Re: Long article on the dollar -- but worth reading

On Wed, 22 Feb 2006 01:29:46 -0600, Harlow Wilcox
<Harcox_Willow@xxxxxxxxxxxxx> wrote:

Rumpelstiltskin wrote:

On Tue, 21 Feb 2006 12:06:25 -0600, Harlow Wilcox wrote:

Rumpelstiltskin wrote:
It didn't make a difference while governments were at least
making a good try at balancing the money it spent with the
money it brought in through taxation and other means, but the
temptation to run up excessive debt because there's nothing
like "gold" to force governments to keep accounts in line with
the real state of national wealth has now poisoned the well of
trust in viability.

I certainly agree that the fiscal irresponsibility of government is
reprehensible, but what does that have to do with the concept of
'money'? Many commentators rail incessantly about 'fiat money', but how
would backing a currency with commodity X improve the deficit/debt
situation?

Because the paper can be exchanged for the commodity, and
the commodity does have real value. That's assuming, of course,
that the paper isn't false, and that the commodity (or commodities)
actually could be exchanged when the time came. When we
run up national debt, that means the paper is false to the extent
of the debt.

The practical difficulty, as you point out, is whether or not the
commodity can be exchanged for food, or clothing, or shelter, or
anything else needed or wanted, rather than just another medium of
exchange. Short of a total collapse of the world's governments and the
world's societies, no one is normally going to agree to such a commodity
exchange.


A point in this thread has been that there is no standard anymore
that can be used as a clear solid basis for money, which leads to
temptation to run up debt, but debt is no less destructive for not
having a simple standard commodity to measure it with.



Whether I obtain a good or service with government notes or
bits and bytes seems immaterial to the willing exchange I make with the
vendor. Whether or not the government takes in enough in taxes to
support its spending habits is a totally different animal.
If there were sufficient a supply available of a commodity such as gold
to represent the 'national wealth', there would have been no valid
reason to discontinue commodity backed currency. There is no way that
the world's total economic worth can be expressed in such a manner. That
is a big reason why the reputation of country 'X' is so important in
world markets. For instance, the wild speculation that the U.S.
government will repudiate the debt represented by the bonds it issues is
totally laughable.

They're trying to do it right now, with Social Security.

And returning U.S. currency to a gold standard will thwart that evil
scheme?



The point was that we used to have a clear standard with gold, and
it's already been covered that gold won't work anymore.



And, oh by the way, do you have any evidence that "they're
trying to do it right now"?




I watch the news occasionally. I also tend to notice when the
president slips something into bills at the last minute to charge
huge sums of money to finance his "private accounts" fund from
what different people had already paid into SS, and stuff like that.




If the bonds and notes issued by the government
represent 'fiat money', so be it. They are backed by the full faith and
credit of the taxpayers.

"Faith" is necessary, but not what the money is supposed
to represent. The money is supposed to represent goods.
"Fiat money" is money that has no such backing, as I
understand the term.

Finally, the nubs of the discussion. 'Money' represents purchasing
power, nothing else. Not wealth, no goods, not rhubarb pie.



I can print you up $100,000,000 in Rasbukniks for only $6,000
American, or ten ounces of gold. Do we have a deal? All that's
required is faith in the purchasing power of Rasbukniks.



In centuries
and eons past, users of 'money' lost purchasing power when counterfeit
'money' eroded the confidence of buyers and sellers of goods in the
value of the 'money'. Governments thus 'backed' the money they issued
with valuable commodities, which they promised to exchange for the
'money' they issued.

'Money' has always had the characteristic of faith; faith of the users
of it that their purchasing power was safe if they used the 'money'
printed by a government. Fiat money is money issued by a government
which the world accords a bad "credit rating", or which a government
cannot support. The actual form that the 'money' takes or the supposed
worth of a commodity upon which the money may be based does not alter
that characteristic.

.

Relevant Pages

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