Fiat Money vs Sound Money, page 2

reply to post by Rockpuck

---

I'll get back to you with more details tomorrow. Time to get some sleep.

I'll just say this one thing: deflation doesn't have to 'spiral' out of control, and you don't need to print more money to stop inflation. What you need, imo, is a nice balance, a set amount of currency, that if given time, will reach a stable value, and probably slowly deflate over time, without all the pseudo-fear-mongering crap perpetuated by the establishment - remember it's all just theory. You explained why deflation can end up being bad, but you still failed to explain how a currency which is inflated way beyond the rate of economic of growth, can be a good thing.

BTW, fiat currency, as I'm using the word, is this:

* money without intrinsic value.[6][7]

Fiat Money

So put simply, a currency not backed by anything, like bills of credit issued directly by the Government, such as the Greenbacks. On the other hand, a sound currency would be a currency backed by something with some sort of intrinsic value, such as gold.

No need to make it any more complex than that.

reply to post by ChaoticOrder

---

Yes but the key point your not getting: The system you propose cannot. Absolutely CANNOT work within the current build of society/economy. Impossible. You'd have to restart and rebuild using your proposed plan, the current way the World operates would have to cease. What I'm trying to get across to you is that the economic theories that drive our economy cannot be messed with.. that there are reasons for why things are the way they are, they all serve a purpose. And if you don't understand the theorem then you cannot understand what a proposed idea would have as an effect on the system as a whole, inside the theorem.

reply to post by Rockpuck

---

What I'm trying to get across to you is that the economic theories that drive our economy cannot be messed with.. that there are reasons for why things are the way they are, they all serve a purpose.

Yeah, things are the way they are because the bankers have worked long and hard to make it that way. The national debt combined with the rapid inflation of the dollar makes it perfectly clear that something isn't working quite as it should, and indeed America is heading straight towards the edge of a cliff, and will come tumbling down if this absurd system is perpetuated for much longer. The only people who benefit from an inflationary currency are those at the top, everyone else gets screwed over. The only real logical answer is to carefully control the quantity of the [fiat] currency in question. That is easier when it's issued by the Gov interest free straight to the people, and I've posted ample evidence to prove how successful this method is.

It worked for Rome and it worked for America when Lincoln tried it. If it weren't for those damn bankers and the sudden recall of the Greenback there wouldn't have been a panic, and the debt-based Federal Reserve Note wouldn't even exist. All the evidence clearly shows how scared they were that this idea of Government issued money would upset the balance of the world because people actually get to hold onto their wealth, instead of it withering away at the whim of a central bank. The fears of a deflationary currency are based on pseudo-scientific nonsense perpetuated by those who wish to stomp out any ideas of a currency that not only holds it value, but actually increases in value over time.

"The government should create, issue and circulate all the currency and credit needed to satisfy the spending power of the government and the buying power of consumers..... The privilege of creating and issuing money is not only the supreme prerogative of Government, but it is the Government's greatest creative opportunity. By the adoption of these principles, the long-felt want for a uniform medium will be satisfied. The taxpayers will be saved immense sums of interest, discounts and exchanges. The financing of all public enterprises, the maintenance of stable government and ordered progress, and the conduct of the Treasury will become matters of practical administration. The people can and will be furnished with a currency as safe as their own government. Money will cease to be the master and become the servant of humanity. Democracy will rise superior to the money power."

~ President Abraham Lincoln, Senate document 23, Page 91. 1865

Another good man assassinated by the money masters.

reply to post by 00nunya00

---

smallbusiness.chron.com...
www.econlib.org...
www.econlib.org...
www.econlib.org...

You may have a hard time finding Classical vs Keynesian because those are non-technical names. Technically Classical Economics are referred to as Austrian School of Economics, and sometimes Neoclassical Economics.

A good book to read, that I read in an economics course is en.wikipedia.org... Capitalism and Freedom. Friedman was another very popular Classical Economist who opposed Keynesian Economics.

reply to post by Rockpuck

---

Much obliged. Have a star.

2

This reply is obviously a bit late, as I haven't checked this thread in a while. But here's a really great (and large) collection of eBooks from the Ludwig von Mises Institution that I stumbled across a few weeks ago. There are some real gems in this collection.

mises.org...

reply to post by ChaoticOrder

---

I wanted to understand the concept of a Gold Standard a bit better to see why Ron Paul is behind is so strongly, so I started reading The Gold Standard - Perspectives in the Austrian School. As we can see by the excerpt below, the argument they present against fiat money is exactly what I expected it to be - the central bank/government has a monopoly on money printing - they will inevitably get out of control and print too much - therefore inflation will get out of control. So once again the whole argument comes down to the quantity of money that is allowed into the money supply. So the problem is clearly not fiat money, the problem is who has control over the creation of said fiat money. I'll get back to this thread later with some more thoughts on the actual nature of a gold standard currency.

The essential meaning of a fiat paper standard is that the currency
unit—the dollar, pound, franc, mark, or whatever—consists of paper
tickets, marked as "dollars," "pound," and so on, and manufactured by the
central government of the nation-state.3 The government (or its central
bank) is able to manufacture those tickets ad libitum and essentially
costlessly. The cost of the paper and the printing is invariably negligible
compared to the value of the currency printed. And if, for some reason,
such cost is not negligible, the government can always simply increase
the denominations of the bills!

It should be clear that the point of the government's having the
power to print money is to monopolize that power. It would simply not do
to allow every man, woman, and organization the right to print dollars,
and so the government invariably guards its monopoly jealously. It
should be noted that government is never so zealous in suppressing
crime as when that crime consists of direct injury to its own sources of
revenue, as in tax evasion and counterfeiting of its currency. If counterfeiting
of currency were not illegal, the nation's supply of dollars or francs
would rise toward infinity very rapidly, and the purchasing power of the
currency unit itself would be effectively destroyed.4

In recent years an increasing number of economists have understandably
become disillusioned by the inflationary record of fiat currencies.
They have therefore concluded that leaving the government and its central
bank power to fine tune the money supply, but abjuring them to use
that power wisely in accordance with various rules, is simply leaving the
fox in charge of the proverbial henhouse. They have come to the conclusion
that only radical measures can remedy the problem, in essence the
problem of the inherent tendency of government to inflate a money
supply that it monopolizes and creates. That remedy is no less than the
strict separation of money and its supply from the state.

Originally posted by Rockpuck
reply to post by ChaoticOrder

---

Thank you Rock for your explaination the of the Fed Income and its payments to the government. What ever money the Fed makes directly is not a cause for concern. I think I see how Alan Greenspan was able to switch sides. The best reason in favor of the Fed is that it can supply money when there is no money. To avert famine or some other national emergency. I agree that in the current social economic situation the Fed is a neccessity.

First rule to perpetual growth is a positive Birth Death Cycle. Old people die, young people are born. The United States in the 1970's and 80's was the first nation in the World to experience a phenomenon never before seen in Human history: When people were wealthy, they stopped breeding. This created a conundrum for economist and politicians. By the 1990's it was evident: White people were going to die off due to their wealth status.

Solution?

Brown people!

There is a book about immigration that i read decades ago that I can't find today. "Immigation counter points" or "Immigration Crosswords" it was the immigration book in a series about various issues. The new edition cut this part out.

in 1832 or 1840 something, there was a debate in congress about immigration quotas and the rate of progress though invention. On side argued that more people fuels more prosperity. The other side argued that more people leads to densely packed cities and demagogery, and that technology would raise the productivity of our economy more than additional people if invention were encouraged. The pro invention side also pointed out that technology would eventually put an end to slavery.

My point is that production fuels the economy. If nothing is produced then nothing can be traded (payed) for. Productivity should mean more leasure time instead of unemployment.

It shouldn't be axiomatic that we need more people.

reply to post by ChaoticOrder

---

The whole point of the gold standard is that the currency would be restricted to the amount of metallic mass held by the bank. There would be no human factor vis a vis the amount of currency.

reply to post by Semicollegiate

---

The best reason in favor of the Fed is that it can supply money when there is no money. To avert famine or some other national emergency.

But your logic doesn't make sense. By printing more notes the existing notes become worth less. It just "fluffs up" (aka inflates) the money supply to make it look like more is there, but in reality the total real value of the money supply is worth exactly the same. It IS impossible to create real money value out of thin air. Then what happens when the dollar becomes worth less? Peoples savings become worth less and the price of commodities go up. That does not avert famine in the slightest, it causes it. The best it will do is delay it slightly until the new money trickles into the money supply and becomes realized.

Originally posted by ChaoticOrder
reply to post by Semicollegiate

---

The best reason in favor of the Fed is that it can supply money when there is no money. To avert famine or some other national emergency.

But your logic doesn't make sense. By printing more notes the existing notes become worth less. It just "fluffs up" (aka inflates) the money supply to make it look like more is there, but in reality the total real value of the money supply is worth exactly the same. It IS impossible to create real money value out of thin air. Then what happens when the dollar becomes worth less? Peoples savings become worth less and the price of commodities go up. That does not avert famine in the slightest, it causes it. The best it will do is delay it slightly until the new money trickles into the money supply and becomes realized.

edit on 1-3-2012 by ChaoticOrder because: (no reason given)

I agree with that. I meant that in an emergency when all of a specie money is tied up, such as in a famine, the advantage of the Fed over gold would be that it could print money with no collateral except the promise to repay.
Knida like taking a loan instead of asking for a loan.

That's the best reason for the Fed. I don't think it was a good enough reason. We should be on a metal backed currency or something like currency based strictly on the GNP and the value of national natural resourses.

reply to post by ChaoticOrder

---

I had a hard time figuring this out as well. but 2 points.

1. The fed does NOT return all money to the treasury, as the fed pays its member banks a 6% share. Now, whether that 6% comes from newly printed money, or by interest/bond payments is unknown to me.

2. Here is the real trick- When the FED injects money into the system by buying bonds, that new money causes inflation. What do you think happens when the Gov't pays bond interest back to the fed? DEFLATION!

reply to post by VonDoomen

---

1. The fed does NOT return all money to the treasury, as the fed pays its member banks a 6% share. Now, whether that 6% comes from newly printed money, or by interest/bond payments is unknown to me.

I honestly cannot say for certain either. I do know that the Member Banks can only claim profit (the 6%) from their regional banks. So by logical sense to me that means they claim the profit of the Feds activities outside of the actual Federal Reserve Boards actions, which has nothing to do with the regional banks. Since all monetization is done by the FRB and the Fed of NY, per their balance sheets, I can only assume that outside of what's held by the Fed of NY that the Member Banks don't profit that much off of buying US Treasuries. That's my understanding anyways. That most of the profit comes from interbank lending.

2. Here is the real trick- When the FED injects money into the system by buying bonds, that new money causes inflation. What do you think happens when the Gov't pays bond interest back to the fed? DEFLATION!

That's why the Fed usually only monetizes short term treasuries, rarely over 5yr terms. So we see a spike in the monetary base then a slightly smaller contraction. The interest paid back to the Treasury then is the only real, lasting, form of inflation.

reply to post by ChaoticOrder

---

Good job, I will send some links to add, but have to take the sons to Baseball practice first. I was thinking my thread drove you to this one, but you have my attention now...

reply to post by Rockpuck

---

Fed buys $900 Billion in bonds

reply to post by VonDoomen

---

And?

You monetize nearly a trillion Dollars .. you would see inflation?

Mainstream Media IGNORES Iceland Revolution
  Posted 10 days ago with 96 member flags

Here Are The 5 Worst Places To Be When The Dollar Collapses
  Posted 6 days ago with 19 member flags

The Coming Canadian Housing Crash
  Posted 16 days ago with 18 member flags

What is *THE* domino you\'re waiting for, and why?
  Posted 10 days ago with 17 member flags

Google Trends - The Powers That Be should be scared
  Posted 3 days ago with 16 member flags

Greece bank run
  Posted 14 days ago with 15 member flags

25 May 2012 (the day europe collapsed)
  Posted 5 days ago with 14 member flags

Facebook insider sales are huge red flags
  Posted 12 days ago with 13 member flags

Newest topics, updated in real-time:

Newest topics getting flags, in real-time:

Newest topics getting replies, in real-time: