Balchinian: GAT_00: Anyone feel like reminding these farks that it was a REPUBLICAN President that took us off the gold standard because it was an out of date system unable to effectively operate in the modern world?

Yes, NIxon did that. But to be honest the only reason that this move from gold was such a supreme disaster was because gold was not replaced with anything as the standard. Banks no longer had anything of value to trade between eachother. Just meaningless pieces of paper that used to represent something tangible and which no longer did. So they ended up trading in the only thing they had left...loans. Essentially that is how the gold standard was replaced by the debt standard, and as a result we now have an economy based on something with negative value.

Returning to the gold standard would be bad for our economy, that is true. But it would be worse to leave it as it is. We are headed down the exact same road as Greece, Spain, Italy, etc. The problem with economies based on negative value is that as each country collapses from debt the load gets bigger on the countries remaining. Eventually, it becomes a case of the last person at the table gets stuck with the check. The strongest country, the one that lasts the longest, loses the biggest. Bottom line is that they all collapse though.

A sustainable economy must be based on something that has positive value. It must be something tangible. It must be something either finite, or extremely difficult to get or produce. Gold worked really well, and would work again just as well once things stabilized. BTW, the US has more gold than most people think. It didn't take economic geniuses to see that Nixon was botching things up by doing what he did, and we have been quietly socking gold away ever since.

Geez, not this crap again.

Gold failed as a standard. Modern economies would be RUINED by returning to it. 3 things you need to know 1) The US Government set the price of gold in order to prevent collapse when we did away with the Second Bank of the United States 2) After WW1, workers got paid better, so the assumed connection between wages and the money supply no longer really existed 3) Long-term price stability came at the cost of short-term price instability. All monetary systems and models have some good things and some bad things. In the reality we lived in prior to WW1, Gold did a pretty good job, except when it came to financing wars (we went to fiat currency due to the Civil War). After WW1, with the changing labor market and need to quickly move money in large amounts (there's yer war again), gold was too limiting and weak to do it. Nixon got us off the Gold Standard why? To help fund the Vietnam War. Nations won't stop going to war, and war wont' become cheaper. Reality kills off theory, every last time.

The price of gold today is determined by how much banks and individuals decide to hoard and release (which should terrify you, since you have zero control over that), speculation, and a group of bankers in London who set the price of gold at the start of every trading day.

Gold does not have a shred of value. We give it that value. It's a completely made up demand, and giving a piece of paper value is still the same crap, except with gold, you now have to rely on the whims of banks, individual possessors, and what the mines put out as exciting wildcard variables. Choose what you want to suck. These days, paper fiat currency sucks less for the world.

So in conclusion, the conditions that existed when we had the Gold Standard no longer exist. Those days are over, and will never return. Putting us back on the Gold Standard won't make them return. It's done. Kaput. Over.

We should tie our currency to a finite resource. A resource that is mostly held overseas (in the ground and by countries/investors). That is such a brilliant f*cking strategy. What could possibly go wrong?

Balchinian: So they ended up trading in the only thing they had left...loans.

It's not really about debt.

By abandoning the gold standard, currency ceased to be a storehouse of value, and instead became a means of exchange, which is really what currency is for, anyway. This meant that you couldn't simply save money and hope to be rich, you had to actually invest that money.

All investment is, to some extent, a loan. I give you $X, and I expect to get back $X+N dollars. "N" encapsulates how risky this investment is. But it's not right to say that banks were spending their time trading loans- they were trading investments. Many of those investments were a classical loan, but stocks, bonds and more exotic financial instruments were involved.

A floating currency is tied, not to debt, but to the productivity of an entire economy. Its value is a proxy for the total capital and labor pool. It does require continual growth, but you can have sustainable continual growth, despite claims to the contrary (increases in efficiency and reduction in waste, switches to untapped or underexploited resources, like solar energy).

Ayn Rand Paul Ryan.

Balchinian: A sustainable economy must be based on something that has positive value

Like labor, natural resources, and capital infrastructure. Which is excellently represented by a floating currency.

TiiiMMMaHHH: Having a corporatist govt control an elastic currency is definitely the way to go.

Switching to a commodity driven currency doesn't solve the real problem in your statement. If anything, a commodity-based currency would allow a corporatist government to travel all the way into out-and-out facism.

getsoutalive: fractional reserve banking

There's nothing inherently wrong with fractional reserve banking. A floating currency needs growth to remain stable, FRB is a powerful way to grow an economy. The important thing is that there's a Goldilocks zone of growth. Growing too quickly is like a cancer- it spirals out of control and explodes into bubbles. Growing too slowly is even worse- it's a positive feedback loop of economic lassitude.

The important thing is that, for such an economy to work, coordinated authorities and tight regulation are required.

t3knomanser: getsoutalive: Otherwise, for someone to borrow money, someone else would have to be willing to lend their savings.

Even with that situation, it allows, nay requires money to be spirited into existence. Let's posit a very small economy. There are three people: Joebob, Sallybob and the bank. Joebob has $100, and wants to buy Sallybob's horse, which costs $200. Sallybob is currently broke, but she doesn't really care- she's got a sweet horse. And the bank has $100. So this small economy has exactly $400 in value- $200 in cash, and $200 in horse. So the bank loans Joebob $100, and expects a repayment of $110 in six weeks.

How does Joebob pay it off?

He can't. So, the bank comes and repossess the horse. Now the bank has a horse and Sally has $200. The bank sells the horse at auction for less than it is worth. The horse is worth $200 but Sally buys it at the auction for $100. Now the bank has it's $100 back and Sally has her horse back plus Joe's $100. Sally owns everything and is now a member of the 1%. She moves her $100 to an overseas account which takes the all the money out of the economy. There is no money left in the economy for anyone to buy anything, so everyone starves plus Sally and Joebob get divorced. Welcome to the world of the 1% sending their money overseas to hide it.

max_pooper: tjfly: He_Hate_Me: Curse that hyperinflation!  My arms sure are tired from hauling that wheelbarrow of cash to the store to buy a loaf of bread this morning!

Wow - a 4 year representation of inflation during the worst recession since the Great Depression. Do you have any other irrelevant data to share? Perhaps a chart about the number of pirates...

According to the version of goldbug folklore disseminated by the non-goldbug establishment, we should have started seeing hyperinflation years ago.

Goldbugs' claims of hyperinflation are about as dependable as your average doomsday prediction.

FTFY. See my link, above, as to why there's been no massive inflation. Even the most devout Keynesian agrees that increasing the supply of money actually circulating in the system must cause inflation. But, all that new money is not circulating... it's being held as assets (to replace the worthless mortgage assets that were causing them to fail).

getsoutalive: No money was created and everyone was paid in full.

False. The total value of the economy has grown. The fact that the currency supply is the same doesn't change the fact that we've expanded the value of the economy. That $10 of labor value can be exchanged for goods and services, as if it were currency. So the fact that there isn't a greenback to represent its value doesn't mean that there isn't something that can be exchanged for goods and services with a value of $10.

Look at it this way, FRB doesn't create actual dollars- nobody's minting greenbacks to cover M2 or M3. But the value exists and we model it with currency.

getsoutalive: I am just answering your silly questions. Now I am Marxist?

Marxist philosophy introduced the idea that labor creates value.

By the end of my scenario, the economy must have $410 of value in it for nobody to lose anything. You suggested that Joebob could do work for Sallybob to create the extra $10 of value. That's a Marxist idea. It's not wrong- in fact, I agree entirely. But you made my point for me: for a lending economy to work, regardless of whether FRB is in play, "Either somebody has to lose $10 of value, or we need an influx of wealth."

You suggested that labor is an influx of wealth. I agree. But now we have more value in our economy than we did before- we have $200 in cash, $200 in horse, and $10 in labor.

getsoutalive: All that is required is for Joebob to do some work for Sallybob, who in your example now has all the money.

The amount of work he does for Sallybob has to exceed the value of the horse by $10. So Sallybob has to end up losing $10 on the transaction.

getsoutalive: The modern futures contract was also conceived during this period.

Which is what actually fueled the tulip mania, not credit, unless you want to count a futures contract as credit, which is stupid.

getsoutalive: The dutch tulip mania was fueled by paper money and runaway credit.

That is simply false. Very little credit purchase was involved in tulip mania, and that's one of the things that helped compartmentalize the economic damage. But fine, if you want to rewind a few decades before that, here's how well precious metal currency works.

getsoutalive: Otherwise, for someone to borrow money, someone else would have to be willing to lend their savings.

Even with that situation, it allows, nay requires money to be spirited into existence. Let's posit a very small economy. There are three people: Joebob, Sallybob and the bank. Joebob has $100, and wants to buy Sallybob's horse, which costs $200. Sallybob is currently broke, but she doesn't really care- she's got a sweet horse. And the bank has $100. So this small economy has exactly $400 in value- $200 in cash, and $200 in horse. So the bank loans Joebob $100, and expects a repayment of $110 in six weeks.

How does Joebob pay it off?

getsoutalive: Banks can only create excessive amounts of credit if they are permitted to loan out multiples of their capital base

False. A bubble can easily be created when the underlying commodity is inaccurately valued. The Dutch Tulip Mania is a textbook example. You'd have a stronger argument if you said that speculation creates bubbles, which is true.

The amount of credit can facilitate a bubble, but it's speculative investing and purchasing on contract that creates bubbles because it abstracts away the actual market value of the good with a financial instrument.

enry: BiffDangler: Since when were farkers in favor of the current "print lots of money and give it to the banks for free" standard?

Since most other standards are worse?

THIS

Flaws in an existing system are not an endorsement of another.

Ideas need to stand on their own merit. The Gold Standard... cannot

getsoutalive: Ah, yes. As I said, perfectly legal.

No one forces you to put your money into a bank. You're free to stuff it into your mattress, set it on fire, invest it in stocks, or do anything you like. When you enter into business with a bank, the bank offers you terms. If you don't like those terms, you're not compelled to take them. To call it "fraud" is an outright lie.

You are a liar.

getsoutalive: It is fraud because the bank promises you unfettered access to your money on deposit

No, it doesn't. You might believe that, but the bank makes no promise to do that. The fact that you're an idiot doesn't mean the bank is committing fraud. Next time, actually read the agreements you make with the bank.

Gwyrddu: There are reasons to print more money, but paying back loans isn't one of them.

Fractional reserve banking effectively prints money. Paying back loans destroys money.

getsoutalive: . Loaning out something that you do not posses and charging interest on it is nothing more and nothing less than fraud

Fraud requires an attempt to conceal the nature of the transaction. Fractional reserve lending is not fraud, any more than using a home equity loan is fraud. A home equity loan involves taking something of notional (not concrete value)- your home equity- and creating a liquid asset based upon it. Even without fractional reserve banking, we've invented money, and I hope you realize that.

The home has the same value as it did before the loan. Now there's a duplicate of that value in the form of the check the bank just wrote. The only thing that balances that out is a negative number on the bank's balance sheet. If I pay off the loan, the duplicate money goes away. If I default, the bank might get the house, but the equity in the house and the money lent to me stays in the economy.

fusillade762: Ayn Rand Paul Ryan.

It looks like a human centipede of wrongness.

I prefer a corn standard. Not sweet corn though. Popcorn.

it appears many topics exist only to temporarily distract people from more important business.

I think we should go with the fetus standard.

GAT_00: MisterTweak: NewportBarGuy: We should tie our currency to a finite resource. A resource that is mostly held overseas (in the ground and by countries/investors). That is such a brilliant f*cking strategy. What could possibly go wrong?

I think they actually wanna go a step beyond that - eliminate the paper currency altogether. Paul Rand Ryan is apparently a huge fan of Atlas Smugged.

It's like Communism, but with more rape.

Legitimate rape, or .. whatever the other kind is? You know, where the girl gets pregnant.

*lightbulb*

They're going to propose we go to the Rape Standard. I'd say "we're screwed", except that would kind of be the crux of the problem, wouldn't it?

NewportBarGuy: We should tie our currency to a finite resource. A resource that is mostly held overseas (in the ground and by countries/investors). That is such a brilliant f*cking strategy. What could possibly go wrong?

I think they actually wanna go a step beyond that - eliminate the paper currency altogether. Paul Rand Ryan is apparently a huge fan of Atlas Smugged.

The Beatings Will Continue Until Morale Improves: Paging William Jennings Bryan...
William Jennings Bryan, please pick up the white courtesy phone

luckily there are no courtesy phones down where he is.

Wall St. will love the gold standard. It's funny shipping tons of gold for the next M & A deal.

Makh: Why not a manure standard? It's a consumable needed around the world, we can produce a lot of it, you don't have to protect it in a heavily guarded location, and if you redeem your money for it as an individual, we give you a trowel and a bag. No longer would we say our money isn't worth shiat.

Not a bag, a basket.

To my knowledge, Ryan has not, in fact, endorsed a gold standard. He's too smart for that. Instead, he endorsed something that sounds better than a gold standard but is functionally identical. "The best way to guarantee sound money is to use an explicit, market-based price guide, such as a basket of commodities, in setting monetary policy," he wrote in the Wall Street Journal.

Why not a manure standard? It's a consumable needed around the world, we can produce a lot of it, you don't have to protect it in a heavily guarded location, and if you redeem your money for it as an individual, we give you a trowel and a bag. No longer would we say our money isn't worth shiat.

Paging William Jennings Bryan...
William Jennings Bryan, please pick up the white courtesy phone