226 replies to this topic

[Br Cornelius]

Yamato, on 02 October 2012 - 07:48 PM, said:

Therefore let's choose something that has proven historical value, doesn't degrade in air or in time, and isn't something to throw out the moment it smells funny.

We have to end the Fed and get the government policy out of the market regardless.  A lot of your concerns just don't play out in history.   Eisenhower and Kennedy didn't call the gold mine before figuring out who to appoint or how much money to create.  Reversing Nixon Shock as a first step is prudent, not naive.

Gold is one possible solution - that is all.
History tells us that it has many intrinsic flaws so I choose not to adopt it as my preferred solution to the current crisis.

Br Cornelius

[Yamato]

Br Cornelius, on 02 October 2012 - 07:52 PM, said:

Gold is one possible solution - that is all.
History tells us that it has many intrinsic flaws so I choose not to adopt it as my preferred solution to the current crisis.

Br Cornelius

History tells you that.   It did a fantastic job of stabilizing the dollar as the video indicated and you can't acknowledge that.   You're making up your own facts as you go and your preferences go from there.

[Br Cornelius]

Yamato, on 02 October 2012 - 07:54 PM, said:

History tells you that.   It did a fantastic job of stabilizing the dollar as the video indicated and you can't acknowledge that.   You're making up your own facts as you go and your preferences go from there.

I personally would be no better off under a Gold standard. I would have no greater control over my destiny than in the current system. It would be controlled and manipulated by an elite of Gold bankers. I would be subject to arbitrary fluctuations in the money supply which would have impacts on my working situation.
The same is true of almost all of the worlds population.

That is totally unsatisfactory and can be addressed by adopting an intrinsically equitable system that doesn't relies on the possession of a shiny piece of metal with a very limited range of uses. You may find it an attractive proposition to have a constant flow of rare metals moving around the world and dictating economic stability - but I do not share your certainty or belief.

What is actually needed is a fixed and immovable international yardstick which is not subject to the whims of any given government. It would be best to have that pegged to commodities which have a real baring on the day to day lives of real people.

My proposal is hardly new and has the backing of the Chinese as a viable means of shedding the dead weight of the debauched dollar;

Quote

Interestingly, China has raised the possibility of an alternative peg for the SDR based upon commodities:

China's government has floated a variant of this idea, suggesting a currency based on 30 commodities along the lines of the "Bancor" proposed by John Maynard Keynes in 1944.

(Keynes was the most prominent economist of the first half of the 20th century, conventionally credited with ending the Great Depression.)
Indeed, the head of the China's central bank wrote recently:

Though the super-sovereign reserve currency has long since been proposed, yet no substantive progress has been achieved to date. Back in the 1940s, Keynes had already proposed to introduce an international currency unit named "Bancor", based on the value of 30 representative commodities. Unfortunately, the proposal was not accepted. The collapse of the Bretton Woods system, which was based on the White approach, indicates that the Keynesian approach may have been more farsighted. The IMF also created the SDR in 1969, when the defects of the Bretton Woods system initially emerged, to mitigate the inherent risks sovereign reserve currencies caused. Yet, the role of the SDR has not been put into full play due to limitations on its allocation and the scope of its uses. However, it serves as the light in the tunnel for the reform of the international monetary system.

Keynes proposed that the Bancor should be fixed to a basket of 30 commodities, including gold.

Keynes' arguments for a currency fixed on a basket of commodities was that it would stabilize the average prices of commodities, and with them the international medium of exchange and a store of value.
As China's central banker said, the goal would be to create a reserve currency “that is disconnected from individual nations and is able to remain stable in the long run, thus removing the inherent deficiencies caused by using credit-based national currencies”.

But Keynes proposed a lot more than simply pegging SDR's to a basket of currencies:

He proposed a global bank, which he called the International Clearing Union. The bank would issue its own currency - the bancor - which was exchangeable with national currencies at fixed rates of exchange. The bancor would become the unit of account between nations, which means it would be used to measure a country's trade deficit or trade surplus.
Every country would have an overdraft facility in its bancor account at the International Clearing Union, equivalent to half the average value of its trade over a five-year period. To make the system work, the members of the union would need a powerful incentive to clear their bancor accounts by the end of the year: to end up with neither a trade deficit nor a trade surplus. But what would the incentive be?
Keynes proposed that any country racking up a large trade deficit (equating to more than half of its bancor overdraft allowance) would be charged interest on its account. It would also be obliged to reduce the value of its currency and to prevent the export of capital. But - and this was the key to his system - he insisted that the nations with a trade surplus would be subject to similar pressures. Any country with a bancor credit balance that was more than half the size of its overdraft facility would be charged interest, at a rate of 10%. It would also be obliged to increase the value of its currency and to permit the export of capital. If, by the end of the year, its credit balance exceeded the total value of its permitted overdraft, the surplus would be confiscated. The nations with a surplus would have a powerful incentive to get rid of it. In doing so, they would automatically clear other nations' deficits.

http://georgewashing...es-replace.html

The thing that most people fail to realize with their fantasy Gold standard is they imagine that it will represent both a stabilizing influence whilst relying on a free market of Gold transfers with independent sovereign nations in control of their own destiny. The reality is the only way to make such a thing work would be surrender money sovereignty to an "impartial" Global third party clearing house. This side of things sits far less well with most enthusiasts.

The Bancor strikes me as an entirely more feasible alternative to the Dollar than a pure Gold standard. The wiki article is factually incorrect in stating that the bancor would be expressed in Gold.

http://en.wikipedia.org/wiki/Bancor

At this stage Yamato - I think you have a very shallow understanding of the actual complexities of international money.


Br Cornelius

Edited by Br Cornelius, 02 October 2012 - 08:21 PM.

[questionmark]

Br Cornelius, on 02 October 2012 - 07:52 PM, said:

Gold is one possible solution - that is all.
History tells us that it has many intrinsic flaws so I choose not to adopt it as my preferred solution to the current crisis.

Br Cornelius

Let me explain it to you: The big wet dream of all gold hamsters is that governments reintroduce the gold standard, appreciate the gold to the level to cover the money in circulation, then stop the trading of gold and buy the whole stash of the "investors" to keep the value of gold controllable (because else we still would need a stable price to have a constant valued currency) and prohibit the free trade of gold to avoid value swings.

Even somebody who invested $10,000 in gold would end up multimillionaire under that scheme.

The problem is that they have not thought their great idea through: If the government prohibits the free trade of gold the only possible customer is the government, so they can plain and simply depossess them by offering $1 an ounce, they have nobody else to sell it to.

Edited by questionmark, 02 October 2012 - 08:24 PM.

[and then]

Yamato, on 02 October 2012 - 07:17 PM, said:

Our currency is already nominally tied to our labor.  The value of your work is represented by your salary.  It's already digital too.   You described what we have already you just changed the word dollars to geos.

I never claimed to be an expert of any kind Yam.  My point is that whatever currency we choose will still reflect the need for VALUE.  And we value necessities above all else.  And ultimately our labor/skill is all we have to trade, no?

[Yamato]

Br Cornelius, on 02 October 2012 - 08:02 PM, said:

I personally would be no better off under a Gold standard. I would have no greater control over my destiny than in the current system. It would be controlled and manipulated by an elite of Gold bankers. I would be subject to arbitrary fluctuations in the money supply which would have impacts on my working situation.
The same is true of almost all of the worlds population.

That is totally unsatisfactory and can be addressed by adopting an intrinsically equitable system that doesn't relies on the possession of a shiny piece of metal with a very limited range of uses. You may find it an attractive proposition to have a constant flow of rare metals moving around the world and dictating economic stability - but I do not share your certainty or belief.

What is actually needed is a fixed and immovable international yardstick which is not subject to the whims of any given government. It would be best to have that pegged to commodities which have a real baring on the day to day lives of real people.

My proposal is hardly new and has the backing of the Chinese as a viable means of shedding the dead weight of the debauched dollar;



http://georgewashing...es-replace.html

The thing that most people fail to realize with their fantasy Gold standard is they imagine that it will represent both a stabilizing influence whilst relying on a free market of Gold transfers with independent sovereign nations in control of their own destiny. The reality is the only way to make such a thing work would be surrender money sovereignty to an "impartial" Global third party clearing house. This side of things sits far less well with most enthusiasts.

The Bancor strikes me as an entirely more feasible alternative to the Dollar than a pure Gold standard. The wiki article is factually incorrect in stating that the bancor would be expressed in Gold.

http://en.wikipedia.org/wiki/Bancor

At this stage Yamato - I think you have a very shallow understanding of the actual complexities of international money.


Br Cornelius

Well thank you for expressing how shallow my understanding is.   That's a great way to treat someone who initiates a discussion and participates in it heavily.  I'm sure that everything I know, you already know all about.

No, undoing what the almighty omniscient and illustrious Richard Nixon did would not make you controlled and manipulated by an elite of Gold bankers.  LOL  I don't know what crazy website you're getting this from.   And you are exponentially more subject to arbitrary fluctuations in the money supply right now than you were in the 1950s, 1960s or 1970s.  I don't need perfection in my solutions, I want something tried and proven throughout history and dramatically better than we have now.

The facts in the video up for discussion haven't even been broached yet, and up to this point you've ignored them in your discussion to arrive at comments like "I would be no better off with a gold standard."   I've given you the reason why you're better off with a gold standard.  You keep telling me what it'll be like when we already know what it's like and it's nothing like you're talking about.   I mean, watch the video.   If you claim you're somehow immune to how you're better off under a gold standard (your 'working situation"?), then you need to explain how that's so before I accept your claim.   If you want to claim something in the video is wrong, you should point out what that something is and then follow up by explaining how and why.

You have given me no reason to think the Wikipedia article is wrong.

Basing on commodities is going to favor the land of plenty and US hegemony anyway if you really think a gold standard will do so simply because you believe the US has the most gold.   So what seems to be your reason not to accept a gold standard (US hegemony) won't exactly be dealt with amicably to all under a commodities standard.  

I honestly hope China adopts a new currency on these lines and I wish they'd do it sooner not later.    Simply unpegging their currency from the dollar would be all it takes for them to begin appreciating their own currency somewhat, and give their budding middle class (especially their saving class) the purchasing power it needs to take part in their economy.  

You're being way too defensive in thinking I won't accept alternatives when that's what I've been asking for the whole time.    Up to this point, you've been quick to complain about the tried and proven old idea in favor of your new global currency that replaces the dollar as the reserve.   At this point it's clear that you're opposed, perhaps morally, to US-hegemony and have written off the US dollar as dead.  I don't know if the latter is due to malice or not, but I'm interested in saving the dollar not surrendering to its demise.  Thank you for redirecting to a solutions-oriented discussion.

[Yamato]

and then, on 02 October 2012 - 08:30 PM, said:

I never claimed to be an expert of any kind Yam.  My point is that whatever currency we choose will still reflect the need for VALUE.  And we value necessities above all else.  And ultimately our labor/skill is all we have to trade, no?

We have a medium of exchange, our currency.

If work was money it's a death sentence to everyone who isn't a "worker", Comrade.

[DieChecker]

Yamato, on 01 October 2012 - 09:07 PM, said:

Dollar stability is an historical fact, 97-years long under the gold standard.  

Man had stable economys that lasted hundreds of years based on the oldest system... Barter, yet that does not mean that Barter is what we should use in the present day. Because gold was stable in the past does not make it stable today.

I do believe that if the US went to a system where money was backed, the rest of the Fiat driven world would have a distict advantage over us on the international stage. So, unless we plan on not trading with anyone I think we're going to have to stick with the Fiat system for now. That is not to say the Fed needs to remain as is. There is definately room for improvement.

[hacktorp]

This may be the ultimate reason why a return to a gold standard will not happen in the US...right, wrong, or indifferent:

Quote

a large portion of the Western central banks’ stated 23,000 tonnes of gold reserves are merely a paper entry on their balance sheets

http://sprottglobal....rticle/?id=6590

On the day the US goes to a gold standard, the people discover their asses really ARE owned by China, et al.

[ninjadude]

Gummug, on 01 October 2012 - 08:47 PM, said:

What I mean is, the government should be responsive to the popular will, the will of the people, as it was in George Washington's day.

What makes you think that it was? There was no mass communication (phone, tv, internet, mail, few and limited newspaper). It is and was responsive by having popular elections.

[sam12six]

Yamato, on 02 October 2012 - 07:48 PM, said:

Therefore let's choose something that has proven historical value, doesn't degrade in air or in time, and isn't something to throw out the moment it smells funny.

Why? Let's imagine we went to $10 gold pieces that had an intrinsic gold value of $2 in today's world (good luck keeping up with your tiny coins):

Do you think our economy would be better if the government paid thousands of times the cost of today's ten dollar bill to circulate more money? Would it help things for the government to add the massive debt of collecting the gold to make into this currency in the first place?

What Cornelius has been trying to explain when stating that gold has an arbitrary value is that early in history, people DECIDED it made a good currency medium (because it doesn't corrode and people couldn't easily run out and get more to make their own currency). If humanity hadn't decided to use it this way, before electronics, its only value compared to other metals was the fact that you didn't need to constantly clean it to keep it shiny.

The reason people who don't think too deeply on the subject want to return to the gold standard is that they imagine a collapse of our economy and themselves sitting on a pot of gold that they can use to start over.

Yamato, on 02 October 2012 - 07:48 PM, said:

We have to end the Fed and get the government policy out of the market regardless.  A lot of your concerns just don't play out in history.   Eisenhower and Kennedy didn't call the gold mine before figuring out who to appoint or how much money to create.  Reversing Nixon Shock as a first step is prudent, not naive.

The supply of money at the time was a tiny fraction of what exists today. Early in history, fractional reserve banking meant that the banks only kept a little of the money deposited in them and loaned out the rest. Today, it means that new virtual money is created every time they make a loan - which has been going on for decades. Short of completely scrapping the current economic system to make the switch, there's no way to go back to a precious chunk of material standard. Even if we did, as Die Checker mentioned, we would then be at a tremendous economic disadvantage unless we also convinced every other government on the planet to follow suit.

The only problem with our current system of money is that the Fed controls the supply of it instead of the government itself doing so (that and that the government pays the Fed to do so). To fix it, there are a couple of simple set of steps the government could take (simple, but unbelievably hard, politically speaking):

Kill the bank. Eliminate the Fed and take back control of the money supply.

Tie the value of currency to something real. This could be the GDP or it could be a formula like stock indices (only based on real commodities) - This formula would be something like : The value of a dollar = The dollar cost of a barrel of crude + the value of an ounce of gold + the dollar cost of a bushel of corn / whatever. The more commodities involved in the calculation, the more stable the currency.

[Yamato]

DieChecker, on 02 October 2012 - 10:35 PM, said:

Man had stable economys that lasted hundreds of years based on the oldest system... Barter, yet that does not mean that Barter is what we should use in the present day. Because gold was stable in the past does not make it stable today.

I do believe that if the US went to a system where money was backed, the rest of the Fiat driven world would have a distict advantage over us on the international stage. So, unless we plan on not trading with anyone I think we're going to have to stick with the Fiat system for now. That is not to say the Fed needs to remain as is. There is definately room for improvement.

Why???

Interesting that Br likes your post when he's the one advocating a barter-based Bancor.   Even more interesting that he likes your post claiming a fiat driven world has an advantage after claiming he understands the problems with fiat currency.   I see someone slopping whatever criticism he can find on the wall with no real conviction to saying anything (just poo poo gold and he's good).

[sam12six]

Yamato, on 03 October 2012 - 06:53 AM, said:

Why???

Interesting that Br likes your post when he's the one advocating a barter-based Bancor.   Even more interesting that he likes your post claiming a fiat driven world has an advantage after claiming he understands the problems with fiat currency.   I see someone slopping whatever criticism he can find on the wall with no real conviction to saying anything (just poo poo gold and he's good).

First, the value of our money wouldn't be tied to the strength of our economy, it would be based on the market value of a commodity. The US economy could be booming and the value of our gold money tank because someone in South Africa discovered a massive deposit of gold. The opposite extreme applies too. A country who doesn't like us could use their fiat money to buy up a bunch of gold. The material our money represented in that case would be more than the currency value. People would start gathering up our money and either hoard it or sell it in the international market. Our economy would grind to a halt because no one would actually be using the money as money.

The only way to avoid such things would be to make the gold value of our money so tiny that it wouldn't be susceptible to swings in gold value. You know what it would be then? Yep, fiat currency. Only it would be fiat currency made of a material that cost hundreds or thousands of times what other nations spend to circulate money.

Generations ago, the gold standard was exactly that - a standard. It applied because pretty much every nation agreed that this rare, pretty metal with no practical application that wasn't better served by other metals would be a good representation of value. In today's world, the gold standard is a fear based imaginary shelter. People feel that if the world should go to hell in a handbasket, they'd be sitting there with their valuable gold. They never stop to consider that if the government could make all the money into gold, it could just as well hand out gold to people for no reason and keep the current money system. Neither's going to happen because of the sheer expense of the idea.

Anything that people can't easily duplicate is a good representation of value. Any government stupid enough to use something unnecessarily expensive for the purpose would deserve the handicaps that policy would create.

[Yamato]

sam12six, on 03 October 2012 - 02:51 AM, said:

Why? Let's imagine we went to $10 gold pieces that had an intrinsic gold value of $2 in today's world (good luck keeping up with your tiny coins):

Do you think our economy would be better if the government paid thousands of times the cost of today's ten dollar bill to circulate more money? Would it help things for the government to add the massive debt of collecting the gold to make into this currency in the first place?

What Cornelius has been trying to explain when stating that gold has an arbitrary value is that early in history, people DECIDED it made a good currency medium (because it doesn't corrode and people couldn't easily run out and get more to make their own currency). If humanity hadn't decided to use it this way, before electronics, its only value compared to other metals was the fact that you didn't need to constantly clean it to keep it shiny.

The reason people who don't think too deeply on the subject want to return to the gold standard is that they imagine a collapse of our economy and themselves sitting on a pot of gold that they can use to start over.



The supply of money at the time was a tiny fraction of what exists today. Early in history, fractional reserve banking meant that the banks only kept a little of the money deposited in them and loaned out the rest. Today, it means that new virtual money is created every time they make a loan - which has been going on for decades. Short of completely scrapping the current economic system to make the switch, there's no way to go back to a precious chunk of material standard. Even if we did, as Die Checker mentioned, we would then be at a tremendous economic disadvantage unless we also convinced every other government on the planet to follow suit.

The only problem with our current system of money is that the Fed controls the supply of it instead of the government itself doing so (that and that the government pays the Fed to do so). To fix it, there are a couple of simple set of steps the government could take (simple, but unbelievably hard, politically speaking):

Kill the bank. Eliminate the Fed and take back control of the money supply.

Tie the value of currency to something real. This could be the GDP or it could be a formula like stock indices (only based on real commodities) - This formula would be something like : The value of a dollar = The dollar cost of a barrel of crude + the value of an ounce of gold + the dollar cost of a bushel of corn / whatever. The more commodities involved in the calculation, the more stable the currency.

I'm not suggesting gold as money.   Like there won't be any tiny coins in this problem that's somehow unique only to gold backing of our currency in exactly the same way we won't be storing oil drums and grain bags and slaves in our basement if we base our currency on various commodities or labor, the idea Br has been trying to sell me.   Obviously we're not going to own the basis for our currency when we propose these ideas, I can't understand why people create these double standards solely for gold?   Because it has historical value?   Because it's legal tender?  Tiny coins aren't necessary because Federal Reserve Notes are legal tender.

Maybe it's easier to accept the destruction of the dollar when we can agree on its demise?   Talk about economic devastation!

I'm glad you admit humanity decided to use gold that way instead of arbitrarily deciding to use ANYTHING ELSE YOU CAN POSSIBLY THINK OF.   What I'm telling you is that everything has value when we perceive it to have value.  There is no exception.  My opinion about gold notwithstanding.   If it's even a criticism at all, it's not just a criticism of gold, it's a criticism of everything.  Maybe these people just don't like money?  But whatever, we need to come up with an alternative policy.   It's pretty telling in this thread that people interpret "alternatives" to mean alternatives to the dollar and not alternatives to the policy.


Even if we did, as Die Checker mentioned, we would then be at a tremendous economic disadvantage unless we also convinced every other government on the planet to follow suit.

I see no economic disadvantage of a responsible currency that can't be printed to destruction.  I see no reason to convince every other government or even one other government.   Even if you believe this, and I have no idea why you do, then how does a multiple commodities basis not pose the same problems?

The world already has commodities based currencies whose value is determined by the demand of the raw materials these companies export.   I've been using these currencies as inflation hedges the same way I use gold.  Earlier in this thread I mentioned the New Zealand dollar and the Canadian dollar as better alternatives to the US dollar.

If you'd like to see this correlation demonstrated graphically, you will notice the the predictability of price action between the Canadian dollar FXC and the materials ETF XLB.

http://finance.yahoo...&q=l&c=xlb&ql=1

You can easily notice the same correlation with the Australian Dollar, FXA.

However, when comparing the US dollar to materials index, correlation is as likely to be negative as it is positive, with random price action and noticeable divergence between prices through time.

http://finance.yahoo...q=l&p=&a=&c=xlb

Having a commodities-based global currency (no different than what you spoke of with gold, it would be after we have to convince every government in the world to adopt it) will favor the commodities producing nations.  The Middle East and Russia will love the oil based money.  Looking past the US dollar and imposing a global currency favoring the production of foreign countries is a ruinous idea for the US.  It's loaded with an acceptance of the death of the dollar.  This is an even more hazardous attitude about money than the fiat money printers have because they ignore the damage their inflation causes or simply deny it exists at all.   Actually accepting the death of the dollar is a new high in jeopardizing our nation's economy I haven't seen until I read the replies here.

[Yamato]

sam12six, on 03 October 2012 - 07:40 AM, said:

First, the value of our money wouldn't be tied to the strength of our economy, it would be based on the market value of a commodity. The US economy could be booming and the value of our gold money tank because someone in South Africa discovered a massive deposit of gold. The opposite extreme applies too. A country who doesn't like us could use their fiat money to buy up a bunch of gold. The material our money represented in that case would be more than the currency value. People would start gathering up our money and either hoard it or sell it in the international market. Our economy would grind to a halt because no one would actually be using the money as money.

The only way to avoid such things would be to make the gold value of our money so tiny that it wouldn't be susceptible to swings in gold value. You know what it would be then? Yep, fiat currency. Only it would be fiat currency made of a material that cost hundreds or thousands of times what other nations spend to circulate money.

Generations ago, the gold standard was exactly that - a standard. It applied because pretty much every nation agreed that this rare, pretty metal with no practical application that wasn't better served by other metals would be a good representation of value. In today's world, the gold standard is a fear based imaginary shelter. People feel that if the world should go to hell in a handbasket, they'd be sitting there with their valuable gold. They never stop to consider that if the government could make all the money into gold, it could just as well hand out gold to people for no reason and keep the current money system. Neither's going to happen because of the sheer expense of the idea.

Anything that people can't easily duplicate is a good representation of value. Any government stupid enough to use something unnecessarily expensive for the purpose would deserve the handicaps that policy would create.

Practical application?   What application does my paper have?    It obviously doesn't matter.   Why do you insist on assigning these bizarre double standards just to gold and not to anything else?

They would use their fiat money to buy "a bunch of gold"?   That's some baseless faith in the value of fiat that ignores the very problem we're trying to fix here.  That's also probably the biggest admission that gold is actually demanded as we can get.   They could also do the same with any other commodity.  

I'm more interested in looking at what did happen than entertaining crazy notions that never did.  People were worried about inflation long before "today's world".  They remember the Continental in this country, which went to zero like every other fiat of centuries ago.  It's not "imaginary" beyond any other storehouse of value we can discuss.  It's superior because of worldwide transferability, portability, survivability, historical value, and a proven track record of currency stabilization.  It has nothing to do with being "pretty" or the bogus claim that gold isn't useful or demanded by the market ex-financials.