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2011 The year when money starts to die
http://www.financeandeconomics.org/ ^ | Alasdair Macleod

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 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.

(Excerpt) Read more at financeandeconomics.org ...


TOPICS: Business/Economy
KEYWORDS: gold; goldbugs; hardmoneydelusions; hyperinflation; sourcetitlenoturl
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To: bert
I'll say it again. Gold is basically worthless and today's market for it is a classic bubble, and anybody buying it at these prices is an idiot. The only two uses there are for the stuff is for electrical connectors and jewelry; the amount of the stuff stashed at Knox alone has to be millions of times what the planet will ever need for connectors and bracelets and there are much cheaper metals to make connectors and bracelets out of.

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.

41 posted on 01/06/2011 5:26:02 AM PST by wendy1946
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To: wendy1946

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 “

http://www.amazon.com/Power-Gold-History-Obsession/dp/0471252107

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.


42 posted on 01/06/2011 5:45:05 AM PST by bert (K.E. N.P. N.C. D.E. +12 .....( History is a process, not an event ))
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To: wendy1946
Basing a monetary system on consumables (which is what goods and services are) is a recipe for disaster. Your washing machine is not a store of wealth, nor is your visit to the doctor.

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.

43 posted on 01/06/2011 6:03:37 AM PST by ex 98C MI Dude (Alea Iacta Est)
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To: bert
as gold repeatedly salvaged lost economies.

Gold and gold standards have repeatedly destroyed economies.

...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 Shay’s 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 wasn’t 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.

44 posted on 01/06/2011 6:14:44 AM PST by wendy1946
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To: wendy1946
Money has to be based on something connected to reality

Gold is reality. Deal with it.

45 posted on 01/06/2011 6:18:58 AM PST by Lurker (The avalanche has begun. The pebbles no longer have a vote.)
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To: wendy1946
You do realize you're quoting a Democrat don't you?

...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.

L

46 posted on 01/06/2011 6:23:10 AM PST by Lurker (The avalanche has begun. The pebbles no longer have a vote.)
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To: Lurker

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??


47 posted on 01/06/2011 6:44:07 AM PST by wendy1946
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To: wendy1946

Looks like you got a lot of response to you post, but you haven’t answered your critics


48 posted on 01/06/2011 6:52:17 AM PST by dollarbull (why are paperbugs so bad at history?)
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To: Antonello

not necessarily


49 posted on 01/06/2011 6:53:26 AM PST by dollarbull (why are paperbugs so bad at history?)
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To: wendy1946
Ben Franklin was called the father of paper money.

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.

L

50 posted on 01/06/2011 6:55:28 AM PST by Lurker (The avalanche has begun. The pebbles no longer have a vote.)
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To: wendy1946

Again the problem... the value of gold is entirely based on psychology and psychiatry and not on economics and physics.


Can you reveal a currency, coin, monetary instrument, or other practical medium of exchange for which that is not true?


51 posted on 01/06/2011 7:55:09 AM PST by Atlas Sneezed ("If you touch my junk, I'm gonna have you arrested.")
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To: fr_freak

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?


Absurd hypotheticals lead you to absurd conclusions.

But I’ll remember not to invest in gold as a way to survive shipwrecks, thanks.


52 posted on 01/06/2011 7:56:59 AM PST by Atlas Sneezed ("If you touch my junk, I'm gonna have you arrested.")
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To: truthfreedom

Throughout recorded history, people liked to wear the pretty, rare, yellow metal.


To put it more bluntly, throughout history, one has had little trouble finding a beautiful woman who will admit a man bearing gold to her inner sanctum.


53 posted on 01/06/2011 8:05:51 AM PST by Atlas Sneezed ("If you touch my junk, I'm gonna have you arrested.")
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To: dollarbull
Bookmark!
54 posted on 01/06/2011 9:13:44 AM PST by ExSoldier (Life without God is like an unsharpened pencil: It has no point.)
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To: Antonello

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.


55 posted on 01/06/2011 9:18:33 AM PST by Secret Agent Man (I'd like to tell you, but then I'd have to kill you.)
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To: NTHockey

Indeed. As long as you have electricity, gold, silver, copper, and aluminum will all be worth more than zero.


56 posted on 01/06/2011 9:28:03 AM PST by RinaseaofDs (Does beheading qualify as 'breaking my back', in the Jeffersonian sense of the expression?)
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To: truthfreedom

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 didn’t find gold pretty anymore, that would effect the price of gold.


There’s much more to gold than “pretty.”

Jim Sinclair writes:
Good money must have a number of unique characteristics.

(1) It must be durable, which is why we don’t use wheat or corn.

(2) It must be divisible, which is why we don’t use a Picasso painting or jade statues.

(3) It must be convenient, which is why we don’t use lead or copper or real estate.

(4) It must have value in itself, which is why we don’t 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 Cleopatra’s 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.


57 posted on 01/06/2011 9:38:10 AM PST by Atlas Sneezed ("If you touch my junk, I'm gonna have you arrested.")
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To: arthurus

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.


58 posted on 01/06/2011 11:23:43 AM PST by truthfreedom
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To: Beelzebubba

I’m pro gold.

I think that all I was trying to say is that

1) people have always wanted it.

because

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 don’t 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.


59 posted on 01/06/2011 11:50:06 AM PST by truthfreedom
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To: truthfreedom

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.


That sounds much like Yogi Berra’s: “Nobody goes there any more, it’s too crowded.”


60 posted on 01/06/2011 11:59:48 AM PST by Atlas Sneezed ("If you touch my junk, I'm gonna have you arrested.")
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