Well put. Reminds me of all the city states that became combined countries in the past. I wonder if they had hysterical conservatives back then that responded like some of our forumites.
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Article: World moving towards new monetary system: Zoellick
- Thread starter jes
- Start date
Well put. Reminds me of all the city states that became combined countries in the past. I wonder if they had hysterical conservatives back then that responded like some of our forumites.
killadoob
Honorary Master
A very big reason that the United States is such an economically and militarily dominating country is apparently that U.S. dollar is the de facto world reserve currency. Lots of things are counted in dollars and some goods are only sold for dollars. That means that foreign governments and corporations and banks are keeping large dollar reserves. That essentially amounts to a huge loan the rest of the world is giving to the United States, which will subsidize the U.S. economy. In order to acquire those dollars, the rest of the world has to provide goods and services for those dollars. That allows the U.S. to have a huge import/export imbalance. Last November, 48% more imports than exports. It would be untenable for any other country to run such a deficit.
killadoob
Honorary Master
If the world traded in gold i am almost certain war would break out. I doubt you can trade in something that some countries are more abundant in.
VioAdmin
Expert Member
Sums it all up.
alloytoo
Honorary Master
I fail to see how basing any currency on something arbitary like gold is good thing.
Floating currencies are based what the market determines is a fair value for the underlying economic activity of the country. It automatically adjusts for the growth or contraction of economies.
What exactly is the point of wasting economic resources to mine/buy Bullion just so it can sit in a vault?
Basket case nations would, at the expense of the poor, buy bullion to boost their currency, where a winning nation would invest in infrastructure, education etc.
Which should have the stronger currency?
Floating currencies are based what the market determines is a fair value for the underlying economic activity of the country. It automatically adjusts for the growth or contraction of economies.
What exactly is the point of wasting economic resources to mine/buy Bullion just so it can sit in a vault?
Basket case nations would, at the expense of the poor, buy bullion to boost their currency, where a winning nation would invest in infrastructure, education etc.
Which should have the stronger currency?
I'm going to assume everyone here knows what fiat money is and fractional reserve banking...
You need to know about that to understand why a central bank makes sense from a certain POV (The POV is the governments/statists POV)
The reason why governments have central banks is to allow them to be able to basically give themselves money and take it away from the people, essentially without taxing anyone.
If a government wants R20 million. It prints out a bond that has R20 million on it, the Reserve Bank prints out R20 million and they swap the bond for the cash (Technically done elctronically). Then the government spends the money on whatever programs they want (Normally to "help" their supporters but others as well). Now the R20 million in new money, didn't exist previously, so it literally came from "thin air". So all of a sudden you have a massive increase in demand, as the government is now using the money to buy resources etc. to do its projects. This increase in demand leads to increases in prices. This is inflation at work. What happens to all those people who already had money prior to the government "borrowing" R20 mil? They're money now becomes less valuable, since due to inflation, their money can now purchase less.
Do you guys see how the inflation, in reality IS a transfer of wealth from those with currency holdings to the receivers of the cash?
Ironically, when currency is devalued, it is the poorer members of a nation who are hurt the most. Wealthier people do not have the majority of their assets as currency, it is property, shares etc. So they lose out less, relatively speaking than someone who has the majority of their assets as currency. Poorer members and less sophisticated savers of our society are the ones who lose out.
This system also benefits big business (Remember the central bank is a monopoly, so please don't call this a product of the free-market, monopoly does not = free market). When it comes to taking out loans from banks, big corporations take out loans that are far bigger than the average person can. Due to the fractional reserve system, whenever ANYONE takes out a loan, technically speaking about 80% (Here in SA, in the US it is about 90%) is created from nothing. Meaning to create a R1 000 000 loan, the bank only needs deposits of R200 000 sitting in the bank. The other R800 000, it creates from nothing.
So whenever a loan happens, the inflationary effect of that loan as demonstrated above happens. However obviously a smaller loan creates less inflation than a larger one. So, big business go to a bank and take out huge loans , tens or hundreds of million. This is new money in the money supply. This creates new demand. But inflation doesn't happen instantly. Whn the corporations get the cash, prices have not risen. So they get the money and are able to purchase goods and capital at the current prices. As the money flows down the system, inflation starts to take place and prices start to rise. Once the money has trickled down the the average joe on the street, the prices of goods have risen and the money is worth less.
So basically it is as follows: Institutions that are able to take out MASSIVE loans, such as large corporations and the government are able to take advantage of this system by taking out massive loans, buying up assets at pre-inflated prices, and in the process bascially transfer wealth from other currency holders.
Now we get onto the one world bank/currency. This simply means the effect of inflation is spread over a greater number of people, so people "feel" the effects of inflation less. To give an example, imgaine a guy took R1 000 from every account held in standard bank, transferred to himself (Essentially this is what happens). The people who lost the R1 000 are likely to notice, especially those with very little money. Lets say the guy took R10 mil in total.
Now lets say you multiply the number of people with deposits at Standard Bank by 1000 (As you now include everyone in the world). Now in order to get that R10 mil, the guy only needs to take R1 from every account. This is a lot less noticable. So whilst it is still theft, as inflation is still a transfer of wealth, the effects of inflation are spread over more people, thus the effects are felt "less" by each individual.
In the meantime, big coroporations and government, anyone who can take out substantial loans will still be the benificiaries of the system.
"Inflation and credit expansion, the preferred methods of present day government openhandedness, do not add anything to the amount of resources available. They make some people more prosperous, but only to the extent that they make others poorer." - Ludwig von Mises
"Credit expansion and inflationary increase of the quantity of money frustrate the common mans attempts to save and to accumulate reserves for less propitious days." - Ludwig von Mises
I really don't care what standard is used. Just allow competing currencies in every country instead of monopolised legal tender. This will solve the problem. The only money people will desire to keep and hold savings will be the currency that loses it's value less (Thus less fractional reserve, more hard currency). Solve's the problem as now people will desire to trade in the better currencies. So in the end the currencies that are more fractional reserve will eventually go out the system in favour of "harder" currencies that retain their value.
Whether that currency is gold backed, gold itself, commodity backed or another commodity itself, it is irrelevant. As long as you allow competing currencies, people will desire to keep the one that retains it's value.
You need to know about that to understand why a central bank makes sense from a certain POV (The POV is the governments/statists POV)
The reason why governments have central banks is to allow them to be able to basically give themselves money and take it away from the people, essentially without taxing anyone.
If a government wants R20 million. It prints out a bond that has R20 million on it, the Reserve Bank prints out R20 million and they swap the bond for the cash (Technically done elctronically). Then the government spends the money on whatever programs they want (Normally to "help" their supporters but others as well). Now the R20 million in new money, didn't exist previously, so it literally came from "thin air". So all of a sudden you have a massive increase in demand, as the government is now using the money to buy resources etc. to do its projects. This increase in demand leads to increases in prices. This is inflation at work. What happens to all those people who already had money prior to the government "borrowing" R20 mil? They're money now becomes less valuable, since due to inflation, their money can now purchase less.
Do you guys see how the inflation, in reality IS a transfer of wealth from those with currency holdings to the receivers of the cash?
Ironically, when currency is devalued, it is the poorer members of a nation who are hurt the most. Wealthier people do not have the majority of their assets as currency, it is property, shares etc. So they lose out less, relatively speaking than someone who has the majority of their assets as currency. Poorer members and less sophisticated savers of our society are the ones who lose out.
This system also benefits big business (Remember the central bank is a monopoly, so please don't call this a product of the free-market, monopoly does not = free market). When it comes to taking out loans from banks, big corporations take out loans that are far bigger than the average person can. Due to the fractional reserve system, whenever ANYONE takes out a loan, technically speaking about 80% (Here in SA, in the US it is about 90%) is created from nothing. Meaning to create a R1 000 000 loan, the bank only needs deposits of R200 000 sitting in the bank. The other R800 000, it creates from nothing.
So whenever a loan happens, the inflationary effect of that loan as demonstrated above happens. However obviously a smaller loan creates less inflation than a larger one. So, big business go to a bank and take out huge loans , tens or hundreds of million. This is new money in the money supply. This creates new demand. But inflation doesn't happen instantly. Whn the corporations get the cash, prices have not risen. So they get the money and are able to purchase goods and capital at the current prices. As the money flows down the system, inflation starts to take place and prices start to rise. Once the money has trickled down the the average joe on the street, the prices of goods have risen and the money is worth less.
So basically it is as follows: Institutions that are able to take out MASSIVE loans, such as large corporations and the government are able to take advantage of this system by taking out massive loans, buying up assets at pre-inflated prices, and in the process bascially transfer wealth from other currency holders.
Now we get onto the one world bank/currency. This simply means the effect of inflation is spread over a greater number of people, so people "feel" the effects of inflation less. To give an example, imgaine a guy took R1 000 from every account held in standard bank, transferred to himself (Essentially this is what happens). The people who lost the R1 000 are likely to notice, especially those with very little money. Lets say the guy took R10 mil in total.
Now lets say you multiply the number of people with deposits at Standard Bank by 1000 (As you now include everyone in the world). Now in order to get that R10 mil, the guy only needs to take R1 from every account. This is a lot less noticable. So whilst it is still theft, as inflation is still a transfer of wealth, the effects of inflation are spread over more people, thus the effects are felt "less" by each individual.
In the meantime, big coroporations and government, anyone who can take out substantial loans will still be the benificiaries of the system.
"Inflation and credit expansion, the preferred methods of present day government openhandedness, do not add anything to the amount of resources available. They make some people more prosperous, but only to the extent that they make others poorer." - Ludwig von Mises
"Credit expansion and inflationary increase of the quantity of money frustrate the common mans attempts to save and to accumulate reserves for less propitious days." - Ludwig von Mises
I really don't care what standard is used. Just allow competing currencies in every country instead of monopolised legal tender. This will solve the problem. The only money people will desire to keep and hold savings will be the currency that loses it's value less (Thus less fractional reserve, more hard currency). Solve's the problem as now people will desire to trade in the better currencies. So in the end the currencies that are more fractional reserve will eventually go out the system in favour of "harder" currencies that retain their value.
Whether that currency is gold backed, gold itself, commodity backed or another commodity itself, it is irrelevant. As long as you allow competing currencies, people will desire to keep the one that retains it's value.
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alloytoo
Honorary Master
This is wrong.
In order to lend $1 000 000 the bank needs to have deposits of $1250000 (assuming 20% reserve requirements)
Fractional reserve banking means that the bank like other financial institutions chooses to or is required to retain a percentage of is deposits and can only lend out the balance.
Without fractional reserve banking money would lie idle in the bank and the bank would only be allowed lend out from it's own reserves. The result would be no interest whatsoever payable on deposits, and extremely high interest rates on a far more limited finance supplies. This would greatly restrain economic growth and expansion,
You are viewing it as a commodity. Think of it as underpinning the money system, otherwise you could just print money when you ran short (exactly what is happening). In any event (this is imperfectly understood) the real value lies in the sweat and effort expended to get gold. Gold, therefore, is simply solidified bricks of human effort (it is also passing attractive – hence jewelry). It is hard to mine and is relatively rare (but not too rare) thus is a good measure. It has little practical use. So, all those vaults (like Fort Knox) are repositories of effort. Same with other metals.
alloytoo
Honorary Master
And inflation is what happens when you print money in excess to the underlying value of your economy. Adam Smiths invisible hand in action.
What is wrong with all the other effort expended in the economy, is it all suddenly worthless because it wasn't related to a shiny yellow metal?
Floating currencies reflect the underlying value of a given economy divided by the money supply.
Fixing a currency to a supply of bullion in a vault disengages it from the laws of supply and demand and that's like trying to defy the second law of thermodynamics.
Of course not! It’s not quantifiable (1 bar of gold weighing X = X amount of effort) = so many tons of Earth processed (X amount of pollution generated), etc.
BBSA
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Gold standard made it so only so much money could be printed. If you had a million ounces of gold and you could only print three dollars for every ounce, you could only print three million dollars.
mcryan
Expert Member
+1
alloytoo
Honorary Master
Which varies per mine, per country, which is why marginal gold mines close when the price declines.
alloytoo
Honorary Master
Exactly, what happens when the economy needs more than three million dollars in circulation? You're going to waste resources acquiring and stock piling a dull yellow metal that is better served in your telly.
BBSA
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The problem today is that governments can print as much money as they need. The most-likely cause of the next depression will be countries’ inability to pay their promised entitlements like Social Security and Medicare. The welfare state is today's equivalent of the gold standard. With aging societies, advanced countries have promised more benefits than their tax bases can support. The debt is simply too much to sustain growth—both on the government and personal level. In response, the government continues to print more and more money out of thin air, making it worth less and less.
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