The Federal Reserve

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Originally Posted by Tyson_Chandler

gold has intrinsic value and has always been considered rare and sought after throughout mankind. currencies can be created and manipulated, not the same thing at all.

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how does the intrinsic value of gold get determined?

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Originally Posted by Tyson_Chandler

gold has ... always been considered rare

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Poop from albino tigers is rare too.

That doesn't mean I want to base a currency on it.

Meh, gold had its uses as currency, just as horses had their uses as transportation.

I feel no need to go back to either when other alternatives that seem to work better are available.

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Originally Posted by RG

I feel no need to go back to either when other alternatives that seem to work better are available.

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like what?

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Originally Posted by Tyson_Chandler

what about in the global markets, exchange rates? that's what i was going for. I'm sure if we were under a gold standard and used gold as money, gold would still be stable "within our economy" as you put it but what about elsewhere?

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I'd argue that exchange rate fluctuation is an important too in ensuring PPP - and that is one of several reasons I don't support the idea of a global currency scheme (which in practice would just lead to oddly fluctuating prices).

We will never escape the fact that the market requires different prices in different places.

One of the functions of money (be it currency or fiat) is to acts as a unit of measure. In the United States, we generally know what a dollar is worth, no matter where in the country we are. But, as we know, a Big Mac in rural Nebraska does not cost the same as a Big Mac in New York City. It can be confusing when the same stuff has different value based on its geography, but because we have borders around our mindset of the value of the dollar (being the borders of the United States), we are able to wrap our minds around those price fluctuations. But if we had one currency, now we have an infinite number of different prices on an infinite number of different goods. It can get confusing, and the unit of measurement function of money becomes diluted and more arbitrage opportunities may occur.

With different currencies, all the same stuff is happening (and as the quantity theory of money and monetary neutrality tell us - in the long run, changes in nominal prices have no real impact) but the currency exchange rates give us a "short cut" of sorts to understand the price differences between one geographic area to another. If we wanted to go overboard, if there was a Rural Nebraska Dollar and a New York City Dollar, the exchange rate between the two would immediately explain to us the difference between the price of a Big Mac in both places (though there still could be some slight price fluctuation away from simply the exchange rate conversion).

Gold wouldn't be "stable within our economy" because the demand and the supply of gold are exogenous to the currency scheme, and the value of gold is determined by those factors - not to mention there is no differentiating between "US Gold" and "Euro Gold". It's all just gold, and you could really damage foreign economies just by taking all their gold way (so China could come and acquire all our nice Commodity Money, then take it back to China, melt it down, and have all the Gold and we're fucked.) The way to stabilize prices would be to implement some mechanism to control the demand and supply available, but then all you've done is make a commodity more into a fiat currency - what's the point of that? In addition, you've disrupted a normally functioning market in the process.

It's important to remember that money has 3 functions:

1) Store of value (ability to use it to transfer your purchasing power from now into the future. So, milk, would be a bad commodity money since it goes bad)
2) Medium of exchange
3) Unit of measure

If money fails in any of those 3 areas, it isn't a good choice for money. Where, in my opinion, Gold falls short is:

1) Store of value: Like all money, it can be destroyed. But unlike other forms of money, it can't really be created as its a metal found in nature.
2) Medium of exchange: obviously we aren't talking about using gold coins, per se, because that would be impractical - so a representation of our gold stores (a debit card) would work just fine. It passes this test.
3) Unit of measure: because gold has intrinsic value beyond being used as currency, the value of it will fluctuate based on the supply and demand of its intrinsic values, making it difficult to use as a unit of measure.

If you remember in your US history, the agricultural sector really pushed for a silver standard, because silver tended to be quite inflationary. This is good for a farmer, who borrows funds at the beginning of the season and pays them back after the harvest and he sells his crops. Who would want to pay a loan back with money that is worth a fraction of what it was when you borrowed it?

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Originally Posted by Tyson_Chandler

yeah, explain how this current flawed fractional banking system is "working better"

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1) Using fiat money is completely unrelated to having a fractional reserve banking system.
2) Can you explain what is flawed about our fractional reserve banking system?

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Originally Posted by Tyson_Chandler

supply and demand i guess, the same way the value of currencies does. except one is just paper and one is a rare element. gold just seems more stable, it'll hold value through any major financial crisis. the current system seems like it may be unsustainable, we just keep kicking the can down the road.

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In September of this year, Gold (using the SPDR Gold Shares as a proxy) fell 11% in value. That was just in one month. How does that qualify as "stable" to you?

the US would be the only nation in the world to use commodity money if it set a gold standard....that would be terrible.

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Originally Posted by scott

In September of this year, Gold (using the SPDR Gold Shares as a proxy) fell 11% in value. That was just in one month. How does that qualify as "stable" to you?

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It fell 11% in value relative to the dollar.

I agree with you scott, but I just felt it necessary to point out that this comment shows the instability of the dollar more than it shows the instability of gold.

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Originally Posted by Tyson_Chandler

I just think that backing our paper money with something real rather than just the lies of a corrupt government would add stability to it. I think the fractional banking system is due to crash in the next decade, we just keep kickin that can down the road. It's a system of debt.

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Our fiat money is backed by something real: the full faith and credit of the United States Government, which has never defaulted on a loan in its 235 year history.

I fail to see how backing it with an unstable commodity would add stability.

Why do you think the fractional reserve banking system is due to crash?

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Originally Posted by Drachen

It fell 11% in value relative to the dollar.

I agree with you scott, but I just felt it necessary to point out that this comment shows the instability of the dollar more than it shows the instability of gold.

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Fair point. Though I think can we agree that the value of gold is not static nor particularly stable.

Note: I don't vouch for the accuracy of this graph, it's just the first one I found:

http://inflationdata.com/inflation/i..._inflation.jpg

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Originally Posted by scott

Fair point. Though I think can we agree that the value of gold is not static nor particularly stable.

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I would think that it could not be stable and that it would always go up.

If we have 100 million Tons of gold in the world and 7 Billion people, then maybe one gold coin buys you a few groceries.

Now if we have 100 million tons of gold in the world and 14 Billion people, then half a gold coin would HAVE to buy you the same groceries.

Fiscal policy wouldn't cause inflation, Birthrates would.

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Originally Posted by Tyson_Chandler

because its a smoke and mirrors economy, there isn't actually any money in the banks. they took on tons of risk because of the FDIC insurance, and damn near all went bankrupt and had to be bailed out by the fed, which still has repercussions today. we're on the brink of a global financial crisis.

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How is it smokes & mirrors? It actually works exactly the way economists predict it would.

Using fiat money, having a fractional reserve banking system, having FDIC/NCUA insurance, banks taking unsound risks... all of these are separate items that don't necessarily have anything to do with one another.

Babies and bathwater.

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Originally Posted by Tyson_Chandler

the system has worked so well that the fed had to loan the banks trillions of dollars to prevent a collapse,

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was it prevented, or just delayed somewhat?

the figure is close to $8 trillion since 2007, $16T if you count foreign institutions

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Originally Posted by Tyson_Chandler

How do they not have anything to do with each other? Under the current system, banks don't even hold onto your money they loan it out and use it to purchase sometimes risky securities..nobody knows or pays attention to what the bank is doing because they all think that they are FDIC insured..therefore the bank is free to take on risk and it's smoke and mirrors because every time you make a deposit, the money supply increases by 10 times what you put in. you and 9 other people are sharing the same deposit essentially, i say sharing because everyone can't go withdraw there money at the same time we share it. the system has worked so well that the fed had to loan the banks trillions of dollars to prevent a collapse, worked so well that it didn't take even 100 years before it has finally spiraled out of control, and we are about to be facing a global crisis.

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They don't. You can have fiat money without any of the other things. You can have a fractional reserve system without the other things. You can have deposit insurance without the other things. You can have corruption and unnecessary risk without the other things.

It's pretty straight forward. You're making the critical flaw of lumping them all together.

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Originally Posted by Winehole23

was it prevented, or just delayed somewhat?

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Ask me in a couple of years. The Fed probably couldn't have prevented (or delayed) it under a gold standard though.

Oh give me a fucking break you gov dick suckers. The bankers and
Their fraud is 100% to blame for this mess, get off your knees and have a little dignity fractional banking is a HOAX.