Arab central banks move assets out of dollar

[SteveA]

Well we certainly need something backing our currency, not simply to stop continual inflation but to keep it from free falling and to stop the Federal Reserve from handing almost free cash to their buddies. You can do a hard days work and never know if the person who just purchased it traded anything in exchange for your work, or if they simply handed you an IOU they never intend to pay back.

[bishop]

i don't think currency needs to be backed by anything.. currency (or anything else for that matter) has value so long as the people who use it view it as having value.. despite what the pro-gold crowd thinks, the vast majority of people (professionals and average joes) view paper currency as having its own value - i.e. it has value regardless of not being backed by a precious metal or other commodity.. any measure to affirm their confidence in the paper currency, such as balancing budgets and paying down debt, further illegitimizes the call for policies like the gold standard.

practicing fiscal responsibility is a hell of a lot easier than attempting to convince the entire world to return to the gold standard... plus, we can be fiscally responsible all by ourselves - we don't need to play diplomatic games at the u.n. to protect our economic future.

[SteveA]

Quote by: bishop i don't think currency needs to be backed by anything.. currency (or anything else for that matter) has value so long as the people who use it view it as having value.. despite what the pro-gold crowd thinks, the vast majority of people (professionals and average joes) view paper currency as having its own value - i.e. it has value regardless of not being backed by a precious metal or other commodity.. any measure to affirm their confidence in the paper currency, such as balancing budgets and paying down debt, further illegitimizes the call for policies like the gold standard.

You know there are probably many people who'd just love to trade you their dollars for another currency but we need to fix things so that becomes an option again. Try saying you don't want to accept paper in an emminent domain exchange or reject the idea that dollars are basically get out of jail "free" cards for the IRS.

http://www.moreorless.au.com/background/germany.html

"The coalition government loses its majority in the elections of 1920, introducing a decade long period of political instability. Inflation skyrockets in 1923 and is fuelled when the government begins printing more and more money. The value of the Deutschmark plummets. In mid-1920 US$1 is worth 40 marks. By November 1923 US$1 will buy 4.2 trillion marks. Social unrest begins to escalate.

A new government succeeds in containing the crisis but is crippled when the Wall Street stock market crash of October 1929 ushers in the Great Depression. Unemployment rises from 8.5% in 1929 to 29.9% in 1932. "

As far as I know the Constitution never granted the federal government anything other than ability to coin money and as far as I know only gold and silver are actually mentioned. They had to force people to stop using gold and basically declared it illegal to trade with it and confiscated it (and the gold magically disappeared during this time also ... makes you wonder where resources were flowing during the WWI, Great Depression and WW II era).

practicing fiscal responsibility is a hell of a lot easier than attempting to convince the entire world to return to the gold standard...

I don't want to go back to the "Gold" Standard either. People make fun of the "Gold" Standard, because it wasn't a standard at all. It was the first dollar. Here's what the "Gold" Standard looked like:



I agree with you it was a cruel joke to play.

Imagine if as an April Fool's Day joke, the Federal Reserve printed up a few trillion dollars and bought up most the U.S., or imagine the chaos if someone rained counterfeit bills around in a few states, or what if a couple banks simply forgot to check for credit limits on their customers cards? Isn't it almost a joke that we have an economy that's susceptible to things like this?

plus, we can be fiscally responsible all by ourselves - we don't need to play diplomatic games at the u.n. to protect our economic future.

And you point out exactly why we should have never created a fiat system for money. We would never have need to have balanced budgets laws (or the continued failing attempts to enforce them) if people were simply expected like everyone else to provide something of real value in an exchange.

[Osborn F Enready]

Well said Steve.

[bishop]

Quote by: steve And you point out exactly why we should have never created a fiat system for money. We would never have need to have balanced budgets laws (or the continued failing attempts to enforce them) if people were simply expected like everyone else to provide something of real value in an exchange.

true, but it took several decades before we began to abandon fiscal discipline...

i still believe that fiat is superior to gold, particularly because it virtually eliminates the nominal volatility (resulting in economic panics) that we saw before fiat.. fiat is, admittedly, more susceptible to real inflation (long-term inflation) than the typical currency anchors.. that said, slightly higher real inflation is perfectly manageable, and if we had balancd budgets that scenario would be true. at the same time, we'd have the ability to vary interest rates to the benefit of the economy and wouldn't have gold-era type panics.

(i know we didn't have a true gold standard. it's just an easy phrase to say that most people understand.)

tangent/

just my own quick blurb about the great depression (definitely deserving of its own thread) - the depression grew out of a multitude of imbalances of which fiat is one piece. the situation could've been different if income disparities in the u.s. (and europe) weren't so heavily skewed - where almost 80% of the u.s. population spent their entire annual income on consumer goods like food and other essentials. or, if the fordney-mccumber act or the hawley-smoot tariff were never imposed, perhaps europe would've been able to pay its debts... these tariffs effectively raised import taxes over 100% in just a few years. so, the market crashed and the vast majority of the population who were living hand to mouth were left in a VERY precarious situation (and people wonder why the country leaned towards socialism during this time)..

/tangent