New Money contest

[Cardinal Fang]

Not sure how to make this any clearer for you.

I don't doubt such uncertainty at all. What meanwhile do you take Greenspan to have meant by "other comparable periods in U.S. banking history". Is he suggesting that there were other free-banking eras? If not, how would any be comparable? What did he mean by "not out of line with"? Usually, that means "a lot more, but not enough for me to be too embarassed to try and deny it." Do you further think that by "bank note holders" he refers to those holding stock or to those who had thought they were holding deposits?

The system of federal rule-making today is indeed elaborate. Because it has to be. Federal rules are designed to meet the needs and protect the interests of multiple stakeholders and other interested parties. Do you think Greenspan would want to steamroller all that in favor of some roughshod, willy-nilly system of rulemaking? His larger point here of course is one that you didn't bother to bold (or even include), namely that while private regulatory organizers sought to provide some level of transparency and protection, their efforts all but universally failed.

Greenspan will of course always be memorialized by what he has termed the biggest mistake of his career -- an assumption that markets were wise enough to regulate themselves. They are not now, and never have been. Otherwise, you'll perhaps want to explain how Greenspan's talking about primitive forms of private bank regulation in the 1850's adds anything at all to earlier described regulatory shortcomings of the free-banking era that existed between the collapse of the second BUS (1836) and the onset of the Civil War (1861).

If you get this far, maybe next go back and try to defend your blown-to-bits claim that there never was any such thing as free-banking to begin with.

 

[Federalist]

Yeah, that's one other option to consider. But I would go for a basket of commodities, otherwise we will get a bubble.

How would a basket with multiple commodities prevent a bubble, but a basket with a single commodity cause one?

 

[Canell]

How would a basket with multiple commodities prevent a bubble, but a basket with a single commodity cause one?

Well, if you have a commodity basket of 20, it is much more difficult to inflate them (demand - supply, remember?). A single commodity (gold for example) is relatively easy to manipulate.

 

[Federalist]

Well, if you have a commodity basket of 20, it is much more difficult to inflate them (demand - supply, remember?). A single commodity (gold for example) is relatively easy to manipulate.

I see. But how does this basket of goods concept relate to the IOUs you talked about earlier. Each IOU would be for a specific item correct. When Annie buys tomatoes from Bill, she gives him an IOU for a haircut, right?

 

[Federalist]

Well, if you have a commodity basket of 20, it is much more difficult to inflate them (demand - supply, remember?). A single commodity (gold for example) is relatively easy to manipulate.

I've never understood this "basket of goods" idea. I can definitely envision a note that allows the bearer to receive a given amount of some commodity. For example, I can imagine a note that could be redeemed for an ounce of gold, or an ounce of silver, or a peck of hard red wheat, or a pound of tobacco, etc. But a "basket of goods" note? Would I get all 20 commodities when I redeem my note?

I don't think that using basket of goods as money would evolve as naturally as using a single good as money. It seems like it would be much more difficult to determine prices in terms of 20 different goods than it would be to do so in a single good.

 

[Canell]

I see. But how does this basket of goods concept relate to the IOUs you talked about earlier. Each IOU would be for a specific item correct. When Annie buys tomatoes from Bill, she gives him an IOU for a haircut, right?

Wait, we are discussing different ideas here, that's the point of this thread. IOUs and commodity money are different.
The point of commodity money is that only real usable things matter - cement, steel, cotton, wool, timber, aluminium, copper, wheat, potatoes, etc., etc.

Commodity money - Wikipedia, the free encyclopedia

As to issuing commodity money, I don't think I am smart enough to tackle that.

 

[Federalist]

Wait, we are discussing different ideas here, that's the point of this thread. IOUs and commodity money are different.
The point of commodity money is that only real usable things matter - cement, steel, cotton, wool, timber, aluminium, copper, wheat, potatoes, etc., etc.

Commodity money - Wikipedia, the free encyclopedia

As to issuing commodity money, I don't think I am smart enough to tackle that.

Hm. I think I was driven off track by your reference to a basket of goods. I'll return to your original idea, sorry.

So I was thinking about your system of IOUs. I had a couple of questions/clarifications in post #35:

I'm getting a better understanding now. So when Annie trades with Bob, he gives her tomatoes, and she gives him an IOU for a haircut. There is no nominal amount, correct? The IOU says, "I Annie owe the bearer one haircut."

Later, Bob says to Carol, hey I'll trade you one haircut for two dozen eggs. Carol gives Bob the eggs and Bob gives Carol the IOU for a haircut. Carol can then go collect a haircut from Annie at a later date.

You seem to be advocating what is essentially barter, but with the added twist of IOUs, which allows deferment of the actual exchange of goods/services.

Your proposed arrangement COULD work, but it suffers from the very same double coincidence of wants problem that is associated with barter, plus it adds the risk of default on IOUs.

So if this system is essentially barter (with IOUs for the bartered item), what DOES eliminate the double coincidence of wants problem?

I could see a situation in which Annie wants tomatoes from Bill, but Bill rejects an IOU for a haircut (he's bald). Instead he asks for cigarettes (or an IOU for cigarettes), since he knows that everyone will always accept cigarettes. Thus, from your system, I could see a money emerge as well, although your system still has IOUs.

I'm not opposed to IOUs, but I honestly wouldn't take an IOU from just anyone. From some people, I'd really insist on immediate payment.

 

[Canell]

Thus, from your system, I could see a money emerge as well, although your system still has IOUs.

Yes, you're right.
See, let's imagine I have bought a glass cup for $10. Now I have an item valued $10. Then I throw it on the ground and it goes to pieces. Not only will I lose those $10 but I am also on the negative if we assume I have to pay a buck or two for someone with the right equipment to clean it up. Once I had $10 of value, the next moment I had -$2.
My point is, value is created and destroyed at all times, 24/7. So, we need a system to monetise that value, we have to think in that direction. The thing we have to eliminate is money counterfeiting, which is essentially banking right now. In other words, only already produced goods and services have to be monetised. Why should bankers be allowed to counterfeit money? People create value, so they deserve the benefits from that.

 

[Federalist]

Yes, you're right.
See, let's imagine I have bought a glass cup for $10. Now I have an item valued $10. Then I throw it on the ground and it goes to pieces. Not only will I lose those $10 but I am also on the negative if we assume I have to pay a buck or two for someone with the right equipment to clean it up. Once I had $10 of value, the next moment I had -$2.
My point is, value is created and destroyed at all times, 24/7. So, we need a system to monetise that value, we have to think in that direction. The thing we have to eliminate is money counterfeiting, which is essentially banking right now. In other words, only already produced goods and services have to be monetised. Why should bankers be allowed to counterfeit money? People create value, so they deserve the benefits from that.

When you mentioned $10 in your example above, that got me thinking about your proposal. Just to be clear, in you system there would be no such thing as a dollar, correct? There would simply be IOUs for various items.

I still don't see how this would eliminate the double coincidence of wants problem associated with barter. What would prevent the most marketable commodity from once again naturally emerging as money?

 

[Canell]

When you mentioned $10 in your example above, that got me thinking about your proposal. Just to be clear, in you system there would be no such thing as a dollar, correct? There would simply be IOUs for various items.

No, no, no! We need money as value, as measure! Probably it won't be USD, may be it will just called "money" or "buck/s". But we need a universal system to measure VALUE. No one wants to cancel value!
For example, Annie issues an IOU, worth 5 bucks. But if you want to go to some fancy hairdresser, you'd have to have 4 of Annie's 5 buck IOU, 20 bucks that is. Something like that.

I still don't see how this would eliminate the double coincidence of wants problem associated with barter. What would prevent the most marketable commodity from once again naturally emerging as money?

Hopefully, no commodity isn't so important to become desirable by everyone. Nor steel, nor wheat, nor water, nor even gold. What use does gold bring? Nothing, except in jewellery and electronics.
We need many commodities in our lives.

 

[Federalist]

No, no, no! We need money as value, as measure! Probably it won't be USD, may be it will just called "money" or "buck/s". But we need a universal system to measure VALUE. No one wants to cancel value!
For example, Annie issues an IOU, worth 5 bucks. But if you want to go to some fancy hairdresser, you'd have to have 4 of Annie's 5 buck IOU, 20 bucks that is. Something like that.

Okay, I understand better now. Prices would be expressed in Bucks. So Annie wants to buy tomatoes from Bill. They agree on a price, let's say it's 5 bucks. So Annie writes an IOU that says something like "I owe 5 bucks worth of goods to the bearer of this note." Later, Bill can come back to Annie and buy 5 bucks worth of goods from her.

I can maybe, kinda, sorta see this working on a personal level for small items in a close knit community. But what happens when Annie wants to take a trip to Florida. She checks into the hotel, and they say, "That'll be 200 Bucks." I don't really think that they're going to want Annie to write them and IOU for 200 Bucks worth of goods. How would they know that Annie is willing and able to provide them with 200 Bucks worth of goods that they are going to want?

Or what about even more expensive items, say for example college tuition. Is a university going to accept an IOU from Annie for 100,000 Bucks worth of goods?

Hopefully, no commodity isn't so important to become desirable by everyone. Nor steel, nor wheat, nor water, nor even gold. What use does gold bring? Nothing, except in jewellery and electronics.
We need many commodities in our lives.

But this is generally what naturally happens. One commodity arises that becomes universally accepted, not because it is desired to use, but because it is always able to be sold. It is highly liquid. For example, in WWII prisoner of war camps, cigarettes emerged as money.

 

[Canell]

I can maybe, kinda, sorta see this working on a personal level for small items in a close knit community. But what happens when Annie wants to take a trip to Florida. She checks into the hotel, and they say, "That'll be 200 Bucks." I don't really think that they're going to want Annie to write them and IOU for 200 Bucks worth of goods. How would they know that Annie is willing and able to provide them with 200 Bucks worth of goods that they are going to want?

Hey, I don't have all the answers but I am working on it. It most probably will work on the principal "I scratch your back, you scratch mine". You come visit, then I come visit. In other words, there would be Floridians that would go to Annie's town too and than pay to local hotels that will later use Annie's services, and so on.

Or what about even more expensive items, say for example college tuition. Is a university going to accept an IOU from Annie for 100,000 Bucks worth of goods?

Again, we the people should issue the money, not the banks.

But this is generally what naturally happens. One commodity arises that becomes universally accepted, not because it is desired to use, but because it is always able to be sold. It is highly liquid. For example, in WWII prisoner of war camps, cigarettes emerged as money.

We are not a prison, we have choice. We need many things to live. I can't think of any commodity that would be so important and with no substitute. Well, may be air. But fortunately it is still free of charge.

 

[Federalist]

Hey, I don't have all the answers but I am working on it. It most probably will work on the principal "I scratch your back, you scratch mine". You come visit, then I come visit. In other words, there would be Floridians that would go to Annie's town too and than pay to local hotels that will later use Annie's services, and so on.

Again, we the people should issue the money, not the banks.

We are not a prison, we have choice. We need many things to live. I can't think of any commodity that would be so important and with no substitute. Well, may be air. But fortunately it is still free of charge.

I'm not saying we are in a prison. I was describing the process by which a highly marketable commodity comes to be used as money. It also doesn't have to be something for which there is no substitute. Many things have been used as money in the past: gold, silver, salt, grain, tobacco, etc. They simply arose out of barter to become the item in which prices are reckoned.

And I hope you don't get the impression that I want banks to issue money, because I don't. And perhaps your system would work fine. I say let all ideas be tried out, and let the best solutions survive the test of the market. Your idea sounds a lot like Ithica hours, which is a system that people actually use, so I'm sure there's merit to it.

 

[Canell]

Yeah, that's why we are here - to discuss different ideas.

Unfortunately, things are getting harder as the bankers prepare the world for a gold standard and such ideas have little to no chance of success. It is like jumping from the frying pan of fiat money into the fire of gold.

 

[Federalist]

Yeah, that's why we are here - to discuss different ideas.

Unfortunately, things are getting harder as the bankers prepare the world for a gold standard and such ideas have little to no chance of success. It is like jumping from the frying pan of fiat money into the fire of gold.

I'm wondering what about gold makes you believe it to be unsuitable to be used as money? It has the qualities found in sound money. It is divisible, durable, portable, uniform, and stable in its supply. What defects do you see?

 

[Canell]

I'm wondering what about gold makes you believe it to be unsuitable to be used as money? It has the qualities found in sound money. It is divisible, durable, portable, uniform, and stable in its supply. What defects do you see?

Some guy digging the ground all day long for a bit of gold, instead of producing anything of real, practical value? Come on, I'd rather have a stainless steel. At least I can make a spoon, a tube, a pot, a container out of it, something useful.

Gold is scarce (moreover in a 7 billion world) and demand-suply will make it skyrocket, like any bubble.

 

[Federalist]

Some guy digging the ground all day long for a bit of gold, instead of producing anything of real, practical value? Come on, I'd rather have a stainless steel. At least I can make a spoon, a tube, a pot, a container out of it, something useful.

If gold was not highly valued, people wouldn't bother to dig it out of the ground.

Stainless steel shares many of gold's qualities, so it might make a suitable money. It has a lower value to weigh ratio though.

Gold is scarce (moreover in a 7 billion world) and demand-suply will make it skyrocket, like any bubble.

I don't know what you technically mean when you use the word "bubble"? Wouldn't it's price simply be a function of supply and demand, as with all goods?

 

[KevinKohler]

I think that no matter what we would think of, it would end up being earily similar to what we already have.


In the mean time, I think that, as time and society progresses, we're going to see more and more things like barter networks, and such, that allows producers and consumers (most of whom are also producers themselves) trade directly, rather than "losing" profits via exchanges of currency.


I photographed a dude's daughter's wedding, and for the package he got, it would have cost him 3,400 $. He redid a LOT of the electrical in my house, and for the amount of time he put in, he could have easily charged me 5k. But we negotiated on a deal, I helped him out a lot on the work he did for me, and I got my electrical done free of charge, out only time, and likewise for him.

 

[Federalist]

I think that no matter what we would think of, it would end up being earily similar to what we already have.


In the mean time, I think that, as time and society progresses, we're going to see more and more things like barter networks, and such, that allows producers and consumers (most of whom are also producers themselves) trade directly, rather than "losing" profits via exchanges of currency.


I photographed a dude's daughter's wedding, and for the package he got, it would have cost him 3,400 $. He redid a LOT of the electrical in my house, and for the amount of time he put in, he could have easily charged me 5k. But we negotiated on a deal, I helped him out a lot on the work he did for me, and I got my electrical done free of charge, out only time, and likewise for him.

It's a beautiful thing when you can work something like that out.

 

[Canell]

If gold was not highly valued, people wouldn't bother to dig it out of the ground.

Human nature is flawed.

I don't know what you technically mean when you use the word "bubble"? Wouldn't it's price simply be a function of supply and demand, as with all goods?

Exactly, supply and demand! Imagine if gold demand increases 10 or 50 fold in this 7 billion world, the price will go through the roof. Then who has gold will be rich. Coincidently, that are the bankers, mainly.

 

[KevinKohler]

It's a beautiful thing when you can work something like that out.

Absolutely, not only for the savings in taxes, because, on barter networks (most of them, lol), taxes get accounted for, or they'd be illegal. Beyond just the tax issue, this saved us both a ton of money, in essence, we both generated value for ourselves beyond what we could have without each other.



I feel that this is the way of the future.

 

[KevinKohler]

Which is odd, because, in it's purist since, this concept is essentially communism. It's communism without currency.

 

[Canell]

Absolutely, not only for the savings in taxes, because, on barter networks (most of them, lol), taxes get accounted for, or they'd be illegal. Beyond just the tax issue, this saved us both a ton of money, in essence, we both generated value for ourselves beyond what we could have without each other.



I feel that this is the way of the future.

That's what I'm writing about. Money as value. That is value without money. You need just the evaluation process and no money at all if you exchange goods with equal value.

 

[Federalist]

Human nature is flawed.

We've got to work with what we've got, unfortunately.

Exactly, supply and demand! Imagine if gold demand increases 10 or 50 fold in this 7 billion world, the price will go through the roof. Then who has gold will be rich. Coincidently, that are the bankers, mainly.

Bankers don't have gold, as far as I know. The gold that was confiscated from the people by FDR is stored in fort knox, I believe. Current dollars should be made redeemable in gold, using this gold to pay them off. Many suggestions exist as to how to accomplish this. One I recently heard was to start with the current market price of gold. Others involve dividing the existing stock of gold across dollars in various ways.

I would DEFINITELY oppose any remonetization of gold that does not involve redeeming dollars using the gold in fort knox. Otherwise, as you say, it would simply make gold holders rich, and that isn't fair to everyone else.

 

[Federalist]

Which is odd, because, in it's purist since, this concept is essentially communism. It's communism without currency.

No way. It's not communism. It's voluntary free exchange through the mechanism of barter.