or take an authoritarian/military complete overtaking of the economy - China may make that the necessary choice because we can't go through a period of economic weakness in rebuilding the economy without a threat of takeover from the Chinese. That's how I see it.

[maple_leafs182]

I think CME raising margins may have been a good thing. I think it got a lot of speculators out of the silver market. I would rather see higher silver requirements so there is less speculation which means less chance of a chance of a speculative bubble being created. Don't want a bubble like the US real estate bubble created in silver.

I think silver may fall more, I am guessing around 30, I will be making a big purchase then.

Edit: went down to just over 32, that's close enough for me, just bought some more today.

Edited May 13, 2011 by maple_leafs182

[maple_leafs182]

Took me a while to figure out what I meant too. It was a matter of spacing and I made the corrections.

Well, the Central bank idea was a plan. The men who made the plan thought they could best serve society by preventing the devastating effects that bank failures had on people and the economy.

Are you sure? I really don't think that was the reason, I think that was the message they used to sell the idea to the public. I really do believe the big banks and industrialists saw that having a Central bank would benefit them, it would give them a one up over all the others. I know that makes me sound like a conspiracy theorist but if you look at what has happened, that is exactly what has happened with Central banks.

Honest question here, does that really sound that crazy?

I think being able to steal all our wealth threw inflation was what the people who pushed for a central bank wanted.

[dre]

Are you sure? I really don't think that was the reason, I think that was the message they used to sell the idea to the public. I really do believe the big banks and industrialists saw that having a Central bank would benefit them, it would give them a one up over all the others. I know that makes me sound like a conspiracy theorist but if you look at what has happened, that is exactly what has happened with Central banks.

Honest question here, does that really sound that crazy?

I think being able to steal all our wealth threw inflation was what the people who pushed for a central bank wanted.

I think being able to steal all our wealth threw inflation was what the people who pushed for a central bank wanted.

Not really. Origionally the plan was the peg the dollar to gold (within 5%) and thats how the system worked for about 30 years. The dollar was decoupled from gold so that the government could gut tax rates for the wealthy and shift their part of the tax burden to the rest of the world.

Not a bad scam really, and there really wasnt any other good options at the time.

[Pliny]

Are you sure? I really don't think that was the reason, I think that was the message they used to sell the idea to the public. I really do believe the big banks and industrialists saw that having a Central bank would benefit them, it would give them a one up over all the others. I know that makes me sound like a conspiracy theorist but if you look at what has happened, that is exactly what has happened with Central banks.

Honest question here, does that really sound that crazy?

I think being able to steal all our wealth threw inflation was what the people who pushed for a central bank wanted.

Well, the public is faced with either bank failures or a stable economy. That was the option offered the public. Of course, the proponents knew quite well the benefits to themselves and the banking industry. I think they did honestly believe they were doing the right thing for society. They were elitists that felt they should have the right to macro-manage the economy for the collective good of society.

The British central bank was established in the last decade of the 17th century, in the 1690's, I believe. I just googled it and it was 1694. It's an interesting article: Bank of England

But anyway where I was about to go with that is that the French revolution occurred, coincidentally, when the King and French Parliament decided to solve their economic problems with the issuing of a paper currency, the "Assignat", It was an idea adopted because it worked so well in England with the English pound. Unfortunately, it was not understood by the French that the English did not just wantonly print their notes and the issue of them was tied to the banks reserves in gold and silver. It seems they just kept on printing the Assignat and after a few years it was a valueless piece of paper, and that circumstance sparked the French Revolution.

The central bank concept is not a wholly unsavoury idea. If governments could limit their spending and borrowing then it would not be so devastating. Tying the issue of dollars to the deposits in gold and silver is ok but you just have to see that the ease to print those dollars made it only a matter of time before the issuance would not be tied to deposits. Once that occurred governments were unrestrained in their spending and borrowing. They could afford wars, big mega-projects and five year plans. The distribution of wealth could be engineered with paper - today it is just a matter of, not even paper, just an electronic entry on a balance sheet - A credit on one and a debit on another.

Well, electronic entries and fiat paper currencies are what is called money today but unfortunately they lack several properties of what are the very essence and nature of money. They only hold two of the essential properties of money, they are an accepted means of exchange and are a measure of value and as long as they are an accepted means of exchange they are a future claim on goods and their measure of value is dependent more upon the level of confidence in that future claim. Since they are valueless by themselves, that is to say they have no intrinsic value, they violate the terms of a contract of exchange. The exchange does not satisfy itself but is dependent upon the future ability to make a claim on other goods in a future exchange. This puts an unreasonable variable in trade and an economy and makes it dependent upon the actions of those with the control of the creation of "means of exchange". It is trusted they will not violate economic law. But of course need for governments to spend will override economic law. Defense, and thus war, is necessary. Devastation and famine must be assuaged by all means available. Poverty must be eliminated. All must have a decent education and health care. We must be protected from every social problem by government. We must not ever suffer in life in any manner and die with dignity bequeathing all to the State for proper redistribution.

Since governments produce nothing but "money" it is their means of transferring wealth to themselves, being a claim on goods, and redistributing it as they see fit.

[dre]

Well, the public is faced with either bank failures or a stable economy. That was the option offered the public. Of course, the proponents knew quite well the benefits to themselves and the banking industry. I think they did honestly believe they were doing the right thing for society. They were elitists that felt they should have the right to macro-manage the economy for the collective good of society.

The British central bank was established in the last decade of the 17th century, in the 1690's, I believe. I just googled it and it was 1694. It's an interesting article: Bank of England

But anyway where I was about to go with that is that the French revolution occurred, coincidentally, when the King and French Parliament decided to solve their economic problems with the issuing of a paper currency, the "Assignat", It was an idea adopted because it worked so well in England with the English pound. Unfortunately, it was not understood by the French that the English did not just wantonly print their notes and the issue of them was tied to the banks reserves in gold and silver. It seems they just kept on printing the Assignat and after a few years it was a valueless piece of paper, and that circumstance sparked the French Revolution.

The central bank concept is not a wholly unsavoury idea. If governments could limit their spending and borrowing then it would not be so devastating. Tying the issue of dollars to the deposits in gold and silver is ok but you just have to see that the ease to print those dollars made it only a matter of time before the issuance would not be tied to deposits. Once that occurred governments were unrestrained in their spending and borrowing. They could afford wars, big mega-projects and five year plans. The distribution of wealth could be engineered with paper - today it is just a matter of, not even paper, just an electronic entry on a balance sheet - A credit on one and a debit on another.

Well, electronic entries and fiat paper currencies are what is called money today but unfortunately they lack several properties of what are the very essence and nature of money. They only hold two of the essential properties of money, they are an accepted means of exchange and are a measure of value and as long as they are an accepted means of exchange they are a future claim on goods and their measure of value is dependent more upon the level of confidence in that future claim. Since they are valueless by themselves, that is to say they have no intrinsic value, they violate the terms of a contract of exchange. The exchange does not satisfy itself but is dependent upon the future ability to make a claim on other goods in a future exchange. This puts an unreasonable variable in trade and an economy and makes it dependent upon the actions of those with the control of the creation of "means of exchange". It is trusted they will not violate economic law. But of course need for governments to spend will override economic law. Defense, and thus war, is necessary. Devastation and famine must be assuaged by all means available. Poverty must be eliminated. All must have a decent education and health care. We must be protected from every social problem by government. We must not ever suffer in life in any manner and die with dignity bequeathing all to the State for proper redistribution.

Since governments produce nothing but "money" it is their means of transferring wealth to themselves, being a claim on goods, and redistributing it as they see fit.

They only hold two of the essential properties of money, they are an accepted means of exchange and are a measure of value and as long as they are an accepted means of exchange they are a future claim on goods and their measure of value is dependent more upon the level of confidence in that future claim. Since they are valueless by themselves, that is to say they have no intrinsic value, they violate the terms of a contract of exchange.

Paper money is backed by demand just like any other commodity. Government backed currency is backed by how many goods and services there is in the marketplace. And the ONLY essential propery of currency is that is an accepted unit of economic account. Its just a temporary vehicle to facilitate transactions.

[Pliny]

Paper money is backed by demand just like any other commodity. Government backed currency is backed by how many goods and services there is in the marketplace. And the ONLY essential propery of currency is that is an accepted unit of economic account. Its just a temporary vehicle to facilitate transactions.

I understand. What you say is the general view of currency and money today.

Is an electronic entry a commodity backed by demand? The demand for paper currency is backed by confidence and stability in the government not by any value in itself. The Zimbabwe billion dollar bill is evidence of that. Its value is solely in the governments ability to decree and uphold it as a legal tender. The government then regulates the supply to create demand. That it has become a commodity unto itself and is traded against other currencies is true. Currencies were, at one time specie or receipts of deposits, and metamorphosed into the money itself. Money, unlike currency, is not a future claim on goods. It is a trade of equal value as determined by the parties involved in a transaction. Money is traded; not redeemed. Currencies, that are not specie, may be traded and redeemed for money or traded again and redeemed by the next person.

What becomes money in a society is determined by the society, it must have the quality of satisfying a trade without it being redeemed in a future transaction or being held as a claim to future goods.

[dre]

I understand. What you say is the general view of currency and money today.

Is an electronic entry a commodity backed by demand? The demand for paper currency is backed by confidence and stability in the government not by any value in itself. The Zimbabwe billion dollar bill is evidence of that. Its value is solely in the governments ability to decree and uphold it as a legal tender. The government then regulates the supply to create demand. That it has become a commodity unto itself and is traded against other currencies is true. Currencies were, at one time specie or receipts of deposits, and metamorphosed into the money itself. Money, unlike currency, is not a future claim on goods. It is a trade of equal value as determined by the parties involved in a transaction. Money is traded; not redeemed. Currencies, that are not specie, may be traded and redeemed for money or traded again and redeemed by the next person.

What becomes money in a society is determined by the society, it must have the quality of satisfying a trade without it being redeemed in a future transaction or being held as a claim to future goods.

The demand for paper currency is backed by confidence and stability in the government not by any value in itself.

No its backed by the size of the economy and the ammount of transactions in the market place. Just like gold, silver, or wheat. All of those things have a value thats based on how much wealth or labor people are willing to trade for them.

[maple_leafs182]

No its backed by the size of the economy and the ammount of transactions in the market place. Just like gold, silver, or wheat. All of those things have a value thats based on how much wealth or labor people are willing to trade for them.

Fiat money is not like gold, silver or wheat in the sense that those commodities all have intrinsic value where fiat money has none. Even if people stopped accepting wheat, gold or silver as a form of money, they would still be worth something.

Paper money is backed by demand just like any other commodity. Government backed currency is backed by how many goods and services there is in the marketplace. And the ONLY essential propery of currency is that is an accepted unit of economic account. Its just a temporary vehicle to facilitate transactions.

Paper money is created out of debt and backed by the demand for that debt. It is not good to have a fiat currency, it gives far too much power to the banks over the economy.

They were elitists that felt they should have the right to macro-manage the economy for the collective good of society.

I don't buy that premise. I think the politicians may of thought that because that is how it was sold to them but if you look at the Federal Reserve in the states and the banking interest that pushed for the Federal Reserve Act, they were clearly looking to gain a stranglehold over the economy.

Ron Paul announced he was running

The first minute or so of this video is relevant to this conversation.

http://www.youtube.com/watch?v=UBngrfL0B6U

[Pliny]

No its backed by the size of the economy and the ammount of transactions in the market place. Just like gold, silver, or wheat. All of those things have a value thats based on how much wealth or labor people are willing to trade for them.

Is that why the US dollar is under threat of collapse? Their economy is shrinking? Last I looked it was still one of the largest economies in the world. According to your statement it should still be well above other currencies. The fact is that government control of the supply and interest rates determine value and demand. Inflate the supply too much and it becomes a Zimbabwe dollar - of course the amount of transactions in that dollar shrink because no one wants it but the dropping of the amount of transactions is an effect not a cause. And transactions will still occur with the use of some other form of currency or money or barter if one particular currency is valueless.

Yes, gold, silver and wheat have a value. Does an electronic debit or credit? Generally, their value is tied to supply and demand. If they are used as money the size of the economy and the amount of transactions are a factor in their value but they don't change fast enough to consider they regulate their value. Regulation of value in currency or money is primarily affected by supply and demand. Certainly if an economy grows without a change in the supply of money then the value rises, that is, prices drop, as there is more demand for money.

I do see your position but consider you're assignment of cause and effect being backwards. Size of the economy is attempted to be regulated by macro-economic factors such as money supply and interest rates.

A stable inflation rate of 2-3% and growth in the economy is desirable and the way to cause that is by regulating the money supply and the interest rate. Controlling the amount of transactions or the size of the economy is an effect of that. Direct control of prices have definitely been tried but in almost every instance that approach has proven a disastrous strategy generally because production and supply disappears. Examples are the USSR and communist China.

Edited May 15, 2011 by Pliny

[Pliny]

Fiat money is not like gold, silver or wheat in the sense that those commodities all have intrinsic value where fiat money has none. Even if people stopped accepting wheat, gold or silver as a form of money, they would still be worth something.

You are correct, in my opinion. Neither is an electronic entry a similar commodity.

I have had this argument before. If there is zero demand for gold then it has lost all intrinsic value just like a paper currency would. But the fact is gold has never been at zero demand in any modern economy. One of the reasons it evolved as the preferred commodity for money.

I don't buy that premise. I think the politicians may of thought that because that is how it was sold to them but if you look at the Federal Reserve in the states and the banking interest that pushed for the Federal Reserve Act, they were clearly looking to gain a stranglehold over the economy.

The bankers and the politicians both realized the power it gave them. The problem they solved was bank failures. The selling feature was a stable economy brought about by a stable banking industry and a single government backed currency. Gaining a stranglehold over the economy at that time meant owning all the gold and silver, they had to somehow decouple the currency from being commodity backed and that became a fait accompli in 1973 but I don't think the originators of the plan intended to decouple the currency from the gold standard. If they had done that at the inception then I would say it was entirely a conspiracy to defraud the public of their wealth. Later on, unwitting politicians who had no clue and just wanted to untie their hands in borrowing and spending convinced bankers to decouple the currency from the gold standard. It took decades and several emergencies, like the depression and WW II to get that done.

Since 1973 we have had an endless cycle of boom and bust. Bubble and recession.

Ron Paul announced he was running

I like that fact but I still don't think the Republicans or Americans are ready for that big a change, even though hope and change is probably what they still desire. Barack Obama only brought them an increase in more of the same old same old, mega-sizing government - or at least trying.

[dre]

Is that why the US dollar is under threat of collapse? Their economy is shrinking? Last I looked it was still one of the largest economies in the world. According to your statement it should still be well above other currencies. The fact is that government control of the supply and interest rates determine value and demand. Inflate the supply too much and it becomes a Zimbabwe dollar - of course the amount of transactions in that dollar shrink because no one wants it but the dropping of the amount of transactions is an effect not a cause. And transactions will still occur with the use of some other form of currency or money or barter if one particular currency is valueless.

Yes, gold, silver and wheat have a value. Does an electronic debit or credit? Generally, their value is tied to supply and demand. If they are used as money the size of the economy and the amount of transactions are a factor in their value but they don't change fast enough to consider they regulate their value. Regulation of value in currency or money is primarily affected by supply and demand. Certainly if an economy grows without a change in the supply of money then the value rises, that is, prices drop, as there is more demand for money.

I do see your position but consider you're assignment of cause and effect being backwards. Size of the economy is attempted to be regulated by macro-economic factors such as money supply and interest rates.

Stable 2-3% growth in the economy is desirable and the way to cause that is by regulating the money supply and the interest rate Controlling the amount of transactions or the size of the economy is an effect of that. Direct control of prices have definitely been tried but in almost every instance that approach has proven a disastrous strategy generally because production and supply disappears. Examples are the USSR and communist China.

Yes, gold, silver and wheat have a value. Does an electronic debit or credit?

All those things have value as long as somebody wants trade labor or wealth for them, including the electronic credit. In fact... gold and electronic credit are both quite similar in this regard. The vast majority of golds value is derived not from its intrinsic value but for the demand for it as a financial instrument... its used a hedge against paper currency.

Is that why the US dollar is under threat of collapse?

The US had the same problem when their currency was pegged to gold. In fact thats the whole reason they ended convertability.

In any case... you dont have a better idea, or a plausible alternative to economy-backed currency.

Since 1973 we have had an endless cycle of boom and bust.

Maybe but under the previous system all you had was stifled economic growth, and a parade into bankruptcy. The pre-73 gold standard did NOTHING to address any of the problems you mentioned. The US still over printed and at the time Bretton woods ended there was a run on gold, and the US didnt even have close to the ammount of gold to redeem all the gold-backed currency it had issued.

Edited May 16, 2011 by dre

[maple_leafs182]

I don't think the originators of the plan intended to decouple the currency from the gold standard. If they had done that at the inception then I would say it was entirely a conspiracy to defraud the public of their wealth.

I know you have previously said that you believe that the Great Depression was caused by the Fed. The Fed was responsible for inflating the stock market bubble which led to the inevitable bursting of the bubble and collapse of the stock market. The wealth of the public was stolen then.

Look at what just happened in 2008, millions are losing there homes and the banks that were responsible for the collapse have gotten bigger, the wealth of the people continues to be stolen.

There is no way the banks don't know what affect their policies have on the economy.

When the Federal Reserve Act was passed, the people of these United States did not perceive that a world banking system was being set up here. A super-state controlled by international bankers and international industrialists acting together to enslave the world for their own pleasure. Every effort has been made by the Fed to conceal its powers but the truth is - the FED has usurped the government ... It was not accidental [the 1929 stock-market "crash"]. It was a carefully contrived occurrence ... The international bankers sought to bring about a condition of despair here so that they might emerge as rulers of us all. -Louis McFadden, Chairman of the House Banking Committee(1920-31)

Conspiracy or not, having fiat money and central banks is hurting all of us. How do the people not see that.

[Bonam]

You are correct, in my opinion. Neither is an electronic entry a similar commodity.

I have had this argument before. If there is zero demand for gold then it has lost all intrinsic value just like a paper currency would. But the fact is gold has never been at zero demand in any modern economy. One of the reasons it evolved as the preferred commodity for money.

A more important reason was its value density based on that demand. You want a currency that is convenient. Having to lug around pounds of something as currency is not convenient, but because gold is expensive enough, even small amounts of it have substantial buying power, all you'd need to carry with you on a daily basis would fit in your pocket. There are plenty of other things that have always been in demand: food, livestock, etc. But those things are worse than gold as currency since you don't want to bring your herd of cows with you everywhere.

But today, we have systems of currency exchange that have arbitrarily high value densities, as well as simultaneously having arbitrarily low denominations. They are far more convenient than gold. A single plastic card gives me access to all of the wealth that I possess, whether it is a few dollars or millions, to an exact value of a penny. We are long past paper. There is no going back from money being a purely electronic entry in a database, not without losing much of the convenience we have come to expect and take for granted over the last few decades.

Furthermore, having your money in the form of a plastic card (or a wireless chip, or a signal from your phone, or an online button click) gives you security: if someone steals it, they can't do anything with it, because you merely deactivate the card by calling your bank, and they will retroactively refund any transactions that may have happened since it was stolen. It automatically compiles all the data on your budget for you: I can go online and see exactly how much money I spent, when, and on what.

To me, the idea of carrying around gold coins (or paper money) already seems just as quaint as bringing your cows and chickens to barter with. As with anything else, it is technological progress that has the greatest impact.

Edited May 16, 2011 by Bonam

[ZenOps]

I don't see why people say gold and silver are inconvenient and heavy forms of commerce.

When you go to the grocery store to buy a chicken, you take a few ounces of coins (at most) out of your pocket and you carry a two pound chicken home.

An ounce of gold is much smaller and lighter than carrying 70+ $20 bills around.

It just seems more honest to me than an electronic number that someone arbitrarily assigned a value to. Sure electronic money is useful for some transactions online, but for anything tangible the real thing (gold and silver) is still king. I mean, when a rich man in Venezuela pays 12 cents per gallon for gasoline with an electronic debit card - does he feel a bit guilty? I think he does.

I think banks prefer electronic because they control the money supply. If they hook you to electronic, they can hook you to fees, interest rates, etc.

[Bonam]

I don't see why people say gold and silver are inconvenient and heavy forms of commerce.

When you go to the grocery store to buy a chicken, you take a few ounces of coins (at most) out of your pocket and you carry a two pound chicken home.

Yeah, and what about if you go to buy a car?

An ounce of gold is much smaller and lighter than carrying 70+ $20 bills around.

Er, why would you have 70 bills? Anyway, paper money is just as inconvenient as coins. Electronic is the way.

It just seems more honest to me than an electronic number that someone arbitrarily assigned a value to. Sure electronic money is useful for some transactions online, but for anything tangible the real thing (gold and silver) is still king.

No, it isn't. Gold and silver is hardly ever used as currency in normal economic transactions in Western countries at present, in case you didn't know.

I mean, when a rich man in Venezuela pays 12 cents per gallon for gasoline with an electronic debit card - does he feel a bit guilty? I think he does.

Huh? Why would he?

I think banks prefer electronic because they control the money supply. If they hook you to electronic, they can hook you to fees, interest rates, etc.

Nonsense. Why the hell would you use a bank that charged you fees? As for interest rates, that's only on money you borrow, and you don't have to borrow anything to use electronic transactions.

[Pliny]

A more important reason was its value density based on that demand. You want a currency that is convenient. Having to lug around pounds of something as currency is not convenient, but because gold is expensive enough, even small amounts of it have substantial buying power, all you'd need to carry with you on a daily basis would fit in your pocket. There are plenty of other things that have always been in demand: food, livestock, etc. But those things are worse than gold as currency since you don't want to bring your herd of cows with you everywhere.

Agreed. Money is about the facilitation of trade, essentially.

But today, we have systems of currency exchange that have arbitrarily high value densities, as well as simultaneously having arbitrarily low denominations. They are far more convenient than gold. A single plastic card gives me access to all of the wealth that I possess, whether it is a few dollars or millions, to an exact value of a penny. We are long past paper. There is no going back from money being a purely electronic entry in a database, not without losing much of the convenience we have come to expect and take for granted over the last few decades.

Furthermore, having your money in the form of a plastic card (or a wireless chip, or a signal from your phone, or an online button click) gives you security: if someone steals it, they can't do anything with it, because you merely deactivate the card by calling your bank, and they will retroactively refund any transactions that may have happened since it was stolen. It automatically compiles all the data on your budget for you: I can go online and see exactly how much money I spent, when, and on what.

To me, the idea of carrying around gold coins (or paper money) already seems just as quaint as bringing your cows and chickens to barter with. As with anything else, it is technological progress that has the greatest impact.

Well, there are several problems with "money" simply being a system of accounting. One is that the true valuation of total wealth is distorted. Labour digging holes and filling them up is not differentiated from labour that has a final product that enhances a society's standard of living. Teacher's, for example, work really hard but the value of their work is not measured in the success of their students to practically apply their studies to life. It is measured firstly, in having the correct qualifications for the job, secondly being physically present on the job, thirdly fulfilling the requirements of the curriculum, etc. The important part, the ablity of students to practically apply their materials to their lives is mostly lost. The value of "schooling" is what is measured in credits and the true value of the product of education is not measured. Schooling becomes the more important measure over education. Is a million hours of schooling the same value as a million hours of education?

Is that a problem of "money"? I believe it is. When "money" is simply a method of accounting "Value" is not understood and becomes detached from real wealth. "I have the credentials, I was here the same amount of time putting in the same hours, as someone else and the result not being the same is irrelevant and probably someone else's fault anyway - I was assigned all the stupid kids", or something like that.

The other main problem is, the ability to create credits by the whim of a few endangers the whole.

We see all western governments create vast amounts of debt which are claims against future wealth and are expected to be paid. The domestic holders of government bonds expect their investments in their country to be paid back. The foreign buyers of government debt expect to be paid back. The central bank expects to be paid back.

It is a mistake, in my view, to herald the debasement of "money" and turn it into a system of mere accounting as a technological miracle of modern economics. It certainly facilitates trade by not having to move anything physical around. It only takes debiting and crediting the accounts of the participants in a trade. Something physical does occur though - a product or service is delivered in reality. Someone is left with a real good or service and another is left with a credit in their account. A claim on future more preferred goods and services.

The danger is in the creators of credits holding to the parameters that regulate their creation. It is proven that they cannot do so. Crises, real and imagined, are handled by ignoring the parameters and creating increasing debt - that is, increasing bank accounts that have a claim on goods and services that if claimed at once is no different than a run on a bank and will collapse an economy in the same way - the very thing the concept of a central bank was created to resolve.

Solution - the creation of "money" must not be left entirely in the hands of any man or group of men.

Do we then so easily spend money to rebuild cities and nations destroyed by war? No, it is too costly - we learn to avoid war in the first place. Economic constraints make us use our resources more efficiently. The argument is that economic restraints should not keep us from advancing but are we advancing or are we just artificially engineering our future and only materialisitically creating an apparency of advancement that will crash down around our ears?

Edited May 16, 2011 by Pliny

[ZenOps]

20 ounces of gold would be able to buy a car fairly easily. A stack of $100s in a small briefcase would probably weigh the same.

Banks use gold as currency between banks, but they do not encourage it for the general populace (double standard)

$20 is the standard circulated note for purchases over $100.

Deadly riots broke out in Venezeula the last time they tried to increase gasoline over 12 cents per gallon. Maybe I should have said rich people are "afraid" when they are getting their gas for cheap and everyone else is in abject poverty, including the gas attendant, who could just twack the carowner over the head, take the car and have more wealth than he could ever achieve in a lifetime of work (think Somali Pirate)

If Canada could arbitrarily print up $600 Billion every year, we could buy as many fighter jets as we want to. But that would also mean a loaf of bread would be $10. The US current policy of money printing is pushing the entire world into inflationary poverty.

http://www.fao.org/worldfoodsituation/wfs-home/foodpricesindex/en/

Now, you would think that with all this money printing - that the US would be coming out ahead. That would be wrong - as the average person does not have "wheelbarrows" full of money that are worthless (Zimbabwe) What the US is doing - is creating electronic dollars that *never* go into public circulation - instead they go to bailing out banks that in turn do things like buy up 200,000 tons of copper that they did not work for.

[Pliny]

I know you have previously said that you believe that the Great Depression was caused by the Fed. The Fed was responsible for inflating the stock market bubble which led to the inevitable bursting of the bubble and collapse of the stock market. The wealth of the public was stolen then.

Yes, inflating the money supply creates bubbles and booms. 1933 marked the point where Americans had their gold taken from them. They were not allowed to own it. 1973 marked the culmination of the debasement of money to being entirely a fiat paper divorced form redemption for anything but an equivalent denomination of fiat paper.

The designers of the Federal Reserve knew they were pulling off a coup by controlling the printing of money. It meant that the deposits of gold and silver intheir vaults never had to be redeemed on a wholesale level again. Runs on banks, with the guarantee of the US Government, could be covered with paper. Money then really did grow on trees. Kind of a pun. Wealth was considered by bankers as gold and silver. I don't think the original creators of the Federal Reserve ever thought that the dollar would not be backed by gold or silver. They knew only too well what happened to currencies that weren't backed by a commodity - they reverted to their intrinsic value of zero. It seems lost to economists today that it is where we are heading, but the course was inevitably set in 1913.

Look at what just happened in 2008, millions are losing there homes and the banks that were responsible for the collapse have gotten bigger, the wealth of the people continues to be stolen.

The wealth had all been stolen by 1973. What is left is the struggle to escape the spiral to economic collapse.

There is no way the banks don't know what affect their policies have on the economy.

They do. But their options are disappearing. Government wants the right and ability to seize and redistribute wealth for social equitability but obviously it isn't being given up as fast as they like to spend it so they just wind up creating more of it and it starts to approach it's intrinsic value of zero.

Soon we will be evolving a new form of "money" as no one will have confidence in the ability of bank credits to claim future goods and services at the value they give them presently.

Conspiracy or not, having fiat money and central banks is hurting all of us. How do the people not see that.

The reality is that they can still claim goods and services for credits in their bank accounts. They may see inflation as a problem but basically there is no understanding that money today is a claim on future wealth, essentially a debt, whereas it used to be wealth in and of itself and part of a trade of wealth instead of being only half a trade completed when the claim, or debt, is presented for goods or services. One of the big problems is that once the debt is transferred it isn't retired but continues to be a claim on goods. Creating more debt, or paper claims, on goods reduces the value of existing claims on goods. That's inflation. Currencies and bonds and IOUs and promises to pay and cheques can be claims on goods but "money" by definition is wealth in itself and receipt of it requires no other transaction to complete an earlier transaction.

Edited May 16, 2011 by Pliny

[Pliny]

I just read that George Soros, Eric Lindrich and Paul Touradji dumped a lot of their gold holdings in the first quarter.

Paul Johnson is still in apparently.

The article I read from Moneynews.com said Soros bought into gold because he was worried about deflation, yeah deflation.

Why would he be worried about deflation? Anyone hazard a guess?

[maple_leafs182]

You can digitally trade gold, you do not need to carry around the physical gold.

I just read that George Soros, Eric Lindrich and Paul Touradji dumped a lot of their gold holdings in the first quarter.

Paul Johnson is still in apparently.

The article I read from Moneynews.com said Soros bought into gold because he was worried about deflation, yeah deflation.

Why would he be worried about deflation? Anyone hazard a guess?

I'll take a guess.

Maybe he saw a bubble in the American bond market. If people stopped buying US bonds then the Fed would have to buy 'em and that would see gold and silver prices rise. Maybe he saw a risk of deflation in bonds.

If he was talking about deflation in the economy as a whole, that would lead to a collapse which would probably be followed by more quantitative easing or loss in confidence of the dollar driving up both gold and silver.

[Pliny]

You can digitally trade gold, you do not need to carry around the physical gold.

Yeah. Or the bank could issue you a receipt of deposit and you could trade that or you could get a check book and write checks. Dollars? We don't need no stinkin' dollars.

I'll take a guess.

Maybe he saw a bubble in the American bond market. If people stopped buying US bonds then the Fed would have to buy 'em and that would see gold and silver prices rise. Maybe he saw a risk of deflation in bonds.

If he was talking about deflation in the economy as a whole, that would lead to a collapse which would probably be followed by more quantitative easing or loss in confidence of the dollar driving up both gold and silver.

I hear the word deflation and I wonder why people would say they "worry" about falling prices. They are a downward adjustment to the price level so, I suppose, that means until prices adjust downward, goods look unaffordable and the economy doesn't grow.

Governments, because of their committed liabilities, cannot afford the revenue loss that deflation would bring. So I understand that they would "worry" about deflation.

True deflation is, of course, a contraction of the money supply with a resultant drop in the general price level. People would not stop buying US bonds under that condition. The US dollar would strengthen

and demand for the dollar would rise with silver and gold droppong. Could Soros have known that there would not be a QE3?

[bloodyminded]

To me, the idea of carrying around gold coins (or paper money) already seems just as quaint as bringing your cows and chickens to barter with. As with anything else, it is technological progress that has the greatest impact.

Personally, aside from expensive items, I find using paper money more convenient than using plastic.