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SecondLife Bans Unregistered In-World Banks
GuruBuckaroo writes "Virtual Ponzi schemes — pardon, "Banks" — have finally been given the boot by the policymakers at Linden Lab's Second Life. According to the company's latest blog post: 'As of January 22, 2008, it will be prohibited to offer interest or any direct return on an investment (whether in L$ or other currency) from any object, such as an ATM, located in Second Life, without proof of an applicable government registration statement or financial institution charter. We're implementing this policy after reviewing Resident complaints, banking activities, and the law, and we're doing it to protect our Residents and the integrity of our economy.'"
LL should have had exclusive control over their currency and the exchange thereof to begin with. Allowing other parties to do this for them was an open invitation for them and their users to get shafted.
Morons.
Still waiting on Serviscope_minor to wake up to fucking reality and realize that Jessica Price isn't going to fuck him.
The thing that I have trouble conceiving of is how people could trust these virtual banks/investment schemes in the first place, especially since there's real money involved. I find Second Life interesting, but like the internet, it's still a bit of the wild west. I barely trust my real world bank to do the right thing with my money, to say nothing of trusting some virtual bank.
To the making of books there is no end, so let's get started
The "virtual" in virtual worlds means it isn't real. Once you leave the bounds of the physical world here on earth, you're in uncharted waters. After that, you might as well be living in the old west where the only justice you get is the justice you take.
The crooks may still wear black, but they pack all new weapons now.
8==8 Bones 8==8
I have never, EVER, met a person who 'plays' this game, I am probably the only one in my circle who has even heard of it, and I only hear about it here on slashdot.
Of course what really just happened is that they have triggered a massive run on the banks now. Is it better to wait for all the different banks to fail or ban them causing everyone to withdraw their money at once? You are giong to see every bank going the way of Ginko in the very near future now. (even that tiny minority that wasnt offering ponzi scheme style interest rates)
In the US, the Federal Reserve has the right to create money out of thin air. They don't want anyone encroaching on that power. In SL, Linden has the power. They should be cracking down. Both worlds need some hard currency in my opinion.
This whole think makes me wonder if criminals are using these places to launder money?
Being a bank in Second Life isn't very attractive to real banks, because they can't create money in Second Life, like they can in the real world.
First, a minor point, banks don't issue money (they used to but that creates undesireable barriers to trade) and thus making banks adhere to the gold standard is meaningless. Governments make currency standards.
Second, gold doesn't have intrinsic value at all. The value of gold fluctuates all the time. All the gold standard did was fix the price of gold. While the gold standard was tenable for a time it didn't work in the long run because it's not stable. Your money supply is dependent on your gold supply which in turn limits your economy. You can't have more dollars than your fixed ratio to gold. New discoveries of gold can also create deflationary shocks.
There's nothing special about money at all. It's a medium of exchange. It has what value we agree it has, no matter if the medium is a piece of paper or a string of bits or a hunk of metal.
Anybody that converts real world assets to virtual ones deserves what they get. Seriously, what's on your mind when you convert your hard earned cold cash into bits in some virtual world ?
Don't you have a better way of spending your money ? Most fads on the internet I can sort of understand what they're about and what their 'pull' is but second life is one step too many for me to follow.
MP3 Search Engine
Unlike fiat currency's, its shiny and you can't print it.
I will have a sig when the market demands it.
When borrowing we are really making a commitment to produce goods or services in the future. Interest can be looked at as a tax on participating in the economic system or what they charge us (at least at the first tier) for the use of the monetary system they maintain.
Banks do several things. Track transactions, create GL entries to produce new money out of nothing, attempt to recover bad debt, asses and evaluate risk.
For doing these few things they collectively generated over, the last 3 years over a trillion dollars in NET profit.
The current cost or charge for contributing to the economic system in the US is about 6% of each dollar. Obviously the real cost is less than half a percent thanks to technology.
It is time for the public to own the monetary system and pay third parties to provide the above services taking advantage of technology.
Obviously we don't really need bank buildings anymore, just some data centers, and home PC's to support the whole system.
Thanks to the Internet and Technology the worlds Monetary and Financial systems are outdated and no longer needed so we don't need to pay 6% of the wealth we generate to the bankers.
More like .5% should be enough to support our Monetary system.
"an infinite player that has lost his finite mind" ~Infinite Play the Movie (it blends with reality)
Err, that should be inflationary shocks. D'oh.
Last year, 5 banks opened up in Entropia Universe, each with a minimum of $100,000 capital for making loans. You can check your in-game items into a safety deposit box at such a cyber-bank, and receive a credit line (in real dollars), using the in-game item as collateral.
Each bank is sanctioned by MindArk (the software company that made the game), and is allowed to set any policies that they want regarding interest rates, etc. MindArk auctioned off the 5 licenses for these banks for a total of $404,000 in May of last year.
I enjoy mixing my gaming life with my real life, but this has gone a little too far for even me.
Free unix account: freeshell.org
What is the intrinsic value of gold?
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make install -not war
Now it's the banks.
What good is 2L if you can't virtually explore the things there that aren't possible, safe, legal, or some combination of all of these virtually? I don't need every part of my life to have training wheels.
So how long before virtual sex entirely is gone too?
Followed by avatars who are too sexy, or provacative.
2L was a place were you could learn life lessons by being stupid. Now it seems intending to become one of the more restrictive Middle East countries instead.
"It's the height of ridiculousness to say for those 9 lines you get hundreds of millions."
Does this mean I can get a new simulated job as a simulated chartered accountant or simulated banking regulator! Oh goody, where do I sign up?
Brett
It's time to update the world's financial and monetary systems to reflect the advanced and new capabilities of technology. No longer should a small private group charge excessive fees for the use of their monetary system, subject to being manipulated to artificially extract wealth by those not actually making a value contribution to the other participants. We should also allow competition in providing monetary system services it is currently a monopoly.
"an infinite player that has lost his finite mind" ~Infinite Play the Movie (it blends with reality)
That's more like a law of government than like a law of nature.
We're seeing the exact process by which people create governments to protect our rights. Since SL already had what was equivalent to tribal and voluntary governments, we are seeing something much like the process SL'ers learned about in history.
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make install -not war
There really is no purpose, that's kind of the point. It's a giant virtual sandbox that you can do pretty much anything in. I personally wouldn't spend any kind of money on it, but it's interesting in small doses just to cruise around, chat with people, and see all of the interesting, cool, weird, and stupid things people build.
The word you want is 'currencies'--and aluminum is just as shiny. 'matter of fact, at one point, aluminum (or 'aluminium' for our foreign friends) was worth -more- than gold.
In the end, currency is only worth what people agree it is worth. It bears repeating: Currency is only worth as much as someone else will give you for it. It's a symbol--it's like a variable, as it were.
I find gold to be more or less worthless in my life, save only as a plating agent for electrical contacts. I don't see any reason why a currency should be based on something that's pretty much useless outside the electronics and jewelery industries. If you want to base a currency on something intrinsically valuable to a large number of people, how about, say, fresh water? Sure, it's not worth that much, but if you don't have it you'll certainly notice it.
Do not mistake the symbol for the thing. Currency of any sort--even gold--is only a symbol for a certain amount of a product or service that you can trade it for with someone else.
In Xanadu did Kubla Khan
A stately pleasure dome decree
I'd like to secure a loan for $5000, in exchange I'll put up my Ashbringer as collateral. I "promise" to pay you back.
Really? You can eat gold? What intrinsic value does gold have? Oh right, it's rare, and somewhat "pretty" although not really all that rare and pretty is such a personal definition. Lots of things are rare.
Let's instead move to the Uranium-235 standard, or better yet, the joule.
Any sufficiently advanced technology is indistinguishable from a rigged demo.
Ripple
Any guest worker system is indistinguishable from indentured servitude.
This video explains all.
The enemies of Democracy are
Giving away my own punchline here, but hey, you still gotta admit it's something you can't do in WoW.
The enemies of Democracy are
The only intrinsic value it has is it's perceived rarity and the fact that you can't just pull it out of thin air. There is no way anyone can go back to the gold standard with the WTO in existence, but that doesn't mean we shouldn't try to find a way to make the currency system actually work.
The way it's set up now every country in the world is gunning for bankruptcy in the end. You can't sustain a system of constant debt growth forever. We need to find something to base money on that isn't a commodity controlled by the few and also isn't debt. Or we can just continue to fight wars and reforming nations and start over every time the debt ceiling is too high.
In regards to the article, I find it hilarious that you can't even run a virtual bank without a real life charter. That just slays me. I think the line between virtual and real just blurred beyond recognition.
You're nothing; like me.
The world is scriptable by the end user. That sets it apart from other graphical MMORPGs, and should make it of interest to a portion of the Slashdot community, particularly those that may have enjoyed the scripting aspect of text-based MUDs.
https://wiki.secondlife.com/wiki/LSL_Portal
I must disagree. There are any number of ways in which a 'gold-based' currency could be rendered completely valueless, not the least of which (but the one that would make the best movie, in my opinion) would be the forcible removal of said gold from whatever repository it was being held in. In addition, the currency will be a fiat currency de facto in that it will be the world of the government in question (or organization, if it is a non-governmentally issued currency) that:
A) There is enough gold to 'cover' it (because really, how can you be -sure- that there's really a dollar's worth of gold in there?) and
B) Said currency or gold will be accepted as a valid form of payment by anyone within the country. Fiat currencies are at least honest about this: there are various laws on the books that state that the currency is to be considered valid payment for debt. Legally, in the US, I must accept a dollar as valid payment; I need not accept any amount of gold as payment, as there is no legal requirement that I do so--I might choose to deal only in platinum, or iridium, or some schist or other.
In Xanadu did Kubla Khan
A stately pleasure dome decree
Next thing you know, they'll be asking your place and nature of employment when opening financial accounts, trying to monitor all communications, and placing incompetent Gestapo in the airports.
Slashdot: Playing Favorites Since 1997
People tend to laugh at Virtual "Assets" because they keep comparing it to physical items.
OF COURSE Virtual assets are not tangible real items. What they represent is effort/service on the part of somebody. When you "buy" something in Second life you are not buying a Virtual House/dress/etc, you are paying for the service/labor involved in the creation of said digital content. Looking at it in that way does not make it so cooky.
One could say when you "buy" an ebook you are not actually buying a book, but people don't lambast others as nutz for buying electronic print.
XenoPhage
Technological Musings
"What is the intrinsic value of gold?"
The value is based on the the belief of the millions of idiots that spout the line about "intrinsic value of gold" - it's effectively self sustaining.
"As God is my witness, I thought turkeys could fly." A. Carlson
1. Fiat currency isn't based on debt growth. The US has a debt because we sell treasury bonds (t-bills) to bring more money into the country from foreign sources (largely, lately, China)
2. Adam Smith solved this problem about 300 years ago... Tell me: What is China going to do with that money except buy things from us? Fiat currency is only valuable if you spend it. The doomsday scenarios people here love to espouse where China intentionally devalues the US dollar make absolutely no sense. They simply wouldn't be in Chinas best interest.
3. Fiat currency really works remarkably well. It's based on the potential of an economy, not the potential of the gold supply. Just use right now as an example.
People here lament the weak dollar. But everything pushes and pulls until it's all back in balance... As the dollar weakens, American-produced products are more affordable overseas. So, they purchase more of our products, which puts more Americans to work and increases American GDP. This results in the dollar rising in value. It will continue to rise until American products become too expensive, which depresses demand for American goods, which causes the dollar to stabilize or weaken again, and the cycle continues...
In all cases, charging interest on money or property lended causes problems. Many economists attribute the existence of interest as the sole cause of inflation, and inflation causes all kinds of other issues. It's a slippery slope to financial ruin for an entire economy, and SecondLife was headed that way. Glad to see them do something about it before many more people lost their money.
I'm not a very religious person, but even the bible states that charging interest is akin to theft. It's simply making money you didn't make, which just isn't good.
"the fact remains that under gold-based currency money does not lose value"
Really? So inflation didn't exist AT ALL under the gold standard?
Riiiiight.
"As God is my witness, I thought turkeys could fly." A. Carlson
CCP do tolerate most scams in their game, and they expicitly warn people against being too trusting. Even if the perpetrator is known, the GMs will usually not refund your money - it's just tough luck ;-)
I think they might make an exception if the scamming was done by exploiting bugs in the game mechanics. But if it is simply misplaced trust, you get no compensation at all.
Even so, the economy in EVE is still working.
C - the footgun of programming languages
Second Life made a prominante apperance on the Television show "The Office". Have you ever heard of that show or are you that out of touch?
http://video.google.com/videoplay?docid=-9050474362583451279
Watch it. Learn. Our system of currency is based on nothing more than a pile of lies and a mechanism for transferring wealth into the hands of the wealthy. It is also based on perpetually accelerating the rate of growth, which is so laughably unsustainable that it's amazing it has lasted this long.
It's a platform. Like any other platform, assholes will make asshole things with it, but on the other hands artists will make art with it, and pragmatists will make useful things with it.
Bitching about SL in general because of financial scams within it is like trashing the entire Web over the very first web-phishing schemes.
Slashdot Burying Stories About Slashdot Media Owned
From what I understand, the gold standard didn't fix the price of gold, because you can't print gold. The gold standard fixed the price of currency in gold. Governments didn't like that, because they cannot inflate the money supply at will to pay for things they want. Otherwise they'd have to raise taxes directly and people get mad at that. Inflating the money supply has the same short-term effect of raising revenue, without any of those pesky tax laws getting in the way. So says Austrian-school economics.
I can explanate how to administrate your network. You must configurate and segmentate it, so it can computate.
Pretty much every currency in history that was based on gold was nevertheless watered down by the issueing government when the government needed more funds. A gold standard does *nothing* to keep a government from pulling new money out of thin air.
It's axiomatic that the government will cheat on the currency, so a fiat currency has a huge advantage: the government doesn't have to hide what it's doing, which makes the whole process much more visible, predictable, and accountable.
Socialism: a lie told by totalitarians and believed by fools.
The value of fiat money is completely out of people's control, especially at this point of US history when financial crises are looming on the horizon. When it is cornered, the government will take our wealth away though this magical money system, they don't even have to come to your home and knock down your door.
Dump dollars, and own real assets.
The amount of gold against which to back currency has been nearly constant for about 100 years. The price of gold has tripled in about a year.
Neither of those two "values" - a century of zero growth, or tripling in a year - are anything like the change in value of our economy during those periods.
This "gold standard is sacred" nonsense is about a stupid as basing an economy on, say, a specific government declaration of production increase 5 years from now.
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make install -not war
The currency system actually works.
(Other aspects of the economic system don't, and deliberately so, because the narrow interests that have the most influence in setting the rules benefit from the brokenness, but that's a different story.)
Well, no, the heat death of the universe will prevent that: you can't sustain anything forever.
OTOH, there is no economic reason a government can't sustain constant debt growth forever (ignoring cosmological constraints), particularly if over the long-term the ratio of debt to the total economic output of the governed nation isn't growing without bound.
Got it in one. My first idea was 'air' but then I remembered that there was already precedent for a water-based economy with which many /.ers would be familiar.
In Xanadu did Kubla Khan
A stately pleasure dome decree
This is only true for the trivial case where the "value of currency" is measured in how much gold you can realize from it, and even then only when gold itself traded for nothing but its metal value is the currency.
Gold-backed currencies can lose value on the market, even when the value is measured in gold, based on the perception of the stability and reliability of the issuing institutions and access to that institution.
Gold-backed currencies issued by governments are also "government-promised based currency", even though they are not "fiat" currency as the term is usually defined. Gold-backed currencies are still backed by promises; of the major forms (commodity, representative [commodity-backed], and fiat) of currency, only commodity money is not promised-based.
Anyhow, why would money that didn't tend, more often than not, to gradually lose value over time compared to other commodities be desirable to money that does? Seems to me that would reduce the incentive for productive investment and economic activity generally.
And you do it with fake money.
.999 fine silver officially by the government, with a gold standard following.
In the olden days "dollar bills" wire actually silver or gold certificates. You could trade these paper certificates for the actual gold or silver. Prior to this, you'd carry it in a coin purse. But the paper money while more subject to wear, was lighter and literally more flexible and therefore comfortable. A US Dollar was based off the Spanish dollar and was settled on 371.25 grains of
This limited inflation (the only way to deflate the currency was to send bankers to the hills to mine metals) and was real value.
Then in 1913 two things happened: we got the Federal Reserve and the 16th amendment. These two institutions, both once non-existent, rule the country today. With the creation of the FR the US borrowed money from the FR ]]at interest[[ setting up a positive feedback loop of inflation. In order to do this they also had to decouple the money from the metal backing, which was completed in 197[2?] under Richard Nixon. If you want to see real inflation, it is measured in the M3 statistic, which the Fed stopped publishing recently. But you can see it here Instead of talking inflation, the Fed tries to talk CPI - which is an aggregate from several industries. Notably absent is the mortgage market, which ask anyone, its costs have doubled in the the past 5 years. But the CPI leaves this out, and only includes rents, which have stayed disproportionately low because of all the house seekers.
Today the paper you move about is as valuable as those bits in the computer. If the word "certificate" appeared on them it would be completely a different situation. You could go to the bank and get metal, whose value wouldn't ever go down. But now, you can't expect to leave $30,000 in the bank and have the same buying power 10 years later. Over the last 90 years, the dollar has fallen to just $0.04 of its original value, as valued by the silver market.
But getting back on topic - any kind of calamity that shakes the confidence of Americans will affect the buying power of the dollar. Not a new vein of gold, not a run on banks, not a stock market crash. The only absolute value is cold hard cash. And by cold and hard I mean a metal.
--Epilogue--
I often wonder what all this means int he grand scheme. If you have money, this is an issue. If you have debt, it is actually a good thing because debts are paid off with future, depreciated money, and they take that money at face value. (Which an old bill is rarely worth.) The key here is to have one foot in both areas: pay off debts with inflating currency and have your investments in metals-backed currency.
There has been a movement to inflation-proof currency, known as the Liberty dollar. These were negotiable certificates which actually were redeemable for metal. The Federal Reserve shut it down and seized all the silver, because this, while completely legal, are the one thing a person can do to retain control and live outside the system. If it ever got popular (and I believe it would, particularly in times of inflation) the Federal Reserve would have competition that couldn't be influenced by it. The important thing to note is that it would be no different of a situation than America, pre-1913.
Finally, note that the Federal Reserve is not Federal (it is private) nor is it a Reserve (it holds nothing - the gold it once held is unaccounted for.) The only worse-named entity is Social Security.
Slashdot's rate-of-post filter: Preventing you from posting too many great ideas at once.
You are only legally required to accept dollar if you chose to quote your price. But if it were legal to barter unlike items, you could just as legally quote your "price" in barter of gold ounces or silver ounces. But that doesn't matter. You talk in hypotheticals. And people do that when they try to point out the problems with the gold currency. I am talking about the actual practice as it has existed. Paper currency has been tried many times and so has value-based currency. Value-based currency is how inflation is prevented. Btw, in the modern world it would actually be more practical to have gold/silver coins. It would be very easy to produce equipment that does a double check (by 2 different physical unrelated parameters) for authenticity of coins. So that the old practice of debasing coins could be easily prevented.
Any guest worker system is indistinguishable from indentured servitude.
Gold-backed currency is such in name only unless the currency is a promissory note which can be redeemed for a quantity of gold on demand. Why do you think banks were issuing notes before the fed? What do you think those notes were? They were essentially IOUs of gold.
Any guest worker system is indistinguishable from indentured servitude.
Really? So inflation didn't exist AT ALL under the gold standard?
Pretty much. Surprising, isn't it? We've all gotten so used to inflation being a norm, that we don't even believe it's possible to live without it. Granted more gold can be found. But again, judging from the past (which is always better than what can be judged from some promises) the amount of gold that can be excavated/refined per year is negligible compared to the gold that is already available. The amount of gold that is found in any one year certainly will never exceed 1% of all the already-existing gold.Any guest worker system is indistinguishable from indentured servitude.
There is a small but significant difference between money and "real" things.
"Real" things have uses that are independent of perceived value (often they correlate but not necessarily, as you say, things are worth what we agree they are). eg. I want gold to make connectors for my stereo, if the whole world decides gold is worthless I don't care, it still conducts signal.
Money doesn't have any use beyond it's perceived value. It's usefulness *is* its value, if the whole world decides it's worthless, it also becomes useless.
Any guest worker system is indistinguishable from indentured servitude.
Probably because Linden Dollars can be exchanged for real dollars and vice versa. The bank might be "virtual" but the collateral you stick into them isn't whether its called Linden dollars, love teddies or anything else with an intrinsic real world value. I expect virtually all of the banks in SL are ponzis, pyramid schemes or some other similar scam. So SL have decided to regulate by clamping down on the entire industry.
It makes sense and it's surprising they didn't do it sooner. Its even possible that they might even attract a REAL bank in now. Personally I think this is just the opening salvo. The scammers will try to skirt these restrictions in other ways. For example, by replacing cash machines with vending machines, machines that buy back whatever they vend and so forth. Or they'll become more inventive and won't call themselves banks anymore and will pretend to be investment clubs, gifting circles and so forth.
Linden is going to have a major headache stopping the scammers. The easiest way would be to stop letting people exchange in-game money for real-world money. I don't see that happening though.
Anyone - not just LL, can sell L$ for any amount they choose. With a free market, how could LL "Adjust the rate to suit themselves"? They could raise the price - and nobody would buy from them (they currently sell at a little above "market value", and so most larger transactions are done through third parties). They could pump the market with new L$, I suppose. This would make the price of all goods go up, and the same amount of "real" money would buy you the same amount of everything else. They could make more land available at cheaper rates, this could either raise or lower the "value" of L$, depending on how you look at it. What would LL serve to gain from any of it? I suppose pumping the market full of new L$, a timely investor could "make it big" before the market adjusts, but this seems as unlikely in SL as it does in RL.
-- 'The' Lord and Master Bitman On High, Master Of All
With value based currency, how does one accommodate a growing population?
Live forever, or die trying.
Actually, the important impact of "legal tender" laws isn't that you are legally required to accept anything as payment. The important impact is when you try to sue somebody for failing to pay: first, if they made a tender of payment in dollars, that will be taken into account and, secondly, if you secure a judgement, except in extraordinary circumstances where the law permits "specific performance" as a remedy, then no matter what form of payment your agreement called for, the damages awarded will be denominated in dollars.
All currency is "value-based". If you are trying to contrast fiat currency, on the one hand, with representational and commodity currency on the other (or, alternative, fiat and representational currency on the one hand with commodity currency on the other), you should say what you mean. Most likely, you have no idea what you are talking about.
Yes, both commodity and representational currency have been tried. One of their many weaknesses is that intense currency fluctuations are very common based on short-term fluctuations in the value of the underlying commodity; radical short-term fluctuations in fiat money values do happen occasionally, but usually only when there is a general economic or government failure. (Commodity currencies also have additional problems in that they can be extraordinarily inconvenient for large exchanges, though this is not a problem with representational currencies.)
No, it wouldn't. You might be able to avoid debasement (if cheap verification equipment was in the hands of every participant in the market), but even then you have the problem that gold and silver are extremely valuable compared to the many common transactions, but a large quantity of either would still be required for large transactions without resorting to representational currencies (and creating a demand for them as currency would increase that value.)
An ounce of silver is worth on the order of $15 now. With a silver commodity currency, it would pretty hard to have any money smaller than $1: a current US $ would be worth a little more than a pennyweight, and be a silver coin about the size of a dime.
At the same time, a $1,000 would be over 4 pounds of silver.
You can manage the narrow range of practical values in a commodity system two ways. First, you can go to a multicommodity system, but then you can't trade both for "real" market value of the metal in the coins and maintain a fixed exchange rate between
coins of different metals. Second, you can abandon a pure commodity system for a representational system, where banknotes backed that are freely exchangable for the backing commodity are issued. But then you don't have commodity money, you have promised-based money again.
BS. While over long periods of time there was little change there were massive jumps over short periods of time. So the value of your money may drop in half in 5 years then go up to 3/4 it's original value within another 5 years of that.
Sounds like somebody is drinking too much of the kool-aid.
Fiat currency IS based on debt growth, debt that is set against the society of people, by the government of said people.
Adam Smith didn't solve shit, he came up with a fly-by-night idea and piled on it loads of seemingly sound philosophy (that was probably also a bunch of bullshit too). China has the government structure and the sheer number of people available to hit us hard with debt they own. Fiat currency seems more valuable if you spend it, but this is China, the land of 'conquering your ass' sometimes its just a valuable as a tool to be used to destroy the opponent. Sun Tzu was around long before Adam Smith.
Fiat currency has worked remarkably well because the US held all of the cards until now and noone but the US could game the system.
The fact is, fiat currency is pretend currency, and it only works as long as someone with a lot more guns than someone else has and keeps control of it.
Cheers.
This is my sig. There are many like it, but this one is mine.
Any guest worker system is indistinguishable from indentured servitude.
Hong Kong dollars are still bank issued. The bills have different logos for the bank they came from.
I am becoming gerund, destroyer of verbs.
No, it wouldn't.
If its not better, there is no reason to adopt it. I've asked why it would be better.
It mostly gains extremely-long-term stability at the expense of far less stability over reasonable time periods (on the order of mere decades).
Nothing compels people to retain their earnings in cash. There is nothing dishonest about using a medium of exchange that people know declines in value over the long-term compared to many other assets. Nothing compels people to keep their stored wealth in cash, and few sane, law-abiding people do so.
No one else said that, so I don't know why you characterize that as "agreeing". People are legally able to exchange property (other than money) for property (other than money) now. I can legally enter into a contract to trade my car for a 6 cows, 8 chickens, and the right to use the buyers bathtub at will for the next years.
The only thing that the law says is that if the buyer breaks the contract and I sue him, I'll most likely be awarded damages for the breach in cash, not livestock and bathtub access.
That's the definition of a gold-backed currency. The thing is, they've existed in the real world, and they do fluctuate in value based on people's trust in the issuing institution.
Why the population is growing isn't the issue, how you deal with the growing population is the issue. The slow increase in the value of money associated with most first-world fiat currencies naturally accommodates a growing population, whereas the relative intergenerational stability of commodity-based money would further retain wealth in the aging cohort.
(The greater short-term instability of commodity or representational money is a separate problem that most proposals for such money fail to address.)
It's the same reason a lot of people used to play MOO's and MUSH's. Perhaps it's just the fun of being able to create things and share them with a community. Personally, I never got into that sort of thing. I played MUDs a lot and as a result I'm an avid World of Warcraft player but I did know a lot of people who played MOO's and MUSH's.
We'll make great pets
I've read the stories and I still say "Get a Life" with no literal intent here on LL. This isn't technology, this is Zork on 'roids making it all a game. If you look at the idiots who lose money in this virtual world, would you want them as an in-law? Crap, if you're stupid enough to invest in a virtual world with Linden Dollars then you deserve to get ripped off, raped and drug over and sharp pointy objects (virtually of course).
I say to all the Second Lifers: Go outside, take a walk and get off the computer! Also stop dating your cousins!
Harrison's Postulate - "For every action there is an equal and opposite criticism"
Knowledge is key.
.
No, its not. Even if it was, so what?
What fly-by-night idea are you referring to that Adam Smith came up with?
China may have leverage because our government currently wants to keep selling them debt, but they debt they already own gives us leverage over them, more than the other way around: they are counting on us to pay it, so who has the leverage?
Fiat currency has, on balance, everywhere in the world, worked better than commodity or representational currency ever has, because it isn't as subject to short-term extreme fluctuations based on the market for a single commodity of any commodity or representational system, doesn't have the exchange value problems of multicommodity systems, and doesn't have the limited range of values for which exchanges are practical and logistical issues faced by commodity systems, particularly single commodity systems.
This is independent, largely, of who is "holding cards". Clearly, anyone holding dominant power in the world economy or over critical resources can disrupt any fiat, representational, or commodity system—though this is easier with representational or commodity systems, where they are vulnerable to most of the same attacks that are possible against a fiat system (particularly a representational system) as well as efforts directed at disrupting or distorting the market for the underlying commodity.
No, the fact is fiat currency is real (and pure currency). Commodity and representational currency is far more unstable in the short-term because it is something other than currency, and is therefore more exposed to particular external uncertainties.
A fiat currency with an actual fixed supply, if that weren't a contradiction in terms, would be the only type of currency intrinsically not subject to loss in value. In fact, assuming increasing productivity, its value could only go up. You can argue about whether this is a good thing or not (it still gives the wealthy a big advantage, but I don't see an ethical way out of that for any reasonable definition of the word "wealthy").
Using anything as money is subject to discovery or creation of more of it. Trying to make that hard is the best that we can do... which is why gold is a *decent* form of fiat currency. The biggest problem with it is that it's also a massively useful industrial resource, and there's a lot more of it that remains undiscovered than there is currently in circulation.
Thanks for the info, that looks promising.
"an infinite player that has lost his finite mind" ~Infinite Play the Movie (it blends with reality)
I will have a sig when the market demands it.
Can't be bothered to go into a long discussion of what when where and how but are there any other financial + technological slashdotians out there who would be interested in writing some software to create a futures market for these (i.e. Wow / SL / etc etc ) virtual worlds?
Any guest worker system is indistinguishable from indentured servitude.
Any guest worker system is indistinguishable from indentured servitude.
So how is that, then, any different than every other fiat currency in existence?
Any guest worker system is indistinguishable from indentured servitude.
Any guest worker system is indistinguishable from indentured servitude.
No one else said that, so I don't know why you characterize that as "agreeing". People are legally able to exchange property (other than money) for property (other than money) now.
People are legally able to exchange property (other than money) for property (other than money) now. I can legally enter into a contract to trade my car for a 6 cows, 8 chickens, and the right to use the buyers bathtub at will for the next years.
I don't know why you think that you can legally do so. I know for a fact that people have been arrested for less. IRS only allows exchange of like properties. Ie, a car for another car.
I did mis-speak about the "agreeing" part. Thank you for pointing that out. I'll rephrase. I assert that the speculative nature of the bubbles would disappear or would be much less prominent if people were allowed to legally exchange property for property (as in gold/silver coins for company shares, houses, cows, etc). I offer as my evidence the fact that speculation has become a necessary part of retirement saving and the fact that fiat money has produced constant debasement of money which (by definition) reduces the risk of borrowing because the debt will have to be repaid with less valuable money.
I am not a lawyer, but I do read.Any guest worker system is indistinguishable from indentured servitude.
Actually, the problem under the gold standard was deflation. This was the driver for the Free Silver movement in the late 1800's. The problem was that goods became less valuable in monetary terms, so farmers, for example, were having to pay back loans with goods that were worth less and less in money terms. This was due to the scarcity of gold, which caused the currency to become scarcer and more valuable in relation to goods over time. This was great for bankers, but it sucked for the common man. It had the side effect of suppressing the economy overall, as people preferred to hold dollars over goods or investments. This little bit of history is usually unfamiliar to the gold bugs.
I was taught to respect my elders. The trouble is, it's getting harder and harder to find some.
"Readily redeemed" is not a binary category, but a continuum. And how readily it is, in fact, redeemed in gold is a factor, but not the only one, in how readily it is perceived to be redeemed, which is what can cause its value in practice to vary compared to actual, physical gold. You can't get around this by shifting definitions: representational currencies (which is what you are talking about) do not have a fixed practical value, even in terms of the commodity for which they are redeemable. They are subject to variation even with respect to that commodity, as well as being exposed to fluctuations in the market for that commodity.
The only way you get a currency that is reliably fixed value relative to a physical commodity is to trade the physical commodity itself.
Yes, that's a demand note representational currency. They've been used, and even they have varying value in practice with respect to the underlying currency based, again, on faith in the issuing institutions capacity and reliability to pay. They are a promised-backed money, and their value is discounted by the degree to which the promise is unreliable. Just because a bank promises to honor it on demand doesn't mean that (1) it is convenient to present it, or (2) any particular other participant in the market is confident that they bank will be able to honor it when presented, regardless of the promise.
Presumably, you mean that's not how the gold standard worked between the United States joining the Bretton Woods arrangement in 1946 and the U.S. abandoning it in 1972; the United States wasn't on the gold standard for the entire 1913-1972, and prior to abandoning the gold standard in 1933, the US did, in fact, a system of free convertibility of gold certificates circulating as currency (the US retained free convertibility of silver certificates circulating as currency into, IIRC, the 1960s.)
Right. They were resolved, successively, by the abandonment of commodity currencies for representational currencies followed by the abandonment of representational currencies for fiat currencies. And, really, now by the dominance of privately issued "fiat representational" currencies (ledger balances which are transferred largely without government-issued currency ever changing hand, and created privately out of thin air through the magic of fractional reserve banking, and backed fractionally not by commodities, but by reserves of government-issued fiat currency) being the dominant medium of exchange.
But since you are advocating undoing all those layers of solutions and going back to commodity currency...
Sure, a check (or a privately-issued banknote) is a privately-issued form of promise-backed currency allegedly backed, in the usual case, by some form of government-issued currency in the banks hands (either in a specific account or the banks general reserve.) To argue against promise-backed currencies and then argue for using checks is to argue incoherently -- a check or banknote is promise-backed.
Or I could use a government-issued gold-backed representational currency, rather than resorting to a privately-issued one; which is why government-issued representational currencies largely displaced government-validate coins (commodity currency) in practical exchange. And for any instant exchange, such a currency is no worse than a government-issued fiat currency. OTOH, if I want to be able to do business and only worry about the general economy as a whole, and the specific industry I work in, but not be concerned additionally about momentary disruptions of the gold supply, I'd be a lot happier using a fiat currency issued by a stable government: which is one reason why fiat currencies have displaced representational currencies globally.
No on is being "robbed" of anything. Money is a medium of exchange. Failing to exchange it for something of value may result in its value changing before you do so. The extreme short-term volatility of commodity money is not preferable the gradual long-term decline in value of most fiat money, since the latter much more than the former can be managed by purchasing productive assets with the money in some reasonable time.
No, its much more volatile, though the more extreme fluctuations may have a greater tendency to average out over the extremely long-term. But short-term volatility is more damaging than long-term decline in value, because the long-term decline can be managed by purchasing productive assets, while the more extreme short-term volatility of commodity prices is harder to manage. There are plenty of long-term stores of value available to participants in the economy: the essential and indispensable role of government-issued money is in a medium of exchange, not a long-term store of value.
Didn't you listen to the parent? Its got an intrinsic value!
Control is an illusion, order our comforting lie. From chaos, through chaos, into chaos we fly
I am sorry, but that's simply incorrect. A check is a draft. As described by the UCC article 3, it is an order to pay. That's why all checks have the words "pay to the order of" on them. A check is a written instruction to a storage institution (ie, bank) to pay (or transfer ownership) of what you store with them. It is distinctly different from as a promise (such as IOU) in that you cannot be sued for writing a check. While it is against certain laws to write "bad" checks, the act of writing a check itself does not create a liability to the person to whom the check is written. No promise is made there. If you make a promise (as with an IOU), you do create a liability -- you can be sued for not fulfilling the promise. As for the claim that a check has to be drawn against a government-backed currency, that's pure fantasy. It is nothing but an order (a command) to pay to the presenter (or to the person whose name is written on the check).
You are correct that bank notes are in fact notes (ie, promises). But I wasn't arguing for bank notes. I was saying that some banks may be trusted enough that the notes that they issue will become "as good as gold" as the expression goes. But would only be because they have the reputation of paying out the gold upon presenting of the notes. The first time they fail to pay, their promise would become worthless. Bank notes would be rated in much the same way as the bonds are currently rated -- by their trustworthiness.
But since you are advocating undoing all those layers of solutions and going back to commodity currency.Not all those layers were solutions. Some did occur naturally to fulfill market-place needs, but some were not. Fiat currency did not solve any problem other than the government's need to issue as much money as they saw fit. That's bona fide debasement.
When I say that these issues have been resolved, I'm referring to the fact that the argument for the central bank (as proposed by Hamilton) have been thoroughly reviewed and consequently rejected by the writers of the Constitution. The banking system was perfected about fifty to a hundred years prior to the American Revolution. It was perfected in England where the practice of writing checks to banks and using bearer checks as currency started. Fiat currency is based on trust and trust is not something that can be demanded (as is the case with anything dictated by law). Trust is only something that results from people's own judgments. In the absence of trust, the exchange must involve something that has unquestionable value. The fungible nature of commodities makes them perfect as a medium for such exchange.Any guest worker system is indistinguishable from indentured servitude.
That's because people are stupid.
Changing to commodity or representational money will not change that (if anything, it will be a symptom that that problem has gotten worse.)
But it won't do so nearly as quickly as investing poorly, which is what you are asserting that they are doing (and, in fact, many people are doing.) I suspect the reason is more that they've heard you can make lots of money investing (which you can, if you are smart and/or lucky enough), which they will continue to hear (because it will continue to be true) no matter what monetary system is in place, as long as there is even a modestly functional economy. Commodity or representational money won't substantially reduce the extreme gap in value between sitting your money on the shelf and investing it well, and the perceived gains to be made investing. (It will probably reduce the average financial gain from investing a bit, but while that will generally slow the economy down, it won't stop investing from being attractive, especially to the people who invest without knowing much based on unreasonable expectations that they will with little effort have good results.)
I wasn't aware you were advocating compelling people to retain their earnings as cash. But, feel free to make the case for that if you wish.
They'd be somewhat more likely too, though most would probably prefer investments with a positive return to no return even then. Of course, if keeping cash around for no return was better than what the market had to offer, people would keep cash and no one would invest: but I don't think that's a desirable outcome.
"Savings accounts" are not "cash". They are low-risk investment. People keep their money in savings accounts now, if they don't have a lot of savings outside of tax-sheltered retirement accounts. Usually, you can get better returns (with less liquidity) with other investments, particularly if you want to invest more, and there are more options for small investors than in the 1980s, with more liquidity, and interest rates are lower, which makes savings accounts less attractive. A savings account is basically letting the bank invest your money for you, and giving the bank virtually all of the returns in exchange for saving you the work of finding decent investments.
Largely because corporations have abandoned defined-benefit pensions. Tax policy plays an important (but not the only) role here, but the currency system is almost completely irrelevant.
How is buying valuable assets (whether financial instruments or otherwise) with money and using those assets to finance retirement less desirable? I really don't think it makes sense to destroy our money system chasing after your misguided idea that people need to be able to just keep surplus cash in their closet and use it to retire.
I am so glad some else has researched this and spared me the trouble. This is, of course, the natural consequence of the fact that with improved efficiency the cost of production and therefore prices must naturally fall. I remember reading somewhere that it was precisely this gold vs silver struggle that was behind the allegories of "golden brick road" and "silver shoes" in the Wizard of Oz. Maybe it was just another slashdot post though. I really don't recall the source.
But to argue with your post I would say that that which you point out as a negative is probably a positive. If farmers couldn't make use of their land, they could rent it out for gold. Naturally that would make food production more scarce and raise the food prices. But that would just force the food prices to catch up with the realistic market-place level.
As for the "lack of investment" part of the comment. So what? Investment in true innovation still happened. It is the speculative nature of investing that went away. I would say that's a plus. I am not sure how it sucks for the common men to be able to save without having to take risks instead of having the current system where Wall Street gives out on the order of $5-$10 billion in bonuses every year while people are to forced watch large portions of their retirement disappear due to mismanagement of fund managers. Volatility should be left to well-informed. Allowing people to preserve their capital in a gold cache would do just that.
Any guest worker system is indistinguishable from indentured servitude.
Any guest worker system is indistinguishable from indentured servitude.
In Second Life, Grey Goo shoot you!
the gold standard fixes the exchange rate between gold and the currency. So a fixed ammount of gold will get you a fixed ammount of currency and vice-versa. The value of gold and the currency tied to it will of course vary relative to other commodities.
If we assume governments don't cheat on the gold standard (that is they hold enough gold to back up all the money they issue, something not all did in practice) then what this means is that if gold becomes rarer (say because it is used in some valuable new industrial process) you get deflation. If on the other hand gold becomes more plentiful (say the discovery of a big new gold deposit) you get inflation.
Which would you rather have controlling the value of your currency? Your government (which is presumablly acting at least somewhat in the direction of self preservation) or the variations of a metal market?
A gold standard also wastes a lot of rescourses mining a difficult to mine commodity just to store it in bank vaults.
note: i'm known as plugwash most places but i screwd up registering that here somehow in the past and now can't register
Much of that thinking is operating in the realm of the illusion that has been created surrounding energy and assets exchange accounting systems.
As for inflation since academics are still debating the cause I think inflation is the measure of asset devaluation and THEFT from the system. Theft being manipulation of monetary instruments to extract wealth from the system rather than creating economic value.
"an infinite player that has lost his finite mind" ~Infinite Play the Movie (it blends with reality)
That's because people are stupid.
Changing to commodity or representational money will not change that (if anything, it will be a symptom that that problem has gotten worse.)
That's elitist and more importantly inaccurate. It's because people don't have a choice. If they don't invest, they lose their savings. That's what will change. It will remove the NEED to invest. So the only time that people will invest will be when they are sure. Given that the most damaging bubble (and its subsequent bursting) in the history of the US economy occurred while the US was on the gold standard with free convertibility -- and gold/silver currency is the only part here that isn't part of the current system, free exchange of property is not, contrary to your misinformation, illegal -- I see no reason to believe this. I assume you are referring to the crash of 1929. That is an interesting argument. But it only goes to prove that 1913-1933 we were on gold standard in name only. The largest effect on the general public from the crash was not loss of investment (most people didn't invest then). It was the collapse of banks. Had the fed not issued credit which was not trully backed by gold, the banks wouldn't be able to lend out so much money and wouldn't have collapsed. On a personal note, please, stay away from ad hominems such as "your misinformation". I wasn't aware you were advocating compelling people to retain their earnings as cash. But, feel free to make the case for that if you wish. eeehh... ad hominem. skip. People are arrested for no valid reason whatsoever. So what? I'll leave that one alone. By your own claim, this didn't happen until sometime after the 1980s, while the US dropped convertibility of gold in the 1930s. Something is out of whack here. The changes that have encouraged speculation as the main route of retirement savings have little to do with the monetary system. It is the confluence of trends that causes singularities. Had people kept their savings in gold, the trend of having to invest when everyone else is wouldn't be there -- people would be perfectly happy with moderate rate of savings their gold provided them. I don't know why you keep insisting that we were still on a gold standard until 1930s. Can you outline the exact procedure one would have to go through to get the gold equivalent of their money in 1925 from the federal reserve? Or at least provide a link to it? Because I haven't been able to find out if it was practically possible to actually get your dollar's worth in gold. To me that's an indication of zero trust.Any guest worker system is indistinguishable from indentured servitude.
Any guest worker system is indistinguishable from indentured servitude.
Any guest worker system is indistinguishable from indentured servitude.
Second Life currency has an official exchange rate. It is directly convertible to real currency. If I run a bank in SL, there's a very real argument that the banking regulations apply to me (or, if they don't, that they should).
One -- you might object 'it's not real currency' -- the response to this is simple: define currency. What makes money valuable to anyone? Why can't I create Dimms, and start using them as if they were legal tender? Companies used to do that, they'd pay employees in company money, run company stores, the works. As I understand it, the answer is that money has value because a large number of people agree that it does**. So the Linden Labs currency can be fixed against real money by fiat, which goes a long way towards making it real money.
Two -- It has an official exchange rate; it can be converted to and from real money. If SL banks don't have to follow banking rules because SL currency isn't real, how long until big-name banks try to pull a fast one? Your bank account isn't actual money, no, you're not depositing anything. You don't have an account balance, no no no -- instead you're now the proud owner of Bank of Ameribucks! Oh, look, all of a sudden we're not "banks" anymore so we don't have to follow all those pesky rules. Sure, they happen to convert to dollars at a fixed rate, but they're not "currency" so it's perfectly fine!
If a loophole like point 2) existed, someone would try to take advantage of it; therefore I'm quite sure that banking regulations apply to anyone who deals in anything that even looks like currency. IANAL, but I'd be willing to bet that the banking regulations as written technically cover entities storing accounts in Second Life dollars in most places; nobody cared before because -- well, actually, the Second Lifers cared, but nobody had ever caused a problem before, so it was ignored.
** -- Yes, I know, horrible oversimplification.
The Nazis did this to Hungary in WWII...
Are you adequate?
The non-gold metals we make our American coins from don't really corrode, and are certainly workable enough to make currency. Gold is too soft to circulate without adulteration into an alloy.
Those aren't "intrinsic value", they're excuses to fetishize gold. There is no intrinsic value in anything that can't be consumed, or directly used to create something else of greater value (like iron for shovels). Gold a great con job.
--
make install -not war
You're not understanding the history. Let's say a farmer bought land in 1870. Under a rationally functioning market, the price of the land, either for sale or for rent, is a function of the productive capacity of the land. As measured in bushels of wheat, let's say the capacity of the land is 1000 bushels a year, and in 1870 dollars, let's say that was worth $1000 1870 dollars (my price levels are off). The rational rent for the land would be something like $1000 - the cost of producing and harvesting 1000 bushels of wheat. The rational sale price for the land would be some present value of the income stream of $1000 - the cost of producing and harvesting 1000 bushels of wheat over say, 20 years.
Now, imagine 10% annual deflation for 5 years. At the end of the five years, the farmer who bought the land has a mortgage that made sense when the land produced $1000 worth of wheat a year, except that now it only produces $650 dollars worth of wheat. His mortgage payment is the same, but his income, measured in dollars, has declined 35%. He's fucked. He can't make any more money renting the land, because the rental value of the land has declined as well. He can't sell the land for what he paid, because it's value has declined, due to the declining income stream associated with the land.
In your example, you posit that food prices would rise. In isolation, perhaps. You have to consider the overall purchasing activity, however. If your money supply is fixed, which is what a gold standard does, the overall price level, for all goods consumed, becomes a function of the size of the money supply. Food prices can't rise without reducing the purchases of something else, because people simply don't have the currency. So if food prices rise, demand for some other good falls, and that lowers the price of that good. Overall, if the supply of gold is small in relation to a growing economy, prices of goods in relation to gold will never catch up. The only way that the overall price level of a basket of goods can equalize with gold is if the size of the basket declines. That is, the size of the economy has to decline, either through emmigration or mass poverty.
This was a very real experience in the late 1800's, and led to the free silver movement, which desired to monetise silver to increase the money supply.
The lesson monetarists have learned from this is that the money supply needs to be roughly stable in proportion to the size and activity of the economy, or you get distortive effects as people try to not hold either money or property. Slight inflation tends to be more popular with the masses, as it favors those who hold real estate and are paying off loans.
Where this relates to fiat money is that if your central banker doesn't understand what is happening here, it is easy to screw this up by going too far in the other direction, ala the US in the 70's, or any of a dozen banana republic countries we have heard about. Paul Volcker, chairman of the Federal Reserve in the 1980's really understood this, and we all owe him a debt that few understand. People give Reagan accolades for the economic stability we enjoyed from the 80's on. Volcker was the one who is responsible, and Reagan fought him every inch of the way.
I was taught to respect my elders. The trouble is, it's getting harder and harder to find some.
Another, more sujective intrinsic value of gold, is its beauty.
So gold does have intrinsic value and is considered a excellent and portable store of value.
If your money supply is fixed, which is what a gold standard does, the overall price level, for all goods consumed, becomes a function of the size of the money supply.
Why would this be the case? Assuming the diets stay the same (probably a safe assumption for the time period we are talking about), the level of consumption of food would stay the same too. So the amount of food that needs to be purchased stays the same as well. You claim that the food prices fell. The only way that can happen in the conditions of constant demand is if the production costs fell. Given that population was actually rapidly expanding at that time, it is plausible to assume that the demand went up. I don't see how the amount of all other goods consumed would effect the price of food. Everyone still had to buy food. Why would they start offering less money for it? Perhaps the technology for producing food improved? Perhaps it was the train system that became more advanced and made the food supply more fungible and thus more efficient? I don't know enough about farming to suggest other possible improvements.
Food prices can't rise without reducing the purchases of something else, because people simply don't have the currency.
But they don't need to rise. You said they fell. They just have to stay the same. And you say they didn't.
If your money supply is fixed, which is what a gold standard does, the overall price level, for all goods consumed, becomes a function of the size of the money supply.
Not so with essentials. Essentials still take up the same percentage of overall expenditures.... unless their production cost falls. It is the discretionary income that can buy more.
This was a very real experience in the late 1800's
Again, are you confident that it was not a result of blanking of the country with trains (which commoditized food) or of other food-production advances? For example, fertilizers began being industrially produced 1850-1870. Certainly, this reduced the price of food. So I guess I have my answer. All industries (including farming) end up needing to increase levels of production in order to maintain the same lifestyle levels when efficiency increases. If the level on consumption stays the same, that means that less people will be employed by the industry. Phew. Now it makes sense. So the food prices fell and allowed for larger level of population through less starvation.
The only way that the overall price level of a basket of goods can equalize with gold is if the size of the basket declines. That is, the size of the economy has to decline, either through emmigration or mass poverty.
Well, no. If everything gets cheaper (as it does with deflation), then there is extra gold left for research and development. The basket increases because of the increase in efficiency. And that's how economy grows anyway -- with or without the gold standard.
As for the farmers' gripe, I imagine they griped quite a bit because all of a sudden some of them were producing more food and reducing everyone's income per unit produced. Had they gotten their way though (with silver standard) it would have created a bubble. For a while there would be more (silver) money to spend, but it would drive all prices up rather quickly and they would be getting essentially the same share of the economy as before... since people wouldn't eat more. But everyone else would go through a bubble and a burst. In other words, there would be a great deal of discretionary income which would get wasted or get spent on some really risky investments.
Where this relates to fiat money is that if your central banker doesn't understand what is happening here, it is easy to screw this up by goin
Any guest worker system is indistinguishable from indentured servitude.
If you want to base a currency on something intrinsically valuable to a large number of people, how about, say, fresh water?
Not that I've thought about it before, nor do I think it's your advice, but I immediately don't like the idea of making pollution into a possible form of economic warfare. Not that fresh water isn't important for economies right now, but... This makes it a direct representation. If fresh water is the new gold standard, then water sources like Lake Michigan are the new Fort Knox.
I think the best currency standard that has intrinsic value was suggested, of course, in SMAC: Energy. Using it as a literal currency like in SMAC wouldn't work in reality until energy becomes easy to store and transport without losing half due to inefficiencies, but the role of oil kinda shows that it may work as a backing before then.
The best part about using energy as currency though is that scenes where a guy owes somebody some money, and he says to his creditor "Here's your fucking money!" and then punches, shoots, or lasers them would be funnier on a much deeper level.
Or just accept what you're saying and use a floating currency. That works too.
The enemies of Democracy are
Your points about increased production, etc, are well taken, and it would be simplistic to deny them. However, overall price and income levels did decline, for whatever factors, and the gold standard was one of the contributing factors. The limited supply of gold was what let Jay Gould have so much fun cornering the market.
Don't get me wrong, I'm not saying that unlimited expansion of the money supply is a good thing, far from it. I absolutely agree that a rampant increase in the available money supply by moetizing silver might have had the effect you describe. What was happening in the 1800's, and to a lesser extent in the early 1900's was that economic growth was outpacing the money supply. Since the supply of money was relatively fixed, this meant that the prices levels for goods declined, relative to money. This meant that anyone who borrowed money risked ending up having to pay the debt back with more expensive dollars than he borrowed. This is the reverse of what we saw in the 70's with houses. This caused widespread bankruptcies of farmers, and contributed to the urban migration. The farmers' issue was that they couldn't make their mortgage payments, because each year, their goods sold for less than the previous year. Overall production was increasing, but the supply of money was inadequate to allow nominal prices to stay stable or rise. Coincidently, wages were not doing anything great either during this time. The populace's dissatisfaction with this was evident in the political strife of the time.
One way to look at money is that it's just another good. It's particular value is that it is readily accepted by people for other goods. As such, it has a price, too. All goods exist in a price universe, and their price is really a conversion rate between each other. What we call 'price' is just the conversion rate between a good and the 'money' good. We like this because it's hard to quote the prices of Cheetos in terms of Toyota Camry's.
What governments have learned, to their embarrassment and pain, is that if you print more money than is needed by an economy, the value of the money declines to the level that is necessary to facilitate money's value, which is to enable trade. You can view this as prices rising of goods, but what is really happening is that the price of money is falling. If you have too much money, the nominal price of all goods, as measured by the money, rises to some new equilibrium level. If the recent rate of rise has been rapid, this tends to overshoot, which is a whole 'nother topic...
If you shrink the supply of money, what -must- happen for equilibrium to return is that overall prices must decline to the level where the nominal supply of money is sufficient to clear the markets. What starts happening is people get reluctant to buy goods, because they perceive money as more valuable, prices of other goods than money decline, so people's expectation is ratified, so they want to hold money even more, and so on. Unfortunately, this process is usually pretty painful, as was seen in the periodic panics and recessions in the 1800's. Many economists think that an insufficient money supply was one of the key contributing factors to the Great Depression. Certainly leaving the gold standard didn't hurt.
In today's world economy, linking a currency to gold would risk the same deflationary effect. The world's economy is growing faster than the supply of gold, which would constrain credit, and restrict economic growth. The probable effect would be reduction of salaries and wages, and an increase in the concentration of financial wealth. It would be good for people holding bonds, Tbills, and currency denominated assets. It would be bad for people who are paid in current dollars, but hold debts in old dollars, as well as people who own goods and real estate. In short, most of us.
You won't even see the Wall Street Journal or the Economist promoting a gold standard, and they mostly support the views of the class that would benefit.
I was taught to respect my elders. The trouble is, it's getting harder and harder to find some.
Having behind us the producing masses of this nation and the world, supported by the commercial interests, the laboring interests and the toilers everywhere, we will answer their demand for a gold standard by saying to them: You shall not press down upon the brow of labor this crown of thorns, you shall not crucify mankind upon a cross of gold.
Two word's -- Wiemar Republic & Zimbabwe
Actually, those are four words... oh! I see. Inflation.
No sig
There's nothing "elitist" about it. It's not inaccurate, either.
AS you yourself note, the degree to which people do this has changed over the last 20 years (since the 80s), and the monetary system hasn't changed since then. People have changed the choices they make, which demonstrates that they do, in fact, have choices.
If they don't invest at all, they face a very slow decline in the value of their cash. If they "invest" in simple interest bearing accounts like savings accounts, they face slower or no decline in the value of their savings. People make higher risk investments not because they are compelled to do so by the gradual decline in the value of fiat currency, but because they are forced to do so by the increasing uncertainty in retirement due to the erosion of defined-benefit pensions, the shorter duration of employment with a single employer, rising healthcare costs, reduced social support programs, and a number of other economic and government policy factors unrelated to the currency system.
Characterizing your statement as "misinformation" is not ad hominem, any more than your characterizing my statement as "elitist" is ad hominem.
"Argumentum ad hominem" is raising arguments about personal characteristics of the other participant in an argument and suggesting their arguments should be discarded because the person making the argument is a bad person. If you are going to complain about ad hominem, please learn what it is first.
There's no evidence to support this. People have been seeking interest-bearing accounts and other investments for retirement security for centuries: purchased annuities have been a popular vehicle since the Middle Ages. People may or may not invest, as you suggest, because pressure from the perception that "everyone else is", but that's not because we aren't on the gold standard. Personally-directed retirement investment may be more popular now than it was even a few decades ago both because their are increased tax incentives and more available vehicles to do it now, and because reliable, employer-provided defined benefit pensions are less commonly found than they were even 20 years ago.
You yourself have noted we were still on the gold standard under the Breton Woods system, which Nixon withdrew from, which mandated currencies be convertible (among participants, not the public) for gold. But free (i.e., public) convertibility of gold stopped with the recall of bullion, gold certificates, etc. under Roosevelt in 1933 (which also was when the US left the gold standard until reestablishing it by joining Bretton Woods in 1946.)
Strangely, the "exact procedure" for redeeming certificates that were made unredeemable more than half a century before the creation of the web browser aren't easy to find on the web. However, the whole reason that the decisi
Except that it has nothing to do with "fiat currency", since the currency described is a representational (commodity-backed) currency. IF you are going to argue about fiat vs. other kinds of currency, it would help to learn what "fiat currency" refers to.
No, actually, a single-commodity system faces greater volatility than modern first-world fiat money systems. That intense volatility may be fluctuation around under a long-run average that doesn't have the kind of gradual downward trend that fiat money tends to have, which is better for institutions which hold large stocks of cash (and act as creditors) for generations, and similarly bad for institutions whose assets are physical capital rather than money and tend to have, over an extended period, more debt than cash, but its still intense volatility.
A check is an order to the bank. To the recipient, it is a promise that there are sufficient funds in the account to cover the draft (and, on top of that, that the order will not be cancelled before the draft is presented through a separate communication with the bank), a promise which is, all too frequently, false; which is why, even with all the modern infrastructure to increase trust by allowing some degree of verification of such promises, checks have fallen out of favor for transactions where there are practical alternatives.
You can't be sued for issuing an IOU either. You can be sued for not paying on an IOU, just as you can be sued for not having the funds for a check.
I tend to fall in with the Catholic view of things (unsuprising, being Catholic): usury is what happens to "interest" after it reaches the point where it could no longer be called just. Catholic thought recognizes that it is possible to lend, and to profit by lending, in a just manner, because there are times when it is advantageous to be a borrower. Thus I really don't worry much about most mortgages and think that payday loan places are, ahem, very close to the scum of the earth.
Here's the deal: in the real world, it takes money to make money. Unless you are already blessed by having wealthy parents, you start with no money or significant property. You have essentially three options to get a career which will allow you to lead a middle-class or better existence: get a college degree, open a business, or be one of the extraordinarily lucky souls in a profession based on natural talent which happens to pay well (football star, etc). Option #3 isn't viable for most people, and option #1 and #2 cost tens of thousands of dollars.
Now, you could try to get your way to the $20,000 worth of seed capital you'd need to get a four year education at a state school by working long nights at low-skilled labor. And, hey, people have done that and if you choose to do it more power to you. However, that throws away years of your life which you will never get back. You could have money donated to you by someone and, hey, if that is an option more power to both of you. Or you could take a loan for the money.
Work with me on the math here: as unskilled labor, the value of your time is approximately $20,000 a year. Let's say you're dead set that you want to major in Women's Studies and graduate with no job skills -- this will still increase your salary to $30,000 a year, give or take, just for having the BA credential. Now, you can either work 2 years at McDonalds to get the $20,000 saved up for college, or you can talk to the bank (realistically, the financial aid office, but it wouldn't change the analysis if you were getting private loans, just bump up the interest).
What does the bank give you in return for your interest payments over the next years? *Two years of your life back*. Instead of going through indentured servitude @ 20k to pay for college, you get to graduate two years earlier and immediately start earning a $10,000 a year premium. Next to that, the ~$3,000 you will pay on interest in your first year (assumption is 15% interest, which is on the high end of private lenders for educational loans) is peanuts. The amount of interest you pay every year decreases, and the value of your degree compounds every year with salary raises. You'd be a fool not to sign up for this.
Education is my canonical example of something you should really be happy to be pay interest for. Other income producing assets, like a building or non-residential real estate, are good choices. After that, the case becomes marginally less clear, and it comes down to how much you want that object of your desires *today*. For example, many men in my situation (mid-twenties, stable professional income, modest savings) are thinking of marrying a bonny lass and buying a house within the next 5 years. That is not a realistic goal without borrowing money to do so. I could do things the Japanese way and save money from my paycheck for the next ~20 years, then shock the bejeesus out of some agent and buy a house in cash, right about when my kids were getting into college. OR, I could sign a home loan with my wife, and have my kids grow up in a house as opposed to a tiny shoebox apartment. There might very well be some value to that that I am willing to pay for. And clearly its right to pay for putting a roof over my childrens' heads: I would do it to my landlord, why not do it to the bank that is fronting me several hundred thousand dollars so that we can live in a slightly better manner.
Help poke pirates in the eyepatch, arr.
What do you think is backing the US Dollar? The Saudis... And look at all the trouble that has caused.
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"Little does he know, but there is no 'I' in 'Idiot'!"
That is pretty much the reason that checks have fallen out of favor. Unlike payment by a credit card, a payment by check is accepted based on trust (rather than legally-binding obligation) that the writer has the funds. Since commerce has become much more impersonal and occurs between buyers and agents of merchants (ie cashiers) rather than merchants themself, the trust can rarely be established. Of course, it might be a chicken and egg argument. Did the commerce become impersonal because it is obligation rather than trust based? Or did the impersonal nature of modern commerce create a market-place need for obligation-backed payment methods?
Any guest worker system is indistinguishable from indentured servitude.
Ok, I realize that my mental picture is not yours, so I won't get upset that it is getting hard to communicate this. First, my assumptions. I view all commodities (including money and gold) as liquid... literally. I view them as flowing in an out of possession. I guess that's a digression.
To the point then. You keep insisting on blaming things on the gold standard when the reality of the situation is that having a fixed or slowly increasing supply of money treats prices as relative shares of the total amount of the purchasing power of money. Ie., if there is $1mil ounces of gold available and I have 1 ounce, then I should expect to be able to buy 1/1mil of the total things that can be bought. The thing is that with improved efficiency (which is what's expected in an industrial society) more goods become available. The reason farmers went bankrupt is that some of them had to. As farming became more efficient, less farmers would be needed to produce the same amount of food. But that's the effect of increased efficiency on all industries. Which farmers went bankrupt was determined by the fact of which of them made better economic choices than others. In a climate of increasing efficiency (since the prices are expected to fall), it must be expected that long term loans are a really bad idea unless they are made with zero interest. Why would a bank make such a loan? I'll get to that in a second. But first, a modern example. Despite inflation, the advances in computers have been so rapid that computer power per dollar spent still increases. So if a large computation (let's say that it would theoretically take years to make) has to be performed, it is a bad idea to take out a loan and start computing. A better idea is to use the money to gradually buy up computing power with the money that would otherwise be spent on mortgage payments. How is that example relevant to farmers? They would be better off buying things as they need them instead of planning ahead. It seems counterintuitive, but people have gotten used to doing that with computers. So I am confident farmers would have gotten used to doing it with their equipment.
Why would banks lend at zero interest? Because storage of gold is a service. Today banks that provide that service (and there are some that provide it to consumers) charge a nominal negative interest (on the order of .5%-1%). It is viewed as a storage fee. Which is a natural way of things, btw. I mean, why do we expect banks to pay us for providing us a service? Anyway, by lending out the gold at zero interest, the banks would pass the cost of storing the gold to the borrowers. They could, also lend it out at lower interest (1% or so), but then again, their added profit there would come from the fact that they would not go through the expense of storing the gold even though they would be charging depositors for that expense.
Lastly, before you disagree again, all the examples you give seem to come from meneytarists. That's why you make statements such as
If you shrink the supply of money, what -must- happen for equilibrium to return is that overall prices must decline to the level where the nominal supply of money is sufficient to clear the markets.
But this ignores the reason why the economy grows. Moneytarist view is that it just does... possibly due to increased population. While the reality is that it grows because of increased efficiency of production. In the environment of increased efficiency, all prices should be expected to fall. And all jobs should be expected to be in jeopardy of disappearing (because same work will be accomplished at some point with less people). You keep saying that it is insufficient supply of gold that caused problems. But you don't actually show how that causality can be established. I suspect you won't be able to. Short term fluctuations notwithstanding, the trend of all prices must be expected to go down. This is the nature of the creative-destructive
Any guest worker system is indistinguishable from indentured servitude.
But it is elitist to claim that "people are stupid". And it is inaccurate to claim that it is the only reason that they go out and make bad investments even though they don't have to. Their lack of education on the subject is not the only reason they do that. Calling an argument elitist is not an ad hominem. Calling a person elitist and claiming that his/her elitism is the sole reason for an argument would be an ad hominem. But I made no such claim.
Any guest worker system is indistinguishable from indentured servitude.
Any guest worker system is indistinguishable from indentured servitude.
In some cases, charging interest (usually at high or usurious rates) on money or property lended causes problems. Most economists attribute the shift from credit being available on only usuorious terms of interest to the modern banking system first established in Holland in the 15th Century as the cause of the shift from wildly fluctuating prices from season to season (up and down) to gradual and persistent inflation. Moderate inflation produces the incentive to invest in productive enterprises, rather than hoarding wealth, which was one necessary step in the economic revolution which brought about the industrial and agricultural revolutions.
An economy based on fraud and usury is on a slippery slope to financial ruin for that entire economy, and SecondLife was headed that way, as Albania did with the collapse of fraudulent schemes in the early nineties in the real world.
There is an interesting philospophical debate on whether investing to recover the time cost of money is prohibited by Judaeo-Christian religions or whether the ban is on usury as we would today understand it.
Uniform Commercial Code was never adopted in Louisiana. QFT.
Then there's the long term devaluation of the currency, essentially the theft of wealth from those who can least afford it. A dollar is now worth a tiny fraction of it's original value, something like 5%. Even short term requirements for particular requirements for a particular commodity don't even come close to that effect.
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Methinks you need to look up the words pretend and fiat.
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Yes, it is tricky remembering the long list of countries China has attacked and conquered in the last 1000 years.
Introduction of regulation is the beginning of the end for entrepreneurs and free markets. It will only be a matter of time before all SL wealth is consolidated in the hands of the few, to the detriment of the many. If these new banks are doing a good job, they will flourish. If not, they will meet their demise. If sanctioned banks are such an ideal prospect, they ought to be able to eliminate these upstarts naturally. If the sanctioning process puts them at a competitive disadvantage, a flaw in that system will have been exposed. The only real reason to ban this activity is if the free market is a Very Bad Thing. In which case, institute tight controls. However, I thought the best thing about SL was supposed to be the freedom to do anything. By contrast, most virtual experiences are very limited, controlled and big-brotherly. This path of action would appear to be a devolution for SL. (cue Whip It)
So all you had to contribute was hyperbole?
The most recent numbers I found were from October, 2007. In that month we exported $141.7 billion worth of goods. America still produces (and exports) a great deal. Besides, even if we exported NOTHING my point would be valid: if the US Dollar continued to lose value it would, eventually, make us very attractive to foreign investors. Foreign companies would close their domestic factories and offshore to the US.
And actually, the theories of Adam Smith hold up now more than ever. And lets be real, have you ever actually READ the Wealth of Nations?
Wow, really? That's curious. How did they manage to avoid it? The Constitution give the power to regulate interstate commerce to the Congress. Again, I am not a lawyer. So I must not be understanding something here. Is UCC optional for states?
Any guest worker system is indistinguishable from indentured servitude.
As opposed to using it for jewelery and circuitry. I miss those days when a rise in demand for jewelery would cause your economy to slow down because people would rather save their now-appreciating gold than spend it today. I miss those days when, during hard times, the only way for government to stimulate the economy was to increase government spending, leading to an increase in interest rates at a time when it would hurt most, to say nothing about the issues of gratuitous government spending that arise.
Having fake money gives governments the useful tool of monetary policy, which lets governments exploit inertia in the economy to increase production, without having to spend (as much of) your hard-earned taxes. It also has the nice effect of making money *only* useful for measuring value, leaving other precious materials to be put to better uses than padding bank accounts.
You'd have to be stupid to put $30,000 in a bank account that doesn't pay interest. Sure, in 10 years time the value of a single $1 may be much reduced, but if you put your money in a variable-interest account (or a fixed-interest one if you want to gamble with your savings), you'll be able to buy (slightly) more with the $30,000 + interest than you could with the original $30,000. Contrast that with putting 1 metric ton away in 1910. According to the US Geological Survey[1], 1T of gold in 1910 gave you as much buying power as $10,600,000 would in 1998. 10 years later, that same 1T you put away would give you almost half the buying power ($5,370,000 in 1998 dollars). Pick another 10-year span and you might get the opposite effect. The point is, even putting away precious metals won't guarantee you the same buying power 10 years later. With real currency, you're subjecting your savings to the market.
This all shows there is no absolute measure of value. The value of something depends on what you can do with it, which changes as society and technology changes. At least with fake money, you're not tying measurement of value with the results of market forces for the commodity backing the currency.
Lastly, inflation doesn't make having debts any more attractive since you'll have to pay interest in the future anyway. Any serious lender will factor inflation into the interest rate. Inflation just makes things more uncertain, since a drop in the inflation rate means you'll have to give up more restaurant dinners to meet your interest payments.
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[1] http://minerals.usgs.gov/ds/2005/140/
Since I was discussing the pragmatics on not the legalities, that's pretty irrelevant. But you are wrong on the legalities, as well.
No, agreeing to purchase the items creates a purchase contract which makes the purchaser liable for $1000; the check if and when honored satisfies that obligation.
No, they're both true. You can, in fact, be sued for passing a bad check, but not for writing a check that isn't bad. You can't sued for writing an IOU, only for not paying on it.
The UCC, covering, as it does, contracts in which their is an exchange for goods, doesn't address bare (gratuitously-issued) notes or checks. It does address checks and notes ("IOU") given in satisfaction of an existing (or simultaneously created) obligation, such as a purchase contract. And, under UCC 3-310, a check or note (other than certified, cashier's, or teller's check, which has the same effect as money) has the same effect on the pre-existing obligation: the check or note suspends the obligation until the check or note is either dishonored or paid. (Checks are a little bit different in that they can be certified after given, in which case they discharge the obligation as if they were money.)
I'm not sure what you are imagining supports your argument in UCC Article 3. Could you be more specific?
Certainly under the UCC, that's entirely wrong; a dishonored check or note can be enforced under the UCC (Sec. 3-310(3)-(4)), and the drawer (the person writing the check) is legally obligated to pay the amount of the check if the bank on which it was drawn does not pay it or agree in writing to pay it. (UCC Sec. 3-414).
XenoPhage
Technological Musings
No, its not. Though its perhaps unnecessarily loaded language, and "people fall short of the rational actors that are a convenient simplification of economic theory in that they often fail to apply all the information at hand to determine the course of action with the greatest expected utility" would be better.
But "people are stupid" is short and to the point.
Certainly. People are ignorant* as well as stupid**.
* if you prefer the verbose and less colorful version: "People fall short of the rational actor model, besides the way discussed above, by not having perfect information from which to assess the utilities of their decisions, which would frustrate them in their efforts to act 'rationally' [in terms of the model] even if they did fully utilize the information available, which, as discussed previously, they frequently do not."
** See discussion in the first response paragraph in this post.
Lack of education isn't stupidity (or even a source of stupidity, though it may be the product of it). It is, frequently, a contributor to ignorance, though.
Yes. Exactly. Saying "X is no more Y than Z is" is not saying "Z is X". Now that that's clarified, go back and read the post you were responding to here: you might actually understand it this time.
Yes, actually, its rather easy to compare the volatility of commodity prices with regard to an inflation adjusted currency figure (to get, e.g., a gold:constant $ ratio) vs. the volatility of existing real world currencies (e.g., current $:constant $).
So?
Irrelevant. Gold is traded as a commodity in an environment with modern information systems. Using gold traded for its commodity value as currency will give the currency the volatility of gold as a commodity.
It wouldn't. It would increase the reward institutions that, over a very long period, held large stocks of cash and dollar-denominated financial assets, and punish (compared to the status quo) those that hold non-dollar/gold physical assets.
If you say so.
metamorphism (n.): "The process by which rocks are altered in composition, texture, or internal structure by extreme heat, pressure, and the introduction of new chemical substances."
I think you are looking for "metamorphosis". Or, if you would just use the most natural English word for the meaning, "change". Or, if you need a big Greek-origin word that captures the meaning you are looking for more specifically than just "change" (which "metamorposis" or "metamorphism" in its archaic sense does not), "metanoia", though that's usually used in a religious context.
I see relatively little evidence that "technology geeks", as a class, have generally gone through that particular conversion experience. And its not like I haven't been explaining things to you at length. And I'm not really an economics-specific geek.
But bravo on the series of inaccuracies and unsupported generalizations crammed into that one sentence.
What invective?
You can try to establish the standard where you get to make any claim you want with no substantiation and anyone who contradicts you needs to provide external sources, but don't expect anyone else to play that game.
Um, I didn't. You're the only one who has used that kind of language in this exchange. Perhaps you ought to practice what you preach.
If academics are still debating the cause, I think that implies woolly thinking and inability to see past certain assumptions that they regard as axiomatic. I suspect your assesment of the cause is correct.
Rich
All your arguments for supporting the claim that a check creates a promise are based on presupposition that a liability has already existed at the time of the writing of the check. But if a liability had already existed, the check would not create a new liability. It would as you put it "suspend it". Any instrument which does not create a liability does not create a promise. For example, if one were to write a bad check against bank A and try to deposit it in bank B, the check would bounce. But bank B would not be able to sue the writer of the check. If the check itself created a promise, then bank B would be able to sue the writer of the check for not fulfilling the promise. The original argument was that checks do not create new liabilities. They may be used to satisfy old ones, yes. But they do not create any obligations on behalf of the writer. Only the banks against which the checks are written have obligations that must be satisfied after a check was written. Perhaps the word I am missing is a "contract". A check does not comit the writer to a contract. And without a contract, no promise is made. The bank against which the check is drawn, however, does have to to satisfy the contract it has with the depositor. Part of that contract is to pay out on all orders as long as funds are available. This is how checks are different from promise-based currency. Everything we've said so far does not change the fact that a check is an order to pay -- not a promise (in the sense of "a contract") to be able to pay. So resorting to checks in the cases of transfering large amounts of gold instead of physically carrying the stuff would be a perfectly acceptable and reasonable alternative.
Any guest worker system is indistinguishable from indentured servitude.
First, I never made the claim that a check "creates" a promise, especially not a generally legally-binding one (I haven't said it doesn't, either claim is irrelevant to my point.) I have said that a check acts as a promise and is accepted, as is an IOU, on trust. Whether there is legal enforcement and under what circumstances is largely irrelevant.
You've gone off on a bizarre (and inaccurate) tangent arguing that a check isn't a legally-enforceable promise to pay in the way that an IOU is, and claiming that this position is supported by Article 3 of the Uniform Commercial Code. I've pointed to the precise provisions of the Uniform Commercial Code which make any check to which the UCC applies just as enforceable as an IOU.
Neither does a gratuitously-given promissory note (IOU). A one-sided offer of something that isn't in exchange for return consideration can't form a contract. OTOH, a check given in exchange for something creates just as much of an obligation as an IOU given in such an exchange.
Incorrect. A promise is required for a contract, a contract is not required for a promise.
A merchant's acceptance of a check is based on trust in the implied promise that the check-writer has the funds on deposit, and the merchant's trust in the banks ability and willingness to fulfill its obligation to pay, whether or not such a promise is enforceable in law (in fact, the promises are enforceable in law, as the provisions of the UCC article you waved vaguely at to defend the contrary position show, as the specific sections of that article I cited in the prior post show. I invited you to point to the specific provisions you felt supported your position, an invitation which you have ignored.)
Since trust in a representational or fiat currency requires only trust in the institution standing behind it (either to redeem representational currency or manage fiat currency until you have a chance to exchange it for goods of intrinsic value for fiat currency), rather than such an institution plus the person drawing a draft, there really is nothing, in terms of reliance on trust or promise, to recommend a system based on commodity currency where most practical transactions require some trust-based alternative medium to one in which you just use a representational or fiat currency. Indeed, there is little practical distinction between a check drawn on a gold-denominated account and a gold-denominated representational currency, except that you have trust at least two different people/institutions to accept the former, and only one for the latter.
Sure, if you were forced to operate in a commodity-currency system, that's pretty much a necessary course of action. But if you are going to be forced to resort to that, you are better off with a representational currency if you are wedded to the idea of some tight chain to a commodity: at least that way, you only have to trust the issuing/redeeming institution, not a bank plus a check-writer. And once you do that, you realize you are even better off with a fiat currency, where you are mostly insulated (once you purchase it) from short-term fluctuations in the supply or demand for a particular commodity that may be unrelated to your interests, yo
The UCC isn't focussed on interstate commerce, and isn't adopted by Congress. It is a product of the National Conference of Commissioners on Uniform State Laws and the American Law Institute, and then adopted (if at all), either as written or with modifications by state legislatures. All US states (and, IIRC, all or most other US jurisdictions) have adopted the UCC in whole or in large part, Louisiana is notable because they didn't adopt Article 2 (covering sales of goods). All this and more is covered in the fairly good wikipedia article on the UCC.
I disagree with the word "nothing" as used in this assertion.
I was using the example of checks as examples of what can be used to handle extraordinary transactions. Usual every-day transactions could be just as easily handled with commodity cache.Any guest worker system is indistinguishable from indentured servitude.
I was just being flippant. While technically La. didn't adopt the UCC like the 49 other states did, all the states are subtly different, and LA. is close enough in most areas.
As you say, the UCC is state law. It isn't related to Federal legislation to regulate interstate commerce. UCC applies to everyday people and businesses in the transactions they make.
Until the 1950s, the states all had fairly different laws regulating what is a contract, what to do whent here is no contract, what kind of promises become part of the warranty, and what kinds of rules govern this or that aspect of deals.
To encourage more deal making, uniform rules were suggested, and 49 states adopted the UCC is one form or another so that contract practices were fluid and consistent. Technically, Louisiana went a different way, but largely is in line with other states.
The UCC is totally optional for state legislators. You see these types of model codes attempted in most legal fields. The Model Penal Code, for example, was not adopted by even a single state (though the military uses it). The UCC is probably the most successful example of these kinds of reform, but have little to do with federalism per se.
No, he hasn't. Or if he read about it his ECON 2101 class in , he didn't really understand it.
Thank you for being a strong, knowledgeable counterpoint to these "Paulsies". Your have not gone unnoticed.
I'm the guy with the unpopular opinion
If you think any of that has any truth to it at all, I've got another paranoid delusion to show you.
http://www.loosechange911.com/I'm the guy with the unpopular opinion
Your logic is flawed in so many ways.
First, interst on bank accounts never out paces inflation by very much. The banks just can't afford it. They exist on the cash flow between loan interest (income) and paying interest (outgo). The inflation rate will be added to interest income and will be leveraged against the paying interest. If the paying interest is less than inflation, the bank is making money.
Value is an always will be speculative. The problem with having a fiat currency (with no metals backing) is the value is completely subjective. At least with metals, there is an international market value, set by the market. With fiat currency the value of the money is up to those who control it. In the U.S. it is the Federal Reserve (FR), which as I pointed out is not part of the government. All the economic woes of this country are controlled by 12 or so private banks. Each bank can have appreciable effect when acting alone, but are devastating when in working in concert. The government has NO control over the FR, though it can apply some pressure. Obviously any entity created by an act of congress can be destroyed by an act of congress. The problem is once created it is hard to argue for is dissolve.
The choice is simple: let bankers who never have your best interest in mind control the economy, or let free markets do it where you and everyone else are an active participants. When bankers control your money, it falls to 4% of what it was in 100 years. I don't see gold falling to 4%... ever.
Finally your last statement... Well it is never profitable to take out a loan unless it is applied in a way that the return out-paces the interest on it. This is rarely true for anything, but recently there have been properties who came close to breaking even. Houses purchased in the late 90s/early 2000s have tripled in some markets. This approaches the cost of the loan in totality in today's dollars. You essentially live in a house for free. Sure you pay the bank every month, the the appreciation is equal to what you pay. This of course won't be sustained, but it is interesting to note that it can happen.
Gold in 1913 was $20.67 an oz, today that number is $438.82 after correcting for inflation. Right now the market is at $894.90, meaning that gold has doubled in _real_ value over the last 94 years. The problem with the way you measured things above, is that you measured it through inflation, so you see a compounded effect of national currency fluctuations and market fluctuations. You should remember that golds is a global market and that other national currencies may not have seen the same valuations despite being in the same market.
Slashdot's rate-of-post filter: Preventing you from posting too many great ideas at once.
When they banned gambling, I quit playing, as Is aw that as the only interesting thing. however, when that happened, the economy slowed down. I forsee SL becoming more and more restrictive.
I must profess not to know the situation in the US, but in Australia it is possible to outpace inflation by depositing money in a bank. Just taking a quick look at what might be a typical savings account[1] from the Commonwealth Bank of Australia (a major bank here in Australia), you can earn an annual effective interest rate of 3.04% p.a. as long as you make one deposit each month and no withdrawals (a reasonable practice for a savings account). If I were to put my money in an ING Term Deposit for 1 year, I could earn 7.5% p.a.[3] By comparison, the current CPI inflation rate according to the Reserve Bank of Australia[2] is 1.9% p.a. and has not gone above 4% for the last 3 years.
It is true that money under the mattress is a terrible investment strategy, as money is the only financial instrument that depreciates over time. A good way to save your money would be to put it into something of actual value, be it commodities like gold, or an interest-bearing bank account (which has actual value because the bank can use your money to finance profitable ventures, giving real value back). But that does not change the fact that money is a great medium for the measure and transfer of value across space (not time).
Having something used only for measuring value, and nothing else, allows us to decouple the measure of value from unrelated market forces which may be operating on a commodity currency. The money value of a meat pie today is unrelated to the supply and demand of gold, or any other metal you might use to back a currency. I would consider that a good thing. Fiat currency also has a nice side-effect of letting governments exploit market inefficiencies to stimulate the economy during hard times.
Money does not store value, it only measures it.
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[1] http://www.commbank.com.au/personal/accounts/awardsaver/rates-fees/default.aspx
[2] http://www.rba.gov.au/
[3] http://ingdirect.com.au/savings/our_products/term_deposits.htm