Ron Paul and the Dollar.

[ShakeZula06]

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The currency issue is a lot bigger than most people realize. The world cannot continue to finance our debt indefinitely. The US has run a trade (and government spending) deficit for many years in a row. At some point our creditors are going to want to be paid back ending the credit bubble we are in now.

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Eg staying on the gold standard would have held back the economic growth that has occurred since it was abandoned.

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This is not true. While the economy has exploded since that time, a lot of the gains are due to inflation, and are not real. My generation is expected to earn less than my parents (baby boomer) in real terms.

More of the gains have come from borrowing money, like the trade deficit that continues every year. If I give you a new credit card with a high limit each year, you are going to be able to buy a lot of stuff. At some point however, you are going to have trouble making those minimum payments. Then the credit cards are going to stop coming in the mail. When that happens, the assets you thought you had are going to have to go back to the bank.

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People who devoted their lives to economics, and are a hell of a lot more intelligent than you or I made the decision to change and understand the consequences and benefits of it.

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You're assuming that the guys that made these decisions have you're interests in mind. Not to mention it's nothing but a naked appeal to authority.

[pvn]

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There are plenty of economic analyses that show that as long as there are sufficient reserves of whatever is backing the currency, there is ultimately no effect on the economy of "fiat money". If there are insufficient reserves to accomodate economic growth a hard currency is a disaster. Eg staying on the gold standard would have held back the economic growth that has occurred since it was abandoned.

The best non technical analysis is probably "There Is No Such Thing As Fiat Currency" , from the UCLA economics department, but I havent been able to track it down online.

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So, what's the "whatever" that's "backing the currency"?

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Bump for copernicus.

[Jeffiner99]

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I am guessing the reason things would get cheaper every year is due to more efficiency and competition? If there is no upwards artificial inflationary pressure (printing money), that would make sense. An interesting perspective that had never occurred to me. Hopefully someone with more background than I have can confirm, deny or further explain the forces at work as described in this post.

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Sounds like you have it. Things get cheaper because people get better at producing them. A few goods, maybe oil, might get more expensive because oil gets more expensive to produce, not cheaper, but generally things should go down in price as workers get more productive.

Of course, at least in a perfectly rational economic world, wages would also go down, so most people wouldn't see much effect on their purchasing power.

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But your savings would be worth more in a few years rather than less. So you would see a great deal of effect on purchasing and retiring power.

[AlexM]

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There are plenty of economic analyses that show that as long as there are sufficient reserves of whatever is backing the currency, there is ultimately no effect on the economy of "fiat money". If there are insufficient reserves to accomodate economic growth a hard currency is a disaster. Eg staying on the gold standard would have held back the economic growth that has occurred since it was abandoned.

The best non technical analysis is probably "There Is No Such Thing As Fiat Currency" , from the UCLA economics department, but I havent been able to track it down online.

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So, what's the "whatever" that's "backing the currency"?

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So Ron Paul could possibly be a disaster to the economy?

...and to the question asked, our word.

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No, this is a bunch of nonsense. What's the worst case scenario if the demand for money is greater than the supply? The value of money goes up? Oh noez!!!

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Oh noez!!! another self proclaimed Alan Greenspan.

If people don't have money to spend they stop buying goods, wages go down, unemployment goes up, and the economy slows. This is economics 101, moron.

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Whoever said anything about people not having money to spend? What does that have to do with anything? People would still have money to spend.

[AlexM]

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People who devoted their lives to economics, and are a hell of a lot more intelligent than you or I made the decision to change and understand the consequences and benefits of it.

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No, politicians made the change.

[Jeffiner99]

Here is another good video about the Federal Reserve. It has a few shortcomings I won't go into now, but it gives a good general explanation.


http://video.google.com/videoplay?do...39329002339531

[bobman0330]

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But your savings would be worth more in a few years rather than less. So you would see a great deal of effect on purchasing and retiring power.

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That would be true if you held a significant portion of your purchasing power in assets whose return isn't indexed to the price level (basically cash, small bank accounts, and fixed-rate bonds). But I would bet that for most people, their cash holdings are dwarfed by either investments or current wages/salary.

[Copernicus]

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But your savings would be worth more in a few years rather than less. So you would see a great deal of effect on purchasing and retiring power.

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That would be true if you held a significant portion of your purchasing power in assets whose return isn't indexed to the price level (basically cash, small bank accounts, and fixed-rate bonds). But I would bet that for most people, their cash holdings are dwarfed by either investments or current wages/salary.

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It depends on age. If you want to maintain close to your pre-retirement lifestyle and retire at 65 you need about 7 years of current wages saved or invested, and most people have 40% or more of that in the form of fixed income investements. 3 to 4 years of pay is a pretty significant cash holding.

[clowntable]

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If people don't have money to spend they stop buying goods, wages go down, unemployment goes up, and the economy slows. This is economics 101, moron.

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You seem to forget that the money itself is a good that people have preferences for.

[pvn]

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But your savings would be worth more in a few years rather than less. So you would see a great deal of effect on purchasing and retiring power.

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That would be true if you held a significant portion of your purchasing power in assets whose return isn't indexed to the price level (basically cash, small bank accounts, and fixed-rate bonds). But I would bet that for most people, their cash holdings are dwarfed by either investments or current wages/salary.

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Well, yeah, in the current environment, where cash is constantly being devalued by inflation, of course most thinking people don't leave all their wealth in cash under the matress.