Economics and the M3 currency

[Osborn F Enready]

So, how many people out there can talk, even remotely, about the fiat vs gold, M3 currency situation?

This article, provides some clearer understanding for some things to me, though I am still researching myself.
http://www.iie.com/publications/pape...ResearchID=417

This one also, provides a little intresting insight.
http://www2.qeh.ox.ac.uk/pdf/qehwp/qehwps63.pdf

And another interesting one.
http://ksghome.harvard.edu/~avelasco...ril%202001.pdf


I am forced to wonder how much longer the fiat myth can continue, with almost no suprise.

Aaron Russo sums up my side of the argument the best by saying that we were UN-constitutionally were sold into economic slavery in 1913 by our own government.

You will be indefinitely taxed on YOUR property, to pay intrest on that fiat via inflation.
You will be indefinitely taxed on YOUR earnings, to pay intrest on that fiat via income tax.
You will be indefinitely taxed on YOUR existence, and forced into economic servitude through globalization of government, currency and the lowering of all rights of all individuals at the behest of mega-monopoly corporations, tran-nationals, and the World Bank.

Aaron Russo says it best himself, and in a simple way for all to understand here.
http://video.google.com/videoplay?do...88777215293198


Let me know where this logic is flawed, please, if you see any?

[RVonse]

I'm afraid my internet speed is too slow for video feeds, perhaps you could summarize what was said?

Bishop is the best person on this board I can think of who knows plenty about economics. Perhaps he will give an opinion here.

Just my personal feeling is that when it comes to the economy, Bush can't find his way out of a paper bag. The monkey in the white house heading up our economy is like putting Nero in charge of flammables. Just about everything he has done, from immigration policy all the way to cutting taxes for the rich has been wrong for our nations long term economic health. Our country is in so much trade and fiscal debt at the moment, I don't see how we can ever get out without some sort of major correction. And even after the correction, how are we going to ever rebuild manufacturing again like it needs to be? Personally, I think the future looks very scary for the U.S..

[tman_ndsu08]

When in doubt, Wikipedia:
http://en.wikipedia.org/wiki/Money_supply

[bishop]

the problem with fiat is that there are no controls governing how much of it can be introduced at any set period of time.. as a consequence, money velocity has been too high as policymakers abuse the flexibility fiat provides - and has left us with higher real inflation than was the case under gold. historically, however, price volatility under fiat has been markedly lower than under gold.

and by contrast, gold was completely inflexible and produced several severe pricing crises because of its inability to handle nominal price fluctuations. plus, with central banks hording gold (and other valuable commodities), they could incite panics while protecting their own economies. but, real inflation didn't really exist under the gold standard.


if certain policies could be introduced to force responsible use of fiat, then the debate of fiat vs. gold would be put to an end - because fiat is inherently superior except for the fact that it's repeatedly abused by those in power. responsible usage of fiat would mean that we'd have balanced budgets and thus, real inflation rates similar to what we'd experience with gold.

[Osborn F Enready]

Almost stressing exactly my intended points, which I must thank you Bishop for so eloquently expressing and explaining more to the point than I could.

Bishop said: (speaking of fiat) repeatedly abused by those in power.

Since fiat, is SOLELY left to power, to be responsibly issued it requires that WE THE PEOPLE maintain power over our system, because if not, what we are seeing today happens. The corporations abuse the system, in collusion with government, artificially fluctuating intrest rates and imposing market restrictions to benefit monopolies, which in turn, pay back politicians through lobbyists donations, favors and trinkets. This is because the Federal Government tightly regulates commerce entirely, and states have little say in anything. (Most of the elected officials are only elected in state positions because they are "officially" endorsed by the major party for the campaigns, based on if they are willing to "play along". This system is protected by both Democrats and Republicans, and they profit equally in power and money due to this, through bill additions, and pork spending with "you wash my back, I'll wash yours" attitude.)

What we have seen over the last 50 years ESPECIALLY, has been a consistently rising, REAL intrest rate, that the people pay for by the loss of the value in their circulated currency, without ever knowing about it, or giving it much thought of how it happens.

The gold standard was supposedly removed, to provide a more "stable" system of finance for government, and its people. It was ACTUALLY created to provide an ability for the government to raise profit, via intrest, for raising armies, and the ability to wage foreign wars. Instead, it has been slowly used to grow government into the biggest global corporation, with its own "forced" financed armies, navies, air-force and marines, without CITIZEN control over any of it.

You are forced to pay taxes every year, to pay the intrest down on the FIAT (worthless paper) that the government prints as US dollars, in trade to theworlds central banks for YOUR, and this NATIONS gold.

How many people think our dollars are backed by Gold that is stored in Fort Knox?
LOL

How many people think the "Federal" Reserve is an actual federal agency?
LOL

Bishop said: but, real inflation didn't really exist under the gold standard

I say:
My other most valued point.


So, which is harder to deal with if either are allowed to occur? Which one is more drastic if let out of control? Real inflation via Fiat or Pricing spikes and depressions due to Gold inflexibility?

To me, the obvious answer is fiat, since there is NO checks on how much fiat is in circulation other than government, meaning if government becomes corrupt (at it has), they have a blank check with which to extort money from ALL AMERICANS via printing worthless fiat, and lowering the value of all printed money without you even knowing it.

Gold, Silver, however is different.

(sections clipped from:) http://economics.about.com/cs/money/a/gold_standard.htm

An extensive essay on the gold standard on The Encyclopedia of Economics and Liberty defines the gold standard as "a commitment by participating countries to fix the prices of their domestic currencies in terms of a specified amount of gold. National money and other forms of money (bank deposits and notes) were freely converted into gold at the fixed price." A county under the gold standard would set a price for gold, say $100 an ounce and would buy and sell gold at that price. This effectively sets a value for the currency; in our fictional example $1 would be worth 1/100th of an ounce of gold. Other precious metals could be used to set a monetary standard; silver standards were common in the 1800's. A combination of the gold and silver standard is known as bimetallism. During most of the 1800s the United States was had a bimetallic system of money, however it was essentially on a gold standard as very little silver was traded. A true gold standard came to fruition in 1900 with the passage of the Gold Standard Act. The gold standard effectively came to an end in 1933 when President Franklin D. Roosevelt outlawed private gold ownership (except for the purposes of jewelery). The Bretton Woods System, enacted in 1946 created a system of fixed exchange rates that allowed governments to sell their gold to the United States treasury at the price of $35/ounce. "The Bretton Woods system ended on August 15, 1971, when President Richard Nixon ended trading of gold at the fixed price of $35/ounce. At that point for the first time in history, formal links between the major world currencies and real commodities were severed". The gold standard has not been used in any major economy since that time. What Do We Use Today? Almost every country, including the United States, is on a system of fiat money, which the glossary defines as "money that is intrinsically useless; is used only as a medium of exchange". We saw in the article "Why Does Money Have Value" that the value of money is set by the supply and demand for money and the supply and demand for other goods and services in the economy. The prices for those goods and services, including gold and silver, are allowed to fluctuate based on market forces.

So, basicly, under our current system, instead of actually owning something with REAL, TANGIBLE value (like Gold, silver), fiat is worthless paper that is used "by commoners" for domestic, and some international trade on a hedge against labor, services, trade and "public acceptance" of your government. Your fiat is only worth a wooden nickel, unless people value your "unique" services you can provide, which dwindle down as laws push companies to merge and monopolize. Then these mega-corporations have huge human services costs, and labor costs from merging and having "duplicate positions" that need eliminated, so they move to areas that have large unemployed labor, with little rights and little pay expectance, and profit by producing cheap goods and selling to growing markets with little or no loss of investment or accrued earnings.

So for example..... say manufacturing and production industry moves to China, India and Mexico, leaving mainly service industry in this nation, we will become totally dependent on foreign goods for income, basicly like renting a store with a lot of shelves, but not actually having money to fill the shelves....no, just hoping other nations will come place their wares on your shelf so you can meek a small profit for moving the good, which in turn, drains the "service related" work force for domestic services, since demand will drop due to a loss of "good paying" industry jobs(that value labor WITH RESPECT to rights of the individual, since China, doesn't have no "stinking individual rights" to deal with when writing pay structure for large industry monopolies. Mexico and India aren't far behind China in this respect.) creating a national shortage of income for luxury and or non-essential services.

So, industry leaves, with good paying jobs becoming extinct in the process (labor jobs, not management) and due to this, domestic consumer spending slows, especially in the service industries, forcing service industry cutbacks and further moves of industry to better markets with less tax, labor cost burdens. Unemployment increases, at a progressive rate, as does taxation to sustain the bloated government payrolls and pork doles. Our labor overall in the nation is worth less, due to high unemployment. Eventually another "New Deal" comes along, and our rights are stabillized to 3rd world levels, and we can again rejoin the work force to do the same work, for 1/50th the income, and no more freedom on top of it.

In other words, the poor get MUCH poorer. The middle-class becomes extinct, mostly becoming much poorer. The rich get richer. The Super-Rich become elites, like Nobles of the highest order.


This is the World Bank, Central Banks, and International Bankers plan to enslave the world, and lower global rights to that of the worst third-world nations today.

The switch from the Gold Standard in the New Deal, set the path for this perfectly, and has weakened the peoples global hand to being almost moot outside of sheer mass violence and or violent revolution, and wealth redistribution.

We are in my opinion, at the end of our chance for re-establishing the proper course to maintain and defend individual rights, the world over.

I would like to challenge everyone to look into this deeper, and be skeptical enough to ask the serious questions.

Don't think in this day an age, you can't pay $100,000.00 for a loaf of bread, because you very soon may if the banks get their way. By the way, the government leased that land you are paying taxes on that you thought you owned.

Very scary folks. Time for serious debate to take place.

[bishop]

you didn't address my last point/paragraph though.. it seems to me to be infinately easier to legislate spending controls and regulate spending in order to focus on paying down our debts, which would also decrease real inflation.. by contrast, it seems to be nothing more than an unrealistic pipe dream to revert back to the gold standard (or any similar standard whereby we fix our currency to a commodity).

also, when you attempted to extend your argument into a more global focus, the basis of your argument is entirely outdated ((read: focused entirely on manufacturing). far larger than fdi, roughly half of all foreign investment is in foreign securities (purchased primarily with M3).



and then you have the forex where several trillion dollars exchanges hands on a daily basis...


global portfolio investment, investment banking and the forex cannot exist if you move towards a monetary policy similar to a gold standard.. you'd completely destroy the global financial system, as well as virtually every developed economy in the world. why? because a gold standard works against liquidity - which is a primary factor driving all investment. by contrast, if you simply legislated reasonable spending controls, you could drastically reduce (if not eliminate) the risk of default from excessive inflation - and you wouldn't cause a global financial collapse in the process.

one of the things that's always intrigued me about the argument for a return to the gold standard is that NOBODY (not even the pros at cato) ever talk about HOW such a transition could occur.. one thing to highlight the benefits of a gold standard while ignoring the cons - it's something else to completely avoid talking about how such a change could occur and what the potential consequences to the global economy would be.

[Osborn F Enready]

Bishop said: you didn't address my last point/paragraph though.. it seems to me to be infinately easier to legislate spending controls and regulate spending in order to focus on paying down our debts, which would also decrease real inflation..

I say:
Show me how that has worked since 1913, and where it ended up?

The whole point isn't about easier, it is about keeping wealth where it belongs, which is in the hands of the people; Fiat, is worthless.

Bishop said: by contrast, it seems to be nothing more than an unrealistic pipe dream to revert back to the gold standard (or any similar standard whereby we fix our currency to a commodity).

I say:
Why such a pipe dream though Bishop? Because there ISN'T enough gold to support the amount of fiat, which means we will ALL lose money, except those who have been hoarding commodities, right?

So, what realistic alternative is there, since the government is near provably running amok?

Regardless of the fiat vs gold comparison, you neglect to address the overall issue with WHY the government chose to go to fiat, as opposed to gold, which was raising revenue without expectation.
The government adopted fiat, because it could profit without accountability for the money, and in 1929, under the DESIGNED depression, people weren't in much of a position for bargaining when the New Deal was brought up, and Gold was STOLEN BACK by the government from the people.

The very reason you prefer fiat, was the very reason government got legs to corruption without accountability.

Bishop said: you'd completely destroy the global financial system,

I say:
That would be a mission accomplished.

Bishop said: one of the things that's always intrigued me about the argument for a return to the gold standard is that NOBODY (not even the pros at cato) ever talk about HOW such a transition could occur.. one thing to highlight the benefits of a gold standard while ignoring the cons - it's something else to completely avoid talking about how such a change could occur and what the potential consequences to the global economy would be.

I say:
Go back and read along with the discussion that took place in when they switched from Gold to Fiat Bishop, same same.

They changed the worlds business in 1929, just like we would have to do it again now to go back to a Constitutional money process.

[bishop]

Quote by: osborn Show me how that has worked since 1913, and where it ended up? The whole point isn't about easier, it is about keeping wealth where it belongs, which is in the hands of the people; Fiat, is worthless.

what i've suggested hasn't been attempted. if it were made law, and if the law was followed, do you agree/disagree with my comments regarding its effects on inflation? but, the paygo rule during clinton's presidency was very close to what i want, and it produced huge budget surplusses which clinton intended to use to eliminate our foreign-held debt within a decade...

Quote by: osborn Regardless of the fiat vs gold comparison, you neglect to address the overall issue with WHY the government chose to go to fiat, as opposed to gold, which was raising revenue without expectation. The government adopted fiat, because it could profit without accountability for the money, and in 1929, under the DESIGNED depression, people weren't in much of a position for bargaining when the New Deal was brought up, and Gold was STOLEN BACK by the government from the people.

no, as i stated, adherence to the gold standard resulted in chronic pricing panics. the creation of fiat ended these types of panics. the ww2 era aside, the government had a strong record of fiscal austerity as opposed to irresponsibility. if your conspiracy theory were true, the government would have continually ran large deficits since fiat's creation, but this is hardly the case. it wasn't until the supply side cult entered the picture until the government began to run up ridiculous deficits (small deficits are entirely acceptable and easily financed - and therefore are immaterial imo).

your consipracy theory doesn't hold water when you look at the time between the 40's and 70's where the government kept spending in check.

Quote by: osborn That would be a mission accomplished.

no, that would be unacceptable - and virtually everyone with any sort of cash/stock assets would agree with me. and i see your argument as even more disingenuous, especially considering that you don't have any savings to speak of (based on what you've publicly stated in previous threads). i've been working my ass off to build up my savings, and no gold bug's pipe dream will dissolve those savings without meeting serious resistance - especially when there is a better, more feasible alternative available.

[Osborn F Enready]

Bishop said: what i've suggested hasn't been attempted. if it were made law, and if the law was followed, do you agree/disagree with my comments regarding its effects on inflation?

I say:
I agree it could work, if things were planned and "followed". My point is that at every point in history this nation aquires wealth, it goes to war. I alledge Clinton raised the money FOR the war, and probably knew about 9-11 as much as Bush. The Taliban was on the U.S. Payroll for years man, and who is to say they still aren't? This two party system, will not obey the law, and it hasn't for over 100 years.

Bishop said: but, the paygo rule during clinton's presidency was very close to what i want, and it produced huge budget surplusses which clinton intended to use to eliminate our foreign-held debt within a decade...

I say:
Clinton SAID he intended those funds for that purpose, but all he was doing was building the war chest, and he helped set it in motion with the transfer of soverignity to the U.N. under State of Emergency situtations if the President so declared.

Bishop said: no, as i stated, adherence to the gold standard resulted in chronic pricing panics.

I say:
I disagree. Speculation, rampant speculation at that, is what caused those massive pricing panics.
Much of that was due to government interference in business activities and commerce.

BUSINESS Moguls designed the Central Bank system, as well as the fiat system of finance. Now, lets say knowing what we know today, and we had Bill Gates, computer language guru, design our computerized defense intelliegence network. After seeing all the "back doors" in Windows software, do you think there would be "back doors" in our computer defense network? Who would end up with the keys to those back doors?

The central bank, fiat system was designed to benefit bankers, corporations and the handlers of them. The people simply get paper monopoly money to play with to trade for food, and luxuries...... WHILE the corporations and central bankers see it as profitable. Once it isn't profitable anymore, which it is quickly becoming so, they will pull the plug, the paper will be worthless, everyones gold will be gone, and we will be left holding the bag, with no industry, no wealth, no way to power the HEAVILY belabored infrastructure.

Bishop said: if your conspiracy theory were true, the government would have continually ran large deficits since fiat's creation, but this is hardly the case.

I say:
Look at what happens to the money, everytime it is accrued. It is spent on the defense network, energy companies, through going to war with a new enemy. Everytime the people get a chance to recoup their wealth for their investment, they are sold out again, and inflation is raised afterwords to boot!

Bishop said: it wasn't until the supply side cult entered the picture until the government began to run up ridiculous deficits (small deficits are entirely acceptable and easily financed - and therefore are immaterial imo).

I say:
And isn't it convenient that everytime one party accumulates wealth, the other one gets in office and squanders it on war? Isn't it convenient that each of the major parties despise each other, yet refuse to even acknowledge another, 3rd party in camera-range? Isn't it convenient that the CPD, and the League of Women Voters only allows debates between the two major parties, and that those debates are usually sponsored by large corporations that make HUGE political donations?

Two parties, one agenda, they take turns wearing egg on their face, to profit for both in the end.

The people don't fit into that picture, unless they are "in the elite". How many corporations you own?

Bishop said: your consipracy theory doesn't hold water when you look at the time between the 40's and 70's where the government kept spending in check.

I say:
We were at war most of that time, and there was a steady inflow of people, and business to the nation. A 30 year gap we are talking about here, out of 90+ years. Any system will show benefits for 30 years, if the downsides aren't calculated to come in for 40 years.

Look at the rate of loss, and how it grows progressively with the welfare state, and increased taxation and inlfation. There is a lot more to that 30 year span than you allude to in your post.

Bishop said: no, that would be unacceptable - and virtually everyone with any sort of cash/stock assets would agree with me. and i see your argument as even more disingenuous, especially considering that you don't have any savings to speak of (based on what you've publicly stated in previous threads). i've been working my ass off to build up my savings, and no gold bug's pipe dream will dissolve those savings without meeting serious resistance - especially when there is a better, more feasible alternative available.

I say:
LOL, and that is exactly what the establishment wants Bishop. Keep clawing at the unattainable carrot.

“The advantage of a free market is that it allows millions of decision-makers to respond individually to freely determined prices, allocating resources -- labor, capital and human ingenuity -- in a manor that can't be mimicked by a central plan, however brilliant the central planner.”
-Friedrich von Hayek

“There's a strange contradiction lurking in all this revisionism: the United States is arguably farther along the road to Marx's communist Utopia. After all, the major means of production are collectively owned, thanks to the stock market and mutual funds. The country certainly boasts of an informed proletariat. And, as Mr. Cheek noted, `With our social security system and Medicare, we are far more socialized in practice than China, which has neither."
-Craig S. Smith, in "Workers of the World, Invest!", in the New York Times, 2001-Aug-19

“If a nation values anything more than freedom, it will lose its freedom, and the irony of it is that if it is comfort or money that it values more, it will lose that too.”
-W. Somerset Maugham

Modern Demorcrip:
“the purpose of government is to reign in the rights of the people”
-Bill Clinton during an interview on MTV in 1993

“If the personal freedoms guaranteed by the Constitution inhibit the government's ability to govern the people, we should look to limit those guarantees.”
-President Bill Clinton, August 12, 1993

Modern Rebloodlican:
“There ought to be limits to freedom. We're aware of the site, and this guy is just a garbage man.”
-George W. Bush, commenting on the website www.gwbush.com

“If this were a dictatorship, things would be a lot simpler. As long as I was the dictator. Heh heh heh.”
-George W. Bush, 2000-Dec-18, in Washington DC, on the occasion of a public appearance with Democratic Congressional leaders

What investments are you protecting Bishop? Investments you made using fiat?

“The Rothschilds, and that class of money-lenders of whom they are the representatives and agents---men who never think of lending a shilling to their next-door neighbors, for purposes of honest industry, unless upon the most ample security, and at the highest rate of interest---stand ready, at all times, to lend money in unlimited amounts to those robbers and murderers, who call themselves governments, to be expended in shooting down those who do not submit quietly to being robbed and enslaved.”
-Lysander Spooner, 1870, in No Treason #6

“The best time to buy is when blood is running in the streets.”
-Baron Nathan Mayer de Rothschild

[bishop]

if the entire basis of your argument revolves around a conspiracy theory to keep the peasants down, then we have very little to talk about.

if the proposal i suggested were implemented and adhered to, it would be able to accomplish everything that the gold standard could accomplish - minus the chronic and debilitating nominal price volatility that was the case under the gold standard. you simply chose to cast that aside, touting "who says they're going to follow the law?".... well shit, you can apply that logic to everything from spending, to war, to education, to whatever else - and that's an entirely different debate and has little to do with fiat vs. gold... (the government can still meddle if there's a gold standard, and the market can still speculate - and we'll probably return to the pricing panics of the "good ol' days").

[Osborn F Enready]

Bishop said: if the proposal i suggested were implemented and adhered to, it would be able to accomplish everything that the gold standard could accomplish - minus the chronic and debilitating nominal price volatility that was the case under the gold standard.

I say:
I think that is a big statement. I do think your idea is novel, and worth checking out, but all I can do is cringe and laugh when we say we are going to let the government hold the "items of value" while the laborers get to hold worthless paper. I have no problem with fiat if it has a solid "price index relationship" with (something) of tangible value. MY point is actually quite simply that these types of currencies ONLY benefit banks, and large multi-national corporations, (and of course, the government, since they are making a profit as the middle man via inflation) and the RISK involved with adopting them ONLY to benefit them, is not worth risking the economic liberty of all citizens.

I want to keep the economic purchasing power reserve, in the PEOPLES hands, not the banks and the corporations, as they are the ones selling EVERY country out in EVERY CASE IN HISTORY.
Our system was designed by people like J.P. Morgan, Glass, Stegall and others, with a shrewd eye towards benefitting the government, and what runs it, banks and corporations.

Bishop said: you simply chose to cast that aside, touting "who says they're going to follow the law?".... well shit, you can apply that logic to everything from spending, to war, to education, to whatever else - and that's an entirely different debate and has little to do with fiat vs. gold.

I say:
I didn't mean to seem that way Bishop, I was simply stating that if it is even "proposed" under the two-party system, you know it will be corrupted from the ground up. If there was a party with this system of economics as their platform, perhaps they could carry this to fruition reasonably, but as of the bi-partisans doing? I don't think it would be worth the effort, since it would be corrupt from the start.

I think you have a solid idea on how to limit real inflation in a fiat based system, but there are a lot of real world variables that would need to be "wargamed" to see what impacts it could have, such as excess and shortage of fiat during certain events. If a shortage were to occur, which government usually arranges, what steps would be the next logical progression to reconcile the shortage?

[bishop]

if we can't assume that the government will follow any of its own rules, which is the case unfortunately, then the first order of business is to vote the bums out of office and get new leadership.. i'm definitely in favor of seeing such a change. and realistically, we won't see any meaningful change in currency or spending policy so long as the status quo remains (although clinton and congress did temporarily buck that trend with the paygo rule)..

so, supposing that we had new leadership, there's the choice of going towards a rigid currency regime, or retaining fiat and imposing rigid spending controls.. both would significantly lower real inflation rates. a gold standard would do a better job of lowering real rates, but you'd reintroduce nominal price volatility, give incentives towards hording (rather than investment) and a host of other ill-effects. plus, i believe that the elimination of fiat would produce a horrendous global depression - it would essentially pop the inflation bubble in one go and would be preceded by massive selling of assets. in a cost-benefit analysis, it seems like too high a price to pay, especially considering that there are other alternatives that would be less detrimental to personal wealth and the global economy. i'd personally like to be able to keep the wealth that i've grown/earned rather than see it all vanish and have to start over from ground zero.

Quote by: osborn If a shortage were to occur, which government usually arranges, what steps would be the next logical progression to reconcile the shortage?

the fed would still be able to manipulate short-term interest rates so that nominal pricing panics don't occur. i think the rules should be changed, though, so that the fed's target rate of inflation is much lower than the current rate of 3-3.5% per annum.. and by doing this, the fed wouldn't be able to keep interest rates excessively low for long periods of time (which is exactly what they did do following the dotcom bust).. this definitely goes without saying but, maintaining low rates in a time of heavy borrowing is a perfect recipe for a sustained increase in real inflation. and the biggest cause of inflation by far is government spending/borrowing, which would be eliminated if we had stringent rules governing spending.