2011 – The year when money starts to die

http://www.financeandeconomics.org/ ^ | Alasdair Macleod

[dollarbull]

Between 1716 and 1720, John Law tried to rescue the French government from bankruptcy with a scheme that came to be called “The Mississippi Bubble”. His strategy was to set up two entities: a bank whose purpose was to issue paper money, and a company whose primary but undeclared function was to refinance government debt. Law realised that he had to confiscate all gold and silver other than smaller quantities, and force French citizens to pay their taxes and buy shares in the Mississippi Company, only with the bank’s newly issued notes. These were the three essential elements of his scheme.[i]

This is precisely what central banks in the US, Europe, Japan and the UK are doing today. They are rigging the markets by buying government debt at artificially high prices with freshly created paper money, having previously excluded gold and silver from any role as legal tender. The following quote from John Law, could equally be attributed to a central banker of today: “An abundance of money which would lower the interest rate to two per cent would, in reducing the financing costs of the debts and public offices etc. relieve the King.” This is quantitative easing, pure and simple, and John Law had fully anticipated modern central banking. Law’s scheme ended in disaster and as a precedent for today’s central banking this should worry us greatly.

[dollarbull]

Kansas City Fed Gov out today saying gold standard is "legitimate".

Paperbugs getting nervous?

[wendy1946]

Again the problem... the value of gold is entirely based on psychology and psychiatry and not on economics and physics. The danger is that the world could wake up to that reality.

A detailed statement of the problems resides here.

[dollarbull]

The value of the fiat dollar is what is based on psychology.

Gold has a 5000+ year history of being valuable. You cannot reconcile that with your beliefs...cognitive dissonance if I’ve ever seen it.

[BooBoo1000]

There has never been a time when Gold was worth nothing.

[dollarbull]

There has never been a time when Gold was worth nothing.

Correct. And paper money becomes worthless EVERY time.

Wendy doesn't get it

[Frantzie]

Martin Armstrong has written some great things lately. He was held in prison on contempt of court in one of the weirdest cases in history.

http://www.martinarmstrong.org/economic_projections.htm

He said govts have been defaulting on debt for over 2,000 years. The American public is so manipulated by the media especially TV - ALL of TV is garbage including Fox. CNBC is the worst. I am so glad I dumped TV over a year ago.

If you want to learn something more about this:

http://www.youtube.com/watch?v=WKTQze2UKWc

[fr_freak]

There has never been a time when Gold was worth nothing.

There's always a first time. For example, if you and one other guy were stuck on a desert island with two loaves of bread, would you sell your loaf to him for all of his gold? I doubt it. If we experience financial collapse in this country, which would most likely also mean financial collapse of the world, what will gold truly be worth? Or would barter be better?

[Secret Agent Man]

People will barter (trade). They will trade whatever they have for whatever they need.

[dollarbull]

If we experience financial collapse in this country, which would most likely also mean financial collapse of the world, what will gold truly be worth? Or would barter be better?

There have been literally 100s of financial collapses in history. Gold always holds its value and paper money always fails.

OTOH, no one has ever been trapped on a deserted island with gold, bread and a stranger.

To each his own...but those that know their history can see what's coming.

[Skepolitic]

Wendy is absolutely correct: “the value of gold is entirely based on psychology”.

Federal Reserve Notes are much, much more secure than gold because they are backed by US Treasury securities, which are in turn backed by the full faith and credit of the US government. Well, they used to be ... now there are bunch of junk mortgages backing US dollars, but there are still a whole lot of US Treasury securities on the Fed’s balance sheet.

So the question is, which do you put your faith in, gold or the US government?

[Erasmus]

Of course. The value of every economic thing is "based on psychology."

[arthurus]

Again the problem... the value of gold is entirely based on psychology and psychiatry and not on economics and physics. The danger is that the world could wake up to that reality.

Dream on. You can stick with Keynes and the Experts in Washington. A Psychological aberration that has persisted universally for in excess of 5 millennias is probably at least as reliable as the wonderfully rational fiat money of the government experts for so long as there have been governments and has been very reliably debased to the destruction of systems and empires over and over again for almost that same period of time.

[arthurus]

Again the problem... the value of gold is entirely based on psychology and psychiatry and not on economics and physics. The danger is that the world could wake up to that reality.

Dream on. You can stick with Keynes and the Experts in Washington. A Psychological aberration that has persisted universally for in excess of 5 millennia is probably at least as reliable as the wonderfully rational fiat money of the government experts for so long as there have been governments and has been very reliably debased to the destruction of systems and empires over and over again for almost that same period of time.

[fr_freak]

OTOH, no one has ever been trapped on a deserted island with gold, bread and a stranger.

Really? You're absolutely sure about that? Well, let me tell you a story, then. It all began with a 3 hour tour...

[superloser]

Only Government can take something as useful as paper and make it worthless by adding ink to it.

Unless you think this "can never happen here" that is:

[Antonello]

People will barter (trade). They will trade whatever they have for whatever they need.

What happens if the person that has what you need doesn't need what you have?

[dollarbull]

What happens if the person that has what you need doesn't need what you have?

that is the purpose of money. that is what defines money. it is the good that has the most utility in barter. that's why gold and silver are money, will always be money.

[Jet Jaguar]

Goldbug ping.

[TruthConquers]

Here is a fun animation of the housing crash mixed in with a very quick history of money.

It is pretty funny. Bit of Back to the Future, Twilight Zone, and ends with a nod to 300, only 29 minutes long.

The American Dream
http://www.youtube.com/watch?v=Kv2oCXbW4r0&feature=player_embedded

[Antonello]

that is the purpose of money. that is what defines money. it is the good that has the most utility in barter. that's why gold and silver are money, will always be money.

Does that not then simply make gold and silver a symbolic measure of the total production of an economy? If that is the case and the total amount of precious metal reserves set aside for currency remains fixed, would a prosperous, growing economy strengthen or weaken the buying power of a gold-backed unit of money?