|
Musicmystery -> RE: The Second Wave of Foreclosures (12/18/2008 3:10:04 PM)
|
quote:
ORIGINAL: MrRodgers
quote:
ORIGINAL: Musicmystery
quote:
Gold and silver have been the most common forms of money for the past several thousands of years, across several continents and in numerous cultures and societies by millions upon million of people (probably more like billions and billions).
Do you believe they were all mistaken in selecting them?
Yes.
Those were simpler times (economically). Even then, when a wealthy Mali king visited Cairo a few centuries back, he brought so much gold that it severely depressed monetary value.
Gold and silver also used to be difficult to extract. New processes in the late 19th century changed that.
People cling to the gold/silver backed monetary concept because it seems simple. It's not. Even at the turn of the 20th century, the U.S. debated fiercely whether to back currency with gold or silver, gold backed by industrialists, silver by populists.
But gold and silver are themselves commodities--gold is used in your computer connections, for example, and silver in your photographs. Their value is not at all constant, and linking money to them only gives the illusion of stability. Sure, you can predict the PRICE, but you still can't peg the VALUE. That value will still be determined by a host of factors, including Real GDP, the Current Account, inflation, and the balance of trade. This is WHY governments turned to free (OK, well, managed) floats--peg currency to gold, silver, pine cones, coffee beans or paper clips, and nothing really changes. All such pegging DOES accomplish is opening the door for arbitragers to take advantage of the real value vs. the pegged value, at the expense of the Central Bank (and then the taxpayers, if only in the form of inflation).
In this case, the simplification is an additional complication. Returning to a silver or gold standard would be fantastically foolish.
btw---I glad to see you're on the mend!
You are wrong on two counts. The using of gold and silver as backing for currency kept the speculation of each much more conservative if not almost eliminated.
(It is primarily because of the capitalist culture of turning paper into money that never actually affects or determines supply and demand, but speculates on future value (futures) that effects the price of each.)
So having the dollar pegged to gold or silver means to speculate on either is to also speculate on the other at the same time creating a much narrower spread or no spread at all.
The demand for the precious metals used by industry does not nearly pace the paper speculation in any and would afford insufficient profit to speculate in currencies with gold or silver backing.
The paper money we use now is essentially worthless. The only exception being the buyer's expectation (speculation) of the value enhanced by labor, for any given product or service. Otherwise the value of any currency is versus other currencies and is changing 24/7.
No, actually correct, as you have yourself noted.
Paper money has existed since medieval China. People laughed then too.
Despite your intent, your last sentence is exactly true--the value of any currency relative to other currencies changes 24/7. And this is exactly why pegging currency is arbitrary and counterproductive.
Where you miss the point is the first two sentences of that paragraph. The money we use today is NOT worthless, simply because, like all money, including coffee beans and sea shells, it depends on whether people will rely on it as a medium of exchange and a store of value. You obviously value it, or you'd offer to empty your coffers for whatever small amount of gold I could give in exchange. You then go on, ironically, to explain WHY it has value--the labor (and the taxing power of the government) give a currency "hard" value. In fact, this is also why the U.S. trade deficit is a problem, and why pegging U.S. currency to gold or silver wouldn't fix the problem.
|
|
|
|
