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fajw

How would you change our governance if you could?

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Sure it's used in jewelry, because it's nice, doesn't make it valuable.

Actually it does make it valuable. Perhaps not to you, but that's beside the point.

 

 

It's a free market? So one day 1 kernel of corn is 1 gold pieces, next day it's 10 gold pieces?

 

Then I'll start trading in corn, because it's value has gone up and is worth more than gold?

 

I can eat corn, it has actual value you to me, because it'll keep me alive.

 

 

Working this way, gold has no value.

To you perhaps.

 

I don't get the point of your hypothetical. As far as I am concerned you should be able to trade with whatever you and your trading partner want.

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I don't get the point of your hypothetical. As far as I am concerned you should be able to trade with whatever you and your trading partner want.

then why are you talking about gold?

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Sure it's used in jewelry, because it's nice, doesn't make it valuable.

Actually it does make it valuable. Perhaps not to you, but that's beside the point.

 

see thats what I think you're missing.

I actually have never met a person who likes gold jewelery. Its expensive, fragile, and everyone I know who is 'into jewelery' likes silver.

but jewelery is a luxury; often an impulse buy, hardly making it valuable.

It has value under our FIAT standard, but remove the dollar value, and it has few uses.

 

But thats not the point; the point is that if we switched standard, my gradfathers 'gold ring' worth as a guess, $500 right now, might be worth nothing, or 500X that on a new standard. How do you begin to change?

Edited by Master_Scythe

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Are you clowns going to argue about monetary policy forever?

You've never heard of a resource based economy?

So who's alt are you?

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I don't get the point of your hypothetical. As far as I am concerned you should be able to trade with whatever you and your trading partner want.

then why are you talking about gold?

 

Because some form of money is desirable to assist in trade, we need something to pay taxes and it's typically what free markets choose.

 

 

Sure it's used in jewelry, because it's nice, doesn't make it valuable.

Actually it does make it valuable. Perhaps not to you, but that's beside the point.

 

see thats what I think you're missing.

I actually have never met a person who likes gold jewelery. Its expensive, fragile, and everyone I know who is 'into jewelery' likes silver.

but jewelery is a luxury; often an impulse buy, hardly making it valuable.

It has value under our FIAT standard, but remove the dollar value, and it has few uses.

 

But thats not the point; the point is that if we switched standard, my gradfathers 'gold ring' worth as a guess, $500 right now, might be worth nothing, or 500X that on a new standard. How do you begin to change?

 

Huh? Why would the absence of a fiat currency standard like we have now diminish the value of gold? If gold is 1000 times the price of corn why wouldn't it still be so when you get rid of our fiat currency's legal tender status? I don't see the problem. Edited by fajw

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Huh? Why would the absence of a fiat currency standard like we have now diminish the value of gold? If gold is 1000 times the price of corn why wouldn't it still be so when you get rid of our fiat currency's legal tender status? I don't see the problem.

It wouldn't necessarily devalue anything - it would destabilise the price. Look at your history: the gold standard does work - it's just that fiat currency works better.

 

You are the one arguing for the gold standard, despite the lessons of history. It's up to you to provide compelling reasons why that would be better than a fiat system. So far, you have made the same assertion, in different words, over and over again, but contributed nothing to the argument other than "because". That does not cut it.

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You post like you haven't read the thread. What history? Which books should I read? What are these "lessons of history"? Why do you say that fiat currency like we have now works better? Do you think legal tender legislation should exist?

 

So far, you have made the same assertion, in different words, over and over again, but contributed nothing to the argument other than "because".

That is BS.

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You post like you haven't read the thread. What history? Which books should I read? What are these "lessons of history"? Why do you say that fiat currency like we have now works better? Do you think legal tender legislation should exist?

 

So far, you have made the same assertion, in different words, over and over again, but contributed nothing to the argument other than "because".

That is BS.

 

Actually, I have read the thread. Since the OP, in fact. I stand by my statement: every time anyone has challenged your viewpoint, you obfuscate, deny, or just plain ignore the post - and then reiterate your initial statement. Actually, that behaviour is not unique to this thread, but to every thread in which you 'argue'. The only reason I don't /ignore you is that I object to blind spots even more than the nonsense you spout. (Besides which, anyone who quotes you makes it visible again anyway.)

 

The question you ask above are pure smokescreen. "What history?" Any that pertain to the history of currency, obviously. "Which books?" As previous. Try Wikipedia for a start. "What lessons?" The ones everyone in this thread except you has been pointing out. "Why do I say that..?" Because it's manifestly true to anyone who can read said history. Also, simple reasoning: every culture did use gold standard (or similar); and now nobody does: unless every ruler, council, and economist in the world is a fucking moron, there has to be a reason for that. (And then do research into what that reason might be.)

 

Seriously, fjaw, use the stuff between your ears for more than just stopping your hairdo going flat.

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itty bitty derail ...

" Seriously, < insert appropriate stuff here >, use the stuff between your ears for more than just stopping your hairdo going flat."

 

If you don't object Cybes I shall put the above in my sig.

 

edit: couldn't wait sorry

 

...end derail.

Edited by eveln

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My questions are not smokescreen at all and I am genuinely interested in them being answered.

 

How do you know "that fiat currency works better" and about these "lessons in history"?

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You post like you haven't read the thread. What history? Which books should I read? What are these "lessons of history"? Why do you say that fiat currency like we have now works better? Do you think legal tender legislation should exist?

 

So far, you have made the same assertion, in different words, over and over again, but contributed nothing to the argument other than "because".

That is BS.

 

Well, I'd start with Golden Fetters by Barry Eichengreen, A Monetary History of the United States by Milton Friedman and Anna Schwartz (this was the book reviewed by Bernake in the speech you linked, btw), the speech you linked (seriously, read it in full - especially the section on the gold standard), and a macroeconomics textbook or international economics textbook - I'd recommend International Economics by Paul Krugman and Maurice Obstfeld, but that's personal preference.

 

From there, I'd recommend looking into New Keynesian macroeconomics. I'll let you do the research on that yourself

 

[edit]: If you're wondering why most of those books are talking about the Great Depression, it's because that was the time when most countries were finally forced off the gold standard for good. Understanding what was going on then will help you to understand why this was, and why going back onto a gold standard would reintroduce these vulnerabilities.

Edited by DaCraw

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Have you read those?

 

Do you think legal tender legislation should exist?

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I was just going back through this topic and saw this post. Wow.

 

Do you not see that gold will devalue as we find more, and in fact dramatically increase in value as we USE it?

Its an important material in making electronic connectors. And I dont see us stopping using electronics anytime soon.

 

If we used a gold standard, what do we do in 300 years time when all our gold is floating in space ensuring radino free space suits and low resistance electronics?

Have you done the math? If so please share and we can go off the gold standard.

 

I don't know about MS, but I have done the math. As has anyone who has studied undergrad-level economics (or possibly high-school level economics, depending on the syllabus). Given that you couldn't recognise a simple production index earlier in this topic, I'm guessing that's not you.

I'm not going to do the math at length here, as these forums don't handle formatting equations well. If you're actually curious, though, I can recommend some good macro textbooks.

 

[edit]: upon rereading, I may have been a bit harsh there. If you're genuinely curious, though, I am serious about the textbooks. How comfortable are you with maths (mainly calculus)?

 

The very nature of 'worthless money' allows us to estimate how much there is in circulation, and keep it at roughly the same ammount. The main cause for inflation isnt the type we use, its the fact that 'interest' can be charged by anyone, which 'creates' money (well debt) where there is none. Unfortunately the world over is already doing this, so that boat has already sailed far far away; and I dont think will be the cause of civil downfall in my lifetime.

(Monetary) inflation is money creation and I don't think it has anything to do with charging interest.

 

Currency is a subset of Money. Honestly, I'd thought you would know that, as it's one of the things goldbugs usually bang on about (for no good reason, but that's never stopped them).

 

That said, a non-zero inflation rate is actually a good thing, provided it is still small and stable. There is loss of consumption per capita due to inflation, but the difference in average consumption between an economy with 10% inflation and one following the Friedman Rule (where nominal interest on riskless securities =0, which is actually slightly deflationary but minimises the lost consumption ceteris paribus) is about 0.36% per year. However, the latter economy would, by definition, be in a perpetual liquidity trap - which we know to be disastrous (just ask the Japanese). Many important economic processes shut down in a deflationary, zero lower bound constrained economy, so the minor gain in efficiency due to optimal monetary policy is outweighed by the losses caused by having your economy implode.

 

The key, then, is to ensure that inflation is kept at a low but stable level. In Aus and the US, this is 2-3% per year. In Europe, they target close to but less than 2%. I'd actually advocate an increase in our target to 3-4%, as the fallout from the GFC in the US has shown that hitting the zero lower bound to be more problematic than we previously thought, so having an extra buffer would be worth the loss of efficiency (remember, real = nominal - inflation, so higher inflation means a lower real interest rate for any given nominal interest rate).

 

In any event, being able to actually control the money supply is crucial to maintaining stable inflation while avoiding damaging periods of deflation, because i = x in the long run (the long-run average inflation rate = the rate of growth of the money supply [note that this is more than just M0]).

 

I guess I'm trying to keep a level head and actually find out WHY you feel this way, other than just 'Gold has Value'. Its a mineral. a metal. Its something we find in the dirt. it has value because we give it value, just like money. As we become better at recycling plastics, why not value the oil in the money? Gold, outside electronics, IMO is worthless. What else can we use it for?

Gold is not like the currency we use. If you want to try and trade with bits of plastic that's fine with me but I don't think there should be legislation to enforce it.

 

Why is gold not like any other currency, apart from the fact that we can't control how much is made (which, as noted above, is kinda important)?

 

Have you read those?

 

Do you think legal tender legislation should exist?

Yes, I have. All 4 were assigned reading at one point or another during my BEcon.

 

As for legal tender legislation, yes I do think it should exist. As I've said in previous posts, in order to avoid the double coincidence of wants problem, you need either a law or a social convention requiring everyone to accept a certain currency as payment in exchange for goods or services. Given all of the other benefits of fiat money (notably the ability to stabilise the economy with monetary policy), I think that legal tender legislation is the best way to go about that.

Edited by DaCraw

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As usual, you're an asset to the forums DaCraw :)

 

Though, even with currency legislation, I think we're still forgetting the fact that its NOT illegal to trade or refuse AUD. I dont know what has his knickers in a twist, he doesnt HAVE to use it. It'll be hard because 99% of people do; but its not enforced.

 

(repeating again, besides debt and government stuff; but thats when you TRADE your GOLD for FIAT, and only exactly what you need)

Edited by Master_Scythe

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As usual, you're an asset to the forums DaCraw :)

 

Though, even with currency legislation, I think we're still forgetting the fact that its NOT illegal to trade or refuse AUD. I dont know what has his knickers in a twist, he doesnt HAVE to use it. It'll be hard because 99% of people do; but its not enforced.

 

(repeating again, besides debt and government stuff; but thats when you TRADE your GOLD for FIAT)

Thank you MS, as are you.

 

Well, I haven't had time to trawl through the case law to confirm the legal situation, so I wasn't going to comment on that. That said, I don't have any reason NOT to trust the RBA website - this is just a debate on a forum, not an actual legal proceeding. :p

Edited by DaCraw

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Its always the risk.

Get too technical and you rebirth communism due to mass unemployment.

But we're a long way (if ever) from that yet.

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Actually we do have legal tender legislation and status for our currency. I quoted the relevant parts of the Act. It should not exist. You do not need a law to eliminate the double coincidence of wants problem. Money with inherent value can be standardised privately and/or by government. The market should be free.

 

I was mathematics dux in high school but I have probably forgotten a lot of it. I didn't understand a lot of what you wrote.

 

Gold is not like other currency in that it has significant inherent value. Why is it important that we control how much is made? Why are you afraid of freedom?

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Gold is not like other currency in that it has significant inherent value. Why is it important that we control how much is made? Why are you afraid of freedom?

Again with the assertions. Gold has no inherent value (or very little). It has very large market value, because we say it is desirable.

 

If you can identify a reason why notional value is OK for metal currency and not for plastic, I might listen to you.

 

And I for one am not against freedom - you can do what you like. I'm against people fucking around with stuff that directly affects me for no better reason than that they felt like it.

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Well, whether something has other uses doesn't change how it works as a currency. It's still only useful as a medium of exchange because people believe that other people will accept it in payment. This is true whether we're talking about gold or pieces of plastic. There are other roles for money (store of value and unit of account), but inherant value as a concept is even less relevant to those. And no, gold isn't any better at those, either - it's too volatile.

 

That said, the fact that gold has other uses is actually a strong argument against using it as a currency. Gold that is minted into coins or stored in a vault somewhere is gold that can't be used to make jewellery or electronics. Fiat money works just as well (actually better) as a currency and doesn't tie up useful resources in the process. To paraphrase Adam Smith, it's as if we could build our roads in the sky, and thereby release the underlying land for more productive uses. He was talking about using gold-backed paper money instead of gold itself, but the logic still applies.

 

Controlling the rate of growth of the money supply is important because it lets us control the money-market interest rate (the LM curve) and the long run inflation rate. The former helps us to keep the economy close to full employment in the short run, while the latter allows us to maintain stability over the long run. So yeah, kinda important.

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