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

On Wed, 22 Feb 2006 13:02:39 -0600, Harlow Wilcox
<Harcox_Willow@xxxxxxxxxxxxx> wrote:

Rumpelstiltskin wrote:

On Wed, 22 Feb 2006 01:29:46 -0600, Harlow Wilcox wrote:

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 commodity may have "real" value, but cannot be used as a common
medium of exchange.


Of course.



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.

A fascinating opinion, not concurred with by most economists, and a most
egregious conflation of debt and the concept of money as a medium of
exchange.


If those economists are the ones Bush uses to run up
trillions in debt, I disagree.



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?

No response?


Response to what? If response to "prove that the government
is trying to get rid of SS", then trying to slip funding for "private
accounts" secretly into unrelated legislation and trying to charge
social security for the funding, that would have made it obvious
enough to suit me, even if I hadn't been already convinced by
the false arguments of SS "running out of funding" by 2017 and
the attempt to disclaim surpluses that the government had
borrowed from SS and still owed, however "dusty" the IOU's.
You're free to disagree, but I very much doubt you'd persuade
me otherwise.



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.

So what? You're stating the obvious.


That was a response to your suggestion I was advocating
returning to a gold standard, if that's what you were suggesting.



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.

Overwhelmingly convincing "evidence".


Convinces me. I've been a lot more right about the Iraq
war than the Bush folks, and I predicted in this group that
Bush would run up $500B annual deficits, before he took
office in 2001, which the Bush folks pooh-poohed at the
time if I recall aright, so I think I'll stick with what I think
rather than what the Bush folks say.



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.

We will agree to disagree. "Money" is not supposed to represent goods;
at most it represents purchasing power.


Purchasing what? Not goods? Services maybe, but what
would the servicepeople purchase with the same dollars?
Someone here posted something lately, a quote from
somewhere I guess, and a good one IMV: "Can we survive
by doing each other's laundry?"



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.

I have no faith in the Rasbukniks you propose to print. Since I collect
curiosities, I'll offer you 3 U.S. cents for the lot. If by some miracle
you could convince me that faith in a Rasbuknik is a reasonable
proposition, we can dicker over the price I might be willing to pay.


I have diminishing faith in dollars when debt increases with
such abandon, as (in much greater extremis than we have in
the USA so far) with Germany in the 1920's and "notgeld".



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