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Money Myths: Fiat vs. Commodity Money

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posted on Jul, 18 2007 @ 06:17 PM
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I realize that this thread will bring me a lot of flak, but please keep an open mind...

Many people on this board believe that fiat money (paper money printed by governments) has no inherent value. Such people often espouse commodity money (currency backed by gold or silver certificates) as being superior to fiat money.

The argument many conspiracy theorists put out about the evils of fiat money is a red herring. Several myths about fiat money have become the focus of much of the conspiracy literature. Unless such conspiracy theorists drop such myths, their arguments will continue to be nonsensical and they will not be able to reach a wider audience with the important information about what is really going on.

This thread attempts to dispel three fiat money myths, and show why proponents of such myths are barking up the wrong tree. The real conspiracy behind the Fed is briefly discussed.



Myth #1
Fiat money is not backed by some commodity and is, therefore, has no value.

This assertion is untrue. Fiat money has exchange value… which is the only value that money needs. I accept fiat money as tender from you in my transaction because I can take it and exchange it for something else, just the same as I’d accept gold certificates or silver certificates.

In fact, this is one thing that makes fiat money superior to commodity money – it has no other uses. Gold can as money could also be used as jewelry. Cigarettes as money (e.g. in POW camps) could also be used for smoking. Coco beans as money (e.g. Mayan Indians) could also be used for culinary purposes.

Ultimately, value is a psychological phenomenon (see any book on modern economic theory). Fiat money has value because people want it for exchange. (Just as gold has value because people want it for jewelry or industrial purposes).

If you think that your fiat money is really worthless, feel free to send it to me. I’ll even pay the postage, just PM me for my mailing address.



Myth #2
Commodity money never loses its value.

Again, this assertion is untrue. Commodity money is subject to inflation and deflation just as paper money is.

On the one hand, increased supply of commodity money, all else equal, will make commodity worth less in purchasing power (inflation). For an historical example, turn to the Spanish Empire. Inflation due to gold and silver imports from Spain’s 16th and 17th century conquests lead to the downfall of Spain as a world power.

On the other hand, if the supply of commodity money cannot keep pace with demand, commodity money becomes worth more in purchasing power (deflation). For example, every year the economy needs more money for transactions purposes (more people = more transactions = more medium of exchange needed). If commodity money supplies don’t keep up, then deflation happens and money is worth more.

But wait, you say, deflation sounds good if it means my money is worth more. Actually, deflation can be worse than inflation. If you know your money will buy more next year, will you buy goods today or next year? If you’re rational, you’d wait until next year. If everybody waits until next year to buy goods, what happens to the economy today? Economic downturn.

This is something else that makes fiat money superior to commodity money. If handled correctly (note this important caveat), a regulating institution can control the price level such that we have no inflation or deflation. It’s more difficult to control gold or silver supplies.

[edit on 18-7-2007 by ArbitraryGuy]




posted on Jul, 18 2007 @ 06:17 PM
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Myth #3
The Federal Reserve uses its control of the money supply to make your money worth less and less every year.

Here, we have a half-truth. Yes, the Fed uses its control over the money supply for nefarious purposes. However, this isn't its purpose.

This assertion makes no sense. Why would the banks want to make money worth less and less? It’d just hurt them. Banks make money by lending out money and collecting it back later, with interest. If loans are paid back in money worth less than the original loan, then banks lose out. Thus, the Fed isn’t using its power to create inflation… such action would just destroy the banks that control it.

Banks don't want inflation. They want a stable price level.



What does the Fed really do?

I agree with the people that hold onto the above myths that the Fed is an institution that is against the common person. However, fiat money is not its game against us. Rather, the Fed uses its power over interest rates (which it has through its control over fiat money) to transfer income from the working class to the banks. Periodically, it uses monetary shocks to whip the working class back into shape. I’ve discussed this elsewhere.

Fiat money is a red herring. If you really want to know how the Fed is out to line the pockets of our rich overlords using our hard earned income look into interest rates. You’ll see that whenever real interest rates go down, the Fed shocks them back up to sustain high interest rates for our rentier overclass at the expense of American workers.

[edit on 18-7-2007 by ArbitraryGuy]



posted on Jul, 18 2007 @ 11:11 PM
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This is actually very well written; even though I don't think that you will get a whole lot of people to agree with you on the Fiat money. Yes, commodity money could lose its value, and the Fed is a worthless institution that should be abolished. I agree that Fiat money is fine, but at least the government could print it so that they would lose some debt that they end up paying to the Fed.



posted on Jul, 18 2007 @ 11:36 PM
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i agree 110%

fiat money that is regulated by fair honest representatives of the people is the only way to sustain a stable economy.

ill even go one further and say to hell with interest rates and income tax.
why would the governemt need to borrow the money and take it from us to build infastructure if it need only spend the money into the economy by paying us to build it, and service it.

you dont lend the money into the economy at interest, because there would never be enough money to pay back the loan if interest was required.

the people that are paid are going to need services the same to spend the money, and the more people we have the more infastructure we need, and the more money we need.

[edit on 18-7-2007 by tom goose]



posted on Jul, 18 2007 @ 11:37 PM
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double post


[edit on 18-7-2007 by tom goose]



posted on Jul, 20 2007 @ 05:24 AM
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Originally posted by ArbitraryGuy
In fact, this is one thing that makes fiat money superior to commodity money – it has no other uses. Gold can as money could also be used as jewelry. Cigarettes as money (e.g. in POW camps) could also be used for smoking. Coco beans as money (e.g. Mayan Indians) could also be used for culinary purposes.



How does being less useful make it superior? If you're using something edible to trade with for example, then in years of a bumper crop when it would be worth less, you simply eat the stuff! In times that it's worth more you can trade with it or eat it as you wish. I would think that the more you can do with any tool, be it economic or mechanical, the better.

I agree with you that there is nothing intrinsically bad about fiat money, but there is something intrinsically bad about people, who will always manipulate such a system to their own advantage. It's much more difficult to manipulate gold and silver markets than it is to run a printing press. The real power of the Fed is to grow or contract the economy, and of course the board member bankers who know what's coming can invest appropriately. It is the ultimate scam, and has made these scum so rich they practically own the planet.

I have to disagree with you on your assertion that money being devalued hurts the bankers. If you can print as much of it as you want, how much it's worth doesn't mean a whole lot; you just print bigger denominations.



posted on Jul, 20 2007 @ 08:32 AM
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^^^^^

I see your point, but i think you are wrong.

if the printing of fiat money was put into the hands of elected governments rather than private companies looking to profit, then it would be harder to manipulate than gold.

gold is easy to manipulate, even today it is manipulated by 5 heads of the biggest banks who make daily confrence calls to eachother to decide the price of gold. not suprisingly called the london gold fix, Rothchilds have been there since the biginning.

Gold like any limited commodity, can be cornered by simply buying all the gold, and then charging higher prices to get it back. It has happened before.

Money needs to be worthless and unlimited. we are not supposed to be massing large amounts of money, we are supposed to be recieving just enough to balance the production of goods.



posted on Jul, 20 2007 @ 09:43 AM
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One and a half thumbs up

Good work, Arbitrary Guy. I've starred both your original posts, even though I only half-agree with the second one, and flagged the thread.

I don't know that central bankers conspire against the working class. This is a special case of the Marxist view that capital exploits labour -- you see interest-rate manipulation as a means of transferring wealth from the poor to the rich. As I'm sure you understand far better than I can explain, interest-rate manipulation is basically used to control the money supply and hence inflation.

Of course the rich exploit the poor. The poor exploit the rich when they can, too -- Marxist revolutions, nationalization programmes and redistributive economic policies are all ways in which this is done, or at least attempted. People will always try to exploit one another, but there's no overarching conspiracy about it.



posted on Jul, 20 2007 @ 10:39 AM
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Thanks for the replies everyone.




resistor said...
How does being less useful make it superior? If you're using something edible to trade with for example, then in years of a bumper crop when it would be worth less, you simply eat the stuff! In times that it's worth more you can trade with it or eat it as you wish. I would think that the more you can do with any tool, be it economic or mechanical, the better.


Another demand for commodity money makes it more difficult for society to control its supply, subjecting the economy to monetary shocks. Of course, on the other hand, it might make it easier for private interests to control, as tom goose pointed out above.



resistor said...
The real power of the Fed is to grow or contract the economy, and of course the board member bankers who know what's coming can invest appropriately. It is the ultimate scam, and has made these scum so rich they practically own the planet.


True, true. Although many argue that the lack of transparency at the Fed is needed to make its policy potent, this might be the true reason for its non-transparency.



resistor said...
I have to disagree with you on your assertion that money being devalued hurts the bankers. If you can print as much of it as you want, how much it's worth doesn't mean a whole lot; you just print bigger denominations.


Let's say I'm a bank and loan you $100 for one year at 5% interest per annum. If there is no inflation, you give me $105 next year. I've made $5 profit. There's no inflation, so that's in today's dollars.

Now let's put inflation into the mix. If inflation is 4% then the outcome of the same loan is different. You give me back $105 next year, that $105 is worth less than $105 today. If you adjust for inflation, then $105 dollars next year at a 4% inflation rate is equivalent to $100.96 of today's dollars. In other words, at this inflation rate, I (the bank) have only made 96 cents.

If the inflation is greater than the interest rate, then I'll lose money.

Inflation hurts bankers. Bankers attempt to control for inflation in the interest rate, but if inflation is greater than expectations, they lose out.



Astyanax said...
This is a special case of the Marxist view that capital exploits labour -- you see interest-rate manipulation as a means of transferring wealth from the poor to the rich. As I'm sure you understand far better than I can explain, interest-rate manipulation is basically used to control the money supply and hence inflation.


Thanks for your compliments. I should have been more clear about what I believe the Fed's goal is.

The Fed is preoccupied with controlling inflation to keep the real interest rate up. Inflation primarily hurts bankers. If the price level goes up accross the board, lets say 10%. Wages go up 10% and prices go up 10%, the real wage stays the same. Workers aren't hurt by inflation if their wages experience inflation, too.

However, bankers are hurt badly by inflation (see above).

The Fed uses some select interest rates (Fed Funds Rate and Discount Rate) to control money supply to control inflation to control real interest rates. High real interest rates facilitate the income transfer from the rest of us to the retier.



Astyanax said...
People will always try to exploit one another, but there's no overarching conspiracy about it.


Perhaps I'm just a wide-eyed idealist, but just because exploitation is an intrinsic characteristic to all societies, doesn't mean we shouldn't cry foul or try to change things.

Thanks for the comments, everyone!

[edit on 20-7-2007 by ArbitraryGuy]


Dae

posted on Jul, 20 2007 @ 12:54 PM
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Good thread, of course! I agree with most of what you say ArbitraryGuy, except the bit about ANYTHING hurting bankers


I once said in a post over here, " I was wondering why we must base it on precious metals, my argument being if we need more money printed and there is not enough metals to back it, what do we do? And we all seem to be doing fine with fiat money at the moment, what we dont do well with is interest and banks being private instead of public (non-profit). As it stands, someone must set the gold standard, someone decides how much gold is worth in terms of paper money. I may have misunderstood the whole concept but I feel I need persuading on the money backed by gold thing."

I dont feel the need to be persuaded anymore!


Originally posted by ArbitraryGuy
Inflation hurts bankers. Bankers attempt to control for inflation in the interest rate, but if inflation is greater than expectations, they lose out.


No way am I standing here and letting this one go. I also once said, "Inflation is not bad for banks because it is all part of the banking system and the banking system benefits the banks! " Id love to be proven wrong on this, but do banks ever have bad years?

Oh and wages. Do wages really increase to rise with inflation, I mean really? Care to show me some charts to prove it, like last years data?

Id like to point out that Tom Goose is honking up the right tree, as he does about many a things



posted on Jul, 22 2007 @ 02:36 PM
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The federal reserve is not only not for the common person, but they have the ability to destroy a nation's economy wether it is a matter of mankind's greed and we are the country who suffers this bad luck or wether we are marked as a necessary chip in a global agenda

and i agree with tom goose that

if the printing of fiat money was put into the hands of elected governments rather than private companies looking to profit, then it would be harder to manipulate than gold.



also i agree with arbitrary guy (great post by the way) when he said


Perhaps I'm just a wide-eyed idealist, but just because exploitation is an intrinsic characteristic to all societies, doesn't mean we shouldn't cry foul or try to change things.


This should be ovbious but to some i don't think it is, i mean just because you are someone doing well does not mean it is not a problem, and the reality is the far reaching effects will be felt by everyone, including MOST that are flourishing now.

now asyantax (thank you for alerting me to this thread) says this is not a conspiracy by the fed, and i don't really think it matters if it is a conspiracy, or corruption or a matter of semantics.

when an organization not affiliated or influenced by the federal government controls monetary policy's that directly effect the country's economy, there is a major potential for corruption. UNneccessry corruption.

and as far as intrest rates being used to move money away from the working class, inflation does that pretty well also, they do not understand the value of there money is decreasing because EVERYONE loves AN EARLY INFLATION

from jans parssons's dying of money


”Everyone loves an early inflation. The effects at the beginning of inflation are all good. There is steepened money expansion, rising government spending, increased government budget deficits, booming stock markets, and spectacular prosperity, all in the midst of temporary stable prices. Everyone benefits, and no one pays. That is the early part of the cycle. In the later inflation, on the other hand, the effects are all bad. The government may steadily increase the money inflation in order to stave off the later effects, but the latter effects patiently wait. In the terminal inflation, there is faltering prosperity, tightness of money, falling stock prices, rising taxes, still larger government deficits, and still soaring money expansion, now accompanied by soaring prices and the ineffectiveness of all traditional remedies. Everyone pays and no longer benefits. That is the full cycle of every inflation."


this either ends in a hyperinflation or spectacular deflation

the united states has had the pleasure of having a long period of EARLY INFLATION because they have been able to export inflation since they had monopoly of the petro dollar , other country's had to hold us assets -treasure billls so they could pay there biggest bil /the oil bill now that standard is falling at the same time many americans are in debt and most of the stocks (ex-Cept OIL, gold silver commoditites) are way over leveraged thanks to credit bubble. so we have the end of an early inflation at the same time we have a massive global credit bubble , both are coming to an end. the credit bubble is a world wide affair

let me quote ludwig von mises


There is no means of avoiding the final collapse of a boom brought about by credit expansion."


further


The dearth of credit which marks the crisis is caused not by contraction but by the abstention from further credit expansion. It hurts all enterprises - not only those which are doomed at any rate, but no less those whose business is sound and could flourish if appropriate credit were available. As the outstanding debts are not paid back, the banks lack the means to grant credits even to the most solid firms. The crisis becomes general and forces all branches of business and all firms to restrict their activities. But there is no means of avoiding these consequences of the preceding boom


so will prices fall as a deflationary credit bubble pops, well sorta. ASSET prices they will pop. stocks, houses that kind of thing, but since we are at the turning point from an early inflation to a higher one, the banks still get there change to hyper inflate ; nearly simulatiously this leads to higher prices for goods, not necessarily ASSETS , especially during a cred bust part of the cycle. GOOD LUCK

we are looking at two bombs going off simultaniously and if you don't think the fed and central banks around the world could see what they were doing, they you don't give them the credit they deserve. united states will be crushed because we shipped all our industry and manufacturing and good tech jobs over seas, tuff to make a recovery, ALSO facing the end of the petrol dollar, OUCH. the majority of people left from the debris will be tons of immigration labor, the NAU is waiting. Some people know what's coming, and they my friends, are moving.


[edit on 22-7-2007 by cpdaman]



posted on Jul, 22 2007 @ 11:35 PM
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First Things First


Originally posted by cpdaman
now Asyantax (thank you for alerting me to this thread) says this is not a conspiracy by the fed...

My pleasure. Now come back to the other thread and answer those questions you've been avoiding.

Or don't you have any answers?



posted on Jul, 22 2007 @ 11:56 PM
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Originally posted by Dae


Originally posted by ArbitraryGuy
Inflation hurts bankers. Bankers attempt to control for inflation in the interest rate, but if inflation is greater than expectations, they lose out.


No way am I standing here and letting this one go. I also once said, "Inflation is not bad for banks because it is all part of the banking system and the banking system benefits the banks! " Id love to be proven wrong on this, but do banks ever have bad years?


Fair enough
. Thanks for your comments and interest. Let me try to explain my position a bit more...

On aspect of inflation hurts creditors (banks) and helps debtors (you and me) because money is paid back in cheaper dollars if expectations are incorrect. See the following:

www.investopedia.com...

Creditors lose and debtors gain if the lender does not anticipate inflation correctly. For those who borrow, this is similar to getting an interest-free loan.


ecedweb.unomaha.edu...

Since a borrower repays the principal and interest in money, inflation over the course of the loan will make the amount the lender receives worth less in terms of the goods and services money can buy.


This is why all Central Banks are crazy about fighting inflation. Inflation is basically a wealth transfer from creditors to debtors. Debtors repay loans back in cheaper dollars if inflation is greater than expected and not properly taken into account in the interest rate formation.


Originally posted by Dae
Oh and wages. Do wages really increase to rise with inflation, I mean really? Care to show me some charts to prove it, like last years data?


About wages and inflation: I argued if wages inflated at the same rate as prices, workers wouldn't notice the difference. Suppose I only purchase groceries and inflation occurs accross the board. If the price of groceries go up 10% (price inflation) and wages go up 10% (wage inflation) then I can still buy as many groceries as before. I'm not hurt by inflation in this manner.

I didn't mean to imply that wages went up with inflation. Actually, real wages (i.e. wages adjusted for inflation) have been stagnant since the 1970s. Quite the opposite has happened in the 1970s with stagflation.


Originally posted by cpdaman
and i agree with tom goose that

if the printing of fiat money was put into the hands of elected governments rather than private companies looking to profit, then it would be harder to manipulate than gold.


I think most of us here can agree to that
.


Originally posted by cpdaman
ALSO facing the end of the petrol dollar


You open up another interesting can of worms here. This will be a very important development. Overseas entities will no longer have any use for U.S. dollars. Petroleum will no longer be sold in dollars, so nobody will need it for that. The U.S. doesn't export much anymore, so nobody will need dollars to buy U.S. goods. If nobody wants U.S. dollars, nobody will want U.S. Tresury debt. The Amero will be "needed" to prop up the value of the U.S. dollar and prevent a U.S. debt crisis. But that's a whole other thread....


Thanks for the comments, all!



posted on Jul, 23 2007 @ 02:37 AM
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Gnomes or windbags? I'll take the gnomes


Originally posted by ArbitraryGuy
Inflation hurts creditors... and helps debtors.

Correct. But don't forget that bankers are debtors as well as creditors. They owe their depositors money. They can ride out an inflation for longer than other creditors because they benefit from it too.


Originally posted by cpdaman
i agree with tom goose that if the printing of fiat money was put into the hands of elected governments rather than private companies looking to profit, then it would be harder to manipulate than gold.

Harder for everyone except the government, which is the last thing you want.

But this is a completely unwarranted assumption anyway. Private companies are bound by law and subject to the power of the state; they are not free to do whatever they want to with monetary policy. Governments are far less easy to control, even in countries where they are democratically elected.

Governments, speaking historically and taking the global view, have proved themselves far more irresponsible with monetary policy than private bankers. And that stands to reason; after all, it's not their money. They'll happily cut taxes, ramp up subsidies and print money till it's worthless, drive an economy to ruin, for no better reason than to make themselves popular with the electorate. And that's leaving aside the kleptocrats who do it for their own personal profit.

The difference between a country with an independent central bank and one with monetary policy set by politicians is the difference between Britain and Zimbabwe. Think about it.

As for how much independence and scope of action 'independent' central banks actually have, this section of the Wikipedia entry on central banks is quite illuminating.



posted on Jul, 23 2007 @ 04:55 PM
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Originally posted by Astyanax
Gnomes or windbags? I'll take the gnomes


???


Originally posted by Astyanax
Correct. But don't forget that bankers are debtors as well as creditors. They owe their depositors money. They can ride out an inflation for longer than other creditors because they benefit from it too.


Thanks for your input. Good point. But I'd still tend to argue that banks are hurt by inflation more than they benefit from it.


Originally posted by Astyanax
But this is a completely unwarranted assumption anyway. Private companies are bound by law and subject to the power of the state; they are not free to do whatever they want to with monetary policy. Governments are far less easy to control, even in countries where they are democratically elected.


Good point, but one could also argue that the government is under the control of private interests (e.g. the new bankrupty laws written by credit card companies, MediCare Part D written by the pharma companies, or the CIA plotting Central American coups at the behest of United Fruit Company in the 1950s). I think the question of who controls who, i.e. does government control business or does business control government, requires a nuanced answer.


Originally posted by Astyanax
Governments, speaking historically and taking the global view, have proved themselves far more irresponsible with monetary policy than private bankers. And that stands to reason; after all, it's not their money. They'll happily cut taxes, ramp up subsidies and print money till it's worthless, drive an economy to ruin, for no better reason than to make themselves popular with the electorate. And that's leaving aside the kleptocrats who do it for their own personal profit.


Or representing their donor's interests in order to raise more money to sway the masses in their favor with fancy TV sound bites.


Originally posted by Astyanax
The difference between a country with an independent central bank and one with monetary policy set by politicians is the difference between Britain and Zimbabwe. Think about it.


The empirical evidence on central bank independence is not as strong as theory or anecdotes might suggest. This paper suggests that the only real performance benefit to independence is price stability (if you can't use JSTOR message me and I can email you a copy). It suggests that various measures of central bank independence do not seem to be related to growth (short or long term), interest rate stability, or unemployment.

Additionally, attributing the differences between Britain and Zimbabwe to monetary policy institutions ignores quite a bit of cultural, historical, geographic, and institutional forces that contribute to economic development. In making such a comparison, one runs the risk of comparing apples and oranges.



[edit on 23-7-2007 by ArbitraryGuy]



posted on Jul, 23 2007 @ 11:09 PM
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Originally posted by ArbitraryGuy

Originally posted by Astyanax
Gnomes or windbags? I'll take the gnomes


???

Oh, bankers vs politicians. Sorry, I guess it was a bit obscure.



posted on Jul, 24 2007 @ 03:51 AM
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Originally posted by ArbitraryGuy
one could also argue that the government is under the control of private interests (e.g. the new bankrupty laws written by credit card companies, MediCare Part D written by the pharma companies, or the CIA plotting Central American coups at the behest of United Fruit Company in the 1950s).

One could. However, it is only an argument. Interest and lobby groups do influence the policies of governments; this is why they exist. That is not the same as to say they dictate policy.

It would be very unwise of any governent drafting a new bankruptcy law not to involve a group of lenders whose potential loss from defaulters declaring bankruptcy may run into the hundreds of billions. It would be equally foolish not to consult drug manufacturers in the process of drafting health-care policy. I am not American and don't know about the details of the laws and regulations to which you refer, but to an outside observer it seems clear that your political system balances interest groups against one another pretty well, all things considered. The amazing prosperity of ordinary Americans -- even those other Americans consider 'poor' -- compared with the citizens of other rich countries is testanment enough to this.



posted on Jul, 27 2007 @ 05:47 AM
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Of course inflation hurts everyone, that's pretty difficult to argue against. With all the advantages the bankers enjoy however, it's easily overcome.

BTW, the gnomes own the windbags.



posted on Oct, 27 2008 @ 10:45 AM
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I'll address myth #3 to make my point. Banks do not lend out real savings of other people. That is your biggest unfortunate error in all of this. Banks create the money they lend you out of thin air. Let me repeat that: Banks create money out of thin air! (in the form of checking deposits) with a signature of a pen or a click of keypad on a computer. The real deposits are used only for the required reserves. If you do not understand this simple fact (as most people do not), you will continure to make these fallacious assertions. Acknowledging this instituionalized fraudulant practice of banks, will make all of your asserted myths invalid. Fiat money therefore, allows banks (with the help of the FED) to expand the money supply (create money out of thin air) without any theoretical limitations. Since banks make their profits on interest charged on money created out of nothing, the inflation is really just a minor cost for the banks. The reall cost is on all of us. Our money is being debased everyday because the governement and banks are tranfering wealth (in the form of a regressive tax) from the people to bankers and government. you should study more in detail how modern fractional-reserve banking works before you declare yourself an expert on banking and fiat money.



posted on Oct, 27 2008 @ 11:46 AM
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Any currency can be manipulated, gold or not, however, a fiat currency cost pennies on a dollar to produce more, to make a gold coin its not the same, a gold coin will actually coast more than the coins face value to product m this will severely limit any inflation.

As for a fiat currency being based on commodities, yeah it could be said that the case, but it that were the case they could not just print more of it when needed. thats what makes any fiat currency bad, really a currency paper or what not that based ona fixed commodity cant inflate nearly as much as a non fixed currency.

As for the biggest question is what does inflation do for the banks, well it helps the central bank the fed reserver the most, becuase they get the money first then it goes to the government.. andy one that gets the money before its released into the general economy, gets abenifit as they get to spend it when before prices inflate.. the looser is always the consumer. Now as for the fact that inflation would hurt banks that loaned moeny as loans would get paid off and thet would not make moeny, Hello banks are allowed to make up to 26% interest on money thats leveraged up to 15 to 1, they make money hand over fist on a 15 to 1 investment.. i they have this income factored into the interest rates they charge, that why rates change all the time there adjusting them to keep there profits stable.

Here is the idea , if i gover you you pay check every week and ever week i doubled how much you made, but the price increases in stores were happening a week behind you would benefit drastically, why because your money would double before the things you buy would double.. this is why the central banks and government benefits from inflation

The biggest question is this why does the government pay the federal reserve to make money when it could do it its self , its granted the ability to coin currency.. why does it hire a privately held bank to do it for them and pay them to do it. The banking industry and currency system is the biggest longest running sham in the history of the world.



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