A fragment of sanity from the gold loonies

feargach

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Gold activists are generally, for the most part, either certifiably insane or insincere whilst profiting from preaching to the former.

But not all of their arguments are free of truth. It is true that all paper money is "fiat money", imposed by fear of harsh punishment by national states.

What the goldbugs fail to recognise is that this fiat imposition is, in normal circumstances, accepted and supported by the citizen as part of a social contract. With few exceptions, people like paper money, and prefer not to go back to using coins valued as to their gold or silver content.

The gold bugs are correct when they say that paper money tends towards creating some inflation. This is true. They start lying, of course, when they pretend that hyperinflation is the natural result.

In economic terms, inflation below 5% and above 3% is the ideal. In the decade leading up to the Lehman's debacle, low inflation was the culprit for the current mess. People stopped having any need to invest in productive activity of any kind. This was also the problem in the robber baron era of the US, where the low-inflation wealth of the US ruling class led to mass poverty and eventually led the Republicans to champion the Fed.

The EU is now living its own robber baron era, with Merkel as the robber chieftain. The wealthy need only to hoard their fortunes to preserve them. They don't need to create any employment or develop any new real-world assets to prevent inflation from eating it away. The Frenchmen who will be forced to delay their retirements by two years were born into a nation where 2% unemployment was the norm. At a time, of course, when inflation was much higher.

Ultimately, the roots of this go deeply into human nature. People are only interested in making productive use of their resources when they see real visible signs of inflation. When visible inflation dies away, people withdraw their resources from productive use.

The social contract is being violated. We are legally forced, literally at gunpoint (in those states where the police are routinely armed) to accept paper as payment. But faceless, corrupt institutions called banks have a monopoly on the production of this means of exchange.

Worse, governments are manipulating the paper to try to ensure that it doesn't even provide the socially-useful, employment-boosting purpose of causing general inflation. There is now no benefit for Joe Average to be using paper instead of precious metal coins. At least coins are not inherently a monopoly. The early USA was perfectly happy with using French, Mexican, Spanish, Dutch and British coinage with total disregard for what the policies of those nations happened to be. All they cared about was the relative gold and silver content.

If European workers must be forced to live in a world where politicians struggle to manipulate inflation out of existence, they should demand the right to trade in whatever coins or specie takes their fancy. The social contract demands that a state monopoly in money must be beneficial to the worker. It no longer is, so that monopoly cannot be justified.
 


Cassandra Syndrome

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We live in a world of scarce recourses

1. Physical Materials are scarce and finite such as the food we eat and the energy sources we need to keep warm and the materials in our houses that we need to shelter

2. Time of one's life is scarce and finite

Rather than bartering for the above, money acts as a medium of exchange of goods and services. And these goods and services are scarce, money has to have relative scarcity and universially acceptable.

Gold and silver has been used for the best part of 6,500 years to serve this purpose. If there is any other commodity that works and serves this purpose than thats great, lets try it.

But, fiat currency via printing presses is NOT the source of REAL money as it will only create hyperinflation and debt ad infinitum in the long term. Thats what is happening now.

Until we invent the replicators that they use on Star Trek, we have to have sound money backed by relative scarcity.

Please tell us how this post is certificately insane, seeing that you are the one that uses wife beating and sexual deviant terminology in your rants.
 

captainwillard

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Mar 2, 2010
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Gold activists are generally, for the most part, either certifiably insane or insincere whilst profiting from preaching to the former.

But not all of their arguments are free of truth. It is true that all paper money is "fiat money", imposed by fear of harsh punishment by national states.

What the goldbugs fail to recognise is that this fiat imposition is, in normal circumstances, accepted and supported by the citizen as part of a social contract. With few exceptions, people like paper money, and prefer not to go back to using coins valued as to their gold or silver content.

The gold bugs are correct when they say that paper money tends towards creating some inflation. This is true. They start lying, of course, when they pretend that hyperinflation is the natural result.

In economic terms, inflation below 5% and above 3% is the ideal. In the decade leading up to the Lehman's debacle, low inflation was the culprit for the current mess. People stopped having any need to invest in productive activity of any kind. This was also the problem in the robber baron era of the US, where the low-inflation wealth of the US ruling class led to mass poverty and eventually led the Republicans to champion the Fed.

The EU is now living its own robber baron era, with Merkel as the robber chieftain. The wealthy need only to hoard their fortunes to preserve them. They don't need to create any employment or develop any new real-world assets to prevent inflation from eating it away. The Frenchmen who will be forced to delay their retirements by two years were born into a nation where 2% unemployment was the norm. At a time, of course, when inflation was much higher.

Ultimately, the roots of this go deeply into human nature. People are only interested in making productive use of their resources when they see real visible signs of inflation. When visible inflation dies away, people withdraw their resources from productive use.

The social contract is being violated. We are legally forced, literally at gunpoint (in those states where the police are routinely armed) to accept paper as payment. But faceless, corrupt institutions called banks have a monopoly on the production of this means of exchange.

Worse, governments are manipulating the paper to try to ensure that it doesn't even provide the socially-useful, employment-boosting purpose of causing general inflation. There is now no benefit for Joe Average to be using paper instead of precious metal coins. At least coins are not inherently a monopoly. The early USA was perfectly happy with using French, Mexican, Spanish, Dutch and British coinage with total disregard for what the policies of those nations happened to be. All they cared about was the relative gold and silver content.

If European workers must be forced to live in a world where politicians struggle to manipulate inflation out of existence, they should demand the right to trade in whatever coins or specie takes their fancy. The social contract demands that a state monopoly in money must be beneficial to the worker. It no longer is, so that monopoly cannot be justified.

What are you doing here?I thought you were busy saving the Irish language.
 

feargach

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Rather than bartering for the above, money acts as a medium of exchange of goods and services. And these goods and services are scarce, money has to have relative scarcity and universially acceptable.

Gold and silver has been used for the best part of 6,500 years to serve this purpose. If there is any other commodity that works and serves this purpose than thats great, lets try it.
Such a commodity exists: it's called a fiat money system run in such a way that inflation is significant but not so high as to allow for hyperinflation. All developed nations have had such a system. It has only led to one case of hyperinflation in a developed nation in the last 100 years. In every other nation with the bare-minimum amount of oversight and good stewardship, hyperinflation hasn't occurred. Hyperinflation is (Weimar Germany being the sol exception) entirely a third-world phenomenon almost always taking place during or shortly after mismanagement by a military dictatorship.

Run tolerably well, fiat money is vastly superior to a coin-based economy. The problem at the moment is that it is not run well, therefore it is appropriate for people to demand the right to have the fiat monopoly lifted. The far better solution would be for the fiat money system to be made run properly so the requisite amount of inflation returns.

But, fiat currency via printing presses is NOT the source of REAL money as it will only create hyperinflation and debt ad infinitum in the long term. Thats what is happening now.

Until we invent the replicators that they use on Star Trek, we have to have sound money backed by relative scarcity.

Please tell us how this post is certificately insane, seeing that you are the one that uses wife beating and sexual deviant terminology in your rants.
No money is real. Gold cannot be eaten, and although it might be possible to make clothes or bicycles from it, that's not very efficient. All money is illusory. The point is to make the illusion useful, as a motivating force to get people to do and make useful things.
 

pragmaticapproach

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Jul 21, 2010
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We live in a world of scarce recourses

But, fiat currency via printing presses is NOT the source of REAL money as it will only create hyperinflation and debt ad infinitum in the long term. Thats what is happening now.
Yes, but Inflation and expanding debt are characteristics of the gold standard also. For instance, if an economy with a 100% gold standard where to exist, Debt would still need to be serviced, since money, backed by gold or otherwise is lent out at interest, of course recessionary cycles would correct this, since an increased demand for gold would lead to an increase in interest rates and the deflationary effect that would follow.

The main problem with fiat money is that its supply can be expanded continually, but this is only a problem when central banks decide to expand the money supply beyond their growth targets. let recessions happen when they need to when prices rise beyond growth targets, by letting interest rates fluctuate to reflect this.

A more transparant banking system with growth targets set by parameters other than the whims of bureaucrats is whats needed. A gold standard isnt feasible, especially since all the main economies dont have a GS. The fluctuations of gold against all the major currencies would wreak havoc with our economy.
 

derm0t

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This animated short does a very nice job of explaining the structural problems with the financial system:

Money As Debt

We live in a world of scarce recourses

1. Physical Materials are scarce and finite such as the food we eat and the energy sources we need to keep warm and the materials in our houses that we need to shelter
Scarce, and getting scarcer:

Richard Heinberg, "The End of Growth":

The End Of Growth By Richard Heinberg

The central assertion of this book is both simple and startling: Economic growth as we have known it is over and done with.

The “growth” we are talking about consists of the expansion of the overall size of the economy (with more people being served and more money changing hands) and of the quantities of energy and material goods flowing through it.

The economic crisis that began in 2007-2008 was both foreseeable and inevitable, and it marks a permanent, fundamental break from past decades—a period during which most economists adopted the unrealistic view that perpetual economic growth is necessary and also possible to achieve. There are now fundamental barriers to ongoing economic expansion, and the world is colliding with those barriers.

This is not to say the U.S. or the world as a whole will never see another quarter or year of growth relative to the previous quarter or year. However, when the bumps are averaged out, the general trend-line of the economy (measured in terms of production and consumption of real goods) will be level or downward rather than upward from now on.

Nor will it be impossible for any region, nation, or business to continue growing for a while. Some will. In the final analysis, however, this growth will have been achieved at the expense of other regions, nations, or businesses. From now on, only relative growth is possible: the global economy is playing a zero-sum game, with an ever-shrinking pot to be divided among the winners.
Most of the world's money exists as debt - it requires constant growth/expansion, or it collapses. At the average historical growth rate of ~2-3%, an economy will double about every 25 - 30 years...along with demand for resources, energy, etc.

This is not in any way sustainable...regardless of whether the economy is based on gold, fiat currency or cowrie shells.

There were about 12 major bank panics in the 19th century. The Gold/silver standard by itself did nothing to prevent them:

Panic of 1873 - Wikipedia, the free encyclopedia

If anything, the move to fiat has produced (for now) greater stability than in the 19th century. Will this last? We'll soon find out.

Given the probable decline in oil and natural gas, the physical energy source that underpins the economic growth (energy being "THE ABILITY TO DO WORK") will be in ever-shorter supply. How can you double your growth based economy without cheap energy to support physical activity?

All that said, on a personal level, it never hurts to have a few ounces of shiny yellow tucked away.

Enough to bribe a border official.
 

feargach

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The least-sane thing you said was failing to allow for the fact that hyperinflation is not, in fact, inevitable. In fact, it's virtually unknown in nations which haven't suffered military dictatorships. One of the reasons it even happened in Germany was because she was being controlled by foreign powers under the Versailles treaty.

If you intend to prove that hyperinflation is inevitable with all paper currency, you have to explain why this didn't occur to the Dutch guilder, the Deutsche mark and the other paper currencies that lasted more than half a century without ever coming within a sniff of three-digit inflation.
 

Hazlitt

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There are so many of the most rudimentary economic fallacies contained in the muddled OP that it doesn't merit the time required to document a humiliating point-by-point refutation and destruction of them. Feargach, you continue to outdo yourself which such asinine posts.
 

feargach

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The main problem with fiat money is that its supply can be expanded continually, but this is only a problem when central banks decide to expand the money supply beyond their growth targets. let recessions happen when they need to when prices rise beyond growth targets, by letting interest rates fluctuate to reflect this.
This is your central error.

There is some slight logic to the notion of a central bank letting a recession happen if the recession is a purely local affair.

Provided there are a lot of high-demand countries which are not in recession, it can be OK for one country to provoke a local recession. Demand from the booming countries will maybe allow a recovery in the hurting nation.

But the logic fails to follow in a universal recession. Germany and China are only in technical growth because they have slashed imports. They absolutely will not pull other nations out of their recessions.

This continuing crisis will continue until money is printed in large amounts, or the ECB's monopoly on money creation is broken entirely.
 

kerdasi amaq

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The German people have a horror of inflation.
 

pragmaticapproach

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This is your central error.

There is some slight logic to the notion of a central bank letting a recession happen if the recession is a purely local affair.

Provided there are a lot of high-demand countries which are not in recession, it can be OK for one country to provoke a local recession. Demand from the booming countries will maybe allow a recovery in the hurting nation.

But the logic fails to follow in a universal recession. Germany and China are only in technical growth because they have slashed imports. They absolutely will not pull other nations out of their recessions.

This continuing crisis will continue until money is printed in large amounts, or the ECB's monopoly on money creation is broken entirely.

Doesnt make the slightest bit of difference. Demand for credit, relative to growth targets, whether its by internal or external factors, will have the same effect. let prices find their natural level, and the economy shrink as it needs to.

Sure some short term instability will be inevitable, but the increase in buying power of our currency, would offset many of the problems you mentioned. Prices will find their own level if allowed to do so.
 

Breadan O'Connor

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This continuing crisis will continue until money is printed in large amounts, or the ECB's monopoly on money creation is broken entirely.

The ECB does create money directly by quantitative easing.

But most money in the economy is created every time a comercial bank gives out a loan. Hence money is debt. And banks lend out money they don't have through the fractional reserve system

"If the banks create ample money, we are prosperous,.....if not, we starve."

Would you therefore favour government treasuries directly issuing currencies instead of allowing the comercial banks to effectiively control the flow of currency?

Check out the first 15 minutes or so of this video.

[ame=http://www.youtube.com/watch?v=U71-KsDArFM]YouTube - The Secret of Oz - English - FREE.mov[/ame]
 


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