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USD is a promise to pay a dollar to the bearer of the receipt. A dollar is an amount of gold, and so is a franc, a pound, a baht, and probably many others. Conv

USD is a promise to pay a dollar to the bearer of the receipt. A dollar is an amount of gold, and so is a franc, a pound, a baht, and probably many others. Conversion of a thing into itself is not a conversion. There is no risk free rate, and the behavior of capital constrained by worldwide tax hunt cannot reasonably be called 'natural'. One more thing: banks can only have reserves after covering the totality of their demand deposits, which means that virtually all public banks are insolvent... You say they can sell some assets to cover? Fine! Let's see the selling, and see how many come out alive! I'm waiting!

betenoire 9y ago
Where do I trade in this piece of paper in my pocket for gold?
- ballenf 9y ago
  Certainly not in Kansas, anymore, Toto.
- _red 9y ago
  Technically a FRN (Federal Reserve Note) is backed by a US Dollar. These are distinctions which seem odd today, and describe the odd system that we now have. A "US Dollar" is defined constitutionally as being "gold or silver". However you can no longer redeem a FRN for a USD....only for more FRN's. It raises several interesting legal questions when pondered, for instance when you pay taxes you are being taxed on USD earnings, although technically you've never been paid this.
  - pmyteh 9y ago
    There's no constitutional definition of a dollar: gold, silver or otherwise. The restrictions in article I section 10 bind the states, not the federal government. Since the suspension of convertibility into gold in the 70s, dollars are essentially a pure fiat currency - whether in FRNs, dollar coins or otherwise.
    - _red 9y ago
      Yes it bound the states...and its obvious intention was to forbid the promulgation of fiat throughout these "united states". Moreover, the First National Bank of the US was forbidden from both buying US treasuries and issuing debts beyond its capitalization. Clearly two limitations intended by the framers of the constitution to prevent the issuance of a fiat currency. The dollar was a unit of measure prior to the existence of the United States. Saying the dollar was not defined is like saying an ounce is not defined. A "dollar" was 550 grains in weight.
      - pmyteh 9y ago
        Its obvious intention was to centralise currency by preventing the states from making their own scrip. The Framers were perfectly capable of writing limitations on the federal government reflecting those on the states if they wanted to - look at the restrictions on bills of attainder and titles of nobility. And the first Bank was not set up by the Constitution - it was set up in 1791 by Act of Congress after a political fight between Hamilton and his critics. The Spanish dollar existed at the time of the US's founding, as did various other countries' (differently weighted) dollars; the US dollar wasn't defined until 1792 (when it was, indeed, defined as given weights of either gold or silver - the Spanish dollar was silver only). But the US dollar was defined by Congress and can be redefined by the same. And they have.
    - betenoire 9y ago
      So something I've never understood, or had explained to me well, perhaps, is ... the value of gold is not proportional to it's actual utility, so its value also seems equally arbitrary. So what is the issue people have with "fiat" currency? Is it simply because it is created and managed by the government?
      - _red 9y ago
        Because you can't print gold. The fundamental question is: Should we represent the value of real finite things (carrots, oil, land, etc) using an abstraction which is also finite or one that is infinite? Exponential growth curves can't continue forever. This is the fundamental reason why all fiat currencies eventually fail.
- HIPisTheAnswer 9y ago
  In the secondary markets, so long as there is one. Currently a USD sells for a little over 1.5 cents of its face value. If it ever becomes impossible to sell for cash (gold) in the secondary market, it has lost its 'money substitute' quality.

betenoire 9y ago

Where do I trade in this piece of paper in my pocket for gold?

ballenf 9y ago
Certainly not in Kansas, anymore, Toto.
_red 9y ago
Technically a FRN (Federal Reserve Note) is backed by a US Dollar. These are distinctions which seem odd today, and describe the odd system that we now have. A "US Dollar" is defined constitutionally as being "gold or silver". However you can no longer redeem a FRN for a USD....only for more FRN's. It raises several interesting legal questions when pondered, for instance when you pay taxes you are being taxed on USD earnings, although technically you've never been paid this.
- pmyteh 9y ago
  There's no constitutional definition of a dollar: gold, silver or otherwise. The restrictions in article I section 10 bind the states, not the federal government. Since the suspension of convertibility into gold in the 70s, dollars are essentially a pure fiat currency - whether in FRNs, dollar coins or otherwise.
  - _red 9y ago
    Yes it bound the states...and its obvious intention was to forbid the promulgation of fiat throughout these "united states". Moreover, the First National Bank of the US was forbidden from both buying US treasuries and issuing debts beyond its capitalization. Clearly two limitations intended by the framers of the constitution to prevent the issuance of a fiat currency. The dollar was a unit of measure prior to the existence of the United States. Saying the dollar was not defined is like saying an ounce is not defined. A "dollar" was 550 grains in weight.
    - pmyteh 9y ago
      Its obvious intention was to centralise currency by preventing the states from making their own scrip. The Framers were perfectly capable of writing limitations on the federal government reflecting those on the states if they wanted to - look at the restrictions on bills of attainder and titles of nobility. And the first Bank was not set up by the Constitution - it was set up in 1791 by Act of Congress after a political fight between Hamilton and his critics. The Spanish dollar existed at the time of the US's founding, as did various other countries' (differently weighted) dollars; the US dollar wasn't defined until 1792 (when it was, indeed, defined as given weights of either gold or silver - the Spanish dollar was silver only). But the US dollar was defined by Congress and can be redefined by the same. And they have.
  - betenoire 9y ago
    So something I've never understood, or had explained to me well, perhaps, is ... the value of gold is not proportional to it's actual utility, so its value also seems equally arbitrary. So what is the issue people have with "fiat" currency? Is it simply because it is created and managed by the government?
    - _red 9y ago
      Because you can't print gold. The fundamental question is: Should we represent the value of real finite things (carrots, oil, land, etc) using an abstraction which is also finite or one that is infinite? Exponential growth curves can't continue forever. This is the fundamental reason why all fiat currencies eventually fail.
HIPisTheAnswer 9y ago
In the secondary markets, so long as there is one. Currently a USD sells for a little over 1.5 cents of its face value. If it ever becomes impossible to sell for cash (gold) in the secondary market, it has lost its 'money substitute' quality.