Posted on 04/29/2002 5:14:43 PM PDT by shrinkermd
Ok so you respond to my post by dismissing the Constitution, cite some half-baked economic “history,” then you declare that you don’t what I mean by the dollar losing 95% of its value since 1913 and then you beat breast declaring that you, “will follow a philosophical and epistemological argument, (I) will maintain a "tradition, tradition, tradition, ritual, myth, cultural, superstition argument.”
This doesn’t sound like a discussion worth pursuing but I’ll give it another shot…
I didn’t address the article because it mixes three distinct problems:
1. The Fed (which I am against and think is unconstitutional)
2. Fiat money vs. money backed by something that has had universal value over centuries
3. Government control of the money vs the free market
The article weaves back and forth between the three issues sometimes combining them sometimes treating them as separate and makes so many assumptions that it would take way too much time to deconstruct.
As to your post, I decided to cite a Constitutional basis for gold and silver but, like the Democrats, you don’t seem to honor the intent of the founding fathers. I don’t believe that the blueprint for the US of A is a “living document” that can be interpreted whatever way you want to with the passage of time. The Constitution was designed to keep the Federal Government small and non-intrusive, ignoring its true intent was what got us to where we are now.
This ranting about the Ibond is completely ludicrous and deserves no investment of my time.
Let’s hear from an economist about “the breakdown of the gold standard” (something that is treated with lies and half-truths by the article:
If the classical gold standard worked so well, why did it break down? It broke down because governments were entrusted with the task of keeping their monetary promises, of seeing to it that pounds, dollars, francs, etc., were always redeemable in gold as they and their controlled banking system had pledged. It was not gold that failed; it was the folly of trusting government to keep its promises. To wage the catastrophic war of World War I, each government had to inflate its own supply of paper and bank currency. So severe was this inflation that it was impossible for the warring governments to keep their pledges, and so they went "off the gold standard," i.e., declared their own bankruptcy, shortly after entering the war. All except the United States, which entered the war late, and did not inflate the supply of dollars enough to endanger redeemability. But, apart from the U.S., the world suffered what some economists now hail as the Nirvana of freely-fluctuating exchange rates (now called "dirty floats") competitive devaluations, warring currency blocks, exchange controls, tariffs and quotas, and the breakdown of international trade and investment. The inflated pounds, francs, marks, etc., depreciated in relation to gold and the dollar; monetary chaos abounded throughout the world.
---Murry Rothbard
More Rothbard:
It must be emphasized that gold was not selected arbitrarily by governments to be the monetary standard. Gold had developed for many centuries on the free market as the best money; as the commodity providing the most stable and desirable monetary medium. Above all, the supply and provision of gold was subject only to market forces, and not to the arbitrary printing press of the government.
The international gold standard provided an automatic market mechanism for checking the inflationary potential of government. It also provides an automatic mechanism for keeping the balance of payments of each country in equilibrium. As the philosopher and economist David Hume pointed out in the mid-eighteenth century, if one nation, say France, inflates its supply of paper francs, its prices rise; the increasing incomes in paper francs stimulates imports from abroad, which are also spurred by the fact that prices of imports are now relatively cheaper than prices at home. At the same time, the higher prices at home discourage exports abroad; the result is a deficit in the balance of payments, which must be paid for by foreign countries cashing in francs for gold. The gold outflow means that France must eventually contract its inflated paper francs in order to prevent a loss of all of its gold. If the inflation has taken the form of bank deposits, then the French banks have to contract their loans and deposits in order to avoid bankruptcy as foreigners call upon the French banks to redeem their deposits in gold. The contraction lowers prices at home, and generates an export surplus, thereby reversing the gold outflow, until the price levels are equalized in France and in other countries as well.
It is true that the interventions of governments previous to the nineteenth century weakened the speed of this market mechanism, and allowed for a business cycle of inflation and recession within this gold standard framework. These interventions were particularly: the governments' monopolizing of the mint, legal tender laws, the creation of paper money, and the development of inflationary banking propelled by each of the governments. But while these interventions slowed the adjustments of the market, these adjustments were still in ultimate control of the situation. So while the classical gold standard of the nineteenth century was not perfect, and allowed for relatively minor booms and busts, it still provided us with by far the best monetary order the world has ever known, an order which worked, which kept business cycles from getting out of hand, and which enabled the development of free international trade, exchange, and investment.
In summation: How you can believe that government-backed fiat money is superior to something which has historical value is beyond me. The problem is government’s central planning compared to the free market. Your Ibonds are based on Big Brother’s guarantee that they will pay you a certain percentage to give your money to the government. All you get is a promise form the government backed by its power to tax. The fact that your quotes are from the Fed website shows your bias.
Also, please get someone to proofread your stuff before you post it as much of it makes no sense.
And by its power to print, and by its power to destroy.
Altogether, a very nice foundation for a free and prosperous society. NOT!!
That doesn't seem to make any sense. Why would banks want to water down the value of the dollar? Don't banks pool lots of short-term deposits to make larger, long-term loans? If the dollars decline in value while they're out on loan, the banks get screwed. I would think banks would be strongly opposed to inflation.
It sounds like you're trying to discredit the gold argument by saying that the transition won't be easy. I don't think too many people are arguing that it would. But the first question to ask is what's the most desirable system in and of itself. Then we can worry about how to get there.
Errr... heads, I was referring to you as the anarchist. But I meant it in the nicest possible way. :-)
You need to catch up on your Sowell. Conservatives are always the conventional ones. We're the safety locks of society.
Surely with a gold standard we'd have the environmental lobby marching on Washington protesting against the "rape" of the ANWR by gold miners. It would be like going on a monetary "Oil Standard," with new Saudi Arabias or Iraqs able to do to our entire economy what they're presently trying to do to do to only one segment.
What the heck are people here thinking?
I dunno, they go to these web sites and they read this stuff, and they think they've found the Secret Poop that explains how big shots control ze vorld. They can't explain what goes on otherwise, so they figure somebody really smart and well hidden must be planning it all.
Where most people turn to religion for the answer to Who that might be, others are more comfortable making up gnomes in Zurich or secret societies of fabulously wealthy Europeans. It's a measure of how old these tales are that the 'perps' are always European Old Money. Never mind that the richest people now are in the U.S. and in Asia.
If you dive into that stuff, you start running into some really weird material : foreign Jews own the Federal Reserve, Kennedy was killed because he was going to introduce a new currency backed by silver, all kinds of crap. It's sort of like the Holocaust Denial sites in that there are all these outlandish statements made, solidly backed up with "quotations" and "references." If you don't know any history, and you don't know any economics, I suppose the stuff might sound believeable.
In fact the stuff goes out of its way to target people who know zero about economics. They go on at some length to "prove" that the Federal Reserve is a private entity instead of a government agency, as though they expect their readership to need convincing of that. I sat through this video one time and laughed out loud while this guy zoomed in on pages in the phone book, showing that "Federal Reserve" was in the business section alongside "Federal Express," like this was some big revelation.
Hey, if somebody doesn't already know that, they are already in over their head and they probably shouldn't be reading or expounding on the subject of macroeconomics. They need to start farther back, with something like Thomas Sowell's Basic Economics. Just that book alone would vaccinate most people against this Art Bell stuff that's out there.
I understand that there are economic incentives for people to hype gold. But I cannot figure out what motivates people to write this other crap. The only thing I can figure is that the authors of these books and web sites are socialist ideologists, and they are out attacking the idea of private banks and non-government entities controlling the money supply... dressing themselves up as 'patriots' as a way to peddle government ownership of the means of production. I guess if you're already economically illiterate, you won't know Socialism when you see it either, so you could even fall for that... and not know you had.
What you are essentially telling us is that we should abandon a free market in currencies, and instead fix the prices by fiat.
Strawman. Non sequitur. I believe that a yard should be fixed/defined as three feet. Would you describe that as my saying that I do not favor a free market in distances, and instead want to fix the relationship by fiat.
[Russia and South Africa] have enough gold in the ground to jack the price around all they want.
Above ground “we” have 25% of the world supply; Russia has 1%; South Africa a fraction of 1%. But what does this matter? By what reasoning do you conclude that defining a currency honestly as representing a specific quantity of a commodity puts an economy at the mercy of another country that has a below ground supply of that commodity?
You want Vladimir Putin setting the rate at which our economy can expand? (I know you don't believe you're doing that by pegging currencies to gold, but again, that's only because you don't understand how any of this really works).
Would you explain how it works?
You pretend that gold just "is," and there isn't anybody mucking around with its supply.
No such pretension is required for my desire for honest money.
Plus you'd take the currency-trading market out of the system, which is what keeps the current system honest.
Honest money does not require a currency trading market. In fact, the mere existence of a currency trading market is prima facie proof that the money isn’t honest.
Pick any one of these topics so we can have an intellectual discussion about it.
Yes, he had to confiscate our money in order to protect our money.
LOL
What cost $1 in 1933 would cost $12.49 in 2001. Equivalently, if you were to buy exactly the same products in 2001 and 1933, they would cost you $1 and $0.08 respectively.
Oh that FDR, wasn't he a sly one?
I cannot discuss these issues at length with impertinent illiterates without becoming too acerbic in my replies.
It's hard to grasp the level of cognitive dissonance necessary to believe that FDR saved capitalism from itself by abandoning legal money and imposing Gubmint fiat paper on every American.
Of course, the 'New Deal' was simply the U.S. manifestation of the world-wide infatuation with 'socialism', 'progress', and 'modernism', in the post-WWI era.
Those very words seem mildewed and dusty now, like tracts from the '30s found in your basement. The 2nd and 3rd rate minds staffing our schools and colleges, however, cherish these worm-eaten doctrines as signs of intellectual/ethical grace. If one does not believe in the merits of 'socialism' one is simply too barbaric to break intellectual bread with; you must be either a fascist or a crank or both to question the intellectual and moral authority of the current elites. Call this phenomena a regression to the historical mean-- the grim acceptance of an ordered society, with a place for everyone and everyone in his place.
The market??? EEEEWWWW!!! Who wants THAT grubby thing??? That's the societal norm today.
Reform may be impossible; it's likely that the financial system must suffer an earthquake before people are willing to become rational. Nothing new there.
The attempted smearing of 'goldbugs' by association with tinfoilers and other paranoid headcases is beneath comment.
I'm certain that a century from now, the criminal antics of today's financial actors and the rube-like gullibility of the investing public will be viewed with the sort of slack-jawed amazement with which we see the authors and victims of John Law's schemes, or tulip-speculators, or of course South-Seas Company investors.
Any lurkers out there reading this thread should take one lesson to heart: there is NO certainty in the market for financial assets-- no certainty, that is, except volatility.
Diversify, diversify, diversify...oh yeah, and sell too early. ;^)
Mr. Carroll's arguments are very easily disposed of when one compares fiat paper money. Certainly a gold-standard currency has its problems, but those problems are orders of magnitude worse with a currency not backed by anything. Nearly every argument he makes can be made more harshly upon a fiat/floating currency.
A true gold standard is really a barter system, wherein people trade goods (gold) for other goods & services. If, in the worst case, there is a run on the banks, everyone actually has something: the gold represented by the gold-backed currency. Sure, one may not find a pile of gold particularly useful, but it is infinitely more useful than an ATM card and a "We're sorry, but your banking institution is permanently closed" screen.
Gold is used for currency because it is relatively (but not exceptionally) rare, compact, easily purified, attractive, and generally convenient in relation to currency needs. Silver and platinum are similar, but less suitable due to greater or lesser availability in relation to the desired convenience. The main idea is that the monetary system is actually bartering, instead of a truly abstract representation of wealth. A barter-backed currency could be based on other goods, but gold is by far more convenient; we could have a pastrami-sandwich-backed currency, but storage & durability proves problematic. A floating/fiat currency represents nothing, it is merely an IOU.
Economic problems begin when the gov't starts cheating by handing out more reserve notes than there is gold to back it, meaning that some people are actually holding reserve notes for nothing - a problem exacerbated ultimately when the currency officially represents nothing; a run on banks means people discover they actually own nothing except an "IOU" useful only in scamming the next person into accepting it.
The only good a floating/fiat currency has is, perversely, economic stimulation: it's in everyone's best interests to pass on the IOU notes as quickly as possible in exchange for other goods/services, so that when the music stops they are not stuck with nothing more than a piece of paper (or, more accurately nowdays, a few bits in someone else's computer).
Sure, gold standards have problems - problems which mostly rise from the abuse thereof: handing out reserve notes with nothing backing them, punishing people for owning & marking gold, etc. But fiat currencies are wholly built upon exactly these problems.
I'd like to see an explaination of what's so great about fiat currencies without resorting to gold-bashing.
I have to confess that the only formal economics course I ever took was "Finance and Investments" with Mr. Fitzsimmons in high school - 1973. Half the year was spent on banking and the Federal Reserve, the other half was spent studying the stock market - we went on field trips to the Fed and the stock exchange in Philly, opened brokerage accounts, kept up with current events. I was on a college track headed for a business degree until I took my science elective in the physics electronics lab and realized that was the way I wanted to go. Despite the school counselors who told me to 'fuggetaboudit', Mr. Fitzsimmons steered me around all of the bureaucratic crap that colleges use to discourage kids from doing what they love instead of what the test scores say. It took me an extra year of catching up on the math, but I have Mr. Fitzsimmons to thank today for my being a disgruntled EE instead of a disgruntled accountant.
We did have the necessary amount of precious metals before Clinton and company sold off a large part of the Gold reserve to pay down the National Debt to make their numbers look good in the Media!
The current system of "Fiat Currency" is a house of cards! FACT: Fiat Currency is worthless. When the next wave of Terrorist attacks happens watch how it effects our economy that is built on worthless currency.
Whenever the money supply grows relative to goods available prices will go up. Part of the reason you don’t see much cpi inflation is that we have (until relatively recently) experienced asset inflation instead (stocks, real estate, etc.). Secondly, our large trade deficit actually exports our inflation by simultaneously increasing the amount of goods and reducing the amount of dollars, domestically. What you are probably concerned about are all those dollars being exported. If and when they come home to roost the scenario you fear will come to pass and we will all have to run for cover.
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