Skip to comments.2011 – The year when money starts to die
Posted on 01/05/2011 9:54:25 PM PST by 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 banks 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. Laws scheme ended in disaster and as a precedent for todays central banking this should worry us greatly.
(Excerpt) Read more at financeandeconomics.org ...
The one other thing gold would be really good for would be waterfowl shot. Half again denser than lead, soft, and totally inert, it would be the perfect metal for killing ducks and geese with. You could kill geese all day long with 2.75" shells and #7 shot.
You said again and are wrong again. For a little help in correcting that condition I would counsel to buy and read “The Power of Gold: The History of an Obsession “
It can be obtained used for as little as $.55. It is very interesting history and provides detailed background on previous debacles that are caused by theories and rulers who try to or are forced to break the rules.
You will learn what has transpired throughout human history as gold repeatedly salvaged lost economies. Now is no different, only the circumstances of how the problem was created.
Gold is a store of wealth (the labor needed to mine, refine, smelt) and not a consumable, but not necessarily the best basis for trade (portability and availability), which is what currency must also be. So we have our dollar, which is based on the future labor of the nation (also called debt, but that really isn't a true representation). Works pretty well.
...Goldbugs argue that there will always be enough gold in a gold-based money system to go around, because prices will naturally adjust downward so that supply matches demand.7 But this fundamental principle of the quantity theory of money has not worked well in practice. The drawbacks of limiting the medium of exchange to precious metals were obvious as soon as the Founding Fathers decided on a precious metal standard at the Constitutional Convention, when the money supply contracted so sharply that farmers rioted in the streets in Shays Rebellion. When the money supply contracted during the Great Depression, a vicious deflatio-nary spiral was initiated. Insufficient money to pay workers led to demand falling off, which led to more goods remaining unsold, which caused even more workers to get laid off. Fruit was left to rot in the fields, because it wasnt economical to pick it and sell it....
Those kinds of contractions and destructions always occurred in cycles so long as money was based on gold. At some point too much gold or gold-based money would be lent out and bankers would call it all in again, collapsing the system as they did so. That speech of W. J. Bryant's was on the money; the gold standard was creating havoc in the late 1800s, and it would work a lot worse now.
Gold is reality. Deal with it.
...Goldbugs argue that there will always be enough gold in a gold-based money system to go around
I've not heard that argument made. Can you give me some names and dates? Thanks.
The drawbacks of limiting the medium of exchange to precious metals were obvious as soon as the Founding Fathers decided on a precious metal standard at the Constitutional Convention,
Go dig up what George Washington had to say about paper money after the Revolution. You obviously haven't.
When the money supply contracted during the Great Depression,
Except that's not what happened during the GR. Go do some of your own research.
Ben Franklin was called the father of paper money. Colonists, particularly in Pennsylvania, had created a super economy using script money and then George II crashed that economy into depression by banning script money. Or did you actually think anybody was going to fight a war over tea or some tax on tea??
Looks like you got a lot of response to you post, but you haven’t answered your critics
Do some research, honey. All that paper money was backed by gold in banks.
Or did you actually think anybody was going to fight a war over tea or some tax on tea??
Whoever taught you History belongs in a prison cell for fraud.
Again the problem... the value of gold is entirely based on psychology and psychiatry and not on economics and physics.
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?
But I’ll remember not to invest in gold as a way to survive shipwrecks, thanks.
Throughout recorded history, people liked to wear the pretty, rare, yellow metal.
More than one thing could happen. The one guy could barter with someone else for soemthing he could trade to the other guy that he does need, just as one example.
Indeed. As long as you have electricity, gold, silver, copper, and aluminum will all be worth more than zero.
Throughout recorded history, people liked to wear the pretty, rare, yellow metal. The psychology involved is the psychology involved with making jewelry out of it. If people didnt find gold pretty anymore, that would effect the price of gold.
Jim Sinclair writes:
Good money must have a number of unique characteristics.
(1) It must be durable, which is why we dont use wheat or corn.
(2) It must be divisible, which is why we dont use a Picasso painting or jade statues.
(3) It must be convenient, which is why we dont use lead or copper or real estate.
(4) It must have value in itself, which is why we dont use paper.
(5) It must be transportable, which means that large values must be contained in a small area (a gold coin weighing only one ounce can be worth far more than fifteen hundred dollars).
(6) It must have a long history of being accepted as a store of value. Gold was considered valuable as long as 5,000 years ago in the age of the Egyptians.
(7) It cannot “disappear” or be used up in manufacturing as is copper and even silver. Thus, the gold coin that you have in your hand may have been part of Cleopatras earrings centuries ago. Almost all the gold that has ever been discovered is still available in one form or another.
(8) It must not be the liability of any sovereign nation, nor should it require governmental law to make it money. For instance Gold requires capital, talent, risk, sweat and courage to recover or to accumulate.
I mean “effect” as in “cause and effect”.
cause - people don’t think gold is pretty any more. people don’t want to make jewelry out of it.
effect - the price of gold falls.
I was very surprised to see my comment replied to so many times.
I’m pro gold.
I think that all I was trying to say is that
1) people have always wanted it.
2) basically, it’s pretty.
People were arguing that people have liked gold forever but for no reason.
I was simply arguing that people have ALWAYS found it pretty.
My comment is a discussion of “(4) It must have value in itself, which is why we dont use paper.”
It has value in itself, because people like to make jewelry out of it.
And a discussion of (6) - people have been making jewelry out of gold for at least 5,000 years.
I don’t think that people like gold today as money because slightly more expensive RCA connectors have a thin layer of gold on them.
I like Ron Paul and am with Ron Paul on this one.
I think people are reponding to my use of the word “pretty”. I don’t mean that as a bad thing, to diminish it.
I suppose that people could argue that gold isn’t pretty, gold is only believed to be pretty. I’m not saying that.
I’m saying that gold IS pretty. 5,000 years of people wanting to make jewelry out of it. The prettiness is in the gold, not in the brains of the specific individuals who agree with everyone else that gold is pretty. Gold IS good for jewelry. Now and 5,000 years ago.
cause - people dont think gold is pretty any more. people dont want to make jewelry out of it.
effect - the price of gold falls.