9 ms·

What you just said means absolutely nothing: "backed by the taxing power of the US government". First and far most, when everybody comes running to the US gover

by mjnaus 18y ago

What you just said means absolutely nothing: "backed by the taxing power of the US government". First and far most, when everybody comes running to the US government to cash in on their dollars, there is no taxing power between heaven and earth powerful enough to satisfy all the creditors. And what do you imagine the government paying them with? For regular folks your statement is even more airy; when they start to figure out that their precious greenback has nowhere to go but down; are they gonna call their local representatives and ask them to change the dollars into gold (oops, no can't do, no more gold standard!) or euros/yen/whatever? Face it; the dollar is backed by NOTHING! And thank god most people don't realize this because we would be in a much deeper hole then we are now.

pg 18y ago
Have you acted on these convictions you seem to feel so strongly? Have you e.g. bought options to buy gold in the future at a price much higher than the present one?
- mjnaus 18y ago
  Yes, I have. I have placed certain bets against the dollar. There is not a single doubt in my mind that the dollar will keep loosing it's value - with some minor exceptions in the short term. With all the billions of fresh created money (created out of thin air) being pumped into the US economy at the moment, the real devaluation of the dollar will pick up speed.
  - pg 18y ago
    Interesting; what kind of bets?
    - mjnaus 18y ago
      Next to buying small amounts of gold and silver, I have made a couple of lucrative forex transaction. Since I receive my income in euros in Europe and live in Thailand (baht rate is connected to the dollar), I have been able to increase my income quite a bit when the dollar hits new lows.
      - yters 18y ago
        I'm probably missing something. If the dollar is worthless because it isn't backed by real goods, why are gold and silver valuable? Just because of common consent, i.e. most throughout history have considered gold and silver to be exchangeable for goods? If that's your reasoning, then the same applies to the dollar, except on a lesser scale.
        gaius 18y ago
        Well, quite. Tell that to Gordon Brown who flogged off the UK's gold reserves at 1/3 of the current price (he even announced weeks in advance that he was planning to dump a load of gold on the market which further drove down the price).
        mjnaus 18y ago
        Common consent doesn't have much to do with the real value of precious metals. The reason why gold and silver are "valuable" and the dollar is not, lies in the fact that gold and silver can not be created "out of thin air". This was exactly the reason why, in better days, currency was backed by gold or silver, thus transferring the intrinsic value of precious metals onto the currency.
        yters 18y ago
        The dollar cannot be created out of thin air either. The constraints are not physical, sure, but they are there.
        mjnaus 18y ago
        Really? Care to name a few? The US government has "outsourced" control of the money supply to a cartel of private banks who have, as far as I know, no restrictions on the amount of money that they're allowed to create.
        Retric 18y ago
        This is where it really get's odd, banks pretend to have money but they don't. When the big banks lend 1 billion they did not create 1 Billion even if it looks like they did. The secret is there is more money in circulation than there is cash. So when you write a check, it just get's deposited in another account somewhere. So your bank can then borrow that money back if it needs to. In the end there is more debt than there is money. So there is a lot of people who are constantly looking for money and they can't all get it at the same time. The actual amount of money is less important than the amount of debt out there. If Debt > money then there is demand. PS: It's far less harmful for society to mess with the value of pretend money, than to take a useful thing like gold, and prevent people from using it for useful things. And because people don't have gold debt it's value is far more flexible. I don't think gold is worth much, and I don't own any, but I don't want to get into gold trading because guessing when the bubble pops is risk I don't need.
utnick 18y ago
Is gold really any less arbitrary than paper money? Couldn't advances in technology create cheap alternatives to gold that would destroy its value?
- likpok 18y ago
  Indeed. This is the point that gold-standard people don't seem to get. Gold is just as arbitrary as anything else. More so, even, because it is absolutely /useless/ in any aspect except as a valuable. It's too soft to do anything with. Furthermore, it has issues with being a finite supply that is occasionally moved around (no control over the monetary supply). Steel. Now /that's/ what we should back our money with. Everybody needs steel. At least until carbon nanotubes get popular...
  - mjnaus 18y ago
    It is actually its finite amounts that make it valuable. Anything that can be produced at will not hold up as a currency.
    - potatolicious 18y ago
      But we do create more of it (or dig it out of the ground and refine it, as it were), there's simply a practically finite rate at which we can grow the gold supply. So the value of gold should in fact deflate over time, as we produce more and more of it.
      - mjnaus 18y ago
        No, we don't. No matter how you look at this, gold is not "created". Cold is extracted from gold mines, the only thing humans can do it try to find, but they simply can not create it. Key here is that the total amount of gold on this planet is finite - not the production or extraction rate - making it truly valuable. Same thing applies to other natural resources such as oil, natural gas and diamonds.
        18y ago
jerf 18y ago
'What you just said means absolutely nothing: "backed by the taxing power of the US government".' Money is recursive. The US government's acceptance of dollars is the base case. The US Military, Police, and various other force-directing agencies are the induction step. It isn't entirely worthless, nor is its worth entirely intrinsic. It lives in the middle. Glib generalizations that put it on one end or the other are wrong.
- mjnaus 18y ago
  I never stated that the dollar would be completely worthless, I only stated that it's backed by absolutely nothing. For all the same reasons, it does not matter that the US government accepts dollars. It matters what you will get back for those dollars. When, if ever, people will come to collect en masse, the US government will have no means what so ever to pay of those creditors, in other words, the government becomes insolvent and the dollar plunges.
  - bokonist 18y ago
    Currencies do not need to be backed by anything. They are simply intermediary goods, valuable because of a coordination game. There is no "collecting in mass". The dollar is the final good. The U.S. has no debts outstanding in anything other than dollars ( which is quite a nice situation to be in).
    - mjnaus 18y ago
      In my world, goods and services I purchase are the final goods, not the money I need to purchase them. About "collecting en masse", I guess time will tell. You might be right, for those holding large amounts of dollars (China for example) a "run on the US government" would be a bad thing, they're better off unloading their less valuable currency gradually and exchanging them for something with intrinsic value such as gold and silver. And in the mean time, the dollar will keep on loosing it's value.
  - eru 18y ago
    When the creditors come, they will get back what they have borrowed: Dollars. Why should that be a problem? Remember: The US is indebted primarily in Dollars. Not in cars, gold or Euros. They can not go bankrupt for lack of their their own currency.
Xichekolas 18y ago
Actually what he described is the basis for Fiat money systems everywhere. As long as the government demands that all entities doing business pay a tax in dollars, the dollars will be worth something to those entities. (It's worth freedom to do business.) From Wikipedia: http://en.wikipedia.org/wiki/Fiat_currency http://en.wikipedia.org/wiki/Fiat_currency The unifying feature of all fiat money is its (typically exclusive) acceptability to the government for payment of taxes. And yet again: http://www.absoluteastronomy.com/topics/Fiat_currency http://www.absoluteastronomy.com/topics/Fiat_currency Therefore the integrity of the financial system requires that there be a different ultimate form of backing, such as the acceptability of the fiat currency in payment of tax.
DenisM 18y ago
You missed my point: US citizens will always accept your dollars because they want to stay out of jail. This means they will give up whatever they have and give it to you. The entire sum of non-dollar poessions(goods and labor) of all US citizens are backing US dollar.

by mjnaus 18y ago

pg 18y ago

Have you acted on these convictions you seem to feel so strongly? Have you e.g. bought options to buy gold in the future at a price much higher than the present one?

mjnaus 18y ago
Yes, I have. I have placed certain bets against the dollar. There is not a single doubt in my mind that the dollar will keep loosing it's value - with some minor exceptions in the short term. With all the billions of fresh created money (created out of thin air) being pumped into the US economy at the moment, the real devaluation of the dollar will pick up speed.
- pg 18y ago
  Interesting; what kind of bets?
  - mjnaus 18y ago
    Next to buying small amounts of gold and silver, I have made a couple of lucrative forex transaction. Since I receive my income in euros in Europe and live in Thailand (baht rate is connected to the dollar), I have been able to increase my income quite a bit when the dollar hits new lows.
    - yters 18y ago
      I'm probably missing something. If the dollar is worthless because it isn't backed by real goods, why are gold and silver valuable? Just because of common consent, i.e. most throughout history have considered gold and silver to be exchangeable for goods? If that's your reasoning, then the same applies to the dollar, except on a lesser scale.
      - gaius 18y ago
        Well, quite. Tell that to Gordon Brown who flogged off the UK's gold reserves at 1/3 of the current price (he even announced weeks in advance that he was planning to dump a load of gold on the market which further drove down the price).
      - mjnaus 18y ago
        Common consent doesn't have much to do with the real value of precious metals. The reason why gold and silver are "valuable" and the dollar is not, lies in the fact that gold and silver can not be created "out of thin air". This was exactly the reason why, in better days, currency was backed by gold or silver, thus transferring the intrinsic value of precious metals onto the currency.
        yters 18y ago
        The dollar cannot be created out of thin air either. The constraints are not physical, sure, but they are there.
        mjnaus 18y ago
        Really? Care to name a few? The US government has "outsourced" control of the money supply to a cartel of private banks who have, as far as I know, no restrictions on the amount of money that they're allowed to create.
        Retric 18y ago
        This is where it really get's odd, banks pretend to have money but they don't. When the big banks lend 1 billion they did not create 1 Billion even if it looks like they did. The secret is there is more money in circulation than there is cash. So when you write a check, it just get's deposited in another account somewhere. So your bank can then borrow that money back if it needs to. In the end there is more debt than there is money. So there is a lot of people who are constantly looking for money and they can't all get it at the same time. The actual amount of money is less important than the amount of debt out there. If Debt > money then there is demand. PS: It's far less harmful for society to mess with the value of pretend money, than to take a useful thing like gold, and prevent people from using it for useful things. And because people don't have gold debt it's value is far more flexible. I don't think gold is worth much, and I don't own any, but I don't want to get into gold trading because guessing when the bubble pops is risk I don't need.

utnick 18y ago

Is gold really any less arbitrary than paper money? Couldn't advances in technology create cheap alternatives to gold that would destroy its value?

likpok 18y ago
Indeed. This is the point that gold-standard people don't seem to get. Gold is just as arbitrary as anything else. More so, even, because it is absolutely /useless/ in any aspect except as a valuable. It's too soft to do anything with. Furthermore, it has issues with being a finite supply that is occasionally moved around (no control over the monetary supply). Steel. Now /that's/ what we should back our money with. Everybody needs steel. At least until carbon nanotubes get popular...
- mjnaus 18y ago
  It is actually its finite amounts that make it valuable. Anything that can be produced at will not hold up as a currency.
  - potatolicious 18y ago
    But we do create more of it (or dig it out of the ground and refine it, as it were), there's simply a practically finite rate at which we can grow the gold supply. So the value of gold should in fact deflate over time, as we produce more and more of it.
    - mjnaus 18y ago
      No, we don't. No matter how you look at this, gold is not "created". Cold is extracted from gold mines, the only thing humans can do it try to find, but they simply can not create it. Key here is that the total amount of gold on this planet is finite - not the production or extraction rate - making it truly valuable. Same thing applies to other natural resources such as oil, natural gas and diamonds.
      - 18y ago

jerf 18y ago

'What you just said means absolutely nothing: "backed by the taxing power of the US government".' Money is recursive. The US government's acceptance of dollars is the base case. The US Military, Police, and various other force-directing agencies are the induction step. It isn't entirely worthless, nor is its worth entirely intrinsic. It lives in the middle. Glib generalizations that put it on one end or the other are wrong.

mjnaus 18y ago
I never stated that the dollar would be completely worthless, I only stated that it's backed by absolutely nothing. For all the same reasons, it does not matter that the US government accepts dollars. It matters what you will get back for those dollars. When, if ever, people will come to collect en masse, the US government will have no means what so ever to pay of those creditors, in other words, the government becomes insolvent and the dollar plunges.
- bokonist 18y ago
  Currencies do not need to be backed by anything. They are simply intermediary goods, valuable because of a coordination game. There is no "collecting in mass". The dollar is the final good. The U.S. has no debts outstanding in anything other than dollars ( which is quite a nice situation to be in).
  - mjnaus 18y ago
    In my world, goods and services I purchase are the final goods, not the money I need to purchase them. About "collecting en masse", I guess time will tell. You might be right, for those holding large amounts of dollars (China for example) a "run on the US government" would be a bad thing, they're better off unloading their less valuable currency gradually and exchanging them for something with intrinsic value such as gold and silver. And in the mean time, the dollar will keep on loosing it's value.
- eru 18y ago
  When the creditors come, they will get back what they have borrowed: Dollars. Why should that be a problem? Remember: The US is indebted primarily in Dollars. Not in cars, gold or Euros. They can not go bankrupt for lack of their their own currency.

Xichekolas 18y ago

Actually what he described is the basis for Fiat money systems everywhere. As long as the government demands that all entities doing business pay a tax in dollars, the dollars will be worth something to those entities. (It's worth freedom to do business.) From Wikipedia: http://en.wikipedia.org/wiki/Fiat_currency http://en.wikipedia.org/wiki/Fiat_currency The unifying feature of all fiat money is its (typically exclusive) acceptability to the government for payment of taxes. And yet again: http://www.absoluteastronomy.com/topics/Fiat_currency http://www.absoluteastronomy.com/topics/Fiat_currency Therefore the integrity of the financial system requires that there be a different ultimate form of backing, such as the acceptability of the fiat currency in payment of tax.

DenisM 18y ago

You missed my point: US citizens will always accept your dollars because they want to stay out of jail. This means they will give up whatever they have and give it to you. The entire sum of non-dollar poessions(goods and labor) of all US citizens are backing US dollar.