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Re: Trump Nominates Chris Waller, Judy Shelton To Fill Fed Vacancies 

By: Decomposed in POPE 5 | Recommend this post (1)
Fri, 17 Jan 20 5:50 PM | 39 view(s)
Boardmark this board | Pope 5 		Msg. 49233 of 62138
(This msg. is a reply to 49231 by micro)
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micro:

Re: "On what basis should US currency be backed in your opinion?"On the basis that if it isn't backed by something, the authorities who control it will counterfeit the currency. That is, after all, the reason for fiat currency - so that whoever is in charge can steal wealth from the currency's users.

Re: "Does it have to be gold?"No, it could be anything, but SOME things serve better as backing material than others. Backing material should have some value. If the currency is backed by dirt, the controlling authority will not be constrained at all from counterfeiting. If it is backed by beans, the currency will become unbacked if the beans go bad. As demand for beans fluctuate with market demand, the currency's value will gyrate wildly.

Ideally, backing material should have the following characteristics: 1) Be easily recognized (so not palladium.) 2) Carry consistent, considerable value in small quantities (so not water). 3) Not spoil, tarnish, burn, die or decay (so not chickens, beans or art). 4) Be easily carried (so not uranium). 5) Be portable (so not land). 6) Exist in limited quantities (so not stock certificates - and definitely not "faith and credit.") 7) Not have other uses. (so not iron.) 8 ) Be hard to counterfeit (so not rolex watches.) 9) Have a history of being used to back money (which rules out most things.)

There might be more. Those are the qualities I can think of off the top of my head.

Re: "What about something more tangible like maybe Energy reserves that have value? "Energy reserves are not portable. It should be possible for a person to take his wealth out of a country, but if the money is backed by Saudi oil reserves, how is he going to get the wealth away from that country? Energy reserve values also fluctuate wildly. Remember when gas was over $4/gallon ten years ago? Then it fell to $1.50/gallon. Can you imagine what that would do to an economy whose currency was fluctuating the way the gas prices were? It'd be a nightmare.


Re: "Or maybe some other valuable precious metals like Platinum or Palladium or both?"Platinum and palladium are difficult to recognize. They both look like silver (but are far more valuable.) Industrial demand for the (both are used in catalytic converters. Platinum is used in lab equipment, electrodes, etc.) It's bad for a currency's value to fluctuate because of changing demand for specific consumer products.


Re: "but we could also have additional precious metals or GEMS like diamonds, or things that could also be used in addition. Why just one thing?"There's no reason for it to be just one thing. Gold and silver have both been used historically as backing material. Many things WOULD work. Pearls probably would. Not diamonds though since they are hard to recognize, and their value is subjective. No backing material is going to be perfect. The trick is to have a backing material that checks off as many of the things I listed above as possible.

Long term price stability for the backing material is important. You don't want to sell a ton of apples for 1,000 yuktahs (which are backed by Seagate hard drives) only to find that the yuktahs lose all their value a few months later when Microsoft announces that its new operating system will only use the cloud for storage.

Good backing materials are hard to find. In the past, all kinds of things have been used - beads, wood, etc.. But there is a reason why culture after culture kept using gold and silver. They work REALLY well.




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Gold is $1,581/oz today. When it hits $2,000, it will be up 26.5%. Let's see how long that takes. - De 3/11/2013 - ANSWER: 7 Years, 5 Months


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The above is a reply to the following message:
Re: Trump Nominates Chris Waller, Judy Shelton To Fill Fed Vacancies
By: micro in POPE 5
Fri, 17 Jan 20 4:46 PM 		Msg. 49231 of 62138

De

on what basis should US currency be backed in your opinion?

Does it have to be gold? Obviously we switched from that to a DEBT based backing and I am not particularly a fan of that because it only encourages more debt..
And debt really has no value anyway. But you know this..

What about something more tangible like maybe Energy reserves that have value? Or maybe some other valuable precious metals like Platinum or Palladium or both?

I mean, if we had enough physical Gold in the vault to cover the fiat currency in circulation I would not be opposed to that but we could also have additional precious metals or GEMS like diamonds, or things that could also be used in addition. Why just one thing?

Anyway, time for some creative thinking....

Thanks!

micro.


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