Wrong. Socialists believe that government has a responsibility to take care of societies basic needs because it isn't profitable enough for private industry to do so.
Maybe that's what the wimpy socialists where you live want. Here in Sweden, we call that "social democracy" and has had it for half a century: the government provides roads, health care insurance, health care suppliers, unemployment insurance, child care, parental leave, insurance for lost income during sickness, a pension system, etc, etc. The people we call "socialists" want to go further than that: they want society to be more politically controlled in various ways, and many of them see Cuba as an ideal.
If we go back to the first half of the 20th century, central control of the economy was at the heart of socialism. It was believed to be a more rational way to run a society. It was also how the Soviet Union was run, and how China was run up until the 1970's.
Also, a lot of socialists ARE authoritarians - they believe they can and should shuffle people around with force to realise their ideals.
Even banning legal tender will not get rid of "money", people would still find a default medium for representing value, even if it is a more traditional good such as coffee beans or salt.
You can do that if the world economy collapses too...
With very high inflation, people rush to buy things before their money becomes worthless
Yes, I believe I said that. "only matters if it starts making day-to-day commerce inconvenient".
It's not just a matter of convenience, it can also lead to investments not being made because they require saving up money (for example, if someone needs to buy a car for their business, or buy their apartment so they can live cheaper in the long run).
A cow and a dozen chickens would be a vast overpayment for an iPhone. Cows cost something closer far to $1000 than $500, though chickens are pretty cheap. Unless of course, we're talking about a younger cow.
You can provide every human need and desire for free using magic, if you have magic.
You can collapse the world economy to the point where no one trusts representative value, then you will be bartering a cow and a dozen chickens for your next iPhone.
There's a third way: central control of the economy could eliminate the need for money. This is what some socialists want to do.
I don't think that would happen - If we had a practically infinite supply of energy, people would start competing for something else instead. Like information, or social status. It's in human nature to not only improve their lot, but to improve it in relation to their peers.
Only true in a sense. BitCoins are currently scarce due to limitations in computing power, but there's another scarcity built into the system - once 21 million BitCoins have been generated, no more can ever be made. That scarcity is due to the definition chosen for what BitCoins are, and I'd say that's more or less to scarcity by decree, i.e fiat.
Problem is, the wealthy don't have big bags of money in their homes or bank accounts with dozens of zeroes in them. Their wealth is tied up in stocks, real estate, inventories, and other real assets, and won't be much affected by inflation, at least not directly.
The people most hurt by inflation will be those who work hard and save money to buy something, like a house. Their savings will be devalued as they accumulate.
Appreciating resources are not actually used as currency. They're investments.
Why not both?
Gold has been used as a currency, and during historical periods when it increased in value, it was still used as a currency - although it was much less useful for the economy as a whole, since people tended to hoard it.
Even if you don't feel like spending it? What if I just wanna save my money and make my descendents very wealthy playboys?
Your statement that 'currency is an IOU that devalues over time' that isn't remotely funny, let alone accurate. Do you think in the real world every person has the ability to invest their money wisely in the stock market?
Saving money (as in stacking bills or gold coins in your safe) still wouldn't make sense, since your descendants would be much better off if you invested the money for them, if only by putting them into a savings account.
While everyone doesn't have the option to make investments on the stock market, everyone can open a savings account and at least get a small increase in value from it, so it still beats hoarding the currency.
The purpose of money is to store value. Good money does not lose its value over time. It's fiat currencies not backed by anything that constantly drop in value, because more and more is issued, diluting the value of all that is in circulation, thus discouraging saving money.
No, the purpose of money is to act as a means of circulation - i.e, a means to trade goods and services in an economy. Short-term stability (lack of fluctuations) is a more important feature in a currency than long-time resistance to inflation.
Saving money, as in piling it under your mattress, doesn't make sense, since money doesn't have value in itself. If you want to hoard, hoard cars or works of art or real estate or whatever has value to you. Or even better, lend out your money to someone so they can use it to produce new goods and services. Saving money in the bank is just an indirect way to lend them out to people who need the capital better, in exchange for interest.
I've heard it argued that in theory it would be possible to completely eliminate all taxes on the theory that the government merely could "issue" currency.... with the inflation being a more direct form of taxation and having a similar impact on the economic stability of the country.
There're are two other reasons that's a very bad idea.
First, it would tax wealth, not income. Anyone who saved money would be taxed multiple times, while those who spent their money quickly would hardly be taxed at all.
Second, it would only tax currency - bills, coins and money in the bank - not real assets. Most wealth is in the form of real estate, stocks, inventories, and so on. Bill Gates doesn't have a savings account that says $600 billion - he has most of his wealth tied up in Microsoft stock. In fact, it's the poor people, who don't own their own homes, who tend to have the largest percentage of their wealth in money (because they need the money for their monthly expenses), and who would be hit the hardest.
Absolutely. This is the one thing that "goldies" never seem to get right. Money is all about you owing me and vice versa. Moreover, all money in existence is ultimately a debt of the government, which is why the current political obsession with austerity is so ridiculous. Government debt is simply the mirror image of private wealth.
It's true that paper money can be seen as a form of government debt, but the amount of money in an economy is much, much higher than the amount of currency. The amount of money is determined by the banks' ability and willingness to lend out money - the same coins and bills can be shovelled back and forth between the bank and the loaners/savers multiple times, creating debts and savings far larger than the nominal values of the coins/bills. Wealth, in turn, is not directly related to the amount of money - wealth is determined by the amount of physical goods and services produced in an economy. Money is merely a means to circulate these goods and services.
Even in the 1700s and 1800s inflation and deflation often hit 20% or more, which killed a lot of economic growth. Yes, that's inflation and deflation of a currency consisting primarily of gold coins. And the government wasn't capable of stopping it. You won't hear that from anyone claiming all of our economic woes are because we went off the gold standard. Inflation has generally been lower and more stable than it was on the gold standard, and deflation has been rare.
That's very interesting. Do you have a reference?
Not that I don't believe you, I'd just like to be able to show my friends.
Hoarding money is bad for a different reason. The economy needs capital - for example, if someone wants to start a restaurant, they not only need a good idea and their own two hands, they also need money to pay the rent, build the kitchen, buy furniture, etc. For that, the banks need money to lend out, and for that, people need to have deposited money into the bank.
If people just hoard bills in their mattresses, the banks will have less money to lend out, and businesses will have less capital to work with.
Of course, if people choose to hoard money, they probably have a good reason for it - for example, that they don't trust the banks. If so, it's the banks which need to improve their trustwrothiness, not common people who need to stop hoarding.
It not only prevents people from *consuming*, it also prevents people from *investing*. Investing is building houses for your children to live in. Investing is digging wells so you can get water. Investing is laying down cables so remote areas can get Internet. Surely your great-grandfather from the Great Depression can agree that we need to invest?
OK, the idea of a currency with only a fixed amount of possible money circulating does sound a little crazy. And it could lead to deflation -- this does happen when money supplies contract. I'd agree with that. But the Bitcoin -- again, like anything traded -- is also only as valuable as its demand vs supply. If no one wants it, it's value will decrease.
The money supply is not limited just because the currency supply is. If, hypothetically, BitCoins would get hugely popular, there would be banks with BitCoin savings accounts which loaned out BitCoin money. Every time someone took a BitCoin loan, they would use it to purchase goods and services, and the seller would deposit their BitCoins back into a bank account, so they could earn interest and the bank could loan them out a second time. If the banks were allowed to loan out all of the BitCoins people deposited with them, the money supply would theoretically be infinite (but in practice limited by the speed of BitCoin transactions).
That being said, the main advantage I see with BitCoins is how they ease electronic transactions - they're not necessarily fit to replace regular government-backed currencies. Much like checks - they make certain payments easier, but they're not intended to replace regular money.
I can give "100x Frank IOU Note" or some service. Then you can use that to get another service from someone else, or from me. Eventually though, that IOU note *must* be used to purchase something from the originator. Only I, the originator, can take Frank IOU notes out from circulation.
That's how ALL world currencies work. USD is ultimately only "meaningful" in the US. The Euro, in the European Union. The Canadian Dollar is only worth anything in Canada. These are the IOU notes that people tend to accept.
Agree.
Money supply is regulated by central banks, so money amount in the economy matches the economic value. Taxes are used to remove currency. Government spending is used to inject the said currency back into circulation. That's the crux of how the currency works.
No, the amount of currency in circulation has no direct relation to the value of a country's economy. The value of a country's economy is defined by how much goods and services are produced, and measured by adding up the total value of all goods and services sold during a period of time. You can have a small amount of currency which changes hands multiple times in a year (signifying many sales and a large economy), and you can have huge monetary reserves which people just sit on, because there's nothing useful to buy (signifying few sales and a small economy).
Money is produced (mainly) by issuing loans. The same currency (bills and coins) can circulate through the banks multiple times to generate loans much larger than the total value of the currency.
If the state ordered every person and organisation in the country to destroy half of their bills and coins, it wouldn't mean all prices would be halved. People's salaries would still be the same, their loans would stay the same size, and so on, so there would be very little incentive to start selling goods for half the price. Currency (bills and coins) are only a method of circulation, not a measure of the amount of money in society.
What gave you the idea BitCoin was for hoarding? It derives it value from the economy of the people who are willing to exchange goods for it, just like the currencies of China, USA or the European Union.
How would that work? The payer in a BitCoin transaction needs to add the seller's public key and sign with their own private key. How would it work when the person who prints the note doesn't know who will convert it back into electronic form?
The differences between the US and Zimbabwe are that the US is the world's #1 economy, the US is a center of innovation, the US preserves inalienable rights. Because of the faith and credit of the US, we can basically print as much money as we like.
Hm? The exchange rates matter very much if you want to buy something manufactured abroad. With crappy exchange rates, the cheap stuff you buy from China will become much more expensive, which will spell trouble for the poor segment of the population.
With very high inflation, people rush to buy things before their money becomes worthless, making it hard to keep a monetary buffer for daily and extraordinary expenses. Money invested in stocks and bonds are not good as a buffer, because it takes time to convert into currency, and may force the owner to sell when the market is low. For very rich people this may not be a problem, since the amount of money they need to keep for daily expenses is negligible compared to their total income, but for the family which uses most of their income on food, clothes and living, not being able to keep a buffer may be fatal.
People who near their retirement also need to convert some of their savings into currency well ahead of time, so they're not forced to sell their stocks and bonds when the market is low. (Japan, for example, didn't have a pension system last time I checked, which forced people to have large savings in ordinary bank accounts.)
The US$ has historically been strong, but if the Federal debts keep growing, there may come a point when the US government is no longer deemed credit worthy by the banks, and that could make the US$ plummet.
Slashdot Mirror
Wrong. Socialists believe that government has a responsibility to take care of societies basic needs because it isn't profitable enough for private industry to do so.
Maybe that's what the wimpy socialists where you live want. Here in Sweden, we call that "social democracy" and has had it for half a century: the government provides roads, health care insurance, health care suppliers, unemployment insurance, child care, parental leave, insurance for lost income during sickness, a pension system, etc, etc. The people we call "socialists" want to go further than that: they want society to be more politically controlled in various ways, and many of them see Cuba as an ideal.
If we go back to the first half of the 20th century, central control of the economy was at the heart of socialism. It was believed to be a more rational way to run a society. It was also how the Soviet Union was run, and how China was run up until the 1970's.
Also, a lot of socialists ARE authoritarians - they believe they can and should shuffle people around with force to realise their ideals.
Even banning legal tender will not get rid of "money", people would still find a default medium for representing value, even if it is a more traditional good such as coffee beans or salt.
You can do that if the world economy collapses too...
With very high inflation, people rush to buy things before their money becomes worthless
Yes, I believe I said that. "only matters if it starts making day-to-day commerce inconvenient".
It's not just a matter of convenience, it can also lead to investments not being made because they require saving up money (for example, if someone needs to buy a car for their business, or buy their apartment so they can live cheaper in the long run).
A cow and a dozen chickens would be a vast overpayment for an iPhone. Cows cost something closer far to $1000 than $500, though chickens are pretty cheap. Unless of course, we're talking about a younger cow.
Or a very good-looking one.
There are only 2 ways to eliminate money.
You can provide every human need and desire for free using magic, if you have magic.
You can collapse the world economy to the point where no one trusts representative value, then you will be bartering a cow and a dozen chickens for your next iPhone.
There's a third way: central control of the economy could eliminate the need for money. This is what some socialists want to do.
I don't think that would happen - If we had a practically infinite supply of energy, people would start competing for something else instead. Like information, or social status. It's in human nature to not only improve their lot, but to improve it in relation to their peers.
That should be "... more or less equivalent to scarcity by decree, i.e fiat."
Only true in a sense. BitCoins are currently scarce due to limitations in computing power, but there's another scarcity built into the system - once 21 million BitCoins have been generated, no more can ever be made. That scarcity is due to the definition chosen for what BitCoins are, and I'd say that's more or less to scarcity by decree, i.e fiat.
Problem is, the wealthy don't have big bags of money in their homes or bank accounts with dozens of zeroes in them. Their wealth is tied up in stocks, real estate, inventories, and other real assets, and won't be much affected by inflation, at least not directly.
The people most hurt by inflation will be those who work hard and save money to buy something, like a house. Their savings will be devalued as they accumulate.
Appreciating resources are not actually used as currency. They're investments.
Why not both?
Gold has been used as a currency, and during historical periods when it increased in value, it was still used as a currency - although it was much less useful for the economy as a whole, since people tended to hoard it.
Even if you don't feel like spending it? What if I just wanna save my money and make my descendents very wealthy playboys?
Your statement that 'currency is an IOU that devalues over time' that isn't remotely funny, let alone accurate. Do you think in the real world every person has the ability to invest their money wisely in the stock market?
Saving money (as in stacking bills or gold coins in your safe) still wouldn't make sense, since your descendants would be much better off if you invested the money for them, if only by putting them into a savings account.
While everyone doesn't have the option to make investments on the stock market, everyone can open a savings account and at least get a small increase in value from it, so it still beats hoarding the currency.
The purpose of money is to store value. Good money does not lose its value over time. It's fiat currencies not backed by anything that constantly drop in value, because more and more is issued, diluting the value of all that is in circulation, thus discouraging saving money.
No, the purpose of money is to act as a means of circulation - i.e, a means to trade goods and services in an economy. Short-term stability (lack of fluctuations) is a more important feature in a currency than long-time resistance to inflation.
Saving money, as in piling it under your mattress, doesn't make sense, since money doesn't have value in itself. If you want to hoard, hoard cars or works of art or real estate or whatever has value to you. Or even better, lend out your money to someone so they can use it to produce new goods and services. Saving money in the bank is just an indirect way to lend them out to people who need the capital better, in exchange for interest.
I've heard it argued that in theory it would be possible to completely eliminate all taxes on the theory that the government merely could "issue" currency.... with the inflation being a more direct form of taxation and having a similar impact on the economic stability of the country.
There're are two other reasons that's a very bad idea.
First, it would tax wealth, not income. Anyone who saved money would be taxed multiple times, while those who spent their money quickly would hardly be taxed at all.
Second, it would only tax currency - bills, coins and money in the bank - not real assets. Most wealth is in the form of real estate, stocks, inventories, and so on. Bill Gates doesn't have a savings account that says $600 billion - he has most of his wealth tied up in Microsoft stock. In fact, it's the poor people, who don't own their own homes, who tend to have the largest percentage of their wealth in money (because they need the money for their monthly expenses), and who would be hit the hardest.
Absolutely. This is the one thing that "goldies" never seem to get right. Money is all about you owing me and vice versa. Moreover, all money in existence is ultimately a debt of the government, which is why the current political obsession with austerity is so ridiculous. Government debt is simply the mirror image of private wealth.
It's true that paper money can be seen as a form of government debt, but the amount of money in an economy is much, much higher than the amount of currency. The amount of money is determined by the banks' ability and willingness to lend out money - the same coins and bills can be shovelled back and forth between the bank and the loaners/savers multiple times, creating debts and savings far larger than the nominal values of the coins/bills. Wealth, in turn, is not directly related to the amount of money - wealth is determined by the amount of physical goods and services produced in an economy. Money is merely a means to circulate these goods and services.
Even in the 1700s and 1800s inflation and deflation often hit 20% or more, which killed a lot of economic growth. Yes, that's inflation and deflation of a currency consisting primarily of gold coins. And the government wasn't capable of stopping it. You won't hear that from anyone claiming all of our economic woes are because we went off the gold standard. Inflation has generally been lower and more stable than it was on the gold standard, and deflation has been rare.
That's very interesting. Do you have a reference?
Not that I don't believe you, I'd just like to be able to show my friends.
The point is also that they should be hard to manufacture legitimately, so no single person ends up with an excessive amount of BitCoins.
Hoarding money is bad for a different reason. The economy needs capital - for example, if someone wants to start a restaurant, they not only need a good idea and their own two hands, they also need money to pay the rent, build the kitchen, buy furniture, etc. For that, the banks need money to lend out, and for that, people need to have deposited money into the bank.
If people just hoard bills in their mattresses, the banks will have less money to lend out, and businesses will have less capital to work with.
Of course, if people choose to hoard money, they probably have a good reason for it - for example, that they don't trust the banks. If so, it's the banks which need to improve their trustwrothiness, not common people who need to stop hoarding.
It not only prevents people from *consuming*, it also prevents people from *investing*. Investing is building houses for your children to live in. Investing is digging wells so you can get water. Investing is laying down cables so remote areas can get Internet. Surely your great-grandfather from the Great Depression can agree that we need to invest?
OK, the idea of a currency with only a fixed amount of possible money circulating does sound a little crazy. And it could lead to deflation -- this does happen when money supplies contract. I'd agree with that. But the Bitcoin -- again, like anything traded -- is also only as valuable as its demand vs supply. If no one wants it, it's value will decrease.
The money supply is not limited just because the currency supply is. If, hypothetically, BitCoins would get hugely popular, there would be banks with BitCoin savings accounts which loaned out BitCoin money. Every time someone took a BitCoin loan, they would use it to purchase goods and services, and the seller would deposit their BitCoins back into a bank account, so they could earn interest and the bank could loan them out a second time. If the banks were allowed to loan out all of the BitCoins people deposited with them, the money supply would theoretically be infinite (but in practice limited by the speed of BitCoin transactions).
That being said, the main advantage I see with BitCoins is how they ease electronic transactions - they're not necessarily fit to replace regular government-backed currencies. Much like checks - they make certain payments easier, but they're not intended to replace regular money.
I can give "100x Frank IOU Note" or some service. Then you can use that to get another service from someone else, or from me. Eventually though, that IOU note *must* be used to purchase something from the originator. Only I, the originator, can take Frank IOU notes out from circulation.
That's how ALL world currencies work. USD is ultimately only "meaningful" in the US. The Euro, in the European Union. The Canadian Dollar is only worth anything in Canada. These are the IOU notes that people tend to accept.
Agree.
Money supply is regulated by central banks, so money amount in the economy matches the economic value. Taxes are used to remove currency. Government spending is used to inject the said currency back into circulation. That's the crux of how the currency works.
No, the amount of currency in circulation has no direct relation to the value of a country's economy. The value of a country's economy is defined by how much goods and services are produced, and measured by adding up the total value of all goods and services sold during a period of time. You can have a small amount of currency which changes hands multiple times in a year (signifying many sales and a large economy), and you can have huge monetary reserves which people just sit on, because there's nothing useful to buy (signifying few sales and a small economy).
Money is produced (mainly) by issuing loans. The same currency (bills and coins) can circulate through the banks multiple times to generate loans much larger than the total value of the currency.
If the state ordered every person and organisation in the country to destroy half of their bills and coins, it wouldn't mean all prices would be halved. People's salaries would still be the same, their loans would stay the same size, and so on, so there would be very little incentive to start selling goods for half the price. Currency (bills and coins) are only a method of circulation, not a measure of the amount of money in society.
What gave you the idea BitCoin was for hoarding? It derives it value from the economy of the people who are willing to exchange goods for it, just like the currencies of China, USA or the European Union.
How would that work? The payer in a BitCoin transaction needs to add the seller's public key and sign with their own private key. How would it work when the person who prints the note doesn't know who will convert it back into electronic form?
"... ever since Asimov's Foundation trilogy."
Don't feed the troll.
The differences between the US and Zimbabwe are that the US is the world's #1 economy, the US is a center of innovation, the US preserves inalienable rights. Because of the faith and credit of the US, we can basically print as much money as we like.
Hm? The exchange rates matter very much if you want to buy something manufactured abroad. With crappy exchange rates, the cheap stuff you buy from China will become much more expensive, which will spell trouble for the poor segment of the population.
With very high inflation, people rush to buy things before their money becomes worthless, making it hard to keep a monetary buffer for daily and extraordinary expenses. Money invested in stocks and bonds are not good as a buffer, because it takes time to convert into currency, and may force the owner to sell when the market is low. For very rich people this may not be a problem, since the amount of money they need to keep for daily expenses is negligible compared to their total income, but for the family which uses most of their income on food, clothes and living, not being able to keep a buffer may be fatal.
People who near their retirement also need to convert some of their savings into currency well ahead of time, so they're not forced to sell their stocks and bonds when the market is low. (Japan, for example, didn't have a pension system last time I checked, which forced people to have large savings in ordinary bank accounts.)
The US$ has historically been strong, but if the Federal debts keep growing, there may come a point when the US government is no longer deemed credit worthy by the banks, and that could make the US$ plummet.