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The easy way out

The easy way out

Posted Nov 6, 2012 18:51 UTC (Tue) by petrakis (subscriber, #39672)
In reply to: The easy way out by niner
Parent article: Let’s Limit the Effect of Software Patents, Since We Can’t Eliminate Them (Wired)

Except that you can't print gold. Try reading "The Case for Gold: A Minority Report of the U.S. Gold Commission". I agree that is yet another token that can be used, just like fractional reserve currency, it's how you use it that matters. Had the federal reserve actually had the mandate to maintain the strength of the currency and held accountable we wouldn't live in the boom/bust economic bubble we're accustomed to today.

The biggest difference between the two is I can trade in my coupons for something *everyone agrees has value* and simultaneously deflate the currency. Trading your dollars for gold is literally a "no confidence" vote in your government, the ultimate check/balance; you can *opt out*. Were we to rework the coupon so that it was only callable by in very discrete terms (preventing a denial of currency attack) it would be perfectly suitable form of currency. You could choose to trade the pointer, or the actual metal. The U.S used Spanish Specie for quite some time until the government declared a monopoly on coinage.

Bimetallism never worked, and never will because you have a magical entity stating "X grams of silver can be exchanged for Y grams of gold". It just causes the metals to move to a market where the ratio is beneficial to the previously subordinate metal. As for the "price of gold", that would abate as soon as it became the "reserve currency" again, these things only had value *in direct comparison to worthless fiat currency*.

Once money has value again, this thing called "risk" actually starts to matter as the health of your institutions really matters, if it goes under, that money is gone. In today's world there's no moral hazard, as the banks know money isn't real and make as much as they can on the time/value of money (interest) before they crash and burn. Previously Banks could *call each other out* on the solvency of their notes, you bet the institutions were much stronger back when metals were dominant. Now, the federal reserve is designed to bail out banks, keeps a ratio of 9:1, where the "1" is considered "high powered money" which came from where exactly?

Finding out that Lehman brothers has only 2-3% on "reserve" is only outrageous to the layman who doesn't understand that the Federal government only requires *11%* on reserve for a bank to continue lending.

I'll take metals any day of the week over this scam.


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The easy way out

Posted Nov 6, 2012 21:54 UTC (Tue) by Cyberax (✭ supporter ✭, #52523) [Link]

> Except that you can't print gold. Try reading "The Case for Gold: A Minority Report of the U.S. Gold Commission". I agree that is yet another token that can be used, just like fractional reserve currency, it's how you use it that matters. Had the federal reserve actually had the mandate to maintain the strength of the currency and held accountable we wouldn't live in the boom/bust economic bubble we're accustomed to today.

Dude, learn some history: http://en.wikipedia.org/wiki/List_of_recessions_in_the_Un... Gold standard not only doesn't prevent recessions, but it robs government of instruments to fix them.

Want more proof? Read about the economy of Argentina. It did exactly what you preach - pegged its currency to dollar (i.e. supporting strength).

The easy way out

Posted Nov 6, 2012 22:26 UTC (Tue) by petrakis (subscriber, #39672) [Link]

Actually, Fiat currency was in full force by then thanks to National Banking Act, the Federal reserve act just made it official, the great depression was the train wreck of which modern momentary policy is formed; "what not to do with fiat currency". I've been studying currency for years so I'm used to "common wisdom drive-bys". That's OK, if it makes you feel any better, your opinion is part of the "common wisdom" majority.

The easy way out

Posted Nov 6, 2012 22:35 UTC (Tue) by Cyberax (✭ supporter ✭, #52523) [Link]

> Actually, Fiat currency was in full force by then thanks to National Banking Act
[citation needed]

The easy way out

Posted Nov 6, 2012 22:40 UTC (Tue) by petrakis (subscriber, #39672) [Link]

http://mises.org/books/caseforgold.pdf, p83

"The National Banking Acts destroyed the previously decentralized and fairly successful state banking system, and substituted a new,
centralized, and far more inflationary banking system under the aegis
of Washington and a handful of Wall Street banks. Whereas the effects
of the greenbacks were finally eliminated by the resumption of specie
payments in 1879, the effects of the National Banking System are still
with us. Not only was this system in place until 1913, but it paved the
way for the Federal Reserve System by instituting a quasi-central banking type of monetary system. The "inner contradictions" of the National
Banking System were such that the nation was driven either to go
onward to a frankly central bank or else to scrap centralized banking
altogether and go back to decentralized state banking."

e.g. the national banking act laid the foundation for the great depression.

The easy way out

Posted Nov 6, 2012 22:45 UTC (Tue) by Rudd-O (guest, #61155) [Link]

Citation provided! Excellent!

Now, in my experience, you must wait for Cyberax to insult you (he could call you "childish"), mock your arguments, change the subject, and tell you "IF YOU DON'T LIKE IT HERE, WHY DON'T YOU JUST LEEEEEEAAAAAAAVEEEEEEEEEEEE".

The easy way out

Posted Nov 6, 2012 22:48 UTC (Tue) by Cyberax (✭ supporter ✭, #52523) [Link]

>The National Banking Acts destroyed the previously decentralized and fairly successful state banking system
Easily refuted: http://en.wikipedia.org/wiki/List_of_recessions_in_the_Un...

The easy way out

Posted Nov 6, 2012 23:07 UTC (Tue) by petrakis (subscriber, #39672) [Link]

I didn't say depressions weren't possible under a metallic currency system. In fact, if you actually took the time to read the document I originally cited you'll find a dissection of many of these depressions and the following conclusion. The frequency and depth of these "depressions" were much lower under a metallic currency then that of a fiat currency. Depressions are "normal", like storms, they come and go, what makes them "economy killers" is the massive use of leverage which is only possible under the arbitrary fractional reserve system e.g. the great depression and the 2008 banking collapse.

The fallacy is that government can actually shield us from a depression actually occurring to begin with. Our currency is based as much on confidence these days as it is on GDP, probably more so.

In closing, I'm not here to win a flame war, I frankly don't care. My goal is to get just *one person* to think twice about business as usual wrt fiat currency and seek the truth for themselves.

The easy way out

Posted Nov 6, 2012 23:41 UTC (Tue) by Cyberax (✭ supporter ✭, #52523) [Link]

So there were depressions before the FRS. That's the fact, it's unarguable.

The pre-FRS banking system was on a verge of a catastrophic collapse, so that's why the NBA had been passed. Saying that NBA destroyed a "fairly successful" banking system is kinda sad.

>Depressions are "normal", like storms, they come and go, what makes them "economy killers" is the massive use of leverage which is only possible under the arbitrary fractional reserve system e.g. the great depression and the 2008 banking collapse.
You might notice again, that 2008 was so destructive exactly because it was caused by a "shadow" banking system. It was not dependent on FRS or fiat currency, it could just as well happen with "hard" money (as pre-FRS crises show us).

The only two things that made it big:
1) Sudden austerity and hard-currency belief among elites.
2) The scale of the modern economy.


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