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. That's why fiat currency only works when it is based on trust. And trust (as a personal judgment) cannot be dictated by law. I am sure you can bring up a lot of arguments for the volatility of the system. But the volatility of the current system is much greater and its understanding requires much steeper learning curve than the understanding that "bank A is close enough and I trust them while bank B is too far or I think the owner is a sleaze bag so I don't want their promissory notes".
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.
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.
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.
It would put more burden on those investing to make sure they invest wisely. No, it wouldn't. Yes, it would. Under the current system people invest even though they have no idea what they invest in. The only reason they do so is because they know that not investing in anything will reduce the value of their savings. But most of the investments they make are highly volatile. What's worse, most of them invest in shares of stocks which make no money (any flower shop that had the same return rate as a Fortune 500 company wouldn't stay in business more than 2 years). If people knew that they can save for
retirement simply by depositing their gold in the bank and using it later, they would save 1/4 of their income or so... expecting that their retirement would last about a quarter as long as the time they worked. Occasionally they would see a rare investment opportunity in a company that is truly innovative and will certainly make money. That's when they would risk their hard earned gold. Now people know that it's not much of a risk to put money in volatile investments because not doing so guarantees loss of capital.
But the argument for gold is not an argument for progress (or against it). If its not better, there is no reason to adopt it. I've asked why it would be better. I didn't say it's not better. I said it's not there to improve (or discourage) progress. It is there to satisfy a different priority. A priority that is largely independent of progress. And I identified that priority as "fairness".
Nothing compels people to retain their earnings in cash. Nothing does so now. If cash didn't lose its value, people would most certainly keep their money in cash. People were keeping their money in savings accounts as late as 80's. Stock market was still considered too volatile for an average investor. Now people have just given up on idea of retirement altogether or decided that they'll take their chances with the volatile markets. Why shouldn't people be able to just keep the money they earned and use it for their retirement?
Certainly, I agree that the speculative nature of the bubbles would disappear if people were allowed to legally exchange property for property (as in gold/silver coins for company shares, houses, cows, etc).
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.
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. I'd be interested to see a source for that. But if the worst thing that can happen is that your money drops in half, sign me up. Paper money can drop 1000 times and does so when society becomes unstable. Again, how can someone make an argument for a system B based on the fact that system A has some instability but system B is much more unstable than system A?
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. Definitions vary. Maybe gold-based is what I should have said. Ie, currency that is readily redeemed for gold. Basically, the unit of exchange is a weight of gold and the only "currency" is a paper that says that a certain bank promises to pay gold the moment this currency is presented. That's not how gold-standard worked between 1913 and the time Nixon abolished it -- only countries could redeem dollars for gold -- individuals could not.
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. C'mon, these issues have been explored and resolved hundreds of years ago. Banks can be storage houses for large quantities of gold. What do you think you do when you write a check? You give an order to pay out of the funds that you have deposited with the bank to the bearer of the check (or to a payee whose name you specified). You could just as well write such orders to transfer ownership of gold. That's how checks came to be in the first place.
Why the population is growing isn't the issue, how you deal with the growing population is the issue. I know. But since the efficiency would make things cheaper, less money would be required to purchase essentials.
commodity-based money would further retain wealth in the aging cohort. But look at the alternative -- robbing people of their savings. Savings allow people to retire. Older people need more money -- they are less efficient and need more care.
The greater short-term instability of commodity or representational money is a separate problem that most proposals for such money fail to address. It is still much more stable than the fiat system. I don't see how you can make an argument that we shouldn't use system A because it is unstable, we should instead use system B even though it is less stable than system A.
With value based currency, how does one accommodate a growing population? Well, first of all the population is not growing because we have more money. It grows because we are more efficient at producing things which make life possible (food, clothing, housing, etc). When something can be produced more efficiently, the natural tendency in a market place is for it to get cheaper (I would think computational power is a good example of that). So that would be part of "how" it gets accommodated. There is also a certain quantity of gold and silver that is excavated all the time.
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. It would put more burden on those investing to make sure they invest wisely. But the argument for gold is not an argument for progress (or against it). It sidesteps that issue. It is mostly an argument about fairness. It's not honest to reduce the value of what people have earned and saved over time. And dishonest dealings are not fair. Certainly, I agree that the speculative nature of the bubbles would disappear if people were allowed to legally exchange property for property (as in gold/silver coins for company shares, houses, cows, etc). And if you mean that there would be no free capital by which the bubbles are marked, then you might be right. We did have a period of great discovery and ingenuity long before we had the fed though. We've only had the fed since 1913. Coincidentally (or not) that's approximately when the gilded age ended.
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.
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.
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.
What is the intrinsic value of gold? You see you are looking for an axiomatically based discussion here. There is a number of theories. But the test of any theory is practice. Regardless how the intrinsic value of the gold can be philosophically shown, the fact remains that under gold-based currency money does not lose value. Under government-promise based currency (fiat) money ALWAYS loses value. So people are constantly lose their savings under no-gold currency standard. That's just how it's always been. Why would you assume that it is any different now?
Let's just hope it's some editor helping his girlfriend with psychology/sociology project that is meant to study how many people will ignore the content of the article and how many will read it despite the misspelling.
Should coffee produce outrage? It has similar effects. It is more addictive than adderoll. Why is there this religion of "natural"? Just because the random nature has produced one chemical in a plant by accident but didn't produce the other we should assume that the one produced by nature is more "natural"? Well, then cocaine is natural. It's just an extract. I wouldn't recommend it instead of adderall.
Slashdot Mirror
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.
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.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.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.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.
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.
Well, certainly it wouldn't be difficult to create SETI-at-home type of downloadable application that does this in a distributed manner.
It wouldn't be that hard to write a script to start exhaustively checking domains.
a.com?
b.com?
c.com?
.....
on what the definition of "il" il?
Those son of a bitches. How dare they! Ass holes! Fuck. God dammit. Son of. aaaaaaaarh. I don't want.. aaaaah. Now!!!!!!!!!!!
...welcome our sperm overlords? No, no,no....
Sounds like a cool hardware hack though.
E, you must be a lawyer.
There is already Provigil which has no effects on metabolism. Its only effect is to remove sleepiness.
This is how it's supposed to work. If they don't like the business terms offered to them, they should work on their own terms.
Let's just hope it's some editor helping his girlfriend with psychology/sociology project that is meant to study how many people will ignore the content of the article and how many will read it despite the misspelling.
Ok, I make my fair share of spelling errors in my posts, too. But shouldn't the editors... ummm edit?
Should coffee produce outrage? It has similar effects. It is more addictive than adderoll. Why is there this religion of "natural"? Just because the random nature has produced one chemical in a plant by accident but didn't produce the other we should assume that the one produced by nature is more "natural"? Well, then cocaine is natural. It's just an extract. I wouldn't recommend it instead of adderall.