Clearly there is only one solution. Gold paint on the dollar bills!
How is US currency worth anything?
- Thread starter CaptainManacles
- Start date
Clearly there is only one solution. Gold paint on the dollar bills!
ponderingturtle
Orthogonal Vector
- Joined
- Jul 11, 2006
- Messages
- 54,545
No one would want a screw that can't be driven in some fashion. YOu are changing the definition of money to remove its fundamental use.
It is simply more useful to everyone if they agree to it.
ponderingturtle
Orthogonal Vector
- Joined
- Jul 11, 2006
- Messages
- 54,545
And has low electrical resistance!
Puppycow
Penultimate Amazing
Cherry-picked currencies. Look at this How about the Phillipine peso? 1969: 3.9/$ 2006 51/$, Hong dollar: 1969 6.06/$ 2006: 7.7/$, Indian rupee: 1969: 7.5/$ 2006: 45/$, and there are more: New Zealand dollars, Thai baht, Italian lira, Australian dollar, British pound, French franc, Canadian dollar. etc, etc...
I don't even want to guess how has Haiti's currency has done against the dollar in the same time.
Or the weak dollar itself could even out the trade deficit.
Last edited:
Suddenly
No Punting
Part of a person's concept of value is personal utility. If I can use it, it holds value for me. If I find I can trade it for something of greater use to me it has value as to trade.
For example, due to carelessness I bought some frozen dinners that have sweet potatoes. I hate sweet potatoes. These dinners are worthless to me as far as any personal use as to consumption goes. However, they do have value as I can trade them to someone, or give them to my secretary which is more or less exchanging them for goodwill.
Not always. Some people collect coins and currency as a hobby. Gold has industrial use. We can use a coin as a binary random number generator, and so on.
Because you have to eat, you place value on food based on that need. A supermarket corporation has no such need, it places value on food as an item for trade to get what it needs, profit for shareholders.
These needs and wants are hardly universal. There is no arguement that a person can find value based on practical use. For me a sweet potato has no value as a food. The only value it has is for trade. If I can't find someone who will trade same, then it is more or less valueless, worth nothing.
It's value is based on someone wanting it, in other words what a person would give for it.
egslim
Graduate Poster
- Joined
- Nov 26, 2002
- Messages
- 1,858
Of course there are many currencies that depreciate faster than the dollar. But the fact remains that apart from a few upticks several strong currencies have outperfomed the dollar continuously since 1969. Unless you foresee a radical change in US policy that trend will continue. Which means converting your money to those strong currencies is safer than keeping it in dollars, expecially at low interest rates.
The top graph here shows the trade balance showing a deficit since around 1975. Compare it with the previous graph I linked to. During the early nineties the dollar gained against other currencies, this corresponds to a decrease in the trade deficit during the same period. Other than that, the dollar continued to depreciate while the deficit boomed. So I doubt this trend will suddenly reverse.
Loss Leader
I would save the receptionist., Moderator
That's only because you only have about as much food as you can eat. Now imagine that you are some sort of specialist magician who is able, using a great deal of your time and energy, to make food sprout directly from the ground. And imagine that this is your only talent.
Now you have acres and acres of food you caused to rise from the ground. You can't possibly eat it all. In a hundred years, you couldn't eat it all.
What value does the food have to you? Other than the couple pounds or so a day that you can eat yourself, it's useless. There is nothing you can do with it except ...
Now wait just a darn minute ... You could give your excess food to other people. It's worthless to you but they don't have any food so they probably need it pretty badly. Amazing - something you don't care about is given value by others. And I bet that you could get those people to give you things that you don't have in exchange for that food.
Money is just the physical representation of the floating concept of value. How much is that food worth to the people who don't have it? Now that we have money, we have a way of measuring exactly how much it's worth to them.
Terrific. You've stumbled upon some sort of primative concept of marginal utility.
Get hold of a high school economics textbook and get back to me.
CaptainManacles
Muse
- Joined
- Apr 21, 2005
- Messages
- 821
But in the case of your sweet potatoes, your secretary gets utility from it. This is different from a situation where you think it has value because you think your secretary will value it, your secretary thinks it has value because a coworker will value it, and your coworker thinks it has value because he thinks you'll want it. This is not a situation where the potatoes have any real value, there is just the perception of value based on mistaken assumptions. You may even get some good trades for the potatoes for awhile, especially if there is a large office and it takes a while for people to realize the potatoes are just being cycled around and no one really wants them, but the system will eventually fail and someone will be left with sweet potatoes that no one wants. This seems to mimic the behavior of US currency quite well. We see a constant decrease in value.
There is a difference from value and the perception of value, as evidenced by the dot com bubble bursting. All the confidence in the web as the business of the future cannot make up for hundreds of businesses not generating any profit and no plans to generate profit in the near future. Perception of value can keep things afloat for awhile, but eventually the bubble will burst.
Yes, if collecting coins was the basis for the US dollar's value then I would say that would be a "real" value, but I doubt that's really what is keeping it's current status afloat and I worry that sometime in the future it may have no value except in it's value as a historical relic.
Suddenly
No Punting
You are going off on a different issue. The only issue I am addressing is that if nobody wants something and nobody has a use for it, it has no value. Period. Whether it be gold, polyester, or the frozen head of Mo Udall.
Incredulity that gold could be seen as no more valuable than polyester or the frozen head of Mo Udall seems to be the problem here.
At some point everything ends, but the US dollar isn't going to collapse because all of a sudden people decide it is worthless. Those with dollars are going to want to trade them for goods and those with goods need to trade their goods for something. Whatever theoretical ideas they have about intrinsic value of gold or polyester or whatever they are going to take the dollar. This is the same reason people used to take gold, a state of affairs that led to mind-bending waste by ignorant fools that didn't understand that finding gold was not an overall increase of wealth.
Personally, I'd rather have human beings who can learn from experience making decisions about the amount of money available than leave it up to mining companies and the random chance of a huge gold strike.
All currency, whether it be a modern concept of fiat currency or the use of scarce shiny things is based upon the presumption that others will want the currency. Once that presumption breaks down, the currency is near useless. Gold can be used in dentistry and electronic components. Paper money can be used to light fires.
Consider a substitution:
Puppycow
Penultimate Amazing
Good try at spinning.
Of 24 currencies on that list, between 1969 and 2006, 8 appreciated against the dollar, and 16 depreciated. Economies that did pretty well relative to the US economy in that period tended to appreciate, while those that didn’t (again relative to the US economy) tended to depreciate.
Appreciated: DEM, JPY, CHF, ATS, BEF, DKK, NOK, SGD
Depreciated: GBP, FRF, CAD, ITL, AUD, FIM, ESP, SEK, PTE, HKD, INR, IDR, NZD, PKR, PHP, THB
Actually, that's what they loudly thought about. Using euros instead of dollars. 5 Minutes later, the US threatened to invade Iran. Not because of ******** nuclear stuff. No, this is to threaten Iran and Opec into not abandoning the dollar.
Correct
Last edited:
Er, not watching the video, but from memory, Ron Paul has it half right.So you confirm that, for example, trading Oil in
Euros instead in Dollars (like Saddam did) would
be a huge threat to the Dollar - a threat which
would be big enough to go to war?
And do you agree that Ron Paul is right and this
isn't just fear-mongering: ?
FIAT works better than Gold. With gold, you will run into a currency underrun, i.e. you simply run out of gold to do the trades with. With fiat, this can never happen. If you'd suddenly find a massive amount of gold, you'd have inflation with a gold-based currency. With a FIAT system, this can't happen.So what are the solutions if Gold backing the
Dollar would be too inflexible for a healthy
economy if the FIAT system is a much bigger
threat to the economy since it's able to destroy
the currency - while this isn't the case with
Gold-backed currency ... unless someone invents
a method to produce Gold...
Basically, the problem is that money doesn't have a high turnover rate. In fact, the turnover rate drops constantly and only spikes in crisis times, which results in massive inflation.
I'm particularly fond of the idea that Silvio Gesell posited: Basically you'd have to make it cost something to store money. A bill should have, rather than a fixed value, a table on it, and the money would decline 3-4% in time. It's called (german) Umlaufsicherung. That way the turnover rate could remain relatively constant. It'd also have a lot of other nice side effects. But try to convince anyone that it's good for him if his 100$-Bill is going to be worth only 99$ at the end of the month... So while economically, it's extremely clever, politically, that won't happen in the near future.
That depends on the central bank. The central bank simply checks prices. Your goal may be, 1% or 2% inflation (if you go below, the economy quickly dies)And how is it possible to "print money out of thin
air"? Who regulates how much money is being
printed - only the private federal reserve? How
stupid is that to give them this power - being
completely independent from Government and
People...
Ron Paul seems to think that there's some sort of conspiracy that causes inflation. Well that isn't even so far off, but without at least a little bit of inflation, the economy would be so much worse off. Because in times of low capital interest, the only thing that seems to keep investment at least somewhat alive is this forced consumerism that is caused by inflation. As you see above, it is not the best option, but having a gold backed currency, or even a FIAT policy that goes strictly for 0% inflation, would be much worse.
Great job! I like it!
What value has gold? you can't eat it. it doesn't give you warm. The only reason gold is valuable is because of its role in the monetary system. So this is just a convention. The reason gold was chosen for this was basically that it isn't as easily available, the mining process is slow, and there's still enough gold to run an small national economy in 1000 BC.
So basically, Gold is just valuable because everyone agrees it is.
Similiarly, the dollar is only valuable because everyone agrees it is.
We need currency. The actual medium is not important.
I'm trying to explain to you the quantity theory. Simply put: all the money that is turning over is necessarily going to be as valuable as all the goods that are turning over. It's not circular, its tautological.
Yes, that is the paradoxon of capitalism. Basically, when you invest into a production facility, you reduce scarcity of the product that is produced by the facility. As long as the good is scarce, you will be able to sell it for more than what it costs you to produce it, thus producing a capital income for your investment.
However, when the economy is doing good, more people do the same investment. You will no longer be able to sell it for much more than what it costs you to produce as the prices drop due to concurrence. Ultimately, you won't get anything back from your investment. That's the point where people stop investing (or actually, even before that due to the so called Liquidity Preference) and money stops turning around. The turnover rate drops, and the national bank has to increase the money supply (bubble style) to keep the prices from dropping (Deflation)
Capitalism works extremely well as long as the interest rates for capital are high. As soon as they drop below 3-4% (which is approximately the liquidity fee) capitalism stops working nicely and becomes increasingly inefficient, with mass unemployment, which drops the price of labour, which makes the problem between rich and poor worse gradually.
Alright, back to the money. Let me try to explain it in a different way.
Fiat Money. It means we simply decide that this fiat money is valuable. Why? Because we need it for any sensible amount of division of labour. Division of labour means specialization, means productitivty, means wealth, means all good things.
But to achieve division of labour we need a currency. Because bartering sucks. In a society where you have no good currency (e.g. hyperinflation, no currency at all) people fall back to self-reliance - productivity lost on a massive scale as everyone starts to farm on his own.
So we need money. We really do. That's why people are readily able to accept a fiat money.
Now, this is my hypothesis: All money is fiat.
Diamonds? Yeah they have some uses but mostly, its a convention (and the control of the danish) that they're valuable.
Gold? What can you do with gold? Other than some electric applications. Its fricking worthless. But everyone agreed in the past that gold and silver and all the other metals are valuable. Probably because they're hard to mine. Not because they've got much use.
So all money is really fiat money.
So what medium should effectively be money then?
gold may sound good to some. Gold doesn't rust: If you have 1 ton of gold today, you'll have 1 ton of gold in 100 years. But really, gold's heavy. try to buy a house with a suitcase full of gold!
And then as the economy grows, it needs more currency. You (as a society) can't simply find more gold - reserves are limited. So when the production rises and the money supply doesn't, you have deflation.
And what if there is some gold found? Suddenly, a few million tons of gold are found, or there's a way to synthesize it, or whatever. Prises will plummet, there will be inflation!
So, gold isn't good.
What else. We could just use a load of dogs poo. Why not? Because dog's poo can easily be faked. The money supply would quickly overflow because of dog poo forgers. Plus, if you use poo, it rapidly evaporates. You'd have 100grams in your pocket one day, and 50grams another. So nobody would ever accept it.
So we create hard-to-imitate pieces of paper. That's good. it's lightweight, it's not easily forged. It doesn't fall apart. Good.
Problem: People don't believe that pieces of paper could be worth anything. So what you do is, you pretend the pieces of paper ARE gold. You write on your bills that they can be readily traded for gold, are basically gold, and just for your convenience (gold is heavy) is not actually gold.
That last part was basically the situation everywhere between 100 and 200 years ago, why paper money had to be backed by gold. Because people wouldn't believe that fiat paper money would work.
But it does. It always has.
Fiat Money. It means we simply decide that this fiat money is valuable. Why? Because we need it for any sensible amount of division of labour. Division of labour means specialization, means productitivty, means wealth, means all good things.
But to achieve division of labour we need a currency. Because bartering sucks. In a society where you have no good currency (e.g. hyperinflation, no currency at all) people fall back to self-reliance - productivity lost on a massive scale as everyone starts to farm on his own.
So we need money. We really do. That's why people are readily able to accept a fiat money.
Now, this is my hypothesis: All money is fiat.
Diamonds? Yeah they have some uses but mostly, its a convention (and the control of the danish) that they're valuable.
Gold? What can you do with gold? Other than some electric applications. Its fricking worthless. But everyone agreed in the past that gold and silver and all the other metals are valuable. Probably because they're hard to mine. Not because they've got much use.
So all money is really fiat money.
So what medium should effectively be money then?
gold may sound good to some. Gold doesn't rust: If you have 1 ton of gold today, you'll have 1 ton of gold in 100 years. But really, gold's heavy. try to buy a house with a suitcase full of gold!
And then as the economy grows, it needs more currency. You (as a society) can't simply find more gold - reserves are limited. So when the production rises and the money supply doesn't, you have deflation.
And what if there is some gold found? Suddenly, a few million tons of gold are found, or there's a way to synthesize it, or whatever. Prises will plummet, there will be inflation!
So, gold isn't good.
What else. We could just use a load of dogs poo. Why not? Because dog's poo can easily be faked. The money supply would quickly overflow because of dog poo forgers. Plus, if you use poo, it rapidly evaporates. You'd have 100grams in your pocket one day, and 50grams another. So nobody would ever accept it.
So we create hard-to-imitate pieces of paper. That's good. it's lightweight, it's not easily forged. It doesn't fall apart. Good.
Problem: People don't believe that pieces of paper could be worth anything. So what you do is, you pretend the pieces of paper ARE gold. You write on your bills that they can be readily traded for gold, are basically gold, and just for your convenience (gold is heavy) is not actually gold.
That last part was basically the situation everywhere between 100 and 200 years ago, why paper money had to be backed by gold. Because people wouldn't believe that fiat paper money would work.
But it does. It always has.
Loss Leader
I would save the receptionist., Moderator
Well, the way out of such a mess isn't only monetary policy. Government-mandated price floors and subsidies can prop up a single industry or commodity. Corn is the best example.
Of course, the unintended consequences from a policy that protects a single commodity can be worse for the nation than either messing with monetary policy or letting the commodity just collapse.
No, subsidies to corn won't help. That behaviour is called rent-seeking, its when a small group (corn producers / secondary production) lobbies government to increase its profits on the shoulders of the public.* Price floors, if anything, reduce the consumption of corn and such make the problem worse.
What helps is creating new markets, to increase consumption. Artificial scarcity.
A war is a good method. There's neverending profit in war, there's no saturation with bombs and grenades, and value is destroyed, and scarcity is created, reincreasing interest rates.
But of course its a very cynical way to save the economy. And not serving the mass.
*Hmm, well, the individual industry is of course "helped" in a way. But the problem of lowering interest rates is a global one that doesn't just affect one industry while another continues obtaining 20% capital interest. Because investors constantly pull money from lame ducks (low interest rates) and put them into high-yield, high performance investments. That way it works out that all industries have roughly the same capital interest at a given time. And in the long run, this global interest rate goes down as the scarcity is eliminated, and wealth is created, and the problem shows up when the global interest reaches the lower floor, the Liquidity Fee.
But hey this isn't the topic. Topic is money. Create a "Save Capitalism!" thread elsewhere!
Last edited:
Loss Leader
I would save the receptionist., Moderator
I didn't say it would help; I just said it was a way to deal with overproduction that wasn't strictly a monetary policy.
In my opinion, the artifical propping up of corn as a commodity has had and will continue to have disasterous effects on the nation.
And that's what I disagreed with. Subsidies to corn worsen the overproduction problem. Actually, depending on the exact subsidiary mechanism, subsidies can create it in the first place.
There's no significant amount of overproduction in a free market, as overproduction is not profitable. The monetary problem I'm describing is strictly limited to capital interest rates.
What subsidies do depends on their type. For example the gvt gives itself a budget to buy all corn every farmer produces at an inflated price, then burns it. That's a mechanism that will inflate the price of corn, will allocate an inefficient (too big) amount of ressources to corn production, and in time will also mean you'll have to stand in line in order to be able to sell your corn, and the gvt will start to give contingents for people to sell their corn to. So after a short while with this subsidy, the only thing that's different is that a huge amount of tax payer money is wasted, a huge amount of corn (and thus land/labour) is wasted, and ultimately, the profit rates of corn will lower down to the old level.
Fun fact: in general, standing in line means the government screwed something up.
Last edited:
An unredeemable currency like the Federal Reserve Note is not worthless, it has value basically for two reasons - coercion, and convention. You're forced to remit Federal Reserve Notes when you pay your income taxes, which naturally creates a demand for the notes. Since acceptance of the notes for this purpose became commonplace, general acceptance of the notes has become conventional. The reason they have value is the same reason why I'm sure you're willing to accept them in exchange for goods and services - they represent at least a temporal store of value.
As the acceptance of the notes becomes conventional, Gresham's Law dictates that they will become even more prevalent - bad money drives out good.
Assuming a static money supply, increasing productivity will result in lower prices over time - disinflation. This is referred to as the productivity norm. Contemporary economists seem to think this is a bad thing, blaming recessions and depressions on it, and using it to "justify" the need for fiat currencies. In fact, recessions and depressions are caused by the boom/bust cycles inherent in fractional reserve banking, as proven by the Russian economist Kondratieff.
There is no justification for fiat money, especially considering the inevitable and great abuse that comes with the allure of free money.