How is US currency worth anything?

[Dabljuh]

Illusion, mistaken, incorrect value. Someone thought something had more value then it really did. Simply thinking something is valuable does not make it valuable.

To the person thinking it is valuable, it does.

 

[CaptainManacles]

If you think that that means the value of that thing is an illusion, then you must believe that all value is an illusion, because you could be wrong about the value your friend would place on anything. (including gold, obviously)?

It's being incorrect, not the potential to be incorrect, makes something incorrect.

Has it occurred to you to wonder why the economy has not completely collapsed already

I've already explained why it hasn't a dozen times.

 

[Nathyn]

Reasons why gold is the ideal material to use for money:

#1. It's pretty, and therefore desirable. Women will coo over gold jewelry today just like they did 3000 years ago. And let's face it, the power to win over women's affection is what makes the world turn 'round, right?

#2. Flowers and seashells are very pretty too, but they are too commonplace to be used for currency. The above would be worthless if it wasn't for one simple fact: It's rare, and it's hard to acquire.

#3. Gold represents work that has already been accomplished. If you own gold it's impossible to get cheated out of your value, as opposed to an I.O.U. which could turn worthless if the debtor goes bankrupt.

#4. Gemstones like diamonds meet all of the requirements 1-3 above, but they are a very poor form of money, for one simple reason: you can't break them in half without destroying their value. Because gold is a metal, it's virtually infinitely divisible. If you own one ounce of gold you can easily exchange it for two half-ounce coins, or ten 10th ounce coins, etc.

#5. It's very easy to recognize gold without any special training. It's virtually impossible to counterfeit, and even a dullard can spot fake gold. If you've ever held a good amount of gold in your hand you know what I am talking about--it has a density which is not found in nature very often. Don't think you can make a fake gold coin by plating lead, it's not that easy. Gold is MUCH more dense than lead.

#6. It's non corrosive. You don't need to worry about taking care of your gold, it lasts virtually forever. The gold that they took out of the Egyptian pyramids shined as brilliantly as the day it was entombed.

#7. It provides some valuable functions in science and technology, for example it's been said that an ounce of gold can be stretched into a thin wire many miles long, whereas with copper or tin you're lucky to get more than a few yards. This helps lend to its value but is secondary to the 6 reasons above.

No one denies that gold is the ideal for using as a hard-backing (although silver is good also), but simply that a gold standard is impractical.

Also, so far we've all been talking about theoretical problems of the gold standard. What about the historical evidence?

For instance, a form of fiat was introduced into the 13 colonies very early because they realized themselves at the time that they didn't have enough gold for a stable monetary system (its rarity can be a problem if it's in extreme short supply). According to Benjamin Franklin, this contributed greatly to America's success, until the British banned the American-issued fiat and required the colonies to use the hard-backed pound sterling, causing a depression and massive poverty by cutting the money supply in half, exactly what would happen were we to issue a gold standard today. Franklin believed this was the cause for the colonial revolt -- not taxation without representation, but forbidding the colonies to issue fiat and requiring them to use the pound sterling, therefore putting them in major economic crisis. The taxation just made things even worse for colonists.

Ironically, proponents of the gold standard use Franklin's writings about "evil bankers" (rough paraphrase) as evidence that central banking failed and caused a depression in America, when that wasn't what he was arguing at all.

Were the Founding Fathers to have viciously distrusted fiat, they never would've issued the Continental... Once the Continental collapsed (due to reasons have nothing to do with fiat), it was then that hard-backed currency came back in style and fiat was viewed as impractical.

 

[CaptainManacles]

Reasons why gold is the ideal material to use for money:

#1. It's pretty, and therefore desirable. Women will coo over gold jewelry today just like they did 3000 years ago. And let's face it, the power to win over women's affection is what makes the world turn 'round, right?

#2. Flowers and seashells are very pretty too, but they are too commonplace to be used for currency. The above would be worthless if it wasn't for one simple fact: It's rare, and it's hard to acquire.

#3. Gold represents work that has already been accomplished. If you own gold it's impossible to get cheated out of your value, as opposed to an I.O.U. which could turn worthless if the debtor goes bankrupt.

#4. Gemstones like diamonds meet all of the requirements 1-3 above, but they are a very poor form of money, for one simple reason: you can't break them in half without destroying their value. Because gold is a metal, it's virtually infinitely divisible. If you own one ounce of gold you can easily exchange it for two half-ounce coins, or ten 10th ounce coins, etc.

#5. It's very easy to recognize gold without any special training. It's virtually impossible to counterfeit, and even a dullard can spot fake gold. If you've ever held a good amount of gold in your hand you know what I am talking about--it has a density which is not found in nature very often. Don't think you can make a fake gold coin by plating lead, it's not that easy. Gold is MUCH more dense than lead.

#6. It's non corrosive. You don't need to worry about taking care of your gold, it lasts virtually forever. The gold that they took out of the Egyptian pyramids shined as brilliantly as the day it was entombed.

#7. It provides some valuable functions in science and technology, for example it's been said that an ounce of gold can be stretched into a thin wire many miles long, whereas with copper or tin you're lucky to get more than a few yards. This helps lend to its value but is secondary to the 6 reasons above.

I think we should have an illegal immigrant labor backed currency. The federal reserve could be in charge of our fiscal policies, border security, and immigration.

 

[Nathyn]

I think we should have an illegal immigrant labor backed currency. The federal reserve could be in charge of our fiscal policies, border security, and immigration.

How many Mexicans would the Fed give me for each dollar?

Also, what would these Mexicans be doing, when they're kept in the Federal Reserve's vaults?

Working, I hope.

 

[CaptainManacles]

And the reasons why gold shouldn't be used as currency

#There's simply not enough of it to replace all currency. As neat your pro-gold reasons sound, this simply kills it.

if the gold price rises too high (which will happen if a 100% gold currency will be reinstated in the US) instead of doing useful work, everyone will be in the shores and streams washing gold.

Back it with more than just gold.

Not even the government can randomly produce more gold if the economy booms

This assumes that randomly producing more notes is necessary if the economy booms.

it doesn't lose value. That's actually a bad thing, a small amount of storage cost is desireable in a currency, as it keeps the turnover rate up.

Don’t keep the rate at which you exchange notes for gold perfectly flat. Decrease the trade rate enough to handle storage costs.

 

[CaptainManacles]

How many Mexicans would the Fed give me for each dollar?

1 1/8th

Also, what would these Mexicans be doing, when they're kept in the Federal Reserve's vaults?

Working, I hope.

They'd be mining for gold. As part of a jewish conspiracy to tank our economy.

 

[69dodge]

If you think that that means the value of that thing is an illusion, then you must believe that all value is an illusion, because you could be wrong about the value your friend would place on anything. (including gold, obviously)

He can be wrong about whether his friend wants a thing for its own sake, but he can't be wrong about whether he wants it for its own sake.

So not all value is an illusion.

So you really aren't supporting your point at all. The "value" of unbacked currency is exactly as real or as illusionary as the "value" of gold, or of anything else.

I think he overestimates how strongly people want gold for its own sake, but people certainly do want some things for their own sake. Grocers buy food to resell, but most people buy it to eat. Clothing retailers buy clothes to resell, but most people buy it to wear. Car dealers buy cars to resell, but most people buy them to drive.

Why this insistence that money is the same as things with real value?

If I print books and give them away, I will be praised as philanthropic. If I print money and give it away, I will be arrested for counterfeiting.

Money is useful, to be sure. And I don't see any particular reason to prefer gold money to paper money. But its value is of a different kind than that of other things.

 

[Puppycow]

If I print books and give them away, I will be praised as philanthropic.

I think that depends on the contents of said books.

 

[Tippit]

* Dabljuh;3198658 points finger at Tippit and screams "MARXIST"


Just kidding. I talk to a lot of marxists on a regular basis, just never manage to ever convince them. It's a religion really.

But I may be wrong about you being a marxist. I think this problem with fractional reserve banking you're having is not marxist nor neomarxist as far as I know. Is this a purely american phenomenon? Elements of marxist economic theory combined with a potential free market policy?

Yes, because Marxists advocate sound money? Your apparent ignorance of Marxism trumps your ignorance of economics. The fifth plank of the communist manifesto calls for the:

"Centralization of credit in the banks of the state, by means of a national bank with state capital and an exclusive monopoly."

Since I neither support monopolism nor central banks, and since the status quo is more consistent with the fifth plank of the communist manifesto, it is the status quo which more resembles Marxism than anything I'm advocating.

It saddens me how such an important issue can be tainted with the idiotic polarization found just about everywhere these days. People like you seem to think my position is consistent with "Marxism", while self-proclaimed Marxists would no doubt call me an extreme right winger (and have).

If you take some time and think about it you may realize that it's possible to be a capitalist while at the same time condemning the fraud that is fractional reserve banking and fiat money. They are not mutually exclusive points of view.

 

[Tippit]

So how do you account for the wide acceptance of dollars in many foreign countries under no obligation to take it? The dollar has also replaced local currencies in some countries (usually non-developed countries). Not gold, the dollar.

Considering that virtually every country in the world has practically the same fiat money system, and that compared to many other currencies the dollar has been debauched relatively less than most, it isn't surprising it achieved status as a global reserve currency. But the dollar's hegemony is nearly done.

As far as why it has been more attractive than gold, the primary reason is because the price of gold has been suppressed for decades. Gold is the one alternative currency that is not managed by men, and for which the supply is limited by nature, not by men. Gold and gold ownership has been ridiculed and disparaged since Roosevelt expropriated it from Americans in 1933 with Executive Order 6102, and it's price has been similarly managed by the central banking cartel. The gold price suppression is documented at GATA.

 

[Tippit]

There's an episode the Twilight Zone you should both see.

Some scientists rob a government-owned train containing gold bullion, then hide in a cave, where they seal themselves in suspended animation chambers for hundreds of years.

When they wake up, it turns out that gold is useless because in the future, it can be synthesized as easy as steel alloy.

I don't take my economic cues from Twilight Zone episodes, and neither should you. As it turns out, gold can already be synthesized in particle accelerators, it's just far from being cost-beneficial. If technological progress renders one of the primary attributes of gold obsolete - its scarcity - then there will probably exist some other substitute. I don't really understand the point you're trying to make with your Twilight Zone story. If according to the story gold is useless in the future because it can be easily synthesized, then what does that say about the utility of paper or electronic money today?

The idea isn't to take a myopic position of gold advocacy, but to realize that a monetary system whereby the cost of the production of money is negligible empowers the monetary creators over those who have to exchange real world value for monetary tokens. It is this power enjoyed by the money masters which accounts for most of the world's ills, economic, political, and otherwise.

And another thing: The strongest argument against the gold standard is that there isn't enough gold left in the world to do it, not even in the poorest countries. In order to print enough dollars to have a stable financial system, you'd have to reduce the convertibility of gold to less than 100% (a partial gold standard) and you'd have to continually reduce convertibility in reaction to deflationary pressures.

All the numbers you need to do the calculations can be found here:
http://en.wikipedia.org/wiki/Gold

Hogwash. According to the WGC (World Gold Council) an estimated 155,500 tonnes of gold has been mined throughout history. Assuming for simplicity that it was all used for monetary purposes, at 32,150.75 troy ounces per tonne this would equate to about 7.6 1/10 of an ounce pure gold coins per person in the world - all 6.5 billion of them. There is quite enough gold for it to function as a currency, and this does not preclude the usage of other precious metals which exist in greater supply.

I'm not advocating a gold standard, that's already been tried and has failed - mostly due to fractional reserve banking and the manipulation (hoarding) of gold by international bankers. I'm speaking against fractional reserve banking, fiat currency, and central bank monopolies on currency.

 

[Kerberos]

Considering that virtually every country in the world has practically the same fiat money system, and that compared to many other currencies the dollar has been debauched relatively less than most, it isn't surprising it achieved status as a global reserve currency. But the dollar's hegemony is nearly done.

As far as why it has been more attractive than gold, the primary reason is because the price of gold has been suppressed for decades. Gold is the one alternative currency that is not managed by men, and for which the supply is limited by nature, not by men. Gold and gold ownership has been ridiculed and disparaged since Roosevelt expropriated it from Americans in 1933 with Executive Order 6102, and it's price has been similarly managed by the central banking cartel. The gold price suppression is documented at GATA.

Ahh, so it's a gigantic conspiracy, why didn't I think of that? Tell me, is it the Jews, the Free Masons or the UN who's behind it?

*boggle*

 

[Tippit]

"Illusion of value" is nonsensical.

The "Illusion of value" isn't nonsensical at all - see the Dutch Tulip Mania. The concept of value has both temporal and qualitative attributes which should be easy to intuit, but is apparently hard for some members of this forum. You can argue that the buyers of tulips during the tulip mania weren't suffering from any delusions. But there were fundamental indicators that they were engaging in a dangerous form of speculation that was likely to end in their financial ruin, namely that they were mortgaging their homes to buy flowers! Their valuations of tulips at the height of the tulip mania were illusory, because they lacked the foresight to see that the irrational speculative demand for tulips would be quickly matched by a nearly endless supply. To a certain extent proponents of fiat money systems suffer from the exact same delusions about paper money. History has shown that all fiat money systems collapse in hyper-inflationary spirals.

What is nonsensical is the idea that there is no intrinsic value. If this were true then there would be no rational basis for valuing anything. The idea that an element that is pretty and scarce is intrinsically equal to paper with markings is ridiculous. It's the difference between a deed to a house, and a house. The deed has value, but only because it represents a placeholder of value for a specific legal construct. If the country is overthrown and a dictator forfeits people's homes, the paper becomes almost intrinsically worthless but the house still has intrinsic value. Since the supply of paper money and ethereal bank credits can be vastly increased at the whim of a few elite bankers, the value of fiat money is most certainly temporal.

There are essentially three forms of money:

1) Commodity money - payment in full

2) Fiduciary money - a token indicating a promise to pay

3) Fiat money - a token with no promises to pay

If you wish to engage in the practice of accepting constantly inflated tokens of value in lieu of real value then that is your choice. I being a student of human nature and economics prefer to accept things with intrinsic value.

 

[Kerberos]

If you wish to engage in the practice of accepting constantly inflated tokens of value in lieu of real value then that is your choice. I being a student of human nature and economics prefer to accept things with intrinsic value.

I'm not going to refute you nonsense in full, because you're clearly not capable of assessing these things rationally. I will however suggest you follow you own advice and refuse to use fiat currency at all. That way you can serve as an object lesson on what happens to people who let govern the lives according to crackpot theories.

 

[Dabljuh]

Gold hoarding is a problem inherent to the nature of gold. It doesn't lose value. And since it's a limited resource in a growing economy, eventually a deflation kicks in, which means it'll be hoarded even more.

You think your gold coins would suffice as currency for the whole world? It wouldn't even satisfy the daily international currency trades. Do you know how much that is? Over 1.2 trillion. And that figure is from back in 1995.

The GNP of the US is around 6 trillion. The value of all gold ever mined: US$3.4 trillion. At a currency supply of 7*300 million=2.1 billion ounces in the US, this means every single ounce would have to be worth 3000 dollars, at a turnover rate of 1 (which is better than what to expect, about 0.5)

And then where do you want to get that gold from? The United States' holding of gold is worth approximately US$164 billion. Those 155k tons are mostly mined and owned by people and central banks.

Gold is just a horrible, horrible currency. But people who believe in the "intrinsic value" of gold probably don't have the brainpower to put this all together. Gold is friggin yellow metal. Why yellow metal valuable, chief asks?

 

[Michael Redman]

What is nonsensical is the idea that there is no intrinsic value. If this were true then there would be no rational basis for valuing anything.

There is no objective rational basis for valuation. Everybody places a different value on everything. Value is personal and subjective. This goes for paper money, food, gold, life.

History has shown that all fiat money systems collapse in hyper-inflationary spirals.

No, it clearly has not.

What history has shown, however, is that the US economy since the end of WWII has been the greatest prosperity generator in the history of mankind. That is the reality against which the claims of the evils of fiat money must be tested.

 

[Dabljuh]

Tippit, I want you to create a new thread that is all about Ron Paul's ideas. Gold-backed currency, abolishing fractional reserve banking (however that would work) and then we talk here. This thread is more about the notion of how fiat money works, and I think, the question has been answered (even if stuff like this needs time to sink in)

 

[69dodge]

The idea that an element that is pretty and scarce is intrinsically equal to paper with markings is ridiculous. It's the difference between a deed to a house, and a house.

You can live in a house. What can you do with the pretty and scarce gold?

Since the supply of paper money and ethereal bank credits can be vastly increased at the whim of a few elite bankers, the value of fiat money is most certainly temporal.

They can be so increased. How likely do you think it is that they will be?

If you wish to engage in the practice of accepting constantly inflated tokens of value in lieu of real value then that is your choice. I being a student of human nature and economics prefer to accept things with intrinsic value.

If you get paid in cash, you don't need to keep it. Buy whatever you want with it. That's what it's for.

Do you really buy gold immediately with any money you get?

In any case, you can if you want to. Why is it terribly important to be able to buy it from the government?

 

[Dabljuh]

The "Few Conspirative Elite Bankers" have absolutely no interest in having currency devalued. Their power as well as their vast income stems from the fact that they control a whole lot of currency.

Quite on the contrary, what would be in an "evil jewish banker's" short term interest would be a deflation. As money increases its value, so does the banker's power as he controls a large amount of the ever dwindling supply.

The reason there's a near constant, small inflation are very unconspirative, downright dull.