22 Feb 11
Originally posted by telerionThe Swiss cannot increase the world supply of gold.
No it actually means that the value of gold in terms of other goods (i.e., some basket or average of goods) went up. Generally speaking the car is worth far fewer of these gold coins. In other words, in a gold-backed currency world you'd have a massive deflation.
By the same token, if the Swiss Bank put some gold into circulation, thereby sign ...[text shortened]... ply of gold, the value of gold relative to other goods would decline and you'd have inflation.
In terms of the worldview I am describing (which I do not hold but everyone knows I'm nuts anyway) these Swiss bankers are filthy rich, and it's their money, and they can do what they want with it, and if you don't like it...well, try and take it and see what happens.
22 Feb 11
Originally posted by AThousandYoungOf course they can, they have stored a bunch of it and if they sell it the supply has increased.
The Swiss cannot increase the world supply of gold.
In terms of the worldview I am describing (which I do not hold but everyone knows I'm nuts anyway) these Swiss bankers are filthy rich, and it's their money, and they can do what they want with it, and if you don't like it...well, try and take it and see what happens.
22 Feb 11
Originally posted by KazetNagorraen.wikipedia.org/wiki/Gnomes_of_Zürich
Of course they can, they have stored a bunch of it and if they sell it the supply has increased.
They have lots of gold. They cannot create gold. They can distribute gold that they are storing and protecting.
But your logic demonstrates why capitalists are so powerful. If you have all the money, you can screw with people immensely, indirectly.
23 Feb 11
ATY, what are you doing man? Are you playing devil's advocate or something? I think that among the reasonable people here (I won't name names but you know who I'm talking about) we have established that a gold-backed currency has some severe drawbacks as money during normal times and that it is even worse during a crisis time. We also given a few reasons (there are plenty more) why gold is not much help during a world meltdown. That's really about it.
As for MB a gold-backed currency has one possible advantage: in theory it ties the hands of the monetary authority which forces the fiscal authority to balance its budget over time rather than inflating it away.
In practice, this really doesn't pan out because governments can either formally or informally suspend conversion into gold.
Also if you think that monetary policy can have an effect on the real economy, then tying the monetary authority's hands comes at a potentially high cost during recessions.
23 Feb 11
Originally posted by telerionYou talk as if I was suggesting replacing all fiat money with gold backing. I am suggesting competition with it, nothing more. If backing a currency with gold and silver is worse it will show when it competes with fiat.
ATY, what are you doing man? Are you playing devil's advocate or something? I think that among the reasonable people here (I won't name names but you know who I'm talking about) we have established that a gold-backed currency has some severe drawbacks as money during normal times and that it is even worse during a crisis time. We also given a few reasons ...[text shortened]... n tying the monetary authority's hands comes at a potentially high cost during recessions.
I don't even think it is necessary to back a currency with anything as long as it has to compete fairly with another currency. Competition should keep inflation in check just to attract people to the currency with a lower inflation rate.
23 Feb 11
Originally posted by Metal BrainI do agree with the last part. If you had two currencies that we equally exchangeable throughout the economy, then that would put a market force on both monetary authorities to keep inflation under control.
You talk as if I was suggesting replacing all fiat money with gold backing. I am suggesting competition with it, nothing more. If backing a currency with gold and silver is worse it will show when it competes with fiat.
I don't even think it is necessary to back a currency with anything as long as it has to compete fairly with another currency. Compet ...[text shortened]... uld keep inflation in check just to attract people to the currency with a lower inflation rate.
The question to consider however is if the costs of producing and maintaining a second money supply would outweigh the benefits. Given the low inflation environment we've seen over the last almost 40 years (thanks to the Fed learning the importance of inflation expectations), I suspect the costs from inflation are small and am perfectly happy with TIPS as a hedge against inflation.
23 Feb 11
Originally posted by telerionI'm just explaining the logic of gold as money. As an economist you should be familiar with it. This logic has a long history behind it. That's why we used to back our currency with gold.
ATY, what are you doing man? Are you playing devil's advocate or something? I think that among the reasonable people here (I won't name names but you know who I'm talking about) we have established that a gold-backed currency has some severe drawbacks as money during normal times and that it is even worse during a crisis time. We also given a few reasons ...[text shortened]... n tying the monetary authority's hands comes at a potentially high cost during recessions.
I'm also expressing my weird conspiracy theories for my own amusement.
23 Feb 11
Originally posted by telerionAs long as the currencies are competitive I don't see why they couldn't be privately owned, or at least one of them.
I do agree with the last part. If you had two currencies that we equally exchangeable throughout the economy, then that would put a market force on both monetary authorities to keep inflation under control.
The question to consider however is if the costs of producing and maintaining a second money supply would outweigh the benefits. Given the low infl ...[text shortened]... e costs from inflation are small and am perfectly happy with TIPS as a hedge against inflation.
I only have a problem with the FRS being privately owned because it is a monopoly. If it is truly competitive I have no problem with it.
24 Feb 11
Originally posted by Metal BrainFor what it is worth the Fed is effectively more a public institution than a private one and since it rebates the overwhelming majority of its revenues back to the Treasury (rather than say private owners or shareholders) it really doesn't behave like a monopolistic firm.
As long as the currencies are competitive I don't see why they couldn't be privately owned, or at least one of them.
I only have a problem with the FRS being privately owned because it is a monopoly. If it is truly competitive I have no problem with it.
24 Feb 11
Originally posted by telerionYou are so full of it!
For what it is worth the Fed is effectively more a public institution than a private one and since it rebates the overwhelming majority of its revenues back to the Treasury (rather than say private owners or shareholders) it really doesn't behave like a monopolistic firm.
You think inflation in the late 70's was an accident????
The FRS has a monopoly on the issuance of money. If you want to claim it is a regulated monopoly that is fine, but it clearly is not regulated enough. You are very wrong, it behaves exactly like a monopolistic firm. Hyperinflation is proof enough of that.
If the FRS had to compete with another currency that is TRULY competitive hyperinflation would not happen.
24 Feb 11
Originally posted by AThousandYoungAn interesting and slightly amusing (to me) article on the topic for anyone...well, anyone interested in the topic:
I'm just explaining the logic of gold as money. As an economist you should be familiar with it. This logic has a long history behind it. That's why we used to back our currency with gold.
http://www.coinresource.com/articles/silver_as_money.htm
Some good info, and some amusing opinions. For example:
All of monetary history teaches us that a dishonest money system leads to the very problems we are witnessing today, yet we fail to look at the root cause. The root cause is accepting anything other than gold and/or silver as money. Plain and simple. The history of money teaches us that civilizations fail for this lack of knowledge. The Roman Empire fell as a result of debasement of the money supply. Marie Antoinette lost her head because of debasement. Following a paper money failure, Napoleon came to power and immediately installed a metal standard. In the last century, Hitler came to power after the paper money debacle in Germany.
It is time to be honest with yourself. Is the crumbling financial system due to improper accounting methods? Greed? Lies? Perhaps the unit of account itself is at fault. Is a dollar really a dollar? What we consider to be money, is it really money? This begs the question, if the basic unit of account is merely a fiction, is not the entire structure unstable?
Is your monetary future based on facts, mere faith – or total fiction?