The collapse of the dollar

[Texas1911]

Originally Posted by NewTxn

The problem is our MONEY.

I don't quite buy into the gold standard ideology, if that is what you are somewhat hinting at. The US economy has suffered far, far worse when it was on the standard, and it was not a saving grace, or at least to the effect people swear by.

It's the same story as physics; which is no coincidence since economics is based upon similar principle. It doesn't matter if the dollar is valued upon by a single ounce of silver, or 10 ounces of canned grape soda so long as the value remains the same on the market. It's the same as a pound of lead is the same as a pound of feathers. By valuating the US currency on our GDP we've diversified the dollar, and in essence, created a cost free, relatively speaking, alternative to monetary infusion.

The issue isn't in the economics, but the politics surrounding our nation's currency. Congress has deemed it viable to simply pluck another million off the money tree. Ergo the source of our own downfall... yet again, Washington bureaucrats.

Washington shouldn't be controlling our economy. In fact, there is virtually nothing that Washington can do to improve our economy at this point in the game. We've had our hand in the cookie jar too long, and now is the time to hit the gym, but no one wants to cash in that option. We'd rather sit on the couch eating cookies until we get diabetic shock and die.

[oldguy]

Washington shouldn't be controlling our economy. In fact, there is virtually nothing that Washington can do to improve our economy at this point in the game. We've had our hand in the cookie jar too long, and now is the time to hit the gym, but no one wants to cash in that option. We'd rather sit on the couch eating cookies until we get diabetic shock and die.

Well stated,we simply cannot continue on our current path and why we do
so gives me concern is it simply ignorance or is there another reason to
totally destroy our economy.

[MadMo44Mag]

Originally Posted by oldguy

Well stated,we simply cannot continue on our current path and why we do
so gives me concern is it simply ignorance or is there another reason to
totally destroy our economy.

Wall Street wants to destroy the economy so a global order of the rich can gain more control -IMO.

Face it there is only a hand full of very wealthy in this world and they control the money and the politics.

They control every aspect of the economy.
Common sense tells you that those who control the money control everything else in one way or another.

[Sig_Fiend]

All I will say is that, having a currency backed by a "rare" commodity like gold, silver, or something else of intrinsic value is a guard against uncontrolled abuse of inflation. That rare commodity is the actual money, the paper "note" is just a promise/receipt. If you start inflating the supply of those notes, there can and will be very serious and quick economical and financial repercussions in the host country. Everyone could just up and decide one day, "Hey, I'm going to get all my notes changed back into gold" and all of a sudden the government may not be able to pay everyone. It presents much more of an immediate risk. It's more complicated than that obviously but, you get the idea. It doesn't prevent people from abusing the system, as people are still morons capable of the unthinkable. What it does do is create a much more immediate effect that presents a more visible deterrence against such actions.

Here's the tricky thing. With a currency such as ours is currently (in which the paper "note" is the actual currency and there is no real backing), there is no backing by a limited commodity that provides an incentive for restriction in production. Because of this, the effects of inflation or excessive inflation can be much more subtle and long-term, and much less apparent to everyone as a whole. In fact, that's the reality we live in. In fact, it can be so much less apparent that the effects of these intentional inflation periods can be shrugged off as a purely random and mysterious "business cycle" or some other completely random thing, even though they are entirely an effect of the policies by the Federal Reserve and their actions with the money supply. This more long term effect has fooled a great majority of our population, and it really offers little if any deterrence against inflation, hyper inflation, etc as it's something that may be noticed years or decades down the line instead of weeks or months from now as under a commodity-based currency.

[NewTxn]

Originally Posted by Sig_Fiend

All I will say is that, having a currency backed by a "rare" commodity like gold, silver, or something else of intrinsic value is a guard against uncontrolled abuse of inflation. That rare commodity is the actual money, the paper "note" is just a promise/receipt. If you start inflating the supply of those notes, there can and will be very serious and quick economical and financial repercussions in the host country. Everyone could just up and decide one day, "Hey, I'm going to get all my notes changed back into gold" and all of a sudden the government may not be able to pay everyone. It presents much more of an immediate risk. It's more complicated than that obviously but, you get the idea. It doesn't prevent people from abusing the system, as people are still morons capable of the unthinkable. What it does do is create a much more immediate effect that presents a more visible deterrence against such actions.

Here's the tricky thing. With a currency such as ours is currently (in which the paper "note" is the actual currency and there is no real backing), there is no backing by a limited commodity that provides an incentive for restriction in production. Because of this, the effects of inflation or excessive inflation can be much more subtle and long-term, and much less apparent to everyone as a whole. In fact, that's the reality we live in. In fact, it can be so much less apparent that the effects of these intentional inflation periods can be shrugged off as a purely random and mysterious "business cycle" or some other completely random thing, even though they are entirely an effect of the policies by the Federal Reserve and their actions with the money supply. This more long term effect has fooled a great majority of our population, and it really offers little if any deterrence against inflation, hyper inflation, etc as it's something that may be noticed years or decades down the line instead of weeks or months from now as under a commodity-based currency.

That is excellent analysis Sig_Fiend! Good Job!

The characteristics that make for a good medium of exchange (money) are:

1. Portable- It has to be easy to move around

2. Durable- It can't degrade or spoil over time which would make savings difficult.

3. Scarce- It has to be something that cannot be acquired with little effort.

4. Useful for purposes other than a means of exchange- Has intrinsic value.

5. It's use is voluntary- You must be free to accept it or reject it as payment.

Our current fiat money fails points 3,4, and 5.

It's scarcity is limited only by our government's restraint in printing it. We see how well that's been working out lately.

It has no intrinsic value. The only other things it is useful for is starting a fire or wiping your ***.

It's use as money is forced upon us by the government. You cannot reject it as payment of a debt.


This idea of "a slow, steady rate of inflation over the long term is good for the economy" that is pushed by most of the "mainstream" economists is a huge scam. It is intended to make you believe that the slow, steady theft of your purchasing power is normal. What a joke.

[Texas1911]

Originally Posted by Sig_Fiend

All I will say is that, having a currency backed by a "rare" commodity like gold, silver, or something else of intrinsic value is a guard against uncontrolled abuse of inflation.

The only rare metal that has responded in this manner has been gold. The currency in circulation prior to 1957 was backed by silver, which did not respond to the amount of currency influx that you saw during the Cold War and WWII / Korea.

I think the large fixation on the gold standard runs in that the history of the United States during the gold standard was largely fixated in terms of the foreign market. Now, with the emergence of the world market, it has been harder and harder to control the amount of currency that is on the market without stifling the trade industry. China has tremendous holdings in US currency, and should US domestic demand increase for currency then the valuation is not going to be readably fixed. The problem is that the free market in this instance plays against us, and Washington and US business is not going to stick around and wait for China to spend it's US holdings here. Ergo the problem. We either stifle the US economy, or we print more money with the hopes that China will re-invest into the US, and at that point, begin to remove currency via an increase in credit pricing through the Fed.

Fact is, the gold standard, nor the silver standard, have prevented inflation of any means in the United States or world wide. The highest amounts of inflation we've seen in this country occurred during the days of the gold eagle and silver note. The second most occurred in the late 70s and into the 80s, and was stifled by reduced taxation in large part.

Ergo the currency backing is not the question, so much as the players behind it. Everyone has played a role in the deflation of the US market, and honestly I think too many people are looking for the wrench in the cog so to speak. The currency has value, always has... it's backed by our GDP. There is a physical object behind every dollar produced, some are gold, some are steel, but the real issue is not the valuation of the money, but the manner in which it is being used.

[pwrincross]

Wow, I'm impressed. you guys seem to know as much alan greenspan himself. I love reading intelligent conversation. especially when i agree with what is being said. Just remember that history shows that hyper-inflation has caused more revolutions and conflicts than poverty. Be wary of hyper-inflation like in Germany prior to WWII with it taking a wheelbarrow of money to buy a loaf of bread.

[NewTxn]

Speaking of Mr. Greenspan, let's see what he had to say on the matter in 1966:

http://www.financialsense.com/metals/greenspan1966.html

The real meat of it is in the last 5 paragraphs. Oh the irony...

[zembonez]

In modern society, a gold standard is nothing more than a myth.

Even if the US were to go back to a "gold standard" the fact remains that any commodity can be manipulated by outside sources. Oil, Gold, Diamonds, etc can vary widely in value depending on world supply and demand. Currency valuations would follow suit.

Every currency ever developed has survived (or cratered) based on the confidence that the people using it had in it. It really boils down to that in a nutshell.

[DCortez]

Taken from the link, next to the last paragraph:



In the absence of the gold standard, there is no way to protect savings from confiscation through inflation. There is no safe store of value. If there were, the government would have to make its holding illegal, as was done in the case of gold. If everyone decided, for example, to convert all his bank deposits to silver or copper or any other good, and thereafter declined to accept checks as payment for goods, bank deposits would lose their purchasing power and government-created bank credit would be worthless as a claim on goods. The financial policy of the welfare state requires that there be no way for the owners of wealth to protect themselves.