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

By: Zimbler0 in POPE 5 | Recommend this post (2)
Fri, 17 Jan 20 10:43 PM | 37 view(s)
Boardmark this board | Pope 5 		Msg. 49248 of 62138
(This msg. is a reply to 49233 by Decomposed)
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Medium of Exchange?

Micro > "On what basis should US currency be backed in your opinion?"

I suspect a better question might be "What should we use as a medium of exchange?

Or, what should we use to pay for goods and services.

What fraction of an ounce of gold would it take to buy a candy bar these days?

The real enemy is inflation.

And it would appear that throughout history ALL countries, empires, regimes,
whatever one wants to call them have indulged in it. 'Monetizing the debt'.
Borrow the money while it has value . . . inflate the currency . . then pay
it back with relatively worthless currency. In centuries of yore it was
done by changing the alloy of coins, and shrinking the size of the coins.

The reality is that the 'medium of exchange' has value because the folks
who use it believe it has value. That value can be manipulated - China
keeping the value of their currency artificially low to encourage the
purchase of cheap chinese schlock . . . The slow inflation of the American
dollar.

In some cases the folks are forced to use it . . . and in the case of
hyperinflation . . . well . . alternatives are sought. With the global
nature of todays economies such alternatives can be found.

But I'm not sure there is an asset 'they' can not use to devalue the
worth of the currency of the realm.

I think 'We the People' need to demand that our government stop de-valuing
our currency.

Zim.




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Mad Poet Strikes Again.


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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: Decomposed in POPE 5
Fri, 17 Jan 20 5:50 PM 		Msg. 49233 of 62138

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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