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What Makes Money Make Money?

By kpaul in Culture
Sun Feb 02, 2003 at 10:32:29 PM EST
Tags: Focus On... (all tags)
Focus On...

As Henry Miller put it in Money and how it gets that way, "To walk in money through the night crowd, protected by money, lulled by money, dulled by money, the crowd itself a money, the breath money, no least single object anywhere that is not money. Money, money everywhere and still not enough! and then no money, or a little money, or less money, or more money but money always money. and if you have money, or you don't have money it is the money that count, and money makes money, but what makes money make money?"

This article sheds some light on where money comes from and where it stands today. It also asks how you, the reader, think it will exist in the future.

Indirect bartering

Where did the current system of money originate? When there were fewer people, man had to live off the land to survive. If you needed something you could trade something of value for it, a simple direct bartering system. As larger and larger groups of people got together for the common good, though, another system was needed and over time developed.

At first, the idea of indirect barter was introduced as a means to make easier transactions between different people coming into contact. Many objects have been used by different cultures; seashells, pigs, goats, and even bananas have been used as a form of currency at one time or another.

Gold and silver eventually became accepted in the known world for indirect bartering. Carrying a lot of gold and silver around was quite a task, though. Gold smiths already had vaults so they took gold and precious items in from people and returned a receipt.

The practice caught on, and soon the gold smiths became what we know of as bankers with the receipts turning into our various forms of our current paper money. Getting from there to here is lot more complicated, though, so we'll take a look at a few of the bigger periods in monetary history in the recent history of the world.

Bimetallic Standard

In 1792 the United States Congress adopted a bimetallic standard with a 15:1 ratio. That is, an ounce of gold was worth 15 times more than the same amount of silver. During the early 19th century, the bimetallic standard was in place around the world. During this time both silver and gold were used to back money.

Technological advances in the steam engine during the mid and late 19th century enabled governments to mint coins that were more detailed and harder to counterfit. As a result, they were able to make coins out of materials other than silver and gold. Between 1871and 1900 every major country, except China, dropped the bimetallic standard for a gold standard.

The Gold Standard

The years 1880 to 1914 were the golden years for the gold standard around the world, as more and more countries converted to gold standard. With this system, only gold is used to back paper money, with each ounce being worth so much in paper money.

Much of the world found an entirely gold standard difficult to live up to because of the expenses incurred during WWI. It was after the first world war, known as the war to end all wars, that the monetary system was changed in countries around the world.

The Gold Exchange Standard

The gold-exchange standard was adopted by a lot of countries after the first world war. The GES was created the Genoa conference of 1922 as a way for the countries of the world to ensure they didn't run out of gold. In this system, some money was backed by gold, but banks could also use other currencies like the British Sterling to back their paper money. This allowed them to grow.

From 1924 to 1930 GES was adopted by countries around the world, especially in Europe. The GES has crashed twice, once in 1931 and again in 1971. The first crash, though, helped create the Great Depression and caused Great Britain to lose their power over the world monetary system.

In the early 40s, with World War II going on and Europe hurting for money, the United States realized that they would have to be the primary force behind the new monetary system. In 1947, European and other nations looked toward the United States who committed to turning paper money to gold, which, of course, soon led to a very large deficit.

IMF and the World Bank

The reins of power were handed to the United States after WWII, which led to The Bretton Woods System being dominant in the world financial market from 1944 to 1976. It was during this time period that the International Monetary Fund (IMF) and the International Bank for Reconstruction and Development (World Bank) were thought up and given power to help stabilize the world monetary system.

Recently, the protests in Seattle and other places in the world were sparked by disagreement with the IMF, World Bank, and other global financial institutions. Since their inception, the IMF and World Bank have been the source of problems for many smaller countries.

Orginally, the organizations had as their goal the emulation of semi-fixed exchange rates, similar to those that occured in gold standard economies. However, some say that over the years the organizations have come to see their role as ensuring financial stability, which can be a tricky business. Instead of just protesting the fact that the organizations exist, some think it is possible to reform the institutions.

Fiat Money

In the United States, the Federal Reserve Act was passed by both houses of congress on December 22, 1913. The term 'dollar-standard' was first used in a speech in 1924, and was meant to convey that the United States could set its internal price level and the rest of the world would be forced to follow suit.

It wasn't until 1971, though, that fiat money was in place in the United States with nothing being backed by a gold standard. The term fiat money refers to the fact that the money is not backed by gold. Rather, the money is backed by the guarantee of the fiat of the United States, a proclamation that the paper money will be valuable and acceptable for the purchase of goods and services. Some think going to fiat money has caused numerous problems. Some even say that it is a fraudulent system.

In a speech called The History of Money, Alan Greenspan said, "The value of fiat money can be inferred only from the values of the present and future goods and services it can command. And that, in turn, has largely rested on the quantity of fiat money created relative to demand. ... If the evident recent success of fiat money regimes falters, we may have to go back to seashells or oxen as our medium of exchange. In that unlikely event, I trust, the discount window of the Federal Reserve Bank of New York will have an adequate inventory of oxen."

If for some reason we are struck back to that point, Mr. Greenspan, then at least I would know what makes money make money. Until such a time, if it ever occurs, I find myself wondering about money that is really only nothing more than paper, worth so much paper in other countries.

Recently a lot of the EU member states switched to the Euro as a common form of currency. An event like that makes me wonder how long before there is a single global currency. Is having a single global currency a good idea, though? Is it possible without forming some sort of world government?

Where do you think money is going next?


Voxel dot net
o Managed Hosting
o VoxCAST Content Delivery
o Raw Infrastructure


Best monetary system?
o Fiat 15%
o Gold Standard 15%
o Bimetallic Standard 1%
o Gold Exchange Standard 3%
o Leaves 10%
o Global Currency 17%
o Barter 20%
o None 14%

Votes: 103
Results | Other Polls

Related Links
o Henry Miller
o Money and how it gets that way
o current system of money originate
o steam engine
o the war to end all wars
o gold-excha nge standard
o Genoa conference of 1922
o The Bretton Woods System
o World Bank
o protests in Seattle
o disagreeme nt with the IMF
o source of problems
o reform the institutions
o Federal Reserve Act
o caused numerous problems
o fraudulent system
o The History of Money
o single global currency
o Also by kpaul

Display: Sort:
What Makes Money Make Money? | 199 comments (176 topical, 23 editorial, 0 hidden)
You stopped to soon. (4.10 / 19) (#5)
by snowmoon on Sun Feb 02, 2003 at 05:34:02 PM EST

The intracies of FIAT money are many fold.  Many intelligent people believe fiat money is a govenment backed pyramid scheme that is a form of regressive taxation.  It also allows governments to pass along debt spending in the form of inflation.

Fiat monetary systems have caused nothing but grief.  One of the reasons america broke off from british rule was the central banking system in england.    In our country a PRIVATE COMPANY has the authority to print money.  This company is called the Federal Reserve Bank.

To see the damage that FIAT banking can do, just see what the "world bank" and the "international monetary fund (IMF)" have done to smaller countries after updating their govenments and banking.  Without fail food riots ensue as people can no longer afford even the most basic necessaties.

I don't mean to rant, but before you rate me do a simple search on fiat banking fraud.  Fiat banking mathmatically cannot survive forever, it will eventually and catestropically fail.

Better? [mt] (3.00 / 1) (#9)
by kpaul on Sun Feb 02, 2003 at 06:02:33 PM EST

2014 Halloween Costumes
[ Parent ]
indeed (4.33 / 3) (#14)
by calimehtar on Sun Feb 02, 2003 at 06:35:38 PM EST

The question asked in the headline is not answered.

What about interest rates, the reins Greenspan uses to control the economy? What about exchange rates -- the US dollar has dropped 20% agains the Euro in about 6 months. What does that mean? Why has the Bush government comitted itself to a strong dollar when it's widely accepted that the dollar is too strong? What about inflation and deflation?

I'm sorry, but this subject deserves a much better treatment than this story gives it.

[ Parent ]
Cheap Dollar vs. Strong Dollar (none / 0) (#47)
by duffbeer703 on Sun Feb 02, 2003 at 11:57:01 PM EST

In general, a strong dollar means cheap imports. A cheap dollar means cheap exports.

Cheap dollars are good for US exports, while expensive dollars make US exports more expensie.

Also, a stonger dollar attracts investment to the US. I believe around 60% of US Treasury debt is held by Japanese, Dutch and British investors. If value of those investments begins to drop, those funds are going to leave this country and force interest rates & inflation to move skyward, just like in the late 70's.

We are utterly dependent on the strong dollar, since the US has chosen to allow all 90% of non-automobile and non-food manufacturing relocate to Latin America and the Far East. Look around in a retail store and look for US goods... they don't exist anymore.

[ Parent ]

Actually.. (5.00 / 1) (#55)
by Kwil on Mon Feb 03, 2003 at 12:45:44 AM EST

..this is the exact reason why you need a weak dollar.

The US doesn't produce near as much as it purchases, which means America is consistently dealing with a negative trade balance.

The American economy has been propped up on the strong dollar (which in turn is propped up primarilly on how the US dollar is the international reserve, so can get away with charging absolutely horrid rates to foreign countries that need to be able to back up their own monetary supplies).

One day, however, this isn't going to be enough. The people who make the goods in China or Japan are going to decide they don't want to keep extending credit to the Americans and instead use the money they've earned on themselves.  When the US can no longer get credit, you'll likely be seeing the return of hyperinflation ala Germany just before WWII.  What do you think the American reaction is going to be when the worth of the American dollar drops off the table?  Do you really think all that money that America is consistently putting into their military technology and infrastructure won't be used when there's no other way that they can purchase oil or food?  Beyond that, because so much of the global monetary and economic system is based on the American dollar and the American consumer, what happens when those things disappear in the span of a few weeks?

What America needs to do is start devaluing its dollar now so that the pace of the devaluation can at least be controlled and give American industry time to ramp up to fill the gap. America also needs to start pushing for either its labour/environmental standards to be adopted globally, or to lower its standards so that it will be able to compete with the rest of the world once the currencies have levelled. Unfortunately, neither course is an easy one.

It's going to be an interesting time.

That Jesus Christ guy is getting some terrible lag... it took him 3 days to respawn! -NJ CoolBreeze

[ Parent ]
It's too late (none / 0) (#56)
by duffbeer703 on Mon Feb 03, 2003 at 12:58:19 AM EST

Power today is in the hands of global businesses who are utterly dependent on foriegn suppliers -- they will not allow congress to ruin their balance sheets!

The global economy makes this all the more difficult. A strong dollar means the status quo. A weak dollar means foreign capital flight and expensive consumer goods.

I think we have reached a point where it is too late for domestic manufacturing to recover. The men who built toolings and industrial facilities are dead. The cities which housed industry and workers are hollowed-out ghettos.

[ Parent ]

It is never to late to become a (wo)man. (5.00 / 2) (#75)
by gulfie on Mon Feb 03, 2003 at 06:57:24 AM EST

If you believe you will be defeated, you have already lost.

There are sustainable options out there. They may be hard to find in this dynamic world, but they do exist. We just have to embrace them.

Yes, there are powerful forces in the world. The most powerful force in the world is a pair of motivated working hands. Without motivated hands, the global businesses don't. Without motivated working, and willing hands, there is nothing.

Global economies matter little if you buy locally. Global businesses only matter if you lend them your own hands, which they will quickly wrap around your neck and tell you to squeeze.

Pie in the sky you say? Ask Gandhi's India about making your own cloth, to throw off British rule. Making Indian salt, from the Indian Ocean without paying British taxes for the work you did. Ask my car about how it likes drinking the fine fine liquor called Biodiesel, I don't have the blood of innocent Iraqi children splashing around in my little cars tank, and I commute on about 2 acres a year. There are good American soy beans, home grown in America, no global corporation involved. My hands, do my work, not theirs.

Sure my car is a product of a multi-national pan global corporation. But I'm keeping it for a long time, and the journey of 10,000 steps has got to start somewhere. Hell, maybe my next car will be a kit car, I build from parts, who knows what the future may bring. But I can tell you this, 'the best way to predict the future is to invent it". Put your willing hand to work for yourself, and help save us all.

[ Parent ]

Inspiring (none / 0) (#92)
by Subtillus on Mon Feb 03, 2003 at 10:10:17 AM EST

But, what if no one but you and me ever hears about it. What if no one but you or me ever cares?

What then?

[ Parent ]

4 of a kind beats 2 pair. (none / 0) (#188)
by gulfie on Thu Feb 06, 2003 at 02:22:39 AM EST

Such questions are great to meditate on and thus to live by.

Effectivly they are Zen Koans some discussion.

I understand the words of your question are not to be taken literaly, but metaphicly.

The literal answer, is that I know more than one person, you and me, has been exposed to the idea.... someone else commented on it. :) And I know that others agree with the sentiment, or the reason behind it.

Metaphorically the question is of self doubt and smallness in the world. The fear that, no matter how right we are nor how hard we try to fix the problems, the overwhelming blind-ignorant-deaf inertia of the world will force us to fail.

Before us metaphorically there is a 3 way fork in the road. Coming from the north we have a choice of east, south, or west. There are 4 directions one can go in. Forward, left, right or nowhere. If one gives in to the truth of the futility of existence there may be enlightenment, but there is no progress.

Another way leads to bitterness and being jaded, crushed by the weight of the world as you try desperately to hold it back from the brink of destruction.

Another way leads to riding on top the world as it rolls over countless living things on it's accelerating path to the brink.

The path I suggest is neither of these, for they end in the world passing over the brink, with or without you. I say one should find a lever, one that is long enough to move the world, and use it.

Levers of the past have included, religion or the changing of hearts and minds, or technology like gunpowder, physics or reading. Gandhi helped to free India by helping her people to understand that they did not have to do what the British were demanding. To find a leaver one must first understand the world.

Gandhi wasn't alone. He had help, or more correctly he helped people. People tend to do what is easy. It's easy to sit back and watch T.V. on the couch and not worry about the world. If we all can make it simpler, easier, cheaper to do the right thing, it will get done more often. India got rid of the British because the British found it easier to leave India alone, than to continue exploiting the colony.

Find something you don't like or would like to change. Figure out a way to change the landscape that the world rolls around in. Figure out a way to make it simpler for people to do the right thing and they probably will.

[ Parent ]

Cwazy (none / 0) (#105)
by spottedkangaroo on Mon Feb 03, 2003 at 12:20:09 PM EST

Where do you get this strange fuel?

[ Parent ]
Biodiesel. (none / 0) (#186)
by gulfie on Thu Feb 06, 2003 at 01:21:06 AM EST

Warning, it only works in diesel engines.

Some places to look, for fuel around you.

You can also get it shipped too you. Though that is rather expensive unless you are ordering fleet quantities (hundreds of gallons), or if you are using it as a fuel addative. Dr. Dan's Alternative Fuel Werks Dr. Dan's is my biodiesel hommie of choice right now. He is just a reseller, he dosn't make the stuff.

If you are interested in making the stuff, the Veggie Van is a good start. I personaly have never manufactured any.

A short google search should get you where you need to be.

[ Parent ]

Forgot about rates! (none / 0) (#48)
by duffbeer703 on Sun Feb 02, 2003 at 11:58:50 PM EST

Low interest rates mean it's easy to buy money. That's why anyone today can get credit!

High rates mean expensive debt and slow growth, since companies cannot afford to borrow.

[ Parent ]

I'm sure we've discussed this before ... (4.76 / 13) (#15)
by Simon Kinahan on Sun Feb 02, 2003 at 07:13:17 PM EST

Many intelligent people believe fiat money is a govenment backed pyramid scheme that is a form of regressive taxation.

Many intelligent people believe all kinds of things. That doesn't make them right. It is true that in a high-inflation environment the value of savings can fall, but this money doesn't go anywhere, so to call it taxation is silly. It is also true that governments have been known to abuse fiat money in order to borrow. They were known to dilute the coinage too. That doesn't make the system bad. It means politicians are sometimes crooks. Big news.

One of the reasons america broke off from british rule was the central banking system in england.

Not true. The Bank of England was founded in 1694; about 100 years earlier. The first inkling of fiat currency came along in 1797, well after independence, when the Bank was prohibited from exchanging Sterling notes for gold. The colonies already had their own de facto monetary policy anyway.

In our country a PRIVATE COMPANY has the authority to print money. This company is called the Federal Reserve Bank.

This is not true. The organisation of the fed is complex: There are 12 federal reserve banks (note that this number is larger than one). Each is organised as a corporation (you got something right), but it is not a conventional private enterprise. It is a condition of a banking license that each bank buy a shareholding in its local reserve bank. It is not permissible for a member bank to sell its shares, and it is not permissible for anyone else to buy shares.

What is more, monetary policy ("printing money" if you like, although that activity has little significance) is controlled by the Federal Reserve Board (note different word: not bank) and the Federal Open Markets Committee (FOMC). The FRB is appointed by the president and approved by the senate, just like any other bunch of government officials, and it decides how much money to "print". FOMC implements the FRB's decisions, and consists of the FRB members, the president of the NY Fed, and four other Fed presidents. FOMC has 12 members, of whom only 5 come from the member banks.

To see the damage that FIAT banking can do, just see what the "world bank" and the "international monetary fund (IMF)" have done to smaller countries after updating their govenments and banking.

This is a rather complex subject, and blaming it entirely in fiat banking is a massive oversimpliciation. For a start, cut the World Bank out of the equation: it is merely a lender. The damage the IMF does is mainly caused by forcing deflationary policy on countries that are in a state of crisis. While this is greatly benefiicial to foreign investors, it sucks for the people who happen to live there. Oddly enough, the British used to use the gold standard for much the same thing: forcing the terms of trade.

Fiat money gives governments to power to manipulate the value of money. They did this anyway, but paper makes it official. If the government is bad, or badly advised, they sometimes do the wrong thing, and introduce inflation or deflation that would not have occurred with a hard currency. On the other hand, if the government is well intentioned and well advised, as is currently the case in most Western countries, fiat money produces a gently inflationary environment, which is generally what you want.

The trouble with a true hard currency is that it exposes the financial system to shocks from whatever industry creates the asset used. This actually happened several times, most notably during the bimetallic era in the USA. Whether this is preferable to exposing it to politicians, I'm not sure. The ideal would seem to be a currency backed by a broad basket of goods. However, the current semi-automatic systems used to control the value of fiat money in (for instance) the UK or the Euro zone come quite close to this ideal.


If you disagree, post, don't moderate
[ Parent ]

Money and the Revolution (5.00 / 4) (#20)
by rhino1302 on Sun Feb 02, 2003 at 07:58:30 PM EST

British monetary policy was indeed a major source of problems in the American Colonies, and a contributing factor in the Revolution.

The major problem was that because of Britain's mercantlist policy, it was illegal to export gold and silver from the mother country to the colonies. That resulted in a big hard currency shortage in the colonies, making business transactions very difficult. Many merchants resorted to issuing their own paper money.

Much of the hard currency that did make it to the American Colonies was smuggled out of Latin America (Spain had the same mercantilist policy, but wasn't as good at enforcing it). That is why the currency of the US today is dollars (dollar was the american term given to the Spanish 8 Real piece, or "Piece of Eight") not pounds and shillings. More info here.

[ Parent ]

Why is "gentle inflation" a Good Thing? (5.00 / 3) (#26)
by skim123 on Sun Feb 02, 2003 at 08:26:36 PM EST

...fiat money produces a gently inflationary environment, which is generally what you want

Why is this a good thing? I recent read The Truth About Money, which doesn't delve into economics, just has investing/planning advice, but the author mentioned that a century ago there was little to no inflation. Was the spike in inflation we've seen over the past 100 years due solely to the move to fiat money?

Also, why is gentle inflation good? Why is it not better to keep the fiat currency fixed?

Money is in some respects like fire; it is a very excellent servant but a terrible master.
PT Barnum

[ Parent ]
It encourages... (5.00 / 2) (#30)
by rhino1302 on Sun Feb 02, 2003 at 08:51:30 PM EST

savings, for one thing. Inflation punishes you for keeping money under your mattress.

[ Parent ]
But it also encourages... (4.00 / 1) (#35)
by DLWormwood on Sun Feb 02, 2003 at 09:43:27 PM EST

borrowing, which activates or energizes a present economy at the expense of future growth or flexability. Isn't excessive borrowing worse than excessive savings?
Those who complain about affect & effect on k5 should be disemvoweled
[ Parent ]
My mistake (5.00 / 1) (#36)
by rhino1302 on Sun Feb 02, 2003 at 10:05:41 PM EST

I should have said inflation encourages investment, not savings. Interest rates should react to the inflation rate to keep borrowing from getting out of hand. However things get weird if you have deflation, which could demand zero or negative interest rates to keep things balanced. I think that is the real reason governments aim for slight inflation, to give themselves some margin to avoid deflation.

[ Parent ]
They're almost the same thing (none / 0) (#103)
by pin0cchio on Mon Feb 03, 2003 at 12:02:35 PM EST

I should have said inflation encourages investment, not savings.

And given a balanced government budget, savings will equal investment.

[ Parent ]
Not for an economy. (2.00 / 1) (#46)
by duffbeer703 on Sun Feb 02, 2003 at 11:49:36 PM EST

There is a certain point where savings is not a positive thing.

If all of the money in an economy is tied up in penny-jars and CD's, that capital is essentially lost.

Loose money and access to capital encourages growth. Sometimes this can be bad (think suburban sprawl), sometimes this is a great thing (think of the miracles of medical science).

Sometimes if money is too loose, bad things happen. College students graduating with $150k in loans or the dot-com debacle are great examples of that.

If you look at times when the savings rate was high (1930-1945, 1947-1952, 1974-1981) you'll probaly notice that those were dark times economically.

[ Parent ]

CD's (none / 0) (#62)
by NFW on Mon Feb 03, 2003 at 02:27:26 AM EST

Money in a CD isn't lost captial, it's money loaned out to people who buy capital with it. That's where the interest comes from.

Got birds?

[ Parent ]

CDs, HIV drugs, and scholarships (none / 0) (#100)
by pin0cchio on Mon Feb 03, 2003 at 11:26:01 AM EST

If all of the money in an economy is tied up in penny-jars and CD's

What does the recording industry have to do with inflation?

Oh, that CD. But unlike money in a jar, money invested in a certificate of deposit is available for lending to other parties.

think of the miracles of medical science

And think of all the miracles that are withheld from poor people because they have no way to earn enough money to buy, say, anti-HIV drugs.

College students graduating with $150k in loans

I see widespread student loan debt as partially the fault of employers that look only for a BS on the resume and ignore any equivalent experience in those who apply. It's BS. If the employer looks for a degree primarily to find people who have the willpower to stick to something for four years, then the employer should offer an "ex post facto scholarship" in the form of a signing bonus to help pay off the loan debt.

[ Parent ]
You are thinking too deeply. (none / 0) (#108)
by duffbeer703 on Mon Feb 03, 2003 at 12:46:49 PM EST

You are talking about issues that arise because credit is available.

Without stable money and credit, lifesaving drugs and techniques would be unavailable to anyone. A soldier shot in the arm in 1860 would have the arm sawed off, instead of treated with antibiotics. The average lifespan has doubled in even the most backward and poor of countries.

Student loans and credit cards are a totally different issue. Today you can choose to use credit responsibly, or not at all, or you can ruin yourself. Before our current system came about, the was NO CREDIT as we understand it. You might have a tab at a local store, but no bank would provide you with a loan to go to school.

So today an idiot can choose to put him or herself in $200k or more of debt. While that sucks, the option didn't exist 100 years ago.

[ Parent ]

But (none / 0) (#119)
by RoOoBo on Mon Feb 03, 2003 at 01:37:34 PM EST

why should you need a loan to go to school? If there is a school, there are teacher and there is someone who want to learn. Just BS. In fact in civilized countries you don't need a loan. School is free and even universitary level education is almost free.

And antibiotics have nothing to do with credit. They have to do with someone called Fleming and something called Science and Medicine.

[ Parent ]
hahahahhahahahahaha (none / 0) (#146)
by duffbeer703 on Mon Feb 03, 2003 at 09:49:03 PM EST

You forgot to read the fine print. You have to take batteries of tests to get anywhere near a good european university, and even then face massive overcrowding and beuracracy. If you flunk the tests - off to the dole or if you are lucky trade school.

Anyone with half a brain and no money can go to a community college or state school and get a great education for cheap. Those with delusions of granduer or the desire to study with a certain specialist pay for the priviledge.

As far as science and medicine go... labs and scientists don't work for free. Private and government funding pay for research, hospitals and medical schools.

[ Parent ]

You (o/t) (none / 0) (#163)
by vile on Tue Feb 04, 2003 at 01:07:45 PM EST

rated me 0 on comments that did not deserve 0 ratings. At the minimum, 1. You have abused your TU status. Additionally, I would suggest that you take another look at the comments that I made, on the second post within hidden comments. To further get at what I was trying to say, please see what I was talking about. The poster I replied to is dxtw (in the text link I just posted), I believe. The poster was a troll. The poster called others idiots. Kept an archive of their comments. And yet, well, you can see what he did on your own. I responded accordingly. I further informed him of the consequences of such actions. Please do not abuse your status privilege again. Thanks.

The money is in the treatment, not the cure.
[ Parent ]
I changed them to 1's (none / 0) (#177)
by duffbeer703 on Tue Feb 04, 2003 at 07:24:31 PM EST

After reading the TU guide (which I haven't read before), I decided that you probaly did not intend to put up content-free posts, so I modified the scores to 1.

However, comment rating is the proper way to deal with spammers, flamers and idiots. Replying to a junk post and creating a thread creates more noise, and will get a 0 rating from me in the future.

[ Parent ]

Reply (o/t) (none / 0) (#180)
by vile on Tue Feb 04, 2003 at 11:07:09 PM EST

Thank you for adjusting your ratings. I normally do not comment on existing 0 rated comments, however, I felt the need to do so to inform someone of what they were doing. Hopefully, he learned. Seemingly, he did so. I have yet to see another 0 rated post from him. Never the less, thanks.. and have a nice day. :)

The money is in the treatment, not the cure.
[ Parent ]
Spain (5.00 / 5) (#44)
by tjb on Sun Feb 02, 2003 at 11:41:20 PM EST

"but the author mentioned that a century ago there was little to no inflation"

That's not true.

Look at the rise and fall of the Spanish Empire - Spain had massive inflation and countless state bankruptcies while very much under the gold-standard.  If a galleon was captured by British privateers, the state was unable to meet its bills.  And if the galleons did make it through, the massive influx of gold raised prices tot he point where it was cheaper to buy goods from the rest of Europe rather than produce them in Iberia, which led to an approximation of widespread unemployment (the nature of pre-industrial economics makes it a little difficult to comapre contemporary unemployment with colonial Spain's problems, but they were similar).  Part of the state remedy for this was to raise the largest standing army the world had ever seen in order to keep the populace paid (as well as the Armada, but the naval expenditure was probably necessary to maintain their empire, a large standing army, at that time, was just a pointless waste of funds).  Needless to say, this did not enhance the Spanish economic position - while the rest of Europe was industrialising, Iberia was de-industrializing and becoming dependent on slave-labor in colonial gold-mines and sugar plantations that they couldn't afford to maintain continuously.

If Spain had been on fiat money, it is entirely possible they would've managed to hang onto the full half of the world given to them by Papal dictat.  Instead, with a gold-standard, they faced massive inflation and constant budgetary crisis.


[ Parent ]

The author was misleading... (4.50 / 2) (#45)
by duffbeer703 on Sun Feb 02, 2003 at 11:44:42 PM EST

A century ago, there was no US currency. The coin of the realm was gold. Paper money was still isssued by local banks, and subject to the financial well-being of those banks.

Bank failures brought on wave after wave of extreme boom cycles, followed by financial panic usually brought on by a series of bank failures.

The Federal Reserve was designed with stability in mind over all else. It has been a collossal success.

Fans of the "good ol' days" tell you all of the advantages of the gold system, but fail to mention any of the negative features. The gold standard places artifical limits on the amount of capital available, and makes obtaining money far more expensive. Reasonable mortgage rates available to working class people and comsumer credit were unthinkable in those days, because there was no money available at low rates or to questionable borrowers!

Gentle inflation allows the money supply to grow, which means that businesses can easily borrow money to grow. The spectacular growth of the last  century and the incredible advances in the sciences and in standards of living were made possible by easy access to capital.

Google for William Jennings Bryan's "Cross of Gold" speech. This speech details the position of the turn of the century American farmer, who was being impovrished by impossibly high interest rates, and a decline in the value of crops due to the railroads.

[ Parent ]

Inflation and Deflation (4.83 / 6) (#78)
by Simon Kinahan on Mon Feb 03, 2003 at 07:43:51 AM EST

Several people have already answered you, but I thought I'd follow up to summarise and add a new points.

The 19th century was the era of the gold standard, and therefore of extreme monetary stability. Britain did not regulate the global flow of gold, so prices remained level and comparable more-or-less everywhere. The problem was there were frequent deflationary shocks and bank failures: there'd be a period of strong growth, they'd hit the limit imposed by the supply of gold, and then either the banks would continue to issue credit, causing a round of bank failures, or interest rates would rise, cause business failures and personal bankruptcies.

In the previous, mercantilist, era, the global powers regulated supplies of gold and silver. Unfortunately, especially in Spain, they created inflation at home and deflation in the colonies. The pound sterling lost around 200% of its value during the 18th century.

The move to fiat currency was motivated in part by acknowledgement of the problems with tight credit, after the war and the great depression. During he Bretton Woods period, the IMF kept the currencies more-or-less under control. From the 1970s onwards, when the USA floated its currency and everyone else followed, however, there was a serious bout of inflation almost everywhere. The exact reasons are debatable, but certainly there was an attempt to use monetary policy as an instrument of economic regulation, which would not have been possible without fiat currency, and it ultimately failed.

Since then, national independent central banks have introduced a regime of inflation targets (generally around 2% per annum) and try to control the money supply to acheive these targets. This has the advantage of predictability and credibility, and so far has worked pretty well. If you ask a present-day central banker, they'll tell you deflation is the bigger risk under the current regime.

You'd think on the face of it that neither inflation nor deflation was worse than the other. Expensive credit, and falling prices and wages are bad for borrowers and good for savers. Cheap credit, and rising prices and wages are bad for savers and good for borrowers. But there's an important asymmetry: wages are extremely sticky downwards. Noone wants their salary cut, even if their actual standard of living is constant. Especially at the bottom end of the market, where market flexibility is most important, cutting wages is likely to cause industrial action. The upshot of this is: deflation causes business failures. On occasion, business failures on epic scales, such as the great depression. Deflation, therefore, is to be avoided like the plague. It can plunge economies into the doldrums for years: see Japan now, where systemic problems have caused high levels of saving, high interest rates and low consumer spending to combine to create a depression the government seems unable to tackle.

Inflation, even hyperinflation, is survivable. Prices and wages get locked into a rising spiral. Debts and savings vanish. It does cause chronic underinvestment, but this is less bad that total industrial collapse. So why the recent emphasis on inflation ? Just that it was the most serious risk for most of the latter part of this century.



If you disagree, post, don't moderate
[ Parent ]

So, to dumb it down a notch (none / 0) (#95)
by Subtillus on Mon Feb 03, 2003 at 10:51:30 AM EST

For those of us who haven't really had much exposure to economics and all... In my program, independant thinking is forwned upon heavily, favouring memorization and the direct regurgitation of soundbytes and deferral to authority. But, I digress...

A gold standard or a mercantilist policy can lead to perios of deflation, this is a bad thing because deflation leads to buisness failure beacuase of so called sticky-wages.

By betting on inflation, we inccur a continuously upward spiral of wages and prices. Also, while the value of saving is mooted in the long run, so is debt; Investment is rewarded.

Inflation is "survivable" in the sense that it is predictable and causes no catastrophic detriments, nothing to really fuss about in any case.


[ Parent ]

Pretty much yes ... (none / 0) (#128)
by Simon Kinahan on Mon Feb 03, 2003 at 02:33:21 PM EST

Sorry if I used too much jargon.

Deflation happens when there isn't enough money in circulation. Because not enough people have money to buy goods, prices fall. Inflation is the oppoosite. When you use a physical asset (such as gold) as money, both inflation and deflation are serious risks, because you cannot control how much of that asset is available: there may be too little or too much. Any gold-standard based system carries these risks. Mercantilism - colonialism, combined with a policy of concentrating manufacturing in the mother country and raw material extraction in te colonies - carries a further risk, because most of the money ends up in the mother country.

The theory about wage stickiness as the cause for the destructiveness of deflation is a bit specultive - the paper I read it in was from 1992 or thereabouts. I'm not sure it is wholly accepted by everyone, but it seems very credible to me.

A lot of inflation is very bad, because it eventually becomes impossible to hold money at all. In inter-war Germany, people dashed from their workplaces to the shops on pay-day to get there before the prices rose, and cafes insisted on payment for food after the meal, because money payed before would become worthless by the end. In the recent past, Brazil almost completely virtualised its currency, because noone would hold cash due to hyperinflation, so everything was done through bank accounts. This is obviously very bad for the poor, who tend to use cash more.

A little inflation makes the economy forgiving, by eventually whittling away the values of debts. It encourages people to invest in productive activities or assets (which is probably a good thing), to stop their funds being devalued.


If you disagree, post, don't moderate
[ Parent ]

Thank you (none / 0) (#93)
by Subtillus on Mon Feb 03, 2003 at 10:18:16 AM EST

for the informed and informing response.

I think if I could do it all over I'd do a major in economics with a minor in english.

[ Parent ]

Will +1FP ASAP. (1.87 / 8) (#16)
by Imperfect on Sun Feb 02, 2003 at 07:16:59 PM EST

Great story.

Not perfect, not quite.
The cashless society (4.75 / 4) (#18)
by Timandra on Sun Feb 02, 2003 at 07:51:24 PM EST

I'm not sure what the next evolution in money is, but I'm sure that the way we use it will unquestionably change in the comming years. How many people for example get a standard check from their emplorers anymore?

With Interac, VISA, on-line banking, internet commerce and fridges that order the food you need and pay for it with your Credit Card the cashless society I feel is closer than people would like to suggest.

Although I can't find it, the OECD has an excellent report on the emergence of the cashless society. I'll keep looking.


Ugh (5.00 / 2) (#31)
by 5pectre on Sun Feb 02, 2003 at 08:54:51 PM EST

I hope not.

With cash comes a certain amount of privacy, you can do with it what you will... with credit cards each purchased is logged and stored.

I don't have a credit card and hope never to have to have one.

"Let us kill the English, their concept of individual rights might undermine the power of our beloved tyrants!!" - Lisa Simpson [ -1.50 / -7.74]

[ Parent ]

RFID chips in cash will change that... [mt] (none / 0) (#34)
by kpaul on Sun Feb 02, 2003 at 09:05:57 PM EST

2014 Halloween Costumes
[ Parent ]
mt = more text? [nt] (none / 0) (#127)
by sludge on Mon Feb 03, 2003 at 02:32:15 PM EST

Hiring in the Vancouver, British Columbia area
[ Parent ]
mt == empty (none / 0) (#137)
by kpaul on Mon Feb 03, 2003 at 07:10:00 PM EST

see here...

2014 Halloween Costumes
[ Parent ]
thoughts on the issue.. (2.33 / 3) (#32)
by postindustrialist on Sun Feb 02, 2003 at 08:55:36 PM EST

money is quite an absurd thing and it's really nothing more than an idea. i doubt that it'll hold the same bearing in the future that it does now. will it disappear? i doubt it.. but still, it's not going to last in its current state. it's not just inflation, but the simple fact that people will not be able to exist on the current system and process of exchange. minimum wage is less than 6 dollars here in the US. nobody can live on that. we barely can live on twice that. this may seem like a governmental problem at first, but it's really a problem within capitalism. the desire to make profit is that one person must make more money than their costs must be for a product. the theory is that the profit is to cover any services and maintinence needed to keep the product around while its waiting for a customer or to pay for employees and services to your store or business that keep it alive. (i include yourself as an employee even though you may own the business,because, mainly, you are.) in the end, ideally it would all equal out and both sides would equally balance each other out and all would be fine. the problem is NOBODY likes that. everyone wants to end up a little ahead and on the plus side. with capitalism and people being allowed to compete, it only feeds this desire to come out with more. people charge more and pay less. the people that are being paid less though happen to be the same people that are buying and problems start to occur..

well, anyhow, it can't continue.
oooh.. looks likes somebody has anger problems.
question everything.
this sig is only one hundred and fifty characters long and it's still not eno
can't read use spaces between thoughts (none / 0) (#71)
by michaelp on Mon Feb 03, 2003 at 04:53:53 AM EST

"Every gun that is made, every warship launched, every rocket fired, signifies in the final sense a theft from those who hunger and are not fed, those who are cold and are not clothed."

[ Parent ]
Euro == bad idea. (3.50 / 4) (#33)
by pb on Sun Feb 02, 2003 at 09:04:09 PM EST

Some countries that now use the Euro as their currency have a history of inflation. Whereas before, with a national currency, the monetary policies of one country would directly affect only that country, now all of the countries that use the Euro would be affected.  I fail to see how this is an improvement over having separate currencies for each country and being able to exchange between them.

Also, I see no reason why Europe couldn't have some sort of reference currency (like the Euro) and still have countries keep their regular currencies as well--this would have all the benefits of the Euro, but still isolate countries from the feduciary irresponsibility of their neighbors.

Incidentally, some Italians don't seem to think that they're getting their money's worth from the Euro as it is; maybe this is just a conversion problem, or maybe some merchants are taking advantage of the confusion.  I'd think that Italians would benefit greatly from having a more stable currency, but they might not feel the same way if it's more expensive than the lira to start with.  However, it's harder to tell if you're being ripped off when you don't have the lira around, even for comparison.
"See what the drooling, ravening, flesh-eating hordes^W^W^W^WKuro5hin.org readers have to say."
-- pwhysall

The idea of averages (4.50 / 2) (#37)
by hex11a on Sun Feb 02, 2003 at 10:38:51 PM EST

I believe (economists - help!) that one of the original ideas behind the Euro was to average out when people had low vs high inflation, and so keep inflation at a regular (and therefore predictable and able to be adapted to) rate. For example if one of the countries with a smaller economy makes some mistakes (which seems to happen more often than with the larger economies) it won't lead to overall inflation as their effects won't largely alter the currency as a whole, hence it provides something of a regulating force - you won't make a fast profit, but will make a long term gain. Hopefully.

Also, why should you be screwed just because your country's economy has gone south? It's a bit socialist, but it puts people in Bulgaria in the same boat as those in France and Germany, hopefully bringing about a greater equality. Of course, this is all the champagne ideas behind it, and I don't know how it will pan out. Needless to say, it probably won't be as good as was dreamed of, but perhaps not as bad as some make out either. If you kept your own currency and had the Euro, shops would be in disarray as they would have to convert prices every night to keep with the exchange rates and it would be a highly impracticable situation to be in, especially when some good is cheaper in one currency than another at the same store. Also I think the whole idea of the Euro is that it gains a kind of critical mass, like that of the dollar, at which any event can only alter it in a minor way, and hence any changes become a lot more predictable. Drop a stone in a glass of water, and a lot splashed out. Drop a stone in the ocean and nothing really happens.


[ Parent ]

Bzzt... wrong! (4.00 / 2) (#43)
by duffbeer703 on Sun Feb 02, 2003 at 11:29:54 PM EST

The dream of the Euro is to create one european economy, which will lead to one European state. It has nothing to do with equality per se, but everything to do with building a great empire.

[ Parent ]
I see (none / 0) (#81)
by hex11a on Mon Feb 03, 2003 at 08:18:09 AM EST

It was done for just one reason eh? Hmm... maybe it was designed to unite Europe, or maybe that was just one of many factors?

[ Parent ]
That is the main reason (none / 0) (#84)
by duffbeer703 on Mon Feb 03, 2003 at 08:45:10 AM EST

The other reasons are largely to convince the British to join the new scheme.

[ Parent ]
EU (5.00 / 3) (#87)
by katie on Mon Feb 03, 2003 at 09:18:32 AM EST

It's not so much a "dream of building an empire" -- Europe's been there, done that. It's an American viewpoint that we're (as a continent) remotely interested in imperialism anymore. I'm not sure anyone outside Britain even considers the euro-zone as a competitor to the dollar-zone -- The rest of Europe is much more concerned with looking inwards rather than outwards.

The EU is an outgrowth of an ideal of not having any more European wars. It's now getting on for 60 years since the last one and in my home city, the council road construction schedules include an allowance for the unexploded bombs they'll dig up and have to have defused.

It seems to be working reasonably well so far.

[ Parent ]

why reward bad economics? (4.00 / 3) (#50)
by pb on Mon Feb 03, 2003 at 12:11:40 AM EST

So you're telling me that countries that make better economic decisions should be punished for them, and those that make worse ones should be rewarded? Well, I suppose that does average things out, at least.

I think that if your country's economy has gone south, you are screwed, or at least will be, if you depend on economics for anything, like income. And I don't quite see why France or Germany should be in the same boat as Bulgaria--do they have many strong ties to Bulgaria, or share many interests with them?

Remember, people already keep track of exchange rates every day; what you'd probably do is post prices in one currency (the most popular one), and have the cash register do the converting for you. At worst, you'd have to punch in the exchange rate from the paper every day.

In any case, if you don't believe in your local currency, you can always invest in another one, like the Euro or the dollar.  But if one of those has problems, well, maybe it'd be nice to have a local currency.

I understand your points, and I hope things work out for Europe and the EU, but I'm not sold personally--I like to be able to hedge my bets a bit more, and I like it when the currency of a state accurately reflects its economic situation. But maybe I'm just old-fashioned.  :)
"See what the drooling, ravening, flesh-eating hordes^W^W^W^WKuro5hin.org readers have to say."
-- pwhysall
[ Parent ]

No (5.00 / 2) (#69)
by twistedfirestarter on Mon Feb 03, 2003 at 04:09:01 AM EST

The euro exists so the international money markets can't manipulate the currencies at will. It's good economics, it was designed by economists.

do they have many strong ties to Bulgaria, or share many interests with them?

Common European history, values and culture. What does Texas have to do with Virginia?
a nation's economy is going, it is a measure of .

If you don't think the Euro is a good idea, then I suppose you think it would have been better if teh US had different currencies in all it's different states?

[ Parent ]

oops (none / 0) (#83)
by twistedfirestarter on Mon Feb 03, 2003 at 08:42:15 AM EST

a nation's economy is going, it is a measure of .
should be

The national currency is not a good measure of where a nation's economy is going anyway.

[ Parent ]

Talk about a non-sequiter ... (5.00 / 1) (#156)
by Simon Kinahan on Tue Feb 04, 2003 at 05:47:03 AM EST

It's good economics, it was designed by economists.

Hahahahaha. That was funny.


If you disagree, post, don't moderate
[ Parent ]

Nope. (5.00 / 2) (#82)
by hex11a on Mon Feb 03, 2003 at 08:22:52 AM EST

Europe has massive shared cultural heritage and a hell of a lot of internal trading. What has been realised is that the economy of somewhere small (here I picked Bulgaria but I could have gone for anywhere really) going bad was affecting those of bigger countries, hence having some kind of central control and dampener hopefully means that things can be kept within limits.

Maybe in the big cities, yes, you can keep changing currencies at supermarkets etc. Try telling it to the little old shopkeeper somewhere in a village in the middle of nowhere.

How exactly does the currency of the US match the economy of any of its member states? And if it works, why shouldn't it work for a similar sized economy ie that of Europe?


[ Parent ]

I've heard this argument over and over (5.00 / 1) (#90)
by porkchop_d_clown on Mon Feb 03, 2003 at 09:40:41 AM EST

and I can't fault the logic.

But I *can* give a counter example: How does the United States survive the economic differences between (say) California and Kentucky - or Florida and Pennsylvania? If the Euro-skeptics are right, how did the USA ever manage to establish a single currency?

"Your article (and I use that term losely) is just a ad-hominem filled rant from a right-wing extremist loony." - Psycho Les

[ Parent ]
excellent question. (3.50 / 2) (#102)
by pb on Mon Feb 03, 2003 at 11:47:58 AM EST

To answer this, it might be interesting to note that the U.S. hasn't always had one currency.  There was a time when individual banks printed their own money, and naturally there were many problems with counterfeiting. Perhaps a better example would be that of the North and the South during the Civil War. Confederate money was rendered useless due to rampant inflation because they just kept printing money with nothing to back it up; in retrospect, this shouldn't be a surprise.  However, the bad economic decisions of the South (printing too much money) did not hurt the North, since they had separate currencies.

But ever since The Great Depression, things have been very different--one way the federal government has had control over the dollar and against inflation has been deficit spending, or Keynesian economics, which is what Bush recently suggested doing more of in his State of the Union address.  It's interesting to note that many of the states in the U.S. are in a budget crisis of some sort (because state budgets must be balanced), while the federal government does not have this problem.

The federal government exerts a great deal of control over the dollar, through the federal reserve and otherwise.  Also, the federal government works to stabilize the economy of individual states, by providing funds when and where they are needed, through their state congressmen, and also for disaster relief programs and whatnot.

So to answer your question, I believe the USA managed to establish a single currency by having a federal government that's strong enough to regulate and control it.  The Euro may very well need a similar analogue to succeed, and only time will tell if the EU will end up having enough power to do the job.  Without such control, however... well, I do not believe that laissez-faire policies would be a solution.  This conclusion also goes along with kpaul's questions about possibly needing a world government to have a world currency.
"See what the drooling, ravening, flesh-eating hordes^W^W^W^WKuro5hin.org readers have to say."
-- pwhysall
[ Parent ]

Good point. (5.00 / 1) (#130)
by porkchop_d_clown on Mon Feb 03, 2003 at 03:05:22 PM EST


"Your article (and I use that term losely) is just a ad-hominem filled rant from a right-wing extremist loony." - Psycho Les

[ Parent ]
USA Single Currency (none / 0) (#116)
by Wildgoose on Mon Feb 03, 2003 at 01:23:11 PM EST

...is only possible because of massive federal intra-state transfers.

These do not exist in the EU, which is why the Euro as currently set up is inherently unstable.

In order for the Euro to work, the EU will need to massively increase its ability to tax and spend as it sees fit.

This is one of the reasons why there is so much pressure building up for CAP reform - it is not just the accession of East European agricultural economies. They need to have massive amounts of funding available for redistribution. It is also why there is increasing pressure to increase the EU budget, and ultimately create a single EU state.

Most European politicians are quite open about their goal of a single EU state, with a single government, legal system, and so on.

OTOH, the English fought several bloody civil wars in order to gain the Rule of Law, and the rights and responsibilities of our own Parliament. For example Magna Carta in 1215, The Bill of Rights in 1669, Habeas Corpus 1679, and so on. To us these are basic freedoms. It isn't true that we haven't got a constitution, as many people like to say. We have a body of constitutional documents, and we have well understood conventions such as no more than 5 years between elections, (even though this latter "rule" is not actually written down anywhere).

Over in Europe, there are countries where Habeas Corpus is unknown, and it is possible to be arrested and imprisoned for years without trial. So perhaps it is not surprising that the UK is seen as being so Euro-phobic. We have more to lose than most.

[ Parent ]

Habeas Corpus (none / 0) (#117)
by Wildgoose on Mon Feb 03, 2003 at 01:30:52 PM EST

My apologies for my above post turning into a rant on preserving our freeedoms. Here's a useful link for Europeans who don't understand what I was talking about: Habeas Corpus

[ Parent ]
Get informed. (4.00 / 1) (#120)
by linca on Mon Feb 03, 2003 at 01:38:41 PM EST

Basic freedoms were fought for all over Europe. Ever heard of the half-dozen French Revolutions? Habeas-Corpus like freedoms exist in every EU country ; indeed, they are a entry requirement.

There's no "country where you can be jailed without trial for years" in the EU. Habeas Corpus is what's called Human Rights charter here, and an other name there. Its absence in name is not its absence in effect.

As for federal intra-state transfers, these already exist, and have done wonders for Ireland or Spain.

[ Parent ]

Sadly, you are wrong (none / 0) (#157)
by Wildgoose on Tue Feb 04, 2003 at 08:35:19 AM EST

Here's a link (to a left-wing newspaper) that shows the the UK wants the Europeans to adopt Habeas Corpus.

The Guardian: European Justice

The reason for this, is that they don't have the "equivalent" system as you are suggesting.

[ Parent ]

Read your link (none / 0) (#158)
by linca on Tue Feb 04, 2003 at 09:42:13 AM EST

It points out that Habeas Corpus doesn't prevent UK from detaining terrorists endlessly.

Of course it is ignorant too ; there is an equivalent to Habeas Corpus in France for example.

As for the European equivalent of Habeas Corpus, read the European convention on Human Right, the supreme law of the European Union (that includes the UK).

Article 5, section 3 and 4.

3.Everyone arrested or detained in accordance with the provisions of paragraph 1(c) of this article shall be brought promptly before a judge or other officer authorized by law to exercise judicial power and shall be entitled to trial within a reasonable time or to release pending trial. Release may be conditioned by guarantees to appear for trial.

4.Everyone who is deprived of his liberty by arrest or detention shall be entitled to take proceedings by which the lawfulness of his detention shall be decided speedily by a court and his release ordered if the detention is not lawful.

The Guardian seems as ignorant as you are of EU law.

[ Parent ]

I did read the link (none / 0) (#164)
by Wildgoose on Tue Feb 04, 2003 at 01:19:54 PM EST

- and the terrorism clause is brand new (the legislation was passed last year) and has caused outrage here amongst defenders of Civil Liberties precisely because it is an attack on the centuries-old principle of Habeas Corpus.

Thanks for the text from the European convention, but I'm afraid they are not the same.

Where is "reasonable" defined? What about "speedily"? For example Is six months reasonable? Because I don't think so. But Europeans judges seem to.

[ Parent ]

Reference Currency (5.00 / 1) (#110)
by Wildgoose on Mon Feb 03, 2003 at 01:02:56 PM EST

This was suggested by the UK government, (John Major's Conservative one of the time).

Instead of a Single Currency, have a Common Currency that existed in parallel.

The idea was that the Common Currency was created as a basket of currencies, but that its value was not allowed to devalue against any of its constituent currencies. This didn't mean that it wouldn't devalue, (i.e. suffer inflation), but rather that it would devalue at the lowest rate of all the member currencies.

The advantage of this is that different countries retained their own currencies in case of some economic shock, but that there would be a gradual pressure causing all the European currencies to converge to the same inflation rate.

But because a Common Currency would not force the creation of a single unitary state, as is wanted by most European politicians, the idea was rejected.

[ Parent ]

And here is a... (4.75 / 4) (#38)
by skyknight on Sun Feb 02, 2003 at 10:47:43 PM EST

link that I just can't resist posting.

Money is indeed printed on just so much worthless paper, but it is "a token of honor -- your claim upon the energy of the men who produce. Your wallet is your statement of hope that somewhere in the world around you there are men who will not default on that moral principle which is the root of money."

Thus spake Rand. I'm going to my bunker now.

It's not much fun at the top. I envy the common people, their hearty meals and Bruce Springsteen and voting. --SIGNOR SPAGHETTI
and what, exactly, did rand do (3.00 / 1) (#54)
by turmeric on Mon Feb 03, 2003 at 12:16:00 AM EST

besides popping out a lot of tripe onto dead trees that her noble workers had broken their backs chopping and pulping?

[ Parent ]
You melodramatic idiot ... (none / 0) (#139)
by pyramid termite on Mon Feb 03, 2003 at 07:29:18 PM EST

... I'll have you know that I've seen paper pulped first hand and nobody broke their back doing it - in fact, they were paid around 20 bucks an hour ...

On the Internet, anyone can accuse you of being a dog.
[ Parent ]
behold mighty pyramid, hero of the worker (2.33 / 3) (#153)
by turmeric on Tue Feb 04, 2003 at 12:12:24 AM EST

he has seen paper pulped!

[ Parent ]
You commie. (none / 0) (#160)
by tkatchev on Tue Feb 04, 2003 at 11:43:08 AM EST

Admit it, you lost.

   -- Signed, Lev Andropoff, cosmonaut.
[ Parent ]

That sounds like... (none / 0) (#165)
by skyknight on Tue Feb 04, 2003 at 01:36:30 PM EST

something that Hitler would say.

It's not much fun at the top. I envy the common people, their hearty meals and Bruce Springsteen and voting. --SIGNOR SPAGHETTI
[ Parent ]
So? (none / 0) (#166)
by tkatchev on Tue Feb 04, 2003 at 02:48:30 PM EST

Hitler was a great animal rights supporter and a vegan. He cried every time an innocent bunny rabbit was killed.

   -- Signed, Lev Andropoff, cosmonaut.
[ Parent ]

Yeah, but... (none / 0) (#167)
by skyknight on Tue Feb 04, 2003 at 03:39:03 PM EST

He was really big into gun control. That really ruins anything else good he might have done or been.

It's not much fun at the top. I envy the common people, their hearty meals and Bruce Springsteen and voting. --SIGNOR SPAGHETTI
[ Parent ]
Well yes. (none / 0) (#181)
by tkatchev on Wed Feb 05, 2003 at 04:41:47 AM EST

My point is that Hitler was a very typical dirty hippie liberal.

   -- Signed, Lev Andropoff, cosmonaut.
[ Parent ]

Hitler...liberal? (none / 0) (#198)
by Matadon on Wed Mar 12, 2003 at 12:41:54 PM EST

Liberals favor less government control and fewer restrictions; Hitler was quite the opposite.

"There's this thing called being so open-minded your brains drop out." — Richard Dawkins.
[ Parent ]
Rand. (none / 0) (#199)
by Matadon on Wed Mar 12, 2003 at 01:13:14 PM EST

She wrote a number of books, some of which were quite good, others which I didn't care for much. She also made a few points which are quite valid, namely:
  1. Life is what you make it.  You may start at an advantage or at a disadvantage, but the distance you achieve is up to you.
  2. That distance is what matters -- not where you start from.  A mediocre man can turn a million dollars into two million; an incredible man can turn $1 into $100.
  3. By extension of the two above, the only person you are competing with is yourself -- or, life is not a zero-sum game.
  4. Many people would rather steal from others to get ahead, rather than do their own work; these are the looters, who believe that life is a zero-sum game, and that by stealing from others they somehow increase their score.
  5. By extension of the above, the world is moved by those that create -- not those who consume.

"There's this thing called being so open-minded your brains drop out." — Richard Dawkins.
[ Parent ]
dough. (3.80 / 5) (#39)
by somasonic on Sun Feb 02, 2003 at 10:53:52 PM EST

Everyone knows money grows on trees. In 1827 John Quincy Adams had them all transplanted into US Government territory, and that is how USians rule the world today.

Four years ago Monsanto created a genetically modified version that produces $2000 bills, and promptly patented it. Despite malice from the Department of Treasury, the Patent and Trademark Office refuses to back down. They stated they were "flawless in every way" and went back to patenting methods of swinging.

Recent efforts to reverse-engineer and distribute the Monsanto DoughTree® to the poor have been held back by the DMCA.

It was Douglas Adams (none / 0) (#91)
by Viliam Bur on Mon Feb 03, 2003 at 09:52:47 AM EST

And the "Hitch-Hiker's Guide to Galaxy". And they had inflation too.

[ Parent ]
Demand for Fiat Money: Protection Racket (1.40 / 15) (#40)
by Baldrson on Sun Feb 02, 2003 at 11:15:50 PM EST

For a more accurate description of fiat, see Federal Reserve + IRS = The Protection Racket Coup of 1913:

Federal Reserve money buys protection from punishment. You are punished if you don't pay taxes. This has become the Federal Reserve's primary monetary authority. The moral hazard of basing monetary authority on punishment has now been realized in the systemic and out-of-control gang rapes of prisoners in the US. All other unlawful acts by US governments are now overshadowed by the murderous, sexually sadistic character of governmental authority that has developed in US penal systems. Federal Reserve money is now protection racket money, or, if you prefer "punishment protection money". Calling it "fiat money", "debt money" or even "legal tender" obscures its true character.

-------- Empty the Cities --------

Lay off the crack man! (none / 0) (#42)
by duffbeer703 on Sun Feb 02, 2003 at 11:27:36 PM EST

You're linking to the frustrated ranting of a lunatic! There are more combinations of sentences with "Federal Reserve", "rapists", "rape", "sexual deviant" or "gang rape" than I care to count.

Why don't you try reading something a little less shrill?

[ Parent ]

He is that frustrated ranting lunatic (5.00 / 1) (#53)
by cr8dle2grave on Mon Feb 03, 2003 at 12:15:06 AM EST

Baldrson = the infamous internet kook and anti-semitic bigot, Jim Bowery.

Unity of mankind means: No escape for anyone anywhere. - Milan Kundera

[ Parent ]
Nelson Mandela (1.00 / 3) (#57)
by Baldrson on Mon Feb 03, 2003 at 01:30:36 AM EST

Slow puncture is the crowning achievement of the system of governance that you folks would foist on the United States. We're already half-way.

You are creating hell on earth for all.

-------- Empty the Cities --------

[ Parent ]

"You folks"? (none / 0) (#58)
by cr8dle2grave on Mon Feb 03, 2003 at 02:14:26 AM EST

Which folk would that be?

Unity of mankind means: No escape for anyone anywhere. - Milan Kundera

[ Parent ]
Is there a way to effectively 'killfile' this guy? (none / 0) (#89)
by porp on Mon Feb 03, 2003 at 09:38:19 AM EST

You know, like an email reject list or a newgroup reader's killfile...

[ Parent ]
IMO, a better ? is where is labor going (1.00 / 1) (#41)
by michaelp on Sun Feb 02, 2003 at 11:26:04 PM EST


I think we will be deciding this in the next century, at least for many industries, automation will replace most labor, and then what is the value of work going to be?

Will people who live off the produce of robots lose their self respect, or will they be happy to find better things to do with their time than sling burgers?

One the one hand, I can see us developing an idyllic society, where humans do the thinking and the playing and machines do all the grunt work.

On the other hand, will we devolve into one of the many dystopias that have been written about this very subject?

IMO, I think what happens to money will be less important as what happens to the way folks get whatever we choose to use as the medium of exchange.

"Every gun that is made, every warship launched, every rocket fired, signifies in the final sense a theft from those who hunger and are not fed, those who are cold and are not clothed."

WRONG (4.75 / 4) (#51)
by turmeric on Mon Feb 03, 2003 at 12:13:45 AM EST

automation has almost never been to let people live off robots, it has rather been for one group of people to better control another.

people have been saying this 'technology will make grunt work obsolete' since the mid 1800s.... most of these people have never so much as grown a single tomato.

automation and industrialization have pioneered a very specific type of technology: the maximize-the-average-case type. this is for profit. this involves quite a bit of human labor, btw, but the catch is that this human labor is completely demeaning and soul-crushing. sitting at an injection molding machine pouring blobs into it every 45 seconds is work, but its idiotic work, and it exists because some engineer/manager was too lazy to build an automatic hopper when they could get some poor schmuck to do it for them for alot less money.

demeaning blind-obedience soul-crushing work will always be cheap, and it will always be necessary as long as machiens are built primarily for profit, not for the comfort of the workers/users. and that is not going to change for a long time probably.

[ Parent ]

If America was the entire world (none / 0) (#60)
by michaelp on Mon Feb 03, 2003 at 02:16:30 AM EST

you might be right.

But there are places where labor is not cheap & where various forces act against it being imported:
The number of operating robots in the world is estimated at 710,000 according to published data in 1997. Within those numbers, 410,000 robots, which corresponds to approximately 60% of the total market, are operating in Japan. The primary reason why robots are popularly used in Japan today is due to ever tightening labor sources. More than one million of skilled labor positions were unable to be filled in 1995 as a result of more college bound students the decreasing birth rate in Japan.

demeaning blind-obedience soul-crushing work will always be cheap, and it will always be necessary as long as machiens are built primarily for profit,

When we view the past 20 years, the number of installed robots has been greatly increased, but the characteristic's of the robot's work has not changed. Today, the robot still executes the monotonous and repetitive work tasks so called "3K" in Japan- Tough, Dirty and Dark. (ibid.)

"Every gun that is made, every warship launched, every rocket fired, signifies in the final sense a theft from those who hunger and are not fed, those who are cold and are not clothed."

[ Parent ]
alright but (none / 0) (#154)
by turmeric on Tue Feb 04, 2003 at 12:19:14 AM EST

japan has expensive labor and is not importing labor. well, the united states is the same way. i mean they import a fraction. but what they mostly do is move their factories oversease to where the cheap labor is. id wager japan does this too: where exactly does all the steel and computers for their robots come from? china? malaysia? what?

somewhere along the line someone is doing a lot of grunt work because its cheap to hold people in near slavery.

[ Parent ]

Nu-uh. (none / 0) (#159)
by tkatchev on Tue Feb 04, 2003 at 11:40:35 AM EST

Haven't you heard the good news? From now on, it's not necessary to work for your money. We can all just work in the service industry, selling each other intellectual property rights. With the advent of the stock market and the intellectual economy, we can now make unlimited amounts of money out of thin air, simply by exploiting the innovationary potential of universal progress.

   -- Signed, Lev Andropoff, cosmonaut.
[ Parent ]

Value of labor (none / 0) (#52)
by PullNoPunches on Mon Feb 03, 2003 at 12:14:16 AM EST

"then what is the value of work going to be"

Define work. The robots will be working, and most likely their work will be extremely valuable. If physical human labor is no longer needed, then it will be as worthless as buggy whips. So what?


Although generally safe, turmeric in large doses may cause gastrointestinal problems or even ulcers. -- Reader's Digest (UK)
[ Parent ]

So what will people do? (nt) (none / 0) (#61)
by michaelp on Mon Feb 03, 2003 at 02:17:34 AM EST

"Every gun that is made, every warship launched, every rocket fired, signifies in the final sense a theft from those who hunger and are not fed, those who are cold and are not clothed."

[ Parent ]
Make no money, starve then die. (5.00 / 2) (#74)
by gulfie on Mon Feb 03, 2003 at 06:24:48 AM EST

It's already happening. It is already here. We live in it today.

Just one link

In the United states of America, today, now, as I type, 3% of Americans, or 1 in 33 people, go officialy 'hungry'. Why? When we literaly pay farmers not to grow crops, and we ship millions of tons of food to other continents? Lack of Money to trade for food.

It is a very simple logical progression.

People do work for money. People trade money for food. People need food to live.

But one might say there is a safety net. Welfare, unemployment insurance, or the dole. Each of these programs comes with strings, stipulations and typically a timeline. When the time is up, you are out of luck.

When one is out of luck one has a few options.

  1. Non governmental safety nets. churches, friends, family, whatever
  2. Crime
  3. Watching as your loved ones, like children, starve before you.
  4. Death

At least you eat regularly when in jail, and the kids will be well taken care of in foster families.

[ Parent ]

bullshit (1.00 / 1) (#97)
by PullNoPunches on Mon Feb 03, 2003 at 11:03:29 AM EST

"Food insecurity". What a fucking croc of shit. They made up that meaningless term because they new if they said anything that could actually be objectively judged, they'd be known for the liars they are.

The questions on those surveys are along the lines of "Have you ever been limited in your choices of meals to serve to your family." Gee, so if I can't afford steak, I am giing hungry? BULLSHIT. Even taken as generously as possible, these statistics reveal that some people have a diet with limited variety. Nobody in the United states is anywhere near starving to death.

Fucking crybaby, get a job.


Although generally safe, turmeric in large doses may cause gastrointestinal problems or even ulcers. -- Reader's Digest (UK)
[ Parent ]

Bullshit. (none / 0) (#131)
by Kintanon on Mon Feb 03, 2003 at 03:55:50 PM EST

I'll tell you right now that in order to starve to death in the town I live in you would have to actually make a concerted effort to do so. Because there are half a dozen churches that serve lunch for free to anyone that walks up and takes it. There are places in downtown where you can walk up and get dinner for free. Yeah the foods not fabulous, but it's nutritious and there's plenty of it.
I don't see how ANYONE in the US manages to go hungry except for kids who can't go get their own food and whose parents are worthless fucks.


[ Parent ]

Did you even read the post? (none / 0) (#189)
by gulfie on Thu Feb 06, 2003 at 07:58:07 AM EST

Congratulations, your town is nicely in category 1 (non governmental safty nets). A safety net still exists. You should be proud that you live somewhere that doesn't suck as much as it does in say... oh rural North Dakota indian reservations.

Not all people have reason to be quite so proud.

Do these churches deliver lunches to hungry kids at school?

Have any of the those fine churches ever run out of food? Have you been there too see with your own eyes, or is it what Rush tells you?

As to poor parenting, I would say lets find solutions, not just demean people.

Like oh... say contraception, or education, or jobs.

[ Parent ]

Seen it myself... (none / 0) (#191)
by Kintanon on Thu Feb 06, 2003 at 11:50:24 PM EST

The schools around here offer free lunches to kids from low income families. So yeah, hungry kids get fed at school.

As for places like Indian Reservations don't they have a community safety net? Seems like such a homogenous culture would take care of its own.

I'm just sayin', it's damn hard to go hungry in America.

Oh, and I'm pro-contraception, abortion, and sterilization.


[ Parent ]

Produce (none / 0) (#99)
by PullNoPunches on Mon Feb 03, 2003 at 11:06:05 AM EST

most production in a modern economy does not involve physical labor, despite the rantings of that lunatic Marx.


Although generally safe, turmeric in large doses may cause gastrointestinal problems or even ulcers. -- Reader's Digest (UK)
[ Parent ]

And automation is taking over more than (none / 0) (#111)
by michaelp on Mon Feb 03, 2003 at 01:05:55 PM EST

just "physical" labor.

For example, planning and scheduling & system administration.

Amd along with intelligent systems are self assembling systems
and automated programming systems, the job of the human being becomes simply 'computer, make me a robot that does (needed task or tasks)'.

O and probably pushing the reset button once in a while.

So the question is what kind of economic system will fit such a world?

"Every gun that is made, every warship launched, every rocket fired, signifies in the final sense a theft from those who hunger and are not fed, those who are cold and are not clothed."

[ Parent ]
Now you've hit on it (none / 0) (#115)
by PullNoPunches on Mon Feb 03, 2003 at 01:21:42 PM EST

"computer, make me a robot that does ___________"

Don't underestimate the value of being able to fill in that blank.

"We came down from the trees, now we're headed to the stars." - Kevin McCalix


Although generally safe, turmeric in large doses may cause gastrointestinal problems or even ulcers. -- Reader's Digest (UK)
[ Parent ]

Wrong : What about cars? [counter example] (none / 0) (#73)
by gulfie on Mon Feb 03, 2003 at 05:48:03 AM EST

I appoligse for not having links to beter data.

When the original Mr. Ford, of the Ford Motor company invented his modern assembly line, he increased productivity by a factor of 8. 8 times more cars rolled off the line.

The workers were paid more, not 8 times more. Nor were there hours reduced. The money went to Mr. Ford. Not to Jonny working on the line.

Profits go to the company, the company is not its' workers. Maybe the company is it's investors, who knows?

We are living in the post industrial world. Robots do a lot of work, and the people work harder to catch up.

[ Parent ]

Wrong? In the current system (none / 0) (#109)
by michaelp on Mon Feb 03, 2003 at 12:50:15 PM EST

only. But the current system obviously falls apart once most human labor is replaced (since there are so few jobs).

The question is: what kind of system will replace the current one when this happens?

Of course it may take much longer to happen everywhere. Japan is well on it's way to complete automation, and of course they have a long tradition of giving everyone a job (even if the job doesn't actually produce anything).

This may mean that a social utopia forms in Japan, while other places experience the dystopia you mention here: Robots do a lot of work, and the people work harder to catch up.

"Every gun that is made, every warship launched, every rocket fired, signifies in the final sense a theft from those who hunger and are not fed, those who are cold and are not clothed."

[ Parent ]
Fiat is best (3.75 / 4) (#49)
by PullNoPunches on Mon Feb 03, 2003 at 12:03:44 AM EST

Fiat money is best if only because it disabuses people of the notion that money is some special magical entity that has a standard, fixed value. there is no such thing and never will be. The history of trying to artifically fix the value of money (or of anything else for that matter) is littered with the wreckage of economic disasters.

Like everything else in this world, money is a commodity. It's value "can be inferred only from the values of the present and future goods and services it can command.", as Greenspan correctly stated. It is only worth what it can be traded for, and that changes all the time.

Of course, fiat money is subject to wild and arbitrary fluctuations in its supply, and as a consequence, in its value. But that isn't the problem. The problem is with monopoly money (which is even worse than using Monopoly Money, which is inherently worth no less than any national currency).

Competitive currencies are the way to go. Fortunately, we have a relatively well lubricated international exchange, but true local competition would be even better. Casino chips are no less (and often more) legitimate as money than "official currencies", nor are store coupons, cigarettes, Yu-Gi-Oh! cards, or "Bank of Joe Schmoe Reserve Notes".

The market will decide the value of each, just as the market, and only the market, decides the value of national currencies on a second-to-second basis. People convert their currency, at an ever-changing rate, to and from things with real value - such as stocks, gold, jewelry - to hedge against fluctuations. Competition simply adds other currencies to the list of alternative stores of value.

With competition, the market will undoubtably favor redeemable currencies should reputable entities be allowed to produce them for general use. But whatever is favored, everyone will have a choice, and can decide to hold their wealth in whatever form they think strikes the best balance between liquidity and value preservation.

Think it's too complicated, that people shouldn't have to do that? People shouldn't have to take time out of their busy day to take a shit, either, but that's reality. A universal monetary standard is a myth, and a standard for a particular currency is only as good as what its producer claims it can be redeemed for and the reliability of that claim.

Deal with it, or don't deal with it. But not dealing with it leaves you blowing in the winds of "inflation" and fluctuating interest rates. No matter what lies your government tells, their money is no more stable, and no more valuable, than the people around you think it is.

Wealth is produced by trading value for value. Though usually the most efficient medium for that exchange, money is only one possible choice. It is a tool, not a magic talisman that entitles one automatically to something with real value. Anyone who wants to control his own life must abandon the idea of any one commodity being the definition and ultimate store of wealth. Even worse would be to think of money as the source of wealth. That's the sure route to life long wage slavery.


Although generally safe, turmeric in large doses may cause gastrointestinal problems or even ulcers. -- Reader's Digest (UK)

Competitive Currencies (2.00 / 1) (#80)
by Paul Johnson on Mon Feb 03, 2003 at 07:45:46 AM EST

The US used to have competitive currencies. It was a mess. You can read more about it here. The basic problem then was security. But with competitive currencies: well I can just imagine going down to my local supermarket and trying to compare prices listed in half a dozen different fluctuating currencies. No thanks!

In any case such a system would be unstable. One currency would be more popular than the others. This currency will have an automatic competitive advantage due to network effects: everyone wants to hold the currency that lets them deal most easily with everyone else. And so the big currency gets bigger at the expense of the small ones, and we wind up back at the status quo.

You are lost in a twisty maze of little standards, all different.
[ Parent ]

A weird example of just this (5.00 / 1) (#86)
by subversion on Mon Feb 03, 2003 at 09:15:15 AM EST

Oddly enough, Cuba functions under a similar system.  3 currencies; the Cuban peso (approximately worthless), the Cuban convertible dollar (fixed by law to a 1:1 to the US dollar, but not so easy to convert in practice), and the US dollar (which is legal tender!).

In practice, the government pays in CCDs, and people do their best to convert these to US dollars.  No matter what currency you pay in, you'll get change in pesos if they can give it to you.  Nonetheless, all 3 co-exist, probably due to the government enforcing the existence of all 3 via their paychecks.

If you disagree, reply, don't moderate.
[ Parent ]

Competition (none / 0) (#96)
by PullNoPunches on Mon Feb 03, 2003 at 10:55:01 AM EST

The early competitive currencies were a mess only if a single stable currency is your measure of order. Continentals were surely more of a mess, no?

It is doubtful that a supermarket would list prices in all currencies, and even if they did, you can always pick one and stick with it. You'd be no worse off than you are now, since now you pick one and stick with it. The difference is that now somebody else picks your one, and tells you you have to stick with it.

It always amazes me when people complain about too many choices, especially when the one they are already using is one of those choices. There's some deep psychological defect in such thinking. Let's take a more mundane example. You go to a logal burger shop every day and order a hamburger, because that is all they have. You're perfectly happy with hamburgers. Then one day, the owner decides to offer chicken sandwiches, fish sticks, and hot dogs in addition to the same hamburgers. Instead of just ordering the hamburger, you bitch about there being too many choices, and demand that other people are not allowed to have fish sticks and hot dogs because you are happy with hamburgers.

So, the next objection is that the system will collapse down to one choice. So, in addition to having too many choices, we also have the additional problem of not having enough choices. Nice.


Although generally safe, turmeric in large doses may cause gastrointestinal problems or even ulcers. -- Reader's Digest (UK)
[ Parent ]

Re: Competition (none / 0) (#136)
by Paul Johnson on Mon Feb 03, 2003 at 07:00:13 PM EST

It is doubtful that a supermarket would list prices in all currencies ...

Great. So I've got a pocket full of Foos and the the local supermarket is listing prices in Bars. I checked this morning and there are 6.314 Foos to the Bar. Now a can of beans costs 3.4 Bars. Lets see, thats, errr, damn. I forgot my calculator. Meanwhile an elderly couple nearby have worked out that a can of beans costs about 0.538486 Foos, which they think is very cheap. "Are you sure you got that right Alfred?".

So, the next objection is that the system will collapse down to one choice. So, in addition to having too many choices, we also have the additional problem of not having enough choices. Nice.

You missed my point. Even if we went to all the trouble and expense of implementing your system it would be unstable and we would be back where we started in six months. So why bother?

There are a few stores in the UK where you can pay in Euros as well as Pounds. The only people who are bothered with it are tourists (apart from one guy on the first day who found he could get change denominated in Euros and given to him in pounds because of a combination of software error and dumb checkout droids).

You are lost in a twisty maze of little standards, all different.
[ Parent ]

Trouble and expense? (none / 0) (#175)
by PullNoPunches on Tue Feb 04, 2003 at 06:32:23 PM EST

"Even if we went to all the trouble and expense of implementing your system "

The only thing necessary is not to have laws against it. Particularly egregious was the US law barring the privatge ownership of gold until, I beleive, 1974. What the laws are concerning other currencies, I don't know. But there is no 'system' to implement.


Although generally safe, turmeric in large doses may cause gastrointestinal problems or even ulcers. -- Reader's Digest (UK)
[ Parent ]

Gold standard (5.00 / 2) (#63)
by NFW on Mon Feb 03, 2003 at 02:47:43 AM EST

Here's the thing I don't get about gold-backed currency.  The gold supply fluctuates with mining and manufacturing, and expands slowly.  The wealth supply fluctuates with innovation and hard work, and expands quickly.

Suppose the government has X tons of gold locked away and issues notes backed by said gold.  Suppose the gold is all spoken for - everybody owns a little bit, and there's none left over.

Now suppose a business starts up turning raw materials (worth not much) into finished goods (worth a lot).  Now there's more value in the goods in the economy, but not more gold with which to buy those goods.  The business can't set prices  in line with demand, because the low money supply forces prices down, because there just isn't enough gold available to buy the goods.  So why bother starting a business if nobody can buy your stuff?

Seems to me that backing currency with gold forces the economy to grow no more quickly than the gold supply...  and that seems stupid.  Am I wrong?

Got birds?

deflation (4.57 / 7) (#68)
by twistedfirestarter on Mon Feb 03, 2003 at 04:00:31 AM EST

but not more gold with which to buy those goods.
  1. people aren't buying things with gold, they are still buying things with notes.
  2. There is a constant amounts of notes. This means that introducing new goods will change the ratio of goods/money in favour of goods, which will increase the "real" value of money (and hence gold). You can buy more goods with the same amount of money.
This is called deflation, and isn't meant to be good (look at japan) as, for example, there is no incentive to lend money or to spend big.

[ Parent ]
A-ha! (3.00 / 1) (#126)
by NFW on Mon Feb 03, 2003 at 02:13:19 PM EST

Since notes are just an easier way to transfer ownership of gold, I figured your points 1 and 2 went without saying.

But on a related note, I always wondered why "we" put up with inflation, since as a consumer I'd rather there wasn't any. However, I never saw it as an incentive to spend and to lend (read "lend" as: "invest"). In that light I can see how inflation can be a constructive force. Thanks for pointing that out.

Got birds?

[ Parent ]

Massive recessions sometimes due to no money (4.50 / 4) (#144)
by belphegore on Mon Feb 03, 2003 at 08:32:35 PM EST

Back when the world's currencies were all backed by some precious metal (gold, silver, copper), there were occasionally instances where a lack of supply of the metal led to a shortage of money, and severe economic hardship as a result, since as you point out, there was not enough "money" to keep up with the requirements. Most famously, in the early 18th century in France, the shortage of gold was so accute that there was massive poverty across the country -- ultimately the shortage was overcome with the ingenuity of a fellow called John Law, who convinced the French to move away from the gold standard and develop a paper currency without gold reserves in place to make good should all the banknotes be called by the holders at once.
Unfortunately, Law tied the paper money scheme to the floatation of highly speculative shares in the Mississippi Company, which shortly went spectacularly belly-up, and caused the collapse of the paper currency.

[ Parent ]
Links of Use (4.00 / 1) (#64)
by snowlion on Mon Feb 03, 2003 at 03:08:11 AM EST

Money is fascinating. You can learn a lot quickly by reading these pages, even if you are a lay person. Transaction.net's pages offer the most insight into the many possibilities of money.

My favorite quote: "You can trade in pine cones for all we care, just as long as you pay taxes on it." - the IRS. (not precise; lost original)
Map Your Thoughts

bigger countries, too (4.33 / 3) (#65)
by Prophet themusicgod1 on Mon Feb 03, 2003 at 03:20:24 AM EST

" Since their inception, the IMF and World Bank have been the source of problems for many smaller countries. "You just may not be noticing, but there have been differences in slightly larger countries, as well. I have heard problems in South American countries dealing with these entities, although i cannot at the moment source these - such as brazil, argentina perhaps and or chile... these are not small countries. Canada, has been changed as well by this - it's another stepping stone in the direction of becoming another american state. But i'm not going to dwell on these points, only leave you to think about them, mabye persue them, mabye ignore them - but i do think that this link is relevant, if you out there wouldn't mind some obvious political propeganda from the canadian federal party i am a card carrying member of. the topic, however, is an important one, people, so wether you have a clue or not, pay attention - the issues spoken about here may sound like greek to some, but trust me - they *will* effect you in your lifetime.
"I suspect the best way to deal with procrastination is to put off the procrastination itself until later. I've been meaning to try this, but haven't gotten around to it yet."swr
above post didnt make sense - hatred for IE rising (none / 0) (#66)
by Prophet themusicgod1 on Mon Feb 03, 2003 at 03:31:39 AM EST

the party,some information on money
"I suspect the best way to deal with procrastination is to put off the procrastination itself until later. I've been meaning to try this, but haven't gotten around to it yet."swr
[ Parent ]
use plain text or auto format nt (none / 0) (#67)
by twistedfirestarter on Mon Feb 03, 2003 at 03:54:56 AM EST

[ Parent ]
auto-format? plaintext? (none / 0) (#70)
by Prophet themusicgod1 on Mon Feb 03, 2003 at 04:29:41 AM EST

do these things exist on version 3.02? if so where?
"I suspect the best way to deal with procrastination is to put off the procrastination itself until later. I've been meaning to try this, but haven't gotten around to it yet."swr
[ Parent ]
No, in Kuro5hin (none / 0) (#72)
by twistedfirestarter on Mon Feb 03, 2003 at 05:00:37 AM EST

when you post there's a little box below the comment box, which is by default (for some strange reason) set to "html". Change it to "plain text", or otherwise all your formatting goes out the window.

[ Parent ]
Survey forgot the 'other' catagory. n/t (4.00 / 2) (#76)
by gulfie on Mon Feb 03, 2003 at 07:24:00 AM EST

The value of money (5.00 / 8) (#77)
by scart on Mon Feb 03, 2003 at 07:29:21 AM EST

Money only has value because the average person believes in it's value. No matter what guarantees the government gives, if people don't accept it, the money is just decorative paper. For instance, you can go traveling in large parts of Africa and only carry US dollars. The locals will be much more helpfull and you will be able to obtain goods and services that is unobtainable with local currency.

I live in South Africa. I am a computer programmer and my social circle consists mainly of upper middle class educated people. Even though the SA rand is one of the better performing third world currencies, I know many people who have US dollar bank accounts as well as large sums of cash in dollars. My own salary is calculated according to the Dollar/Rand exchange rate even though both my employer and I are based solely in SA. Most companies that import goods for resale, calculate prices in dollars, then translate the prices to rands just before giving a quote.

In my opinion, a global currency standard for people who live and work in a high tech first world environment is almost inevatable. Whether that standard will be based on the dollar, the euro, or just arbitrary bits in a central computer isn't clear, but the base is almost irrelevant, as long as the vast majority of end users believe in it's stability.

However, I do not believe that it would be possible to create a currency with global value. For instance, one dollar in the US can almost be considered small change, while that same dollar can feed a family for a week in a country like Zimbabwe. It might be possible to close this value gap in a few generations, but humanity has too much cultural diversity for all people's value systems to converge completely.

Oddly enough (Cuba) (4.50 / 2) (#85)
by subversion on Mon Feb 03, 2003 at 09:11:19 AM EST

A few years back, Cuba adopted the US dollar as a legal tender.  There are now 3 legal currencies in Cuba; cuban pesos (almost worthless), Cuban convertible dollars (fixed by law as equal to one US dollar, and what you get paid in), and US dollars.

I bet you can guess which one is most desired and accepted, and which one most people try to conduct their business in.

If you disagree, reply, don't moderate.
[ Parent ]

Belief is an amazing thing (4.00 / 3) (#88)
by porkchop_d_clown on Mon Feb 03, 2003 at 09:36:24 AM EST

Particularly belief in the dollar - any objective analysis says the dollar should have collapsed long ago - all that deficit spending, and so on.

I think the only reason the dollar has kept it's value is that there's been no good replacement. The Euro may become such, over time. I wonder what will happen then?

"Your article (and I use that term losely) is just a ad-hominem filled rant from a right-wing extremist loony." - Psycho Les

[ Parent ]
show the value... (4.00 / 1) (#106)
by wiremind on Mon Feb 03, 2003 at 12:31:05 PM EST

For instance, one dollar in the US can almost be considered small change, while that same dollar can feed a family for a week in a country like Zimbabwe.
Well, in relation to value, that pretty much does say it all. If there was one world currency, People would see that, 'hey, if i move to Zimbabwe, i can puchase some land and live there for a year, on 2 months of my current pay check' That tells you that there is very little value in living there. you move to downtown $BigCity, and you pay 1/2 a months paycheck to live in a small apartment. then that would tell you the value of living there is very high.

Just my first probably premature thoughts....

[ Parent ]
the Future of Money (4.40 / 5) (#94)
by Fantod5 on Mon Feb 03, 2003 at 10:38:49 AM EST

I recommend Bernard Lietaer's book "The Future of Money", 2001, available from Amazon UK. He describes how fiat money works, particularly how it is created and destroyed: money is created when a bank (or the Fed) originates a loan, and destroyed when that loan is paid back. This process is amplified by fractional reserve banking, in which each bank is allowed to originate loans far in excess of its deposits.

Lietaer's vision of future money includes various forms of complementary currencies that operate alongside the familiar national currencies. Such currencies occur in systems like LETS, TimeDollars, and OpenMoney.

Demurrage (5.00 / 1) (#174)
by SimonTzu on Tue Feb 04, 2003 at 05:10:41 PM EST

Lietaer's big idea is Demurrage.

For those who don't want to follow the link:

(Demurrage) is a time-related charge on outstanding balances of a currency. Acts similarly to a negtive interest rate, and was designed to give a disincentive to hoard the currency. Savings would then occur in forms other than accumulation of the medium of exchange.
I fear this may require too big a conceptual leap to be implementable. But perhaps a similar effect could be created by a low interest, moderate inflation environment. Say 10% inflation at interest rates of around 3%. Governments could encourage this via the money supply.

Simon Tzu
[ Parent ]
Money is really an interesting topic (3.00 / 3) (#98)
by mveloso on Mon Feb 03, 2003 at 11:03:49 AM EST

One interesting thing about Karl Marx's work is his writings on money. He might have been a lot of things, but his writings on money and the nature of money are really worthwhile reads (Das Kapital).

Generally, there are two real uses for money: as a unit of account and a store of value. What does that mean? That money is both a way of measuring the value of something and a way of preserving value over time. The first point is pretty obvious today, but is a really radical notion: everything is/can be measured and expressed against some unit of value: labor is $50/hr, bread is $1/loaf, etc.

The second point is obvious once you think about it:  money also stores value. You save money assuming that it'll be worth around the same amount at a later date. Those countries that experience massive inflation, hyperinflation, etc understand that money is not always a good store of value, but were getting ahead of ourselves...

The first point, that money is a measure of value, is a radical notion because it posits the general equivalence of everything. A car is worth $20,000, which means that a car costs 250 days of work for someone making $10/hour. That $10 can also buy 10 loaves of bread, which means that a car is the equivalent of 20000 loaves of bread, etc. The abstraction of value as a concept separate from the item itself allows the easy comparison of totally different items,and allows for the symbolic manipulation of the idea of value.


The second point, money as a store of value, is hard to understand for people in the US because the US dollar generally doesn't decline in value much. However, the loss of value over time is a real problem in other parts of the world. Money as a value store means that the money/value that you stash away today will be worth around as much tomorrow, or at least the loss of value will be marginal relative to the original value.


Anyway, there are really interesting issues with money in general that are really fun to think about. For example, how much is anything worth, like a loaf of bread? Loaf of bread is a dollar. Well how much is a dollar worth? It's worth a loaf of bread.

This circular referencing is a problem because of the way the international monetary system works, where everything is measured against the dollar or some other currency (the British pound, etc) and is known as the n-1 problem: if everything is measured relative to the dollar, how do you measure the value of a dollar? In the old days people attempted to fix value to a physical thing, like some amount of gold, silver, shells, etc to get around this, but it eventually faces the same problem.

Likewise, what does that mean, that everything is equivalent? One hour of labor in Manhattan is more valuable than one hour of labor in New Delhi, because that's what the market says. That's a value judgement by the market, one that can be examined etc.

There's more, but I've run out of brainpower this morning (need sugar). Interesting to read, definitely....

You might... (none / 0) (#124)
by cr8dle2grave on Mon Feb 03, 2003 at 02:09:23 PM EST

The first point, that money is a measure of value, is a radical notion because it posits the general equivalence of everything. A car is worth $20,000, which means that a car costs 250 days of work for someone making $10/hour. That $10 can also buy 10 loaves of bread, which means that a car is the equivalent of 20000 loaves of bread, etc. The abstraction of value as a concept separate from the item itself allows the easy comparison of totally different items,and allows for the symbolic manipulation of the idea of value.

...be interested in reading Hernando De Soto's The Mystery of Capital. In it he posits that monetary systems can be analysed semiotically -- where monetary instruments are conceived as a representational system -- and that the phenomenon of capital is best understood in those terms. Very interesting, unfortunately the idea remains only partially developed at best.

Unity of mankind means: No escape for anyone anywhere. - Milan Kundera

[ Parent ]
My favorite part... (5.00 / 1) (#162)
by snacky on Tue Feb 04, 2003 at 12:49:15 PM EST

...be interested in reading Hernando De Soto's The Mystery of Capital. In it he posits that monetary systems can be analysed semiotically -- where monetary instruments are conceived as a representational system -- and that the phenomenon of capital is best understood in those terms. Very interesting, unfortunately the idea remains only partially developed at best.

My favorite chapter was "A Critical Metaphysics of Dialectical Mortgage Phenomena," which is probably history's single most important work in unifying Focault's thesis with the increasing securitization of homeowners' debt. I also found a true Kuhnian paradigm shift in De Soto's postmodern critique of the lack of social context embodied in the text he was criticizing (i.e., land-use laws).

I like snacks
[ Parent ]

Metaphysics of Dialectical Mortgage Phenomena? (none / 0) (#171)
by cr8dle2grave on Tue Feb 04, 2003 at 04:34:08 PM EST

Thanks for the biggest laugh I've had all day ;-).

Unity of mankind means: No escape for anyone anywhere. - Milan Kundera

[ Parent ]
Only 88,000 tons of Gold (4.33 / 3) (#101)
by zyzzyva on Mon Feb 03, 2003 at 11:38:23 AM EST

The Gold Standard is effectively a fiat system anyway.

The amount of gold discovered in the world since the beginning of mankind could fit into a cube smaller than 18 yards on a side. This translates into roughtly 88,000 tons of gold.

88,000 tons * 2,000 pounds/ton * 16ozs/pound * 350 dollars/oz. = 985,600,000,000 dollars worth of gold in the entire world.

This is less than 10% of the annual GDP of the United States. The economy is accelerating faster than the amount of gold being mind so this disparity will just continue to increase.

gold does not have a price (5.00 / 2) (#107)
by krkrbt on Mon Feb 03, 2003 at 12:46:21 PM EST

88,000 tons * 2,000 pounds/ton * 16ozs/pound * 350 dollars/oz. = 985,600,000,000 dollars worth of gold in the entire world.

The "price" of gold is not stable.  Gold is going for ~$370/ounce today, a year ago it was right around $290.  Suppose the bottom falls out of the USD - Tomorrow (next month) gold could be trading at $2000+/ounce.  An ounce of gold is an ounce of SOMETHING SCARCE, something you can touch.  A "dollar" is a piece of friggin paper or an entry in a digital ledger, and is essentially and intrinsically WORTHLESS because THERE IS NO SCARCITY.  

[ Parent ]

I want to move to wherever you live (5.00 / 5) (#113)
by your corporate master on Mon Feb 03, 2003 at 01:19:13 PM EST

If there is no scarcity of dollars where you are, could you send some to me please? Thanks.

[ Parent ]
You wouldn't want to move there (5.00 / 1) (#169)
by Rainy on Tue Feb 04, 2003 at 03:49:09 PM EST

If there was no scarcity of dollars, they'd cost about as much as paper they're printed on. What he meant I think is that you can go and print as much dollars as you want, but you can't do the same with gold. Fiat money means that essentially you're putting all your trust in discretion of the Issuer of paper money. As long as the issuer is reliable, fiat money are more flexible than gold, but the issuer goes down, fiat money will disappear too while the gold remains.
Rainy "Collect all zero" Day
[ Parent ]
Scarce doesn't mean valuable... (none / 0) (#190)
by wnight on Thu Feb 06, 2003 at 09:18:01 PM EST

Just because there isn't a lot of something doesn't mean it's worth anything.

And would gold be worth anything if the moon was solid gold? As in, if we knew there was near infinite gold for the taking, but it was just expensive to get, would we value it as much as we do now, thinking that it's scarce.

Gold is just as arbitrary as anything else.

I always laugh when conspiracy nuts talk about stocking up with gold for when WW3 hits. If they want to be "rich" in an "after-the-bomb" world they should stock up on tools, guns, seeds, textbooks, etc. No starving farmer is going to sell his last food for gold when there isn't a tractor maker willing to take the gold. Portable food, or a gun with which to hunt it, would be much more valuable.

We'd have a beef-jerky currency. "I promise to pay the bearer of this note one kilogram of hickory-smoked beef-jerky." :)

[ Parent ]

Um... (none / 0) (#194)
by Gromit on Tue Feb 11, 2003 at 09:25:48 AM EST

[Nit-pick mode on]
88,000 tons * 2,000 pounds/ton * 16ozs/pound * 350 dollars/oz. = 985,600,000,000 dollars worth of gold in the entire world.
You've made the common mistake of not differentiating between Troy ounces, which are what gold is sold in, and Avoirdupois ounces, which are what you're used to and of which there are 2,000 in a ton, 16 in a pound (an Avoirdupois pound, anyway), etc. There are 14.583 Troy ounces in an Avoirdupois pound, so that should have been:
    88,000 tons * 2,000 pounds/ton * 14.583 Troy ozs/pound * 350 dollars/Troy oz. = 898,312,800,000 dollars
It gets worse. There are 12 Troy ounces in a Troy pound, not 16 as we're used to in the Avoirdupois system. And don't get me started on tons, I assume you're talking Imperial, not metric tons, or short tons, or...

Details here

[Nit-pick mode off]

Would kind of like to know where you got that figure for all the gold in the world (and what measurement system the numbers started out in).

None of which invalidates your point.

"The noble art of losing face will one day save the human race." - Hans Blix

[ Parent ]
energy/entropy (4.50 / 2) (#104)
by turmeric on Mon Feb 03, 2003 at 12:11:25 PM EST

perhaps value could be calculated as the amount of energy and/or entropy that goes into building a product.

but where is the value add? --NT (5.00 / 1) (#129)
by ph0rk on Mon Feb 03, 2003 at 02:56:14 PM EST

[ f o r k . s c h i z o i d . c o m ]
[ Parent ]
Therefore, (5.00 / 1) (#149)
by bjlhct on Mon Feb 03, 2003 at 10:49:30 PM EST

if I make something in an inefficient way then it's worth more?

[kur0(or)5hin http://www.kuro5hin.org/intelligence] - drowning your sorrows in intellectualism
[ Parent ]
The new gold standard: golden arches (4.50 / 2) (#112)
by your corporate master on Mon Feb 03, 2003 at 01:14:46 PM EST

My favorite measure of relative purchasing power is The Economist's periodic Big Mac index, which uses the ubiquity and standardization of McDonald's burger to compare different currencies' values. It is, like any economic measure, an imperfect index; but it's more fun than most numbers you read in the business section. Plus, the idea makes a lot of sense. The sameness of the global Big Mac makes it almost a commodity like gold, oil, etc. Yet it's manufactured from a "basket" of inputs including food, labor, and energy, which makes it a more balanced unit of comparison than some other commodities.

Here's the most recent index. Compared with last April, it looks like EUR/USD might have peaked for the time being. Also, for the budding entrepreneurs out there, notice the stunning arbitrage opportunity for importing burgers from Argentina to Iceland!

The problem with that is (none / 0) (#178)
by porkchop_d_clown on Tue Feb 04, 2003 at 08:26:19 PM EST

that it's difficult to store value in Big Macs. Well, I store them in the flab around my gut - but it's hard to trade that for something else...

"Your article (and I use that term losely) is just a ad-hominem filled rant from a right-wing extremist loony." - Psycho Les

[ Parent ]
The future is with digital gold (3.00 / 2) (#114)
by krkrbt on Mon Feb 03, 2003 at 01:20:41 PM EST

The digital gold concept in a nutshell:  the company has gold in vault(s), and has an internet-accessible account system (ala Pay-Pal), whereby you can "spend" some of the gold in your account to others with an account in the same DGC (digital gold currency).

e-gold is the first and the largest DGC
e-bullion is the fastest growing DGC
goldmoney iss another stable one
Crowne Gold is another that has been recommended to me with high marks.

The difference between holding money in your national currency, and holding gold/digital gold, is that with gold -- you know exactly what you have.  The bottom could fall out of your national currency tomorrow, and then you're up the creek without a paddle.  Yes, the purchasing power of your gold/digital gold will change, but an ounce is an ounce is an ounce.

exchange your national currency for digital gold by using an "exchange provider" - I've used http://www.cambist.net/, http://www.goldfingercoin/ and http://www.fastgold.net.  E-gold has a listing on their site somewhere w/ exchange providers they've done Due Dilligence on, and have determined that they are legitimate.  There are, of course, scamsters w/ a legit-looking website that will take your money & never deliver the gold...  Caveat emptor.

Be wary of choosing a DGC without properly investigating them first.  OSGold presented themselves as a DGC, but the company never Really had any gold, and never had any intention of ever storing any shinny metal anywhere (it was a pyramid/ponzi scheme in the internet sense of the term).  There is and has been some controversy in the DGC community about the lack of a recent audit of E-gold's gold holdings.  People with more expertise than I recommend e-bullion and goldmoney for their strong auditing procedures.  Caveat emptor.  

(an aside:  my dad's stock broker think's he's looking at a new bull-market in stocks.  There's certainly a bull market somewhere, but it's not where he's looking.  Gold has just recently ended a 20 year bear, and is really beginning to shine.  See my other post in this thread for some price info...)

Gold not always golden (none / 0) (#118)
by your corporate master on Mon Feb 03, 2003 at 01:35:22 PM EST

The bottom could fall out of your national currency tomorrow

Of course, it's worth noting that the bottom could fall out of gold tomorrow. It's happened before. Gold cost more than $800/oz in the early eighties, and fell to below $300/oz in the last few years. (The fall is more significant if you take into account inflation. One dollar in the 80s was worth more than one dollar today.)

Like any commodity the value of gold fluctuates with supply and demand. In this case, the supply is always increasing. The supply grows relatively slowly, although this is not guaranteed; a huge new source of gold could be discovered tomorrow. Demand is a subjective thing, and mostly depends on what else is going on in the global economy. Lackluster economies and the risk of war are the main reasons gold has appreciated lately.

[ Parent ]

Disadvantages of E-Gold (none / 0) (#132)
by intelligentalien on Mon Feb 03, 2003 at 04:41:02 PM EST

There is a huge disadvantage to gold + E-Gold vs. national currency + credit card or PayPal.

Just keeping gold in your e-gold account causes it to lose value because they charge you a fee to lock that gold up in a vault somewhere.  Contrast this with PayPal or any other money market account who pay you around 2% to hold your money.

Gold is subject to devaluation just as in any other market, be it currency, stocks or pork rinds.

I had an e-gold account for a while, but after watching my money trickle away for over a year, while my paypal account paid me interest, I closed the e-gold account and now only use paypal.
Whatever theoretical, ideological or political reasons you may have to support gold over U.S. currency, unless it is financially advantageous, people will not switch.

[ Parent ]

response (none / 0) (#134)
by krkrbt on Mon Feb 03, 2003 at 05:38:33 PM EST

Let's say I bought $5000 in e-gold one year ago.  Gold's price then was ~$290/ounce, so my $5000 would have bought ($5000*.98) / 290 = 16.8965 ounces of e-gold (cambist charges a 2% fee to purchase e-gold from them).  What you say about e-gold charging a storage fee is true, and that fee is 1% of the account balance/year, assessed monthly.  So, after one year, there are 16.8965*.99=16.7275 ounces of gold in my e-gold account.  

Today gold closed above $370/ounce.  At $370/ounce, my 16.7275 ounces of gold are worth $6189.175.  Cambist (and many other market makers) would be more than happy to send me a check for $6189.17 if I spent my e-gold to them.

Yes, the price of gold in terms of fiat currency fluctuates constantly.  Fiat currency devalues constantly.  It is worth having a little, imho, Just In Case Your Fiat Currency Starts to Devalue Extra-Fast (aka "hyper inflation").  If you don't like having to pay 1% / year storage fee (or .5% / year [e-bullion]), buy a little physical gold.   Then you can keep that under your mattress at home for free.

Gold is subject to devaluation just as in any other market, be it currency, stocks or pork rinds.

gold is a little different than currencies or commodities:  it is presently rather scarce.  While technology may make it less scarce in the future (ie, it may become cost-effective to harvest gold from seawater), this is not the same as a renewable resource, or creation of "value" by government fiat.

I had an e-gold account for a while, but after watching my money trickle away for over a year, while my paypal account paid me interest, I closed the e-gold account and now only use paypal.

You could have placed your e-gold in a fastgrams account - they store your e-gold for free.  

Whatever theoretical, ideological or political reasons you may have to support gold over U.S. currency, unless it is financially advantageous, people will not switch.

I view gold/e-gold as a sort of insurance policy.  All empires fall, and all fiat currencies devalue given sufficient time.

[ Parent ]

more response (none / 0) (#140)
by intelligentalien on Mon Feb 03, 2003 at 07:31:17 PM EST

I'm sure it feels good to have just rode the market upswing of gold valuations. When I had my account a couple years ago, I believe the market went down slightly. Market fluctuations I can handle, it is the 1% "deflation" fee that e-gold charges everyone which drove me away. Proponents of gold complain that the government deflates the currency, which it often does. However, until a frictionless alternative system is setup, it will not be practical to conduct day to day business transactions using gold. Sure, if I had a bar of gold 50 years ago, I would still have a bar of gold today. But that's not the whole story - for daily transactions I can't shave pieces of gold off that bar to pay for things, I have to use e-gold and similar services. These charge their own fees so in the end I'm no better off by using gold, and may be worse off. At least with US currency, I know everyone else in the country is rising or sinking in the same boat, so the goods and services I consume will vary in price along with my salary in US dollars. And I earn interest. If e-gold did not have a transaction fee, did not have a storage fee, and allowed me to lend my gold to earn interest on it--put my sold savings in a gold "money" market account as paypal does with my US dollars, then I will gladly switch 100% to gold. To be sure, I do not feel comfortable at all knowing the government can wipe out all my savings tomorrow through currency deflation. I will check out fastgram to see how it compares to paypal and e-gold. Tim

[ Parent ]
Is gold really an appropriate medium of exchange? (none / 0) (#172)
by SimonTzu on Tue Feb 04, 2003 at 04:43:41 PM EST

The supply of gold is finite while harvesting gold is energy intensive and damages the environment.

Mutual exchange currencies like time dollars seem more sensible to me.

Time Dollars

  • recognize, and thus encourage, reciprocal community service;
  • are backed with service time and thus resist inflation without encouraging hoarding; and
  • are in sufficient supply, enabling trade and cooperation among participants.

Simon Tzu
[ Parent ]
e-gold audit procedures I'd like to see (none / 0) (#135)
by svillee on Mon Feb 03, 2003 at 06:38:43 PM EST

There is and has been some controversy in the DGC community about the lack of a recent audit of E-gold's gold holdings.

Could you give me a link to this discussion? I searched google for "e-gold audit", and couldn't find it.

I believe digital currencies have wonderful potential, though auditing needs to improve. For what it's worth, here are some audit procedures I'd like to see for e-gold.

First, the auditor needs to be chosen. The auditor needs to be trusted not to favor e-gold in any way, and also needs to be trusted not to leak individual account balances to other people.

Then, audit moments would be chosen at regular intervals, say at least once a week. E-gold would take a snapshot of each customer's balance as of each audit moment. A full audit for each audit moment would be compiled; each record in this audit would consist of an account number and the balance of that account as of this audit moment.

The full audit would be digitally signed by e-gold and sent to the auditor within some reasonable time (e.g., 24 hours) after the audit moment. The auditor would then add up the amounts and verify that the sum was no more than the amount of physical gold in the reserve as of the audit moment. Both e-gold and the auditor would save the last N full audits, where N is at least 100.

All e-gold customers would be strongly urged to perform an individual audit check on a frequent basis. The customer would request an individual audit from e-gold; this would consist of records pertaining to his account for the last N audit moments. The individual audit would also be digitally signed by e-gold. The customer would make sure the amounts looked reasonable; he would then send his individual audit to the auditor, who would verify it against the records from the full audits that were saved. If there was any discrepancy, e-gold would be hit with a hefty fine, a portion of which would be paid to the customer.

Naturally, both kinds of audits (full and individual) could be sent to the auditor electronically, encrypted with the auditor's key.

[ Parent ]

audit discussion location (4.00 / 1) (#138)
by krkrbt on Mon Feb 03, 2003 at 07:18:55 PM EST

I skim the e-gold discussion list digest, archived at http://talk.e-gold.com ("e-gold-list" - it's a crummy interface, so if you want the last year or so of digests forwarded email me (@yahoo.com)).  As I said earlier, both GoldMoney and E-Bullion have stronger auditing procedures in place, so it might be interesting to compare what they do, to what you've proposed here.

[ Parent ]
Credit makes money. (4.83 / 6) (#121)
by jabber on Mon Feb 03, 2003 at 01:46:30 PM EST

You tried to chart the evolution of the concept of money, and by doing so, to a reasonable degree you defined what money is. Your title suggests an exploration of whence money in the sense of an increase in wealth. You stop short of the answer, and in fact short of the next step in the evolution of the concept. Credit.

The manner in which credit makes money is similar to that in which a traditional loan does the same. When money is loaned, the entity receiving the loan has money they can spend, and pass on to others. However, since it is not really their money, they are obligated to return it to the loaning entity as well. This makes it appear as though money doubled.

The loaning entity has an outstanding loan, and is not in possession of the actual money, but since it is owed this amount, it can claim it as its own asset. The loan recipient also claims that same money as an asset, and so money makes money.

The situation with credit is effectively the same. The ability to spend money one does not actually have, as in the case of a loan, or even more virtually with credit, creates the perception of there being more money than there really is.

When a loan or credit is not paid back, money appears to be lost, because we are so used to its apparent growth when the system works as intended.

Money makes money on the large scale in this fashion.

On the small scale, money makes money through interest. If a person who has money loans it to someone else, they expect it back with interest. Interest is the cost of the convenience of using someone else's money temporarily. As a loan is paid back, the amount returned is greater than the amount loaned, and this is how money makes money on the small scale.

It takes money to make money, because money can only be made through letting others use it.

None of this has anything to do with the form taken by the money. The value of the variable is irrelevant. It can be measured in any arbitrary unit of national currency, or in a certain standard quantity of a metal, or in chickens and eggs. But value grows through loans and interest.

If I loan you an ox, under the terms that in a year you return to me two oxen, you now have an ox. But, I also have an ox, which is currently in your possession. More over, at the end of the year, I will have two oxen - where you get that other one is not my problem. You make my new ox for me. But it takes my ox to make that happen. The evolution of oxen has little to do with it.

Even when we were under the gold standard, gold was required only to represent the amount of money actually in circulation as currency. Wealth is not a hoard of currency, it is the value of money one controls. Even under the gold standard, banks gave out loans. This did not mean the government had to buy or mine more gold to cover those loans.

[TINK5C] |"Is K5 my kapusta intellectual teddy bear?"| "Yes"

er.. (5.00 / 1) (#168)
by Rainy on Tue Feb 04, 2003 at 03:41:44 PM EST

If you take out a loan, even though you can put it down as your asset, you also have to put down a number with a minus sign before it that signifies your debt. So, it only seems to double up if you don't count the debt figure. But why would you not count it?
Rainy "Collect all zero" Day
[ Parent ]
Shhh! (5.00 / 2) (#170)
by jabber on Tue Feb 04, 2003 at 04:28:10 PM EST

That sounds like crazy "terrorist talk" to me. The concept of "debt" is bad for the economy, and therefore un-American. Off to the gulag with you! ;)

The reason money seems to multiply through loans is because of exactly the point you make. Most people look at their cash in hand as their money, and they spend it accordingly. Sure, it's actually in the negative numbers, but they have the cash, so clearly, they're in the black. It's the "I can't be over-drawn. I still have checks!" phenomenon, which credit cards only make worse.

Loans create a perception of wealth, they make for an apparent multiplicity of money. I never said otherwise. It's a bit of a philosophical point, since money only has value because we all agree that it does. If we also all agree to ignore mathematics, and see loaned cash as a positive value, money loaned is money multiplied.

In reality, the interest percentage is where the money comes from. This only works in an open system, where money and goods can flow into the system resulting in a net gain. In a closed system, the math accounts for the sum total remaining constant. Since "money" is an agreed upon concept, it's all bullshit, really. Economics is just a bunch of self-referential definitions we all agree to accept, and so the illusion works.

[TINK5C] |"Is K5 my kapusta intellectual teddy bear?"| "Yes"
[ Parent ]

Thanks (none / 0) (#187)
by Rainy on Thu Feb 06, 2003 at 01:27:00 AM EST

That explained a lot to me.. The only slight trouble that it never seems to me that the money is multiplied that way. IOW, when I hear 'money is multiplied', I don't get anything in my mind's eye that looks like what you describe. So, I don't know if it's just me, but I think it's much more descriptive to say "people spend more if they can get a loan" instead of "loans make money seem to multiply".

One other thing.. it's not, or not only that people think themselves in the black, but that some of them perhaps think they'd be better off spending a bit now, and paying it with interest later. In USSR there was a lot of criticism for US system that went like "people get lots of things, go into debt and then feel just terrible". When the system was changing there was a lot of reaction along the lines of "yeah we've been doing much better - we'd have someone work for 50 years living in a communal appartment without a car or TV or a refrigerator and then they hit 70 and finally have enough to buy all that crap that they no longer need." Both points are good, I guess. I only wonder if people on average are mature and smart enough to use credit in moderation.
Rainy "Collect all zero" Day
[ Parent ]

Think larger. (none / 0) (#183)
by mindstrm on Wed Feb 05, 2003 at 08:40:01 PM EST

Yes, you owe that money.. but.... think on a larger scale.

The bank you borrowed $1000 from puts that $1000 down as an assett.

You owe the bank.. okay.

You spend that $1000 in my store. That's now MY money.. I don't owe it to anyone.  I just made money off the money you owe the bank.

So more money now exists in the economy.

[ Parent ]

That 'feels' wrong.. (none / 0) (#185)
by Rainy on Thu Feb 06, 2003 at 01:17:16 AM EST

Look at it from this angle.. Bank put the loan down as an asset but it cannot use it until you pay it back. If you pay it back, it becomes their real asset but you did not spend that money - as you would do otherwise. So, saying that 'money is doubled' (and in any case, it's not doubled because debts are not always paid back), but even saying that say for each $1k there's now $1.7k is misleading. It's just a play of words like St. Anselm's proof of god. This same thing could happen without money at all, picture me as a pre-historic artisan who makes knives. I ask a sheep herder to lend me a sheep, and I promise to repay two knives 1 month later even though normally I'd just pay one knife upfront. He trusts me and the deal goes through. Is the number of sheep or number of knives multiplied? Even if I immediately trade the sheep to someone for grain? Obviously, not. And here we have the same exact situation.

When I first read your post I was almost ready to reply with 'yeah, you're right, didn't think of that.' Then I thought about it for a few minutes :P.
Rainy "Collect all zero" Day
[ Parent ]

Nope. (none / 0) (#195)
by mindstrm on Fri Feb 14, 2003 at 09:10:12 PM EST

If you owe the bank money, it's an account receivable, it's an assett. It's somethign they can/will collect on, because it's secured by somethign else. It's "money in the bank". It goes on the balance sheet as an assett. Yes, money is doubled. That's how the money supply goes up! There is far more money in circulation out there than actually exists. All money is, ultimately, owed at some point. If you balanced every single book, money is owed, say, to the Fed. Plus interest. It's the continued cycle of borrowing/payback/interest that is used to regulate the US economy. It can never be static. Remember, all the money the bank has on deposit is a liability. It's money the bank owes someone else. Yes, it's a play on words.. that's the whole point.

[ Parent ]
Ummm.. (4.00 / 1) (#196)
by Rainy on Mon Feb 17, 2003 at 10:20:40 PM EST

Money the way I understand it is something you can buy something with. Now. Let's say I have $5 in my pocket. I can go and buy some loose-leaf tea from a local tea shop. Money is this possibility to buy something. Expression 'to have money now' means you can buy something now. If I have an asset that says someone will give me money in 3 years, that is not the same at all. They may go bankrupt in 2 years. Even if not, I may die in 1 year. Even if I live, I can't use the asset *now*.

Words for different things spell and sound different for a reason. I see a computer now and my table. We don't call both 'computer' because table does not compute. It would be confusing and pointless.

So, if I have money I'll say I have money. If I have an asset in form of someone's debt to me he may give back later on when I may still be alive; I say I have a loan asset (or something like that, the point is, I won't call this money).
Rainy "Collect all zero" Day
[ Parent ]

DBarter (4.50 / 2) (#122)
by Baldrson on Mon Feb 03, 2003 at 01:49:18 PM EST

While it is true that money is backed by promises, and those can be classified as one of:

  • Promises to do give soemthing of value on presentation of a token. (ie: commodity-backed money)
  • Promises to not do something damaging on presentation of a token. (ie: protection-racket money otherwise known as "fiat" money which is backed by the promise not to throw you in jail if you present it as legal tender for taxes)
people seem to think that it is important to have only one currency as "the standard".

Prior to desktop automatons pushing electrons around as tokens and 'zero-risk' arbitrage algorithms for money markets, this may have been necessary but discovery and transaction costs are now so low there is no reason for it.

In steps DBarter.

DBarter is a simple way for people to create and exchange value.

Value creation is similar to money creation in that someone creates a transferable promise of some sort. All similar promises belong to the same "symbol" of value. In normal money the promise is something like "I, the Victorian era Bank of England, will give a pound of sterling silver to the bearer of one of this symbol upon its return to any of my offices." A symbol can also have the same behavior as other financial instruments, such as insurance claims, mortage bonds, coupons, stock certificates, etc.

In any case, there are, presumably, some people somewhere who value the promise and are therefore willing to give up something of their own in order to acquire some quantity of the associated symbol. If what they give up is a quantity of another symbol, "barter" occurs.

Value transfer is similar to money payment in that someone gives value to someone else.

To be precise, what is transferred is a bunch of values, possibly of various symbols, called a portfolio. To be even more precise, what is transferred is a note for a portfolio. A note is created by withdrawing a portfolio from an account. The note is mailed to another account. The note is then deposited by the other account thereby cancelling the note.

For example, Bob withdraws 15 Amazon Dollars, 10 eBay Dollars and 50 Bob Dollars creating a note. Bob signs the note over to Cindy and mails it to her. Cindy then deposits the note in her account.

In summary, the DBarter Server:

  • allows banker accounts to create other accounts of any type.
  • allows "minting" accounts to create new symbols.
  • allows accounts to withdraw notes, which can be sent via mail.
  • lets accounts send mail to other accounts electronically.
  • allows accounts to deposit notes.
  • keeps a history of all of these activities.

All steps that might be vulnerable to fraud are protected by public key encryption.

-------- Empty the Cities --------

I have only one question (none / 0) (#145)
by magney on Mon Feb 03, 2003 at 09:34:41 PM EST

What the hell does the nature of the currency have to do with taxation? In what way does commodity-based money not lend itself to being the medium of a "protection racket"?

Do I look like I speak for my employer?
[ Parent ]

Issuer's Promise -- Not Bearer's (2.33 / 3) (#148)
by Baldrson on Mon Feb 03, 2003 at 10:00:44 PM EST

If I issue currency without a promise to give the bearer of the currency something of value in exchange, there will be no demand for it -- UNLESS -- I create demand by threatening to harm those who do _not_ obtain it.

That's where taxation steps into the fiat shoes.

I can bootstrap a fiat currency by the simple expedient of taxing something you do and then demanding that you pay your taxes in fiat currency. You don't acquire it? Then I punish you. The fiat authority of the money is limited only by my ability to torture you.

-------- Empty the Cities --------

[ Parent ]

Tobin tax (3.50 / 4) (#123)
by dollyknot on Mon Feb 03, 2003 at 02:00:03 PM EST

There seems to be a process in many different economic interactions. That being, the idea of getting less and less people, doing more and more work for less and less money. Hence the movement of production facilities to where people will work and get less amenity for that work. This is happening with the writing of software as well, in terms of India

There are some benefits accrued from this obviously, such as the transference of skills infrastructure etc etc. There are also costs and they are dangerous in terms of social cohesion, such as the concentration of more and more wealth ending up in fewer and fewer hands. Another apparent danger would be the de-skilling of the peoples the jobs have been exported from and the resulting disinterest in social cohesion that ensues from those people.

There is another process apparent in all this, that being it takes less and less people to create the same amount of wealth than it used to. This is illustrated by the idea that a man with a tractor and plough can plough approx. thirty times the acreage in a day, that a man with a horse and plough can. This exacerbates the problems mentioned in the previous paragraph.

Last year American economics Noble Laureate James Tobin died, he invented the Tobin Tax

As an economic environment, the internet has up to the present, been shown to be not very conducive to people being able to pay their bills. Much media funds itself with spam, there is a problem with this, media that funds itself with spam, usually ends up going for the lowest common denominator. Not a recipe for human advancement because of the tragedy of the commons

There appears to be two models by which media gets funded, either by spam or subscription. In terms of static media like CD's DVD's etc. etc. the chicanery is evidenced by people who get paid over and over again, for the same amount of work. So OK where does the Tobin Tax come in all these ravings of a mad man. Simple, the UN institutes the Tobin Tax and uses it to pay for 'net content based on hit rate, mojo and karma. This would facilitate the Peruvian goat-herder being able to share his wisdom with the planet, and get paid for it
They call it an elephant's trunk, whereas it is in fact an elephant's nose - a nose by any other name would smell as sweetly.

assume a spherical cow.. (1.00 / 1) (#152)
by turmeric on Mon Feb 03, 2003 at 11:00:12 PM EST

from this we derive ... A BUNCH OF CRAP

[ Parent ]
Money is just a fiction (4.33 / 3) (#125)
by RoOoBo on Mon Feb 03, 2003 at 02:09:44 PM EST

I could say that everything is a fiction but that would give a +20 in solipsism :).

What it matters about money is not what it is but what is used for.

Given a more or less closed system with a fixed amount of resources (or a fixed flow of resources, let's say Sun hours) how do you manage and distribute those resources to fulfill an specific proposit.

For example you could try to feed and distribute wealth between all humans in Earth. Or you could try to get as many wealth as possible to the hands of a few humans. Whatever you prefer.

Money (or more exactly currency) can be used to manage those resources. Or not ... The problem is when the money is not used for managing and distributing the resources but as a resource by itself. That is what seems to be happening lately. It is more important the money market than the production market where resources and goods produced using those resources are exchanged. And as I don't think people will be able to feed themselves eating money sooner or later something will fail drastically.

And then may be we will start to talk about real economy which is based in resources and production, not in money.

Legal Tender for all Debts (4.75 / 4) (#133)
by NoBeardPete on Mon Feb 03, 2003 at 05:15:51 PM EST

I'm suprised no one has commented on this yet. On my American $1 bill here, I see the phrase "This note is legal tender for all debts, public and private." If I am indebted to you, you can enlist the aid of the government in forcing me to settle up. If I offer to pay you in, say, gold or cattle, you can decline that form of payment, and demand dollars. The government will back you up on this. However, if I offer you dollars, you cannot decline and still enlist the aid of the government in forcing me to pay you in some other form. As far as the government is concerned, when I offer you dollars, the matter is settled.

So if I walk into a restaurant, sit down, order a meal, eat it, and offer to pay with a piece of jewelery, the restaurant can refuse. If I can't some up with dollars, or some other form of payment they agree to, they can call the cops. However, if I produce legal US tender, they have to accept it. They can't have a policy of not accepting $100 bills, or pennies, as those are both legal tender.

Now, many transactions occur such that neither party is ever in debt to the other. If I walk into a convenience store and attempt to buy a carton of milk with a $100 bill, or with pennies, they can decline to perform the transaction, before it even starts. Thus, I am never indebted to the convenience store, and am not entitled to pay with US currency.

Fortunately for us, because legal currency is always an acceptable means for settling debts, people also typically accept it for other transactions. Sure, they may not want to take large quantities of pennies, or very large bills, but they are generally happy to take cash. They are willing to accept cash because 1) they can use cash to settle debts, and 2) they are confident that others will accept cash for transactions they might wish to engage in later. And they are confident that others will accept cash, because those others can 1) use it to settle debts and 2) use it for other transactions. So at the root of it, legal tender has value because the government will use force to make people settle their debts, and it always considers money a valid way of doing this.

Arrr, it be the infamous pirate, No Beard Pete!

people who give 100$ bills to restaurants (2.00 / 2) (#151)
by turmeric on Mon Feb 03, 2003 at 10:58:34 PM EST

are assholes. unless its a tip.

[ Parent ]
Why? (none / 0) (#173)
by smithmc on Tue Feb 04, 2003 at 04:54:42 PM EST

Um... why? What if the check is for $100.25? Why would a $100 bill be inappropriate?

[ Parent ]
Depends on the restaurant. (none / 0) (#197)
by Matadon on Wed Mar 12, 2003 at 12:14:27 PM EST

Someone who uses a Benjamin to pay for a McBurger Value Meal is nominally an asshole -- there is no reason to pay for a $6 meal with a $100 bill unless you're trying to impress...er...yourself.

Then again, there's an Italian restaurant near where I live where it's easy to spend $200 on a meal for two (they've got an incredible wine collection), so paying with a couple of hundreds and a couple of twenties[1] is not exactly uncalled for; in fact, it's a bit better than paying by credit-card, as the $40 in tips can be "forgotten" at tax time by the waiter.

[1] I have always received excellent service there, and tip accordingly -- twenty percent.  The really sad thing is that I'm probably the patron with the lowest income, yet I tip better than most of the people that make three times my salary.  It is a slap in the face to give a 5% tip, no matter what the meal cost.

"There's this thing called being so open-minded your brains drop out." — Richard Dawkins.
[ Parent ]

Euro vs US Dollar == cause of impending Iraq war? (4.25 / 4) (#141)
by kpaul on Mon Feb 03, 2003 at 08:02:52 PM EST

interesting article - any finance/economics type people out there who could tell me if his theory holds any water or if he knows what he is talking about?


2014 Halloween Costumes
makes sense (4.00 / 3) (#147)
by RelliK on Mon Feb 03, 2003 at 09:57:25 PM EST

I am not an economist, and only have an introductory understanding of the matter but the argument presented in the article makes perfect sense. US dollar, just like any other commodity, is subject to supply and demand. Conducting all oil transactions in US$ artificially increases demand for $, raising its value. Also, since oil is one of the most important commodities, it puts the pressure on other international trade to be conducted in US$, which too increases the value of the $.

US$ is also the de-facto currency in many developing nations, as well as the de-facto store of value -- even developed countries need to keep US$ reserves. Now with euro being a strong contender, it is possible that we will see the end of the US$ hegemony, and with it, the end of US bullying and militarism. Now, if you were an oil-man, and all your buddies were either oil-men or military contractors, wouldn't you try to prevent that?

The most telling paragraph is one about the attempted destabilization and dissolution of OPEC, but the author draws the wrong conclusion. He suggest that in response the OPEC countries might switch to euros -- which is exactly what the bush is trying to prevent. No they wouldn't. Not with the puppet regimes in both Saudi Arabia (largest --) and Iraq (second largest oil reserves in the world), as well as CIA-orchestrated coup in Venezuela (fifth largest), which will likely lead to the installment of yet another puppet regime.

It is well known to anyone who cares to think, that oil is the real reason for the imminent war, but I didn't realise just how deep the oil influence goes. Anyway, thanks for the link -- a really interesting read.
Under capitalism man exploits man, under communism it's just the opposite.
[ Parent ]

Just trying to be 'fair and balanced' ;) [mt] (none / 0) (#193)
by kpaul on Fri Feb 07, 2003 at 03:38:54 PM EST

2014 Halloween Costumes
[ Parent ]
No it doesn't (3.00 / 4) (#155)
by Demiurge on Tue Feb 04, 2003 at 03:42:40 AM EST

First of all, it's highly unlikely that invading Iraq could coerce OPEC to not switch to the Euro if they had decided too.  It's also highly unlikely that the Europeans would be so incredibly stupid as to shoot their own economies in the foot by attempting to devalue the dollar.

Really, all this crap about war for oil, or war for corporations, is worthless.  This war is an ideological war, and any coherent opposition to it needs to realize that.

[ Parent ]
Bah (5.00 / 1) (#161)
by MotorMachineMercenary on Tue Feb 04, 2003 at 12:28:22 PM EST

All I have to say about this 'interesting article' I already said in this comment attached to a k5 story that was thankfully shot off the queue a few days back.

"In a time of universal deceit, telling the truth is a revolutionary act."
-- George Orwell

[ Parent ]
Money's just how we keep score. (3.00 / 3) (#142)
by Innocent Bystander on Mon Feb 03, 2003 at 08:18:56 PM EST

How else will we know who won?

How decimal has ruined money. (2.00 / 3) (#143)
by Fen on Mon Feb 03, 2003 at 08:25:44 PM EST

Using ternary, you can handle transactions with at most one swap of each type of coin. Binary denominations can be handled so you only need one of each type of coin. And hexadecimal amounts are beautiful and logical, while decimal is ugly. So remember to write your amounts in hexadecimal (like $10h for sixteen dollars).
foreign suppliers (4.00 / 1) (#150)
by cronian on Mon Feb 03, 2003 at 10:55:39 PM EST

The problem is that foreign manufacturers for the United States in countries like China, pay their workers virtually nothing. If they stopped extending credit to the United States, then they would lose a market, because the few rich people wouldn't be able to buy everything. This may eventually change, but the economics of capitalism won't allow a sudden change from giving credit to the United States, and then selling the goods to the US. Europe could take the US's place more or their could be a gradual shift to benefiting people in outside the US, but it could castrophic for everyone if it were attempted too quickly.

We perfect it; Congress kills it; They make it; We Import it; It must be anti-Americanism
supposed to be reply to Euro vs US Dollar == cause (none / 0) (#176)
by cronian on Tue Feb 04, 2003 at 06:39:01 PM EST

This was supposed to be a reply to RPAUL's comment. I don't know what happened.

We perfect it; Congress kills it; They make it; We Import it; It must be anti-Americanism
[ Parent ]
This is actually a very interesting questin... (4.60 / 5) (#179)
by Malor on Tue Feb 04, 2003 at 09:53:42 PM EST

I've been studying economics for several years now, on an armchair basis.  (I was caught up in the middle of the dotcom bubble, KNEW something was wrong, and started learning about why.)   You've hit a nerve here with me; I suspect that the fiat money system we are using now is slowly destroying us.  

There are a number of schools of thought about money.  The one I personally think makes the most sense is from the father of Austrian economics, Ludwig von Mises.  Per Mises, money is "the most marketable commodity".  

That's all.  That's it.  Real money, in a system that self-arranges, instead of having things forced on it from the outside, is just a commodity.   Past a certain point, a commodity becomes popular enough that it can be used as money.  Even if I don't want the commodity myself, if I know that someone else will take it for things that I want, then I will also take it.  Because I am now taking it, then other people who want my products will also start taking it.  There's a very powerful network effect that happens after a certain point.

Historically, the commodities that the market settled on have generally been gold and silver.   That's not always the case; some islanders used seashells.  But, by and large, that was what we ended up using. Both metals are compact, fungible (they can be broken into pieces; if you have a 1-ounce coin and need change, you can literally break it in half and spend the pieces), are beautiful, contain high value in a small space, and, best of all, are hard to manufacture.  They can't be made out of nothing; it takes a lot of work to find, mine, refine, and smelt gold and silver into coins and bars.  This means that when you are holding these metals, you are holding VALUE, and not just promises of unspecified value.

In a normal market economy, there's really no need for centralized control of the money supply.  When you realize that money is just the most marketable commodity, it doesn't have to be treated any differently than any other commodity.  We don't worry about, for instance, the soap supply.  Or the sawdust supply.  These things take care of themselves.  If there are shortages, the increased demand will raise prices (in the case of gold, making everything else cheaper in terms of gold), which will attract new producers to explore and mine more of it.  If there's too much, the amount of goods that gold will buy drops, and some producers either curtail production or go out of business.  It's self-regulating.

The only reason for a government-issued currency is to give that government more power.  Politicians looooove getting their hands on the money supply, because it lets them tax you without you realizing it.  You may have noticed the dollar dropping of late.... this is probably related to the fact that the Federal Reserve has been inflating the money supply madly for the last 10 or 12 years.  Previously, the liquidity went mostly into the stock market.  Asset inflation is one of the most seductive forms of inflation -- people LOVE IT, even though it's terribly dangerous.  

The Fed was particularly bad in 2001 -- I believe the money supply (measured by M3, one of the "broader" measures of money) grew by 18% that year.  It grew 12% last year, and it's on track to exceed that amount this year.  By way of comparison, during the entire two decades of the 40s and 50s, the money supply increased by about 18%.  (and apparently there were big arguments amongst the economists of the time, because the GNP had grown by a much larger amount, and some of them were worried that the money supply wasn't keeping up.)  

In other words, in ONE YEAR of fiscal excess we equaled TWENTY YEARS' worth of (presumably) healthy money expansion.   This is NOT how to run a stable system.  

I could literally write pages and pages about this; there's a lot more here than I'm talking about, but this is just a comment, not a novel. :-)

Cconsider: if you get yourself an inkjet, and buy some good paper, and print up a bunch of $100 bills, you can, if not caught, spend those bills for real goods and services.  If you are caught, you will most likely do jail time.  The only difference between you with your inkjet and the Federal Reserve is a matter of degree.  They are spitting out vast piles of money with no inherent promises to pay anything.  It took them no work at all to produce it, and yet by government decree it has value.  There is essentially NO DIFFERENCE between your printer and the Fed's, at least in terms of damage to the economy.  The government, by printing all this paper, can take real wealth from its citizens and use it for its own ends.   And mostly, the citizens are unaware of it.  You'd get mad if they showed up and stole $500 from you every month, but if they bleed you to death slowly by inflation, you don't notice.

That's what's really good about a commodity money system.  Politicians can't just invent new money at will.  Someone has to work very hard to collect the commodity; it's not free, and it keeps politicians much more honest with the purse strings.  I do not believe that we would have the vast debts and deficit, if we were on a gold standard.  All the gold would have left the country and we'd be broke!   We were flagrantly overspending in the late 60s, with Lyndon Johnson's Great Society and the Vietnam War at the same time, and the French started turning in their dollars for gold when they saw we'd printed a lot more bills than we had gold to cover.  So Nixon took us off the gold standard once and for all, and the fiscal policy of the government has been on a steady downward slide ever since.

Money needs to be a store of value to work properly.  When it has no real value but is decreed by fiat to be valuable anyway, this causes problems, which slowly and steadily accelerate.  

I could possibly write a real article. Not just about money, but rather about the huge mess we're in, economically, how we got there, and (maybe) how we slowly get out of it.    Let me know if you're interested.

Meaning of fungible (none / 0) (#182)
by wurp on Wed Feb 05, 2003 at 06:34:29 PM EST

Per Merriam Webster, fungible means: "being of such a nature that one part or quantity may be replaced by another equal part or quantity in the satisfaction of an obligation <oil, wheat, and lumber are fungible commodities>"

So it's not that they can be broken into pieces; it's that one piece of gold is just the same as any other.

I'm sure there's a word for what you're saying there, but fungible isn't it.  I'm interested if anyone thinks of it, because I care about stupid shit like that.
Buy my stuff
[ Parent ]

Personally, (none / 0) (#192)
by kpaul on Fri Feb 07, 2003 at 03:35:35 PM EST

I'd love to see you do an article like that.

2014 Halloween Costumes
[ Parent ]
Something to remember (5.00 / 1) (#184)
by mindstrm on Wed Feb 05, 2003 at 08:44:57 PM EST

when talking about money... looking at any individual factor, like the amount of money in the system, or how money is created now -vs- then, is not enough information to really judge by.

The judgement should be on how well the system, as it works at this moment, is serving society at large.

Money moves, and keeps the economy growing. Economic wealth is the ability to move money.. not the money itself.
Donald Trump was not a rich man simply because he had a lot of cash in the bank.. it was because he could convince huge banks to loan him billions of dollars to build a casino (or however much it cost).

Ultimately, money is not really anything but a representation... whether you like a gold standard or cocoa beans or fiat. What matters is how well it serves it's purpose.

The problem with a single global currency is it doesn't give individual nations any room to regulate the economy. You'd have to have some global entity giving money ot different countries.... and that could give rise to regional currency anyway.

The Euro isn't just about using the same money, but about treating the member states as one economy, and that involves agreements all over the political spectrum.

What Makes Money Make Money? | 199 comments (176 topical, 23 editorial, 0 hidden)
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