Fiat currencies are a WMD

[garyd]

No actulaly all the rest of history agrees with me as I just pointed out.

[Pints with Plato]

Also, readers, please note that Chachma's "objections" contain no refutations, nor counter-points... only assertions and smug condescension regarding a school of economics, the followers of which were calling the current economic recession YEARS before it occurred; and in contrast with the prevailing school in government and media, the proponents of which were whistlin' dixie the right up to the doorstep...

[Pints with Plato]

No actulaly all the rest of history agrees with me as I just pointed out.

My reply was meant for Chachma.

Regardless, most of human economic history was lived with a commodity money... because humans have understood from the get-go that when you exchange one thing for another, the thing you use as a medium of that exchange ought to have value as well. Otherwise, why make the trade?

Again, does your labor have value?

[garyd]

Because it's easier than carrying around cows and chickens?

[Pints with Plato]

Because it's easier than carrying around cows and chickens?

Quite right. Do those cows and chickens have value?

In a sense, I agree with you that money "doesn't have value", in that the value is essentially subjective. It's just that humans have subjectively assigned a value to certain commodities... those typically have certain characteristics which make them ideal as money, but I would not - and have not - suggested that money *must* be a precious metal. The market should decide what works best as money.

[Pints with Plato]

Also from the "Obama: by the Numbers" thread:

Me, you and one other person are neighbors. I grow apples. You and the other neighbor buy apples from me for 1 dollar, and this is a balance which satisfies you, me, and the neighbor.

Now the neighbor has access to a printing press, which allows him to out-bid you for the apples. He comes to me and offers me 2 dollars/apple. I naturally agree, because, being a poor farmer, I want to make as much from my apples as I can to supplement my income and hopefully expand my operation.

Now the neighbor has an obvious edge over you, because he has money that he didn't have to work for (and money in a real, just society is nothing more than transferable labor). He has effectively "bid up" the price of apples from 1 dollar to 2 dollars, and has forced you to expend more labor to maintain your standard of living. I am only slightly less well off, because I'm able to profit from his inflation, but my expenses necessarily go up as his inflationary dollars hit the economy.

The big winner? The counterfeiter. Second place? Me. Loser? YOU.

Regarding how fiat currencies are devastating to the poor...

[Cyclone Ranger]

It is patently false that a commodity backed currency causes economies to implode. Over 5,000 years of human history laughs in your face.

Bullshit. It would certainly cause our economy to implode, by shrinking the money supply down to catastrophic levels. Markets would collapse, businesses would be forced to shutter, banks would melt down, vast numbers of people thrown into poverty, etc.

What happened in the past is completely irrelevant, because no previous economy was ever as large as ours, nor was our population ever as large, nor was the world economy ever as globalized, or as post-industrial and dependent on high-technology, etc.

So, the alternatives are fiat currency, or global catastrophe.

[Cyclone Ranger]

Fiat currency is only devastating to the poor if you think employment is devastating to the poor.

The money supply has to be large enough to maintain a large enough economy to keep people wporking. The gold standard = no where near enough credit to supply business loans and nortgages.

[Cyclone Ranger]

Quite right. Do those cows and chickens have value?

Nothing has intrinsic value. What something is worth is simply what someone else is willing to pay you for it.

Metal has no more intrinsic value than paper, cows, or chickens.

[Cyclone Ranger]

But isn't 'growth' related to the problem Pints and I are underlining: that a paradigm that relies on growth is unsustainable and flies in the face of the finite nature of our planet?

There is no evidence that growth is unsustainable.

And, it better not be, because without growth, economic, technological, and human, the economy will station, making both capitalism and democracy impossible.

Hasn't the US returned to a commodity backed currency before? If so, it shows that it is possible. It seems you feel society either has to be booming or busting.

That's exactly how the economy has to be. It's called the business cycle.

[optimus]

Good to see Pints has opened up to the clusterfuck known as our monetary system. Although I personally don't see "fiat" currency as being the problem since in my mind all currency is fiat including precious metal-backed notes, the problem is that our currency is all essentially debt owed to the federal reserve, and is destined to crumble.

[garyd]

Wrong Optimus but you usually are.

[Pints with Plato]

Bullshit. It would certainly cause our economy to implode, by shrinking the money supply down to catastrophic levels. Markets would collapse, businesses would be forced to shutter, banks would melt down, vast numbers of people thrown into poverty, etc.

What happened in the past is completely irrelevant, because no previous economy was ever as large as ours, nor was our population ever as large, nor was the world economy ever as globalized, or as post-industrial and dependent on high-technology, etc.

So, the alternatives are fiat currency, or global catastrophe.

Cats and dogs, living together! Mass CHAOS!!

The entire currency could be backed by a single ounce of gold, if that is what people (the "market") chose as money.

FIAT - Latin, "decree, command". A fiat currency, then, is imposed upon society by a central authority, typically with the ability to reproduce it at will.

Very simple logic and deduction allows one to see how beneficial an arrangement this is to the counterfeiter... er, I mean "central authority". And if one were also capable of understanding how inflation works, he would also be able to see how devastating it is to the poor.

[Pints with Plato]

Nothing has intrinsic value. What something is worth is simply what someone else is willing to pay you for it.

Metal has no more intrinsic value than paper, cows, or chickens.

Agreed. Yet a command, infinitely replicable currency is vastly inferior to one which possesses the qualities of sound money: homogenous, durable, divisible, portable, and scarce.

[Pints with Plato]

Fiat currency is only devastating to the poor if you think employment is devastating to the poor.

The money supply has to be large enough to maintain a large enough economy to keep people wporking. The gold standard = no where near enough credit to supply business loans and nortgages.

Once again, you have it wrong.

A commodity money may not provide the spectacular growth that the fiat regime has produced. Yet it will not collapse into itself, as the fiate regime will inevitably.

This meme of catastrophe of our economy were to operate on a commodity currency is laughable. Take a look at the history of fiat currencies for a good example of catastrophe and chaos.

[garyd]

And that's not problem. It won't keep politicians from making bad decisions. And it won't magically make those same politicians a damn bit smarter. Hell, as you just inadvertently pointed out, it won't even keep them from devaluing the currency whenever they want.

[Pints with Plato]

Good to see Pints has opened up to the clusterfuck known as our monetary system. Although I personally don't see "fiat" currency as being the problem since in my mind all currency is fiat including precious metal-backed notes, the problem is that our currency is all essentially debt owed to the federal reserve, and is destined to crumble.

Fiat simply means, "command". If the currency is not imposed upon us, then it is not fiat. If society freely chooses what to use as currency, then it is not fiat.

I agree that gold, cows, rocks, etc., don't necessarily have intrinsic value; it's just that commodities, particularly precious metals, have traditionally been chosen by societies to serve as currency, because they well suit the five characteristics of sound money: homogeneity, durability, divisibility, portability, and particularly, especially, scarcity.

Couldn't agree more about the Fed. Anyone who values his liberty would want to see the Fed ended on principle alone; but what it has done to the currency, and to subjugate the population are practical reasons enough.

[Pints with Plato]

And that's not problem. It won't keep politicians from making bad decisions. And it won't magically make those same politicians a damn bit smarter. Hell, as you just inadvertently pointed out, it won't even keep them from devaluing the currency whenever they want.

One argument at a time, gary.

I don't believe in the legitimacy of the state, either.

[garyd]

Unfortunately anarchy doesn't work either.

[Cyclone Ranger]

Cats and dogs, living together! Mass CHAOS!!

The entire currency could be backed by a single ounce of gold, if that is what people (the "market") chose as money.

You obviously don't understand how markets and currencies operate.

Why don't you read WEALTH OF NATIONS first, and get back to me?

Very simple logic and deduction allows one to see how beneficial an arrangement this is to the counterfeiter... er, I mean "central authority". And if one were also capable of understanding how inflation works, he would also be able to see how devastating it is to the poor.

Inflation certainly can be devastating to the poor, particularly if coupled with recession.

But, inflation is also necessary for economic growth and investment, which is the key to remedying their poverty. A rising tide lifts all boats.

Economic policy has to walk a fine line between promoting growth and restricting inflation. Since we don't have that much inflation right now and we're just getting out from under a major recession, we have to promote growth.