What's wrong with the Gold Standard Again?

Besides jewelry gold is an excellent conductor of electricity, lasts a long time, doesn't rust, won't breed bacteria and it is rare.

The "gold " standard doesn't have to be in gold per se. You could have currency based on diamonds or anything, anything that is rare. The less of an item there is the more it is worth. Like a Mickey Mantle rookie card.

Value is in the eyes of the beholder: Peter Minuet bought Manhattan for 24 bucks worth of beads. The Indians placed a great value on them beads.

You have it exactly right.

The value of money is entirely fictional in nature (A useful fiction.), and the amount of gold you had was just a simple way of keeping track of the amount of money you had.

Gold was used because it was rare and hard to fake. Other than making nice jewelry and being a good electrical conductor that doesn't corrode, gold has few other practical uses and thus little inherent value.

Humans have always placed value in gold so it would be useful for those that think the value of the dollar will collapse. Maybe humans continue to place value in gold because of the history of its use for many historical civilizations.

Socrates, if the pieces of paper you're referencing is the US dollar, it's backed by the assets of the US.

No, Polka, the value of Gold is not "artificial" too.

Gold is a rare but useless metal. It should be nearly worthless but it isn't. Humans give it value. It has no value of its own.

Gold does have an intrinsic value.

Actually NO it does NOT - gold, just like with everything else, only has whatever value that people are willing to assign to it.

Intrinsic: Belonging naturally; essential.

There is nothing "natural" or "essential" in the price of gold. The price of gold will fluctuate based on the value of gold in relation to other commodities (including based on the use of gold for purposes other than monetary policy in relation to other commodities) and/or based on the amount of gold (as the amount of known gold fluctuates) - WITH THE PRICE BEING ASSIGNED OR DETERMINED BY PEOPLE - NOT DETERMINED INTRINSICALLY.

For example, if a large previously undiscovered sh*tload of gold is discovered somewhere in the world, the price of gold - AS ASSIGNED OR DETERMINED BY PEOPLE - will drop significantly. For that matter, when ANY gold is newly discovered and added to amount of gold in the world, the price of gold changes. If gold had an "intrinsic" value, the price of gold would not change.

If a new property of another commodity is discovered, or a new process or product is invented or discovered, that obviates the use of gold or makes the use of gold less desirable in certain applications (e.g., in electronic products), the price of gold will drop. If gold had an "intrinsic" value, the price of gold would not change under such circumstances.

Redder:

Value is in the eyes of the beholder: Peter Minuet bought Manhattan for 24 bucks worth of beads. The Indians placed a great value on them beads.

The people you are referring to thought the guy was insane, so they played along. The idea that you could own land was foolishness.

Gold has value that money does not. Its most significant characteristic shared by few, rare resources, gold has no shelf-life. It does not interact with other elements, particularly oxygen. As Redder pointed our, it does not rust (oxidize), and it does not grow bacteria. It is malleable and cohesive, so it can be shaped or melted into new forms by heating when necessary. If you buy a fresh loaf of bread, it's fresh the first day, but it's only good for about a week. Gold is still the same gold next week or next year unless you trade it (or change it).

Our current system of fiat currency has a similar problem as the loaf of bread. Its value deteriorates in time. While on the surface one might think the value of gold rises and falls, it is actually the value of the currency that changes. Gold remains just as it is, the best storage of wealth known to mankind, the value of currency is what changes.

"While on the surface one might think the value of gold rises and falls, it is actually the value of the currency that changes. Gold remains just as it is, the best storage of wealth known to mankind, the value of currency is what changes."

FALSE!!! Gold changes in relation to the value of other commodities EVERY SINGLE DAMN DAY(!!!) - AND in relation to the uses of gold in relation to other commodities, processes, inventions, etc. - AND in relation to the amount of known gold in the world - among other reasons the price of gold changes.

Further, according to this idiotic gold standard some of you advocate for, Country A with a lot of gold would have more worth than Country B having no gold, even if Country B has a lot more to offer to the world than Country A in the way of other commodities, resources, know-how, products, other tangible or intangible property, etc., than Country A. What - now the only way Country B is to have any worth is for Country B to purchase gold???!!! UTTER AND COMPLETE NONSENSE!!! GIVE IT UP!!! The gold standard is an archaic standard that may have served a purpose in less enlightened times, BUT it has absolutely no place in a more enlightened world!!!

I understand the meaning of "intrinsic" just fine. You're failing to understand that gold, like anything else INCLUDING CURRENCY, only has a value as determined by people.

only has a value as determined by people

and what you are not giving credit to is that historically the value associated with gold has been a positive one. But with commodities that perish or can be gained for less cost it is not always the same. Your placing more emphasis on the actual value associated with gold rather than the value it has maintained as a currency and asset over time. It is real and tangible and has been desired by people for thousands of years and has been a symbol of money for just as long. It is recognized as a standard that can be held across cultures and language, where other things have not had the maintained the same level of consistency.

sliding in...and most of that was before the age of electronic transmission of funds. Can't beat that with a stick. Transferring gold required a lot more effort, time and cost too,.

our currency is only an IOU issued by the Fed and we continue that when we make purchases by stating we have the funds to cover the debt.. Nothing has to be transferred on a day to day basis here in this country. Furthermore it would apply the same for a transaction to say England. Basically you are saying IOU X amount of Gold and it really does not matter until the debt has to be called, it is only then that the actual asset that is backing the IOU matters. Or that is the way I understand it to be.

wonder when the last time was that any country was called on to ante up the gold?

our currency is only an IOU

Yes, and then they need to monetize the debt by 'selling' debt... which is why we have the problems we do.

'Debt' doesn't have value... it's based on the speculative and derivative markets.

Our money 'needs' to be based on something that has 'standard' value.

Our money 'needs' to be based on something that has 'standard' value.

First, NO IT DOESN'T. Second, no commodity or resource has a "standard" value.

mstanley,

last time was that any country was called on to ante up the gold

I am not able to find such a time. But I do know that the story of the Zimbabwean Dollar is one tale of what can happen with fiat money vs gold (commodity) backed money.

kinda what I thought, just didn't really care to spend a lotta time looking. Last I heard it was back in like the 1300 1400, Spanish Galleons and all that. Legitimate transfers anyway. Though during war, the losers were usually trying to get as much out as they could.

Which makes the whole idea of a Gold Standard, rather ridiculous because then gov'ts would either transfer the gold physically or do it paper wise, which is already being done. :)

Second, no commodity or resource has a "standard" value.

Yes most comodities have a standard value.

On a commodity exchange, it is the underlying standard stated in the contract that defines the commodity, not any quality inherent in a specific producer's product.

Which makes the whole idea of a Gold Standard, rather ridiculous because then gov'ts would either transfer the gold physically or do it paper wise, which is already being done.

No. I am not advocating for something of that nature.

There are several adaptations of a Gold standard and one was the last one where the US was to only issue monies it would back with actual Gold and that the dollar would be the currency that all transactions would be done with. Thus there was some validity to the money being transferred. At the moment the only guarantee you have that the money you say you have in the bank is worth what it is supposed to be is the WORD of the US Government. Which is absolutely worthless should the government default. But if the money was backed by something such as gold then it would maintain all or most of its value.

But if the money was backed by something such as gold then it would maintain all or most of its value.

So if the US government defaulted what do you value gold's worth an ounce in?

The US gov't has gold, and other assets..so no matter the people in the US gov't, the dollar has backing and protection from any dingbat ideas of any current gov't people and the financial people know it. It is the why the dollar is the world currency. :)

It is the why the dollar is the world currency.

no. China just has not positioned itself to take that spot yet. It is coming.

Jack,

So if the US government defaulted what do you value gold's worth an ounce in?

well at the moment since there is no Gold standard that question would not have an answer. But Gold is currently traded on all markets and can be redeemed for any currency.

China just has not positioned itself to take that spot yet

China can "position itself" all it wants -- until they truly allow their currency to float, no one will move from the U.S. Dollar.

Flip side is that if they allow it to float, no one will WANT to move from the U.S. Dollar :)

no. China just has not positioned itself to take that spot yet. It is coming.

China will not take the spot.

But Gold is currently traded on all markets and can be redeemed for any currency.

Yes all based on dollars.

Second, no commodity or resource has a "standard" value.

Yes most comodities have a standard value.

On a commodity exchange, it is the underlying standard stated in the contract that defines the commodity, not any quality inherent in a specific producer's product.

I believe you very much misunderstood or misinterpreted what the above Wikipedia statement actually means. First, it appears that the term "standard" is being used to refer to the quality of the commodity, NOT the value of the commodity.

Second, AGAIN, the value of the commodity is ASSIGNED to the commodity by people. If that Wikipedia statement could somehow be construed to relate to the value of the commodity being standardized (which I still contend is not an accurate interpretation of that Wikipedia statement), then based on the statement above (as construed here), the commodity value was still assigned by people via a contract. The commodity itself does NOT have a "standard" or "intrinsic" value. The value of the commodity is set by man via a contract and/or via the market - JUST LIKE THE VALUE OF CURRENCY IS. The "standard" of a commodity for one contract can be very different from a "standard" for that same commodity in a different contract. The same thing can occur with currency.

FOLKS - THERE IS NOTHING F#@KING MAGICAL OR SPECIAL ABOUT GOLD (OR ANY OTHER PRECIOUS METAL FOR THAT MATTER) IN RELATION TO MONETARY POLICY - ENOUGH ALREADY!!!

Uhhhhh, OK, if you were referring to my statement at #2.33, the article you cite does absolutely NOTHING to prove your point ...

Here I'll prove a point:

http://the2012scenario.com/2011/12/the-silver-rush-at-mf-global/?utm_source=rss&utm_medium=rss&utm_campaign=the-silver-rush-at-mf-global

Here I'll prove a point:

http://the2012scenario.com/2011/12/the-silver-rush-at-mf-global/?utm_source=rss&utm_medium=rss&utm_campaign=the-silver-rush-at-mf-global

What is the point of these meaningless links that are not relevant at all to the fact that gold (or silver or whatever) only has a value as assigned to it by men and THERE IS NOTHING F#@KING MAGICAL OR SPECIAL ABOUT GOLD (OR ANY OTHER PRECIOUS METAL FOR THAT MATTER) IN RELATION TO MONETARY POLICY???

All that article says is that the failed MF Global is being liquidated, and there is a dispute regarding whether remaining customer assets — gold, silver, cash, options, futures and commodities — are to be placed in a single pool or whether gold and silver should be placed in a separate pool from the other remaining assets - NOT because there is anything special about gold and silver, BUT RATHER because the investors in the gold and silver allege they have "warehouse receipts" that warrant treating the gold and silver differently than the other remaining assets. All the complaining parties are really contending is "hey, yeah, my gold and silver assets have dropped a bit in price, but not nearly as much as the other remaining customer assets held by or associated with MF Global, so we want to split off what we contend are our assets from all of the other assets - and we have these 'warehouse recipts' to help distinguish our gold and silver assets from the other remaining customer assets."

All this proves is that some of the MF Global customer assets dropped very precipitously due to a huge and failed gamble by MF Global in Europe, and other of the MF Global customer assets (e.g., gold and silver) didn't drop as much.

IFeelSoCheapAndDirty

All due respect, we get it. The point you make is well-founded, and I agree with your premise, but you would do well to move forward in this thread. There is more to discuss than the philosophy of value assignment.

All things of value are relative to your point. Nothing has any value unless we assign value to it. The fallacy is that we assign value to paper currency that is only a ghost or a reflection of real commodity backed currency. That currency only saves us from trading the real heavy stuff in large quantities. A gold coin can be cut into bits if needed to make small trades, but if you're purchasing large value items, the paper is easier to manage. The trick that has been played on us is that the paper is now worthless whereas it used to be directly exchangeable for the gold if we chose to hold the gold. Now you can only exchange dollars for more dollars. That is the problem in a nutshell.

Bankers care about monetary policy because they have made a HUGE mistake. They put too much debt into each others' hands, bad debt that isn't being repaid (by the little people), and they can't pay each other. They are attempting to send the bill to the taxpayers, otherwise, they are headed for global bankruptcy and will be forced to sell off their hard assets in order to pay their bills. They do not care about the little people on the bottom, they only care about beating each other on the big scoreboard.

Additionally because we have put too much faith in their monetary system, many of the little people will suffer because of their risky behavior.

I have some links for you if you are interested, but they only divert from this discussion. This article provides a step forward in your reasoning that gold is not magical as you have stated. I believe we are not so distant in our lines of reasoning, but to this point have created a standoff on the one concept that gold cannot be eaten or used for energy in a crisis.

What part of "secured assets" vs "unsecured assets" do you not understand?

I understand the difference just fine. I'm an attorney who has had to deal with such financial matters many times, although currently the focus of my law practice is in other areas of the law. By the way, when I talk "secured asset" and "unsecured asset", I'm doing so in the legal sense, not the non-legal sense where people falsely claim that gold is a "secured asset", but fiat currency is not.

From the legal standpoint, whether an asset is secured or not for legal reasons in relation to a liquidation of customer assets means nothing with regard to whether the US should continue operating with a monetary policy based on a fiat currency, or instead unduly and unwisely tie its currency to a completely arbitrary standard like the gold standard.

In any event, with regard to the article, I would note that the complaining customers do not seem to be contending (at least not expressly) that their gold or silver assets are secured assets - whether in the legal sense or in the false and flawed belief that gold/silver are "secured assets" and paper financial instruments are "unsecured assets". Rather, they simply claim that they have these "warehouse receipts" for the gold and silver and can therefore identify specifically which assets of all of the customer assets are theirs. Based on what I know of these "warehouse receipts", merely having such "warehouse receipts" doesn't turn such assets into "secured assets" (in the legal sense). From a legal standpoint, only a contractual agreement between the customer and MF Global providing that such assets are "secured assets" (providing that doing so stands up legally) or a provision of law that would treat such assets differently from other customer assets and deem such assets as "secured assets" would make such assets "secured assets".

And THAT is your problem, you are using the terms incorrectly.

in the english language sense, it could be used to state that something is locked up. You are missing the point that there is a LEGAL definition and a set of general definitions. In the context of a lawyer, and the bankruptcy of a firm, and the financial industry, it has the LEGAL definition.

and you are using the wrong definition. IFeelCheapAndDirty was using the CORRECT definition for the application of the term.

Which was....?

Same definition I'm using.

COMPLETELY FALSE!!!

For example, I form a corporation and I need capital to help get my corporation off the ground. I personally own a building worth $200,000, and I assign ownership of that building to my corporation for use in my business.

I convince Person A to loan my corporation $200,000 in gold assets for use in helping to get my corporation off the ground with the agreement that my corporation will pay Person A $300,000 in gold assets within two years. Person A and my corporation had a contract that specifically identified the gold so that the gold was readily identifiable, if need be.

I convince Person B to loan my corporation $200,000 in US currency to further help get my corporation going in exchange for my corporation agreeing to pay Person B a lump sum of $250,000 in US currency within two years, WITH THE PROVISO that my loan contract with Person B is secured by the building I assigned to my corporation.

Let's say I was able to get my corporation operating using some of Person B's cash, and getting credit lines with creditor companies for some materials and services the corporation needed, without touching the $200,000 in gold, and the gold was sitting in a safe at my corporation's building.

A year later my corporation files for bankruptcy because a multi-million dollar lawsuit was filed against my corporation in relation to my corporation violating environmental laws resulting in a toxic spill that caused a lot of people harm, and there is a strong likelihood of millions of dollars in civil judgments against my corporation looming - and insurance will not cover the harm. Further, my corporation owes a lot of money on the credit extended to me by other companies. At the time the bankruptcy is filed, my corporation has corporate assets comprising the building still only worth $200,000 (due to a sluggish commercial real estate market), $25,000 in US cash, and the $200,000 of gold in the safe, and my corporation owes various creditors $650,000, and there are those civil judgments looming on horizon.

In bankruptcy court, here is what will happen (let's assume that the lawsuits end up being a $2 million judgment):

Person A, who loaned $200,000 in cash secured by the corporation's building by contract, will get the building worth $200,000 (and he likely will get an order letting him get this property relatively quickly while other unsecured bankruptcy claims are still pending);

Person B, who put up $200,000 in gold assets, will only get (eventually – maybe many years later) a VERY SMALL PORTION of the remaining corporate assets, which are the $200,000 in gold assets and the $25,000 in US cash, BUT all of those remaining corporate assets, INCLUDING the $200,000 in gold assets, will be put into the same pot and will have to be shared (e.g., on a pro rata basis, unless a particular bankruptcy law says otherwise) between Person A (owed $300,000 in gold assets per the contract), the creditors who are owed $650,000, and the plaintiffs in the civil lawsuits (owed $2 million in civil judgments) – who are ALL UNSECURED CREDITORS entitled to respective portions of the remaining UNSECURED ASSETS of my corporation.

AS A RESULT:

Person A (the "gold" guy) would only get roughly 10.2% of the remaining corporate assets (i.e., 10.2% of $225,000) which comes to roughly $22,950 – EVEN THOUGH Person A PUT UP $200,000 IN GOLD and was supposed to get $300,000 in gold on the loan – AND EVEN THOUGH THE $200,000 IN GOLD WAS STILL IN THE CORPORATION'S SAFE AND WAS STILL READILY IDENTIFIABLE AS BEING THE GOLD FROM Person A;

The creditors who extended the credit line to my corporation would get roughly 22% of the remaining corporate assets (i.e., 22% of $225,000) – including some of the gold assets or cash after liquidating the gold – which comes to roughly $49,500; and

The plaintiffs in the lawsuits would get roughly 67.8% of the remaining corporate assets (i.e., 67.8% of $225,000) – including some of the gold assets or cash after liquidating the gold – which comes to $152,550.

Person A SCREAMS, "WAIT, HOW CAN THIS BE???!!! Socrates told me that gold is a "secured asset", so I should get my $200,000 in gold, which was sitting in the corporation's safe and was readily identifiable as my gold – my gold was specifically identified in the contract, and gold is a secured asset – SOCRATES TOLD ME THAT!!!"

The judge responds: "Sorry Person A, BUT your $200,000 loan of GOLD assets was NOT SECURED, so you only get a pro rata share of the remaining $225,000 in assets of the corporation after the secured creditors, like Person B (who only put up US currency), GET PAID IN FULL."

I actually have to qualify a portion of what I said above in #2.47, as Person B may still be entitled to a portion of the $225,000 in remaining corporate assets as well, since Person B was supposed to get $250k on his $200k secured loan to my corporation, and thus, Person B may have a $50k unsecured claim against the remaining $225k in UNSECURED corporate assets - INCLUDING the GOLD. In such instance, Person A (the gold guy), the business creditors, and the plaintiffs may get even less than I indicated above, since Person B may get part of the UNSECURED ASSETS (e.g., the $200,000 in gold and $25,000 in cash) in addition to getting the SECURED ASSET (e.g., the building).

Ifeelsocheap,

So I have read what you wrote and am here wondering why it is you can not see how you have just confirmed the premise Socrates was attempting to put forward.

Simply this.

Person B was able to recoup a large portion of their investment because their loan was secured by the actual building. The remaining people involved where left with little or nothing because their loan had been unsecured.

When the government issues currency backed by it's word it is no different than the situation with person A. Here is how. I have a piece of paper that states it is worth 'x' amount upon redemption by the federal bank and the Federal bank states it will indeed redeem my currency for the stated amount.

New corp took loan from person A and stated the corp. would pay back the loan at some point in the future. This was based only on the word of the corp. and not secured by any real assets.

Federal Bank issues currency on word and not secured by any real assets.

When the business failed person A only got a small portion of their investment. Should the Fed fail the holder of the IOU (currency) will only get a small portion if any of what the IOU is claimed to be valued at. And the bearer like person A has no legal avenue to be fully compensated.

In your scenario person B gives loan to corp. but has a lien on the property as collateral for the loan. When things went south person B gets current market value for said property.

If federal bank currency was backed by (secured) a real asset (such as gold) should the government that has issued the currency fold then the holder of the currency would get first dibs on the asset that the currency was backed by (secured) in this case it would be the gold.

From what I understand of the matter this is exactly what Socrates has proposed from the start.

will

no socrates said that any money backed by gold (the gold standard) is secured, and that isn't correct.

IFeel probably should not have used gold in his example but the reality is, unless there is a SPECIFIC LIEN (a contractual document) that ties debt to the asset, it is UNSECURED>

no socrates said that any money backed by gold (the gold standard) is secured, and that isn't correct

Ok I understand what you are getting at. And you would be correct in what you are saying.

In dealing with currency (IMO) it is a little different. Every time the mint prints new currency it is writing a new lien (so to speak) that says it will pay the holder the assigned denomination.

currently that is the extent of the guarantee. It is akin to going to a bank and having a line of credit on your good word that you will repay it as you have stated. This responsibility to repay is based on your word. A contract document is now in the place of a persons word because people were not good on their word. However we are still at the place where we will take the word of the fed when it comes to our money.

On the other hand, if the fed were to be held to a gold standard they would be limited in the amount of new IOU's they could issue. This is the same principle that is behind a secure loan. The bank wants assurance that they will get their money and they want that in the form of collateral that they can then sell to re-pay for the money lent. It works the same with the gold backed dollar. Should the Fed not be able to continue to run it would have to honor it's IOU's (currency ) with the gold it has. That is the same thing. It is dealing with a secured asset.

So if I take a loan out for a business venture and I use my house as collateral, I have a secured loan. Now my business goes belly up and I go bankrupt. The lien holder then would take possession of the collateral (my house). Now here is the twist. Just as the paperwork is being finalized a freak storm comes along and destroys the house. So what is the house worth to the lien agent now?

Will,

the terms of those loans will generally require that you carry insurance on those assets, or part of the loan that you put the house up as collateral for will have as part of its payments a portion going to insurance.

only under a gold standard, you are forbidden from actually possessing said gold.

But hey, I guess THAT part you forgot (or deliberately ignore).

And what use is that gold if you can't do anything with it. Remember that gold was chosen specifically because it was a) rare and b) had NO commercial use. So an ingot of gold doesn't actually give you anything useful.

And what use is that gold if you can't do anything with it. Remember that gold was chosen specifically because it was a) rare and b) had NO commercial use. So an ingot of gold doesn't actually give you anything useful.

That is the bottom line. Great answer

NO, that is NOT how a gold standard works in practice. The money is issued by the government and therefore the gold is HELD by the government.

Now if you are saying that anyone should be able to issue money, then that is a COMPLETELY different topic which goes out WAY beyond the gold standard.

And you deliberately chose to ignore it, yet, the times that the US was on the gold standard for the last 150 years, it was illegal for a person to hold gold (in bulk form, gold in the form of jewelry was allowed but that was generally impure gold as well as pure gold is too soft). So ignoring it, (deliberate or not) is just completely ignoring the reality.

actually, no,

under the bretton woods accord, gold had a SET price for the duration. That has nothing to do with who holds the gold, that is just a mechanism to ensure that the creation of money is controlled, so if you have a gold standard, then that gold must be held by the government for the government to control the supply of money.

then you are talking about a seriously fragmented monetary system that will do NOTHING but stifle the economy because nobody will know what. You are talking about any entity being able to issue money.

That is just as much a failure as the gold standard is.

WOW!! this is just amazing.

why don't you actually quote the @!$%#ing parts of the constitution that you are referring to.

And seriously, if YOU want to go back to the 19th century, then please by my guest, I wouldn't be missing your presence. Different time, different place, different requirements.

And this STILL doesn't fix the problem of how to expand the money supply when it is desired. Because by fixing the value of money to a set amount of gold means that in order to expand the money supply, you need to spend money to acquire the gold. Does that not sound counter productive to you? (yes that is right, you need to give out bits of gold to get bits of gold back). It ONLY works if you have gold reserves IN YOUR TERRITORY.

Hell spain found out the wisdom of that long time ago.

US Constitution:

"The Congress shall have Power ... to coin Money, regulate the Value thereof, and of foreign Coin ...."

First, NO-F#@KING-WHERE in the US Constitution is there any support whatsoever for the assertion that the founding fathers wanted a gold standard. Second, the US was not on any "precious metal" standard when the US was first formed - then years later the US went on to use a form of silver standard, but even that standard is not the same type of idiotic "precious metal" standard proposed in this thread - and then the US went on to VARIOUS different hybrid bi-metallic standards!!! Third, even if some of the founding fathers were somehow in favor of a gold standard, those founding fathers were F#@KING wrong on that issue (especially as it pertains to the US today), because the gold standard is an INCREDIBLY F#@KING stupid way to do monetary policy for a large country with a very large and diverse economy in a world that has a very large and diverse economy.

IFeel

I believe that there was something somewhere, too lazy to look it up, that state duties to the federal government had to be in gold (that may have been the declaration of independence though), but he ignores the REASON for that. That reason is NO LONGER VALID!!!

personally I think we should go to the demon from buffy the vampire slayer currency, KITTENS. Apparently they make good eating too. (and to those that have no sarcasm detection ability, that was layered in sarcasm so thick you it would exceed the amount of gold EVER mined.

And I wouldn't say that the gold standard is stupid, Depending on the conditions that are present in the economy, (such as what was there after WWII or prior to the advent of computers along with a largely local economy), a gold standard MAY make sense. It does NOT however make sense in today's economy and probably never will again.

US Constitution:

Section 10 - Powers prohibited of States

No State shall enter into any Treaty, Alliance, or Confederation; grant Letters of Marque and Reprisal; coin Money; emit Bills of Credit; make any Thing but gold and silver Coin a Tender in Payment of Debts; pass any Bill of Attainder, ex post facto Law, or Law impairing the Obligation of Contracts, or grant any Title of Nobility.

This is a restriction on the states - NOT the federal gov't - and ALL it is saying is that states were not allowed to create their own money.

The states by ratifying the Constitution were agreeing to give the federal gov't the power to coin and regulate the value of money (per Congress' Section 8 powers). The US would have ONE currency - US currency, instead of every state having its own currency.

yeah whatever for the insult. My point was, if you are going to make a @!$%#ing point, you make the point. That is like saying 'read the bible, it tells you everything you need to know'. You want to make a point, you SPECIFY the point. Why is that? because NOT EVERYONE READING IT IS ME. Yes I could have looked it up, but it is YOU making the @!$%#ing point, not me.

How is that insulting? it is YOU making the @!$%#ing point, not me, so if you want to know what it is insulting, it is YOU that is being insulting, not me.

You did make an error, you erroneously assumed that everyone here has been following your bull@!$%# over who knows how long to be able to understand what you are saying. Hell, you don't even state HOW your gold standard idea would work. All you say is gold standard, but then you get into fractional banking (which can be present in ANY monetary system, and has been present in just about EVERY gold standard monetary system along with EVERY fiat system. Then you describe a system where it seems that ANYBODY CAN CREATE CURRENCY, which is about as dangerous as you can get.

Seriously man, why don't you create an article where EVERY aspect of your gold standard idea including how foreign trade would work (needed because the US can't pump enough oil among other things), how the banking system would work, etc... EVERY aspect.

Hell I did that with my idea of removing the US currency as a global reserve currency and at the end of that (it was my MBA thesis), I came to the opposite conclusion from what I went in to it with. I changed my mind. It can't be done without creating FAR TOO MUCH global and most importantly domestic financial havoc. Why don't you do the same with your idea.

1) My little digs come from your comments, nothing else. You obviously have NOT researched that which you try to speak from.

2) NO, that is NOT how it would work. That is a VERY HIGH level view of something. What you need to do to tell the world how it would work is to explain how EVERY component of how the system would work. Tell the world the following:

a) How do you increase the money supply

b) how do you DECREASE the money supply.

c) how do you remove the US from the global monetary reserve system (because that is what you have to do to go on your system).

d) how do you control the issuance of money because on a gold standard you have to, as you put it, have gold. How are you going to do that? The US doesn't have enough gold.

etc...

3) The fractional system has been present in the monetary system since roman times. Now all of a sudden you want it to go away?

4) actually in the US, there is a LAW that prevents the creation of a local currency that is beyond token consumption. In other words the US Secret Service (their real function, not the guarding of the president) will legally prevent the issuance of any currency that is more than what would be considered a token local unit.

5) You haven't explained the basics, you just say gold standard, and the details of it just keep changing, and quite frankly become more unworkable as you explain it.

6) yeah, the MBA paper was about 600 pages (including research information), but you don't even get to the point of describing a summary of it, you have no concept other than 'money is backed by a certain amount of gold'. You have NO concept of all the different components of how a monetary system works.

Article 1, Section 8: "The Congress shall have Power ... to coin Money, regulate the Value thereof, and of foreign Coin ...."

THIS section of the Constitution gives Congress the power - VAST POWER - to institute a fiat currency!!!

Congress has the power to coin money AND regulate the value of such money.

This gives Congress the power to have as much money as it wants printed, and to regulate (e.g., control, adjust, etc.) the value of such money to assign whatever value Congress wants to such money.

As part of Congress' power, Congress has the power to set up regulatory government entities, including the Federal Reserve, to manage US monetary policy, coining of money, regulating currency values, among many other duties, in accordance with US law.

WOW!!! THIS IS NOT EVEN CLOSE TO DEBATABLE AS A CONSTITUTIONAL QUESTION.

These are pretty easy to understand basic concepts of constitutional law (well, at least for most). I'll see if Schoolhouse Rock has an episode on Congress' vast constitutional power to coin and regulate money to hopefully help you understand ...

IFeelSoCheapAndDirty:

I didn't think it would be, I figure the Necessary and Proper clause in the constitution in terms of facilitating commerce would negate ANY challenge even if there was. I honestly never even bothered to look at it in depth because it is such a non starter for me.

As for something to look for, maybe an episode of barney talks money (I mean the purple barney) and constitution might be more appropriate.

@Jonathan-1917156 -

I know that you didn't think it would be - haha!!! There are others who are constitutionally challenged though.

Oh, and yes, you are correct that the Necessary and Proper Clause furthers Congress' other enumerated constitutional powers including Congress' power to coin and regulate money. That is, Congress' powers to coin and regulate money, in conjunction with Congress' powers under the Necessary and Proper Clause, give Congress very broad powers to implement and manage a monetary system as Congress sees fit.

I didn't find any Schoolhouse Rock episodes. I'll check to see if there's a Barney episode, but right now I'm going through the Beavis and Butthead catalog ...

don't forget ren & stimpy or the 'team america teaches the constitution'. Actually considering that the political attitudes of parker and stone, that might be the best bet.

What I would most like to see though is not 'his view of the simple of what this gold standard would look like' but a 'here is how it would work within the context of the economy'. That part just seems to keep changing, and it keeps changing more and more into something that would basically stop commerce, not facilitate it.

1) Of course my digs are directed at you, IN DIRECT RESPONSE TO WHAT YOU SAY, AND HAVE SAID IN THE PAST.

2) YOU are the one making the suggestion about the gold standard. Why should I document YOUR idea. I KNOW how it would work (I can visualize in my head how your idea would work; actually NOT work is a MUCH more accurate statement). Now YOU are the one making the suggestions, not me.

As for me, I see problems in the current system, but I don't see problems with the current system. None of the problems that I see can't be resolved without tweaks to the current system, they don't require that the system be thrown out.

3) Other countries will reject the current system because IT DOESN"T WORK. Current money DOES have value, that value is backed by the full faith and credit of the respective government. And guess what, it works. Zimbabwe printed money like it was going out of style, the perceived value of that money dropped to the mantle of the earth. If there happened to be a gold mine in that country, that would not have happened. You would have had a country that was rich even though there was nothing to actually base that wealth on (other than they had a gold mine).

4) The romans were going to die regardless, like all empires, like the United States will, etc... The one thing that is guaranteed with your system is that if applied across the board, NO COUNTRY, NO CIVILIZATION will become a great power. They will ALL be so starved for the tools needed to do so.

5) You don't think there is anything to manage? take that gallon of gas that you bought last time you filled up your car. That gallon of gas more than likely required foreign transactions. That gallon of gas required investment in a refinery (those suckers cost a few billion of those dollars). If we didn't have a fractional reserve system, we would still be in the middle ages. If we didn't have a fiat system, we would probably be in a depression right now. Yes there is nothing to manage at the micro level, but that also means that YOU CAN"T EVEN MANAGE IT WHEN YOU NEED TO.

6) Any comment regarding my critical thinking skills would be a definite CoH violation, and that just isn't your style, you egg people on with subtleties until they are the ones that commit the violation. That is your MO.

As for my critical thinking skills, I COMPLETELY understand your so called idea. I also use my critical thinking skills to very quickly realize that it is a regressive, extremely poorly thought out idea. You on the otherhand are so fixated on a radical ideology and refuse to even consider that just maybe it doesn't work that you completely ignore, and more often than not, deride any other's views.

As for the constitution, first off, the world CHANGES, and our society changes with it. If you really want to live in that time period, please invent a time machine and go back. Maybe you can take ron paul with you (who doesn't even believe in a gold standard that is even close to yours. Nobody has.

As for the gold standard itself, do you even KNOW what one of the disputes with england was? One of them was the imposition of the gold standard which created mass unemployment, where previously several of the colonies had almost full employment by working off a fiat currency. It wasn't even working then.

And who cares about a quotation, but I leave you to ponder this part from your own quotation:

"Had every State a right to regulate the value of its coin, there might be as many different currencies as States, and thus the intercourse among them would be impeded; retrospective alterations in its value might be made, and thus the citizens of other States be injured, and animosities be kindled among the States themselves."

WOW, even your own quotes don't back you up.

Some of these comments may actually be worthy of separate articles. I wouldn't suggest that that the discussion is anywhere near complete. I think the framers were attempting to define the problem we are currently experiencing with fiat currency through past experience with same or similar systems, and by forecasting the potential for the misuse of credit through fiat currency.

bd,

the problems with a fiat currency are such that if you don't have a system that can naturally control the value of that currency, then you run the risk of a currency being fraudulently pushed to where it is worth nothing. We HAVE that system in place now.

When Zimbabwe started to print money, the world reacted, by pushing the value of that money down to where it was worth nothing. That is the system working. At the time of the constitution's writing, there was no international system of trading, there wasn't even really much in the way of interstate trade to the point where each state had it's own currency, some gold based, some fiat. Nobody knew what each currency was really worth because there was no real MACRO way of measuring it. That was then. Those conditions are no longer present. There IS a system in place currently to deal with that.

Now the fed @!$%#ed up in not increasing interest rates during the last 10 years to slow the market bubble, but that isn't the fed, that was ONE person, that was one administration. And it was the political pressure to keep growth going even if it wasn't warranted, that created the problem. So Ron Paul's concept of interfering in the FED's decision making process is actually the WRONG direction. The FED if anything needs to be FURTHER detached, not just from government, but from business as well. The FED needs to be able to increase the money supply when there is real productivity/economic growth, and it needs to be able to DECREASE the money supply when it sees a bubble being formed.

Going to a gold standard does not allow for that. It gives absolutely NO control over the money supply and hence no ability to shape the economy. It leaves you completely at the mercy of other forces that really often have no impact on the underlying economic forces. As I have said, depending on the type of economy you have, a gold standard may be perfectly fine, but we don't have that kind of economy. We haven't had it for more than 50 years.

No that's the PROBLEM WITH IT.

No matter WHAT SYSTEM, people are going to find a way to @!$%# with it. That is the nature of the beast. You can't remove the propensity for corruption from society. Now setting up the system where you can't actually respond to that corruption, that is just stabbing yourself in the back.

Do you understand how little sense that makes?

My statement makes perfect sense. What makes no sense is to tie a nation's currency value to an arbitrary standard, and more particularly, to an arbitrary commodity. Why don't we just tie the US currency to tea leaves? Corn? Wheat? Pizza? iPods?

What can be more arbitrary than allowing a small group of people, meeting behind closed doors, to decide how many pieces of paper to print, and, in so doing, allow them to control the entire economy to their own benefit?

So long as the US backs its currency, and other countries and people are satisfied that the US will back its currency, we're fine in this regard. There are very important economic reasons for the US to have flexibility in its monetary policy as opposed to having our monetary policy being arbitrarily hamstrung by an arbitrary commodity, such as gold.

And it's worth more than gold, Forest, oil, minerals, natural gas, but most of All Land. The value of land is always up there especially when there are fewer and fewer pristine acres left. The US has 84 million acres.

The US Dollar is backed by the assets of the US Government...like oh say Yellowstone National Park, in all 84,000,000 million acres with natural resources, oil, gas, precious metals, etc :)

It's not chump change for just the mineral resources.

About 570 million acres of federal land in the continental U.S. and Alaska are open for oil and gas leasing -- an area of land about the size of all 12 states included in this investigation: Arizona, California, Colorado, Idaho, Montana, Nevada, New Mexico, Oregon, South Dakota, Utah, Washington, and Wyoming. EWG estimates that about 301 million acres in the 12 western states considered in this investigation are open for oil and gas leasing. This estimate reflects the total area of federal public land in these 12 states less lands that are nearly always restricted from leasing and drilling regardless of administration policies or local land use plans — National Parks, Wilderness, National Monuments, Forest Service Recreation Areas, Military Reservation, National Fish and Wildlife Refuges, and National Recreation Areas."

How royalties and other revenue are distributed depends on the status of the land from which it is produced. For example, the royalties from federal offshore lands are distributed differently than federal onshore lands. Moreover, the distribution of royalties from federal onshore lands varies depending on the status (public domain lands, acquired lands, Alaska Native lands, etc.).

Making the question even more difficult is that government reports generally lump all mineral revenue together when discussing disbursements. That said, the largest recipient of mineral revenue is the U.S. Treasury, which receives over half of the revenue. The Land and Water Conservation Fund, which acquires and provides funds to maintain parklands, receives about $900 million each year. States receive revenue from oil and gas activities on federal lands as well. These categories - the U.S. Treasury, Land and Water Conservation Fund and states - represent the largest recipients of federal mineral revenue."

We've lost full control of many of our resources, and we don't how long this will continue. If China wants to 'cash in' then we'll lose resources.

Twenty important symbols of national pride, along with 51 million acres of our wilderness, are World Heritage Sites or Biosphere Reserves now falling under the control of the U.N. This includes the Statue of Liberty, Thomas Jefferson's home at Monticello, the Washington Monument, the Brooklyn Bridge, Yellowstone National Park, Yosemite, the Florida Everglades and the Grand Canyon - to name just a few.

Most ironic of all is the listing of Philadelphia's Independence Hall. The birthplace of our Republic is now an official World Heritage Site. The very place where our Founding Fathers signed both the Declaration of Independence and the Constitution - the documents that set America apart from other nations and created the world's longest-standing democracy - is no longer fully under the control of our government and the American people.

World Heritage Sites or Biosphere Reserves now falling under the control of the U.N.

Sorry, that's not true. This falsehood keeps getting spread around.

I've read the UN agreements and they do NOT give control over such places in the US to the UN. In a nutshell (a very small nutshell) - basically all the UN agreements provide is that participating UN nations, including the US, recognize the importance of such sites/places within their respective borders, and that the respective nations will endeavor to protect, conserve, and promote such sites/places within their respective borders (e.g., endeavor to implement policies that aim to protect, conserve, and appropriately use the sites/places (as determined by that nation)). Further, a site/place within the US is only put on the UN list if the US agrees to it.

CL1 source?

Socrates, comparing those two, is comparing apples to oranges. The Assets back the dollar. The assets are worth more short term and long term as producers of value, ie oil, natural gas and minerals. albeit via leases. Also, down to the crunch the actual land, arable, timber, and clean water. Most of all clean water.

Gold has only as much value as people or the market place on it. There is no benefit of production of value from gold. When more gold is found the value of gold goes down. As in South America, when gold production increases in the future, which it will, then the value of gold will go down.

The value of oil and natural gas is on supply and demand. Since energy demand is going up due to the increase in the world population, then oil and natural gas are more a sure bet on higher value.

Clean water is also a future supply that will be more costly. There are many more 'things' of value than gold. To tie the dollar to gold, is redundant.

It's still a Fictional Value.

What is the value of gold to a man who has the only water in a desert?

Answer: NOTHING!

The water has value, the gold has only as much value as the man with the water is willing to give it, say 1 pound of gold for 1 cup of water for example. If the man with the water doesn't want the gold, then the gold has NO value at all.

Gold has very little intrinsic value, it's only value is what you can make out of it, or buy with it.

Gold has VERY LITTLE intrinsic value.

Water is essential to life.

This means that in environment that has very little of each, the Gold is ALMOST WORTHLESS and the water is VERY VALUABLE.

The Assets back the dollar.

And those assets are manipulated. Which is the point. We need a finite, inherent-valued resource, not a worthless piece of paper that can be manipulated and falsely inflated/deflated. A 'standard' value would be set, regardless of quantity availabe in a particular country.

The point I was making above with land, is that our government has used our land resources as collateral with other nations in creating debt (along with our military). That is the reason why value of resources fluctuate. That process should be reversed by having a 'standard' value backing a piece of paper, like it once was.

A 'standard' value would be set, regardless of quantity availabe in a particular country.

That isn't how the Gold Standard works. The value of gold would fluctuate on a daily basis, it wouldn't be a Set Value (Ever).

How much your money would be worth would be based on HOW MUCH gold you can buy with it, the LOWER the amount of your money needed to buy a set quantity of gold, the more your money is worth. When you exchange your money for some other country's money you would be comparing how much gold each country's money can buy.

This CAN NOT work in the modern age, no way, no how. All it leads to is people hoarding gold and not spending it, and this automatically causes inflation as people offer more money for gold so that they can hoard it too, and this of course increases the incentive to hoard gold. It's a vicious circle, that can only be prevented by Governments confiscating gold, and that's certainly a bad idea. The ONLY way you can break the circle of hoarding is to not permit printed money at all in any form, and require all transactions to be made in coin, and that ain't gonna work at all.

No, 800 dollars would not equal 1 ounce of gold, that would vary based on the amount of gold and other commodities available. The price of gold fluctuates, even when you're on the Gold Standard.

If somebody finds a huge vein of gold and dumps a 100 Tons of gold on the market, the price of gold will drop. It's basic supply and demand.

It's YOUR argument that has no validity.

That is only the price that the Government will pay for Gold and redeem money for, not the price other people will pay for the gold. Other Nations and Private individuals can pay more for gold or refuse to pay what the Government wants. This only applies when the Government sets the Value of Gold, and requires the cooperation of the rest of the world to make it work. If the rest of the world doesn't agree with the value set by the Government it makes Foreign Trade very difficult.

If other Nations are not on the Gold Standard themselves, it makes trade even more difficult.

No you aren't unable to 'explain', it is a difference of opinion on how the financial system of the US should be based on. Gold or assets. Since the Gold Standard is of limited use in a world financial market, ie selling goods for gold and transportation of the gold to the seller, it became necessary to institute a different approach to world financial exchanges. It is the bigger financial operation that is workable for all involved. No one can exchange gold as fast as an electronic transfer of funds ie paper money from the account of the buyer to the account of the seller.

In the world financial markets, an asset backed system is the current one in use. When the US switched from the Gold Standard to the asset backed it was to work within the framework that most of the rest of the financial world was using.

The dollar is asset backed by not just the Amerian people, their labor and property but also by the assets of the US Government. The how and why it is considered asset backed.

How much is an acre of land worth in dollars? Depends on the acre, does it have resources that can be translated into a valuable asset? Land can go from $100 to $10,000 depending on the resources. An acre of desert without water, probably less. An acre with oil deposits, much more. Fact is when someone owns land with oil deposits or gas, they lease the land to companies, not sell it.

A check is only worth the value of how much is in your bank account that is not committed to other expenditures that you have made with a check which would arrive at the bank at the same time as the blank check, properly filled in of course with an amount. If there are no other expenditures, then the check is worth most or all the money in your bank account because I'd fill in an amount :) Gonna send me one to test the theory? :)

There are no 'blank' checks given to the Federal Reserve. They know, more than most, the balance that has to be achieved with assets and money flow to balance financials to keep the ship afloat so to speak.

All product is on a buy/sell with an amount and an account. Imports and exports, production of goods, natural disasters that impede goods production, flucuating financial markets around the world affected by bubbles, etc. Stability of the financial markets, big picture, is crucial to a societal stability. The Great Depression is proof enough of that scenerio.

This "general pool" of which you speak, is my checking account, but without a ratio, I can simply write whatever checks I want for any amount I wish claiming they are "backed by the value of my checking account"

No, the value of money is based on the REPUTATION the issuer has of actually paying their bills.

The Confederate States of America had a Gold Backed Currency, and their money was almost worthless (Even in the South), because nobody believed that they would be able to pay up.

A Gold Standard can't work anymore than an Voluntary Unmonitored/Unverified Nuclear Disarmament can be trusted.

It can't work because Nations can claim to have more gold than they really have, and there is NO reliable way to prevent these Governments from cheating. It's one of the reasons the Gold Standard disappeared from World Trade. It's because NOBODY was sure how much Gold ANYBODY really had.

Terry, good synopsis, and one of the many reasons to ditch the Gold Standard but IMO the Best one..Liars abound when it comes to finances.

The main thing is we have to have faith and trust in the people in our government. This lack of faith and trust is a misplaced representation of a lot of societal ills, many of which are totally blown out of all proportion.

The World Money Market isn't based on TRUST, is based on an assessment of the Financial Value of the Issuing Nation.

Any Nation that prints too much money will find itself unable to trade it's money on the World Market for full value.

The system is mostly self-regulating and works MUCH better than the Gold Standard.

And it's not that we don't trust them to play fair, we KNOW that they won't play fair. In the system that we have now, they are forced to do things out in the open. If the Gold Standard was adopted again it would be Absurdly Easy to cheat.

terry,

If I may ask. Can you tell me what the actual value the US dollar is worth, currently?

The actual value of a dollar is a 1.5 liter soda from the dollar store.

Money is only as valuable as what you can purchase with it.

Meaningless.

No less so than $800 = 1 ounce of gold.

Socrates, I'm sorry but your argument simply makes no sense. Are you sure you're not simply repeating words without thinking through their meaning?

How much gold is in the Gold Reserves of the world?

Answer: Nobody knows.

You will never how much gold is really there, you will have to take everybody's word for how much gold they actually have.

You can't trust Our Government or any other government to tell the truth on such a financially critical matter.

In the world Money Market the transactions are at least out in the open (Not 100% of them), with gold you will never know how much gold was there to start with, and almost every trade between nations will be done in secret. How do you know this, you ask? Because that was the way it was done when we were on the Gold Standard before.

The dollar has value because you can exchange it for the 1.5 liter of soda.

It's YOU that doesn't seem to understand the concept of what money is. It's nothing more than an agreed medium of exchange for goods and services.

Money represents a marker for the exchange of goods.

I suggest you simply are missing the entire concept of what money represents.

Oh sure!!! Money is nothing more than faith, belief, confidence or any other adjective it what one believes to be of value.

An old Samaritan clay tablet was worth more than gold in its day.

It is simply taking it on trust nothing more.

One ounce of Gold IS $800.00

Only to you.

To me gold is worth a little more, so I will buy your $800.00/Oz. for $900.00/Oz (as many as you will sell at that price). I value the gold more than the paper currency at this time. When I can sell the gold for $1000.00, I may choose to do so in search of currency to make an additional purchase. Until then the gold remains my standard for storing wealth, and it doesn't depreciate with inflation as the paper currency does.

Until then the gold remains my standard for storing wealth, and it doesn't depreciate with inflation as the paper currency does.

Just remember that if the dollar becomes worthless what is gold worth?

Bartering with gold when there is no reference point becomes a total joke.

Jack, perhaps if you substitute electricity for gold, you will see the joke is not on me. Whatever commodity or resource might be useful is more valuable than the fiat currency. Look at the definition for trade deficit. We have a huge debt with China because we accept their goods in trade for our debt. If we simply paid in gold in place of fiat dollars, the trade deficit would become an obsolete term. Gold is an excellent storage of wealth when that wealth is not in use. Almost all other resource lose value when in storage. This fact is undeniable.

Your contention with the use of gold as a standard exists not in the defense of fiat currency but in the belief that those who value gold are tricked into believing it is valuable because of some traditional value rather than a practical value. Create your own standard, for instance you may value gasoline, or wood for heat, or food. Storage and ease of trade are strong indicators for gold as a storage for wealth.

Storage and ease of trade are strong indicators for gold as a storage for wealth.

Storage is not what matters. What is gold worth if the dollar has NO value?

People will barter for what can be used not stored.

That old 1928 campaign slogan "Chicken in every pot and two cars in every garage" almost the the entire US population would have gladly taken that chicken after the 1929 crash.

We were on the gold standard in 1929 it made matters worse.

terry,

The actual value of a dollar is a 1.5 liter soda from the dollar store.

Money is only as valuable as what you can purchase with it.

Well I agree only in part. Money (legal tender) is only as valuable as those who you purchase from say it is. That value is based upon what is backing the money. If it is fiat money then the money is only as good as the word of the person or entity backing the money. When our money is backed up by the standing of a government body it is only as good as the government it is representing. If our money was based on the a gold standard then it would be redeemable for a prescribed amount of gold. Since it is not based upon a gold standard it is redeemable for absolutely nothing.

. This web page is fun to play with but gives the exchange rates of current world currency. It is interesting to see what an oz of gold is worth today around the world vs what our dollar is worth.

And I will gladly trade chickens for gold. However, if you cannot afford to pay, you may want to help me raise more chickens so we can collect gold from other hungry folks. That's the basis of a commodity backed system.

The dollar has no value. Actually the paper currency has a slight value. It makes good TP, it's washable (fabric not paper), and it burns as fuel. Gold has intrinsic value as stated earlier in this discussion.

In order for gold or any other commodity to be trade-worthy, both parties involved in the transaction would have to place value on the gold. If not, I am left with my gold, and I certainly can't eat it or burn it for fuel, or use it to power my gasoline driven electric generator. It is only a storage of wealth.

It is only a storage of wealth.

So dying of hunger, cold or lack of water means somebody down the line can barter with your gold.

That is all that the storage of wealth means.

Like I said you having gold is NOT a guarantee it will be a tool that can be used to barter with.

Gold would still have value...the dollar would not.

What value? You cannot answer that question.

We were NOT on the TRUE gold standard at the time of the crash...it was a fractional system which is, once again, what created the conditions both for the boom and the bust.

What is your TRUE gold standard? Because here in the real world there is not one country on any gold standard.

Like I said you having gold is NOT a guarantee it will be a tool that can be used to barter with.

Of course it's no guarantee other than that in the gold standard, each dollar is guaranteed a certain amount of gold backing. The market still requires a buyer and seller. If there's no food to be had, we starve together.

If there's no food to be had, we starve together.

Then nothing matters.

The subjective theory of value (or theory of subjective value) is an economic theory of value that identifies worth as being based on the wants and needs of the members of a society, as opposed to value being inherent to an object.

It holds that to possess value an object must be useful, with the extent of that value dependent upon the ability of an object to satisfy the wants of any given individual.

"Value" here is partially separate from exchange value or price, except insofar as the latter is intended to help identify the former; the value of any good or service simply being whatever someone would trade for it in the present. This creates problems as consumers tend to bid up prices if they are funding demand with credit. This tends to separate subjective values from stable values.

The theory recognizes that one thing may be more useful in satisfying the wants of one person than another, or of no use to one person and of use to another.^[1] The theory contrasts with intrinsic theories of value that hold that there is an objectively correct value of an object that can be determined irrespective of individual value judgements, such as by analyzing the amount of labor incurred in producing the object (see labor theory of value).

Jack, nothing or everything. My choice is to provide food & water at my level. It is hard work, but in the interest of survival, I'm willing to do the work. It actually started for me as a hobby. So I happen to be sitting pretty. Except that I don't know how I'll do it without more electricity.

The survivalist mentality can be good but, in the end no man is an island.

I see you did not say you have a large weapons stock pile or were you just being coy?

Unnecessary, I live around Fort Bragg. I would be unnoticed.

Nonsense, the Middle Class is disappearing because the Republicans are shipping our jobs overseas to make bigger profits themselves and their Corporate Masters.

It has NOTHING to do with inflation.

Well, someone has clearly been drinking the Kool-Aid. The decline of the middle class began in the late 1970s and the trend has continued across both Democratic and Republican administrations. One cannot properly understand or address the problem without honestly acknowledging that both parties are complicit.

No, both parties AREN'T equally complicit, the vast majority of what was done to destroy the Middle Class can be clearly laid at the feet of the Republicans.

Socrates.. in all sincerity, you need to learn/tell the truth about the GOP.

FDR put the United States into bankruptcy, introduced the most regressive of taxes, and fleeced the common folk of their wealth...and he was a Democrat.

Once again that is your opinion NOT fact.

FDR (A Democrat) pulled the USA out of the Great Depression that was a least partially caused by Herbert Hoover (A Republican).

Every time the Republicans, and other so-called Conservatives get their grimy paws on the Finances of the of the United States they screw things up for everybody.

So, I DO care about the Republican Party. I don't want them or their Libertarian allies anywhere near the keys to the Treasury because they just can't be trusted. Letting these people get their hands on this Nation's Finances would be about as smart as giving a loaded gun to a monkey.

FDR (A Democrat) pulled the USA out of the Great Depression that was a least partially caused by Herbert Hoover (A Republican).

In all fairness Terry, Coolidge is the one that deserves the credit.

It may be partisanship, but it is NOT blind.

Saying that both Democrats and Republicans are equally bad, is blind.

I don't buy the False Equivalence that some people seem to embrace. I look at the facts and place the blame squarely at the feet of those responsible whether they're Democrats, Republicans or whatever.

Currently it's the republicans who deserve most of the blame, in the 19th century it was the Democrats who deserved the vilification, eventually it may change back.

-------------------------------

Jack,

I wouldn't say Calvin Coolidge deserved the "Credit" for the Great Depression, but he definitely shares the "Blame" with Herbert Hoover". I think it's a toss-up as to which of the two Republicans was more responsible for that financial disaster.

I think it's a toss-up as to which of the two Republicans was more responsible for that financial disaster.

Why I say Coolidge is because he had control for 8 years and Hoover only 6 months when the crash hit. (Hoover inaugurated Mar 3 1929)

True, but many economists blame Hoover's lax enforcement and regressive policies for adding to if not causing the Great Depression.

While the Stock Market crashed in 1929, the Banks didn't start failing until October of 1930, one year after the crash and a year and a half into Hoover's Administration.

You realize the Federal Reserve was created in 1913? Only took them 16 years to create the "Great Depression". Good job...lol

Another depression with a gold standard.

Nope...as I have already explained to you....On the other hand, certainly another depression in a nation with a central bank.

You did not explain anything except agree with me that we were on the gold standard.

You have some other gold standard that you seem to think exists.

Did you miss the part about it only taking 16 years for the "Central Bank" to create the Greatest Depression the United States had ever known? Coincidentally it also took the opportunity to relieve American citizens of their gold, and put the country into receivership which it continues to be until this day.

HOLY COMPLETE FALSEHOODS, BATMAN!!!

Thanks for a truly devastating rebuttal expressed in an original and thoughtful manner.

I just gave a conclusory (and accurate) response to your conclusory and unsubstantiated falsehood - that's all!

If Zimbabwean Dollars were on the Gold Standard, they'd STILL be worth nothing because there's absolutely no way to tell how much Gold ANY Nation really has.

In other words, you have to take the Issuing Country's word that they can cover their money with Real Gold.

That's really no different than taking a Country's word that their money is good when it isn't backed by gold.

And right now we don't have to take some country's word as to how much their money is worth, that's determined by the world money market. If you print too much money, the world market will pretty much automatically devalue your money, so there's no real gain to printing too much money.

Returning to the Gold Standard is a completely stupid concept. That's why you won't find any reputable economist who thinks it's a good idea.

It does not matter how much gold a country has it matters that all countries are basing the value off the same thing. If an ounce of gold is worth x amount then your currency is based upon that amount. Again as I said above, it only matters how much gold you have when you debt is called until then your currency is only an IOU. If you have to sell off every asset the country owns to gain the amount of gold equivalent then so be it.

It does not matter how much gold a country has it matters that all countries are basing the value off the same thing.

So what do you use as a value? Oil, dollar, condoms ect it would have to be agreed upon for the whole world just like oil is traded in dollars now.

Removing the dollar as the world's currency would make for a very messy economic environment.

The value of gold fluctuates, and always has.

It's always been based on how much you can buy with it, and that has always varied depending on the amount commodities available.

In good times when there are plenty of goods and services for sale, your gold is worth a lot. In bad times such as Famine, Drought, and War etc., your gold isn't worth as much. This is the way it's been throughout history, going back to the Gold Standard won't change this basic economic fact.

Terry, It is not the value of the Gold fluctuating that is my problem. The problem is fiat money vs a money that is backed by a redeemable resource. Gold just happens to be one of those resources that has maintained a consistent value over a long period of time.

I personally don't care if we use cow patties as the collateral (jut kidding lol), though others may not agree I just want it to be backed by something other than the good word of the ol' Fed Reserve care of the slickster politicians in the government.

I just want it to be backed by something other than the good word of the ol' Fed Reserve care of the slickster politicians in the government.

Jesus Christ you got "In God we trust" on it what the hell else could you ask?

So I heard it this way.

It says in "God we Trust"....but for everyone else we only take the real thing.

but for everyone else we only take the real thing.

That is funny. Hell until GOD was added to the pledge then to the dollar silver backed the money. Then after the GOD adding to money in less than 10 years the silver was gone.

The price shot up when Republicans in the 70's went off the Gold Standard for Foreign Exchange, and allowed private ownership of gold again.

The Gold Reserve Act of 1934 made gold clauses unenforceable, and changed the value of the dollar in gold from $20.67 to $35 per ounce. This price remained in effect until August 15, 1971, when President Richard Nixon announced that the United States would no longer convert dollars to gold at a fixed value, thus abandoning the gold standard for foreign exchange (see Nixon Shock).

The limitation on gold ownership in the U.S. was repealed after President Gerald Ford signed a bill legalizing private ownership of gold coins, bars and certificates by an act of Congress codified in Pub.L. 93-373,^[7][8] which went into effect December 31, 1974.

The rest of the world had already dropped the Gold Standard, we were just catching up to the modern world.

No, you're just in major denial.

In good times when there are plenty of goods and services for sale, your gold is worth a lot. In bad times such as Famine, Drought, and War etc., your gold isn't worth as much. This is the way it's been throughout history, going back to the Gold Standard won't change this basic economic fact.

Is that why in every city of this depressioned out country that there is a man on every street corner trying to get people to sell their gold prancing around with a big sign? Something must be amiss?

Linda,

This is because the instability of the World Financial Market has driven up the price of Gold.

If there was a true World-Wide Famine that caused a total economic collapse, that $1700 ounce of gold might buy you a loaf of bread that you could purchase with a handful of bullets. Then again, that ounce of gold may be completely worthless and barter for useful commodities may be the only acceptable trade.

Value is ALWAYS relative to circumstances.

No, that's subjective value, not stable value as I pointed out in 20.31. If the universal standard was the same across the planet.. gold .. it would always maintain its intrinsic value, regardless of individual (nation) circumstances.

There is ZERO chance of there being a Universal World Standard for the value of Gold.

That's exactly the same as creating a Single World Currency, and that ain't never gonna happen.

The value is, has been, and will always be subjective.

Terry,

The US dollar was off the gold standard between 1933 and 1948 when the Bretton Woods accord was signed, which lasted until 1971. During the bretton woods era, there WAS a single global 'price', (not value) for gold that was referenced to the US dollar which was considered the global reserve currency.

One of the reasons for going off the gold standard was that there was an economic disparity that resulted from rising trade deficits and europe was able to offer higher interest rates for US dollar deposits than the US was, which made the economic issues worse. This was the original Euro Dollar. (There were other reasons for the euro dollar, one of which was the fear that the US would confiscate monies earned from oil sales by middle eastern countries)

Inflation is inevitable. It can't be stopped no matter what (not without throwing the economy into a heart attack anyway).

So instead of moaning that $1 now costs $4.21, you should be glad $1 doesn't equal $10, $100, etc.

Let me put it in simpler terms for those who do not "get" it. The "value" of a silver dime from the 1960s is worth over $2.00 today. The silver did not lose value, the currency did.

Great article Socrates!

Yeah, instead of moaning about 350% inflation, we should be grateful that it is not 1,000% or 10,000%. If you're complaining about taking it up the a$$, you should actually be grateful that at least some lubricant was applied. ROTFLMAO X 10

The currency didn't lose value, silver became more valuable.

Why? Silver production has not kept pace with population growth.

There is now less silver in the world per capita than there was in the 1960's. It had gone on for quite a while before they stopped making dimes out of silver because people were melting down the dimes and selling the silver for a substantial profit.

The currency didn't lose value, silver became more valuable.

Does it matter which came first, the chicken or the egg?

If our currency was still backed by precious metals, our dollar would still buy the same amount! That's the whole point!

No it wouldn't.

There wouldn't be anywhere near the amount of goods and services available if we returned to the Gold Standard.

You CAN'T go back, it won't work.

sparrow,

the value of that 'silver' dime as currency is 10 cents. The value of that dime as a collectable will vary depending on what people are willing to pay for it.

It's the same thing as the value of a pre revolutionary ruble. As a currency that is no longer valid, it is worthless, however to a collector it may be worth a lot. It has NOTHING to do with the issues of a resource backed standard.

@Jonathan-1917156 -

I'm not sure, but I believe sparrow may have been referring to the "melt" value, i.e., the value of the coin's silver based on current silver prices.

In any event, even if a silver dime is worth $2 today, it still doesn't change the fact that it would be stupid for the US to unduly bind our currency to some arbitrary standard like the gold standard, thereby unduly and greatly limiting our flexibility in being able to manage the US economy.

An paragraph extract from the trading guide for a computer trading platform:

July 2006 Edition (EasyForex Trading Platform)

However, the gold standard had a weakness in that it tended to create boom- bust economies. As an economy strengthened, it would import a great deal, running down the gold reserves required to support its currency. As a result, the money supply would diminish, interest rates would escalate and economic activity would slow to the point of recession. Ultimately, prices of commodities would hit rock bottom, thus appearing attractive to other nations, who would then sprint into a buying frenzy. In turn, this would inject the economy with gold until it increased its money supply, thus driving down interest rates and restoring wealth. Such boom-bust patterns were common throughout the era of the gold standard, until World War I temporarily discontinued trade flows and the free movement of gold.

Basically what this means is that if you need to add a dollar to the monetary system (population growth requires that you add dollars just to stay even in GDP/capita, hence living standard), you either need to have enough in the ground to dig up and add to your monetary system OR you need to pay a dollar to someone to sell you that same amount of gold. Now considering that the US hasn't got anywhere near that amount of untapped gold reserves (IIRC Canada, South Africa, Russia and Australia have the most untapped gold reserves), that is going to be something that creates a HUGE drain on the economy just to keep up. If anyone wants to see a similar effect, just think of the reparations that germany had to pay after WWI and the impact of that on the german economy.

It is just plain silly to even think about the gold standard.

As for the melt value, under the gold standard, you have to have fixed prices for the 'backing resource' because otherwise you just create another 'valuation bubble' problem. His 'melt value' price is meaningless in the 'gold standard' system anyways because you have to be restricted from owning the resource (it was largely illegal to own gold while you are on the gold standard) and even then, the price of the material today is NOT what would happen to the price if you were using that as the currency backing.

So your concept is that the economy cannot grow, period. That is your idea of an economic system. Now that is a concept that is just plain ludicrous.

Correction:

No, it is comments such as yours erecting strawmen and using fallacious logic that makes the discussion POINTLESS.

reread my above post, but this time, take your hardline unreasonable, obviously sourced from someone who has no clue other than their hardline beliefs, deluded view.

No need for me to restate the same thing, but if you want me to, I could cut and paste the exact same post.

The forex article attributes free market operations to a gold standard. The criticism of gold in the article is unwarranted. The free market operation will automatically correct under normal circumstances and allows for growth when growth is warranted. Many examples introduced as criticism of free market operations are merely suggestion for controls which will benefit those who control it rather than a real system of control for a fair market.

In a gold standard, the game is similar to monopoly in that the banker is a non-player. The player may act as the banker, however, the player receives no gain or loss as a result of banking operations. The free market cycles, and to exploit those cycles one must compete on a level playing field with other players.

Under the current system of fiat currency, bankers (as in the game of Monopoly but in reality are corporate, government, and financial interests)are the players, and the rest of us don't matter except as a source of taxation and interest. We are commoditized people who land on their properties and have to pay taxes or rent (or go to jail). We never get to 'pass Go' or collect our 200$ income because it costs more to live in this system than we can possibly earn through legitimate, taxable income. We have no viable means to store wealth as would be provided if we were using a commodity backed currency.

BD, please take your conspiracy glasses off for a moment. (seriously, if you don't then you will always be coloured by the impression that everything is some form of conspiracy).

The issue that the forex MANUAL, NOT ARTICLE refers to is this.

Your country has a billion dollars worth of gold (the reserve). That allows you to print a billion dollars worth of currency. Now economic expansion requires that more money be created. The question is HOW do you do that.

1) dig out more gold if you have untapped reserves.

2) buy more gold from a country that has untapped reserves.

If the US had enough untapped gold reserves, that would be fine, from a LOCAL economic perspective. But the US economy is such that it would be pretty much impossible to do so.

That leaves the 2nd option, which means that you need to spend your gold backed dollars in order to buy gold to create more gold backed dollars. That means that you need to slow the economy down in order to free up those dollars to be able to spend to buy that gold to create more dollars (the BUST). The way you do that is to increase the interest rate, which is how the economy slows down. Again, the BUST.

Once you have bought enough gold to print your increased money supply, you then have the boom, because now you drop interest rates. But you haven't really increased your money supply, because that money is now in the hands of foreigners who can then use that money to impose control on your economy. Now you can't even use any other measures to decrease that control either, so you may have something similar to today with foreign debt holders, but you have no way to address the problem. But the end effect there is now you have a BOOM situation, with the likely probability of rapid inflation. But because your money supply is fixed, (because you have that gold), you again, can't really address the core issue.

The one thing about the fiat system is that the central bank can create AND destroy money at will. It goes both ways. In other words, it sees a problem, it can address that problem immediately. That the FED didn't do so over the last two years is not a problem with the concept of the FED, it is a problem with the people that run the FED, who in my mind, the prime culprit is now gone.

And under the current system, you not only are a victim of it when things are badly run, you are also the beneficiary of it when things are going good, I rarely ever heard a peep of complaint in the last decade when peoples homes were on what was then an unstoppable rise in values. Not a single peep. But now, OMG it is a @!$%#ing travesty, my home has lost half its value blah blah blah. The problem is that it shouldn't have had that value in the first place. Yes it should have been stopped, but could you imagine the screaming if it was? That requires an independent fed, not one tied to anything.

The other part about item number 2 is that what you are essentially doing is tying the value of your economy to the amount of that resource that your country has. So a country like South Africa would have an oversized economy, only because they are one of the worlds largest sources of gold (johannesburg was pretty much built on gold, there was no other reason to create the city), but can you honestly say that there is very much to south africa's economy that would warrant it? It really doesn't produce anything but gold and other minerals, but doesn't really add any economic value to it. But under a gold standard, it would be one of the wealthiest countries in the world. All based on a metal that has almost NO economic value.

So NOW you are saying that you are treating gold as the commodity, and not the backing of the currency.

You don't seem to understand how the gold standard works it seems. It isn't a strawman argument, it is the nature of how a gold standard works.

And you make that comment over and over again, yet you can't actually state HOW the system would work, and the reality that the US just doesn't have enough gold to provide enough currency to run the country. So with that, assuming that everyone has a gold standard, HOW does the US acquire the gold to provide enough currency to run the country.

You should at least be able to answer that.

BD, please take your conspiracy glasses off for a moment. (seriously, if you don't then you will always be coloured by the impression that everything is some form of conspiracy).

Where's your rose-colored lenses? I like conspiracy theory. There has to be something in this for me as well or I will simply yawn myself to death. Surely you must see that many folks who did all the right things are finding out they have been cheated by this current system. Where do you think the OWS movement came from? My choice is to talk about the theory and use my better judgement to plan for the future rather than to camp out on someone else's lawn and complain about the present. But then someone might think I'm trying to put down OWS, which I am not, but it isn't my thing. I don't think politics or violence will bear fruit under the current scenario.

BD

My rose coloured glasses? I for one do not believe that the current system is perfect, in fact I don't believe that ANY system is perfect as perfection is in the eye of the beholder. It does however have fewer faults than the alternatives.

As far as all the many folks that did things right? really??? The biggest whiners about what is happening right now are the same people that put themselves neck high in debt because they wanted to 'exploit the equity' in their homes or wanted to take advantage of the speculation in the real estate world. The people that did things right didn't do that. They aren't complaining because they didn't get involved in the scams. Why do you think I keep saying that people weren't complaining about it when their home prices were going through the roof when there was no underlying reason for it. They were too busy exploiting that so called new value, when it was really just a hyped up bubble.

People are FAR too willing to ride the wave without realizing that on the other side is a huge drop. So NO, I am not sympathetic, I am not sorry for them. They were trying to cheat the system themselves.

The problem with the gold standard though is that you can't plan for anything at all. It is the exact opposite, you are at the mercy of it. People focus on the gold issue, when the reality of our current economic situation is that we have destroyed our economy. No amount of gold is going to fix the 30 years of damage that we have done to our economy. Do you honestly think that we would be in this situation if we didn't actually stop to think about it when we shipped half our manufacturing overseas with nothing to replace it? That has SWEET @!$%# ALL to do with the gold standard. That has everything to do with short sighted decisions made at the micro level without regard to the impact at the macro level. Going back to the gold standard would just prevent us from correcting the problem.

As far as the camping out on the lawn, that did more to change the dialogue that is going on now than all the bitching and screaming about peoples @!$%#ing underwater mortgages could have. Again, NOTHING to do with the gold standard. (remember how Kent State was the precipice of something that was building up for years in the 60's, same thing). The WHOLE point of OWS wasn't to physically change things, it was to open the dialogue into areas that really do affect people. And guess what? it worked, people ARE talking about it.

That has been far more productive than anything ron paul has talked about regarding the gold standard.

socrates:

Now, what you need to do is to work that transaction through, assuming that neither side has that gold. Work it through first the acquisition of gold, especially since Saudi Arabia has NO gold to speak of. Try to figure out the MECHANICS of that transaction.

Why do I have a double standard. If people want to take advantage of an unwise investment, they need to accept the fact that they are taking the risks. If they don't want to take the risk, then keep your investments low risk.

Sorry, if you can't take the heat, stay out of the kitchen.

There is a reason why Jim Cramer's show by the way is called MAD MONEY. It means he is referring to money that you can afford to lose. He has NEVER indicated that people should play with money that they can't afford to lose.

The reason why you can't adapt while you are on the gold standard is that you literally can't print money. In some cases printing money is bad, but in other cases, it is what is needed to avoid financial disaster. If you are on a gold standard, you can't print money, EVEN if it is called for. Not sure why that is so difficult to understand. And I have stated that many times. That you refuse to acknowledge that I have stated that many times is your problem. You just have the attitude that printing money is bad in all cases. It is your view that is holding up the discussion.

And NO the fiat system is NOT the cause of our current predicament. It is the offshoring of jobs without replacing them with like jobs that is the cause. It has NOTHING to do with the fiat system. It would have happened whether we were on a gold standard or not.

The trends prior to 1971 was that we were offshoring jobs. Only prior to 1971, we were offshoring them to europe.

As for your quote on the linked seed:

(Said to be from an informal talk at the University of Texas in the 1920s, but as yet unverified.)

In other words, who the hell knows who even said it.

And quite honestly, you can't even describe how your vision of a gold standard would work, how can you even laughably make the comment that the gold standard would not prevent us from correcting economic problems. You can't even describe how to sell bushels of wheat to saudi arabia if neither party has gold in their reserve. Man those comments are laughable.

Depends on if the game is fixed.

Nobody forced people to mortgage their homes to the hilt, nobody forced people to buy obviously overvalued homes with no down payment. People tried to game the system, they lost. People should learn to live with the consequences.

Perhaps I missed the part where you advocated the banks, and Wall Street Firms, being allowed fo fail for doing the very same thing. If you did, I apologize and agree.

I really don't care personally if a bank fails, UNLESS the failure of the bank will severely impair the function of the underlying financial system, which would then end up taking down other, otherwise viable, banks and non bank companies. However, that is ALSO why I am very much for very strict regulations including the enforcement of those regulations. That includes in this case, what should have been an interest rate increase by the fed back in 2004 which would have SHRANK the money supply and slowed the bubble. You couldn't do that with a gold standard.

Well, yes, which would be supporting your statement above. If you can't stand the heat, get out of the kitchen, don't count on your debts being paid with less valuable printed money. Stay consistent.

I have no problems with the dollar dropping in value, if the economic fundamentals support that drop. That can't happen under a gold standard. If you want the dollar to increase in value, then improve the economic fundamentals. Something that you don't have with a gold standard. With the gold standard, any country that just happens to have a lot of gold reserves can print up a lot of money, because they can dig it out, but that doesn't mean that they have an economy that backs that value, they just have a lot of gold.

Meaning you reject your statement above? People should not be held responsible for the mistakes they make?

People don't print money, the nation does. And the nations central bank takes a look at the overall economy to decide whether it is warranted to either print or destroy money (which is accomplished by either lowering or raising interest rates in the current system).

And yes it is....without an unlimited credit card there would have been little point.

There isn't an unlimited credit card, you only pretend to think there is. There are implications to any decision to either increase or decrease the money supply. If there truly was an unlimited credit card, then there would be no consequences to it. There are. Just because you refuse to see it doesn't make it not true.

Not to the same extent, but for the same reason, which is what led us to repudiating the Gold Standard in the first place. (By the way, did you even read the quote you pasted so long ago, which repudiates much of your argument now?)

Of course it isn't to the same extent, the economy works FAR faster now because of computers, and as well the tax system actually encourages offshoring of jobs. In otherwords, NOTHING to do with a gold standard.

As for the quote, are you referring to my forex manual quote? because if so, it does NOT repudiate what I am saying. It totally backs what I am saying. You just refuse to see it because you refuse to see beyond a failed monetary system.

Nope...you must have gone to Wikipedia, which is where that was indicated. I searched elsewhere to see if it was quoted without that caveat...and indeed it was.

The wikipedia referenced mentioned that there was a dispute as to whether he even said it. All I did was reference that dispute. Just because another site doesn't have that dispute mentioned doesn't make the dispute not valid.

I'm afraid it is not I who am failing to explain............and, frankly, unless you have something new of value to say, I would suggest, once again, that we end the discussion.

All you said is that the Saudi's will pay X amount in gold backed currency. That does NOT explain the underlying processes, which is the part YOU don't understand. The ONLY thing YOU can state is the very outer shell, which does NOT explain how something works.

That is like saying that the only way a car can work is with a gas engine, without looking at the reality that there are OTHER engine types out there. Each one has strengths, each one has weaknesses. The one to choose from would depend on what the requirements are.

In the case of a gold standard, the requirement for it to be appropriate is a slow growing economy that has a stable population with no real disruptive economic factors taking place. Once you have a disruptive economic factor hitting the economy, then the gold standard lacks the flexibility to adapt to those changes. So if the economy was the same as in the late 1800's in Austria, the gold standard would be fine. The economy then in austria was stagnant, population levels were stable, and the industrial revolution had largely run its course and everything was largely stable. Gold standard works (a fiat standard would work too, but it would be harder to keep stable, especially without computerized brokerage systems).

Again, if you want to live in that time period, please be my guess, invent a time machine and go back in time.

Right now, gold is a good buy. Won't last long though...

under a gold standard, your gold is not tradable on the open market, and needs to be set at a fixed price. It turns the gold as a commodity into gold as the foundation. You are taking the current system and trying to apply it to a different financial system, and you can't do that.

you can't trade the gold, because the gold is what is backing your currency.

Everytime the nation was on the gold standard, gold ingots were NOT openly tradable. Not sure what part of that you don't get.

and if you go BACK to a gold standard, then that freely tradable aspect MUST DISAPPEAR, because then someone can just take the gold out of the monetary system. You have to control the backing of that currency. If you don't you are just creating problems.

Yeah if you want no economy, then please allow for the free trade of the resource that is backing your currency. That's the ticket.

what is the point of looking at the price of gold in 1960, when the price was an artificial value for currency valuation purposes. If you really want to look at it, you need to look at the value from 1971 to today when gold started the process to become a tradable Commodity.

Federal reserve notes are NOT backed by gold and haven't been since 1971, so therefore the assertion is incorrect.

hmmm so since federal reserve notes are not backed by gold, people won't invest in them unless they are backed in gold?

Federal Reserve Notes get FAR more investment dollars than gold does. They are NOT backed by gold. No amount of word spinning and language use is going to change that.

I don't care about gold as a commodity, it has NO PURPOSE to me as a commodity (though it probably will in the future, but not as function of a monetary unit).

Investing in gold is plain and simple investing in hype. There is NO inherent economic value in gold, and there is very little industrial value. It quite frankly is a substance's whose value is plainly based on hype, nothing more.

I really don't care if people put their money into gold though. If they want to put there money on a pure speculation play, fine (my grandfather did that in the 70's, and boy was he ever crying in his sleep about the hundreds of thousands of dollars he lost when the price dropped. Serves the @!$%#er right)

At least if you buy a car (or a house), even if the value drops, there is an economic exploitive value associated with it. Gold doesn't have that.

if your money is backed in gold, and the value of that gold drops, there is NO inherent economic value to that gold, it is just there. That is WHY gold was used in the first place. So in the case of a gold standard, you have to create a FIXED value for gold, so you are in essence creating NOTHING.

Gold value truly lies in the eyes of the beholder. If not gold, then what? I store wood for fuel. I can trade it for gold if I value the gold more highly, or I can trade it for a car. Actually I traded an old car for some wood a couple weeks ago. The kid needed the car and I needed the wood -- commodity trading in its simplest form. The government has no ownership interest in the transaction.

Under our current fiat system, the government has ownership interest in all transactions. It will eventually evolve into the elimination of all private transactions.

Under our current fiat system, the government has ownership interest in all transactions. It will eventually evolve into the elimination of all private transactions.

Every reserve note says "This note is legal tender for all debts, public and private" so that statement makes NO since.

it has the value of the economy that which the currency belongs to.

As previously stated, a note without value is meaningless.

The note has value because the world has FAITH in it.

Same applies to any precious metal.

One requires faith in the man behind the curtain...one doesn't.

They both due. There has been times in history that other commodities values out way gold or silver.

So the faith thing is all we have.

it isn't one man, it is an entire system, if which you are a part of.

And? We KNOW the value of the currency will drop, with gold we have a chance.

That is false. Gold is not any more than what the other person thinks it is.

Your whole premises is the Glenn Beck Goldline scam. Goldline is going to get it's clock cleaned for all of it's misrepresentation that it has done.

Jack,

actually if there is a fraud, the glenn beck goldline scam is it.

They have been targeted by the City of Santa Monica,CA and have not answered the complaint yet.

My guess is they'll kill the speculators

Speculators are what caused the 1929 crash while the US was on the gold standard.

Killing them would be NO lose.

you do realize that speculation is not a modern phenomena right?

Jack

and the gold standard was what really prevented the steps that were needed to prevent the depression, unlike what happened in 1989 where the impact was FAR less.

Agree

Jack, just digest it for a moment.

legal tender for all debts, public and private"

It says debt. All transactions are debt free until some medial instrument like currency (or in the case of financial institutions, the loan) is imposed on the transaction. As in the barter scenario, no debt is ever incurred because there is direct exchange of goods. In the current evolution, we impose an intermediary, the dollar, to our transactions so that the government gets its share. That share is a debt, and the intent of the dollar is for government to issue and collect debt. Bankers have put themselves in the middle to collect interest on the debt.

bd,

a debt is generic, if you walk into a store, and say you want to purchase 100 dollars worth of goods, that is a debt. Even if you don't actually take out a formal loan, it is still a debt.

And your barter situation is the same. If you have 100 widgets, I have 50 Whatchamacallits, if I want your widgets, then I am in debt for the price of those widgets, until I pay off that debt with my whatchamacallits.

(It probably should be worded debit or liabilities but that is neither here nor there).

In the current evolution, we impose an intermediary, the dollar, to our transactions so that the government gets its share. That share is a debt, and the intent of the dollar is for government to issue and collect debt. Bankers have put themselves in the middle to collect interest on the debt.

The key words are public and private. That is what separates what you are saying.

Private does not involve the banks or the government hence the black market, drugs or corrupt people for political gain.

All transactions are debt free until some medial instrument like currency (or in the case of financial institutions, the loan) is imposed on the transaction. As in the barter scenario, no debt is ever incurred because there is direct exchange of goods.

FALSE!!! Once the agreement is made for the barter, each side has incurred a debt to the other per the agreement. Then the exchange is made and the respective debts are satisfied.

E.g., Person 1 to Person 2: I agree to give you A if you give me B. Person 2 to Person 1: OK, I agree to give you B if you give me A - so we have an agreement. At this point, per the agreement, Person 1 has incurred a debt of A to Person 2, and Person 2 has incurred a debt of B to Person 1. If they don't make the exchange at this point, they each have the respective debts to each other per the agreement. If they each go through with the barter, their debts are satisfied.

IFeel

We must be thinking the same thing and was typing it in at the same time hahaha

HAHA - I just noticed your #16.28. That wasn't there when I first started typing #16.30.

it is a more restrictive standard, not a more responsible one.

In that case since I am more knowledgeable in currency

you really shouldn't word your sentences like that because some may take it as a CoH violation, especially since you have made NO mention of any exposure to currency issues from a professional viewpoint, of which I DO HAVE experience.

Ok to rephrase then, since from the position of the person who is more knowledgeable in currency... Wrong use of pronouns, I get that. You know what I mean. :-)

The answer though is that you don't know more about currency. I worked in it largely from a risk standpoint working on the risk management systems for the financial industry (And I DO understand the mechanics of Socrates hypothetical transaction of bushels of wheat to saudi arabia, I just don't think I should be the one to document it in a way that the average person can understand, he is making the assertion, he should be able to explain EXACTLY how the transaction would work, because the imposition of that standard would require those mechanics to be worked out).

As for gold as a standard, again, we go back to the point that the only reason why gold has a value is because we give it a value, not because it really has a value. In fact, there is no real economic value associated with gold (more true in the past than today), which is WHY it was chosen. It is a rare substance, that has no economic use. The rarity makes it 'valuable' but the no economic use makes it suitable as a reserve. But that is in the past. I will not say that the gold standard is stupid (I don't think I ever have said that), all I say is that it is not relevant at this point in history. We have enough systems in place that we can reproduce the 'advantages' of gold and by not being on a gold standard, we avoid the problems of gold (or any other backing).

These two paragraphs from the link in 17.6 stand out as clear arguments for the gold standard:

Mesopotamian economic thought c. 2000 BC rested on a more realistic mathematical foundation than does today’s orthodoxy. At least the Babylonians appear to have recognized that over time the debt overhead became more and more intrusive as it tended to exceed the ability to pay, culminating in a concentration of property ownership in the hands of creditors.

***

Babylonians recognized that while debts grew exponentially, the rest of the economy (what today is called the “real” economy) grows less rapidly. Today’s economists have not come to terms with this problem with such clarity. Instead of a conceptual view that calls for a strong ruler or state to maintain equity and to restore economic balance when it is disturbed, today’s general equilibrium models reflect the play of supply and demand in debt-free economies that do not tend to polarize or to generate other structural problems.

socrates,

You better watch it with the personal insults.

second off, I understand it because I have worked through it, YOU most obviously haven't worked through it. Maybe you should beyond the superficial high level.

Again, you have a transaction worth your 800 dollar ounce of gold value. NEITHER country has that gold in reserve. now work through that transaction for your 800 dollars worth of wheat.

My response to your link is, DIFFERENT TIME, DIFFERENT PLACE, DIFFERENT CONDITIONS.

If you really want to go back to the time of ancient sumeria, please feel free to invent a time machine. Do you really think that blood letting is a credible medical technique? which was considered credible back then.

I agree that it can be worked out, but my comment does have value, for the following reasons:

1) that you can work out what YOU are saying is extremely important.

2) that you can work it out implies that you understand the implications, both good or bad

3) that you can work it out indicates that you have more to what you say than bull@!$%#.

NONE of this has been answered because alas, you haven't worked it out. (and no, saying that 1 oz of gold is worth 800 dollars is NOT working it out).

all the while you still continue to deflect that you can't understand the underlying concepts of what you are talking about. Seriously man, is that your only defence, that 'I won't actually state it because you disagree with me'.

No, the reason why I disagree with you is because what you are saying is wrong. I don't even take that personally. I take that as someone that believes in an ideal, and is willing to take that ideal to their death, even if it isn't workable. Now if you actually tried to work it through, the mechanics of that transaction, right through from the beginning to the end, from the point of acquiring that gold, and how you acquire that gold, you just might see how unworkable it is in the big picture. You refuse to do that. That isn't my problem, that is yours.

Yeah, I know the answer, and I know WHY it is bad.

So either you believe that hurting the economy for no valid reason is a good thing or you don't know what the impact is.

The value of my JonLand dollars in the fiat world is based on the integrity of the underlying economy that issued those dollars. So if I print JonLand dollars like they are going out of style, they will 'dilute' the value and cause the amount that people are willing to buy those dollars for to decrease. If I build an an economy that those JonLand dollars are part of that is robust and solid, then the amount that people are willing to buy those jonland dollars for will increase. That is how the system today works.

Now what are those valuations based on? well right now, they are based on the US dollar, which is the global reserve currency. So my JonLand dollars would be valued based on the US dollar (which is always valued at 1 dollar). So if you had SocraticPickWicks, you would convert those into US dollars and then convert those US Dollars into JonLand dollars.

As far as why you should take those JonLand dollars? personally I would prefer that you didn't take them, but in the world of global finance, I can't stop that.

it is based on what people are willing to pay for those jonland dollars. Not sure why that is so difficult to understand. So if people think JonLand dollars are worth 1.50 US dollars, then that is what they are worth, if people think they are worth 10 cents US, then that is what they are worth.

Now what people think they are worth, that is dependent on the properties of the entity that JonLand dollars are part of. If the economics are good, that increases the value, if the economics are bad, that decreases the value. Not that difficult to understand to be quite honest.

Its the same thing as the value of your house. The value really isn't what it is assessed at, the real value is what someone is willing to pay for it. The house I live in is assessed at close to 400,000 but there is no way that I would be able to get anyone to buy it for that price now (hell I would be lucky to get 250K for it). My other house in the area (the one I have owned for two decades) is assessed at close to 1.2 million, but there is no way I could get that for the house. That is the point, the housing market is depressed, the economics are depressed, so the value of the assets (in this case houses) are not as high as they once were. It is the EXACT same thing with money.

and again, those one million jonland dollars are worth what people are willing to pay for those jonland dollars.

If a person isn't willing to pay 1 cent us for them, then they aren't worth the 1 cent.

I personally cannot claim they are worth anything. That is up to the market to decide.

socrates.

Ok, something that you may not be aware of, (which would explain a lot).

There is something called a FOREX exchange. It is where entities bid on currency exchange. There are 2 main components as well as the pricing component, There is a sell figure, a buy figure and a spot figure (basically the last price that a currency exchange trade for those currencies went for). EVERY currency that is generally available (there are a few currencies that are not freely tradable, even still) is on that foreign exchange trading system. In the current system, every currency trades against the US dollar. So if I am going to go from Canadian Dollars to Sterling, then I need to first trade Canadian to US dollar then US Dollar to Sterling. That is how the system works today.

(My MBA thesis was about removing the US dollar from that position and make it floatable. The more I looked into not only the process of making it work as well as the de-leveraging process, the more it ended up proving that my idea wasn't workable. So my paper was an interesting one in that the hypothesis going into it were COMPLETELY different than the conclusions that were derived from the paper)

As for what the decisions are based on, the basis is a variety of factors:

1) Monetary policy,

2) Economic policy

3) economic performance

4) factors beyond their control

and a large number of other factors.

That number 4 is important because something like an oil embargo would impact economic prospects that have nothing to do with the policies of the nation in question, and therefore would lower the price of the US dollar compared to say the UK, which is self sufficient in oil. (other factors would make the price of the US dollar go up however).

The problem with gold in this scenario is that your arbitrary price for gold is such that it really doesn't give anyone indication of how solid the economy of that country is. The economy is not gold mining. The economy is far more than gold mining. The price of gold doesn't tell you what you can actually buy for that gold either. It is an arbitrary metal that was used to be an arbitrary base of currency and at the time that it was made that, it made sense. It made sense most of the time until the latter half of the 20th century where OTHER mechanisms where put in its place that allowed for the controlling mechanism to function, but STILL allow for the flexibility that the gold standard does not allow for.

sounds like you do need a lesson though.

The value of JonDollars are WHAT PEOPLE ARE WILLING TO PAY FOR THOSE JON DOLLARS.

There is NO underlying value of the jondollar other than that.

But that is no different than jondollars based on gold because If I have no interest in gold, especially since it has NO value to me, then a jon dollar based on gold with no real economy is worth less than a jondollar based on nothing with a strong economy.

But hey, you like your gold, please feel free to buy as much of it as you want. I prefer to put my money to commerce.

and attaching gold to your socraticdrachma's imparts NO value to them either. You seem to think that gold has a value. It DOESN'T. It is ARBITRARY, as arbitrary as anything else.

so your gold backed dollar is with 1/800th of an ounce of gold. SO what? Seriously??? so what.

What can 1/800th of an ounce of gold buy you?

You have the EXACT same problem. You can say that oh it buys me X amount of wheat, but that amount of wheat will have a varying price. So again, your attribution of value by gold has no real basis in reality.

You seem to think that gold is a magic wand. It isn't. It just an arbitrary standard. That is all it is. It is a standard that had a purpose in the past, and would still have a purpose if used today. The only problem with it is that it is an arbitrary measurement, and the restrictions that that arbitrary measurement places on you do more harm in todays economy than good.

And note, I have NEVER said the gold standard is stupid, I have never said that it didn't do anything. ALL that I have said is being on the gold standard today is NOT a smart or effective thing to do. We have systems in place to do the same thing that the gold standard did, without the problems. Does it take more work, yes, but the flexibility to deal with economic factors makes it such that being on the gold standard would do more to harm our economic system than good.

Seriously man, I have stated how the JonDollar valuation system would work. You haven't described how your system would work. The fact that you don't acknowledge it is just you being blind to it.

These are effective points, and Jon I appreciate the education on the Forex. As a sidebar, what currencies are not freely tradable?

In the interest of clarity, please explain how the value of gold or any other commodity is arbitrary. I think they all have a relationship, and to suggest any are arbitrary implies that all values are arbitrary. It regresses to the statement that my car is worth what someone will pay for it, only I may not accept that price, therefore it is worth nothing, or it is priceless. When a resource is taken into consideration, it may have no price, but it nearly always has value by its nature as a resource. Because it is not for sale doesn't mean that it has no value. By this notion I suggest that currencies have no value other than the resources they represent, so I think what is needed is an establishment of the formula used to value US dollars. I have suggested before that it is relative to GDP.

Perhaps one could use a model based on the US' complaint that China some how manipulates the value of its currency. I heard it on the news again today that China keeps the Yuan depressed. If they can do that, essentially they prop the value of other currencies and in the middle of that is they prop the value of commodities like gold as well.

BD, the reasons why commodities have value, atleast minimun value, is simply because of the markets, trading and speculative futures, yes? In comparison, is there a market for 'dollars' ? If the answer is no, then it would seem a commodity, any commodity, would have greater value over a dollar.

Since commodities are traded on exchanges, their prices are not set by a single individual or entity. On the exchanges, commodities are traded via futures contracts. These contracts obligate the holder to buy or sell a commodity at a predetermined price on a delivery date in the future. Not all futures contracts are the same - their specifics will differ depending on the respective commodity being traded.

Yeah and yeah. I'm trying to establish that difference because some suggest that gold has no intrinsic value where I tend to disagree. I think it's the currency that has no intrinsic value. Even though for instance your house may be 'under water' as the saying goes, you take no loss unless you sell it. Stocks have market value by same notion, but if you don't sell, you don't realize any gain/loss. So again value lies in the beholder.

In a free market, values fluctuate with supply/demand. In our currently regulated market, values are manipulated by additional means while supply/demand affectations are buffered.

BD,

the Remimbi (China) is one currency that is not freely (only partially), Cuban currency is not freely tradable, North Korean currency is another one. Between the end of the Bretton Woods accord and the fall of the soviet union, none of the 'communist block' currencies were freely tradable either.

what china did before was to fix the exchange rate.

after they realized that they couldn't withstand a WTO challenge, they changed the system where they have a basket of currencies and base their currency value on that basket. If they want to lower the 'spot' price of the Remimbi, they would just adjust that basket to lower the value of the chinese currency. They are essentially doing what I thought was the better way for a global currency, only they don't have any controls with how those baskets are arranged, they are manipulating it themselves to justify a lower exchange rate.

As far as the value of a commodity, a huge part of the value of that commodity isn't just the commodity, but what you can do with that currency. Oil is valuable because I can use it to create many products and make more money from it than I paid for that commodity. If the demand for that commodity increases, then the inherent value for that commodity will increase (assuming that supply does not increase). At some point, the economic value for some lower margin items may end up making oil not profitable, at which point, alternatives that rebalance that particular equation will end up lowering demand, thereby dropping the value at that point in time.

The biggest reason why I say what I say about gold is that it really has not had, until recently, any economic value. (currently it is used in the electronics industry so there is today current economic value, but that wouldn't have happened if gold was the currency reserve, because it would have been illegal to use it).

Everything by the way has value. Everything that my company owns is on one of our accounting ledgers with a value. That is the same thing for the currency. And the assets of my company follow the same value, my houses follow the same rules. There is on paper a value attached to my two houses in the US. However, that is largely meaningless in the grander scheme of things until I try to realize that value by selling them. At that point, it becomes a 'what the market will bear' proposition.

Now as far as the US dollar is concerned, part of the reason why it continues to stay high in value is because of the phrase 'full faith and credit'. In part, this is what you might call 'goodwill' value that is on the books of many companies. The faith that if I put my assets into US dollars, I am going to be pretty confidant that my investment will be protected. Short term, that is still a certainty, longer term, who knows. But until there is another currency that a) has the depth and size of the US economy and b) has the faith and credit that the US dollar currently has, the US dollar will always be worth more than the underlying economic factors may indicate. In other words, as much as the US Economy is hurting, there really isn't any place to put your money right now that has anything better to present. Would you really trust putting billions of dollars into assets in Chinese currency? Hell I wouldn't invest in the country, let alone put my money there.

as far as the value of gold being arbitrary, well here goes:

1) In past monetary systems, there really were no control mechanisms between jurisdictions (countries states, even counties) to limit or control the creation of money. So you needed something to control it. Backing your currency with a 'resource' was needed because we didn't have central banks, but we also didn't have the level of trade that we do today. So the level of control that was needed wasn't all that high either.

2) The choice of gold is arbitrary, but not out of line. The circumstances of gold today are slightly different so I will ignore that in this discussion because it is not relevant to the past when the gold standard existed. Gold was chosen because it was a hard to acquire material that had little economic value. In other words, gold was never consumed in an industrial process. So you had a rare item, that had no other economic use. Perfectly reasonable to choose that substance to back your currency with.

3) Once you choose your resource (hell we can go to gold pressed latinum to get into a star trek reference), you need a way to determine its value. So you have to set a fixed valuation. If you don't you haven't solved anything. Having your dollar set to 800$ per ounce of gold at the start doesn't solve anything if you let the value of that underlying gold drop. You have just created another way to have an inflationary or deflationary effect and you make a bad situation even worse. So you fix that value (as they did in the bretton woods accords). So now, you have a FIXED value for gold. (if you use a bimetal system, you fix the value for gold and the other metal, usually silver). Everything floats around it.

If you don't do that, then what you have is the multiple problem of requiring the purchase of more gold to increase your money supply, but then you have the additional problem of the value of that gold fluctuating, so you have no clue how much gold you need to buy.

Now if you want to make a simplistic currency valuation that ignores the 'goodwill', you can say that it is the total economic output divided by the number of dollars in circulation. But that would be a difficult thing to calculate because the economic output today is based on dollars, but you can't calculate that until you have a valuation for the dollar, so it sort of becomes circular.

As to the Chinese currency problem, first off, I think this is in part real, and in another part a huge red herring. Business is saying that it is not economical to invest in the US because china depresses the value of the dollar, but the reality is that china can triple the price of the US dollar and it STILL wouldn't change the equation because the problem in the US is that it is uneconomical to invest in the US because of the way the tax system is structured. Capital/Gains tax rates are less than half the corporate income tax rates right now, so no matter what the chinese currency is, it is ALWAYS going to be more economical to offshore my jobs, and just churn my money on the stock market. Plain and simple. (the inflation rate in china, which now exceeds the growth rate, is actually doing more harm to that country than the depressed currency exchange rates).

The longer term solution is that yes, china needs to freely float the exchange rate, but that isn't the bigger issue. (actually their below cost pricing is another part of the trading problem), but we here need to change the skewing in our tax system so that economic behaviour that is beneficial to the country is taxed less than the economic behaviour that hurts the economy. Churning your money on the stock market is NOT beneficial behaviour.

Hell the stock market isn't even a place to get capital anymore. You already need to have the capital and be a certain size before you can even go public. So all it is doing is churning money. The people that can play the game benefit from that, most just get screwed over. Almost ALL of the capital gains taxes are on stock market trades. So really, we need to correct that structural problem.

As for Socrates comment.

YOU CANNOT PUT THE MARKET CONDITIONS OF TODAY ON A SYSTEM THAT IS COMPLETELY DIFFERENT. Going to a gold standard completely changes the rules, so saying gold is X dollars today is meaningless when you compare it to a gold standard currency system. If you do that, you have to take that resource OFF the market. You have to FIX THE VALUE.

As for investing in gold itself, the only people that are making money on the gold market over the long term are the market players (the select few at the top) and the brokers. Everyone else gets screwed in the end.

Yeah and yeah. I'm trying to establish that difference because some suggest that gold has no intrinsic value where I tend to disagree. I think it's the currency that has no intrinsic value.

Neither gold nor currency has an "intrinsic" value from an economic standpoint, i.e., in relation to a monetary system. They each only have the economic value that people respectively assign to them.

The actual "intrinsic" value of gold is, for example, that it's a conductor of electricity, and it's a malleable and ductile metal, so it has an intrinsic value in that it can be used, e.g., to form electrical wiring. Oh, and it's also relatively dense, so good (and shiny looking) paperweights can be made using relatively little amounts of gold.

The actual "intrinsic" value of paper currency is that paper currency can be burned to create heat.

IFeel

but that intrinsic value for gold is a) modern and b) not unique to gold. You didn't need to use gold because copper worked better and was much cheaper, and so had a higher value for that purpose. (now gold also has the non reactive quality; doesn't oxidize; so that is why it has gained that modern use).

Jonathan-1917156 -

I understand that copper ALSO has the "intrinsic" value based on copper's qualities of being a conductor of electricity, as well as being a malleable and ductile metal. However, gold also has such "intrinsic" value based on those similar qualities. Gold also does have "intrinsic" value from its quality of not oxidizing, as you pointed out.

The point of my post was to point out what "intrinsic" really means.

yeah, but the gold one is modern, as it was too rare to be considered such until recently,

I think I was just trying to say that gold's supposed value was more subjective.

Helium-3 is supposed to have enormous value, but unless we can get it, that value today is not economical to exploit.

So many different factors, lol.

It would seem if the JonL dollar can be added to the exchange markets --regardless of finding an individual that wants to trade it or not ---it now becomes part of the 'futures'. (kinda like the thinking behind the Carbon tax:).

So, intrinsic value is a result of the markets? ..in addition to what it costs to produce it?

no, the realizable value is a result of the markets, considering that 99% of all currency in existence is on a computer, the cost of producing that currency is marginal

the intrinsic value is the economic exploitable value over and above the production value.

So if gold is 800 per oz, that really doesn't mean anything if the production value is 200 per oz, because you are losing money every time you use it.

Copper (using IFeels and my discussion) is much lower cost to acquire (it isn't anywhere near as rare) while creating the same actual production value is much more valuable for that economic activity than gold.

The rarity of gold is why for millenia, gold really never had much economic intrinsic value, there were just too many other substances that did the same thing at a much lower cost.

Something did happen with Aluminium though. For thousands of years, it was a known substance, but there was no cheap way to extract it from bauxite. Until that happened, the bauxite was worthless, but when the process to create aluminium out of it was discovered, the value went up. It gained an intrinsic economic utility.

Jonathan-1917156 -

yeah, but the gold one is modern, as it was too rare to be considered such until recently

I think you are sort of not quite getting what I'm trying say. Regardless of whether, in the past, it was desirable (e.g., from an economic standpoint) to use gold for forming electrical wiring, gold ALWAYS had those intrinsic qualities (e.g., being an electrical conductor, being malleable, being ductile, etc.), i.e., its natural or essential qualities, and thus, ALWAYS had an intrinsic value that stemmed from those intrinsic qualities. That is, gold is always going to have those qualities - those qualities are part of what gold is.

However, from an economic standpoint (in relation to being a standard for a monetary system), gold does NOT have an intrinsic value, as gold only has whatever economic value we assign to it.

socrates.

not sure what part of 'there is no value other than what others are willing to pay for it' you don't understand. WOW, are you really that dense?

IFeel.

I have NEVER seen gold be used for Electrical wiring and besides, that is a very recent phenomena. Gold has been a currency backing for something 4 or 5 thousand years, electricity only for a few hundred. (we knew about electricity before that, but not really how to use it from economics). But again, I have never seen gold used for wiring, copper and more recently aluminium.

Not trying to argue with you on that because you are correct, gold does have those properties, but it also has a scarcity factor that made it uneconomical to use for that purpose.

Jonathan-1917156 -

You're still not understanding what I'm trying to say. Regardless of whether or not we, as humans, knew about, or had the ability to exploit, those intrinsic qualities of gold (e.g., being an electrical conductor, being malleable, being ductile, etc.), gold still ALWAYS had those intrinsic qualities, i.e., gold has ALWAYS had those intrinsically valuable properties. We just didn't discover those intrinsic properties and a way to exploit them until recent times though.

gold certainly doesn't make it any more or less valuable, seriously man, you completely miss the point, but that is definitely to be expected from you whenever ANYONE disagree's with your narrow minded unworkable so called philosophic rantings, here, and everywhere else you interject.

If the country that uses JonDollars has economic growth happening, then that will increase the perceived value of jon dollars, if there is economic contraction, that will decrease the perceived value of jon dollars (hmmm thought I stated that multiple times now but hey, if he gets it after the 10 millionth time, whatever).

The problem with China is that they DO NOT participate in the mechanisms that manage this, and nobody is willing to force them to. That isn't china's problem, that is the problem of the country's that refuse to force china to do this.

Now the last laugh is really on china there because as a whole, they are LOSING money on their investments in US dollars because the interest rates are so low. They would be much better off investing it in their own country. But hey, I am not them. (another reason why the complaints about china are hollow). This has NOTHING to do with a fiat currency or not because shenanigans happened under the gold standard (you should study the euro dollar under the bretton woods accords) and more to do with allowing the shenanigans to occur.

I still think the markets actual value is "controlled", Jonathan (by the banks), though, they would never admit it. Some of those games they've played of buying and selling ahead of publicly known decreases and increases... a few have been caught. Values are set, not by us, and I believe they are manipulated by the FED to make money, by dumping huge sums into the markets to jack them up, and then selling after several big investors bought in. Sure, it's realized gain, but the value was 'set' at the start, is my point... and when all is said and done, it goes back to its set point, that's how the markets control 'value'. ..and also 'give' value to something.

So, it's not the individual barterer that gives the commodity value --it's the exchange markets.

CL1,

so what though. The value on the foreign exchange markets is only important if you need to change your currency from one to another (or in the case of non us currencies, from one to US Dollars then to the other. IT implies nothing about what the buying power of that currency is, but gold backing doesn't do that either.

For many years, sterling ran for almost 2 dollars US (the pound has always been worth more than the US dollar), but the reality is, that within the domestic markets, 1 pound sterling had pretty much the same buying power as 1 US Dollar. The FX valuations had no bearing on it.

The fed really doesn't do much to manipulate the currency valuation. Their focus is on inflation. The only mechanism that the fed has left to control is in fact the interest rates (they needed far more control when we were on the gold standard because they needed to control certain aspects of the economy to prevent outright manipulation). So if inflation is running high, they increase the interest rate which slows the economy, thereby lowering inflation (and vice versa).

Your issue about the pump and dump is something that happens in ALL markets. It is one of the reasons why the entire stock market (which has nothing to do with FX valuations) is to me largely a big casino. I still have about 95% of my money in the stock market though because the economy itself isn't really conducive for me to invest it in my company's growth. Now having said that, even though my investments are largely long and conservative long at that, I am personally NOT a normal investor. I know where to play the game, and have in most cases pulled out before I got nailed. (I haven't lost anything in the Euro crisis as an example)

Now as far as your individual barterer, again, it really doesn't matter what the so called value of the currency is within the domestic market, because your costs/revenues are going to be based on the same thing, the US dollar. BUT when say buying products from another country, it does matter, because now you have added that external component. EIther way, from a DOMESTIC perspective, there is NOTHING within the FX system that states how much your product (what you are bartering for) is priced at. So in the bushels of wheat example, if I want to charge 50 US dollars for a bushel of wheat, that is directly comparable with the 60 US dollars that your farm neighbour may decided to price his product at. The question for Forex is what is the difference between what the US farmer is selling it at and what the Canadian farmer, using Canadian dollars is selling it at, but that is not something you as a person would deal with.

as the market for something becomes more global, yes the futures market tends to come into the picture, but in that case, the commodity tends to be priced in the same currency (mostly the US dollar), so that levels the playing field in that the price comes off a common baseline.

In the context of china, one of the things that does impact china in their undervaluing of resources is that it makes anything that they have to import, (mostly raw materials, like wood, oil, etc...) much more expensive so it also hurts them as well. The question for them is, overall does it even itself out. With their current trade surplus, yes it does, but as with Japan, that can easily start to work against them.

to move that firewood over the roads, you are using government funded roads.

in most cases, food grown uses government subsidies, and is also transported over government funded roads.

Unless you can show the world that NO PART of your transaction ever touched anything that was government funded/subsidized or otherwise impacted, then your argument that it shouldn't be taxed is baseless.

the government tends to call it black market. Private transactions are being made illegal.

Not necessarily, private can be 100% legit. In your example wood for food or legal tender for food.

It is illegal when the transaction is for illicit gain or sale of something illicit.

jack,

he is looking at it from an income tax perspective. So if he sells a cord of wood, he is expected to pay income tax on it, even if he barters it for food, (and vice versa).

But he isn't expected to pay income tax on the sale price, but only on the profit, which if he didn't keep his books in order, he wouldn't know what his costs were and what his profit was.

That only works if he is making large amounts of money.

large = 100,000s of dollars.

Barter is a taxable income but, much harder to trace and besides unless he banks the cash there is no real record.

jack,

well the IRS doesn't even really care about it unless it is on a scale that is beyond trivial. But that would be the same whether he used cash or not. Only with the cash transaction, if he doesn't declare the revenue, he also can't declare the costs

if he doesn't declare the revenue, he also can't declare the costs

That is why it is called an underground economy.

Yes it is on this very basic conceptual level. It can be much more complicated.

Barter is a taxable income but, much harder to trace and besides unless he banks the cash there is no real record.

Jack, that is better than I could put it myself. I see that as the basis for the difference between a private and public transaction. The real record is what makes it public. Buying a house might seem a private transaction between a buyer and seller, but in reality, it is not the least bit private.

In #18.1 the point is that somehow I must prove that I didn't use a government funded service, but the use of the service is already taxable in the user fees, so the argument although relevant actually differentiates between income tax and user fees, excise taxes, sales taxes.

Jack, taxation does drive underground economies or perhaps it's safe to say it can drive economy underground. I would happily go unnoticed by IRS or whoever else, and I don't want much or need much. The issue is more for the rich people in that case. To carry the notion further, suppose one manages to trade wood for a commodity that surpasses others in extremely high value. Suddenly one has become wealthy. IRS will become interested then. That is precisely what I mean to say when I speak of the current system that oppresses those with small means. They may pay no attention, but they reserve the right to @!$%# with you any time they want. :-) Which is whenever you gain control of any substantial wealth.

bd,

so unless you want every little thing that the government does for you to not be done (go take a look at how the somali economy works for an example) then you have to live with taxation.

Everyone that screams and yells about taxation doesn't even consider the impact that removing the taxation would have. Lets just say, your opportunity to gain that income that you don't want taxed wouldn't be there.

That doesn't equal or isn't congruent. The amount of immediate gain is hindered, however the opportunity for some gain exists, else I will seek opportunity elsewhere. The problem as I see it is that those opportunities that exist within the current system however viable today are unsustainable. I may have the opportunity to make easy profit because of gasoline engines and asphalt roads, those exist artificially as a result of an unsustainable system that is failing (or has already failed). So I may take a profit today, but I have deprived future generations of the ability to take any profit at all because I consumed too many resources to take the current profit.