an argument against the gold standard

[jogger08152]

Here.

US monetary policy will be at the mercy of foreign countries.

Future increases in gold supply will muck things up.

[Copernicus]

Good link. the "tight money" graphs also highlight the threat inherent in deflation

[TomCollins]

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Good link. the "tight money" graphs also highlight the threat inherent in deflation

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An excellent use of "assert your way to victory". Steven Bickford would be proud! The criticisms below it make the article worth reading just to watch the author get owned.

[Exsubmariner]

If you'll recall, the expose called "The Money Masters" advocated a fiat money system similar to the greenbacks printed by Abe Lincoln in the Civil War.

The problem with the fiat money system we presently have is that it is dependent on the creation of new government debt. Government must go into debt to get new money into circulation. This has the effect inflation, but also a hidden tax on lenders and accumulators of cash in that the returns on investments and money already lent decreases in absolute value. A fiat currency not based on debt would mitigate some of the effects of constantly putting currency out into the economy every time the government needs money if limitations were placed by law on how much new money could be introduced at a time. A good link about this is

Here.

[Copernicus]

[ QUOTE ]
If you'll recall, the expose called "The Money Masters" advocated a fiat money system similar to the greenbacks printed by Abe Lincoln in the Civil War.

The problem with the fiat money system we presently have is that it is dependent on the creation of new government debt. Government must go into debt to get new money into circulation. This has the effect inflation, but also a hidden tax on lenders and accumulators of cash in that the returns on investments and money already lent decreases in absolute value. A fiat currency not based on debt would mitigate some of the effects of constantly putting currency out into the economy every time the government needs money if limitations were placed by law on how much new money could be introduced at a time. A good link about this is

Here.

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Love the titling..."Gives Lecher at the Tax Freedom Rally".

and to increase the money supply the Fed BUYS debt from the public, ie retires debt. it doesnt increase debt.

[Taciturn]

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and to increase the money supply the Fed BUYS debt from the public, ie retires debt. it doesnt increase debt.

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I really don't understand how it's like that. When they 'buy' debt, they receive treasury bonds in return for newly created money, right? How does that retire debt?

[TheEkim]

Gold being used as money (or a store of value in a reserve scenario) artificially inflates the price of gold. This is a bad thing cause gold has useful properties for the construction of high tech goods. Fiat currencies are nice because they dont directly inflate the price of any basic material directly. Unfortunately both people and countries still hold gold as a hedge against hyper inflation which kinda defeats the purpose. If everyone would just agree to do away altogether with the idea of gold being used as currency (or a backing for currency) the price should drop substantively and we would get better and cheaper electronic goods.

Just a thought.

[mjkidd]

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Gold being used as money (or a store of value in a reserve scenario) artificially inflates the price of gold. This is a bad thing cause gold has useful properties for the construction of high tech goods. Fiat currencies are nice because they dont directly inflate the price of any basic material directly. Unfortunately both people and countries still hold gold as a hedge against hyper inflation which kinda defeats the purpose. If everyone would just agree to do away altogether with the idea of gold being used as currency (or a backing for currency) the price should drop substantively and we would get better and cheaper electronic goods.

Just a thought.

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Or, we could have a currency backed by a diverse basket of commodities.

[Copernicus]

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and to increase the money supply the Fed BUYS debt from the public, ie retires debt. it doesnt increase debt.

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I really don't understand how it's like that. When they 'buy' debt, they receive treasury bonds in return for newly created money, right? How does that retire debt?

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They buy the treasuries from primary dealers..banks and securities brokers who were holding them as investments, which takes them off the market.

You are right that it doesnt literally "retire" them. They become part of the backing for the dollars they issued to purchase them, along with precious metals and foreign currencies. It takes them off the open market, pretty much permanently, so in that sense they are retired, but they do remain an obligation of the US. More importantly, and what I was responding to, is that the issuance of currency doesnt INCREASE debt.

[Copernicus]

[ QUOTE ]
[ QUOTE ]
Gold being used as money (or a store of value in a reserve scenario) artificially inflates the price of gold. This is a bad thing cause gold has useful properties for the construction of high tech goods. Fiat currencies are nice because they dont directly inflate the price of any basic material directly. Unfortunately both people and countries still hold gold as a hedge against hyper inflation which kinda defeats the purpose. If everyone would just agree to do away altogether with the idea of gold being used as currency (or a backing for currency) the price should drop substantively and we would get better and cheaper electronic goods.

Just a thought.

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Or, we could have a currency backed by a diverse basket of commodities.

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and exarcebate the problem by having many different commodities that can fluctuate in supply. I think you are missing one of the main problems with any specie currency...changes in supply wreak havoc on the monetary system. Gold at least is scarce enough that supply doesnt often change rapidly. The California gold rush was substantial enough to disrupt prices, and if the world were still on a gold standard (if that were even feasible) would be highly susceptible to a large find, which is highly likely to come at some point....most likely under water somewhere.