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  • Posted by $ jbrenner 9 years, 8 months ago
    I have no problem with paper money that is 100% backed by coin of equal value. I reject fiat currency and fractional reserve banking as well, for numerous reasons that are wonderfully laid out in The Creature from Jekyll Island by G. Edward Griffin.

    America's experiments with a Federal Reserve system has been nothing less than financial rape of people who work hard to save what little they can. Inflation is a particularly vile foe because it is so hard to see.
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    • Posted by CircuitGuy 9 years, 8 months ago
      All money and media of exchange are backed only by our willingness and ability to create things that serve one another's needs. That goes for oil, metals, coins, or anything else that stores value. All the underlying value is in that people will put their ingenuity to work in fair exchanges without mutual coincidence of wants.
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      • Posted by $ jbrenner 9 years, 8 months ago
        What you say is accurate, but the underlying value of the paper money is undermined when it is not supported by something with real value. Roughly $1 trillion of paper "money" is printed each year. It is like Monopoly money. Compared to a $15 trillion GDP, that is a 1/15*100% = 6.7% inflation rate beyond what is stated by the federal government. Given that checking and savings accounts have less than a 1% return, the paper dollar you give me today is worth 94 cents next year. In 10-11 years, it is worth 50 cents. In 20-22 years, it is worth but a quarter. How is anyone expected to save for retirement without getting a return higher than the correct inflation rate? That is not possible now through even through conservative investing. Only aggressive investment in what is now a stock market pyramid scheme can approach the government printing rate. At this printing rate, it is well nigh impossible to produce fast enough to outpace the dollar's depreciation. Time to shrug.
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        • Posted by CircuitGuy 9 years, 8 months ago
          "That is not possible now through even through conservative investing."
          This is that same thinking where inflation only affects your costs (i.e. other people's prices) but not your prices (i.e. other people's costs). In this thinking, I or my business must product 5% extra value per year just to maintain constant real earnings b/c all my vendors' prices are going up, but I can only raise prices if I add value. I don't think you're actually arguing that, but it sounds that way when you say inflation makes it hard for investments to give a positive real return. It's saying every thing else's price goes up except whatever your business and investments happen to be selling.
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        • Posted by CircuitGuy 9 years, 8 months ago
          "How is anyone expected to save for retirement without getting a return higher than the correct inflation rate?"
          Money is a medium of exchange, not a long-term store of value.
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          • Posted by $ blarman 9 years, 8 months ago
            Not anymore at least.

            The difference between fiat-based currency and backed currency is that with fiat-based currency all you have is extrinsic value. You can't even burn the paper for heat it is so worthless.

            A backed currency has both the extrinsic value of the faith in one using it AND the intrinsic value of the backing material. Will the actual intrinsic value of the backing material fluctuate slightly as to market demand? Absolutely. But those are reflections of real value - not merely the faith of the transaction participants.
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            • Posted by $ 9 years, 8 months ago

              I understand what you are trying to say in vernacular or colloquial English, but without the correct epistemology you start down a path that leads to a thicket of thorns. There lies the briar patch of bad politics and failed economics. The words _objective_ and _subjective_ allow more precision while avoiding problems.

              Consider the standard US Silver Dollar 1878-1935. It contains 0.77344 troy ounces actual silver weight. At today's spot price, it contains about $15.81 in silver. But you would be hard pressed to find a coin store that will sell you one for less than $20 - and a >well worn< one that that. That is a 30% mark-up, at least. It is only because Americans love American silver dollars and are willing to pay more than the "intrinsic" i.e.. _"objective"_ value for them.

              "Objective value" means "relative to all the other goods and services on the market right now." (That is what you call "intrinsic.") Subjective value includes patriotism and nostalgia and whatever else that is within the individual.

              The reason that I caution against "intrinsic" and "extrinsic" versus "objective" and "subjective" is that those first two words carry a lot of philosophical baggage that led int the past and still leads today to grave errors including failed civic politics and so-called "political economy." To claim intrinsic value is to confuse the metaphysical with the man-made. Mass, energy, wavelength, velocity... those are intrinsic properties of real existents. As standard of action for people, values are objective or subjective.
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              • Posted by $ blarman 9 years, 8 months ago
                Intrinsic -> objective and extrinsic -> subjective. Point taken.

                However, when you are dealing with matters of economics, you are dealing with matters of value per se. You are dealing with utility. And utility is ALWAYS going to have some subjective portion because it is an evaluation based on that person's judgement of such. That's why business negotiations take place at all: there is a meeting-of-the-minds where each decides at what point they can compromise to maximize the utility to both. Money is not immune to this phenomenon, but the variability and volatility of the utility of money is directly affected by its tie to actual backing. When backing is used, there is an independent standard erected that places a non-arbitrary value on a unit of currency that decreases the volatility and variability of the valuation of the money itself. With a fiat currency, the value of money becomes whatever the issuer says it is - a vague and variable notion!
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          • Posted by teri-amborn 9 years, 8 months ago
            Money is a representative of your stored productive time. If your time is being stolen from you through taxation and inflation you end up with little or no savings.
            When 50% of our society is unproductive, this nation will "flip" over to complete dependency and will fall into a looting stage where you won't be allowed to store time.
            Get ready to shrug.
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            • Posted by CircuitGuy 9 years, 8 months ago
              "Money is a rep"resentative of your stored productive time.
              I agree with most of what you say except the hint that money may be a good long-term store of the productive time.
              I have to work 5000 hrs to earn the value of my home or the one down the road where I lived as a kid. My parents had to work 5000 hrs to earn that much value too, but the house cost $60k instead of $250k. Because the neighborhood didn't change much in 40 years, a house turned out to store value decently. If you'd put $60k in businesses and RE actively meeting peoples' needs 40 years ago, it would easily be millions. If you'd worked 5000 hours and put the $60k under the mattress, you would have lost the vast majority of it. Money is a medium of exchange that's not completely free to its users. Most of its value is gone in 40 years if left under a mattress.
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              • Posted by $ jbrenner 9 years, 8 months ago
                Your argument "seems" logical, but the difference is that both parents have to work to support what one parent could 40 years ago. The size of the debt is so high that it is like having a child I didn't father as a dependent.
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                • Posted by CircuitGuy 9 years, 8 months ago
                  " the difference is that both parents have to work to support what one parent could 40 years ago."
                  I think this is completely a myth. The ave job provides the same lifestyle as a job 40 years ago. A bad thing about this is we've had so much growth in the form of return on capital, and it hasn't gone to wages. I think it's b/c of automation. I have no solution, and am not sure we should even treat it as a problem to be solved. I think this fact has the potential to drive more support for socialism, which in general is a bad.

                  "The size of the debt is so high that it is like having a child I didn't father as a dependent."
                  If you mean national debt I agree. If you mean personal debt, it's the problem of those who signed the note.
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                  • Posted by $ jbrenner 9 years, 8 months ago
                    I am referring to the national debt. I am completely out of personal debt, but still feel the saddle of the US government. If you work the numbers like I have in other threads, you will see that it works out to about one extra kid (including that kid's college education).
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                    • Posted by CircuitGuy 9 years, 8 months ago
                      " If you work the numbers like I have in other threads, you will see that it works out to about one extra kid (including that kid's college education)."
                      It's a HUGE problem. On the other hand if we just took modest steps, the problem would disappear. We don't take modest steps though. All we want to do is take symbolic steps, like a politician at a ground breaking ceremony moving one 300ml of dirt. We should address it now while modest steps would work, not wait for it to become a crisis.
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                      • Posted by $ jbrenner 9 years, 8 months ago
                        1) The magnitude of the US debt is beyond repair. It may look like we are just over a year's GDP in debt, but what is missed is that as soon as we start paying off such debt (which will likely never happen), interest rates will go up, and the interest on the debt will be overwhelming. Federal Reserve chairpeople literally have no more games that they can play now that interest rates are effectively zero.

                        2) America does not even want to take symbolic steps to reduce the debt anymore. When Paul Ryan's and Tim Penny's plans for reducing the deficit (not the debt) are viewed as extremist when they aren't even close to enough, it is time to shrug.
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                        • Posted by CircuitGuy 9 years, 7 months ago
                          "as soon as we start paying off such debt (which will likely never happen), interest rates will go up, and the interest on the debt will be overwhelming."
                          Rates would go *down* if we started retiring debt. We should start right now before some event causes rates to spike and generates a crisis.
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          • Posted by $ blarman 9 years, 8 months ago
            Fiat-backed currency, absolutely. If the money is backed, however, one can always retrieve the intrinsic value of the backing. That's one of the huge problems with inflation: it is a reflection of the artificial manipulations of the value of currency.
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          • Posted by $ jbrenner 9 years, 8 months ago
            The way things are right now is that there really is no good long term store of value at this point. Everything is worthLESS.
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            • Posted by $ 9 years, 8 months ago
              You could put your savings into 100% gold coins. The gold coins of Canada are the purest on the market: 5 Nines - 0.99999 fine gold. You do not have to save Federal Reserve Notes in the FIT Credit Union. You could also diversity to minimize risk with coins of silver, platinum, and palladium from the US Mint. You could invest in Microsoft, Apple, Disney, ... and other companies. You could buy futures contracts for December 2022 in Home Heating Oil, Brent Crude, or Ethanol. You could lend money to entrepreneurs in return for stock options. You have good job and you are young. I don't know how you manage your finances, but you are in an enviable position (if I were given to envy, (ahem)...)
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              • Posted by $ jbrenner 9 years, 8 months ago
                I am in a pretty enviable position. I could indefinitely survive the financial apocalypse that the last two presidents have besieged us with, but my goal is not to survive, but to thrive.
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              • Posted by $ jbrenner 9 years, 8 months ago
                I probably have too much invested in Au at this point. It is a good investment, but might be a little overvalued right now.

                Investment in companies - I stick to mutual funds like Vanguard. I really don't have the time to monitor individual stocks.

                In the late 1990s, I did invest in gasoline futures and home heating oil futures. As risky as those are, I did make a killing on them. I'm not sure I have the stomach for that anymore, but I might pursue this path again.

                I do have a good job and am 47. We did great financially until about 2000. A couple more years like the late 1990s, and I could have retired at age 40, but my progress toward retirement in the last fourteen years has been pretty slow.
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                • Posted by $ 9 years, 8 months ago
                  We all did great until 2000. My wife and I were both working steadily; and she was day trading on her spare time. We thought that we would retire millionaires. The Dot Com Meltdown, 9/11, the wars in Iraq and Afghanistan, the Mortgage Bubble, and the Bailouts all cost a lot.

                  However, the first "Long Recession" 1873-1879 or even 1873-1896 was also America's greatest age of industrial expansion. Prices were falling, but among those prices were wages and agricultural products: factory workers and farmers organized to fight the bankers. William Jennings Bryan's "Cross of Gold" speech July 9, 1896, capped the era. And yet many of us long for that better time of glorious capitalism.

                  It is always easier to solve someone else's problems. If I had a Ph.D. in chemical engineering and a job at a university, and if money were at zero percent, I would be forming all kinds of companies to invest venture capital in new ideas. Maybe it is harder than it looks...


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                  • Posted by $ jbrenner 9 years, 8 months ago
                    Moreover, the division of time between starting a business while still actually doing the job of faculty member is not easy either. I tried to get them started during summers to the point of being self-sustaining. I could get that done on the technical side, but not the non-technical side.
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                • Posted by CircuitGuy 9 years, 7 months ago
                  "Investment in companies - I stick to mutual funds like Vanguard. I really don't have the time to monitor individual stocks.

                  In the late 1990s, I did invest in gasoline futures and home heating oil futures. As risky as those are, I did make a killing on them."

                  We invest in the same way, except I have no exposure to precious metals right now and I've lost money or broken even almost every time I've traded derivatives. I know a decent bit about them, but when I speculate I usually lose.
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            • Posted by CircuitGuy 9 years, 8 months ago
              "there really is no good long term store of value at this point. Everything is worthLESS."
              There never is a perfect store of value. We could measure value with a basket of goods and services used by consumers and business, but it gets difficult over decades b/c technology replaces human labor and makes difficult things, like having a library of movies at home, easy.

              If you do want to store value, you can easily do a conservative portfolio of short- and intermediate term corporate bonds and Treasuries. You can add a little RE, income stocks, and precious metals if you can tolerate the volatility .

              The "everything is worthLess" joke is similar to where this discussion with advocates of tight monetary policy ends up. They end up arguing that the basket of goods and services I buy and everything I bill for is actually worth less than it used to be b/c things are generally going to the devil. I tell them, "10 years ago I bought a bottle of pop for $1, and it costs $1.25 in today's dollars." They say, "$1.25 in today's dollars is actually more like $0.75 in 2004 USD. You're getting less value out of that pop, and the bottler is earning less real profit." Saying *everything* has less value sounds suspiciously like some form of depression. I'm not putting those arguments in your mouth; just pointing out "everything is worthless" is a serious argument for many advocates of tight monetary policy.

              One more note: I'm not an advocate for tighter or looser policy. I think the Fed Reserve has done a decent job during my adult life (past 20 years or so). I also think automation is creating so much value, that it's hard to quantify.
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              • Posted by $ jbrenner 9 years, 8 months ago
                Are you serious about corporate bonds and treasuries, CircuitGuy? I had corporate GM bonds when such bonds had a reasonable rate of return. Now the return on investment is so little as to be barely better than cash.

                I have some precious metals. They did fine for awhile, but not so hot recently.

                I have some invested in stocks, but right now the market looks like a bubble ready to burst.

                Real estate is not a bad buy right now. It would have been better about four years ago, but I didn't really want to go into debt in order to acquire it. I guess I could have gotten a REIT.
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                • Posted by CircuitGuy 9 years, 8 months ago
                  "Are you serious about corporate bonds and treasuries, CircuitGuy? I had corporate GM bonds when such bonds had a reasonable rate of return."
                  In this case I'm not saying to own individual bonds but rather a portfolio of them or a mutual fund that owns a diversified portfolio. Also, I'm not talking about a good rate of return in this scenario. I'm talking about storing value. So in this scenario, I would avoid high yields bonds and anything that requires me to assess broad trends. This is just for storing value.

                  I agree with all that stuff, though, when the goal is investing. That's my personal situation too. I'm not in a mode of storing value away somewhere. I want growth, through my businesses and things I invest in.
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                  • Posted by $ jbrenner 9 years, 8 months ago
                    Bonds are a partial store of value. Relative to inflation, you lose about 2-3% per year over the last 100 years or so with bonds. Drip. Drip. Drip. It is a leaky faucet.
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                    • Posted by CircuitGuy 9 years, 8 months ago
                      "Bonds are a partial store of value. Relative to inflation, you lose about 2-3% per year over the last 100 years or so with bonds. Drip. Drip. Drip. It is a leaky faucet."
                      Yes. Short-term Treasuries alone, esp these days, are NOT a great store of value. 2-3% per year sounds right.
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      • Posted by $ sjatkins 9 years, 8 months ago
        Doesn't this confuse a fungible value token with the actual value it is a token for exchanging? It has certainly been the case that actual value existed but the fungible value tokens were inflated or otherwise debased as a fungible means of exchange.
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    • Posted by $ 9 years, 8 months ago
      You are free to create any kind of money you want. Many anarcho-capitalists agree with you (via Rothbard) that only 100% gold backing should be lawful; anything less would be fraud. However, Hayek and others disagree. The best evidence that I can offer is the stock market. Common stock typically has _no par value_. Yet, stocks trade for more than nothing.

      These 19th century notes all carry the empirical evidence of (nearly) unregulated banking. And the regulations themselves tell stories. (In frontier Michigan, a bag of gold coins ran from bank to bank ahead of the auditors.) Reading the histories also requires a perspective. A newspaper story from Georgia complained that paper money from Michigan traded at a discount. Many people thought that money should never have a transaction cost.

      As for your gold coins, what happens when they wear down? Is it fraud to spend a coin that has previously been circulated? Hard money people have their hearts in the right place, but Rothbard was a sloppy scholar and his theories are full of holes because he never relied on the facts of numismatics.
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      • Posted by xthinker88 9 years, 8 months ago
        Has anyone read Neal Stephenson's works? Specifically Cryptonomicon which ends up dealing a lot with money in the modern world and the System of the World cycle which does the same in Isaac Newton's day. I learned a lot about money from reading these books even though they are fiction. For example, that is why quarters and some other coins have ridges around the edge. Because in hard money days, people would shave off the rim of the coin and still spend it at full value. Also, people would examine any coin and might or might not sell their goods at full face value of the coin depending upon its condition. I can see that working in a 17th century town square, but I have difficulty seeing Microsoft hiring an army of coin inspectors to make sure that the coins they receive for their software are actually within acceptable tolerance in terms of weight.
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        • Posted by $ 9 years, 8 months ago
          Your fictional history is close to correct, but not complete. People in England shaved silver pennies because the coins were _legally_ all the same "by tale" (by count). Gold coins were weighed. The poor state of silver coinage - nothing significant was issued for almost 100 years - led to counterfeiting. Newton estimated that 20% of the coins in circulation were counterfeit. Also, those coins that were good silver were about 20% under weight by shaving. Newton recommended a new coinage at 20% the value of the old, but the committee he served with John Locke Locke, Christopher Wren, and others, decided to just recoin the entire nation at the old standard. As Warden and Master of the Mint, Newton achieved that. (See my review of Thomas Levison's _Newton and the Counterfeiter_
          http://www.coinbooks.org/esylum_v12n32a0... )

          People today wring their hands over the shaving of coins as "dishonest" but it was the easiest way to bring the coinage into conformance with commerce. There were NO copper coins. People used lead tokens and other expediencies. The silver pennies had been cut along the long cross into fourths (farthings) for 300 years by Newton's time, creating yet another largely undocumented expediency of small silver slivers.

          (Again, there was no copper. That problem was solved by the Birmingham Button Makers of the Soho Mint. They make copper coins economically feasible. And coinage was a monopoly of the crown - and protected by a charge of treason which brought drawing and quartering in punishment. By contrast, in the USA of the 18th and 19th centuries, we had a plethora of coinages, with Federal coins being a second or third tier and Spanish or Mexican being first with UK second in many place. Many banks in New York, Michigan, Alabama, etc., showed pictures of Spanish coins while promising to pay Federal. See "Spanish Coins on American Money" here: http://scoan.oldnote.org/ ) Merchants along the East Coast kept their books in pounds-shillings-pence until the 1830s, fifty years, a lifetime, after Independence.

          As for armies of coin inspector, just exactly such an army did exist. The job title - the guild - was called "The Shroff." In China of 18th through 20th centuries shroff schools trained clerks in the certification of silver coins. (See my article "The Shroff" here http://www.coinpeople.com/index.php/topi... ) Of course, today, we would have machines for that - and such machines do exist.

          Also, today, we would have electronic coin cards and digital coin codes and all the rest. And, indeed, we do.
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        • Posted by xthinker88 9 years, 8 months ago
          Even our coin money - even when it was silver - was basically fiat currency because you had to accept a silver dollar as a dollar even if it weighed only 95% of its original weight. (Talking say the 1950's and 60's - not sure if that was true in the 1800's).
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          • Posted by $ 9 years, 8 months ago
            Can an "almost fact" exist? Your claims fall short of reality.First of all, the silver dollar was struck from 1794 to 1935. Originally 26.93 grams (defined by law as 416 grains even) from 1794-1840. The Coinage Act of 1834 revalued the dollar, but no dollar coins were struck after 1803 until after 1840.) From 1834-1935, the silver dollar was 412.5 grains (26.73 grams). The coins were 90% (0.900 fine). It was both a matter of seignorage (profit to the Mint) and also the convenience of a tougher alloy.

            Minor silver coins - Half, Quarter, and Dime - were struck on a lighter standard. Four silver quarters only weighed 25 grams .900 fine. In addition other fractional silvers such as the 20-cent and 3-cent came and went. (The 3-cent was only 0.750 fine; it was always a token.)

            Your confusion of a dollar being worth a dollar in silver stems from the universal confusion of money of account with weight of metal. For about 2100 years (about 550 BCE to about 1550 CE), a coin was worth its weight, nothing more or less. Henry III or IV of France created a coin called the "franc." From that point on, the franc was worth whatever the government claimed it was. Other nations followed suit.

            Note, however, that even today the British Gold Sovereign has no statement of value on it. Our own Eagle gold coins of 1795-1804 also had no statement of value. The first silver dollars - by law our standard coinage - said "one hundred cents one dollar or unit" only on the edge, not the obverse or reverse. (The half dollar was similar.)

            As for "a dollar's worth of silver" the price of silver relative to gold has always been in flux. That was another conceptual challenge beyond the grasp of most people in 19th and 20th century America. From the Bland-Alllison Act of 1878 forward, silver was inflation money. Rising against the dollar during the Civil War, the price of silver collapsed both with peace and huge strikes in the west. The government propped up silver miners by buying their metal at above market prices and by law striking 2 million silver dollars per month from 1878 to 1904. By the Depression of the Thirties, silver was down to about 34 cents per ounce, making a silver dollar worth about 21 cents.... if metal was all that mattered.

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    • Posted by xthinker88 9 years, 8 months ago
      I tend to agree in principle and want a hard money system. Yet I'm not sure it could work in today's economy. Gold is more than just a precious metal to potentially back currency. It is also a key ingredient in electronics and other industrial uses that render it's use as money questionable. Silver is even worse from this perspective. In addition, with either, I'm not sure there is enough gold in the world to back the currency needs of the world's business transactions. And if we were to use it then we would instantly be giving tremendous power to countries that are basically enemies of our way of life (eg Russia).

      I'm not sure I can accept that a gold-backed currency is anything more than an unrealistic fantasy in 2014 - as great as it could have been in 1914.
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      • Posted by $ 9 years, 8 months ago
        First, the fact that gold (silver, oil, etc.) is limited means that its value rises relative to the other many new goods and services constantly created. Gold money becomes worth more over time, prices fall; saving is rewarded.

        Second, money has always been the _second_ use of gold: jewelry was always first.

        Even as money, gold was primarily for large transactions. It was the medium of kings and emperors, not commoners (or barons). For most of history in most places, silver was the common currency. Capitalism changed that. Of all the coins of the US Mint 1794 to 1934, the $5 gold - about the same size as the UK pound sovereign - was a steady product, one always produced regardless of whatever else was struck. America led the way with small gold coins, the quarter eagle ($2.50) and one dollar - even as the dollar was legally defined in terms of silver.

        The price of gold today versus 1914 relative to the economies tells you what gold would be worth. A nice three-piece man's suit is still about an ounce of gold. But a cellular telephone under contract is 1/10 ounce or less - and that did not exist at all in 1914. Candy or eggs versus Lakers tickets or an hour in a Cessna with a flight instructor, whatever you measure, that which existed in 1914 costs more or less the same (allowing for industrial progress), and that which did not exists is "miraculously" affordable to just about anyone in the West - and many people everywhere. (Cells phone time is an informal currency in parts of Africa.)
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        • Posted by xthinker88 9 years, 7 months ago
          I'm really just playing devil's advocate here and trying to understand why the counter-arguments that are used might not be correct. I would like to see such a system possible and in place.

          And how does the biggest economy in the world make this transition? How does the federal government acquire the gold that it would need to back the dollar? Certainly if it began buying it the price of gold would go up drastically.

          According to the M2 definition, there are about $10.5 Trillion in existence. So if the government went to the gold standard and set the price at $1,000 per ounce (a price that at today's rate nobody would accept), it would take $10.5 billion ounces of gold to back up our currency.

          Here is an article on how much gold there is in the world by the BBC. If we use the larger estimate of 2.5 million metric tons of gold as the total in the world, then that is the equivalent of 80.376 billion troy ounces. So the US government would have to own 1/8 of the world's gold and have it sitting there, redeemable in Ft Knox (or someplace else obviously). If we use the smaller estimate of 171,000 metric tonnes then there are only 5.5 billion troy ounces in the world total so the price of the dollar would have to be $2,000 per oz and the US would have to have stockpiled all the gold in the world.

          I'm not seeing how this could work. It seems to me that the world's need for currency has greatly outstripped its supply of gold.
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        • Posted by xthinker88 9 years, 7 months ago
          And what happens if the US essentially gave up its own currency as the reserve currency of the world and turned to gold - which then means that a country like Russia which may have some of the largest untapped gold reserves in the world essentially becomes the defacto monetary power.
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  • Posted by Herb7734 9 years, 8 months ago
    Just a comment from a retired guy:
    Worked, struggled, succeeded, saved. And now, it is just so much fun to see all those savings and investments withering away. Not because of bad investments. Not because of overspending. But because the money buys less and less every year, because the money diminishes in value while prices inflate.
    Compared to many others, we are in pretty good shape. Almost enviable shape. Everything is paid for. Anything bought on credit is only done if it can be repaid at 0% interest. Even with all of that, there's a pretty good chance that the dough won't last until we assume room temperature. That is, unless we exit earlier than planned. So...I've been hard-working and pretty smart my whole life, to what avail? So that some drooling idiots who think wealth is created because they say so is causing me grief.
    Am I off topic?
    Where else can I complain if not here, to people who get it?
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    • Posted by $ jlc 9 years, 8 months ago
      Yes, I too have found it nice to have a place to comment where I do not have to explain my point of view every other sentence.

      Insofar as work is concerned, when I was in my 20's, I looked ahead and decided that I would probably need to continue working until I died. I did not think that Social Security would be around to provide me with an income, nor that I would be able to accumulate 'an independence'...nor that I would want to. (I have seen too many people fall apart after retiring.)

      Fortunately, I do not work digging ditches (when I was in my 20's I was employed as a medical technologist), so continued employment was quite possible. Now - as a software designer - it is even more so.

      So Herb: Have you considered putting your considerable intelligence and talents to finding something to do that can provide you with an income? No, it is not good that what you worked for has been taken away from you, but the only real remedy that I can see is to bring more money in.

      Jan
      (Which advice makes it obvious that I do not work for the federal government. If I did, I would have suggested that Herb start a counterfeiting business and just print the money he needs.)
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      • Posted by Herb7734 9 years, 8 months ago
        My wife, who has been a photographer, an esthetician and a bookkeeper is now an Avon Lady. Quite successful at it. I am somewhat disabled, so any job that requires standing, or sitting at a desk for hours is not possible. Besides, I'm having so much fun writing articles, reading more than I ever had time for in the past, and being an internet gadfly that I'd hate to give it up. I am exploring things I can do while sitting at my computer, with my comforts surrounding me and my meds not far off. As to counterfeiting, the government has a monopoly on that and they outgun me. I was thinking about starting a new religion, but I'd need a young good-looking front man/woman.
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    • Posted by $ jbrenner 9 years, 8 months ago
      No, you are quite on topic, Herb. Obama and his banker friends at Goldman Sachs have conspired to steal from all of us. For many years we were told by financial advisors to plan a nest egg such that we could live comfortably by taking 5% of that per year, with the assumption that we would make enough interest on our investments to make that possible. But none of us is making enough on our conservatives investments in the last several years to make that possible. Moreover, with this high a debt, the Federal Reserve bankers cannot raise interest rates and expect anything other than default.
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      • Posted by Herb7734 9 years, 8 months ago
        I have come to be relieved if I don't lose anything. So far, I've been able to keep a constant balance on my accounts, earning just enough to pay back the spending. If, however, some catastrophic expense comes down the road...I will be in deep excrement.
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        • Posted by $ jbrenner 9 years, 8 months ago
          If you are not losing your nest egg, then you are doing better than most.
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          • Posted by Herb7734 9 years, 8 months ago
            I am aware. However, it's seeing the catastrophe others are suffering that makes me nervous. But one advantage of getting old is that pretty much anything that can be experienced, good or bad, has been experienced and we survived. Like I said, I get nervous -- but not afraid. It's a case of been there, done that (and had that done to me).
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  • Posted by Kittyhawk 9 years, 8 months ago
    Bitcoin is a very interesting alternative to fiat and paper money. It's now being accepted by big retailers like Overstock and Dell computers. It goes to show that pretty much anything can be a means of exchanging value as long as people agree.
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  • Posted by $ 9 years, 8 months ago
    American capitalism floated on a sea of paper. The British colonists were greatly disappointed not to find a tribe of cocaine addicts to loot for their silver. So, they made do with paper money. Except for China (famously), and an early attempt by the national bank of Sweden, the American colonies of Britain led the world in the creation of fiduciary currency. America was truly a land of _promise_. The vignettes on these notes show production, creation, crafts, farming, commerce, and very many very ordinary people being very busy at work.
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  • Posted by $ 9 years, 8 months ago

    The tet-a-tet between jbrenner and CircuitGuy though seemingly off track is indeed relevant to the basic subject matter of the original post.

    These 19th century banknotes, issued by independent, private banks focused several conceptual problems with "money qua money." Doty's book is about the images, the stories of America and Americans told by the vignettes. The notes themselves as monetary media underlie that.

    In some ways, the history of banking parallels the history of physics and calculus. Ancient people had spears and catapults, but no good theory of motion - and none that explained both terrestrial acceleration and planetary orbits So, too, did some men of the Middle Ages borrow and lend money at interest - with some subterfuges because of Christian law - and they kept track with double-entry bookkeeping. As I said earlier, they created abstract money of account (pounds-shillings-pence) to deal with the plethora of local coinages; and yet at great fairs, cleared their books without ever touching coin. But that was not the retail banking that we think is "normal". We learned that from the National Bank Era 1863-1933: money so stable that it falsified Gresham's Conjecture. That model served us until 2000 or so.

    When banks failed periodically 1817-1857, people were outraged and incensed. They demanded that the government "do something." Pharmacies could fail. Farms failed. Banks were held to a different standard. You all must know the scene from Mary Poppins where the boy wants his tuppence back and the argument starts a run on the bank. By law, a bank had to pay all demands by the end of the day or be declared bankrupt. Barbershops did not have that problem.

    So, here, jbrenner and others want a passive investment that stays ahead of inflation. Even gold is not good enough because it is not "performing well." Every farmer wants a crop that will plant and harvest itself. Inflation is a serious problem. We all know that it comes from the government writing bad checks and everyone else accepting them. As an external problem, inflation is just another kind of hurricane or earthquake.

    In the early 19th century when these banknotes were created, banks were engines of local credit. They created circulating media for people who needed to keep track of their incomes and expenditures. Some banks failed right away. Others failed later. A few survived for 20 years or more depending on the success of the village and the acumen of the directors. LOOK AT THE PEOPLE ON THE NOTES. khalling has asked rhetorically (The Bell Curve here in the Gulch http://www.galtsgulchonline.com/posts/ce... ) why America's greatest era of economic expansion took place with so many people of such apparently low intelligence. Let people be free and they will work miracles. That does not mean that even they will understand why. If they had, we would still have laissez faire.
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    • Posted by $ jbrenner 9 years, 8 months ago
      I think that maybe you hit on one of my weaknesses with regard to business startup, MikeM. I don't like going into debt. I am willing to put existing cash into the companies, but I just don't see a long term market. That is influenced by my biofuels company experience. I have been on several different sides of the energy business. My market in the alternate energy business was predicated on gaining wealth by absolving liberals of their irrational environmentalist guilt. Because liberals change which alternate energy they want with alarming frequency, it was difficult to see a long enough term future market to justify my capital investment. I should have let them remain in their guilt. Your comment about 0% interest rates for a Ph.D. chemical engineer was an interesting one. Chemical engineering is a very capital intensive business, much moreso than most other businesses. In general, we plan for a business on the 30 year timeframe, with typical breakeven points in the 7-10 year range. After the last ten years, I can have no confidence that the next ten, let alone 30, years are economically solid enough to make it worth that capital investment. It is this reason why AS struck such a sensitive nerve for me.
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    • Posted by $ jbrenner 9 years, 8 months ago
      The turning point for this country was when JPMorgan, Rockefeller, and Carnegie sought the cronyist protection of government in 1896 when they put McKinley in as their puppet. That backfired when McKinley was assassinated, and Teddy Roosevelt took over.

      As for the passive investment that stays ahead of inflation, I am willing to take risks in the stock market in order to increase my wealth. The increase in the stock market lately seems like a bubble because of all the low interest money out there right now. My concern is that many of these companies are ridden with more debt than they were prior to 2000.
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  • Posted by $ TomB666 9 years, 8 months ago
    Inflation is GREAT if you are a debtor. You get to pay off your loan in money that is less valuable then the money you borrowed. Example of a home loan: you get a 30 year mortgage that requires a payment of 1 week per months pay. 30 years later, still doing the same job (let's say auto mechanic) your pay has risen due to inflation to the point that your mortgage payment is now less then a day's pay. Great so far.

    What they fail to realize is that when they retire, the value of their retirement will shrink in purchasing power as fast as their ability to pay off their mortgage grew. In this inflationary world you have to hope you die before your retirement becomes worthless.

    From my studies of money through time, there has yet to be a utopia where money actually in use had a constant value through time. While gold and silver have retained roughly the same value in terms of purchasing power, they are no longer 'money' any where that I know of. If a government were to try to back its currency with gold, it would have to value it so highly to maintain convertibility that it would be a real boon to those who knew (and acted on the knowledge) of what the government had been doing in debasing the currency. The US dollar no longer serves one of the most important functions of money - that of being a store of value. (See http://www.cliffsnotes.com/more-subjects...)
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  • Posted by barwick11 9 years, 8 months ago
    Why do people assume gold and silver backed currency is the best? It's certainly better than paper, but it too is only valuable as long as someone thinks it has value.

    Just as well would be a currency that replaces current currency and is unable to be reproduced. Something with a serial number maybe. 1 out of 1,000,000,000,000, and is infinitely divisible, like Bitcoin.

    Some type of proven secure, redundant system would have to track the whole thing (cloud or otherwise), but essentially, fraud would be impossible unless someone could spoof the owner of a currency's "key", which could be a combination of three things: Something you know (password), something you carry (a rotating key generator), and something you are (your fingerprint, retina, something).

    The retina scan would go through a hash that is based on the key you carry, which would then also go through a hash based on the password you input, and compared to what it should be, which is stored on the system in some manner.

    It's way more complex, but if done right, fraud would be near impossible. Even if someone hacks the system, the transactions related to the hack could be tracked down and reversed, unlike bitcoin.
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    • Posted by $ jbrenner 9 years, 8 months ago
      Gold and silver backed currency are not by default the best, but they have proven so throughout history relative to man's effort. Part of the reason for this is that Au and Ag are noble metals (referring to their resistance to corrosion). Bitcoin could be a reasonable alternative, but it has no long term track record.
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      • Posted by $ johnrobert2 9 years, 7 months ago
        Ag is resistant to corrosion? The chemistry I learned did not make it so. Silver recovered from sunken ships is clumped with corrosion and must be cleaned. Eating utensils and other dining ware using silver, when not used, suffer corrosion through oxidation called 'tarnish'. Am I wrong?
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      • Posted by barwick11 9 years, 8 months ago
        I'm not suggesting bitcoin, but something different. There's a lot of negatives to bitcoin, but some things we can learn from it.

        Bitcoins can be lost. Just, disappear. Gone, forever. Whoops. Instant deflation. Plus, bitcoins are still being "made". I think there's something in there that they'll stop "making" them at some point, but I'm not sure.
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  • Posted by xthinker88 9 years, 8 months ago
    Silver and gold
    Silver and gold
    Everyone wishes for silver and gold
    How do you measure its worth?
    Just by the pleasure it gives here on Earth.
    (from Rudolph the Red Nosed Reindeer movie)

    LOL.
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  • Posted by $ 9 years, 8 months ago
    You probably know George A. Selgin's book, _Good money: Birmingham button makers, the Royal Mint, and the beginnings of modern coinage, 1775-1821_. (You can buy it at Mises.org) In fact, Richard A. Doty was first by ten years.

    "His 1998 book, “The Soho Mint & the Industrialization of Money,” explored important links between an 18th-century British inventor’s use of steam power rather than manual labor to make coins and the influence of that breakthrough on minting worldwide. No one had connected those dots before, [Smithsonian curator Karen] Lee said." -- http://www.washingtonpost.com/national/r...

    It is also important to place paper money in its commercial context. In the first half of the 19th century, a skilled worker earned 50 cents a day (for a 10- or 12-hour day). Call that about $100 in present value and you can see that a $2, $5, or $10 was clearly intended for large transactions, not retail purchases by consumers.

    Therefore, these bills spoke to the upper tiers of commerce and finance. When they tout slavery or present women as decorative (and decoratively undraped) they reflect the implicit values of those people of that time.
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  • Posted by $ 9 years, 8 months ago
    Previously posted six months ago, I felt that this became relevant again because of recent posts condemning "fiat" money in favor of gold and silver.

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  • Posted by Notperfect 9 years, 8 months ago
    The next time in all of your travels take a gander at all of the Feds. here in the good ole U.S.A. They remind you of an Arsenal compared to all other government buildings. Then inside is where all the fun begins.
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