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eat_yeot
Joined: 11 Dec 2009
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 Posted: Tue Apr 17, 2012 1:25 am Post subject: |
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| visitorq wrote: |
This just proves my point. The only legal tender is the currency issued by government. No competing currencies are allowed. |
Do you know the difference between may, can, and must? Obviously not. |
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eat_yeot
Joined: 11 Dec 2009
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| Posted: Tue Apr 17, 2012 1:31 am Post subject: |
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| ontheway wrote: |
The cited law applies to paper currency as well as coins. |
It specifically mentions coins. Maybe someone needs a better lawyer.
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| In a practical sense that would be true in any case: a gold or silver backed currency consists of either gold or silver coins, or paper bills backed by gold or silver coins. Both require gold or silver coins and minting those as money is illegal. |
Coins are not necessary for a 100% gold backed currency.
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| under a 100% gold standard there is no inflation. |
Still waiting for the empirical proof. At what point in history has there been no inflation? |
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visitorq
Joined: 11 Jan 2008
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| Posted: Tue Apr 17, 2012 9:08 am Post subject: |
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| eat_yeot wrote: |
| Coins are not necessary for a 100% gold backed currency. |
Of course they are, in any practical sense. Coins are the most basic of monetary units. Would you expect to redeem a 20 guinea note for an arbitrary amount of bullion of uncertain weight and purity? No, you'd redeem it for reputable coins of established weight and purity. A chunk of raw ore containing gold or silver is not money - coins are money. Notes backed by coins on deposit are also money.
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| Still waiting for the empirical proof. At what point in history has there been no inflation? |
I think you're being very obtuse here. It's very easy to understand how a fixed monetary system = no inflation, just by the very definition. Of course there will always be some minor inflation in a gold-backed currency, until the day comes where no new gold deposits are discovered/mined, but it is a minor amount and easy to adjust to. Inflation can also be caused by government debasing gold currencies, but then that is the fault of the government and not the currency. |
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eat_yeot
Joined: 11 Dec 2009
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| Posted: Wed Apr 18, 2012 6:43 am Post subject: |
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| visitorq wrote: |
| eat_yeot wrote: |
| Coins are not necessary for a 100% gold backed currency. |
Of course they are, in any practical sense. Coins are the most basic of monetary units. Would you expect to redeem a 20 guinea note for an arbitrary amount of bullion of uncertain weight and purity? No, you'd redeem it for reputable coins of established weight and purity. A chunk of raw ore containing gold or silver is not money - coins are money. Notes backed by coins on deposit are also money. |
Personally, I rarely use coins. I've been to several countries where coins are never used. Since gold has very little intrinsic value (outside of jewelry) having access to the physical gold is not an essential factor. As long as the holder of the gold can be trusted.
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| Still waiting for the empirical proof. At what point in history has there been no inflation? |
I think you're being very obtuse here. It's very easy to understand how a fixed monetary system = no inflation, just by the very definition. Of course there will always be some minor inflation in a gold-backed currency, until the day comes where no new gold deposits are discovered/mined, but it is a minor amount and easy to adjust to. Inflation can also be caused by government debasing gold currencies, but then that is the fault of the government and not the currency. |
Inflation is not merely the result of money supply. It is also affected by the supply and demand of goods. While a gold backed currency does usually lead to low long term inflation, there's still short term volatility. Just waiting for a country and era that someone puts forth as "100% gold backed" so that I can verify. Ideally the US or UK, where data can more easily be obtained. |
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visitorq
Joined: 11 Jan 2008
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| Posted: Wed Apr 18, 2012 10:36 am Post subject: |
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| eat_yeot wrote: |
| visitorq wrote: |
| eat_yeot wrote: |
| Coins are not necessary for a 100% gold backed currency. |
Of course they are, in any practical sense. Coins are the most basic of monetary units. Would you expect to redeem a 20 guinea note for an arbitrary amount of bullion of uncertain weight and purity? No, you'd redeem it for reputable coins of established weight and purity. A chunk of raw ore containing gold or silver is not money - coins are money. Notes backed by coins on deposit are also money. |
Personally, I rarely use coins. |
Obviously not the point.
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| Since gold has very little intrinsic value (outside of jewelry) having access to the physical gold is not an essential factor. As long as the holder of the gold can be trusted. |
In a free market of competing currencies, the most trustworthy will be those who mint their gold into reputable coins that are well-known and readily accepted (and this goes equally for the notes they circulate). Moreover, how on earth can a bank issue a gold backed currency without minting coins to keep track of how many monetary units are on deposit vs how much money is circulating? Are they supposed to just print up a bunch of notes, each worth X amount of un-minted bullion and then provide you with, say, 1 gold nugget in exchange for 23.678 (or whatever arbitrary number) notes? Of course this would be a stupid way to go about it. That's why coins are minted, and have been for thousands of years, as the most basic unit of money.
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| Inflation is not merely the result of money supply. It is also affected by the supply and demand of goods. While a gold backed currency does usually lead to low long term inflation, there's still short term volatility. Just waiting for a country and era that someone puts forth as "100% gold backed" so that I can verify. Ideally the US or UK, where data can more easily be obtained. |
This is where you are just totally wrong. Inflation is a monetary phenomenen, not a price phenomenon. It is caused by an expansion in the money supply, which makes the money less valuable, requiring more of it to exchange for goods and services. Supply and demand of goods is a separate issue altogether. In a fixed money supply, increased demand or scarcity of a good might push up the price, but since there would be a finite amount of money the price would only go up if the prices of other goods went down to compensate. There would have to be an equilibrium, hence no real inflation (although deflation would still be possible, people would just put their excess money into savings). Price "volatility" is certainly not the same as inflation. You could still have minor speculative bubbles formed by credit issuance (and banks that engage in risky speculation could fail), but nothing like the sort of monster bubbles or too-big-to-fail insanity that you see in our current central banking ponzi scheme system. |
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jaykimf
Joined: 24 Apr 2004
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| Posted: Wed Apr 18, 2012 12:29 pm Post subject: |
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| A time series plot of the price of consumption in ounces of gold, and then in US dollars, clarifies that gold is not a stable standard. |
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| Modern interest-rate feedback rules (Taylor rules) do a vastly better job. The instability of the relative price of gold is way too high. |
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| The relative price of gold can be very volatile. |
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| A gold standard regime would be a disaster for any large advanced economy. Love of the G.S. implies macroeconomic illiteracy. |
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| There are much better ways to avoid excessive inflation, while maintaining the flexibility of a fiat currency. |
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| Gold is intrinsically close to useless, so its price is determined as a "bubble". |
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| Gold is used as a safe haven in financial crisis. That has little to do with US inflation. |
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| This is a market like any other. The supply of gold and other sources of demand affect its price in real terms relative to other goods. |
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| There is no discernible connection between gold price and CPI movements in the period since the demonetization of gold in 1971. |
http://www.igmchicago.org/igm-economic-experts-panel/poll-results?SurveyID=SV_cw1nNUYOXSAKwrq |
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atwood
Joined: 26 Dec 2009
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| Posted: Tue Apr 24, 2012 9:51 pm Post subject: |
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| Once someone states that "hyperinflation is inevitable" you should realize there's very little point in engaging them in a discussion regarding economics. |
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ontheway
Joined: 24 Aug 2005
Location: Somewhere under the rainbow...
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| Posted: Thu Apr 26, 2012 8:24 am Post subject: |
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Comments like the one quoted here show the individual is economically and mathematically illiterate:
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| A time series plot of the price of consumption in ounces of gold, and then in US dollars, clarifies that gold is not a stable standard. |
When comsumption prices are denominated in dollars, they will tend to be stable in dollars since daily price changes are impractical for nearly all retail establishments, restaurants, etc. and salaries and wages are also fixed over short time intervals despite the daily fluctuation and constant decline of the dollar.
Prices of consumption goods are likewise stable when denominated in gold.
However, over long periods of time, thousands of years, gold has maintained it's purchasing value. The dollar has lost 99% of its purchasing value in 100 years.
Gold has been subject to massive manipulation and intervention by the governments of the world in an attempt to support their own failed currencies. Yet gold has managed to be fairly stable, with daily fluctuations that can be attributed more to the volatility of the world community of socialist governments, their economically disasterous policies, their attempts at currency manipulation and their fiat curencies gradual and sometimes precipitous declines.
The important factor is this: Since 1913, every socialistic fiat currency in the world has lost most of its value, many, far worse than the 99% loss of the US dollar, have fallen to zero. During that same period, gold has maintained its value.
It would be a waste of time to counter the rest of the nonsense written by fake economists. |
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jaykimf
Joined: 24 Apr 2004
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| Posted: Fri Apr 27, 2012 8:05 am Post subject: |
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| atwood wrote: |
| Once someone states that "hyperinflation is inevitable" you should realize there's very little point in engaging them in a discussion regarding economics. |
It's not just what they believe, but the absolute certainty with which they hold those beliefs. There is no argument you can make or facts that you can present that can shake their beliefs in the slightest. Anyone who disagrees with what they "know" to be true, including the worlds most prominent Economists, are routinely dismissed as ignorant morons or similar. It's pointless to argue with them. |
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Spartacist
Joined: 18 Feb 2012
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| Posted: Tue May 01, 2012 3:58 pm Post subject: |
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| Kuros wrote: |
| Spartacist wrote: |
| I would expect marine biologists to predict a major drop in shark numbers though, and I would expect climatologists to predict changes in climate. I wouldn't expect economists to predict a company failure but I would expect them to see a major economic event like the global financial crisis coming. The fact is of course that most mainstream economists didn't see it coming, and I believe this does call into question the validity of any kind of consensus opinion in the profession. |
That's fine. Nobody is asserting that the economics profession is infallible. There were economists complicit in Wall Street's failure and fraud, and certainly the crash discredited the Chicago School.
And yet this is being thrown out there presumably to defend protectionism and import substitution (or perhaps a centralized gold standard). And that's intellectually lazy.
There is an overwhelming consensus on these two issues (and two others) within the academic discipline. This isn't efficient market hypothesis we're debating. |
One might say that simply making appeals to intellectual authority is lazy. You right though, simply trying to discredit the profession due to failures in another area is lazy too. I've explained my objections to free trade more than once on Dave's ESL cafe, but I'll do it again. BTW, I'm going to confine my answers here rather than posting here and the other post on NAFTA.
Much of the support for free trade, and this is what those who model free trade now base their calculations on, comes from Ricardo's theory of competitive advantage. This is what the USITC (United States International Trade Commission) currently base their calculations on, along with much of the economics profession. However, this theory is based on a number of assumptions that are unrealistic in the real world, assumptions such as
- 2 economies of equal size
- only two inputs, capital and labour, which are perfectly mobile within countries
- immobility of capital and labour across national borders
- full employment of all resources, including labour
Immobility of capital across national borders? Economies of equal size? That just doesn't play out in the real world. These calculations are used simply to support a free market ideology which benefits big business. Rather than looking at models, it is of benefit to look at real world evidence on the performance of FTAs. This study found that U.S. trade with non-FTA countries grew more between 1998 and 2007 than with countries they had signed FTAs with
http://www.citizen.org/documents/FTA%20Penalty%20Paper%20FINAL1.pdf
I think we need to look at free trade and the case for FTAs on a case by case basis, but something like the KORUS FTA will benefit only the elites in each country. The Korean chaebols will have greater access to American markets, and U.S. financial servies will have greater access to Korean financial markets due to substantially deregulated financial markets in Korea for U.S, firm, the same forms of deregulation that destabilised the U.S. financial industry leading to the global financial crisis. |
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atwood
Joined: 26 Dec 2009
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| Posted: Tue May 01, 2012 5:16 pm Post subject: |
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| Spartacist wrote: |
| Kuros wrote: |
| Spartacist wrote: |
| I would expect marine biologists to predict a major drop in shark numbers though, and I would expect climatologists to predict changes in climate. I wouldn't expect economists to predict a company failure but I would expect them to see a major economic event like the global financial crisis coming. The fact is of course that most mainstream economists didn't see it coming, and I believe this does call into question the validity of any kind of consensus opinion in the profession. |
That's fine. Nobody is asserting that the economics profession is infallible. There were economists complicit in Wall Street's failure and fraud, and certainly the crash discredited the Chicago School.
And yet this is being thrown out there presumably to defend protectionism and import substitution (or perhaps a centralized gold standard). And that's intellectually lazy.
There is an overwhelming consensus on these two issues (and two others) within the academic discipline. This isn't efficient market hypothesis we're debating. |
One might say that simply making appeals to intellectual authority is lazy. You right though, simply trying to discredit the profession due to failures in another area is lazy too. I've explained my objections to free trade more than once on Dave's ESL cafe, but I'll do it again. BTW, I'm going to confine my answers here rather than posting here and the other post on NAFTA.
Much of the support for free trade, and this is what those who model free trade now base their calculations on, comes from Ricardo's theory of competitive advantage. This is what the USITC (United States International Trade Commission) currently base their calculations on, along with much of the economics profession. However, this theory is based on a number of assumptions that are unrealistic in the real world, assumptions such as
- 2 economies of equal size
- only two inputs, capital and labour, which are perfectly mobile within countries
- immobility of capital and labour across national borders
- full employment of all resources, including labour
Immobility of capital across national borders? Economies of equal size? That just doesn't play out in the real world. These calculations are used simply to support a free market ideology which benefits big business. Rather than looking at models, it is of benefit to look at real world evidence on the performance of FTAs. This study found that U.S. trade with non-FTA countries grew more between 1998 and 2007 than with countries they had signed FTAs with
http://www.citizen.org/documents/FTA%20Penalty%20Paper%20FINAL1.pdf
I think we need to look at free trade and the case for FTAs on a case by case basis, but something like the KORUS FTA will benefit only the elites in each country. The Korean chaebols will have greater access to American markets, and U.S. financial servies will have greater access to Korean financial markets due to substantially deregulated financial markets in Korea for U.S, firm, the same forms of deregulation that destabilised the U.S. financial industry leading to the global financial crisis. |
Simplistic reasoning--those industries/corporations employ lots and lots of people who will benefit from those industries/corporations' gains.
I looked at the paper you linked to--very interesting. It seems that the U.S. needs to do a better job negotiating FTAs (here your point about elites may hold; corporate lobbyists may well skew these agreements) and to change its tax code to make it less profitable for companies to off-shore production. It also mentions what it calls "the China problem" and says that could be another reason for the FTAs not benefitting the U.S.
It's pretty clear what's happening in the world economy. You have the mercantilist Asian economies preying on the free market polices of Western nations. Western nations need to close their markets to Asian trade until Asian markets reciprocate. Easier said than done because so many corporations want access to China's markets and cheap manufacturing. |
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visitorq
Joined: 11 Jan 2008
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| Posted: Tue May 01, 2012 7:00 pm Post subject: |
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| atwood wrote: |
| It's pretty clear what's happening in the world economy. You have the mercantilist Asian economies preying on the free market polices of Western nations. Western nations need to close their markets to Asian trade until Asian markets reciprocate. Easier said than done because so many corporations want access to China's markets and cheap manufacturing. |
China sends over giant container ships full of cheap products to the US, and we send them a bunch green paper in exchange. Explain how exactly we are being "preyed" upon? |
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atwood
Joined: 26 Dec 2009
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| Posted: Tue May 01, 2012 7:16 pm Post subject: |
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| visitorq wrote: |
| atwood wrote: |
| It's pretty clear what's happening in the world economy. You have the mercantilist Asian economies preying on the free market polices of Western nations. Western nations need to close their markets to Asian trade until Asian markets reciprocate. Easier said than done because so many corporations want access to China's markets and cheap manufacturing. |
China sends over giant container ships full of cheap products to the US, and we send them a bunch green paper in exchange. Explain how exactly we are being "preyed" upon? |
The goods are cheap becasue they are manipulating their currency. We can't send them products in return because the currency difference makes them too expensive. Not to mention the dumping, the illegal government subsidies, the unfair tax treatment of foreign corporations in China, etc. |
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visitorq
Joined: 11 Jan 2008
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| Posted: Tue May 01, 2012 10:40 pm Post subject: |
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| atwood wrote: |
| visitorq wrote: |
| atwood wrote: |
| It's pretty clear what's happening in the world economy. You have the mercantilist Asian economies preying on the free market polices of Western nations. Western nations need to close their markets to Asian trade until Asian markets reciprocate. Easier said than done because so many corporations want access to China's markets and cheap manufacturing. |
China sends over giant container ships full of cheap products to the US, and we send them a bunch green paper in exchange. Explain how exactly we are being "preyed" upon? |
The goods are cheap becasue they are manipulating their currency. We can't send them products in return because the currency difference makes them too expensive. Not to mention the dumping, the illegal government subsidies, the unfair tax treatment of foreign corporations in China, etc. |
Uh huh, all of which are fair points, but do you think this is unintentional on the part of the US government? What it really amounts to is that US consumers get more stuff for less, and most major Western corporations are making huge profits (else they wouldn't be there).
So really, unless you want to a make a point about how off-shoring eliminates US manufacturing jobs and hurts the middle class, the arrangement you have described basically means China is being used by us, more than the other way around...
I would also add that China is not really a serious competitor, since there is little or no technological innovation in communist countries. At least not without Western corporations going in and building it up from scratch, as they did with the Soviet Union. |
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atwood
Joined: 26 Dec 2009
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| Posted: Tue May 01, 2012 11:10 pm Post subject: |
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| visitorq wrote: |
| atwood wrote: |
| visitorq wrote: |
| atwood wrote: |
| It's pretty clear what's happening in the world economy. You have the mercantilist Asian economies preying on the free market polices of Western nations. Western nations need to close their markets to Asian trade until Asian markets reciprocate. Easier said than done because so many corporations want access to China's markets and cheap manufacturing. |
China sends over giant container ships full of cheap products to the US, and we send them a bunch green paper in exchange. Explain how exactly we are being "preyed" upon? |
The goods are cheap becasue they are manipulating their currency. We can't send them products in return because the currency difference makes them too expensive. Not to mention the dumping, the illegal government subsidies, the unfair tax treatment of foreign corporations in China, etc. |
Uh huh, all of which are fair points, but do you think this is unintentional on the part of the US government? What it really amounts to is that US consumers get more stuff for less, and most major Western corporations are making huge profits (else they wouldn't be there).
So really, unless you want to a make a point about how off-shoring eliminates US manufacturing jobs and hurts the middle class, the arrangement you have described basically means China is being used by us, more than the other way around...
I would also add that China is not really a serious competitor, since there is little or no technological innovation in communist countries. At least not without Western corporations going in and building it up from scratch, as they did with the Soviet Union. |
We're using them but our economy is lagging while theirs grows and grows and grows. That's a strange type of using.
As for technology, China doesn't have to innovate; it just steals. That's why most foreign companies doing business have some sort of joint venture arrangement which includes sharing of technology. And they're now setting up shop in the U.S. and the EU.
The Soviet Union? |
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