Re: Amero Hint?

In article <493173ef$0$14307$607ed4bc@xxxxxx>,
"Ed Huntress" <huntres23@xxxxxxxxxxxxx> wrote:

"Joseph Gwinn" <joegwinn@xxxxxxxxxxx> wrote in message
news:joegwinn-8AA43C.11281729112008@xxxxxxxxxxxxxxxxxxxx
In article <49311104$0$14293$607ed4bc@xxxxxx>,
"Ed Huntress" <huntres23@xxxxxxxxxxxxx> wrote:

"Harold and Susan Vordos" <vordos@xxxxxxx> wrote in message
news:5_6Yk.76$xY.54@xxxxxxxxxxxxxxxxxxxxxxxxxxxxx

"Ed Huntress" <huntres23@xxxxxxxxxxxxx> wrote in message
news:49302d91$0$20307$607ed4bc@xxxxxxxxx
snip--

is a fiat system.


Ed,
As you know, I have almost no knowledge where these things are
concerned.
Would you, or could you, explain in a few words exactly what a fiat
system
is? All I can think of is the import auto. Leaves a great deal to
be
desired.

I'm sincere, Ed. I really don't know.

Harold

Don't feel bad; you aren't alone. And it's not as simple as it sounds.
So,
no, I can't do it in a few words. Here's a middling-sized bunch of words.
d8-)

A fiat currency is one that's backed by nothing but faith ("the full
faith
and credit of the United States") that the government will take it for
tax
payments, that it will be accepted in exchange for goods and services by
the
domestic population and by foreigners, and so on. It's what we've had
since
1971. The whole world operates now with fiat currencies. They've been in
and
out of use for many hundreds of years. To make a fiat based currency
work, a
government has to impose its use on its citizens. To make it work
internationally, a government needs to be a fair and honest trader with
other currencies. As for what really "backs" them all, I'll just touch on
it
in a minute.

There is a pretty simple definition of "fiat currency", and it's written
on all greenbacks: "This note is legal tender for all debts, public and
private". In other words, by Federal Law, we all must accept
greenbacks as money, and are not allowed to insist on for instance gold.
That's the "fiat" in fiat currency.

The value of gold is inherent, so no law was required to get people to
accept payment in gold.

Joe Gwinn

But the part that sounds easy at first, but which really is the unanswerable
economic question in discussions about money, is what does it mean that gold
has "inherent" value? Its use value is a small fraction of its market price.

It's a form of mass hysteria. So gold-backed currencies depend upon mass
hysteria, very much like the "irrational exuberance" that inflates house
prices to many times their true replacement cost, and corporate stocks to
several times their asset value plus any rational assessment of their
earning potential. We buy gold because we believe that there is someone even
more irrational than we are, who will pay at least as much for it as we
paid.

In the 21st century, it's a hell of a note on which to base one's economic
transactions.

Wrong thread, Ed. I took no position on use of gold as a currency.

The fact that gold has inherent value is not an argument for or against
its use as a currency. Lots of things have inherent value. Some have
been used as mediums of exchange, a few for millenia.

Use of gold (or any other commodity) as a medium of exchange is not
irrational, although one can argue practicalities.

When people pine for the gold standard, what they are really saying is
that they want a currency that the politicians cannot debase. Are they
wrong? Is this fear irrational?

A good example of the issue is the silver versus gold money debates and
William Jennings Byrant's Cross Of Gold speech. They just don't
speechify like they used to.

In any event, there was a real policy question buried in that debate.

Joe Gwinn
.

Relevant Pages

  • Re: Amero Hint?
    ... Would you, or could you, explain in a few words exactly what a fiat ... A fiat currency is one that's backed by nothing but faith ("the full ... The value of gold is inherent, so no law was required to get people to ... irrationality is quite a common human trait. ...
    (rec.crafts.metalworking)
  • Re: Amero Hint?
    ... Would you, or could you, explain in a few words exactly what a fiat ... A fiat currency is one that's backed by nothing but faith ("the full ... The value of gold is inherent, so no law was required to get people to ... irrationality is quite a common human trait. ...
    (rec.crafts.metalworking)
  • Re: "Vital National Interests"
    ... All your rhetoric about fiat money being regulated ... you could buy 100 acres of land for say, an ounce of gold. ... *relative* price of items, ... some countries DO legally define their currency in terms of ... ...
    (alt.gathering.rainbow)
  • Re: ripped off with tickets.......
    ... what is the INHERENT value of gold? ... a dollar worth about 1/900 of an oz of gold. ... but currency doesn't, which in my opinion makes it qualitatively ...
    (rec.motorcycles)
  • Re: itz coming -- really
    ... Simply put, Soros is smart, a master at his craft. ... the apparent battle being waged between gold and the U.S. dollar. ... Given Soros's measurable success in currency markets, and given his alliance with the world's ... be the demise of the current system of a heterogeneous fiat currency system that all will point to ...
    (sci.research.careers)
Loading