Issue: Economic: On the Federal Reserve

[G-khan]

I agree with Joe. Any form of exchange has value as a currency because people agree to use it for exchange. The problem with fiat money is that whomever prints it can simply create as much of it as they want, of course. I wouldn't say the problem with fiat money is its valuelessness in itself, but rather cronic miss-management by government. After all, it DOES have some logistical advantages over commodity-backed money.

But other than constitutional limits on how its managed, I don't see a way to keep it from being abused.

Here is one solution that has been offered from the Money Masters and to me it seems it could work...

Part 2 Is the solution and what could be done!
http://goldismoney.info/forums/showthread.php?t=27150

 

[Bradley in DC]

Bradley in DC, I want to continue to argue that gold is a type of fiat money, fiat meaning we put "faith" in that it will be accepted as a unit of stored value in exchange for actual commodities that we consume while having little consumption value itself, other than as jewelry. It's scarcity and present impossibility to "counterfeit" makes it an excellent fiat currency. However:

1. The "Gold Supply" constantly grows through mining by the tens or hundreds of tons per year. New gold enters in private hands so its entry into the marketplace is already inherantly unfair to the general public. In effect, wealth was created without having to produce value to the community, in a similar way as printing paper money on a machine, though more labor intensive.

2. By its nature, using gold and silver as money has produced a long history of slavery, war, theft and other atrocities as there is tremendous incentive by those who are prone to violence to go straight for the gold & silver as opposed to producing goods and services that have tangible value to the community.

3. The fair distribution of gold, or money backed by gold, is rarely talked about by gold money advocates. It's an easy system for Americans to promote as they have (once had?) enormous gold stores, not all of it acquired ethically. What about countries that have no gold? Most of the above ground gold is in the hands of elite private citizens or heavily armed 1st world nations.

4. Gold does not fairly represent the goods and services exchanged for it, because gold lasts forever and food, consumer goods, etc. last for days, weeks and/or decades. I believe it was Silvio Gessell who points out that true neutral money must fall in value to best mimic the underlying goods and services.

5. Gold money does not address the problem caused by the growing gap between national production and national income due to automation. We don't earn enough to pay for the goods and services that we've produced. This falls into the realm of National Dividend, Basic Income Guarantees and, I believe, the work of Henry George.

Sorry to go on at length. I'm not trying to be a know-it-all, as I am just learning all this in the past year and think that all ideas should be on the table and that we should equally discuss the flaws of using gold as money as we do its strengths.

Joe, it's good to see discussions of important public policy issues! You define your own terms (fiat money) in a manner contradictory to the conventionally accepted one. Fiat money is paper money that is not backed (redeemable) in an underlying commody. Commodity money (such as gold or silver) cannot be fiat money. One could have paper instruments (such as gold certificates) that are redeemable in gold and would not be considered fiat money, but there are, by definition, no commodities that are fiat money.

Without wanting to come off as pedantic, I'd like to suggest some fundamental readings:

The last chapter of the Princples of Economics by Carl Menger on how money evolved in the first place (and what money is). He has a similar article here:
http://www.mises.org/web/2692

The Foundation for the Advancement of Monetary Education (FAME) has lots of good resources:
http://fame.org/ReadingList.asp

The Committee for Monetary Reform and Education
http://cmre.org/

The Mises Institute has a lot of good information including a pdf of a book of Dr. Paul's
http://www.mises.org/books/goldpeace.pdf

In response to some of your observations:
1. Yes, new gold is mined. This introduction into the community is inherently "fair" even by your subjective definition since they mined the gold and produced something of value.

2. "By its nature" no such thing. If you argue one does things for money, it is the nature of greed for money itself, not the nature gold and silver.

3. "Fair distribution" is an alien concept not applicable here. If you understand what money is and how gold evolved in the market (ie, how people choose gold over every other competing monetary instrument), it would be a better discussion. Check Menger. It was FDR (out of "fairness" I'm sure) who confiscated monetary gold held by the common citizens now held by a heavily armed elite that offends Dr. Paul and his followers.

4. If one didn't find the exchange "fair" or to their advantage, the exchange would not take place. How often do you give up your labor when you do not subjectively "get your money's worth" out of it? Don't some things, in fact, increase in value over time? I'm not familiar with that author, but that presentation of his ideas gives me little inclination to spend my time that way.

5. If prices are allowed to fluctuate in a free market, and automation reduces relative prices on those goods, the prices gently fall over time to the benefit of consumers (think of Walmarts falling prices ads).

I think you are trying to address concerns that go beyond the nature of money. A more focuses line of inquiry might help in a conversation on a forum like this one.

 

[RonPaul4President]

If gold is fiat money, what isn't fiat money? I thought gold "was" the commodity and paper the promissory note. BTW, I don't think I'm a know-it-all either. I'm learning as I go just as everyone alive is. If I offended anyone with my abundance of opinion, I apologize.

 

[G-khan]

If gold is fiat money, what isn't fiat money? I thought gold "was" the commodity and paper the promissory note. BTW, I don't think I'm a know-it-all either. I'm learning as I go just as everyone alive is. If I offended anyone with my abundance of opinion, I apologize.

Gold is not fiat money! It has substance and you can't just add some zeros to it and change 1 dollar into 100 by what you print on it..

Fiat money is paper money and gets its worth from what is printed on it. Now you can take paper money and have it backed by gold or silver and redeemable in the metal itself. This requires the trust that those who issue it actually can pay all the bills off if they come in for redemption.

The actual gold or silver is better than the backed money because it has its value in your hand and you own it. The banksers can't control gold and silver that you hold as you own it.

I have been reading and studying a lot of opinions on money and what it is and happen to think that printing US notes is what we should do as a country. The congress should be in charge of it. We should not pay interest to private bankers for creating money. Think about it - the banksters create money out of thin air and then charge us interest on it.

How would you like to have the privilege of creating money from nothing and then charging others interest on it. While you are in debt to them you also work for them which means they control you..

I don't pretend to know it all or the answers to it all - I do know I don't like giving this privilege to private bankers and the Fed.

We need to get rid of the Fed, they make the mafia look like child's play IMO

 

[RonPaul4President]

I agree 100%, right on!

 

[joenaab]

I am all for abolishing the Fed, so don't mistake my discussions regarding gold as me standing in oppostion of what I think is the single most important issue facing the world.

This idea that gold is a form of fiat money is not mine, I read it recently in my studies of monetary theory, but I don't remember where. I understand that it's not the common definition, but it makes sense to me. Is has value because we believe it has value (fiat=faith).

An example of a non-fiat currency would be a currency backed by something we all use, such as a kilowatt of energy. (Of course when zero-point free energy is worked out, there goes the money!) I will drop the subject and start referring to gold as non-fiat, for the sake of uniformity of dialog here.

Though I can't say for certain until I've studied some more, I expect that in an ideal situation, a well-managed fiat currency would be better than gold or gold-backed currency. The question would be could the ideal ever be achieved?

Bradley, thanks for the links to the reading material. I'll add them to my growing list and I'll get to them after this week's chaotic post-debate online madness.

Thanks guys, great thread.

 

[Gee]

The point is that the value of all commodities is subjective. If gold lost its industrial usage and people stopped using it for jewelry, it would be worth very little. Its a lot more likely for fiat money to loose its value than gold, of course, but ultimately the value of gold is still subjective. The primary benifits of the gold standard are not really adding "value" to money, IMO, its more that it prevents the government from abusing the money supply for its own purposes.

 

[G-khan]

From what I understand of money per say.. it is not faith but guns that back the currency each country chooses to choose. Your government tells you by law what is legal tender and what you must pay your taxes in.. If they tell you it must be sea shells then that is your currency...

 

[Gee]

From what I understand of money per say.. it is not faith but guns that back the currency each country chooses to choose. Your government tells you by law what is legal tender and what you must pay your taxes in.. If they tell you it must be sea shells then that is your currency...

Thats true, but the dollar is accepted overseas because people have faith in it. It has a subjective value to them. That value varries, and futures markets try to predict the changes to the dollar just like they do to gold, silver, etc.

Many odd currencies arose (such as sea shells, or whatever) not by law, but by convenience. That is the whole point of money after all, convenience. Fiat money is more convenient than commodity-backed money, at least to the people who run the currency.

I'd rather the market just decide what currencies to use.

 

[Bradley in DC]

This idea that gold is a form of fiat money is not mine, I read it recently in my studies of monetary theory, but I don't remember where. I understand that it's not the common definition, but it makes sense to me. Is has value because we believe it has value (fiat=faith).

Bradley, thanks for the links to the reading material. I'll add them to my growing list and I'll get to them after this week's chaotic post-debate online madness.

Hi Joe,

My pleasure. Of course I should have pointed out Greenspans article (but you can find that on FAME, etc.). Before repeating that gold is fiat money again anywhere else, I kindly suggest you go back and try to find what you read (it was either a misunderstanding or that person was just plain wrong). Gold--or any other commodity--does not have value based on "faith" but on it's INTRISIC value as a commodiy (look at the global commodity markets for gold, base metals, oil, etc.).

There are characteristics that make up a good money (divisibility, easily identifiable, durable, etc.--please, please read up on Menger first) that should also help shape your understanding of how we got money in history in the first place, how different types of commodities were traded for those with higher use value and eventually a global acceptance of gold (and silver) as the preferred medium of exchange and store of value.

It is government paper money that relies on faith (actually the full faith and credit!) of the issuer (government). Commodity money such as gold has intrisic value set by the market (ie, the equilibrium price at any given moment of the willingness of holders of gold to sell vs. the willingness of others to buy). Remember also, that the market is a *process* not a thing, or place, etc.

 

[joenaab]

As G-khan posted, I, too, was intrigued by the idea at the end of the Money Masters and the warning against returning to the gold standard. This is what set me off in the direction of alternative theorists like Gessell and George.

We already know that using gold itself is impractical due to its weight, and that even currencies backed by gold can be taken off the gold standard on a whim, so we'll never be 100% safe.

The issue of ethics and human mismanagement is what breaks the bank everytime, not necessarily the system employed.

 

[joenaab]

Bradley, I plan to read up, though it's hard to get books in Brazil. However, gold's value as a commodity is derived almost solely from its use as money (due to the faith we put in it as money). Oil and gas produce energy, fruits and vegetables can be eaten. Even silver has many industrial applications.

There is also the argument that gold's scarcity can inhibit the ability to transact. The ideal "money" would be readily available when an exchange of goods and services has been agreed upon. This is why sea-shells and nuts and fiat currencies emerge, because transactions must occur even in the absense of gold.

Most people on the planet still live far from the big cities and money centers and have neither access to nor priviledge to acquire gold held in big vaults by big business and big government.

 

[G-khan]

As G-khan posted, I, too, was intrigued by the idea at the end of the Money Masters and the warning against returning to the gold standard. This is what set me off in the direction of alternative theorists like Gessell and George.

We already know that using gold itself is impractical due to its weight, and that even currencies backed by gold can be taken off the gold standard on a whim, so we'll never be 100% safe.

The issue of ethics and human mismanagement is what breaks the bank everytime, not necessarily the system employed.

I think we must some how come up with a money like US notes and make strict rules that make sure that no one can profit from it would be best. Our monetary system is most basic to our freedom and having a just country for all. It must be written like the constitution only with more checks and balances so it can never be abused. Anyone even trying to tamper with it profit from it like the Rothchilds etc. would get life in prison..

Funny how we all go to school to get an education so we can earn money and they never teach what money is or how it comes into circulation.. Back in the 1800's the people knew more about money and its creation then they do now.

Well if Dr. Paul does get elected we will need to have a plan on what to do after he gets rid of the Fed. My guess is if it looks like he will get elected they will kill him..

 

[RonPaul4President]

Personally, I would like to use U.S. minted gold coin. Make the coins the weight needed to make them the value of todays coins. Why get wrapped up in the promissory notes. Let's just use the real thing. Of course that would mean buying our gold back from The Bank of England.

 

[joenaab]

Imagine how I feel, - I've got a degree in Economics and never learned a thing about money and central banking.

I like the idea of replacing Reserve Notes with Treasury Notes right away as suggested in the Money Master. We'll need some time to get the gold back if its not where we left it. Ending fractional lending will also be a high priority.

And, no, they won't give it up easy, which is why this campaign is as much about raising awareness as it is about getting RP elected. I can envision state by state secession if we stay on this course and the economy/dollar gets crushed. If countries with populations in the few millions can have their own currencies, so can our states.

 

[aravoth]

Yeah, I'd rather use gold and silver coin myself. None of this "Pay to the bearer on demand" shit.

 

[Bradley in DC]

Bradley, I plan to read up, though it's hard to get books in Brazil. However, gold's value as a commodity is derived almost solely from its use as money (due to the faith we put in it as money). Oil and gas produce energy, fruits and vegetables can be eaten. Even silver has many industrial applications.

There is also the argument that gold's scarcity can inhibit the ability to transact. The ideal "money" would be readily available when an exchange of goods and services has been agreed upon. This is why sea-shells and nuts and fiat currencies emerge, because transactions must occur even in the absense of gold.

Most people on the planet still live far from the big cities and money centers and have neither access to nor priviledge to acquire gold held in big vaults by big business and big government.

Joe, where are you in Brasil? Never been but hope to go "soon." I used to live in Colombia and Chile and have cousins in Argentina. It was in Peru during Garcia's previous stint as President in 1987 that I got interested in monetary policy (the gold dealers there were the last functioning banking system in the country at the time).

Most gold is bought for commercial (electronics) and jewelry (though some of the jewelry sales in India, China, etc. are a "clunky jewelry" gold standard as a store of wealth for many poorer, rural people and others who don't trust the local fiat currencies or don't have ready access to the formal banking sector--or one that isn't corrupt anyway).

Again, please read the Menger article (you know a lot already, he just helps fill in some of the gaps). If we can put it behind ones and zeros on the back of a piece of plastic, it's easy to transact!

Are you familiar with goldmoney.com and egold?

 

[Freedom]

Imagine how I feel, - I've got a degree in Economics and never learned a thing about money and central banking.

That's exactly the way the banksters want it to be! Imagine collecting the interest on the government debt - what would you do with all of that money? You might spend it to secure your position to get that spigot of money. Perhaps you purchase all of the media so you can control public opinion, next you might purchase entire educational systems to control what young persons are taught (or not taught!). You could even promote economic theories (Keynesian) that help obfuscate your evil deeds. (Look into Austrian Economic theory to see what's really going on - www.mises.org is a great place to start!) You might convince people's of a country to go to war and then loan money to both sides. You care not who wins, you just want the interest.

Mayer Amschel Rothschild once said, "Give me control of a nation's money and I care not who makes her laws."

A great book to read about the central bankers' evil doings is The Creature from Jekyll Island by G. Edward Griffin

Central banking is the root cause of most of the evil in this world. It must be destroyed at all costs!

 

[joenaab]

I've definately spent some time on the Mises site and I've listened to a few hours of Rothbard spoken word. Great stuff. I've also read the excellent book, "How the World Really Works", which includes a chapter which summerized Griffin's Jekyl Island book. I also learned in that book how the Bankers paid Congress to create the tax-exempt foundation laws which they used to create all the text books we use from kindergarden through PhD, to make sure we learn exactly what's "in our best interests". Education was federalized to guarantee that we use their books.

Bradley, I live on an island called Florianopolis, in the state of Santa Catarina. Beautiful place. I left the U.S. in June of 2001 and arrived here after three years of continuous travel with no more than a suitcase full of clothes and an ATM card to my name. I lived a year in Colombia and loved it. I spent three months in Ecuador. You are welcome to visit.

I saw the writing on the walls in big letters and got out early, taking no chances. I never thought that a man like Ron Paul would turn up (while being there all along). Thought I'd join the fight, since the NWO is here in Brazil and ready to do horrible things.

 

[joenaab]

Oh, Bradley, and yes, I know of goldmoney and egold. I love the idea. I would trust this type of private enterprise, audited, etc. much more than any govt.