sams on February 27, 2011, 03:47:40 pm
Oh I understand the value of services. However you seem convinced that money is necessary for the existence of services. Then your fetishism of gold.

Let me have a good laugh at you :

My father father raise cows, he want to buy a car and send me in town with 50 cows :

Scenario A : I go to the market, sell the cows for 50 gold coins, Coca Cola tokens, fiat paper, 1000 Dollar Bills or 100 Silver coins. I then get these currency that I have and head to the car dealer.

Scenario B : I got the dealer and ask him to change his car for my cows, but he his only willing take ONE Cow and you have 50 cows .... what do you do then ? He would like some 50 diverse consumer goods, but are the people who have them willing to accept entire cows ? Welcome to the confusing world of barter.

I have scholarship in Europe valued in 50 000 USD, how the heck would have had travelled with the value of goods for barter over seas and who guaranty me that people will accept my Cows in Europe ?


Without currency modern economy is not possible.

ETA :

Gold is just one the best things to be used for currency, but the ideal thing is to have free market in currencies
« Last Edit: February 27, 2011, 03:50:49 pm by sams »

Holt on February 27, 2011, 05:05:02 pm
Well I'm happy. You're thinking now, you weren't doing that before. You've actually sat down and thought about the why instead of going "it just is"

GlennWatson on February 27, 2011, 06:26:20 pm
The problem with a gold based monetary system is that there is not enough to lubricate the system, even throwing in silver, there is still not enough, for an economy the size the the USA.

We need a more fluid flexible system with fiat paper money that is cheap to produce and hard to counterfeit.

What we have now works pretty well unless the government intervenes and causes inflation or deflation, which it looks like they are about to do.

 

SandySandfort on February 27, 2011, 07:07:50 pm
The problem with a gold based monetary system is that there is not enough to lubricate the system, even throwing in silver, there is still not enough, for an economy the size the the USA.

This is a tempting idea, but at heart it is based on an erroneous belief. To wit, that there must be enough gold (or whatever) to spread around. At one time, I was paid a Krugerrand a week. I made the same sort of statement to my boss, about there not being "enough" gold for world commerce. He said he would be quite happy if there were only one kilo of gold in all of the earth, on which to base a currency. Instead of a gold ounce representing the price of a quality man's suit, maybe some fraction of a nano-gram of gold would be the price. It is just a medium of exchange, after all. It can map to any amount of wealth in the worlds.

For the naysayers, of course, this suggests two "problem." (1) Monetary inflation. As the net amount of gold increases due to mining, each gram of gold has microscopically less buying power. Which leads to price inflation. (2) Monetary deflation. As the amount of wealth in the world increases, due to innovation and progress, each gram of gold is worth more. Which leads to price deflation.

In the first case, though, the marginal effect would be deminimus; a drop in the ocean. In the second case, well, who's against having their money increase in value? Only the Keynesians worry about this for reasons that are faith-based, not reality based.

GlennWatson on February 27, 2011, 07:52:07 pm
I don't want to be a knee jerk contrarian here but I think there must be a limit as to how far a society would accept the division of its favorite medium of exchange before it lost its ability to satisfy everyone. 

"How much for the hot dog?  That will be two atoms of gold sir." 

I don't think so.  But I could be wrong. 

If half the gold in the word just vanished we might logically all just agree that whats it left is now worth twice as much but I don't think it would work out that way.  Money is about confidence.  Even gold money.  And especially with gold money people want to be able to see and feel it.

Of course right now most money is not even physical.  I read that it mostly ones and zeroes in cyberspace so my argument is weak. 

But I do remember reading in graduate school that there was not enough gold to create the liquidity a modern America needs and so we had to move off the gold standard.


Apollo-Soyuz on February 27, 2011, 08:01:28 pm

For the naysayers, of course, this suggests two "problem." ... (2) Monetary deflation. As the amount of wealth in the world increases, due to innovation and progress, each gram of gold is worth more. Which leads to price deflation.

... In the second case, well, who's against having their money increase in value? Only the Keynesians worry about this for reasons that are faith-based, not reality based.

I'm not against my money increasing in value, but if I manufacture cars or sell smoked bacon, or do handyman work or produce any other product, I don't want to do that in a deflationary economy.  Because if the consumer knows that if they can manage to put off purchasing an item for another month,their money will go farther. I have to buy materials or pay expenses with the value of today's money, then let the item sit until it's sold, but I have to charge less the longer it sits due to the fact that the customer's currency is now worth more and goes further.

I've kinda assumed that as the Belter economy grew, since mining is such a large part of the economy, I guessed that roughly as much wealth was refined out of the rocks to keep pace with a the rest of the Belt's growth. 

OTOH, I could also see the argument that without a government mandated fiat currency, if the economy tended to grow faster than the gold supply could expand, we might see other items drafted for use as currency. We could see platinum or palladium coins minted. We could see "cokens" (a private fiat currency that might be good for inexpensive purchases but not something anyone would keep their life savings in unless they could afford to constantly keep an eye on the books over at the Ceres Coca-cola bottling plant). We could see negotiable futures contracts  for commodity items (metric ton of copper, 100 kilos of golden rice)  used for trade too.

BTW, I'm far from being a Keynesian.  I've lived through a number of  recessions. I can't believe there's still people with "piled higher and deeper" after their names still supporting that theory.  I always try to ask them, "When in your lifetime during the "good times" has the government scrimped and saved and significantly payed down the debt incurred during "bad times" when the government was falling all over itself to spend-spend-spend to "stimulate the economy"?"

quadibloc on February 27, 2011, 08:09:25 pm
But I do remember reading in graduate school that there was not enough gold to create the liquidity a modern America needs and so we had to move off the gold standard.
If you didn't scramble the wording slightly, they lied to you.

It is true that there is "not enough gold to create the liquidity" countries need. That's why they started printing paper money. But long after they started printing paper money - and doing other things to generate more liquidity, like allowing banks to create money themselves - they still remained on the gold standard. Because the gold standard itself doesn't prevent money from being issued in excess of the gold in Fort Knox.

What the gold standard does do, though, is require painful steps to be taken if, say, an economic slowdown means that real estate and the like used for collateral on bank loans is no longer worth the amount of gold it once was. It... keeps the paper money honest. That eventually got to be too much to ask.

Sometimes, countries just devalued their currencies, while remaining on the gold standard, but at a lower level. This worked reasonably well. And in 1933, F.D.R. did not take the U.S. off the gold standard completely. He just devalued the U.S. dollar in terms of gold - from $20.67 per troy ounce to $35 per troy ounce - but he also got more gold for Fort Knox by requiring much of the gold in the hands of Americans to be turned in for paper money.

It wasn't until 1968 that the $35 dollar an ounce gold standard was abandoned - and, in fact, that was still a devaluation; the U.S. dollar wasn't set floating until a few years after that.

Was the U.S. a "modern country" during the 1960s? I thought so.

Plane on February 27, 2011, 08:31:44 pm
http://en.wikipedia.org/wiki/Rai_stones

http://www.npr.org/blogs/money/2011/02/15/131934618/the-island-of-stone-money

Quote
There's a tiny island called Yap out in the Pacific Ocean. Economists love it because it helps answer this really basic question: What is money?





  There is money with intrinsic value like the 1900 dollar backed by gold or the 2000 dollar backed by oil , there is also intangable money with no intrinsic value at all , money that represents credit purely because all partys involved have agreed  that the symbol chosen represents certain value.

J Thomas on February 27, 2011, 08:58:09 pm
I had thought that this was settled the last time, but here are the same people saying the same things, plus some new ones.

Everybody wants a medium of exchange. They don't want too many mediums of exchange because with too many different kinds of money it's as confusing as barter.

For money that you accept and that you will then spend immediately, all that matters is that other people accept it. If the money loses 0.01% of its value between the time you get it and the time you spend it, you may have gained or lost that much just when you negotiated price when you got that money. It isn't a big deal.

So the immediate thing is that you don't want to accept money that other people don't accept. For small sums that you spend the same day or so, that's pretty much all that matters. You have a pretty good idea what that money is worth today, so you quote your price on that basis and then you buy stuff the same way.

Say you are real active in your buying and selling. You sell something for a dollar. Then you buy something with that dollar. You sell something else for a dollar. You buy something you want with that dollar. After awhile you notice that when you want to buy they want to charge you $1.01. OK, next time you charge $1.01 too. And later still they charge you $1.02. Next time you charge $1.02. By the time the currency inflates 10%, that inflation has cost you 10 cents.

But the longer you keep currency instead of spend it, the more you care that the value is stable.

If the value of a currency drops too fast, you lose significant money holding it. So when you start to see that happen, you won't want to accept too much of it. You want to get just enough of the inflating currency to spend immediately, and get the rest of your money in something that's more stable.

Similarly, if the value of a currency rises too fast, you lose if you spend it. Better to save as much of that currency as you can and spend currencies which are stable or inflationary.

With money that decreases in value too fast, nobody wants to accept it as payment. With money that increases in value too fast, nobody wants to spend it.

So people prefer to do much of their trading using whatever currencies seem stable in value.

It's a disadvantage if a currency has no stable value in itself. Suppose for example that people agree to use Babe Ruth signatures as money. There is a limited number of them because Babe Ruth is dead and each of the ones that is accepted as genuine is registered. Everybody will accept them as money because everybody else does. But what if people just stop? They get a history video from Terra that makes Babe Ruth look ruthless, and they don't like him anymore. Whatever reason. Vagaries of social consensus can make your money worthless.

Valued currency can have problems too. If somebody rich has a big project that will require a lot of gold for some industrial purpose, he will start taking gold out of circulation and the value of the remaining gold will rise. People will notice the rising value and take more out of circulation because they'd rather keep it than spend it. A big increase in industrial demand can disrupt the currency.

Similarly, if the mining of gold happens faster than gold is used up by the economy, then gold as a currency will inflate. This can particularly happen if gold is a by-product of some other operation. No matter how cheap the gold gets, people will go on mining it while they make a profit on the other metals that come from the ore.

Well, gold could be widely used as a major currency until one of those things happens. While the value is stable people will use it. When the value gets less stable they will use it less. The currencies that are widest used will be fairly stable because their use is voluntary, and if a currency inflates too much people will not want to accept it, and if a currency deflates too much people will not want to offer it.

People mentioned that gold doesn't rust. If you use milk as a currency then somebody had better actually drink it or something before it goes sour. Similarly with fresh eggs. Things that go bad aren't as good for currency unless it's easy to tell how bad they are, because otherwise people will try to pass bad eggs for good ones and old eggs for fresh ones. and they will have a limited number of exchanges before they either get used or go bad, so the volume of trade with that currency can't be gigantic.

Of course there's some expense to proving that gold is not counterfeit also. There's no free lunch. But the easier it is to show that a particular batch of some commodity is good, the easier it is to use that commodity as money.

And the harder it is to inspect the commodity itself, the more you depend on documents from trusted sources, the more likely somebody will cheat on that and back their documents with bad product, or even put out multiple documents on the same batch of product. The documents which assert that the product is there and is good, might as well be paper money that's partially backed by the product.

What did I leave out?

terry_freeman on February 28, 2011, 12:35:10 pm
If paper fetishists really believe in the value of paper, why don't they agree to a fair competition? End legal tender laws - let buyers and sellers negotiate freely whether to accept paper, or gold, or silver, or bales of tobacco, or ingots of iron, or whatever they choose. Legalize private minting of coinage. End taxes on precious metals.
You won't get an argument from me on this, even if there might be some practical difficulties, as long as there's an income tax, in completely ending the legal tender laws.

As long as it's legal to include what would be, effectively, a gold futures clause in what is an ordinary contract for goods and services - without such trading being confined to a securities market - being required to accept the amount of paper money that can actually buy the amount of gold specified in an agreement would be little enough hardship.

Why make it so complicated? It could be ( and was ) much simpler: "Party A agrees to pay X ounces of gold to party B at such-and-such time, in exchange for Y."

No need for futures contracts and conversion to faith-based paper.

Such gold clauses were common, and were enforceable for many years, until the government unilaterally overturned them.

During the War to End Southern Independence, California enforced such clauses. Gold and greenbacks traded in the same markets. Greenbacks traded at a discount of about 50%. Some vendors refused to take greenbacks entirely. Everyone preferred to pay taxes in greenbacks, of course. If the government thinks that faith-based money is worth so much, let them keep it.


macsnafu on February 28, 2011, 01:39:33 pm
The problem with a gold based monetary system is that there is not enough to lubricate the system, even throwing in silver, there is still not enough, for an economy the size the the USA.

We need a more fluid flexible system with fiat paper money that is cheap to produce and hard to counterfeit.

What we have now works pretty well unless the government intervenes and causes inflation or deflation, which it looks like they are about to do.
Any amount of money can represent any amount of wealth, so 'liquidity" is not really an issue. Just be sure to use a commodity that is divisible.

What we have now works pretty well, except for the fact that the Fed has been consistently inflating money *every* year since their creation in 1913, which is why the dollar has gone through so much devaluation in the last century.  You don't really notice it because other countries also have a central bank that devalues their currency, as well.

While the mining of gold may indeed increase the money supply if we were using gold as money, they can't mine gold nearly as fast as our current government can print paper.  And that would be a good thing, as our money couldn't possibly lose value as quickly as it historically has.
I love mankind.  It's PEOPLE I can't stand!  - Linus Van Pelt.

Plane on February 28, 2011, 09:25:41 pm
Does anyone know yet how much gold is in Asteroids?

I think the recent impactor experiment would have given a clue , but not proof since it represents such a small sample.

Is it safe to assume that gold will be scarce?

terry_freeman on February 28, 2011, 10:22:41 pm
Does anyone know yet how much gold is in Asteroids?

I think the recent impactor experiment would have given a clue , but not proof since it represents such a small sample.

Is it safe to assume that gold will be scarce?

This does not actually matter. In an AnCap society, if huge amounts of gold were discovered, then gold would lose its attractiveness as money; something else, such as silver, platinum, or whatever would become the preferred medium of exchange.

It's a free market, after all.


quadibloc on March 01, 2011, 01:47:48 am
Is it safe to assume that gold will be scarce?
My understanding is that silver will remain scarce; gold will be so-so, and platinum and iridium will be... almost common.

However, the proportions of platinum and iridium in nickel-iron meteorites, while higher than in Earthly iron ore, aren't really all that high. Otherwise, meteorite specimens wouldn't be affordable to collectors. Platinum might be a by-product of iron production in space - as gold might be a by-product or iron production on Mars - but it doesn't have to be true that there are technologies for cheaply beneficiating ores at the parts-per-million level, even in the time of EFT. Even if such technologies would seem trivial compared to much else they have.

SandySandfort on March 01, 2011, 11:11:16 am
I CARE

I have been looking for an alternative to PayPal in Latin America. I have found a handful of companies, but I have to check them out. Tomorrow, I will go to Panama City and visit the offices of such a payment service provider. Yes, the government has licensed them, but I am much more interested in performing my own "sniff" test.

Anyway, whenever there seems to be an unserved or under-served market, my entrepreneurial muse always whispers in my ear, "Business opportunity." And just today, I realized that the gold deniers on the Forum have inadvertently brought a seriously under-served market niche to light. The total absence of a iron-based alternative currency!

Being one of life's losers is toxic to the soul. Being a winner, on the other hand, can break the vicious cycle of self-loathing and anger that causes one to be a troll.

Well, I care. I would love to help sad folks like Holt, Contrary Guy and others (you know who you are), to break the cycle by becoming successful entrepreneurs. So I pledge to write promotional text and provide marketing assistance to these folks for free. The only requirement is that they write a good business plan and either contribute or solicit start-up capital.

What is the business I envision? The First Iron Monger Bank of America. It's perfect. Though you cannot eat iron either, at least you can build cool stuff with it. Iron is the most recycled material on earth. As pointed out on this forum, it does not rust, if stored right, is easily recognized (by its magnetism), is divisible and fungible. Usable coins would be bit unwieldy (see previously posted photo of Yak stone money), but the bank could simply print and distribute certificates denominated in pounds of iron. (I think scrap iron is currently trading in the 80 per pound range.)

Gold deniers, what could possibly go wrong?