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buff
3rd December 2006, 13:43
About forty years ago when the government separated gold from paper there was five cents of gold for every dollar. And, that was only for international dollars. I guess that was confidence builder for somebody. Now, here is my same my question. Where do you expect to get the gold and silver for your metal money or even a metal reserve? How much reserve do you want? How do you expect the US government to have enough metal to redeem international dollars which will represent a net drain of gold reserves? And more importantly, what do you expect to do when the value of gold and silver deviates from the face value of your metal money? If you advocate a gold reserve, what do you do when the price of gold declines and the government suddenly has to come up with a billion pounds more of gold to meet the reserve? A few words only please.

The truth requires few words......Ghandi

oroborean
4th December 2006, 01:31
i have never advocated metal-backed currency on this forum, only the purchase of silver as a hedge against inflation, and, even better, as a sector that's outperforming most of the market. therefore, i don't feel any particular imperative to explain where metal reserves would be obtained, other than to say that the most reasonable solution i've heard is the following two steps:

1. issue a single global currency backed by the world's existing gold and/or silver
2. create a minimum price for gold and silver, a la hugo salinas price's prayer for the mexican peso

buff
4th December 2006, 10:51
Oroborean......You do not feel an imperative to explain where the metal reserves will come from because you know they do not exist and have never existed in the quantities sufficient to provide a reserve to the world's currency. The gold reserve for the dollar...when it was used...was never more than 25%. It was 5% in America when it was abandoned by the executive order of Richard Nixon. After that, gold currency reserves were quickly abandoned worldwide. Silver left in the early sixties. The issuance of a single 100% metal backed money is the worst idea. The value of any currency (and metal) depends on a banking systsem's ability to control its supply. Without any control, the money supply could not be expanded or contracted when an economy is over producing or under producing. Inflation and deflation could not be curbed. Unemployment would drift a low equilibrium. And, with a 100% metal backed currency, no credit could be issued. Also, fixing the price of gold would eventually stop all new exploration and production as cost came to exceed your price fix. Everybody here at this forum keeps harping about a currency unbacked by a nonexistant supply of metal. I am just wondering how we are worse off now than we were during the depression when the gold reserves for currency were at their highest. Establishing price controls for gold as you advocate would require the confiscation of all gold bullion like was done during the depression or you could have complete chaos and hording of gold in private hands.

oroborean
4th December 2006, 16:48
first, the risks of the highly-leveraged derivative markets and fractional reserve lending far outweigh the risks of a metal-backed economy. the low reserve rates you describe hardly indict the metal-backed currency, but simply describe the dollar's transition from actual redeemable note to worthless paper.

second, creating a minimum price for gold and silver does not prevent the price from increasing. however, in a true metal-currency system, production costs would tend to get lower, not higher, as a relatively fixed money supply creates deflation as productivity rises. money supply could be regulated through government purchases or sales of metal and/or creation and destruction of actual circulating notes.

third: credit could absolutely be issued in the form of promissory notes or metal-backed currency and repaid with interest in through a similar instrument.

fourth: there is no incentive to hoard physical metal when paper currency is easily redeemable. in fact, metal-back currency is a disincentive to hoarding, therefore, it's unlikely there would be any confiscation or prohibition. fiat paper is the only incentive to hoard physical metal.

buff
4th December 2006, 19:07
Can I just ask one more time...Where is the metal going to come from to support a metal backed currency? That kind and amount of metal has never existed and never will. I wish all you guys here knew something about money, banking and monetary policy. Another thing, could you explain how a gold backed dollar with maximum of a 25% fractional reserve helped the depression. Once more, where is the metal going to come from to support a world wide metal backed currency. Or do you only want the US to back its currency? Buying and selling huge amounts of gold and silver in some ill advised scheme to control the money supply would only serve to run the price up and down and create the worst kind of speculators market. Where is that gold and silver going to come from anyway?

buff
4th December 2006, 19:11
P.S. I forgot to mention again that bills and coins are less than 10% of the money supply. Do you really think the economy can be controlled by managing coins and bills in micro amounts. Does it really matter if less than 10% of the money supply has some fractional metal reserve?

buff
4th December 2006, 23:34
Is all of the world going to support their currencies by gold or is it just the US? If it is just the US then let us pretend for a moment that sufficient amounts of gold exist and can be bought on the world market without running up the price and creating a world wide banking crisis. If only the US backs its currency by gold then how will we keep all of the annual trade surplus from being redeemed in gold from the American government? You also want the money supply to be expanded and contracted by buying and selling gold. Would that require an army of trucks to be constantly shifting gold from one place to another? Where would banks get the money to purchase gold? Now here is the big question. when the government buys gold from a bank, a payment in gold backed dollars will be required. That would be like I buy a bar of gold from you and then I pay you with a bar of gold. So, where is the contraction in the money supply? And, when banks settle their check transfers every day, will that also require the daily physical shifting of gold among thousands of banks in the US. What will we do about foreign deposits?

oroborean
5th December 2006, 11:54
what happened to a only a few words? and why are you asking me these questions, i'm not the one who's going to redesign the monetary system -- i don't even have an economics degree. what i do know is that the fractional reserve lending you describe above, the 25% during the depression, is not an indictment of metal-backed currency. the speculation caused by that fractional reserve lending is what caused the market crash and ushered in the depression.

but, if you want me to speculate on how a metal-backed banking system might work, i suppose that a $100 cash deposit at a bank would appear as $100 credited to an account with the bank holding a note with which it can redeem $100 worth of gold to satisfy the account holder should he or she demand metal. at every step of the way, all of the currency, digital and paper is backed by metal. increase in money supply would occur when the government bought metal that wasn't already represented by a note, such as new production from a mining company, or private holdings not previously monetized. you correctly point out that a trade deficit, like the one we currently maintain, would draw down the gold reserves, but don't mention that for most of America's history it actually had a trade surplus, which created an accumulation of reserves. eliminating the trade deficit is sound monetary policy advocated by more than one member of congress.

buff
5th December 2006, 21:07
You talk like eliminating the trade deficit is a voluntary act. Since a huge part of the trade deficit is oil. How do you think that is going to happen? Eliminating a trade deficit would also eliminate low priced, high quality products from American retail centers. And, eliminating the trade deficit would require a larger labor force of skilled workers that just does not exist in America. Now, about your cockamamie metal backed constitutional money......
where is the metal going to come from? Do you think it might create a trade deficit?

oroborean
6th December 2006, 11:13
for most of america's history, it produced a trade surplus. there certainly are, or can be, enough skilled workers in this country to create the products americans consume. if instead of financing a war, we took the burden of healthcare costs off of employers, then we could keep the cost of those american products competitive. the bottom line is that there are lots of possibilities. if you believe metal-backed currency would create a trade deficit, i'd like to know how.

buff
6th December 2006, 20:12
If you believe that there is plenty of skilled labor in this country you are not in touch with today's labor market. First of all, you can not get anyone out to your house to repair the roof or do any plumbing for less than $100 to $200 per hour. When someone does show up it is a pony tailed tattoo freak who is in business for himself because he can not pass a drug test for anyone else. Chances are huge that he will show up drinking or on drugs. Eighty per cent of today's high school students can not read or write above a semi-literate level. They will all need help with the big words. Forget about getting them to read a ruler. Yet, this is who comes to your house to perform service work for you. College students are a little better. However, most are taking liberal arts courses and sleep walking through their classes. The get a degree and still have no specific job skills. There is little work for them in a setting where real work is required. They are above going to work clean and returning home dirty.

Why will a gold backed currency create a trade deficit? If you would like to know, I would like to tell you. Gold does not exist in this country in the amounts necessary to support the American dollar. We will have to buy is somewhere. Where are you going to get it from? If you want a minor reserve we can always use the 25% reserve we kept during the depression.

Ardent Listener
6th December 2006, 20:19
Back to Gold-Eagle

Can a leopard change his spots...?

Following is a verbatim article published in the Wall Street Journal on September 1, 1981. Its author is Alan Greenspan, who at the time was a partner in Townsend-Greenspan & Co. - an economic consulting firm. It is relevant and very significant to also know that Greenspan was the Chairman of the Council of Economic Advisors from 1974 to 1977, a period witnessing dramatic changes in the price of gold.





CAN THE U.S. RETURN TO A GOLD STANDARD?


By Alan Greenspan

The growing disillusionment with politically controlled monetary policies has produced an increasing number of advocates for a return to the GOLD STANDARD - including at times president Reagan.

In years past a desire to return to a monetary system based on gold was perceived as nostalgia for an era when times were simpler, problems less complex and the world not threatened with nuclear annihilation. But after a decade of destabilizing inflation and economic stagnation, the restoration of a GOLD STANDARD has become an issue that is clearly rising on the economic policy agenda. A commission to study the issue, with strong support from President Reagan, is in place.

The increasingly numerous proponents of a GOLD STANDARD persuasively argue that budget deficits and large federal borrowings would be difficult to finance under such a standard. Heavy claims against paper dollars cause few technical problems, for the Treasury can legally borrow as many dollars as Congress authorizes.

But with unlimited dollar conversion into gold, the ability to issue dollar claims would be severely limited. Obviously if you cannot finance federal deficits, you cannot create them. Either taxes would then have to be raised and expenditures lowered. The restrictions of gold convertibility would therefore profoundly alter the politics of fiscal policy that have prevailed for half a century.


Disturbed by Alternatives

Even some of those who conclude a return to gold is infeasible remain deeply disturbed by the current alternatives. For example, William Fellner of the American Enterprise Institute in a forthcoming publication remarks "...I find it difficult not to be greatly impressed by the very large damage done to the economies of the industrialized world... by the monetary management that has followed the era of (gold) convertibility... It has placed the Western economies in acute danger."

Yet even those of us who are attracted to the prospect of gold convertibility are confronted with a seemingly impossible obstacle: the latest claims to gold represented by the huge world overhang of fiat currency, many dollars.

The immediate problem of restoring a GOLD STANDARD is fixing a gold price that is consistent with market forces. Obviously if the offering price by the Treasury is too low, or subsequently proves to be too low, heavy demand at the offering price could quickly deplete the total U.S. government stock of gold, as well as any gold borrowed to thwart the assault. At that point, with no additional gold available, the U.S. would be off the GOLD STANDARD and likely to remain off for decades.

Alternatively, if the gold price is initially set too high, or subsequently becomes too high, the Treasury would be inundated with gold offerings. The payments the gold drawn on the Treasury's account at the Federal Reserve would add substantially to commercial bank reserves and probably act, at least temporarily, to expand the money supply with all the inflationary implications thereof.

Monetary offsets to neutralize or "earmark" gold are, of course, possible in the short run. But as the West Germany authorities soon learned from their past endeavors to support the dollar, there are limits to monetary countermeasures.

The only seeming solution is for the U.S. to create a fiscal and monetary environment which in effect makes the dollar as good as gold, i.e., stabilizes the general price level and by inference the dollar price of gold bullion itself. Then a modest reserve of bullion could reduce the narrow gold price fluctuations effectively to zero, allowing any changes in gold supply and demand to be absorbed in fluctuations in the Treasury's inventory.

What the above suggests is that a necessary condition of returning to a GOLD STANDARD is the financial environment which the GOLD STANDARD itself is presumed to create. But, if we restored financial stability, what purpose is then served by return to a GOLD STANDARD?

Certainly a gold-based monetary system will necessarily prevent fiscal imprudence, as 20th Century history clearly demonstrates. Nonetheless, once achieved, the discipline of the GOLD STANDARD would surely reinforce anti-inflation policies, and make it far more difficult to resume financial profligacy. The redemption of dollars for gold in response to excess federal government-induced credit creation would be a strong political signal. Even after inflation is brought under control the extraordinary political sensitivity to inflation will remain.

Concrete actions to install a GOLD STANDARD are premature. Nonetheless, there are certain preparatory policy actions that could test the eventual feasibility of returning to a GOLD STANDARD, that would have positive short-term anti-inflation benefits and little cost if they fail.

The major roadblock to restoring the GOLD STANDARD is the problem of re-entry. With the vast quantity of dollars worldwide laying claims to the U.S. Treasury's 264 million ounces of gold, an overnight transition to gold convertibility would create a major discontinuity for the U.S. financial system. But there is no need for the whole block of current dollar obligations to become an immediate claim.

Convertibility can be instituted gradually by, in effect, creating a dual currency with a limited issue of dollars convertible into gold. Initially they could be deferred claims to gold, for example, five-year Treasury Notes with interest and principal payable in grams or ounces of gold.

With the passage of time and several issues of these notes we would have a series of "new monies" in terms of gold and eventually, demand claims on gold. The degree of success of restoring long-term fiscal confidence will show up clearly in the yield spreads between gold and fiat dollar obligations of the same maturities. Full convertibility would require that the yield spread for all maturities virtually disappear. If they do not, convertibility will be very difficult, probably impossible, to implement.

A second advantage of gold notes is that they are likely to reduce current budget deficits. Treasury gold notes in today's markets could be sold at interest rates at approximately 2% or less. In fact from today's markets one can construct the equivalent of a 22-month gold note yielding 1%, by arbitraging regular Treasury note yields for June 1983 maturities (17%) and the forward delivery premiums of gold (16% annual rate) inferred from June 1983 futures contracts. Presumably five-year note issues would reflect a similar relationship.


A Risk of Exchange Loss

The exchange risk of the Treasury gold notes, of course, is the same as that associated with our foreign currency Treasury note series. The U.S. Treasury has, over the years, sold significant quantities of both German mark - and Swiss franc denominated issues, and both made and lost money in terms of dollars as exchange rates have fluctuated. And indeed there is a risk of exchange rate loss with gold notes.

However, unless the price of gold doubles over a five-year period (16% compounded annually), interest payments on the gold notes in terms of dollars will be less than conventional financing requires. The run-up to $875 per ounce in early 1980 was surely an aberration, reflecting certain circumstances in the Middle East which are unlikely to be repeated in the near future. Hence, anything close to doubling of gold prices in the next five years appears improbable. On the other hand, if gold prices remain stable or rise moderately, the savings could be large: Each $10 billion in equivalent gold notes outstanding would, under stable gold prices, save $1.5 billion per year in interest outlays.

A possible further side benefit of the existence of gold notes is that they could set a standard in terms of prices and interest rates that could put additional political pressure on the administration and Congress to move expeditiously toward non-inflationary policies. Gold notes could be a case of reversing Gresham's Law. Good money would drive out bad.

Those who advocate a return to a GOLD STANDARD should be aware that returning our monetary system to gold convertibility is no mere technical, financial restructuring. It is a basic change in our economic processes. However, considering where the policies of the last 50 years have eventually led us, perhaps there are lessons to be learned from our more distant GOLD STANDARD past.

buff
7th December 2006, 00:38
Where did he say he was going to get the metal?

buff
7th December 2006, 00:52
You people are so fond of cutting and pasting here I thought I would cut something from Wikipedia for you.

In modern mainstream economic thought, a gold standard is considered undesirable because it is associated with the collapse of the world economy in the late 1920's, and that aggregate supply and demand is a far better means of regulating interest rates, money supply and monetary basis.

Well......so much for a return to honest, constitutional money.

oroborean
7th December 2006, 15:00
posting an anonymous excerpt from wikipedia is hardly the same as quoting alan greenspan. plus, as i've said before, it's not the gold standard that caused the depression, it was fractional reserve lending. anyone who suggests otherwise is shamelessly revisionist.

as for your assertion that returning to a gold standard would create a trade deficit because the u.s. government would have to accept gold in exchange for worthless paper dollars, i would personally recommend and welcome such purchasing activity. the proposition is so tempting, in fact, that we should commence before china, who has threatened to do the same and send the dollar hopelessly reeling.

in all, i would have to side with alan greenspan over anonymous wiki poster on this one -- there is significant potential benefit in tentatively working towards a new gold standard.

buff
7th December 2006, 16:08
Do you have a quote from Greenspan saying where he expected to get the metal?

Since you are so fond of internet quotes I have a few for you.

Samuelson got a Nobel prize for economics...but what does he know anyway? “The gold standard’s very rigidity led to its collapse in the Great Depression. Too little gold fostered banking and currency crises.”
Tsk, tsk. Poor gold! Now the blame for the Great Depression lies at your feet.
Such a view is not uncommon. Our own newly appointed Fed chief, Ben Bernanke, also holds such views.

Greg Ip’s piece in the Wall Street Journal summarizes some of Bernanke’s views on the Great Depression. On the top of the list: “Beware of outdated orthodoxies such as the gold standard.”

I am trying to stick to a few words. But how is it that you know the merits of a gold standard and not a single central bank on the planet does. Another thing, stop quoting me. You are not good at it.

You do understand that in addition to creating a trade deficit, the values among currencies would freeze and international trade would all but come to a stop....just like in the depression.
Of course we have a huge number of illegals and that army of simi-literate, skilled pony tailed tattoo freaks to produce our products. Who needs trade anyway?

Ardent Listener
7th December 2006, 22:20
Where did he say he was going to get the metal?

Buff,

Why do you think we would need so much metal any way? PMs could be divided into grains or smaller. I don't think we are going to see dollars backed by $35 per ounce gold again. Actually, I'm for at least a bimetal or trimetal standard.

buff
7th December 2006, 22:34
Well, if you want a trimetal system you will need to make one of metals pig iron. We got plenty of that. Let me explain something that I usually try to keep a secret. The supply of gold is limited. The supply of paper and ink is not.

Bill
9th December 2006, 16:32
If you believe that there is plenty of skilled labor in this country you are not in touch with today's labor market. First of all, you can not get anyone out to your house to repair the roof or do any plumbing for less than $100 to $200 per hour. When someone does show up it is a pony tailed tattoo freak who is in business for himself because he can not pass a drug test for anyone else. Chances are huge that he will show up drinking or on drugs. Eighty per cent of today's high school students can not read or write above a semi-literate level. They will all need help with the big words. Forget about getting them to read a ruler. Yet, this is who comes to your house to perform service work for you. College students are a little better. However, most are taking liberal arts courses and sleep walking through their classes. The get a degree and still have no specific job skills. There is little work for them in a setting where real work is required. They are above going to work clean and returning home dirty.

First of all, I am deeply offended by most of this entire paragraph. If you want a skilled worker then, yes, there is a price to pay. Have you ever though about hiring an actual skilled tradesman who belongs to a union to repair something wrong with your home? If you pay cheap, then cheap is what you get. I am 27 years old. I have a pony tail as well as some tattoos (which are well hidden by the way). And guess what? I DON'T USE DRUGS!!! I recently graduated from serving a 5 year apprenticeship to become a Union Sheet Metal Worker at Local 265 (suburbs of Chicago). The 5 years of training I received was no walk in the park. My training facility is also one of about 5 in the nation which gets college recognition. With a few online courses I will end up with an Associates Degree in Applied Science. In 2005, I competed on an international level in my trade. Contest included drafting, welding, blueprint reading, a long written test, as well as the hand layout, forming, and assembling of an intricate fitting which, the likes of you could not even begin to comprehend. Out of 14,000 apprentices between the US and Canada, I took 12th place. I also have an IQ of 130 or so (it's been a while since I last took an IQ test). So, for you to stereotype someone based strictly on appearance, rather than the skills of their labor, is simply asinine. As for the price, if you want skilled labor performed on your home repairs (or any repairs for that matter), you have to pay the going rate. If it's too steep for you, you can always write a lettter to the Fed Chairman and ask him to stop inflating the money supply so damned much, which only contributes to higher prices. If that doesn't suit you, then you go through a several year apprenticeship and you learn the trade so you can make proper repairs yourself.

Now that I have that bit out of the way, here is a link to a video I'd like you to watch. It's a long one. But, if you aren't the complete sheeple you are making yourself out to be thus far on these forums, you should be able to comprehend the message which it trys to convey.


http://www.mecfilms.com/mid/movies/fiat2.wmv


As for the matter of where the metals would come from to back our currency again, I guess the central banks would have to 'fess up as to how much they actually have in their holdings. I'll bet dollars to donuts they have plenty.


Buff,

Why do you think we would need so much metal any way? PMs could be divided into grains or smaller. I don't think we are going to see dollars backed by $35 per ounce gold again.

Exactly! Why do we need so much? We don't! Clearly, population continues to rise year after year, decade after decade. As population increases, the less gold there is for every one person, which can only drive it's value up. So, your wealth can only grow, until you spend it. At which point it will become the wealth of someone else. Just give that video a watch (all the way through) and tell me how this pretty colored toilet paper we use for currency now is fair and just, and does not steal from the people. Please explain to me how it works and will not eventually and inevitably fail like all other forms of FIAT throughout history have. What's so different this time?


EDIT:

Well, if you want a trimetal system you will need to make one of metals pig iron. We got plenty of that. Let me explain something that I usually try to keep a secret. The supply of gold is limited. The supply of paper and ink is not.

How does that fact not scare you in the least? They can and do print all they want! It devalues all which we have saved! Hell, they don't even have to tun on the printing presses. Here's a little secret for you. They can do it electronically! We don't even have the paper in circulation to back these "dollars" that exist!

buff
9th December 2006, 18:14
All I have found at this forum are foaming at the mouth metal horders raging about unconstitutional paper fiat money. Not speaking of you, but they do not know a thing about money, monetary policy, the constitution, case law or even who prints money. All they know is that the government has put a big one over on the public by passing out paper money and getting people to believe that it is honest, constitutional money. They want every currency to be backed by gold of an unspecified reserve from an equally unknown source of supply of the same. Even if this happened in their fantasy world, none have a clue about the log jam this would cause to any increase in the money supply, or how fixed exchange rates will freeze international trade. Let alone how the price of gold will be controlled worldwide and how a price control will effect production and supply. All here are masters of cut and paste of the internet from articles written by other equally foaming at the mouth metal horders.

7nomads
11th December 2006, 13:57
About forty years ago when the government separated gold from paper there was five cents of gold for every dollar. And, that was only for international dollars. I guess that was confidence builder for somebody. Now, here is my same my question. Where do you expect to get the gold and silver for your metal money or even a metal reserve? How much reserve do you want? How do you expect the US government to have enough metal to redeem international dollars which will represent a net drain of gold reserves? And more importantly, what do you expect to do when the value of gold and silver deviates from the face value of your metal money? If you advocate a gold reserve, what do you do when the price of gold declines and the government suddenly has to come up with a billion pounds more of gold to meet the reserve? A few words only please.

The truth requires few words......Ghandi

Buff thought I would get in on this. You asked five questions.
But first, I doubt we'll (Americans) as a nation go back to a "money" metal standard. Today's money is only a medium of exchange. Cultures though history have exchanged beads, rocks, wampum, etc through history. Now we exchange pictures of presidents.

The fact that we don't use metals today doesn't mean they don't have value or use. Value is according to time and space, that old silver dollar i have is still the same (except for a little wear) as it was a 100 yrs ago, but its "value" to a US $ is different today. Its relative value (as compare to other things) is probably less.

On to the questions.

Questions 1-3 have but one litte answer. "Zeros" I mean if they can print a dollar out of air, why no print one to .00000001 gram of gold or silver.

#4Deviate -dollar buys more than the gold backing it (like now) add another zero.
-dollar buys less than the gold backing it (like those old silver certificates) this is a problem (as people would hoard dollars, spent less and bringing down prices).

#5 Reread the question a couple of times. I think you mean how do we handle a trade deficit or the problem we had in the early 70's. Since the flow of dollars is out of America, there would be less in America thus causing a recession or worst. We'll have to add another zero.

Conclusion - America's finances are a mess and there will be a crash. We're all broke and we don't know it. Our kids will have it even worse. :(

buff
11th December 2006, 16:22
Well......I was going along with you pretty good until you got to your less than optimistic view of America. We have the strongest economy on earth. Our dollar is the key currency that the value of all other currencies is quoted in. America creates more wealth each year than any other country and have been doing the same for a couple of hundred years. No population has ever lived better in history. All of this has been accomplished without a dollar that can be redeemed in gold or silver. So, I am not going to share your view of America's future.
In 1850 there were 8,000 private banks and other issuers of bills. How many do you think held a gold reserve? Was this source of bills honest, legal and constitutional?

About printing money......money is not printed out of thin air any more than checks are negotiable on accounts that do not exist. The use of printed bills and coins is the only way that money can get out of the computers and into our pockets. They are the tokens that make computer data more negotiable. It should be understood that bills and coins have no value other than the computer data it represents. Just like checks. They are constitutional, honest and legal. The bills are printed and passed to the Federal Reserve by the treasury department. The Fed pledges the government securities it owns towards the security of the bills it uses from the treasury. Metal heads do not like the fact that money continues to evolve into more abstract forms. They get lost in the complexity of it. But eventually, all money will exist only as electronic pulses in a data bank. Ninty percent of of already does in the world's leading central banks. The world's business simply can not be carried out in cash.

Some here at the forum believe that the Federal Reserve is unconstitutional. I do not think they understand that the Federal Reserve is not a part of government, it was not created by government and it is not run by the federal government. For the Fed to be unconstitutional, at least one of these would have to be true. Having the central bank removed from government and politics turned out to be a very wise practice.

Before the Fed, the government did own and operate banks. A couple of different times, these early attempts of the government to bring stability to the banking system were judged unconstitutional by the Supreme Court. After the 1913 contraction, the worst since the civil war, the government made one more attempt to establish a central bank. The Fed came into existence as a privately owned, profit making, government regulated bank...just like evey other institution in America that takes deposits. The responsibility of the Federal Reserve to control the supply and value of money evolved out of the need to stabalize the banking system during the depression and out of the Governments new commitment to support high levels of production and employment during the same era. Fiscal and monetary policy have continued to evolve since that time. Now, however, it is the widely held view by government, bankers and economist that monetary is the most precise and effective to support production and employment at sustainable levels. This is a view held by every central bank in the world although many central banks are not so effective because they are still operated by their respective governments. When compared to private enterprise, governments do not run anything at a high level of efficiency. Just look at the long lines at every government provided service starting with the post office.

If it is true that the truth requires few words, sometimes more truth requires more words. The above is something that I did not cut and paste from the internet. It is as money and banking realities exist in the world today. Metal can not longer be used as money any more all of our cars and trucks could be exchanged for horses. There is not going back. I do not want any person to go picking through what I have said and asking for me to defend some part of it. Perhaps I should just quote the bible at this point..."he who will not hear will not hear."

7nomads
12th December 2006, 12:44
About printing money

I used to play a lot of monopoly. Its a good economic game. A guy i know who owns a lot of property in and around Dallas told me he never had any financial training, but learned everything he knew about finances from playing the game. Anyway, as a kid I used to play two types. One according to the rules, the other was all money paid by players went to the middle of the board instead of the bank. If a player landed on "free parking" he or she collected all the cash in the middle of the board. If the game had several players the cash got quite large and the bank would run out of money and had to write out little slips of paper for $10,000 to keep it afloat.

This game was different than the straight game because. Players holding a lot of cash would start buying pieces of property from other players at much higher prices(a housing bubble). We allowed players to double up hotels, with double rents(over development). The game usually lasted much longer for the lucky players and much shorter for those who weren't.

Now Buff, you're right that money isn't printed out of thin air. There's an obligation attached to it. In fact all currencies of the world have an obligation attached to them because all money is created with debt (See a great book, DEATH GRIP OF DEBT). Those obligations will either be diluted away through inflation, defaulted on, or paid back with great pain.

My favorite financial Bible verse is "the borrower with be the lender's slave" Pro 22:7

buff
12th December 2006, 14:11
How about that. All that time I spent earning my Master's in Business and all I had to do was play a few games of monoply. Well, all of those years in college was time wasted.

Is all money really created by debt? I always thought that a lot of it was compensation for labor and created by profits through production and added value......Another shocker.

Bill
12th December 2006, 15:41
How about that. All that time I spent earning my Master's in Business and all I had to do was play a few games of monoply. Well, all of those years in college was time wasted.

Is all money really created by debt? I always thought that a lot of it was compensation for labor and created by profits through production and added value......Another shocker.


Congratulations on your Master's in Business. Perhaps you should now go for a Master's in Economics and learn a thing or two about fractional reserve banking. The above statement is one-sided. It merely deals with cost and profit, not the creation of money. Companies that make the products and the workers who make/service them are only a couple of instruments that make money flow, not the instruments that create it. Go back to school. You have much to learn.

buff
12th December 2006, 17:33
Well...at least I did not get my education from playing monopoly. I do not have a master's in economics but I do have a BA in economics and half of my master's was in economics. I know all about fractional reserves. We might take notice that it has been more than thirty years since the Federal Reserve has adjusted the reserve rate in an effort to control the money supply. So, it will be hard to explain any expansion of the money supply since that time through fractional reserve manipulations. In fact, we should not look for any adjustment in reserve rates anytime in the future. Adjusting the reserve rate is considered the least desirable and most disruptive way to control the money supply. Buying and selling government securities in combination with interest rate adjustments is by far the best. Can you believe it? I have come to this understanding without every having played a game of monopoly.

xxuxtewwgp
24th January 2011, 16:35
hi
i hope i enjoy my stay here


pls be nice to me

thanks!

What is Truth?
24th January 2011, 20:24
Well...at least I did not get my education from playing monopoly. I do not have a master's in economics but I do have a BA in economics and half of my master's was in economics. I know all about fractional reserves. We might take notice that it has been more than thirty years since the Federal Reserve has adjusted the reserve rate in an effort to control the money supply. So, it will be hard to explain any expansion of the money supply since that time through fractional reserve manipulations. In fact, we should not look for any adjustment in reserve rates anytime in the future. Adjusting the reserve rate is considered the least desirable and most disruptive way to control the money supply. Buying and selling government securities in combination with interest rate adjustments is by far the best. Can you believe it? I have come to this understanding without every having played a game of monopoly.

A B.A. in economics? I bet a Masters in teaching. So, how do you like teaching Jr. High?

maplesilverbug
24th January 2011, 20:37
How about that. All that time I spent earning my Master's in Business and all I had to do was play a few games of monoply. Well, all of those years in college was time wasted.

You said it, not us!

I was headed in the same direction but quit after Econ 101.
I really could not get past the level of bullshit and lies.
Glad my choice was proven correct in 2008+.


Is all money really created by debt? I always thought that a lot of it was compensation for labor and created by profits through production and added value......Another shocker.

Oh dear.
The brainwashing really took well with you, didn't it! :)