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Thread: money and value

  1. #1 money and value 
    Forum Masters Degree DianeG's Avatar
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    So I'm making chilli tonight and listening to NPR and they mention that today a hand written working version of Bob Dylan's "Like a Rolling Stone" sold for 2 million at Sotheby's. I'm always strangely fascinated when works of art, or even mundane objects belonging to famous people, are sold for huge sums of money. In some literal way, I can understand that an object is worth whatever whatever people are wiling to pay for it, and obviously that piece of paper that Dylan scribbled on is worth 2 million because somebody did pay 2 million for it, and presumably, someone else would pay a similar amount, more or less, if it were reauctioned tomorrow.

    But what bewilders me is, if there is a fixed amount of money in circulation, how can "value" just be created out of, well, nothing? Or does the increase in value of Bob Dylans lyrics somehow suck value out of some other item in the market of available dollars for rock star memorabilia?

    Perhaps my question doesn't even really make sense and is therefore unanswerable. But things like this make wonder how much of the economy is, well, illusionary, and not strictly based on concrete things like currency or natural resources.


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    Forum Radioactive Isotope cosmictraveler's Avatar
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    Value is made by what people will pay for stuff. That's for many things like cars, boats and vacations. If people were to say stop buying a certain boat type then its value will decline until it reaches a price at which people will buy it again. The real problem is that the more money that is printed the less value it has and will cause inflation to happen everywhere to most stuff.

    Then there's the problem with America's financial system for it is broken and it is in bankruptcy but the news media nor politicians will admit it. Bankruptcy happens when more money is going out than coming in and our GNP is only 16 trillion dollars but we noe owe 17 trillion and soon it will be 18 trillion.

    Many people know the prices of everything but the value of nothing.


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    Forum Masters Degree DianeG's Avatar
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    Quote Originally Posted by cosmictraveler View Post
    Value is made by what people will pay for stuff. That's for many things like cars, boats and vacations. If people were to say stop buying a certain boat type then its value will decline until it reaches a price at which people will buy it again.
    I get that, or I think I do. But let's say that the seller of the Dylan lyrics goes back to Sotheby's and uses his 2 million to buy some other recently discovered historical novelty - Van Gogh's paint brush, Napoleon's pajamas, or whatever. And that seller does the same, and the next. It seems weird that you've somehow instantly created several millionaires (on paper) simply by having that same two million change hands and temporarily attach itself to these items. I know it doesn't work if a lot of other people don't also "value" these items, but it still seems like you're creating wealth out of nothing.

    The real problem is that the more money that is printed the less value it has and will cause inflation to happen everywhere to most stuff.
    So how do governments decide how much to print? So that it doesn't cause the currency to devalue? But at the same time, if people really do become more productive, if they are growing food that someone will eat, if they are inventing new things others need or want, and everyone is willing to exchange these goods and services, how do governments know how much currency is needed to facilitate these transactions since it's no longer based on things like gold or silver?
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    Forum Radioactive Isotope cosmictraveler's Avatar
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    but it still seems like you're creating wealth out of nothing.
    No, you've actually bought something for your money that you VALUE. You pay the seller what you think is a worthy amount and they accept or reject that offer. That item could increase its value over time again and you could sell it to who you wanted to, for a much higher amount IF someone is willing to pay what you ask. So that added amount that you ask for is not "nothing" but just more than what you originally paid.

    Then that means its value has risen IF someone buys it for the higher price. Remember that the painting originally done was sold by the painter for something which then created a value for it then.


    So how do governments decide how much to print?
    By how much they owe to how much they earn within their taxing system.
    Last edited by cosmictraveler; June 25th, 2014 at 05:21 PM.
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    There are two things here.
    1.Are the resources that go into the product easily available?
    2.It is also about subjective value of an item.
    The first point is more important. The second can be managed.
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    Quote Originally Posted by DianeG View Post
    But what bewilders me is, if there is a fixed amount of money in circulation, how can "value" just be created out of, well, nothing?
    Aren't ALL values "created out of nothing"?
    If people don't want something then it doesn't matter how "cheap" it is - it won't sell.
    If people do want something... (especially, in a large number of cases, if it's [perceived as being] something that other people want).
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    Great question Diane. Value is just a perception. In the case of an auction, value comes from who wants it more. I just started painting about 3 months ago, and 5 of the 6 paintings I have done have sold. I'm actually surprised people would pay $50-$165 for one of my paintings. Where did this value come from? I'm not an established artist, and my work isn't earth shattering....one of those paintings only took an hour to paint...surely my labor isn't worth $65 an hour. I guess the value comes from desire.
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    I think the confusion here is between money as a unit of account (so $ amounts assigned to things) vs money as a medium of exchange (think cash in circulation as a rough estimation, unless you really want to get into money supply stuff). So me being grand king of the world and declaring that the rock in my hand is worth $1 billion affects the first type of money but not the second. The rest is just accounting.
    As is often the case with technical subjects we are presented with an unfortunate choice: an explanation that is accurate but incomprehensible, or comprehensible but wrong.
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    Quote Originally Posted by river_rat View Post
    I think the confusion here is between money as a unit of account (so $ amounts assigned to things) vs money as a medium of exchange (think cash in circulation as a rough estimation, unless you really want to get into money supply stuff). So me being grand king of the world and declaring that the rock in my hand is worth $1 billion affects the first type of money but not the second. The rest is just accounting.
    The rock is only worth that if you can convince a least a few people it is, and they actually are willing to pay you something close to that amount. Otherwise you're just eccentric. But your comment made me think about whether economic up turns and down turns have a domino effect beyond concrete things like productivity or resources like oil or land. If the economy takes a serious dive, there would be fewer people willing to purchase those Dylan lyrics or Napoleon's pajamas, or $10,000 paintings in galleries in Manhattan. I understand that even the value of corn or titanium - while related to cost of production, is also subjective, in that its based on what people are willing to pay, and yet many forms of wealth would appear to be created out of nothing more than desire. I guess it just seems odd that, providing there are a certain number of people who have enough disposable income to arbitrarily agree on a high value for Elvis Presley's frying pan, you can somehow keep creating more and more millionaires without there being any more dollars in circulation. Or is this wrong?
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    Genius Duck Moderator Dywyddyr's Avatar
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    Quote Originally Posted by DianeG View Post
    I guess it just seems odd that, providing there are a certain number of people who have enough disposable income to arbitrarily agree on a high value for Elvis Presley's frying pan, you can somehow keep creating more and more millionaires without there being any more dollars in circulation. Or is this wrong?
    You don't need more money in circulation.
    Yes, there's a new millionaire, but the guy who now owns Elvis's underpants is down $1M.

    PS, River Rat, gimme a couple of days to raise the money and I'll buy your rock.
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    Well there's production value and then there's the value the buyer will pay.
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    Ok let me have a stab at explaining this one. Money is, as River Rat correctly idetified, an exchange mechanism. It is designed for the purpose of allowing each us to know what the cost or value of one item is compared to that of another e.g. a loaf of bread might cost 1 or 1$ where as an apple may cost 50 cents, thus we know that the value of bread to apples by using an exchange mechanism (money). Because money is an exchange mechanism for everything it allows us to the value/cost of anything against anything else.

    Money is not though fixed against any particular item, prices of individual items go up and down all the time and these changes are usually driven by supply and demand, obviously when demand is high and supply low then prices will rise, this can give the impression that the money in your pocket is no longer worth as much as it once was. But this can also somewhat misleading because money isn't fixed to any particular item is has an exchange value with every item, what this means is to actually know whether the money in our pockets is becoming worth less than it once was then we have to look at how it relates to a whole different range of items and when more is required to buy all these items we have 'inflation'.

    Inflation is usually the normal state of progression, usually that is rather than stagnation or deflation, over time it tends to devalue the money in our pockets and makes our bills and living costs more expensive than they previously were before. But it also plays a key and very important part in a capitalist economy, and this is where really get down to this issue of money supply, because inflation increases the need for more money.
    Obviously if the cost of an entire economy's good and services goes up then the money supply (exchange mechanism) aslo has to increase in order to allow everyone to be able to still buy and sell these goods and services.

    One of the most common ways in which the money increases is through banking and interest charges, any money being lent out at some stage has to be repaid meaning this requires all the original money to repay the principal of the loans plus new, this being newly created money, to repay the interest. What this actually means is when the interest rates are high then more more is created when loans made and also when more people are borrowing money then also more money is being created.

    Also the government can create money, sometimes called quantitive easing or printing money, whether it is actually printed or not is pretty much irrelevant the point being once the government decide it exists it means there is then technically more money out there to buy the same amount of goods and services. This means that if done on a large enough scale it can actually start to devalue, make things more expensive to buy, the money in your pocket. It could be considered a form of stealth tax taking money off people, by devalueing there money, without them actually realising it.

    That is perhaps an extreme dramatisation of a process governments usually only use for economic stimulus measures to generate growth and economic activity. Economic activity generally has an opposite effect to infation and tends to help make us all richer, when we make more things and provide more services then ther is more of these available for us to exchange for that same amount of money in ours pockets, this is generally how and why even with inflation living standards have improved over time.

    Finally just to touch on the concept of value for this or that objects such as art or even indeed song lyrics, it seems that things of rarity and especially uniqueness will always be valuable because people tend to want things that others can't have, but there are also many other things we may perceive as being valuable that you may indeed wish to question if they really are or indeed would remain so. Here I mean things like paintings that 2 or 3 hundred years ago were once absolutely unique and thus held such value, yet today anyone with a printer could own simply by running of there own prints. Surely one must suspect at some point this illusion of value could come crumbling down once every Tom, Dick and Harry has there own copy!
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    Nice Ascended +1 :-))
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    Value IMO comes from work. How valuable something is or isnt is determined by individuals. Governments today create/print money that is not based on work but rather based on personal wants, wishes and desires of those in the government. In short, they get what they want, wish and desire without doing very little to nothing and common folks have to mow lawns, lay concrete, break rocks and work in order to pay for, to provide value for, what the government prints/creates.

    The more they print, the less working people get for their hard work. This is because working people have to pay for, work for, the things they need as well as all the things the people in their government buy and hand out.

    Governments and the people in them are so fat, greedy and money hungry that they cannot live on what they can take and rob from the people, in the present, in their nations, that they take and rob wealth from the hard work of people in the future and from the unborn in order to feed their lavish appetites for cash.
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    Well, what I personally value for myself is certainly not gold or diamonds or paintings. I do invest money in the economy, though through buying stocks and bonds in companies I think will give more jobs to more people and create more products that can bring greater information to more people at more reasonable prices. (and of course having a good job that I enjoy) = This actually has been increasing my financial storebank. But what is most valuable to me in available monetary resources, is that I can afford transportion to where I would like to go, and that I can afford food and drink and safe haven from the elements. I abhor having to borrow money from others, and I will do anything I can possibly do to honor anything I ever to owe to anyone else.
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    One needs a means of exchange and stores of value. The more valuable and liquid the exchange units/items and stores of value the better. Gold and diamonds provide a great back up means of exchange (highly liquid, multiple denominations/sizes, well known as valuable) and gold, diamonds and paintings are all great stores of value.

    Every fiat nation will suffer a collapse in currency. Those currencies will become worthless. On the road to worthlessness, the currencies will suffer losses in value. I would rather have 1 ounce of gold than 2 trillion us dollars when that day comes.

    I am like you and most people though. I want soap, TP, food, water, medicine and shelter but, those things are perishable and need to be replaced/replenish. Its smart to not have everything of value and savings in fiat currencies or pieces of paper.
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    One point that I didn't see mentioned above is that if I spend $1 on an object, that $1 doesn't disappear because the person from whom I purchased the object now has the $1 and can spend this on some other object. Thus, the same $1 can be spent on several dollars worth of goods and services. How many dollars worth of goods and services is purchased with a single dollar depends on the average proportion of each dollar that remains in circulation and not lost to such things as savings, etc. In economics, this is referred to as a multiplier.
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    Quote Originally Posted by KJW View Post
    One point that I didn't see mentioned above is that if I spend $1 on an object, that $1 doesn't disappear because the person from whom I purchased the object now has the $1 and can spend this on some other object. Thus, the same $1 can be spent on several dollars worth of goods and services. How many dollars worth of goods and services is purchased with a single dollar depends on the average proportion of each dollar that remains in circulation and not lost to such things as savings, etc. In economics, this is referred to as a multiplier.
    You aren't confusing money velocity with the money multiplier here KJW?
    As is often the case with technical subjects we are presented with an unfortunate choice: an explanation that is accurate but incomprehensible, or comprehensible but wrong.
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    Quote Originally Posted by river_rat View Post
    Quote Originally Posted by KJW View Post
    One point that I didn't see mentioned above is that if I spend $1 on an object, that $1 doesn't disappear because the person from whom I purchased the object now has the $1 and can spend this on some other object. Thus, the same $1 can be spent on several dollars worth of goods and services. How many dollars worth of goods and services is purchased with a single dollar depends on the average proportion of each dollar that remains in circulation and not lost to such things as savings, etc. In economics, this is referred to as a multiplier.
    You aren't confusing money velocity with the money multiplier here KJW?
    I don't think so. Velocity of money is how quickly money passes from one holder to the next. I'm actually referring to the total amount of purchases a given amount of money produces over all holders of that money. For example, if the average proportion of money that remains in circulation per transaction is , then the multiplier is:



    Note that this is the same as the formula for an infinite geometric series:



    Then, for amount in circulation, will be total amount of purchases (until that amount is no longer in circulation).
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    Imagine a circle of 10 people, 1 of which has a dollar and the other 9 each have an apple worth 1 dollar. No matter how many times that dollar is used in the circle to buy an apple from someone else, there is still only going to be 1 dollar and 9 apples. Nothing multiplies.

    That 1 dollar does not buy 9 apples, it buys 1 apple. No one in the circle can or will end up with more than 1 apple or an apple and the dollar. This is because each transaction is completely isolated from all past or future transactions. Currency ripples around on a 2d wave. That wave starts and ends with each individual transaction.
    Last edited by gonzales56; September 7th, 2014 at 06:55 AM.
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    Does this suggest that value actually travels in the opposite direction that the money does?
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    Quote Originally Posted by dan hunter View Post
    Does this suggest that value actually travels in the opposite direction that the money does?
    Depends on what the money/currency is. If the money/currency is only valuable as a means of exchange and nothing else, then yes, most of the value travels in the opposite direction of money.

    US paper currency is a fiat currency. Most of the value in transactions using USD flow in the opposite direction of the currency (with one exception: current coins: US Nickels). Outside of the value US paper currency has as a means of exchange, a lesson in history (which just about everyone ignores or doesnt know) or a novelty item, it has no value beyond the coins it can be exchanged for.
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    Quote Originally Posted by gonzales56 View Post
    Imagine a circle of 10 people, 1 of which has a dollar and the other 9 each have an apple worth 1 dollar. No matter how many times that dollar is used in the circle to buy an apple from someone else, there is still only going to be 1 dollar and 9 apples. Nothing multiplies.

    That 1 dollar does not buy 9 apples, it buys 1 apple. No one in the circle can or will end up with more than 1 apple or an apple and the dollar. This is because each transaction is completely isolated from all past or future transactions. Currency ripples around on a 2d wave. That wave starts and ends with each individual transaction.
    I would perhaps take slight issue with your anology here. Whilst in your example you are perfectly correct you'd indeed still have only 9 apples and 1 dollar I would like to point out that in most cases things are a little bit more complicated. Let's change things slightly and say that you still have your person with a dollar but have 9 other people each with a different fruit but each worth a dollar.

    In this scenario the person with the dollar can purchase a fruit with his dollar and that dollar can be spent by it's recipient to buy a different fruit and thus continue onwards allowing many fruits to be both bought and sold. The point is that the dollar is an exchange mechanism that allows people to exchange goods or services they don't want or need, in this example a fruit, for goods or services they want or require i.e another fruit.

    This is what gives money it's unique property, the money itself doesn't hold any real value other than it's ability to allow people to exchange things with it. If you give it an actual value then you start to take away or effect it's particular unique ability. This is because you are changing the nature of it's exchange value with all things to be more greatly affected by one in particular, the thing that is by which it's been given value.

    To give you a example of this in practice imagine you replace a $100 dollar bill with a gold bar worth exactly $100 dollars. Now over time what you can buy with your gold bar will change, some things you will get more of and other things less, things go up and down in price, this works exactly the same for both your gold bar as well as for your $100 bill. But here's where the problem is, if the supply of gold changes and increases then you will need more gold bars to buy anything, likewise if the supply of gold decreases you will need less of it to buy the same amount of things. The point is it disproportionally effects the money's ability to function properly by giving it a seperate value. It also prevents inflation from working correctly resulting in that a very small number of people could very quickly end up with most of the wealth.
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    I understand where you are coming from.... However, we disagree a lot here.

    We should not forget that value comes from work. The ability of a few to add or subtract currency into markets with little to no work is not healthy inflation. There are many factors that go into price inflation and deflation, healthy inflation and deflation on prices comes from supply and demand.

    Gold is and has always been, in markets, very stable in its value. This is because golds value is in the work it takes to get it out of the ground plus the cost of living and liberties of those who mine it. When money has work attached to its creation the value of that money is weighed and measured against the work attached to everything else in order to determine the exchange rate between items.

    Most price swings on items now are not due to the item itself but rather due to wild swings in fiat currencies or the ability of fiat currencies to overwhelm reality and chase them. If a fiat dollar cost 3-4 hours of hard labor to create, then it too would be stable and unhealthy price swings would not occur.

    Work is value. Value sets price. Fiat currencies are detached completely from this when the people in government create them and spend them, and as these newly created fiat units ripple through markets they get their value by people working and/or handing over their valuables in exchange for them.

    Its like this.. The 10 people in a circle... 9 have apples and 1 gets to do nothing and write a number 1 on a stick and trade that for an apple. He buys up all 9 apples quickly then highers 8 of them to pick apples for 10 dollar sticks an hour and hires 1 person to gather up and scribble on sticks all day. This is how fiat currencies are and work.
    Last edited by gonzales56; September 8th, 2014 at 03:05 PM.
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    If a currency itself is created by work, if it has value in the item itself, then all are equal and all must work. If gold is the medium of exchange in the circle of 10, and 9 have apples or 9 different fruits, the 10th person has to work for a gold dollar to exchange for a fruit. The 10th person does not get to sit on his butt and create all the money he wants for little to no work. He does not get to make the other 9 people do all the work for everything he needs and wants while he does nothing.

    If he is allowed to make twig dollars he will sooner or later make trillions and trillions of them, currency inflation will occur and the people in his village will have to work harder and harder for less and less. In the end though some of them will have a hut or two full of twigs .
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    Quote Originally Posted by gonzales56 View Post
    If a currency itself is created by work, if it has value in the item itself, then all are equal and all must work. If gold is the medium of exchange in the circle of 10, and 9 have apples or 9 different fruits, the 10th person has to work for a gold dollar to exchange for a fruit. The 10th person does not get to sit on his butt and create all the money he wants for little to no work. He does not get to make the other 9 people do all the work for everything he needs and wants while he does nothing.
    But the person producing the gold dollar is devoted to producing the gold dollar and is not producing anything of true value such as the fruit. It seems that you are advocating that everyone should be working for the sake of working even if the work isn't useful to anyone.
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    Quote Originally Posted by gonzales56 View Post
    We should not forget that value comes from work.
    But that does not mean that work automatically equals value.
    Of what worth is a mud pie that someone has taken 100 hours to make?
    Is it really worth more than the original mud?
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    Quote Originally Posted by Dywyddyr View Post
    Quote Originally Posted by DianeG View Post
    I guess it just seems odd that, providing there are a certain number of people who have enough disposable income to arbitrarily agree on a high value for Elvis Presley's frying pan, you can somehow keep creating more and more millionaires without there being any more dollars in circulation. Or is this wrong?
    You don't need more money in circulation.
    Yes, there's a new millionaire, but the guy who now owns Elvis's underpants is down $1M.

    PS, River Rat, gimme a couple of days to raise the money and I'll buy your rock.

    Very insightful answer, Dywyddyr.

    The thing to remember is that money doesn't disappear. If someone buys Elvis's frying pan for a million, that same million might get spent tomorrow on a matching pair of Lamborghini Diablos, or maybe some ocean front property at the beach, or ... well.......

    And if it is spent on ocean front property, the previous owner of the ocean front property will take it and spend it again on something else. Maybe buy some stocks. The guy who sold the stock then buys a whole lot of socks for kids in Somalia, and whoever sold the socks will go out and buy machines to improve their sock factory.

    So in the end, the guy who bought Elvis' frying pan was really paying to improve a sock factory, and didn't know it.

    The money just gets spent again and again and again...



    Quote Originally Posted by gonzales56 View Post

    Gold is and has always been, in markets, very stable in its value. This is because golds value is in the work it takes to get it out of the ground plus the cost of living and liberties of those who mine it. When money has work attached to its creation the value of that money is weighed and measured against the work attached to everything else in order to determine the exchange rate between items.
    Gold is just the one currency that cannot be printed. It can be mined, but most of the world's gold deposits that are practically accessible have already been harvested. And even the gold that hasn't been harvested yet, if it is confirmed, can still be traded by speculators.


    The reason for the current world wide recession is really the same as the reason for the Great Depression. It's deflation. But it's not deflation of the US dollar. It's deflation of the gold Krugerrand (or gold in general, I guess.)

    During the Great Depression, wealthy Americans were hiding dollars under their mattresses, which starved industry and caused widespread deflation. Wages were continually falling, and the price of goods and services was falling to keep up with it. But back then, the US dollar was backed by gold. A USD was a "certificate of gold ownership" which you could literally turn in to the US treasury and be given an equivalent amount of gold.

    If gold goes up, that means everything else is going down relative to it. IE - deflation. That's what happens when you let wages fall by trading with nations that have no minimum wage. It should be obvious that's where it will lead, but I suppose that human beings have a gift for self delusion. Everyone wants something for nothing.
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    Quote Originally Posted by KJW View Post
    Quote Originally Posted by gonzales56 View Post
    If a currency itself is created by work, if it has value in the item itself, then all are equal and all must work. If gold is the medium of exchange in the circle of 10, and 9 have apples or 9 different fruits, the 10th person has to work for a gold dollar to exchange for a fruit. The 10th person does not get to sit on his butt and create all the money he wants for little to no work. He does not get to make the other 9 people do all the work for everything he needs and wants while he does nothing.
    But the person producing the gold dollar is devoted to producing the gold dollar and is not producing anything of true value such as the fruit. It seems that you are advocating that everyone should be working for the sake of working even if the work isn't useful to anyone.
    Regardless of what you or I think of gold or fruit, they are both valuable.

    Quality of life and the enjoyment of life, and all things which bring quality and enjoyment to individuals, has value and are valuable. You may only want an apple, and good for you but, the vast majority of human beings, from the dawn of humanity to today, want beautiful gold things and they have always paid far more than what fruit is worth to most. Again, this is because its easier to grow and pluck an apple than it is to dig, find and shape gold.
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    Kojax the great depression was not about gold or deflation. It was about fractional banking, inflation, crooked bankers and crooked politicians. Bankers issued more notes than they had in gold or gold deposits. They inflated the supply of currency, drove prices and caused a run on banks (people wanted their gold/money).

    Gold also does not go up and down like that in value. It is and has always been very stable throughout history. What is not stable today is the fiat money needed to purchase gold, not the gold. What it takes to get gold out of the ground is pretty stable. Speculation is done not on the value of gold but, the value of fiat currencies and how many it may or may not take to buy gold in the future based on what might happen to the fiat currency, not what will happen with gold.
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    Quote Originally Posted by Dywyddyr View Post
    Quote Originally Posted by gonzales56 View Post
    We should not forget that value comes from work.
    But that does not mean that work automatically equals value.
    Of what worth is a mud pie that someone has taken 100 hours to make?
    Is it really worth more than the original mud?
    Surely some people are foolish and toil for hours working and no one finds value in what they have done. Zero is still a number and people are more than free to place that number on things too .
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    Quote Originally Posted by Ascended View Post
    Quote Originally Posted by gonzales56 View Post
    Imagine a circle of 10 people, 1 of which has a dollar and the other 9 each have an apple worth 1 dollar. No matter how many times that dollar is used in the circle to buy an apple from someone else, there is still only going to be 1 dollar and 9 apples. Nothing multiplies.

    That 1 dollar does not buy 9 apples, it buys 1 apple. No one in the circle can or will end up with more than 1 apple or an apple and the dollar. This is because each transaction is completely isolated from all past or future transactions. Currency ripples around on a 2d wave. That wave starts and ends with each individual transaction.
    I would perhaps take slight issue with your anology here. Whilst in your example you are perfectly correct you'd indeed still have only 9 apples and 1 dollar I would like to point out that in most cases things are a little bit more complicated. Let's change things slightly and say that you still have your person with a dollar but have 9 other people each with a different fruit but each worth a dollar.

    In this scenario the person with the dollar can purchase a fruit with his dollar and that dollar can be spent by it's recipient to buy a different fruit and thus continue onwards allowing many fruits to be both bought and sold. The point is that the dollar is an exchange mechanism that allows people to exchange goods or services they don't want or need, in this example a fruit, for goods or services they want or require i.e another fruit.

    This is what gives money it's unique property, the money itself doesn't hold any real value other than it's ability to allow people to exchange things with it. If you give it an actual value then you start to take away or effect it's particular unique ability. This is because you are changing the nature of it's exchange value with all things to be more greatly affected by one in particular, the thing that is by which it's been given value.

    To give you a example of this in practice imagine you replace a $100 dollar bill with a gold bar worth exactly $100 dollars. Now over time what you can buy with your gold bar will change, some things you will get more of and other things less, things go up and down in price, this works exactly the same for both your gold bar as well as for your $100 bill. But here's where the problem is, if the supply of gold changes and increases then you will need more gold bars to buy anything, likewise if the supply of gold decreases you will need less of it to buy the same amount of things. The point is it disproportionally effects the money's ability to function properly by giving it a seperate value. It also prevents inflation from working correctly resulting in that a very small number of people could very quickly end up with most of the wealth.
    If there's less gold or money, it becomes worth more or can purchase more, too much in circulation there is inflation. If society increases productivity, continues to create more and more valuable goods and services that other people want and are willing to work for, how does the amount of money in circulation keep pace to facilitate these transactions? How does a government prevent "hoarding" of money or keep it from ending up all in one place? Although there is inflation - or at least increases in prices as reflected by my grocery bill and energy bills, there also seems to be an increase in bartering - trading services - especially in rural areas. It's not just to circumvent taxes, but because people just don't have the cash, or are afraid to spend it, but are willing to work harder to get what they want. This seems like a paradox, in that money becomes the sticking point even though people are working and have things they want to exchange.

    Can hoarding or sitting on money also cause a kind of inflation, if people have to raise their prices to make up for fewer transactions? That sounds counter intuitive and foolish, but I see small businesses do it all the time when they don't have enough customers.
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    Diane, people should save. They should store their wealth.

    An increase in production or product through efficiency or technology reduces the cost per an item. Only in the fiat world of theft does producing more for less equal a higher price to the customer.

    A gallon of milk today is well over 3 fiat dollars despite modern farming technology. A simple t-shirt, despite modern technology and being made by what is practically slaves in 3rd world situations, is 5 dollars a shirt. Minimum wage paid in fiat currency is a joke and an hour of hard work on fiat minimum wages cant even afford to buy a gallon of milk processed by a 20 year old machine and a shirt made by a slave. The american people have been and still are being robbed. They are being devalued and reduced at the minimum stated US government goal of 2% annually. They are doing it more at a rate of 5-10% annually but who cares, it all leads to and ends at 0 value anyways.

    To understand how government stole and steal value and wealth from the american people, take a 5 dollar coin your parents great grandparents would have used in the past to buy something and use that same 5 dollar coin to buy as much milk and plain t-shirts as you can. How about a simple quarter your parents or grandparents used in the 50s or 60s? Find a handful of quarters from the 50s and see how many gallons of milk and plain t-shirts they will buy you.....

    That 5 dollar coin would buy you over 100 gallons of milk. Over 70 plain T-shirts.

    The wage a young man could expect in 1920 for working hard was a dollar an hour. His dollar though was far more valuable than today's dollar. Give him his pay and send him to 2014 and he would be extremely wealthy. You see, technology and efficiency reduces cost, it doesn't increase it. Fiat creating governments stole so much of the wealth, the value, out of the currency that those saving and breaks where never realized.

    Give a hard working young man from 2014 his fiat pay and send him back to 1920 and he would not be able to buy anything. Heck, his fiat pay every hour in 2014 is not even enough in 2014 to buy him a shirt made by a slave and a gallon of milk rounded up and processed by a machine.

    Fast forward to 2040.. How valuable will the US fiat dollar be then? What will a shirt made by a slave cost? At the rate we are going, it might be the young american who is the slave making the shirt for a bed at the factory.
    Last edited by gonzales56; September 11th, 2014 at 01:28 AM.
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    I need to make this point because so many people just don't get it.

    Fiat currency is created from nothing, for work. It is a negative transaction. It devalues the work, goods and services in a market.

    Gold currency is created by work, for work. It is an equal transaction. It adds more work, goods and value to a market.
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    Quote Originally Posted by gonzales56 View Post
    Kojax the great depression was not about gold or deflation. It was about fractional banking, inflation, crooked bankers and crooked politicians. Bankers issued more notes than they had in gold or gold deposits. They inflated the supply of currency, drove prices and caused a run on banks (people wanted their gold/money).

    That was the precursor to the Great Depression, yes. But once people had lost faith in the banks, and started trying to convert all of their assets into straight currency, that lead to massive deflation. The massive deflation that followed all of that is what made everyone jobless.

    Because so much money was being hid under mattresses, all the prices of goods and services (and labor) were continually going down. That made it an unattractive investment to try and manufacture anything, because you'd have to buy your raw materials at a high price, but anticipate selling the finished product after prices for everything had dropped.

    Right now, the deflation is caused less by crisis, and more by the straight mechanics of world trade. Since there is no buffer against falling wages, wages are dropping, and prices are dropping too. Under those circumstances, private investors become disinterested in starting manufacturing projects, because they have no way of accurately predicting what the cost/benefit ratio will be.

    They risk that they may end up spending quite a lot of money building the factory, but end up having to sell the product coming out of that factory for a low price. But I'm using the term "risk" loosely. It's nearly a guarantee of getting the bad outcome when there is deflation.
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    Quote Originally Posted by kojax View Post
    Quote Originally Posted by gonzales56 View Post
    Kojax the great depression was not about gold or deflation. It was about fractional banking, inflation, crooked bankers and crooked politicians. Bankers issued more notes than they had in gold or gold deposits. They inflated the supply of currency, drove prices and caused a run on banks (people wanted their gold/money).

    That was the precursor to the Great Depression, yes. But once people had lost faith in the banks, and started trying to convert all of their assets into straight currency, that lead to massive deflation. The massive deflation that followed all of that is what made everyone jobless.

    Because so much money was being hid under mattresses, all the prices of goods and services (and labor) were continually going down. That made it an unattractive investment to try and manufacture anything, because you'd have to buy your raw materials at a high price, but anticipate selling the finished product after prices for everything had dropped.

    Right now, the deflation is caused less by crisis, and more by the straight mechanics of world trade. Since there is no buffer against falling wages, wages are dropping, and prices are dropping too. Under those circumstances, private investors become disinterested in starting manufacturing projects, because they have no way of accurately predicting what the cost/benefit ratio will be.

    They risk that they may end up spending quite a lot of money building the factory, but end up having to sell the product coming out of that factory for a low price. But I'm using the term "risk" loosely. It's nearly a guarantee of getting the bad outcome when there is deflation.
    I'm surprised that people still don't get the systemic/endogenous character of the Great Depression.

    At that time the total amount of fictitious capital (debt, shares, credit, etc) exceeded profits that could be made in the production sphere. That eventually led (after the "roaring twenties") to the collapse of debt- debt deflation. The result was the collapse of aggregate demand and therefore, the collapse of GDP growth.

    http://www.zerohedge.com/sites/defau...21210_keen.png

    (Can't upload the png, sry)
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    In short, fractional banking on real money and assets created the great depression.

    The worlds economy is facing the same problem today. There is just not enough real wealth and assets to fulfill what is owned or owed on or in paper. Just about every real and tangible thing one can think of is on the brink of failure to make or deliver as promised or expected.

    The global economy is very fragile, and it is fragile because it has been using worthless paper to consume up real wealth, real value. Real work and wealth cannot keep up with fiat currencies appetite to gobble up everything in exchange for less and less value in return.
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    Quote Originally Posted by gonzales56 View Post
    In short, fractional banking on real money and assets created the great depression.

    The worlds economy is facing the same problem today. There is just not enough real wealth and assets to fulfill what is owned or owed on or in paper. Just about every real and tangible thing one can think of is on the brink of failure to make or deliver as promised or expected.

    The global economy is very fragile, and it is fragile because it has been using worthless paper to consume up real wealth, real value. Real work and wealth cannot keep up with fiat currencies appetite to gobble up everything in exchange for less and less value in return.
    I think it's a combination of debt deflation and falling rate of profit. One can not be separated from another
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    Quote Originally Posted by Achilleas View Post
    Quote Originally Posted by gonzales56 View Post
    In short, fractional banking on real money and assets created the great depression.

    The worlds economy is facing the same problem today. There is just not enough real wealth and assets to fulfill what is owned or owed on or in paper. Just about every real and tangible thing one can think of is on the brink of failure to make or deliver as promised or expected.

    The global economy is very fragile, and it is fragile because it has been using worthless paper to consume up real wealth, real value. Real work and wealth cannot keep up with fiat currencies appetite to gobble up everything in exchange for less and less value in return.
    I think it's a combination of debt deflation and falling rate of profit. One can not be separated from another
    I am one who firmly believes that there is no real public debt as long as it can be paid with fiat currency. What is the debt? What is being paid? What is owed? Fiat paper is owed, nothing else and that can be created from next to nothing, little work, little effort.

    I agree on the falling rate of profit.... One can only take and use up so much value and valuables for little to nothing in exchange for those valuables. The rate of return on these exchanges will always return less and less value, less and less true profit regardless of the total number of fiat currency calculated in the equations.

    Throwing more fiat currency into the equation will only make if worse. This is because the governments and banks introduce the currency into markets by spending it themselves. This takes more value out of the market and makes the people have to work even harder to pay for that loss. Every fiat unit they produce and spend is a step backwards in productivity for the people and it ultimately equals a loss in true profit for business.
    Last edited by gonzales56; September 11th, 2014 at 08:14 PM.
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    Quote Originally Posted by gonzales56 View Post

    I am one who firmly believes that there is no real public debt as long as it can be paid with fiat currency. What is the debt? What is being paid? What is owed? Fiat paper is owed, nothing else and that can be created from next to nothing, little work, little effort.
    That is true to a point, but there is also quite a lot of private debt.

    The US government already started using printed money to make payments on the national debt.

    Treasury Scarcity to Grow as Fed Buys 90% of New Bonds - Bloomberg

    The way the US debt works is it sells T-bills at a price lower than their face value, and then redeems them at face value after they mature. So basically whoever buys the new T-bills, the money from the new T-bills is used to pay the old T-bills as they mature. So, if the Federal Reserve (the entity that issues US dollars) is buying T-bills, they are effectively using inflation money to make payments on the US national debt.



    Throwing more fiat currency into the equation will only make if worse. This is because the governments and banks introduce the currency into markets by spending it themselves. This takes more value out of the market and makes the people have to work even harder to pay for that loss. Every fiat unit they produce and spend is a step backwards in productivity for the people and it ultimately equals a loss in true profit for business.
    Very insightful.

    Printing more fiat money is actually how worker wages drop most of the time. The newly printed money causes inflation, and then businesses simply fail to give their employees raises at a rate that is fast enough to keep up with inflation.

    It's a politically acceptable way to reduce a worker's real wage without making them angry. Most people don't know the rate of inflation and so they never bother to compare their raise against it. They're just glad they're getting a raise.

    But.... what you are missing is that you're failing to understand that inflation is not *why* their wages are being cut. It's *how*.

    The *why* is because of unregulated international trade with nations that have many different currencies, and often no minimum wages. Because the lowest cost nation changes every couple of years, investors can't count on any of their investments to remain profitable long enough to earn a positive return. Whenever they set up a manufacturing operation in a nation with a very low standard of living, and a low value currency, that nation begins producing and earning money, and soon its currency goes up in value (raising the cost of production in that nation.)

    It's such a roller coaster of a system that investing in it becomes about as likely to be profitable as taking your money to Las Vegas and spending it all on the roulette wheel. I'm not saying they can't earn a return. They can if they are lucky. I'm saying the odds of losing money are greater than the odds of making money.

    Under these circumstances, investors only take interest in an operation if they can sell their product at a huge margin. Hoping it will be a poor country where the product is made with extremely low wages (extremely low cost of production) and hoping to be able to sell the product in a country with extremely high wages (extremely high sale price.) Of course such situations are usually either an illusion, or a scam, or short lived (which makes it impossible to recover their full investment before the profits come to an end). But they don't mind, so long as the government will bail them out.

    But if the odds of a return were more favorable, then investors would also be willing to accept a smaller profit. And if they would accept a smaller profit, there would be a lot more economic activity.

    The Pundits keep saying it is the workers who need to accept less, but really it is the investors that need to accept less. When the workers around the world all accept less income, they also spend less, causing both costs and profits to decline simultaneously. Then the "best investment" starts shuffling around the globe like a hot potato.

    But if wages were stable, investor risk would be less. And that right there is the key to fixing everything else.
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    Quote Originally Posted by gonzales56 View Post
    Quote Originally Posted by KJW View Post
    Quote Originally Posted by gonzales56 View Post
    If a currency itself is created by work, if it has value in the item itself
    But the person producing the gold dollar is devoted to producing the gold dollar and is not producing anything of true value such as the fruit.
    Regardless of what you or I think of gold or fruit, they are both valuable.
    The true value of gold depends on its uses beyond being a monetary exchange medium. But gold that is being used as an exchange medium is not being used for anything that gives gold its true value. And likewise, gold that being used as its true value is unavailable for use as a monetary exchange medium. In other words, anything of true value is incompatible with being a monetary exchange medium because being an exchange medium makes it unavailable to be used in a way that gives it its true value, and visa versa.

    Paper money gains its monetary value not by being intrinsically difficult to produce, but by being difficult to produce by unauthorised personnel.
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    Very insightful.

    Printing more fiat money is actually how worker wages drop most of the time. The newly printed money causes inflation, and then businesses simply fail to give their employees raises at a rate that is fast enough to keep up with inflation.

    It's a politically acceptable way to reduce a worker's real wage without making them angry. Most people don't know the rate of inflation and so they never bother to compare their raise against it. They're just glad they're getting a raise.

    But.... what you are missing is that you're failing to understand that inflation is not *why* their wages are being cut. It's *how*.

    The *why* is because of unregulated international trade with nations that have many different currencies, and often no minimum wages. Because the lowest cost nation changes every couple of years, investors can't count on any of their investments to remain profitable long enough to earn a positive return. Whenever they set up a manufacturing operation in a nation with a very low standard of living, and a low value currency, that nation begins producing and earning money, and soon its currency goes up in value (raising the cost of production in that nation.)

    It's such a roller coaster of a system that investing in it becomes about as likely to be profitable as taking your money to Las Vegas and spending it all on the roulette wheel. I'm not saying they can't earn a return. They can if they are lucky. I'm saying the odds of losing money are greater than the odds of making money.

    Under these circumstances, investors only take interest in an operation if they can sell their product at a huge margin. Hoping it will be a poor country where the product is made with extremely low wages (extremely low cost of production) and hoping to be able to sell the product in a country with extremely high wages (extremely high sale price.) Of course such situations are usually either an illusion, or a scam, or short lived (which makes it impossible to recover their full investment before the profits come to an end). But they don't mind, so long as the government will bail them out.

    But if the odds of a return were more favorable, then investors would also be willing to accept a smaller profit. And if they would accept a smaller profit, there would be a lot more economic activity.

    The Pundits keep saying it is the workers who need to accept less, but really it is the investors that need to accept less. When the workers around the world all accept less income, they also spend less, causing both costs and profits to decline simultaneously. Then the "best investment" starts shuffling around the globe like a hot potato.

    But if wages were stable, investor risk would be less. And that right there is the key to fixing everything else.
    Let me raise my concerns.
    As long as your inflation rate is higher than unit labour cost growth path, the real wage devalues. But, this does not happen mainly by printing money (by the way, printed money is only 3% of total money supply).
    It happens by reducing union's power, introducing individual employment contracts, reducing worker's class reproduction total cost (maybe by increasing productivity in consuming goods sectors, etc), restraining wage growth at a rate lower than total productivity growth, intensifying labour process through various management techniques, redistributing wealth from the bottom to top (through various financialisation processes, privatization, etc) and so on.
    Also
    1) raising money supply does not cause inflation, unless your economy functions at full capacity (or very close to it). (Just think of the enormous "rivers" of money flowing through quantitative easing)
    2) Central Banks (despite what typical textbooks argue) does not control the money supply
    3) Private banks create money independently

    Nice points regarding why wages has been reduced.
    Let me write a few more thoughts.

    US has been under external trade deficits for decades. They could fix it quite easily by devaluing dollar a bit. The main reason FED does not even think about it is that dollar is the most common world money- it functions as reserves currency. Therefore, financial sector as well as other large corporations would have enormous losses. Therefore, the only way they have to fix external deficits is by reducing unit labour cost, in other words, to keep wage growth lagging in relation to total productivity growth.

    Lastly, wages are stable.

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    In my mind the economic problems are easily fixed by trading labor for labor, valuables for valuables. It will be hard for the west to get back to a place and time were they are producing/making things of value but, they have to get back there... Concerning actual productive nations, they have to realize that if they don't help the west return to productivity, they are going to have no one to sustain the growth they have grown to depend on.

    The governments in the west have stole and spent most of the wealth of the people in their own nations... Unfortunately for the people in those nations, they either didnt care or didnt mind as long as they could still buy what they wished and wanted.

    In order for government theft and consumer spending to occur at the same time, the people in the west had to have accumulated/stored wealth and the people in the west had to stop producing because the cost of them working would have left no wealth, no margin, for the government to steal. All the government had to do was find cheaper and cheaper labor/production to hide the steady decline in wealth the western people were going through.

    In the west today, just about everything is purchased and subsidized by government fiat currencies. People in the west cant afford food... Agriculture only exist as it is today because of food stamps, because it is subsidized and because governments pay the bills with fiat monies. Energy is the same. The people cant afford it. Banks cant rely on the people, they are being flooded with fiat currencies from government. Business relies on government. Free new cash is being pumped into businesses by governments because the people cant keep their doors open. Stocks, bonds, everything, all being fueled, funded and highly invested in by governments. The people in the west have had just about all their wealth stripped from them. There is very little left to take and they have very little to offer in the way of real value to anyone they trade with.

    China, india, ect need to realize that they are going to be making products for near to nothing and for no one soon. They are going to have to slow down and the west is going to have to start producing.
    Last edited by gonzales56; September 12th, 2014 at 09:45 PM.
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    Just to go back to the concept of value, let us for a while consider both gold and currency notes. Currency notes derive their value from the goods and services they can be exchanged for or secondarily their collectability, usually derived from rarity when no longer in useage.

    Gold however derives it's major value from the money/currency it can be exchanged for. It should also be noted that gold is useful for some electronics and for jewelry, but again even for jewelry mostly it is still chosen for it's perceived value.

    As to why gold is actually valuable in the first place though derives from it's relative rarity and cost of extraction and refinement.

    If we consider that to support the amount of money the world uses in a single year we'd have to find, extract and refine approximately 1.5 million metric tonnes of gold at today's prices, it does seem a rather mammoth endeavour with no actually discernible benefits.

    Also of more note is the fact that if 1.5 million tonnes were being refined every year the price of gold would start dropping through the floor. The actual gold doesn't and can't add any real value to the world economy, it's simply not consumable and just doesn't provide for any of the primary needs of human beings such as energy, water or housing ect....

    In fact what it would do is take value away from the world economy, this is because of the effort involved in accumalating a substance that we'd have no real use for such great quantities of. Efforts, endeavours & labour that would otherwise be spent on creating consumable products, food production and building homes, all activities that really do add measurable value to the world ecomony.

    No, the only real advantage of 'backing' or replacing existing money/currency with gold is only for the few and it would have to be done only on a small enough scale so that the gold had retained it residual value, gained from it's rarity, certainly without actually significantly increasing global gold production. For example one small country in the world perhaps decides to back some or all of it currency using gold, the advantages for it's citizens would then be that it's currency would be rising, relative to other currencies affected by inflation, thus increasing their spending power for imported goods. Negatively of course this would also make it harder and harder for the said country to export their own goods and services to other countries. They would be continually rising in cost relative to foreign currencies, which of course would have a very damaging effect on that country's economy. Whenever the country was required to create more money for morgage lending and loans ect..., it would be forced to go out into the world market to buy more and more gold to back this extra currency.

    Most certainly this would not even be possible for a country with an economy the size of the US however because there just isn't enough gold.

    But could gold be better than a currency note for the individual though? In the short term no, in order to realise it's value it has to be exchanged for currency to be exchangeable for any other goods or services. In the long term however since it retains it's value without the same inflationary pressures it could be better for those who have no need to realise that value however, e.g actually spend it to buy things with.

    So the benefits of gold are really only for a very few rich people who can afford to hoard it, and certainly it doesn't work for the masses on a large scale for ensuring currency values against inflation because there simply is enough of it, even if that were to change then so would it's 'rarity' derived value, making it virtually worthless and not much use then for ensuring anythings value, let alone an entire nations currency.

    If we were however to replace gold in our equation with something else, silver, wood, rice or basically anything you can think of, we would again encounter similar such problems, because the unique property of money/currency is it's special relationship with and to everything else. This relationship is about money's inherent exchangeability with everything else. The ability of it's exchangeability comes from the fact that money is a way to exchange goods at a fixed rate with each other. Each product or service has it's own value, exchange rate through the money, with every other product or service. Money/currency allows this to happen as a direct transaction unaffected by other external factors.

    If we change the money to something else such as gold we then have to encounter a transaction of one product/service fixed value relative to that particular times fluctuating gold value, this of course being externally affected by the gold's supply/demand & rarity ect.... followed by another transaction again also adversely affected by such external factors affecting the golds value at that given time. Resulting in that with every transaction, whenever anyones buyes anything, is always dependent on the changing conditions of golds supply & value. This results in a situation where it is virtually impossible to know at any given time what the money/gold could actually buy you, certainly not an ideal state of affairs.
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    The discussion about gold vs paper seems silly and antiquated to me. The dollar hasnt been backed by gold for how many years now??? It's just a very valuable mineral that is rare and hard to get, not un like uranium.

    What is more interesting is the concept of money and people's attitude about it. As some one said earlier, ideally money should have no inherent value besides its means as an exchange medium, but I would argue that it does. And that's why people save it for their old age. I can trade my goods or services for what I want now. But after a certain point, I can't.The point of money is to transact more conveniently or save it when you no longer work or sell what people want.
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    Quote Originally Posted by DianeG View Post
    The discussion about gold vs paper seems silly and antiquated to me. The dollar hasnt been backed by gold for how many years now??? It's just a very valuable mineral that is rare and hard to get, not un like uranium.

    What is more interesting is the concept of money and people's attitude about it. As some one said earlier, ideally money should have no inherent value besides its means as an exchange medium, but I would argue that it does. And that's why people save it for their old age. itrade my goods or services for what I want now. But after a certain point, I can't.
    Hi Diane, would you perhaps please explain a little more about how or why you feel money has a value beyond it's use as a exchange medium.
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    Quote Originally Posted by Ascended View Post


    Hi Diane, would you perhaps please explain a little more about how or why you feel money has a value beyond it's use as a exchange medium.
    Money, like a kind of battery, stores value or work for future use. I would happily trade goods and services for what I want, but I worry about my ability to do that when I'm old so I put money in my savings. It has a kind of added value beyond the work that generated it.
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    But whether you use the money to buy something today, or in eight years time, you are still using it as a medium of exchange. No?
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    Quote Originally Posted by DianeG View Post
    The discussion about gold vs paper seems silly and antiquated to me. The dollar hasnt been backed by gold for how many years now??? It's just a very valuable mineral that is rare and hard to get, not un like uranium.

    What is more interesting is the concept of money and people's attitude about it. As some one said earlier, ideally money should have no inherent value besides its means as an exchange medium, but I would argue that it does. And that's why people save it for their old age. I can trade my goods or services for what I want now. But after a certain point, I can't.The point of money is to transact more conveniently or save it when you no longer work or sell what people want.
    The very definition of a US dollar is Silver. For 170 years, in the U.S., gold and silver had been money. For the past 40 years, the US has been a fiat money nation. Since then, the American people have been getting poorer and the US has been on a steady path towards ruin.

    One can save fiat US Dollars if they want to see their wealth and value decrease every month, until one month, it has no value as a means of exchange at all. It is the goal of the united states of America to devalue the Fiat US Dollar and they tract it monthly. The value of the fiat dollar started at a silver dollar, today it is about 2000% less valuable than a silver dollar, and with a bit of time, the fiat US dollar will have the same value as a copper penny, then it's value will drop well below that.

    Fiat USD are not a store of value. A silver dollar is. A 5 dollar gold coin is. A fiat dollar is not. A fiat dollar is a thief of wealth. It is and was designed to rob you of your wealth. The fiat dollar is designed to lose value.

    The fiat dollar is designed for you to lose on every trade you make with it. The longer you go between trades, the more you will lose.
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    Ascended, in your analysis you made a lot of assumptions and drew a lot conclusion based on faulty reasoning. Again, from the dawn of humanity gold has been extremely valuable. Once basic needs of humans are met, the wants and needs that follow the basic needs for survival are very valuable..... In fact, when basic needs of survival are present with extended wants and needs, the extended wants and needs are massively more value to people.

    Gold has always been there helping to fulfilled mankind's extended wants and needs. Beauty, art, attention, etc... How valuable is art? How valuable is beauty? Will the king wear a crown of common straw and river rocks or gold and emeralds? What gifts will you give your wife? A bag of cow manure to wear around her neck or a gold necklace?

    Most of those who have all they need and enough to buy what they want will always want nice and beautiful things. Gold is one of the most beautiful metals on earth, a hard and rare metal to obtain too, and as such, it will remain as valuable as it has from the very beginning.

    We are no longer hairy apes who sit on the ground nude eating bugs all day long . Our wants and needs go well beyond our ape ancestors and brethren. Beautiful things are desirable. Handsome things are desirable.

    Gold is finite. There is only so much of it in the world. Today, there is about 1 ozt per a person on the planet. No one has to pay anyone to gather and mine gold. If people want to make money, they can go and get it. Gold mining does not reduce market production, it increases market production. There is also not enough gold in the ground that can be had to cause currency instability. Impossible.

    Gold is also divisible. It can be used to create all the dollars one wants. What it will due though is make the means of exchange itself valuable, and it will give the people the ability to create new money, not just the banks and the government. No theft, no robbery, no manipulation... The people maintain and control the value of their labor... This, that, is the cornerstone of freedom. Fiat currency is the cornerstone of tyranny and servitude.
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    No, gold is just a commodity like any other commodity. The price of gold being fixed at $35 an ounce caused a mining boom in the middle of the depression because it was one of the few commodities that could still be exchanged for cash, and it had a ready market because the USA guarranteed that it would exchange gold for cash. As the depression ended and mining costs rose because the prices of other commodities were rising itt created a crash in the gold mining industry.

    Keeping the price of gold fixed at $35 an ounce because of the Bretton Woods agreement failed because the price of gold as a commodity rose above the $35 dollar level so the money got exchanged for gold to sell on the open market.

    See
    https://www.imf.org/external/about/histend.htm
    Bretton Woods system - Wikipedia, the free encyclopedia
    Triffin dilemma - Wikipedia, the free encyclopedia
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  53. #52  
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    Quote Originally Posted by gonzales56 View Post
    Ascended, in your analysis you made a lot of assumptions and drew a lot conclusion based on faulty reasoning. Again, from the dawn of humanity gold has been extremely valuable. Once basic needs of humans are met, the wants and needs that follow the basic needs for survival are very valuable..... In fact, when basic needs of survival are present with extended wants and needs, the extended wants and needs are massively more value to people.

    Gold has always been there helping to fulfilled mankind's extended wants and needs. Beauty, art, attention, etc... How valuable is art? How valuable is beauty? Will the king wear a crown of common straw and river rocks or gold and emeralds? What gifts will you give your wife? A bag of cow manure to wear around her neck or a gold necklace?

    Most of those who have all they need and enough to buy what they want will always want nice and beautiful things. Gold is one of the most beautiful metals on earth, a hard and rare metal to obtain too, and as such, it will remain as valuable as it has from the very beginning.

    We are no longer hairy apes who sit on the ground nude eating bugs all day long . Our wants and needs go well beyond our ape ancestors and brethren. Beautiful things are desirable. Handsome things are desirable.

    Gold is finite. There is only so much of it in the world. Today, there is about 1 ozt per a person on the planet. No one has to pay anyone to gather and mine gold. If people want to make money, they can go and get it. Gold mining does not reduce market production, it increases market production. There is also not enough gold in the ground that can be had to cause currency instability. Impossible.

    Gold is also divisible. It can be used to create all the dollars one wants. What it will due though is make the means of exchange itself valuable, and it will give the people the ability to create new money, not just the banks and the government. No theft, no robbery, no manipulation... The people maintain and control the value of their labor... This, that, is the cornerstone of freedom. Fiat currency is the cornerstone of tyranny and servitude.
    It's not the issue of the gold's value per se but more the fact that like anything else that has a seperate value or usage it then becomes dependent on the laws of supply and demand for it's value. We can discuss the merits of gold all day long but the fact is it will still always be affected by external factors, just as would also be cotton or silver or virtually anything else you care to think of.

    Just to give you a working example of this, let's for a second imagine we're now using silver (we'll use silver instead of gold to highlight how it would still share the very same flaws if used as an exchange mechanism) to replace our money.

    All transactions are then based on what the silver is worth relative to what you wish to buy with at any given time. In other words shops prices would fluctuate around the silvers current market value.

    Now ok you might well think here that surely prices arn't likely to change that much, but the fact is nobody would know how much they could or would change or over what time periods, but anyway suppose people do actually get used to this situation and then all of a sudden a massive silver deposit was found on the otherside of the world. It may result in a trembling of world supply. People's hard earned or saved money (still stored and used as silver of course) would then be massively devalued and the foreign owners of all this excess silver supply would be able to exchange it for massive amounts of the country's goods and services, thus depriving it's native people and certainly making them all very much poorer.

    This isn't based on assumptions, this is actually what could happen. If we look at the fluctuations of silver supply and prices over the last few years it becomes quite clear this would cause considerable problems if ever used instead of, or to 'back up', a currency.

    What all economies need for their currency is both stability, so as people actually know what it will buy them at any particular time, but also control over it's supply so that the economy can successfully respond to the challenges of growth and borrowing demands of it's citizens and businesses. Something that only money/currency can really provide. This isn't speculation or faulty logic but in fact rather it's just basic economics.


    Quote Originally Posted by DianeG View Post
    Quote Originally Posted by Ascended View Post


    Hi Diane, would you perhaps please explain a little more about how or why you feel money has a value beyond it's use as a exchange medium.
    Money, like a kind of battery, stores value or work for future use. I would happily trade goods and services for what I want, but I worry about my ability to do that when I'm old so I put money in my savings. It has a kind of added value beyond the work that generated it.
    Well unfortunately there isn't any really successfully way to merely 'store' value over the long term. This is because whatever medium you choose to have your money stored in you're still actually just making a form of investment. Even with money itself, given that inflation generally affects money's actual spending over time interest is required to offset this loss, in this situation the investment is considered to the interest generated from the capital if the money is stored in a bank.

    If you simply decided to keep currency notes at home or in a safety deposit box then the investment would be considered to be investing on a deflationary situation where you expect the actual spending power of the currency to increase over time rather decrease.

    Pretty much the point is this though, there really is no easy way to just 'store' value, whatever you do with it really is just another form of investment who's value will always move relative to the value of other types investments, it could go up or down.

    Also unfortunately money is no great respecter of the work involved in actually generating it, but rather instead it is more closely governed by the wisdom in the way in which it is used, and most importantly to generate more money from.
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    If I have my data right we will face scarcity of minerals in 100 years. That will mean the third world countries will provide for the developed countries. Forget feeding humans we are going to see a period of turmoil with developed countries using all means to get the resources. "Oil" is just the beginning. More is going to follow. "Religion" is going to decide the future of the countries.We will see rise of the "Oligarchs" and the others. The others will include those people who will feed the "Oligarchs" by making the working of companies "smooth". Type of companies will decide your class. Companies will replace class. There is going to be redrawing of borders of some countries.
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    Ascended, gold and silver do not fluctuate that much in its value. What fluctuates most in value today is fiat currencies, not metals. An ounce of gold today will roughly buy you exactly what an ounce of gold bought 2,000 years ago. This is because what it takes to mine it is roughly the same and it will remain roughly the same.

    Commodities tend to trade with each other at or near the same ratio. Price swings on commodities under a fiat system are mainly due to the overwhelming number of fiat dollars fractionally chasing fake paper commodities in the futures market.... Even with these fake swings, all commodities tend to swing together except for when a fake paper futures commodity market buys fake paper commodities at an amazingly stupid and silly rate (fiat currency at its finest). In gold, just about every day the equivalent of an entire years supply of gold is bought and sold in the fake paper futures market. I have seen the equivalent of 10 years of corn be traded on the fake corn paper market in one day .

    You can buy or sell pounds of "gold", fake paper gold that is, for a few fiat dollars in the future market, and you can sell the Sun's weight in "gold" in the market if you so wished to

    Take oil, coal, gas, energy etc fiat price charts and lay gold and silver fiat price charts over them and you will learn that what changes is not the value of these things to each other but rather the value of the fiat currency itself.

    What sets price in fiat currency is not supply and demand or anything real, tangible or physical. What raises or lowers fiat prices is how many fiat dollars are chasing an unlimited number of fake paper commodities that do not exist and never will exist.

    If people could only purchase real commodities, at full price, due to crazy high demand, real fiat inflation would show its ugly head and make the price of every commodity in fiat currency astronomically high.

    In fact, if that was the case, if people had to invest in the real market at full fiat price today, In one day all the worlds commodities for the year would disappear instantly to just a few people/institutions/banks. They would own everything in short order.
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    Look at it like this.

    Lets say I am a billionaire and I want to buy up the worlds gold production for the 2015 calendar year which is roughly 96 billion USD worth. If I go to the fake gold futures market I cant buy gold but I can buy 80 million fake ounces of gold bullion on the fake market (valued at 96 billion u.s. dollars) for about 7 billion dollars with the rest due in a few months when the future contract is up / ready to be closed. Purchasing 1 year production supply of gold in this market doesn't move the price that much at all. This amount and then some is traded in the fake gold market every day . There is a lot of fiat dollars chasing fake gold, and very few know that its paper gold, not real gold.

    Now lets say I go to the real market and buy 80 million ounces in one day... What do you think happens then?
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    Quote Originally Posted by gonzales56 View Post
    Now lets say I go to the real market and buy 80 million ounces in one day... What do you think happens then?
    You buy a big safe and hire a really good security firm.
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    Quote Originally Posted by gonzales56 View Post
    ....
    Now lets say I go to the real market and buy 80 million ounces in one day... What do you think happens then?
    It creates a dramatic price increase for the remaining supply of the commodity and puts the price of jewelry up.
    Most jewelers that use gold are actually serving middle class people. Think of 10 karat wedding rings.
    The result is jewelers are priced out of the market because very few people can afford the increased price and you instantly created your own gold market collapse.

    Think of the unborn babies getting born by unwed mothers as a result of your greedy little market move, you cad you!
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    Quote Originally Posted by John Galt View Post
    Quote Originally Posted by gonzales56 View Post
    Now lets say I go to the real market and buy 80 million ounces in one day... What do you think happens then?
    You buy a big safe and hire a really good security firm.
    John... Thanks for that!
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    Quote Originally Posted by dan hunter View Post
    Quote Originally Posted by gonzales56 View Post
    ....
    Now lets say I go to the real market and buy 80 million ounces in one day... What do you think happens then?
    It creates a dramatic price increase for the remaining supply of the commodity and puts the price of jewelry up.
    Most jewelers that use gold are actually serving middle class people. Think of 10 karat wedding rings.
    The result is jewelers are priced out of the market because very few people can afford the increased price and you instantly created your own gold market collapse.

    Think of the unborn babies getting born by unwed mothers as a result of your greedy little market move, you cad you!
    Dan... Thank You as well.

    Her ring would just have to be made out of melted nickel and copper coins, that is if she was smart enough to get her hands on some change before my buying spree .

    Bad money always removes good money from the market. Bad money gets spent and good money gets hoarded.
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    I have not been following many threads where John Galt has been posting recently.

    How long has Galt been saddened and by what cause?
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    Quote Originally Posted by gonzales56 View Post
    There is also not enough gold in the ground that can be had to cause currency instability. Impossible.
    ...
    What it will due though is make the means of exchange itself valuable, and it will give the people the ability to create new money, not just the banks and the government. No theft, no robbery, no manipulation... The people maintain and control the value of their labor... This, that, is the cornerstone of freedom. Fiat currency is the cornerstone of tyranny and servitude.
    Things were just dandy when there was a gold standard. /tic

    While it may seem proper that exchange currency should have the same value as the items being traded, the gold standard suffers from being based on a false premise: that the wealth of a nation is determined by the amount of gold it has in storage. Quite simply, the value being stored is only the value of the metal itself and therefore does not include any other value that the nation possesses. Fiat currency provides the government with a greater control over the economy than gold currency allows. You seem to think that the restriction imposed on the government by gold currency is beneficial, but given that the restriction is the result of the supply of gold rather than based on the economy as a whole, the restriction imposed on the government is artificial and does not match the state of the economy.
    There are no paradoxes in relativity, just people's misunderstandings of it.
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    People tend to overestimate the importance of fiat money vs gold standard. Fiat money does not represent the value that a nation possess; that's a misunderstanding. Roughly, in the long run, the value of a currency reflects the balance of payments and its flows. But other factors (institutional, financial, historical,etc) can affect the exchange rate as well. That doesn't make fiat money better than the gold standard. The main benefit for fiat money is that government can have deficits indefinitely. This is what Modern Monetary Theory argues, at least.
    Interestingly, even though gold standard does not exist, most central banks still keep enormous amounts of gold at their basements. Therefore, I'd argue that gold still affects currencies, indirectly.
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    Dollardaze.org looked at 775 currencies. 20% of them failed due to inflation, 21% ended due to war, 24% ended through monetary reforms, 12% ended due to acts of independence and 23% of them are in circulation today. Currencies in circulation today have an average median age of only 39 years. The currencies no longer in circulation, 599 of them, had an average median lifespan of just 12 years. Currencies are just relatively short lived.

    Fiat currencies travel towards what they are worth, which is nothing, and the closer they get to nothing the faster they travel towards it... Constantly picking up speed, constantly robbing, more and more, the people who use it.

    Bullion is easily divisible, weighed, coined/barred, distributed and stored. It represents its own value and part of its value is as a means of exchange and a store of value/wealth, and it does this better than anything else. When the buck stops, when currencies weaken or fail, the bullion money doesn't and it can be spent across all borders and at any and all time periods.

    Bullion money doesn't restrict an economy either. It restricts theft, and governments hate that. Fiat currency begs for abuse and theft to occur, and thus it does and thus governments love it.
    Last edited by gonzales56; September 21st, 2014 at 05:57 AM.
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    Quote Originally Posted by Achilleas View Post
    Interestingly, even though gold standard does not exist, most central banks still keep enormous amounts of gold at their basements. Therefore, I'd argue that gold still affects currencies, indirectly.
    Are you sure? Have you seen any of these huge piles of bullion?
    I haven't.

    German Politicians Demand to See Gold in US Federal Reserve - SPIEGEL ONLINE
    U.S. Dollar Collapse: Where is Germany’s Gold? | Global Research
    China's Secret Vaults: Where Is All The Missing Gold? - Forbes
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    Quote Originally Posted by dan hunter View Post
    Quote Originally Posted by Achilleas View Post
    Interestingly, even though gold standard does not exist, most central banks still keep enormous amounts of gold at their basements. Therefore, I'd argue that gold still affects currencies, indirectly.
    Are you sure? Have you seen any of these huge piles of bullion?
    I haven't.

    German Politicians Demand to See Gold in US Federal Reserve - SPIEGEL ONLINE
    U.S. Dollar Collapse: Where is Germany’s Gold? | Global Research
    China's Secret Vaults: Where Is All The Missing Gold? - Forbes
    Central Banks held in 2013 1/5 of total gold supply (30.500 tons). Central Bank Gold Agreements | World Gold Council
    For a post- Bretton Woods system, this is way too much. Also, if you observe the price of gold you will find that it was counter-cyclical each single time we faced a global crisis (from Napoleonic wars to the "silent crisis" of 70s). After that, the same occurs if you examine normalized CPIs (CPI/gold price).
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    Quote Originally Posted by gonzales56 View Post
    Dollardaze.org looked at 775 currencies. 20% of them failed due to inflation, 21% ended due to war, 24% ended through monetary reforms, 12% ended due to acts of independence and 23% of them are in circulation today. Currencies in circulation today have an average median age of only 39 years. The currencies no longer in circulation, 599 of them, had an average median lifespan of just 12 years. Currencies are just relatively short lived.

    Fiat currencies travel towards what they are worth, which is nothing, and the closer they get to nothing the faster they travel towards it... Constantly picking up speed, constantly robbing, more and more, the people who use it.

    Bullion is easily divisible, weighed, coined/barred, distributed and stored. It represents its own value and part of its value is as a means of exchange and a store of value/wealth, and it does this better than anything else. When the buck stops, when currencies weaken or fail, the bullion money doesn't and it can be spent across all borders and at any and all time periods.

    Bullion money doesn't restrict an economy either. It restricts theft, and governments hate that. Fiat currency begs for abuse and theft to occur, and thus it does and thus governments love it.

    But surely gold just locks away money, it prevents it being spent which then makes it harder for businesses or even ordinary people to buy and sell goods and services because more and more of the exchange mechanism they would be using is being taken out of circulation to be hoarded by the wealthy who can afford not spend it.

    With fiat currency there is a strong deterrent against the hoarding wealth, in that a government can simply create more currency to allow people and businesses to continue buying and selling things. Ok this might create inflation but that disproportionally affects wealth being hoarded by the rich and gives them a strong incentive to spend it or invest it, thus giving ordinary people more access to a country's wealth.

    Any monetary system where you allow a few to amass and hoard an entire nations wealth is terrible for growth, nobody then has money to buy anything or incentives to make or sell things in the first place. Furthermore it is terrible for future generations who are consigned to poverty as simply put they have no access to the wealth hoarded away.

    Also if we're still here discussing gold then lets just put things into perspective here, total known gold reserves measure appoximately $8.5 trillion at todays gold prices, around 165,000 metric tons, this is the total amount of gold that has ever been produced. Now every year the size of the world economy is about $72 trillion, as you can see these figures don't exatly match up. Also currently yearly gold production is only around 2500 - 2800 metric tons a year hardly enough to close the gap and certainly not enough to keep pace with GDP growth.

    What this would mean in practical terms is that if gold was ever used directly to replace currency, in other words you could actually use it to buy things with rather than having to exchange it for money first, because of it's limited supply it would be travelling up in value so fast as to make no one ever want to spend it, which in turn would only increase it's value. So you end up where no one ever wants to spend their money.

    This is why, even though many people don't like it, inflation can prove so vital in correctly governing the economic health of nations.
    Everything has its beauty, but not everyone sees it. - confucius
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  68. #67  
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    Ascended, savings is not terrible for growth, value or wealth. The hyper inflated fiat money supply is out of touch/sync with everything, including gold but, instead of realizing something is very wrong with fiat currency and its hyper inflated supply, you declare the obvious by stating the price in fiat units/dollars is going to go way up but, I am telling you the price of everything is going way up in fiat units/dollars until the bubble pops.

    The supply of fiat currencies are amazingly over blown and massive. Fiat inflation/prices are so high that Governments are just about the buyers of everything. Common people can hardly afford anything. Loans are being given out at near nothing again, in fact my dog, yes, my dog, got a car loan of $25,000 3 months ago with 100 dollars down.

    Every time I go to the grocery store just about everyone is paying with food stamps.

    The majority of Americans cant even afford basic living costs due to the theft and devaluing of the US currency by way of fiat currency inflation, and that inflation is getting worse faster and faster.

    The fiat bubble is going to pop.

    Bullion has no problem keeping pace with real growth, even fast growth.. What bullion, as well as all goods, services and commodities cant keep up with is the ever increasing theft and greed of the people in government. Government folks can only steal, manipulate and create so many fiat units before it all falls apart though.

    How much longer do they have? I dont know but I know that today we are in stagflation. The fiat dollar is so inflated that common people can afford very little to nothing and the Government is doing just about all the spending to keep the fiat economy alive and money supply inflation going (they are not done stealing). Governments have two choices. Stop creating so much fiat currency to steal and buy or put the fiat currency in the hands of the people so they can steal and buy with it.

    Either way, the gig is almost up.
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  69. #68  
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    Quote Originally Posted by gonzales56 View Post
    Ascended, savings is not terrible for growth, value or wealth. The hyper inflated fiat money supply is out of touch/sync with everything, including gold but, instead of realizing something is very wrong with fiat currency and its hyper inflated supply, you declare the obvious by stating the price in fiat units/dollars is going to go way up but, I am telling you the price of everything is going way up in fiat units/dollars until the bubble pops.

    The supply of fiat currencies are amazingly over blown and massive. Fiat inflation/prices are so high that Governments are just about the buyers of everything. Common people can hardly afford anything. Loans are being given out at near nothing again, in fact my dog, yes, my dog, got a car loan of $25,000 3 months ago with 100 dollars down.

    Every time I go to the grocery store just about everyone is paying with food stamps.

    The majority of Americans cant even afford basic living costs due to the theft and devaluing of the US currency by way of fiat currency inflation, and that inflation is getting worse faster and faster.

    The fiat bubble is going to pop.

    Bullion has no problem keeping pace with real growth, even fast growth.. What bullion, as well as all goods, services and commodities cant keep up with is the ever increasing theft and greed of the people in government. Government folks can only steal, manipulate and create so many fiat units before it all falls apart though.

    How much longer do they have? I dont know but I know that today we are in stagflation. The fiat dollar is so inflated that common people can afford very little to nothing and the Government is doing just about all the spending to keep the fiat economy alive and money supply inflation going (they are not done stealing). Governments have two choices. Stop creating so much fiat currency to steal and buy or put the fiat currency in the hands of the people so they can steal and buy with it.

    Either way, the gig is almost up.
    I found your post a bit like a doomsday scenario; with inflation being widely demonized. I'd gladly hear any scientific proof or at least some reasonable arguments.
    Currency and coins is 3% of total money supply. Is that the "hyper inflated" fiat money?
    Where is the "so high inflation" you're talking about? EMU is deflating at the moment- it's way below the target of 2%
    Also, the reason that Americans can't afford basic living expenses is that American wages have been stagnant for decades and that they have to pay for public goods that should be provided for free (eg education, social security, nursing, etc)! No doubt that a raise in CPI will cause a raise in living costs, but, it's mainly the lagging wage growth compared to productivity path that causes the problem.
    Btw, what do you mean by fiat bubble? I honestly don't get it.
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  70. #69  
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    Quote Originally Posted by Achilleas View Post
    Quote Originally Posted by dan hunter View Post
    Quote Originally Posted by Achilleas View Post
    Interestingly, even though gold standard does not exist, most central banks still keep enormous amounts of gold at their basements. Therefore, I'd argue that gold still affects currencies, indirectly.
    Are you sure? Have you seen any of these huge piles of bullion?
    I haven't.

    German Politicians Demand to See Gold in US Federal Reserve - SPIEGEL ONLINE
    U.S. Dollar Collapse: Where is Germany’s Gold? | Global Research
    China's Secret Vaults: Where Is All The Missing Gold? - Forbes
    Central Banks held in 2013 1/5 of total gold supply (30.500 tons). Central Bank Gold Agreements | World Gold Council
    For a post- Bretton Woods system, this is way too much. Also, if you observe the price of gold you will find that it was counter-cyclical each single time we faced a global crisis (from Napoleonic wars to the "silent crisis" of 70s). After that, the same occurs if you examine normalized CPIs (CPI/gold price).
    According to their chart Official(govt) reserves were 17.5% not 20%
    Private investors held more, 20% which is1/5.
    Jewelry accounted for a whopping 48.5%, industry for another 12.2%, and what the refer to as underground resources was given as a tonnage instead of as a percentage.
    I suppose using only tonnage instead of giving a percentage should indicate it is being estimated differently.

    Anyhow what I was pointing out is that there is room to doubt that they actually still have any gold stashed away. Your post does nothing to challenge that point.
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  71. #70  
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    Quote Originally Posted by dan hunter View Post
    Quote Originally Posted by Achilleas View Post
    Quote Originally Posted by dan hunter View Post
    Quote Originally Posted by Achilleas View Post
    Interestingly, even though gold standard does not exist, most central banks still keep enormous amounts of gold at their basements. Therefore, I'd argue that gold still affects currencies, indirectly.
    Are you sure? Have you seen any of these huge piles of bullion?
    I haven't.

    German Politicians Demand to See Gold in US Federal Reserve - SPIEGEL ONLINE
    U.S. Dollar Collapse: Where is Germany’s Gold? | Global Research
    China's Secret Vaults: Where Is All The Missing Gold? - Forbes
    Central Banks held in 2013 1/5 of total gold supply (30.500 tons). Central Bank Gold Agreements | World Gold Council
    For a post- Bretton Woods system, this is way too much. Also, if you observe the price of gold you will find that it was counter-cyclical each single time we faced a global crisis (from Napoleonic wars to the "silent crisis" of 70s). After that, the same occurs if you examine normalized CPIs (CPI/gold price).
    According to their chart Official(govt) reserves were 17.5% not 20%
    Private investors held more, 20% which is1/5.
    Jewelry accounted for a whopping 48.5%, industry for another 12.2%, and what the refer to as underground resources was given as a tonnage instead of as a percentage.
    I suppose using only tonnage instead of giving a percentage should indicate it is being estimated differently.

    Anyhow what I was pointing out is that there is room to doubt that they actually still have any gold stashed away. Your post does nothing to challenge that point.
    Yes, you're right. I'm just saying that gold still is an important commodity to observe. I'd be interesting to find any relations between dollar and fed's policy regarding gold as well as renminbi and the relevant policy from the people's bank of China. Not having anything to say in particular about this topic, though.
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  72. #71  
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    Quote Originally Posted by Achilleas View Post
    Quote Originally Posted by gonzales56 View Post
    Ascended, savings is not terrible for growth, value or wealth. The hyper inflated fiat money supply is out of touch/sync with everything, including gold but, instead of realizing something is very wrong with fiat currency and its hyper inflated supply, you declare the obvious by stating the price in fiat units/dollars is going to go way up but, I am telling you the price of everything is going way up in fiat units/dollars until the bubble pops.

    The supply of fiat currencies are amazingly over blown and massive. Fiat inflation/prices are so high that Governments are just about the buyers of everything. Common people can hardly afford anything. Loans are being given out at near nothing again, in fact my dog, yes, my dog, got a car loan of $25,000 3 months ago with 100 dollars down.

    Every time I go to the grocery store just about everyone is paying with food stamps.

    The majority of Americans cant even afford basic living costs due to the theft and devaluing of the US currency by way of fiat currency inflation, and that inflation is getting worse faster and faster.

    The fiat bubble is going to pop.

    Bullion has no problem keeping pace with real growth, even fast growth.. What bullion, as well as all goods, services and commodities cant keep up with is the ever increasing theft and greed of the people in government. Government folks can only steal, manipulate and create so many fiat units before it all falls apart though.

    How much longer do they have? I dont know but I know that today we are in stagflation. The fiat dollar is so inflated that common people can afford very little to nothing and the Government is doing just about all the spending to keep the fiat economy alive and money supply inflation going (they are not done stealing). Governments have two choices. Stop creating so much fiat currency to steal and buy or put the fiat currency in the hands of the people so they can steal and buy with it.

    Either way, the gig is almost up.
    I found your post a bit like a doomsday scenario; with inflation being widely demonized. I'd gladly hear any scientific proof or at least some reasonable arguments.
    Currency and coins is 3% of total money supply. Is that the "hyper inflated" fiat money?
    Where is the "so high inflation" you're talking about? EMU is deflating at the moment- it's way below the target of 2%
    Also, the reason that Americans can't afford basic living expenses is that American wages have been stagnant for decades and that they have to pay for public goods that should be provided for free (eg education, social security, nursing, etc)! No doubt that a raise in CPI will cause a raise in living costs, but, it's mainly the lagging wage growth compared to productivity path that causes the problem.
    Btw, what do you mean by fiat bubble? I honestly don't get it.
    There is not a single fiat economy that is deflating the amount of its circulated currency. Inflation of those money supplies are also much greater than 2% each year.

    A fiat bubble occurs every time an overwhelming amount of fiat units chase something. There are so many fiat dollars that they can and do overwhelm anything and everything they chase and there is nothing they cant or wont chase.
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  73. #72  
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    Quote Originally Posted by gonzales56 View Post
    Ascended, savings is not terrible for growth, value or wealth.

    What are you saving when you save currency, or gold? Are you saving the thousands of bushels of wheat that currency is worth?

    No. You're not. Probably something like 95% of the real "wealth" out there is perishable and cannot really be saved for any meaningful length of time.

    Most of the real wealth that gives money its value is being produced right now, and needs to be bought before next month or its value/usefulness will drop dramatically.

    So, if you allow money/gold to be hoarded, what you are doing is creating a financial situation that doesn't reflect the physical situation. Ultimately the ONLY purpose in even having a financial system is so we can use it as a road map of the real economy. If that map becomes inaccurate, then it fails. Either it will self correct with catastrophic consequences, or people will lose faith in it and have a war (or go commie).




    The hyper inflated fiat money supply is out of touch/sync with everything, including gold but, instead of realizing something is very wrong with fiat currency and its hyper inflated supply, you declare the obvious by stating the price in fiat units/dollars is going to go way up but, I am telling you the price of everything is going way up in fiat units/dollars until the bubble pops.
    The question is: what else will we use as our map? The proposal that we use gold obviously fails, because while it prevents us from making one type of error (since we can't inflate it as easily), it also pushes us to make another (since it is easier to hoard than fiat currency).


    Every time I go to the grocery store just about everyone is paying with food stamps.

    The majority of Americans cant even afford basic living costs due to the theft and devaluing of the US currency by way of fiat currency inflation, and that inflation is getting worse faster and faster.

    The fiat bubble is going to pop.

    Bullion has no problem keeping pace with real growth, even fast growth.. What bullion, as well as all goods, services and commodities cant keep up with is the ever increasing theft and greed of the people in government. Government folks can only steal, manipulate and create so many fiat units before it all falls apart though.

    How much longer do they have? I dont know but I know that today we are in stagflation. The fiat dollar is so inflated that common people can afford very little to nothing and the Government is doing just about all the spending to keep the fiat economy alive and money supply inflation going (they are not done stealing). Governments have two choices. Stop creating so much fiat currency to steal and buy or put the fiat currency in the hands of the people so they can steal and buy with it.

    Either way, the gig is almost up.
    At the core, the investment sector of the economy is where the money is draining out. Investors keep chasing the dream of building a factory with cheap labor and selling to a market of highly paid labor. But the economy keeps self correcting, and rebalancing the wage ratios.

    It's a colossal game of "wack a mole". The best currency ratio changes monthly. But an investor needs the ratio to stay locked for at least a few years if they want to make back their principal.

    If the government can't prop up American consumers, then all those factories being built in low wage nations will keep failing to make a return for the investors who built them. Those investors will show up at the government's doorstep, crying and broke, and beg for another bailout.

    Nobody wants to just plain admit that a system that is in constant flux can never be a workable place to invest money. I think they all want to believe they're going to be the one who finds a niche.

    Just like how every gambling addict believes they're going to be the one who chooses the longshot at the horse races, and wins.
    Some clocks are only right twice a day, but they are still right when they are right.
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    Kojax, I would like to thank you for at least understanding what value, wealth, a store of value and money/currency is, as well as fiat currency.

    Most cannot store perishable valuables but, metals can be stored and traded in place of, and for, perishables... Metals also have their own value, a value equal to a certain quantity of all things.

    Lets say we back paper currency with grains, I submit to you that even this is better than a fiat currency system. It is better to have a known value rather than no value at all, and today, no real value is what we have in global currencies. Most don't realize they hold paper and computer digits worth nothing but, they will find that out sooner or later.

    What will a fiat dollar buy you in 5 years? 10 years? 20 years? Do you know? No one does, and that's because there is no real value in fiat currencies beyond the paper they are printed on. It is the currency of thieves, where as currencies backed by real assets and valuables are the currencies of common and free people.

    Multiple commodities and assets can back a paper currency to cover any and all possible booms. If I know a dollar is worth 1 pound of copper, and a politician cant create 1 trillion dollars without adding 1 trillion pounds of copper to the US reserves, then I would sleep better at night... However, this is not how it works now. Politicians do nothing, store nothing, have nothing, give nothing... They create dollars from nothing and spend them by the trillions every year. With that said though, the 40 year experiment in the US of letting politicians create as many dollars as they want, for nothing, for free, out of thin air, is coming to an end soon.

    Gold has to be used, so does silver, copper, nickel, etc... In the end, it will be the only solution. The US learned this lesson with the Continental Dollar, and this is how and why the US Dollar (also knows as Silver) became the currency of the US. The destruction of the US Dollar in the 60's and 70's, and the creation of a new Fiat Dollar by the same name to replace the US Dollar, was a horrible mistake the american people should have never allowed in the 1960 and 70's.
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  75. #74  
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    Quote Originally Posted by gonzales56 View Post
    Most cannot store perishable valuables but, metals can be stored and traded in place of, and for, perishables.
    I believe the point kojax was making is that the ability to store inert precious metals does not counter the inability to store valuable perishables.


    Quote Originally Posted by gonzales56 View Post
    Metals also have their own value, a value equal to a certain quantity of all things.
    Metals can only have their own value. They cannot have the value of any other commodity. If a nation stores its metals, then it is only storing its metals, it is not storing anything else of value.


    Quote Originally Posted by gonzales56 View Post
    Lets say we back paper currency with grains, I submit to you that even this is better than a fiat currency system. It is better to have a known value rather than no value at all, and today, no real value is what we have in global currencies. Most don't realize they hold paper and computer digits worth nothing but, they will find that out sooner or later.
    If I perform $1 worth of labour and receive $1 in currency, then spent that $1 in currency on $1 worth of food, what difference has it made to me if the $1 in currency had no intrinsic value? After all, ultimately I traded $1 worth of labour for $1 worth of food.


    Quote Originally Posted by gonzales56 View Post
    What will a fiat dollar buy you in 5 years? 10 years? 20 years?
    Why should the $1 I earned today be worth $1 in 5 years, 10 years, or 20 years? Surely the value of money today is based on today's economic conditions while the value of money in 20 years time will be based on the economic conditions of 20 years time.
    There are no paradoxes in relativity, just people's misunderstandings of it.
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  76. #75  
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    In 2009 I started a thread on this precise topic at another forum. Here is my opening post and a link for anyone who might be interested. My name on that forum is Labelwench.

    It's All About The Money
    "It's All About The Money", or currency equivelants when it comes time to negotiate a new union contract.

    A recent survey at the work place listed the following as the top three items of interest:

    a) Wages
    b) Health Benefits
    c) Vacation Time

    In essence, people want to work less, but receive more.

    So, by what means are we to come up with a formula which balances same?

    Money is a mental construct. It has no value but that which we assign to it. Our current financial model was designed to address the needs of it's time.

    It is becoming evident that it is time for a new model. My purpose in posting this thread is to generate some discussion on what those new models might look like.

    Criticism is incredibly easy. I task the reader with doing some actual work in suggesting alternatives that might provide a solution.

    What models do you see as being viable for leading us into the future?

    Regards,

    Labelwench

    John Law's method of money creation is still the dynamo that powers our present world. By replacing specie with a simple national accounting system of credit and debit, he made money infinitely more flexible, able to be contracted or expanded to meet any situation.

    However, using the Fractional Reserve System has not been a universally happy experience. It has a built in mechanical flaw that always keeps total national and private debt ahead of the money available to repay it. In fact the more a nation expands, the more it automatically goes into debt to the system over and above the money that it borrows.

    To explain, imagine the first bank which prints and lends out $100. For its efforts it asks for the borrower to return $110 in one year; that is it asks for 10% interest. Unwittingly, or maybe wittingly, the bank has created a mathematically impossible situation. The only way in which the borrower can return 110 of the bank's notes is if the bank prints, and lends, $10 more...at 10% interest.

    When presented with this scenario, there is often a tendency to think :"Ah, but the borrower can always make the extra $10 somewhere else, through hard work or a deal overseas." However, although we frequently inter change the two sayings, earning money is not the same as making it. Earnings are simply a transfer of money from on ownership to another and neither increase nor decrease the total money in existence. Making money actually does increase the nation's money supply but no-one can do that but the banking industry itself as laid down in its charter from the federal government.

    The result of creating 100 and demanding 110 in return, is that the collective borrowers of a nation are forever chasing a phantom which can never be caught; the mythical $10 that were never created. The debt in fact is unrepayable. Each time $100 is created for the nation, the nation's overall indebtedness to the system is increased by $110.

    The only solution at present is increased borrowing to cover the principle plus the interest of what has been borrowed. The business or government that cannot expand its borrowing every year is seized by its increasing debt load and dragged under.

    Many economists are not unmindful of the problem but pass it off as irrelevant. They say that if the marketplace economy keeps expanding, thereby fuelling an increase in the total money supply, there is no problem with meeting interest payments on an increasing debt load. But under such circumstances, economic expansion is not a luxury but an imperative to stay ahead.

    In John Law's day, the need to continuously expand to meet growing debt repayments was seen as a minor problem of no consequence. Today however we all know the planet cannot sustain unlimited growth. Even so, we are stuck with a monetary system that demands continuous expansion or face the chaos of total economic collapse.
    It's All About The Money - Page 109
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  77. #76  
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    Quote Originally Posted by gonzales56 View Post
    Quote Originally Posted by Achilleas View Post
    Quote Originally Posted by gonzales56 View Post
    Ascended, savings is not terrible for growth, value or wealth. The hyper inflated fiat money supply is out of touch/sync with everything, including gold but, instead of realizing something is very wrong with fiat currency and its hyper inflated supply, you declare the obvious by stating the price in fiat units/dollars is going to go way up but, I am telling you the price of everything is going way up in fiat units/dollars until the bubble pops.

    The supply of fiat currencies are amazingly over blown and massive. Fiat inflation/prices are so high that Governments are just about the buyers of everything. Common people can hardly afford anything. Loans are being given out at near nothing again, in fact my dog, yes, my dog, got a car loan of $25,000 3 months ago with 100 dollars down.

    Every time I go to the grocery store just about everyone is paying with food stamps.

    The majority of Americans cant even afford basic living costs due to the theft and devaluing of the US currency by way of fiat currency inflation, and that inflation is getting worse faster and faster.

    The fiat bubble is going to pop.

    Bullion has no problem keeping pace with real growth, even fast growth.. What bullion, as well as all goods, services and commodities cant keep up with is the ever increasing theft and greed of the people in government. Government folks can only steal, manipulate and create so many fiat units before it all falls apart though.

    How much longer do they have? I dont know but I know that today we are in stagflation. The fiat dollar is so inflated that common people can afford very little to nothing and the Government is doing just about all the spending to keep the fiat economy alive and money supply inflation going (they are not done stealing). Governments have two choices. Stop creating so much fiat currency to steal and buy or put the fiat currency in the hands of the people so they can steal and buy with it.

    Either way, the gig is almost up.
    I found your post a bit like a doomsday scenario; with inflation being widely demonized. I'd gladly hear any scientific proof or at least some reasonable arguments.
    Currency and coins is 3% of total money supply. Is that the "hyper inflated" fiat money?
    Where is the "so high inflation" you're talking about? EMU is deflating at the moment- it's way below the target of 2%
    Also, the reason that Americans can't afford basic living expenses is that American wages have been stagnant for decades and that they have to pay for public goods that should be provided for free (eg education, social security, nursing, etc)! No doubt that a raise in CPI will cause a raise in living costs, but, it's mainly the lagging wage growth compared to productivity path that causes the problem.
    Btw, what do you mean by fiat bubble? I honestly don't get it.
    There is not a single fiat economy that is deflating the amount of its circulated currency. Inflation of those money supplies are also much greater than 2% each year.

    A fiat bubble occurs every time an overwhelming amount of fiat units chase something. There are so many fiat dollars that they can and do overwhelm anything and everything they chase and there is nothing they cant or wont chase.

    Greece is deflating. Portugal too. Spain is marginally under 0% as well.

    Greece Inflation Rate | 1960-2014 | Data | Chart | Calendar | Forecast
    Portugal Inflation Rate | 1961-2014 | Data | Chart | Calendar | Forecast
    Spain Inflation Rate | 1955-2014 | Data | Chart | Calendar | Forecast

    It's normal. They have no national CBs to pump up money supply, and both private sector & state are deleveraging while net exports are close to 0%. Nothing mysterious or magical here.

    Do you mean Money Supply growth? Then again have a look:

    Greece Money Supply M3 | 1980-2014 | Data | Chart | Calendar | Forecast
    Ireland Money Supply M3 | 1999-2014 | Data | Chart | Calendar | Forecast
    Spain Money Supply M3 | 1997-2014 | Data | Chart | Calendar | Forecast

    All countries have a peak at 2008-9.
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    What you fail to understand is that those nations use the Euro. The Euro money supply is being massively inflated and it doesnt matter what is in Ireland, Greece etc.. The Money Supply is not a Greek supply, it is not an Irish supply, and trying to sell the Euro as such just doesn't work, or apply, here.

    Contrary to your claims, the Euro money supply is not deflating, it is inflating.

    Fiat currencies are designed to oppress, rob and steal from the people. Just because the governments of Greece, Ireland, Spain and many others were stupid enough to allow another nation and foreign banks to oppress, rob and steal from them as well as their people, it doesnt make the Euro theirs. Concerning the people of those nations, it doesnt matter who is in charge of the fiat currency they use, so be it the Germans or their own government, they will still be oppressed and robbed by those in charge of the fiat currency.

    The people of Greece and Ireland are being pillaged by foreign governments and financial institutions right now. It could get a lot worse for them and at some point it will get a lot worse for them, however, this will happen to everyone who uses fiat currencies sooner or later.

    Those who are in charge of money and whom are capable of creating wealth out of thin air for themselves, will use that power to oppress and take from those who cant.
    Last edited by gonzales56; October 10th, 2014 at 03:19 AM.
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