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Why not move back to a backed currency?

NonConformer said:
More than one leftist-liberal on this forum has alluded that Econ 101 is bunk.
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Oh for ****'s sake. Is this really so hard?

Econ 101 isn't wrong.

Econ 101 is insufficient to actually understand an economy.

It's like someone who took Physics 101 and thinks they can be an engineer. Physics 101 isn't wrong. But it is a world of frictionless planes and moving perfectly rigid objects by pushing exactly on their center of mass. It's not enough to design an engine.
 
OrphanSlug said:
One, Debt and Currency in Circulation.

We have gone so far down the road of using a Fiat Money system that trying to back our currency now would reveal a real system shortfall. Namely to our Total Debt position, and how that debt is handled in relation to "full faith of the government" vs. precious metal backing. We know beyond a shadow of a doubt that we have so much Total Debt today that trying to introduce a Gold Standard would show we do not have near enough.

Over estimate and assume we have 10,000 tonnes of Gold somewhere (best estimates suggest the US has roughly 8,133 tonnes.) So, you are talking about one ton being 2000 pounds, and 16 ounces per pound. That takes the overestimate at 320,000,000 ounces of gold held by the US government. Gold closed yesterday at $1,218.20, or Government valuation at $389,824,000,000 as of yesterdays prices. Factor in that we have roughly (as of April 2015) $1.36 trillion in circulation in some form. Just to cover what we have in circulation alone, gold would have to be valued at roughly $4,250 per ounce very damn quick. Or, we would need roughly 34,800 tonnes of Gold at present prices. Neither seems even plausible, and do not forget we have not even talked about covering the $18.2 Trillion in debt we have currently racked up (which is above 100% of our GDP.)
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Great point even if the math is a bit off
 
NonConformer said:
The only thing holding back competing currencies is - once again - the government, who has "legal tender" laws on the books which say that it's a crime to conduct business in anything but US Federal Reserve notes. When you have a monopoly, there's not much incentive to produce a solid, stable product.
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I am no expert on this subject but I think that is inaccurate or not the whole story. The reason I say that is here in the US I have done business not only in US currency but in gold, foreign currency and even Bitcoin. Granted, when it comes tax time the IRS gets their share in good ol' USD, though.
 
AmericanSpartan said:
Do you see that being the end result after the collapse of fiat currency?
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Just about any monetary system can be abused, and just about any monetary system can be pushed to the point of collapse. Our issue here is feasibility of your proposal, and the goal behind it.

If the overall complaint is the amount of Total Debt we have, or the level of government spending, or whatever else those issues need to be addressed directly as a matter of fiscal and economic policy. Trying to change the monetary system (or monetary policy) in itself does not necessarily remove political habit.

Assume for arguments sake we had more than enough Gold on hand now to handle present currency in circulation, that does not mean that going to a Gold Standard will force the government into better spending habits or force the Fed into different buckets of activity to handle economic problems. If nothing else changes, all it means is putting pressure on the Gold supply to always go up via mining or always be devalued via policy. In that sense Gold ends up just as the US Dollar has over time. A series of devaluations in order to handle the monetary supply based on economic condition, as there is a finite amount of Gold on this planet.

It is a pipe dream at best to suggest we can value our currency at a fixed point, and keep it there when considering the needs for the money supply to always go up. We do *not* have a fixed population, operating with a fixed amount of currency, operating in a fixed year on year economy. Going to commodity or representative money systems will not remove the need for economic expansion, so all we are talking about here is management of all these monetary systems in comparison to one another. And not a bit of that really throttles fiscal and economic policy.
 
OrphanSlug said:
Just about any monetary system can be abused, and just about any monetary system can be pushed to the point of collapse. Our issue here is feasibility of your proposal, and the goal behind it.

If the overall complaint is the amount of Total Debt we have, or the level of government spending, or whatever else those issues need to be addressed directly as a matter of fiscal and economic policy. Trying to change the monetary system (or monetary policy) in itself does not necessarily remove political habit.

Assume for arguments sake we had more than enough Gold on hand now to handle present currency in circulation, that does not mean that going to a Gold Standard will force the government into better spending habits or force the Fed into different buckets of activity to handle economic problems. If nothing else changes, all it means is putting pressure on the Gold supply to always go up via mining or always be devalued via policy. In that sense Gold ends up just as the US Dollar has over time. A series of devaluations in order to handle the monetary supply based on economic condition, as there is a finite amount of Gold on this planet.

It is a pipe dream at best to suggest we can value our currency at a fixed point, and keep it there when considering the needs for the money supply to always go up. We do *not* have a fixed population, operating with a fixed amount of currency, operating in a fixed year on year economy. Going to commodity or representative money systems will not remove the need for economic expansion, so all we are talking about here is management of all these monetary systems in comparison to one another. And not a bit of that really throttles fiscal and economic policy.
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What about all 4 metals? Sliver, Gold, Platinum, Palladium?
 
NonConformer said:
More than one leftist-liberal on this forum has alluded that Econ 101 is bunk. I've oft wondered about that. The basic principles of Economics - supply & demand, behavior of consumers & producers - has been around for, like, hundreds of years. If it all truly is a farce and a sham, then I'd be curious to know what "scholarly" work is supposed to replace it.

Is the real world more complicated? Yes but the very GOAL of Economics, as you will find in the 1st chapter of any Econ textbook, is to take this complex, tangled, garbled, intricate, diverse, voluminous conflagration of buying, selling, trading, producing, consuming, etc, etc, etc, and condense it down to a handful of simple models we can all grasp.

So again I say, and Econ 101 backs me up here: competition is better than monopoly. And no, the US Dollar is not absolutely 100% solid and stable. For centuries, the best tried-and-true medium of exchange are the precious metals like gold and silver.
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The problem is that econ 101 is oversimplified it rarely has any real world application beyond explaining the basic concepts. Look at the basic supply/demand/price graph and try to apply it to something like the .22lr shortage. Supply hasnt increased to meet demand and price hasnt risen from manufacturer to supplier or from supplier to 1st buyer
 
AmericanSpartan said:
What about all 4 metals? Sliver, Gold, Platinum, Palladium?
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You are missing the point, you can make commodity monetary systems based on water and we still have the potential for abuse when economic and fiscal policy (political desires) collides with monetary policy (economics, arguably.)
 
OrphanSlug said:
You are missing the point, you can make commodity monetary systems based on water and we still have the potential for abuse when economic and fiscal policy (political desires) collides with monetary policy (economics, arguably.)
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True but you can not print more rare metals..
 
OrphanSlug said:
You are missing the point, you can make commodity monetary systems based on water and we still have the potential for abuse when economic and fiscal policy (political desires) collides with monetary policy (economics, arguably.)
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Gold is just a shiny metal, never understood why people get so crazy about it. It is pretty hilarious hearing all the gold shills on talk radio over the last few years, not just wrong, but incredibly, laughably wrong. Meanwhile my 401(k) is doing quite well and my employer never stopped matching. :)
 
If we're going to back the dollar with a commodity, I vote for wood.
 
NonConformer said:
The Federal Reserve Notes issued by the US government are nothing more than pieces of paper, not backed by anything of real value. If you or I did that we'd be prosecuted for counterfeiting, but for some reason, it's perfectly Ok for the government to do it.
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Greetings, NonComformer. :2wave:

:agree: I read recently that all the gold that has ever been found during human history would only fill two Olympic-size swimming pools. It's the rarity of the metal which makes it valuable. Currency is only pieces of paper backed by promises from governments, which are always changing. Zimbabwe suffered terrible hyperinflation when their currency became worthless, and other countries have suffered the same fate recently. It's been said that there is more gold buried in gardens in France than is held in their government storage places. The people learned the hard way, and they haven't forgotten that lesson.

As someone also pointed out recently, covering the earth in a ten-foot layer of worthless currencies backed by nothing but promises from various governments would not only cause people to suffer from lack of buying power, but it would also have a detrimental effect on agriculture! It was meant as a joke, but it did make a point that was well made. :mrgreen:
 
Crovax said:
The problem is that econ 101 is oversimplified
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Well yeah it's "101". There's also "102", etc, and a whole bunch of advanced Econ classes for the taking.

But let's get back to the original topic: why not a backed currency?

Again my arguments: A currency not backed by anything is basically counterfeiting, with nothing to stop government from cranking up the printing presses and lettin' er' rip.

The whole concept of a "currency" wasn't even invented by government. It was created by entrepreneurs to make transactions go smoother. But governments everywhere realized the enormous power that comes with mandating a fiat currency, and took it over.

So if you believe that government, by its very nature, is wiser and more honest and dependable than us common folk, then I suppose you'd like the idea of fiat currency. But on the other hand, if you believe that government is a sham run by a bunch of self-serving con men, then we'd all be better off without this economic meddling.
 
NonConformer said:
Well yeah it's "101". There's also "102", etc, and a whole bunch of advanced Econ classes for the taking.

But let's get back to the original topic: why not a backed currency?

Again my arguments: A currency not backed by anything is basically counterfeiting, with nothing to stop government from cranking up the printing presses and lettin' er' rip.

The whole concept of a "currency" wasn't even invented by government. It was created by entrepreneurs to make transactions go smoother. But governments everywhere realized the enormous power that comes with mandating a fiat currency, and took it over.

So if you believe that government, by its very nature, is wiser and more honest and dependable than us common folk, then I suppose you'd like the idea of fiat currency. But on the other hand, if you believe that government is a sham run by a bunch of self-serving con men, then we'd all be better off without this economic meddling.
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NonConformer, you do this in every single thread. You offer up this absurd black and white universe, the same false dichotomy. Let me turn your own rhetoric around for you. Again.

If you believe the government is a sham run by a bunch of self-serving con men, surely you must think we shouldn't have a government. You MUST believe that we should emulate the libertarian fantasy that is the Trans-Somali disputed zone. Right? No functional government there!


Some day you will learn that your concept of other peoples' beliefs is grossly inaccurate. On that day, you might start being able to have real conversations here. I look forward to it.
 
Deuce said:
surely you must think we shouldn't have a government.
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Good point. Actually, I do concede that government has a role in our society, but it's a very, very small role. Among libertarians, I am what they call a "minarchist".
 
AmericanSpartan said:
Why not?

Wouldn't the value of Gold sky rocket exponentially to in relational to the value of the dollar taking off?
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gold would skyrocket as a result if it were gold backed.

fyi gold backing was mostly post ww2.prior to most the world used silver as a backing due to its more abundant supply and ability to meet the worlds monetary needs of the day.and no it will not go back to gold until the current system collapses,reason being gold is backed by a commodity,hence print and spend will dissappear.

what they would do if the fiat dollar collapses is switch to silver or gold,then wait a few decades,then go back to fiat.
 
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