2 Inaccurate Economic Ideas Repeated Daily by DailyPaul members
I've noticed there are a few economic/money ideas repeated by many people who post here. They seem to fly in the face of data we all accept or fail to hold the pro-liberty/anti-establishment supporting idea to the same standard as the "conventional wisdom". Being critical of our own beliefs prevents us from becoming disconnected from reality.
In spite of everything I'm going to say in the rest of this post, I believe that liberty and individual freedom is superior to collectivism. I oppose compulsory social security schemes, fiat money, state run education, etc.
1) Gold and Silver
Gold Chart
CPI Chart
There seems to be a deeply held belief here that Gold is and always has been a hedge against inflation. There can be bubbles in gold too, and no one wants to talk about it. If you bought an once of gold in the '80s at $600, to this day you have never been able to make a profit in real terms. Even if you bought in at $500 in January of 1980 and sold it in March of 2008 for $1000 you have still not made a profit. Assuming a rate of annual inflation of 3%, which is low for the years 1980-2008, you would have to sell in 2008 for $1144 to break even. Investing in gold seems about as much about timing as investing in real estate or stocks. Whenver someone says, "One ounce will always buy X", be suspicious. Such statements are clearly false in the general case.
Enough about investing, lets talk about survival.
A lot of you seem to think gold and silver will be accepted as money if the Dollar fails. If the US dollar went collapsed tomorrow, it probably won't be. I know several people from Argentina. When their accounts were frozen, they didn't want gold or silver. They wanted their payments in USD/EUR/JPY/CAD/GBP/etc given to them in cash or transferred to bank accounts outside of Argentina. Read this survival guide to get an idea of how a crash might go down. Gold may be effective at preserving your weath for the long haul. I can think of no common commodity that you could have bought 500 years ago and still get value for today. If there was a crash tomorrow you'd probably do better in the short term to hold razor blades because your gold won't be worth much until the economy recovers.
Often I hear and read people saying, "There is a shortage of Silver". As far as I can tell, this is not true. It's hard for me to prove it. Call around and judge for yourself. Obviously don't call a bank because they don't want to sell you metals. The people at banks you talk to are very likely to be receiving commission for selling you various investment products. Just because there's no reason for those people to help you does not mean there is a silver shortage.
Finally on the precious metal topics, most DPers tend to accept obvious advertising from some sources as fact while rejecting it from others, calling out those sources as shills. Some of them may be shills, but uncritical acceptance of certain ideas and cognitive dissonance when it comes to others is bad, and exactly what many DPers who are guilty of it accuse the "sheeple" of. The recent post about Wiess is a great example. (I've been guilty of this on other forums.)
2) Fractional Reserve Banking
I admit when I watched many videos on this subject I found it hard to understand every point. There's just so much that has been said about banking that for me, the message boiled down to "banks are permitted to create money out of thin air if they have 10% to back it up". That message gets repeated a lot on here.
Someone claiming to be a shareholder in a bank said differently. He said banks get their seed money from private investors, and that seed money determines the amounts of already circulating dollars the bank is allowed to accept. As soon as the bank accepts a deposit from its first customer it has to pay him interest, so if the bank is going to make money it had better start lending that deposit out.
So the inflation of the fractional reserve system happens when the money loan is redeposited into a bank where it is again loaned to someone else and available to someone else as a demand deposit.
When I tell people how evil something is, I want to at least have my facts straight. Does anyone have a copy of the Charter for a major US bank? I'd rather see the facts in all their gory details than accept watered down generalizations, especially when it comes to such a critical topic.
I must thank all involved in
I must thank all involved in this conversation. Some of the things I have been reading are finally clicking. So much has been said that it is hard to figure out where to reply, so I will put my piece here and hope for the best.
Earlier, I gave a definition of interest and I have come to the conclusion that it was incomplete. Would the following be a more accurate definition of interest?
Interest is an amount of money:
(1. Charged to the borrower to compensate the lender for inflation of the money supply that occurred over the time period the loan was being paid back
OR
2. Subtracted from the principal to compensate the borrower for deflation of the money supply that occurred over the time period the loan was being paid back)
AND
1. Charged to the borrower to compensate the lender for the amount of return the lender could have expected to gain if the lender had used the loan money on other pursuits
Interest is necessary in any monetary system where the money supply or number of participants can be expanded or contracted. Even if lenders gave out their money free of charge, they would at least expect to have the same amount of purchasing power from their money when it was returned as it did when it was first loaned out.
Interest, would be required in a fiat system or a gold system.
In the gold system, the money supply can change by the mining of new gold or the destruction or loss of gold (i.e. a ship filled with gold sinking to the bottom of the sea.)
In the fiat system, the money supply can expand when the fed directly injects new money into the system or when borrowers default on their loans. It contracts when money is taken out of circulation.
In either system the ratio of participants to the amount of the money supply can change by people being born or dying or by people refusing to participate or by people deciding to participate whereas they had previously not (i.e. tarzan decides to move to london to collect pounds instead of spending his time picking bananas in the jungle.)
I would like to give an example of a system that could work without interest, but the philosophical complexities that would need to be explained are so mammoth that I dare not even start. At the very least, such a system would require that the money supply only be expanded or contracted in direct relation to the addition or removal of participants.
It is amazing. So many realizations are coming to me at the same time that it is hard for me to keep up. Even as I type the above statements I am seeing the holes in what I have typed.
A pure fiat system is completely evil. Fiat money is debt. It has no intrinsic value. The only thing that gives it power is the threat of force if the note is not returned to the issuing agency.
Our system is not purely fiat. It is hybrid fiat, since at one time the federal reserve note was linked directly to gold. Now that the link has been broken it is barreling towards becoming fully fiat.
It is impossible to start a purely fiat monetary system as no one would ever trade a material item for a worthless fiat note unless they were forced to do so. "You want me to give you an ounce of gold for one of your $20 notes and then when I do, you are going to increase the supply of those $20 notes so that I can only buy .90 ounces of gold with one $20 note? You're out of your mind!"
That is why we have slowly been tricked into gradually giving up our gold for these worthless notes that represent an imaginary value system.
so the 2 so called
so the 2 so called inaccuracies by canada have been proven false! good to have these conversations!
"When governments fear the people there is liberty. When the people fear the government there is tyranny."
-Thomas Jefferson
I am more concerned about the return of my money than the return on my money. --Mark Twain
“A prudent man foreseeth the evil, and hideth himself: but the simple pass on, and are punished.” (Prov. 22:3; 27:12 KJV)
Hey McCain-----┌П┐(◣_◢)┌П┐
Good article...
Trusting God's Life Boat
(Hop on Board!)
Silver Stock Report
by Jason Hommel, December 29th, 2008
I'm sure many of you have heard the joke-parable of a man on his rooftop during a flood. As the floodwaters were rising, first, a man in a dingy came by and said, "get in", and the man on the roof replied, "No Thanks, I'm praying and waiting on the Lord." Next, a lifeguard came by, and again, the man refused the help, saying he was waiting on the Lord. Finally, even a helicopter was refused with the same excuse, he was waiting on the Lord. After dying in the floodwaters, and getting to heaven, the man asks God, "Why didn't you save me?" God replies, "I sent you the dingy, the lifeguard and helicopter, what did you expect?"
Soon, many people are going to be asking God a similar question. "God, I trusted you to protect my finances by living a good life, I avoided alcohol, and other sins, I've gone to Church daily, and prayed daily, gave to charities, gave to many Pastors, and been an overall good Christian, so how could I have lost 90-100% of my savings which I pledged to support the growth of the Kingdom of God?"
And God will have to reply, "I gave you silver, gold, platinum and palladium. But you didn't want them. Instead, you bought paper promises from anonymous men in bankrupt institutions who have a stated goal to support the fraud of the paper dollar which is not even an unjust weight and measure but a failure to pay any measure at all, so what did you expect?"
Well, maybe God won't say all of that exactly, but I would think he would say something very similar, and as a student of the Bible, that's what I hear him saying to me. Whether you can hear a similar message or not, is, of course, highly debatable, which is why most people now are not listening to the instructions and provisions of God, which is my point.
that is a great article.. I
that is a great article.. I hope everyone reads it and understands!
"When governments fear the people there is liberty. When the people fear the government there is tyranny."
-Thomas Jefferson
I am more concerned about the return of my money than the return on my money. --Mark Twain
“A prudent man foreseeth the evil, and hideth himself: but the simple pass on, and are punished.” (Prov. 22:3; 27:12 KJV)
Hey McCain-----┌П┐(◣_◢)┌П┐
DrKrbyLuv... sp?
I have been sitting here reading you go back and forth with republicae for about an hour and a half now...not a slow reader...just trying to soak in the information from republicae..and fighting off a raucous puppy. It doesn't take much to figure out that your looking at a completely and totally 100% tried and true socialist model. Which leads me to this one question...and I know for a fact that I have seen republicae ask you this at least ten friggin times.
If I have a large amount of money, and you want some. If there is no interest, and I gain absolutely nothing but a warm fuzzy feeling in my chest, why would I loan you money?
Where is the incentive for people with money, to loan to those who think they "need" money, if they have nothing to gain?
That seems like a fairly simple question..why not answer it?
I just keep reading your scenario where people can "borrow" 100,000 dollars and just pay it out over 40 years...no interest. So where did the money come from, and why were they nice enough to loan it without any compensation on their part? I want to meet these people.
Money is created
I would not expect anyone to loan money for free...but I contend that there is absolutely no reason for private banks to control and profit from money that they are creating on the spot.
Please note the following chart from the Federal Reserve:
http://research.stlouisfed.org/fred2/series/BOGNONBR
Basically this chart shows that our banks are no longer holding even the small fractional amount of reserves; 9:1 required by deposit lending. They may however still lend money by borrowing "high powered money" from the private Federal Reserve. High powered money enables them to borrow $1,000 from which they may lend out $9,000.
This is a scam as they are creating the money that they borrow and loaning it out again with a profitable mark-up (spread between Federal Reserve rate and lending rate). And the private Federal Reserve banks have no reserves - they create their money from nothing and then charge our country interest. Why do we need them? Why not create our own money and save the interest?
If the banks kept 100% reserves and were lending their money, then maybe they would be justified but they don't. It's a scam.
If you want to lend your money to someone else and they agree to pay interest, then fine, become a loan shark.
END the FED before it ENDS US
END the FED before it ENDS US
So, basically you are saying
So, basically you are saying that you don't support Montagne's view of the world and the banning of intrest. I mean, which is it, do you support his Exploitation Theory of the capitalist world or do you support free-market capitalism which has always provided the greatest degree of prosperity and freedom to the individual?
What you are saying is exactly what we are saying concerning the FED. We don't want the FED anymore than you do, but a free market society where individual freedom and liberty bring the responsibility for our actions.
We agree, the fractional reserve system, along with the FED are bogus, fradulent and irresponsible.
If you are saying what you appear to be saying then WELCOME ABOARD and let's get this rEVOLution started!!!!!
http://www.1776solution.blogspot.com
"If I want to be free from any other man's dictation, I must understand that I can have no other man under my control." ~William G. Sumner
http://militantjeffersonian.com
"Men do not willingly read unpalatable truths of themselves. The People like those best who fool them most, by pandering to their vices and flattering their foibles" Raphael Semmes
No, I don't believe in interest
You must work at a bank because you constantly defend them. As I stated before, I believe that any nation that subjugates the control and creation of its money to private banks relinquishes its national sovereignty and effectively becomes a client state. Neither a democracy nor a republic may exist when the greatest power of the nation is held in the private hands of a few.
We should create our own money and it should be free from interest!
END the FED before it ENDS US
END the FED before it ENDS US
No, I defend interest rates
No, I defend interest rates because I understand that a persons money is, or should be his property. Do you work for free? Are you willing to work for free? The money you make is, in reality, a portion of your life represented by the time you put in at work, for which you are compensated for; it is also, or should be your private property, just like a piece of real estate that you own. You would no more rent out a home you own for free than you would rent out your money, unless you don't understand that they are essentially the very same thing and operate on the very same principles of ownership.
Do you think that interest was just made up by someone in 2000 BC, no it, like money itself, performs a vital means of exchange within any economy. Interest evolved to fill a very definite need to the market, it is ashamed that you don't understand those functions or the need for interest in a free market.Yes, there are abuses, of that there is no doubt, but interest performs so many vital functions within an economy that it would not function, could not function as a free market otherwise.
We are not talking about a nation subjugating the control and creation of its money to a central bank, what we are talking about is the free market exchange mechanism of money. As I said, the FED must go and the Fiat Monetary System along with the Fractional Reserve System with it.
What I am asking you is about interest within the market place, not about the fradulent Federal Reserve System that creates money out of thin air and charges an interest fee to do so. What I am asking you is do you believe that interest should be completely banned from the economy?
Gold money does not have interest attached to it when it is mined or minted into coin...but in the market place, particularly a free market, interest is one of the most vital functions within a free market economy and without economic freedom you can no possibily have individual freedom.
http://www.1776solution.blogspot.com
"If I want to be free from any other man's dictation, I must understand that I can have no other man under my control." ~William G. Sumner
http://militantjeffersonian.com
"Men do not willingly read unpalatable truths of themselves. The People like those best who fool them most, by pandering to their vices and flattering their foibles" Raphael Semmes
exactly what I figured...still no answer worth repeating.
"If you want to lend your money to someone else and they agree to pay interest, then fine, become a loan shark."
I think your fighting a losing battle here, enjoy the fight.
It just takes awhile to sink in
I don't think it's a losing battle, it just takes awhile to sink in. People have been conditioned all their lives (not by accident) to believe that someone must profit from a nation creating it's own money through interest.
Some would suggest we eliminate the Fed and replace them with 1,000 private banks basically doing the same thing - profiting from the creation of money.
The revolution is really an awakening to the fact that we do not need the parasitic load of interest in order to conduct trade and commerce. And we do not need the private banks to perform any function that cannot be compensated by fees (credit reports, checking accounts, etc).
Monetary freedom is required before any other other freedoms may be guaranteed.
END the FED before it ENDS US
END the FED before it ENDS US
You really should study the
You really should study the concept of the brief free banking period of this country and the prosperity that occurred during that period. During that time, banks were, like any other business, they charged fees and loaned money out of their deposit reserves. They naturally wanted to compensate their depositors for using their money, so they paid their depositors interest on their deposits out of the interest they charged on the loans to other clients who were also their depositors. The money was gold and silver, sometimes the money on deposit was coins from other countries, which were exchanged freely in this country from its birth until the power hungry politicians stopped the practice in 1858.
Money was not created with interest attached to it, the reason being that at that time money was mined from the ground and not simply printed. All “paper money” was not money at all, but Certificates of Redemption for the real money, which was gold and silver.
During this period, the overall prosperity of this country rose immensely. The free banking system was owned by private individuals or groups of individuals who had to conduct their business like any other business or otherwise face the consequences of bad decision making, fraud or corruption. These bankers had a fiduciary responsibility to their depositors; this included keeping 100% reserves while using their depositors money to make loans, thereby profiting both the bank and the depositors via the interest they charged on the rent of money over a period of time in the form of a loan.
You apparently misunderstand what people are saying when they say that they want to do away with the FED, but are willing to allow, as you put it, a 1000 private banks to do the same thing… you are mistaken, obviously. What free-marketeers, like myself propose is a free-market banking system that is confined to the principles of sound monetary policy and systems. In other words a 100% Gold/Silver Backed Dollar, no interest is accrued at the creation of such money, it is interest free at its creation. But in order for a free economy to operate then the principles of private property must be the cornerstone of that system. Therefore, interest, which is nothing more than a rent on your money, just like anything else you rent out, is essential for a free market economy and the free market economy is essential for free people.
http://www.1776solution.blogspot.com
"If I want to be free from any other man's dictation, I must understand that I can have no other man under my control." ~William G. Sumner
http://militantjeffersonian.com
"Men do not willingly read unpalatable truths of themselves. The People like those best who fool them most, by pandering to their vices and flattering their foibles" Raphael Semmes
Exactly! http://www.1776solut
Exactly!
http://www.1776solution.blogspot.com
"If I want to be free from any other man's dictation, I must understand that I can have no other man under my control." ~William G. Sumner
http://militantjeffersonian.com
"Men do not willingly read unpalatable truths of themselves. The People like those best who fool them most, by pandering to their vices and flattering their foibles" Raphael Semmes
I have to admit
that some of the things you speak of go way above my head, but I get the most general gist of the idea, and I thank you for the on-going education.
I also know when someone is avoiding very simple questions because the answer doesn't fit within their outrageous scenario. My Grandpa always told me that you can't bull$hit a bull$hitter.
I am the same way Dale! I
I am the same way Dale! I always knew what Republicae is talking about I just could not get it into words.. Great having him here! Everything he talks about backs up what we are doing, where the economy is going, and what each of us needs to do to protect our families! time is short!
"When governments fear the people there is liberty. When the people fear the government there is tyranny."
-Thomas Jefferson
I am more concerned about the return of my money than the return on my money. --Mark Twain
“A prudent man foreseeth the evil, and hideth himself: but the simple pass on, and are punished.” (Prov. 22:3; 27:12 KJV)
Hey McCain-----┌П┐(◣_◢)┌П┐
Nevertheless Dale, you are
Nevertheless Dale, you are getting it, that is what matters. You are most welcomed, if I can help with any questions please feel free to ask or send me a message on my profile contact form.
Yeah, when someone can't answer questions it usually means they are not sure of their own position or their position is not what it appears to be.
http://www.1776solution.blogspot.com
"If I want to be free from any other man's dictation, I must understand that I can have no other man under my control." ~William G. Sumner
http://militantjeffersonian.com
"Men do not willingly read unpalatable truths of themselves. The People like those best who fool them most, by pandering to their vices and flattering their foibles" Raphael Semmes
What if this is all wrong?
Is there any chance that a fiat money system is fine? Consider:
Population of USA has grown from 120 million in 1900 to over 300 million today, standard of living (by almost any measure) has exponentially increased, and the availability of goods, services and information has been completely transformed, and the nature of money has completely changed as well (credit cards, electronic transfer etc). Also consider that the US FRN has been the basis of the world currency as population has gone from 2 billion to 6 billion. Has a fiat money system made this all possible? Could a gold backed system have done this?
I put this out there for discussion!
h-daddy
Forget a gold backed national currency
I've already established that we don't have enough gold/silver to even consider backing our national currency. Others have suggested we partially back the currency - like less than a penny on the dollar.
The fallacy with this "partially backed" argument is that if we were to do this, we would still have a 99.9% fiat currency. The sooner people come to realize that the gold-backed idea is a bugaboo, the sooner we may be able to have serious discussion.
I have no problem with gold and silver coins and think they should be offered for those who prefer them as a parallel currency but this is a far cry from attempting to reform a national currency.
END the FED before it ENDS US
END the FED before it ENDS US
Dr. Can you explain what
Dr.
Can you explain what money is, how if functions within a free market economy? Can you explain the social benefit that money provides within a free market economy or the manner of barter exchange that its functions perform in a free market economy?
Do you know how, for instance, a free market economy reacts with fluctuations in the money supply when the monetary specie is gold and silver? Do you know the mechanisms of equilbrium that take place within an economy that operates under a commodity specie monetary system?
If you can’t then why do you assume certain things based on a fiat monetary logic of the supply of money? That is exactly what you are doing…you look at the world as it is and based on the view you see you make assumptions that are neither based on fact or on proofs to the contrary that were made over 200 years ago concerning the vitality of money in a free market.
You are basing your understanding on flawed and even incomplete information.
http://www.1776solution.blogspot.com
"If I want to be free from any other man's dictation, I must understand that I can have no other man under my control." ~William G. Sumner
http://militantjeffersonian.com
"Men do not willingly read unpalatable truths of themselves. The People like those best who fool them most, by pandering to their vices and flattering their foibles" Raphael Semmes
In spite of a fiat money system!
You list improvements and ask if a fiat money system made this possible, or could a gold backed system have done this.
The reason the standard of living improved and the population tripled was unrelated to the monetary system. Those changes were the result of exploitation of energy resources. On the farm, oil drove tractors, combines, and the like which previously depended on steam power or animal power. Oil and natural gas are the source of nitrogen fertilizer and many pesticides. Yields of corn more than tripled for example, and the need for human labor on farms decreased significantly, resulting in a huge population shift into cities. The labor freed up on farms was employed to expand production elsewhere, and energy drove production of everything. It was as if we had 100's of energy slaves working tirelessly to produce at a rate never dreamed of before; machines built with energy ran on energy to replace human labor. All this was in spite of the detrimental effect of our debt based monetary system, not because of it.
What the debt based monetary system did do was to shift wealth out of the pockets of the majority into the pockets of the relative few who benefit from the interest paid on the debts. The debt based monetary system allowed government to expand far beyond its ability to tax; simple print up the money at the federal reserve and loan it to government resulting in a transfer of wealth from the population to the government via loss of purchasing power of money. What the debt based monetary system did to was to magnify the boom/bust cycle. The present bust may well bring us the collapse of this unstable system; compound growth is unsustainable and we are in the near vertical portion of the resulting growth curve, so keeping growth going is problematic and Washington DC may not be able to pull off yet one more boom.
You list the population increase as a positive. I think perhaps the opposite is true. This population is heavily dependent on the production of the industrial age to survive. We are at the end of the industrial age for want of energy to fuel it. We now face huge energy constraints, particularly with oil and natural gas.
Since the inception of the oil age in the mid 19th century the amount of energy expended to acquire a barrel of oil has increased at about 3.5% per annum. This meant that every 20 years the energy expended to get oil doubled. Obviously you cannot expend more energy than you get back, so there is a built in time bomb for all fossil fuel extraction. We have gone from an initial 1% cost level up to about 10% today. By the middle of the 21st century the cost will be so high that oil, as a practical matter, will be unavailable. There will be plenty left in the ground, but the cost of acquiring it will be prohibitive.
The above discussion does not even address the rate of production. World conventional production reached its highest rate ever last July at 74,885 million barrels per day. Many inside the oil industry have been expecting the rate of production to fall beginning in this time frame, simply because the rate of discovery of new oil has not kept up with the rate of depletion of old fields. The list of countries where production is in decline keeps growing. US production has been in decline since the 1970's. This decline in domestic production has been replaced by imports, a concentrated reliance on fewer and fewer countries which still produce more than they consume. Mexico, a significant exporter to the US went into terminal production decline in the last few years, for example and is now reducing exports. Again, we must look to simple math to realize the implications of declining world wide production. If production declines at 4%, an optimistic assumption, then production will fall to 1/2 in just 17.5 years, so instead of producing 74,885 mbpd, the world would only be producing 37,443 mbpd. Production of all the things that oil has allowed us to produce in abundance will fall proportionately or worse since things never unravel smoothly.
So tell me again that going from 2 billion to 6.5+ billion population was a good thing! What you are looking at is a bubble about to burst, a probability too frightening for most to even consider.
"The deepest sin against the human mind is to believe things without evidence." Thomas H. Huxley
Great postand thanks for the thoughtful response.
I wasn't saying that the changes were "good" but rather simply that they occured. Your idea about energy availability being the driving force is food for thought. I would only add that coal is the main fuel for producing electricity.
If not a "debt based" monetary then what? Debt is a natural and essential aspect of free markets. I still wonder if a fiat money system, as exposed in this entire thread, is the evil agent that it is made out to be. What is the evidence?
The gloom and doom about oil supplies has been spouted since I was a little kid. Raise the price and the marginal supplies come back on line. Lower it and the reverse happens. The great tragedy of oil is that we are using it for the wrong reasons. Burning oil is the worst possible thing to do with it!
h-daddy
Continue reading down the
Continue reading down the thread H-Daddy. Remember, your fiat money has a Face Value that is substantially lower than its Purchase Value. You need to find out how money operates as a medium of exchange within an economy, it will surprise you....It is not the Quanitity of Money that matters but the Quality of Money that matters.
http://www.1776solution.blogspot.com
"If I want to be free from any other man's dictation, I must understand that I can have no other man under my control." ~William G. Sumner
http://militantjeffersonian.com
"Men do not willingly read unpalatable truths of themselves. The People like those best who fool them most, by pandering to their vices and flattering their foibles" Raphael Semmes
Got it. Read all that and more
and yet the fact(?) appears to be that a fiat money system has been in place as the changes I noted have taken place. So, and I ask whether or not this is evidence for its efficacy and usefullness? And, I ask, could a gold backed system have accomplished the same?
Obviously the Face value does not match purchase value. Has it ever? Is it ever supposed to? The bottomline is that my labor in 1900 earned me a standard of living. My labor in 2008 earns me a better (IMHO)standard of living.
h-daddy
Absolutely, not only would
Absolutely, not only would the same thing be accomplished but more. The prosperity of a gold monetary system that is not depreciated through inflation would be astounding. During the first couple of decades after the Constitution was ratified the level of prosperity in this country increased 5 fold. Imagine a 5 fold increase in overall general prosperity. Remember, your U.S. Dollar today only has the purchase power of around 3 Cents, if not less...imagine a Dollar that has full purchase power 100 Cents per Dollar. Imagine the power in such a currency and the productive capital that it would produce.
Under a fiat system, such as the one we are illegally and fradulently subjected to the potency of the monetary system has gradually declined over the decades, particularly after 1971. It now take over 7 Dollars of imput into the economy to produce 1 Dollar of economic growth. Think about that for a while. Thus today, it takes around $21.88 Dollars to equal the Purchase Power of one 100 Cent Dollar. Once again, think of the productive power of a 100 Cent Dollar verses a 3 Cent Dollar.
http://www.1776solution.blogspot.com
"If I want to be free from any other man's dictation, I must understand that I can have no other man under my control." ~William G. Sumner
http://militantjeffersonian.com
"Men do not willingly read unpalatable truths of themselves. The People like those best who fool them most, by pandering to their vices and flattering their foibles" Raphael Semmes
Respectfully, it seems you have mixed together
a few different ideas to make a weak point. Any booming economy will have multiple underlying factors. Whose to say that monetary policy was the key factor in the era of prosperity you describe? Off the top of my head I could think of many other reasons (expansion of territory, slavery, industiral processes, cheap labor, expansion of railroads...)
You keep going back to the purchasing power of a dollar. You are talking about the price of goods from one era to the next. I get it. But I have more dollars at my disposal. The bottomline, as I see it, is overall standard of living not purchasing power.
I can accept the statement that we would do even better if we had a different system. I'd like more evidence and would like to know exactly what that system would be.
h-daddy
Remember, I am speaking of
Remember, I am speaking of the time period between 1787 and 1840, the railroad expansion had no taken place, the slave trade, while contributing to a degree to the economy well being of the country was, by 1840 an economic burden and the leadership in the South recognized that fact. Also, as far as cheap labor, the cost of labor was proportional to the productivity of the country at the time. None of those factors contributed to the over all production that was created during those first few decades in this country as did the free market of money and productive capital.
So, concerning the purchase value of the dollar do you not understand that if it takes you $21.88 to purchase what $1.00 did when it was not depreciated that there is a problem. Also, if you look at the overall living standard, while it is higher in terms, you must realize that most of the rise in the living standard in this county rides on the back of a massive, unprecedented debt. Like the money itself, it is an illusion that can and potentially will disappear rapidly as this fiat monetary system continues to collapse. In 2012, come back and talk to me about the level of the standard of living in this country.
Since the New Deal, proportionally the poverty level in this country has risen, not fallen, since 1971, poverty levels have shot up…why? It has to do with the quality of the productive power of the monetary unit. The less purchase value a currency has the less productive value it can generate. Why do you think we have been transformed from a creditor nation into a debtor nation, it was the only means by which the system could continue under a fiat monetary system.
http://www.1776solution.blogspot.com
"If I want to be free from any other man's dictation, I must understand that I can have no other man under my control." ~William G. Sumner
http://militantjeffersonian.com
"Men do not willingly read unpalatable truths of themselves. The People like those best who fool them most, by pandering to their vices and flattering their foibles" Raphael Semmes
We agree that there are other factors
contributing to the prosperous period of 1787 to1840. And I agree that the monetary system and availablility of capital were important. I remained unconvinced that it was the key factor. The US has had numerous prosperous periods; some during times of fiat money.
Back to your continuing lecture on the purchase value of the dollar. Agreed that it now takes more dollars to purchase the same item that previously cost fewer dollars. That is a fact. But what is also a fact is that the average person has more dollars available to them. To me the key is standard of living which we agree has risen substantially. The relative price of goods is not particularly important. Your attempt to convince me by making a prediction about 2012 is not useful. A better argument would be if I put $1 under my mattress in 1900 and took it out to spend in 2008 I would be shocked to see what it will not purchase. However, my counter argument is that if I put a year of labor under my mattress in 1900 and pulled it out in 2008 I would be pleasantly surprised to see what it would purchase.
My question concerns the fiat money system. It has been said by many, including Dr. Paul, that is a fatally flawed system. I observe that it has been in operation for many years and that during those years we have seen great gains in overall living standards. To me that is properity. How can it be fatally flawed and amazingly useful at the same time? What is the evidence for a better system?
BTW My prediction is that the population of the world will rise to 9 billion while overall standard of living continues to increase, with a fiat monetary system still in place.
h-daddy
Oh, fiat money acts as a
Oh, fiat money acts as a medium of exchange; it is only natural that there would be periods of prosperity. The problem is that since it always depreciates, eventually it will no longer function as a medium of exchange.
Back to your continuing lecture on the purchase value of the dollar. Agreed that it now takes more dollars to purchase the same item that previously cost fewer dollars. That is a fact. But what is also a fact is that the average person has more dollars available to them. To me the key is standard of living, which we agree has risen substantially. The relative price of goods is not particularly important.
The problem is that you can’t put a year’s worth of labor under your mattress, there is no way to do that under any economic system unless you have some magic labor absorbing material that would accomplish such a feat.
The fatal flaw within the fiat monetary system is the fact that, in the hands of government, it will always, as history shows, be depreciated through inflation. Governments always abuse the power of moneymaking and since fiat money is the only money that allows them to actually create without accountability they love fiat money.
Remember, fiat money is nothing more than a money substitute and because we, the world, is forced to use as a medium of exchange it will have a marginal utility, but instead of a constant marginal utility as gold would have, fiat money has a declining marginal utility because of the propensity of inflation in such system. So, fiat money acts as money and if you look at all countries in history you will see great gains in the overall living standard…for a while but eventually that disappears since it cannot be sustained under such system. Usually the system ends in either an extremely high inflationary event or even worse a hyperinflationary event.
Think of fiat money as something that has use but that it can be easily abused and eventually its usefulness wears out.
http://www.1776solution.blogspot.com
"If I want to be free from any other man's dictation, I must understand that I can have no other man under my control." ~William G. Sumner
http://militantjeffersonian.com
"Men do not willingly read unpalatable truths of themselves. The People like those best who fool them most, by pandering to their vices and flattering their foibles" Raphael Semmes
Cause and Effect
You are confusing cause with effect - the fiat currency is not the cause of a flawed system, it is effected by a flawed system just as the gold standard failed.
If the problem is "fiat" currency, why did the great depression occur when there was a gold backed system in circulation?
Now, we are entering the second great depression but yet this time, you blame fiat currency.
END the FED before it ENDS US
END the FED before it ENDS US
Poor Dr….doesn’t know
Poor Dr….doesn’t know his economic history, particularly that of the Great Depression.
The Federal Reserve, contrary to the limitations of the Federal Reserve Act began to almost immediately inflate beyond the gold reserves of this country. Almost the entire period of the early 1920s was an inflationary boom. There were two factors that were involved during the Twenties. In 1921, July of that year, after a relatively deep recession, the Federal Reserve increased the money supply over 61.8% within a period of less than 8 years. That doesn’t sound like much compared to the vast amount of fiat money being injected today, but it really was an extraordinary amount at that time.
During that same period bank deposits went up by 51.1%, loan shares by nearly 225% and life insurance policy reserves increased by nearly 114%. The increases in the money supply mainly took place between 1922 to 1923, then again in late 24, again in late 25 and late 1927.
To compare the gold reserves to fiat dollars between 1912 and 1929 you have to look at the total dollar claims made, the total gold reserves held and finally at the Total Uncovered Dollars exposed without gold backing. By June of 1921, the Total Dollar Claims of that year was nearly $45 Billion, the Total Gold Reserve was only $2.6 Billion and the Total Uncovered Dollars was $42.1 Billion. By 1929, the Total Dollar Claims rose to $71.8 Billion, the Total Gold Reserves were $3.0 Billion and the Total Uncovered Dollars rose to nearly $69 Billion.
Thus, instead of gold, the Great Depression was, as we are now seeing, was caused by the unrestrained injection of fiat currency into the economy, causing a boom cycle within the economy. Of course, part of the problem was the loosening of the reserve requirements on banks and other fiduciary institutions. I’m not going to go into all the details because otherwise this would be a book and not a rebuttal to the conclusion you are basing on an assumption that is contrary to the facts of the period and the causation of the Great Depression.
The primary cause of the 1920s inflation was the increase in total bank reserves of paper money verses a low reserve of gold. During the 20s, when someone deposited gold in commercial banks, the banks would deposit it at the Federal Reserve Bank of New York, now while there were gold inflows and outflows in the U.S., most of those transactions were on the foreign front. In fact, during that period of time the Bank of England was having a difficult time and the Federal Reserve came to the rescue by “lending” gold to the Bank of England.
Also, the Federal Reserve was purchasing assets, now it did that from member banks and from the public. Basically, what the Federal Reserve was doing was monetizing debt, contrary to the Federal Reserve Act of 1913. When the Congress saw the wonderful effects of debt monetization [printing money out of thin air], it passed an expo facto law and made the Federal Reserves crime legal.
Now, the Federal Reserve also issued Bills, which represented nothing more than loans to its member banks. They were discounted and provided advances to member banks on the banks guarantees or IOUs. As I said, these Bills were discounted to the banks and it got to the point that there was such an expansion of these Discount Bills that the increase was over $200 Million in just three years., then by 1924 the increase was by $400 Million and thus it continued.
Now, it is important to remember that during this time every single Dollar was a real promise to pay, a real redemption certificate that, upon presentation to a bank would require that bank to redeem that certificate face amount in either gold or silver. However, remember, during the 20s, the countries gold reserves were being shipped to Great Britain to help the Bank of England and the Federal Reserve was issuing a large amount of paper money beyond the actual reserves of gold on hand [at the time, it was illegal to do that, but alas the Federal Reserve was above the law then as it appears to be now]
Throughout the 1920s, the Federal Reserve kept rediscount rates [we now know as the FED Funds Rate] below market and continually loaned out during this easy credit period. So between 1923 and 1925 it depressed the rates being charged in bank to bank transactions and fostered what amounts to nothing more than a massive credit boom. It failed to increase the rediscount rates and soon it was too late, by the time it did raise the rates and try to reign in its monetary policy mistakes the contraction began, as we know in late 1929.
There is, of course, much more to the story, but needless to say that you simply don’t have a full understanding of the events leading up to the Great Depression. If you would like me to continue I would be more than happy to go into a detailed explanation of the causes of the Great ?Depression.
http://www.1776solution.blogspot.com
"If I want to be free from any other man's dictation, I must understand that I can have no other man under my control." ~William G. Sumner
http://militantjeffersonian.com
"Men do not willingly read unpalatable truths of themselves. The People like those best who fool them most, by pandering to their vices and flattering their foibles" Raphael Semmes