Art Vandelay said:
Because they would be paying the workers the dollars directly, and those dollars would very likely not be spent or invested in the American economy. But if you have to exchange them for rupees, then you ensure those dollars would have to come back in. It isn't about how the firm gets the dollars; it's about what happens to the dollars when they pay their workers, what happens when the dollars go outside the country.
Not a problem. As I said, take that amount, take how much gold you have, divide.
No, it wouldn't! The dollar would still have the same market value; the only difference is it would also have tangible value in that it would be redeemable for gold, which would increase its real value, not devalue it!
UserGoogol said:
That is hardly a straightforward question. Money in the US is printed by the Bureau of Engraving and Printing for the Federal Reserve. The Fed buys the money at about 3½¢ per bill.
The Fed orders new money when it needs to increase the number of reserves. After it prints it, the money gets loaned out; they either purchase bonds from the Treasury whenever the government runs a deficit, or they loan it out to banks at the discount rate.
If you really want to know how all this works, an excellent book (which is also a good and surprisingly quick read) is The Case Against the Fed by Murray Rothbard.
The Don said:
The historical record disagrees with you. They did such a good job that they could even deposit their notes at the Bank of England without question. The forgeries were called "almost perfect." It forced the Bank of England to recall all their notes higher than £5 and reissue them with new designs.
Drooper said:
1) Medium of exchange; gold has been used for this throughout history.
2) Store of value; I don't think anyone is going to doubt gold's use here.
3) Unit of account; you can argue that gold possibly doesn't meet this one, but the reality is that throughout history units of accounts have often been measured on weights of gold.
Gold is still the #2 form of money behind the dollar because when the dollar starts to inflate, people start buying more gold, and vice-versa. Talk to pretty much any investor and they'll confirm this.
I have taken reputable courses, thank you very much.
You are quite wrong when you intially said thatshanek said:
It did not almost completely wreck the economy.
Notes higher than £5 were comparatively rare at the time (the equivalent of notes hogher than $100 in value in use in the U.S.)
The war DID have massive economic repercussions but I cannot find any source which ascribes these to the volume of forged bank notes in circulation.
The value of the global currency could be set by something other than the value in relation to other currencies.
If the government decides to print less or charge more to banks for the money, making the costs higher, then that would control the circulation. That's what they do internally with the Federal Reserve. That doesn't change, it just means instead of one country's banks, it included many countries.
I still don't see a very good reason why there shouldn't be one global currency, or maybe 4 or 5 regional currencies. For example, the US/Mexico/Canada and the Carribbean could have one currency.
The economies of neighboring countries are ALREADY interlocked. When one rises, they all tend to rise. When one falls, they all start falling.
About 10 years ago or so, the Asian countries started having serious problems with their currencies. It all started in one country, I think Japan and then everyone fell into the sewer. Countries that border each other are already economically linked. Why have multiple currencies?
shanek said:
For 1 correct out of three you get an F.
Gold is NOT a medium of exchange. (historically, we used to use all sorts of things for exchange)
Gold is NOT a unit of account.
Gold IS a store of value.
Ergo it is not money.
And there some who buy gold as an inflation hedge. But simply as an asset with (relatively) fixed supply. Ther eis also flight to other assets, commodities as well.
Repeat after me. Gold is not money.
CapelDodger
Penultimate Amazing
A single world currency is desirable in principle, but there would have to be a lot of changes in the world before it became workable. Currency conversion costs and uncertainties are an impediment to trade, and therefore, in my opinion, undesirable. But there are other impediments, and other undesirables. Different standards on workers' health and safety, child labour, forced labour, environmental standards, tariffs and so on are also impediments. Member countries would have to provide certain basic standards, and free trade.The idea said:
The process could begin with the developed nations that engage in most of international trade, and other countries could join as and when they fulfilled the necessary conditions. A Central Bank of some sort would have to exist to manage the money-supply. As the (evolving) European Central Bank does for the Euro.
All of this is blue skies thinking. I doubt that any of us will live to see it.
CapelDodger
Penultimate Amazing
If it's never optimal for the world, it's never optimal for the US. Currency conversion and uncertainties impose a cost on trade which has nothing to do with the traded goods (or services). Currency speculation also distorts trade, and currency manipulation is a constant temptation to governments (see China currently). On an otherwise level playing-field, a single currency would eliminate conversion and hedging costs without otherwise affecting trade and thus would be a good thing.Drooper said:
CapelDodger said:
FX costs are the tiniest proportion of trade costs.
Compared with tarriff, regulatory, customs, insurance costs etc. that are associated with international trade, and could be far more easily reduced, they aren't even worth measuring.
By comparison, the cost imposed by a single currency are of a significant magnitude - even in a country like the US.
For example the Euro area is bearing a massive cost for their single currency, just as the Eastern Lander in Germany did before that. Other countries that are at the limit of their optimal currency area include Italy, the UK, and France - all of which would probably be better off if the split into separate monetary areas.
But if you want a good example of the absurdity of stretching monetary areas too widely, just go to Argentina, which Dollarised. Once an assymmetric shock hits such disparate regions within a common currency area the shock to the real economy (output, employment) can be shocking.
A single global currency will always be a ridiculous idea from this perspecitve alone.
Art Vandelay
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What are the workers going to do with them, then? Make paper hats?shanek said:
The two come down to the same thing. A situation in which dollars flow into India, but not out of, is simply not sustainable.
Okay, say we need one trillion dollars in circulation. And say gold is selling at $10/gram (IOW, one dollar is worth 100 milligrams). Logic says that to be fully backed by gold, the dollars require 100 billion grams (or 100 kilotons). But say we only have 1 billion grams. Then that would mean that each dollar would be backed by 1 milligram. So in a world in which one dollar is worth 100 milligrams, we are going to guarantee that each dollar can, at any time, be turned in for 1 milligram? I guess one could call that being "backed" by gold, but only in a rather trivial sense. If we rely on the gold backing to support the value of money, the dollar will experience a 99% devaluation.
Except that under your scheme, there is simply no way to BOTH keep the market value, AND keep it redeemable for its full market value. Offering holders of dollars a deal they would be a fool to accept would not increase its value.
Art Vandelay said:
No, they would be spending them in the Indian economy, duh!
Are you aware that there are localities that are using their own money, only useful in that area? For example, the Ithica Hour? It's there for precisely that reason: to avoid capital flight.
It's irrelevant what gold is trading at on the commodities market.
Again, this has nothing to do with the market value. You can redeem the gold not at the market value, but at whatever the gold standard is set to. Or, you can use the dollar to purchase gold in the commodities market; but that just moves the dollar to where it can be spent by someone else. Redeeming the dollar takes it out of circulation.
Art Vandelay
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So they give the dollars to other Indians. That doesn't answer my question. What do these Indians do with the dollars?shanek said:
That's simply an argumentum ad populum: "people in Ithaca think that separate currencies stop capital flight, therefore it does". Sorry, not much of an argument.
Then I'd like for you to explain what it means for the value of a dollar to be backed by gold, if a dollar can be redeemed for only a small portion of that value. According to that logic, dollars are already backed by gold. Go to any bank in the nation and ask whether you can turn in a thousand dollars in exchange for a gram of gold. I'm sure they'll agree.
What you are proposing is a completely vapid meaning of "backed" by gold. Only part of the value would be backed by gold, and on top of that, that portion wouldn't even be guaranteed. The whole point of being backed by gold is that one can turn in money at any time for gold. If the formula is total gold/money needed, then any inflation would cause the "money needed" portion of the equation to go up, reducing the redemption value of a dollar. So how is that any different from the current situation?
If the redemption value is less than the market value, then it is not backed by gold. The only possible way that the market value could be greater is if people attach value to it beyond its redemption value.
UserGoogol
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shanek said:
I think e-Gold is more of a Gold-backed-currency than Gold itself. I'm not sure what difference this makes, but I'm sure the difference could be viewed as meaningful by someone, if not you.