Sound Money?

[bjornart]

As a Norwegian I believe you are exempt from this conversation. Think of yourself as an American, or a Brit, with your money in their banking systems.

comfortable with that?

No, but the cure is not to get rid of fiat currency. Norway has one of those and is integrated in the same international economy as everyone else.

I believe you have grossly misrepresented, misunderstood and exaggerated my question and understanding of the matters.

That's entirely possible as you keep being vague and "questioning".

what exactly did I suggest, and why is it unworkable?

You're suggesting tying money to tangible assets:

No it's not about gold, it could be tied to anything, what else would you suggest to give stability over long periods and prevent debasement?

Why that is unworkable has already been pointed out. But even if we accept your irrational fear of currency debasement and let you base your currency on every conceivable stable commodity out there, you'll still come short of the current currency needs without inflating the price of all those commodities.
So now you've made every metal and mineable resource in your currency base as unnecessarily expensive as gold, and in addition artificially tied their prices to each other.

 

[kevsta]

No, but the cure is not to get rid of fiat currency. Norway has one of those and is integrated in the same international economy as everyone else.

Yes, but Norway has bucketloads of free oil which makes it a strong economy and hence currency, all the while that lasts.

That's entirely possible as you keep being vague and "questioning".

Im not trying to be vague, and isn't questioning what we are here for? I am anyway.

You're suggesting tying money to tangible assets:

Why that is unworkable has already been pointed out.

not to my satisfaction it hasn't. Germany had a gold backed currency until very recently (geologically speaking) and is still the powerhouse of the world. this is unworkable why?

But even if we accept your irrational fear of currency debasement and let you base your currency on every conceivable stable commodity out there, you'll still come short of the current currency needs without inflating the price of all those commodities.

irrational fear nice. it's neither irrational, nor am I afraid of it. it's unsustainable over any long period, fundamentally unstable, and benefits some, way more than others. IMO it doesnt work and needs changing along with the banking system.

why would I be afraid of debasement? I already have my own personal answer, the more they debase (or inflate) the comparatively better off I become, compared to those stuck in the sinking fiat regimes.

this would not be the case any more if changes were made for the better for everybody.

So now you've made every metal and mineable resource in your currency base as unnecessarily expensive as gold, and in addition artificially tied their prices to each other.

who has? I haven't tied anything yet.

Ok, so in an attempt to not be vague, I will lay out exactly what I think will probably happen, and you can tell me why that is unworkable, and impossible.

then we can just compare theories and events moving forwards.

What I think IS going on, is that the Fed is devaluing the dollar as hard as they can, while smiling in our faces mumbling about strong dollar policy nonsense.

But as we are in a competitive devaluation loop, everybody cannot all devalue, *something* has to be the benchmark to devalue against.

WHEN (not if) gold gets back to a level that would support a gold backed dollar (remember, the US is on an unofficial gold standard backing of 17% right now assuming the gold is still as reported in the 70's) what is to stop them reverting to a gold backed Dollar exactly?

IMO nothing. the US are a gold superpower, along with the European region.

another question.

what do you think would happen if another credible country or region decided to back their currency with gold in the meantime?

play along with my thought game please, assume that the Pentagon currency warfare scenario that Rickards outlined, actually happened.

Russia and China deposit a large amount of gold in Swiss vaults, and launched a gold backed currency based out of London banks, and demanded payment for anything they produce in their own money.

You are the president and in charge of the Fed, what is your next move?

if we could possibly avoid invasions and nuking people, that would be good.

 

[kevsta]

and apologies to everyone else, this thread does now seem to have moved back to Gold.

that actually wasnt my initial intention.

if you prefer, we can use an imaginary substance for the sake of the currency war game, lets use "unobtainium" and pretend it has similar qualities and distribution to gold.

the point is, that if other countries started demanding payment in things of some actual worth, ie not endlessly printable green paper that the the vendor then has to lend back to the buyer to support their credit addiction..

what then?

 

[psionl0]

Im not disagreeing with this either, but can you stop trying to change the subject of my thread?

I appreciate your point, I don't like fractional banking either, and it may well be necessary to sort that out first / as well but I wanted to explore options for the transaction medium here.

presumably you have seen this? www.positivemoney.org.uk - I know Ben. sort of.

I'm not trying to derail this thread - merely pointing out that it is a cut finger vs ruptured artery situation. If neither the government nor the banks could create money would it still be just as important to you what the money base is?

The main attraction of a gold "unobtainium" standard is that governments can not print gold "unobtainium". However, if the banks can still create money then only a small fraction of the money supply is gold "unobtainium" - the rest is still "monies of account" which was created by the banks.

Yes, I have studied www.positivemoney.org.uk and I'm surprised you are not more on-board with it. A fiat currency with full reserve banking is far superior to an gold "unobtainium" standard with fractional reserve banking.

 

[kevsta]

I am actually quite onboard with it, however unfortunately I don't have every much faith that a "campaign" is ever going to change anything, even a campaign that Mervyn King is basically in favour of, has a vast amount of vested interests to overcome to achieve it's objectives.

I would be very happy if it did, however I think change will only come from the smoking ruins of the current system, at which point it may well be out of the hands of individual countries to do much about the direction it heads in.

 

[psionl0]

I understand your pessimism but you should still be careful of what you wish for. The "smoking ruins of the current system" could spawn a CT'ers worst nightmare if nothing is done to prevent it.

The world doesn't have to be trapped in its self-imposed debt prison. There is a way out. Surely there is a way to get this message out.

 

[kevsta]

I understand your pessimism but you should still be careful of what you wish for. The "smoking ruins of the current system" could spawn a CT'ers worst nightmare if nothing is done to prevent it.

The world doesn't have to be trapped in its self-imposed debt prison. There is a way out. Surely there is a way to get this message out.

again, Im not wishing for it at all. I just think I can see it coming pretty clearly, like I could the debt bust.

and more disturbingly, lots of people that I trust, and who have been correct about events thus far, see the same thing.

if it was only me, I could just smoke some more medication and get on with my life

 

[Sceptic-PK]

WHEN (not if) gold gets back to a level that would support a gold backed dollar

Never happen.

(remember, the US is on an unofficial gold standard backing of 17% right now assuming the gold is still as reported in the 70's)

That isn’t a “gold standard”, official or otherwise.

what is to stop them reverting to a gold backed Dollar exactly?

There isn’t enough gold/gold will never be worth enough to back the amount of currency in the economy.

 

[kevsta]

Never happen.

incorrect.

That isn’t a “gold standard”, official or otherwise.

yes it is

There isn’t enough gold/gold will never be worth enough to back the amount of currency in the economy.

yes there is and yes it will.

see, I can do the same as you.

 

[Sceptic-PK]

incorrect.

Well sure, if we’re into voodoo economics then a gold standard is just around the corner! Maybe tomorrow?

yes there is and yes it will.

Well, do the maths for me. How much would gold have to be per ounce in order to back the currency already in the Us economy? I don’t have any figures myself but I posit that it is an order of magnitude higher than the price is currently.

yes it is

How is it a gold standard? Explain in detail.

 

[kevsta]

Well sure, if we’re into voodoo economics then a gold standard is just around the corner! Maybe tomorrow?

this doesnt make sense. the conversation went..

Originally Posted by kevsta
WHEN (not if) gold gets back to a level that would support a gold backed dollar

Never happen.

incorrect

so we are talking about a rise in price, not whether its today or tomorrow?

Well, do the maths for me. How much would gold have to be per ounce in order to back the currency already in the Us economy? I don’t have any figures myself but I posit that it is an order of magnitude higher than the price is currently.

How is it a gold standard? Explain in detail.

it all depends on the amount of backing, 20% 50%, 100% etc, and what you decide to back, M1, 2 etc

at current prices, the USA is already on a shadow gold standard at 17% backing of M1. right now.

but dont take my word for it, watch the video, where the Pentagon's financial advisor explains it all very clearly for the uneducated about the matter.

http://www.bloomberg.com/video/79944740/

 

[Sceptic-PK]

so we are talking about a rise in price, not whether its today or tomorrow?

So how much would the price have to rise?

it all depends on the amount of backing, 20% 50%, 100% etc, and what you decide to back, M1, 2 etc

Well one presumes a gold standard = 100%? Otherwise it’s not really a standard is it?

at current prices, the USA is already on a shadow gold standard at 17% backing of M1. right now.

So, based on your 17% figure (where did you derive this might I ask, given you have no idea how much gold is in the US?) we’re talking a price of about $9000 USD/ounce? Is that a realistic number do you feel?

But I will add (again) that this isn’t a “gold standard”, shadow or otherwise. A standard means that the government sets the price of gold versus their currency, or at least adheres to the gold price with regards to how much currency they can create. The fact that the price of the commodity is $X is completely irrelevant to the standard. It’s no different to claiming we have a shadow oil standard. The claim has no basis in reality because a commodity standard has a very specific connotation, you can’t just make up new definitions to suit.

 

[kevsta]

So how much would the price have to rise?

Well one presumes a gold standard = 100%? Otherwise it’s not really a standard is it?

simply incorrect, you could back whatever percentage you decide.

So, based on your 17% figure (where did you derive this might I ask, given you have no idea how much gold is in the US?) we’re talking a price of about $9000 USD/ounce? Is that a realistic number do you feel?

going on the reported 8000 tons at current prices and M1 = 17%

But I will add (again) that this isn’t a “gold standard”, shadow or otherwise. A standard means that the government sets the price of gold versus their currency, or at least adheres to the gold price with regards to how much currency they can create. The fact that the price of the commodity is $X is completely irrelevant to the standard. It’s no different to claiming we have a shadow oil standard. The claim has no basis in reality because a commodity standard has a very specific connotation, you can’t just make up new definitions to suit.

you didnt watch the video did you? how about you take it up with Mr Rickards himself if you doubt his words?

here's his Twitter account, would you like me to put you in touch?

http://twitter.com/#!/JamesGRickards

 

[Sceptic-PK]

simply incorrect, you could back whatever percentage you decide.

But then it won’t fix the imaginary problem you have with fiat now would it?

going on the reported 8000 tons at current prices and M1 = 17%

Cool, thanks. You didn’t answer my question though. Do you see gold going to $9000/ounce soon?

you didnt watch the video did you? how about you take it up with Mr Rickards himself if you doubt his words?

I’m at work I can’t watch the video. You made the claim, I’m asking YOU a question about it. How is gold’s recent rise in price, a “shadow standard”? What impact does a rise in gold price have on governments’ abilities to print money? How is it a “standard” of anything if it doesn’t act as anything other than an inflation/turmoil hedge?

 

[kevsta]

But then it won’t fix the imaginary problem you have with fiat now would it?

I am not holding out much hope of that happening anyway to be honest.

Cool, thanks. You didn’t answer my question though. Do you see gold going to $9000/ounce soon?

No, maybe in another 10 years.

I’m at work I can’t watch the video. You made the claim, I’m asking YOU a question about it. How is gold’s recent rise in price, a “shadow standard”?

nothing to do with any recent price rises.

the "shadow standard" was Rickards words. I have been trying to get somebody from here to watch the ****** video and tell me what they think of what he said for days now.

it is a shadow standard, because at the drop of a hat, if necessary, the USA (allegedly) have the gold, and could do it if they wanted to.

I know what I think, I wanted to know what Skeptics think of his interview.

What impact does a rise in gold price have on governments’ abilities to print money? How is it a “standard” of anything if it doesn’t act as anything other than an inflation/turmoil hedge?

please watch the video when you get home, and we can continue this tomorrow if you want to, it's sleep time here now.

 

[psionl0]

Well one presumes a gold standard = 100%? Otherwise it’s not really a standard is it?

Correct.

If the government can still dilute the money supply then the only attraction of a gold standard disappears and we might as well remain on a fiat standard.

 

[kevsta]

Correct.

If the government can still dilute the money supply then the only attraction of a gold standard disappears and we might as well remain on a fiat standard.

disagree.

if we say it must be 50% backing, yes they can still increase the money supply, but they still have to increase metals reserves by the same amount?

if we want to pump another two hundred gazillion dollars into the system, we still have to acquire an extra one hundred gazillion dollars worth of unobtainium to back it?

who says it has to be 100%? as long as the ratios are enforced, it still works.

 

[psionl0]

who says it has to be 100%? as long as the ratios are enforced, it still works.

And that is the problem.

Under a 100% gold standard (set up with the approval of the public) it would be politically difficult for a government to dilute the money supply with fiat currency.

However, under a 17% gold standard, there is nothing to stop a politician from solemnly promising not to tamper with the gold ratio then, after winning the election, claiming that he has to break this promise because of the activities of the previous mob. (It's the oldest trick in the book).

Another trick to thwart the public would be to allow the fed to do some QE'ing then claim that the fed is not "controlled" by the government.

No, it has to be all or nothing.

 

[kevsta]

I dont follow your logic. unless you are saying we actually have to use coins made of the substance so there is no possible way it can be done..?

otherwise even with 100% backed they can still pull exactly the same antics? why would it be any easier or more difficult to veer from legislation on 17% or 100% ?

once they are going to cheat, the amount of backing is only the previous start position

 

[psionl0]

You really can't see it? We might still be doing our banking electronically (or with paper money) and storing our gold in repositories but not a single unbacked dollar could be introduced into the economy without it showing up in the government's books somewhere. There is no adding fiat money to the mix by "stealth".

It is a lot harder for a government to introduce the first fiat dollar into the economy than the 5,000,000,000,000th fiat dollar. Once the principle is accepted that we can mix gold and fiat currencies then we don't have a gold standard.