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People should understand that a fiat currency is better than any commodity based currency. But they don't. People are idiots and have let TV windbags convince

People should understand that a fiat currency is better than any commodity based currency. But they don't. People are idiots and have let TV windbags convince them that a gold based currency is more "real". Shiny!

patrickg_zill 13y ago
It is certainly something open to debate, and should not be stated so stridently, as a fact.
- mindslight 13y ago
  Debate can't really be had. Fiat currencies are better and more predictable... right up until they aren't. Which takes so long that hard-earned experience has long since diffused.
- gilgoomesh 13y ago
  There's some investment debate but ethically, there's no debate. It's simply not "right" to tie the value of everything in society to the value of a specific good. Gold, like all other goods should be free to have a value that is intrinsic to its uses (of which there are many in science and engineering) and other goods should not be subject to price fluctuations due to supply and demand issues related to gold. Obviously, people have issues with their fiat currency issuer – especially since currencies tend to be a government monopoly and lots of governments abuse that monopoly. However, that's well outside the point I was making. In any case, that's not an issue with fiat currency per se but with government monopolies on fiat currency (something that currencies like Bitcoin have set out to address).
speeder 13y ago
As someone that lives in a country that saw 2000% of inflation... Believe me, gold currency is awesome.
- seanmcdirmid 13y ago
  Iran? Argentina? Until someone discovers a mine that doubles reserves over night. Gold can be just as bad as paper with modern mining technology. Zimbabwe kicked their inflation problem by dollarizing. Note they have plenty of gold to mine in that area.
  - wintersFright 13y ago
    in ground gold reserves are reasonably well known and factored in. There is a finite amount of gold in the crust. There is no limit to the amount of digits one can add to the banks balance sheet. dollarizing won't be possible for the USD.
    - seanmcdirmid 13y ago
      We only have estimates for unknown discoveries, and the margin of error is huge for those. Not well known at all. There is definitely a finite amount of gold in the crust, but no one knows how much, and even "knowing" how much China has locked up in their vaults is difficult (they keep it secret for obvious market manipulation reasons). Of course, we are less than a hundred years away from being able to mine asteroids, but I'll doubt we'll bother mining for something as intrinsically worthless as gold. The US dollar is still a very stable currency, whatever the libertarian alarmists claim.
      - dfc 13y ago
        1. User A submits link to HN explaining the intrinsic properties of gold that are useful for space program at NASA. 2. User B lists a number of additional areas in science and technology that rely on the intrinsic properties of gold and bemoans financial system reliance on gold. Somewhat off topic and interesting discussion of fiat currencies ensues. 3. User C comments that gold is intrinsically worthless. Great example of why I find HN so interesting and infuriating.
        seanmcdirmid 13y ago
dragonwriter 13y ago
> People should understand that a fiat currency is better than any commodity based currency. But they don't. The way that fiat currencies have pretty much displaced commodity currencies suggest that this is actually a fairly widespread realization.
- gweinberg 13y ago
  Well, they're obviously better for somebody.
- smsm42 13y ago
  https://en.wikipedia.org/wiki/Gresham%27s_law https://en.wikipedia.org/wiki/Gresham%27s_law
coldtea 13y ago
Well, it does lead to a stabler economy. Some people value that, instead of endless expansion and/or large crises.
- philwelch 13y ago
  Stable indeed: http://en.wikipedia.org/wiki/List_of_economic_crises#19th_century http://en.wikipedia.org/wiki/List_of_economic_crises#19th_ce...
  - coldtea 13y ago
    Err, some of those are tied to stock exchange crashes, others to extended warfare periods etc. And all are tied with ever-expanding industrial production, which is another independent parameter.
    - philwelch 13y ago
      I don't see your point here. Hypothesis: Gold economies are more stable than fiat currency economies. Expected observation: Gold economies have fewer economic crises and panics than fiat currency economies. Actual observation: They don't. Any recession is caused by "expanding production", the whole point of a recession is that it's a correction that happens after a boom cycle.
      - coldtea 13y ago
        When did the actual observation that gold economies are not more stable happen? The list provided only shows that they also have crises -- it doesn't show how those crises measure (respective to fiat currency economies) in magnitude, frequency and consequences.
        philwelch 13y ago
        Well, go on and make your point then. They seemed pretty frequent, consequential, and high-magnitude to me, certainly comparable to the 20th and 21st centuries (and even the Great Depression began under the gold standard).
smsm42 13y ago
Better for what? If you want to have stable money supply, commodity money is better. If you want to manipulate money supply in order to achieve political purposes - of course fiat money is better. BTW, if fiat money are so great and gold money is so inferior, why exactly the government snatched the private gold in the 30s[1]? Did they want the inferior thing so much that they had to force people to give it up because they wouldn't voluntarily exchange it for the much better thing? I imaging they were rescuing those people, that's what it was. A sacrificial act by the Feds. [1] https://en.wikipedia.org/wiki/Executive_Order_6102 https://en.wikipedia.org/wiki/Executive_Order_6102
- philwelch 13y ago
  The gold standard wasn't as "stable" as you think. There were severe inflation crises during the California and Alaska gold rushes, while the Nevada silver rush made bimetallism untenable. Your other argument is incoherent--there's no fundamental reason to build monetary policy such that it favors individual investors over the health of the economy as a whole. In fact, if people simply hoard money rather than spending and investing it, that's generally an indicator of a poor economic system that can cause the type of deflationary spirals that caused the Great Depression in the first place.
phyalow 13y ago
Not sure if your serious or not... Here's an absolutely classic piece from the austrian view point. Take a read, it might expand your narrow views even if you don't agree! http://www.amazon.com/The-Monetary-West-Jacques-Rueff/dp/B0006DYVOC http://www.amazon.com/The-Monetary-West-Jacques-Rueff/dp/B00... https://mises.org/books/monetarysin.pdf https://mises.org/books/monetarysin.pdf

patrickg_zill 13y ago

It is certainly something open to debate, and should not be stated so stridently, as a fact.

mindslight 13y ago
Debate can't really be had. Fiat currencies are better and more predictable... right up until they aren't. Which takes so long that hard-earned experience has long since diffused.
gilgoomesh 13y ago
There's some investment debate but ethically, there's no debate. It's simply not "right" to tie the value of everything in society to the value of a specific good. Gold, like all other goods should be free to have a value that is intrinsic to its uses (of which there are many in science and engineering) and other goods should not be subject to price fluctuations due to supply and demand issues related to gold. Obviously, people have issues with their fiat currency issuer – especially since currencies tend to be a government monopoly and lots of governments abuse that monopoly. However, that's well outside the point I was making. In any case, that's not an issue with fiat currency per se but with government monopolies on fiat currency (something that currencies like Bitcoin have set out to address).

speeder 13y ago

As someone that lives in a country that saw 2000% of inflation... Believe me, gold currency is awesome.

seanmcdirmid 13y ago
Iran? Argentina? Until someone discovers a mine that doubles reserves over night. Gold can be just as bad as paper with modern mining technology. Zimbabwe kicked their inflation problem by dollarizing. Note they have plenty of gold to mine in that area.
- wintersFright 13y ago
  in ground gold reserves are reasonably well known and factored in. There is a finite amount of gold in the crust. There is no limit to the amount of digits one can add to the banks balance sheet. dollarizing won't be possible for the USD.
  - seanmcdirmid 13y ago
    We only have estimates for unknown discoveries, and the margin of error is huge for those. Not well known at all. There is definitely a finite amount of gold in the crust, but no one knows how much, and even "knowing" how much China has locked up in their vaults is difficult (they keep it secret for obvious market manipulation reasons). Of course, we are less than a hundred years away from being able to mine asteroids, but I'll doubt we'll bother mining for something as intrinsically worthless as gold. The US dollar is still a very stable currency, whatever the libertarian alarmists claim.
    - dfc 13y ago
      1. User A submits link to HN explaining the intrinsic properties of gold that are useful for space program at NASA. 2. User B lists a number of additional areas in science and technology that rely on the intrinsic properties of gold and bemoans financial system reliance on gold. Somewhat off topic and interesting discussion of fiat currencies ensues. 3. User C comments that gold is intrinsically worthless. Great example of why I find HN so interesting and infuriating.
      - seanmcdirmid 13y ago

dragonwriter 13y ago

> People should understand that a fiat currency is better than any commodity based currency. But they don't. The way that fiat currencies have pretty much displaced commodity currencies suggest that this is actually a fairly widespread realization.

gweinberg 13y ago
Well, they're obviously better for somebody.
smsm42 13y ago
https://en.wikipedia.org/wiki/Gresham%27s_law https://en.wikipedia.org/wiki/Gresham%27s_law

coldtea 13y ago

Well, it does lead to a stabler economy. Some people value that, instead of endless expansion and/or large crises.

philwelch 13y ago
Stable indeed: http://en.wikipedia.org/wiki/List_of_economic_crises#19th_century http://en.wikipedia.org/wiki/List_of_economic_crises#19th_ce...
- coldtea 13y ago
  Err, some of those are tied to stock exchange crashes, others to extended warfare periods etc. And all are tied with ever-expanding industrial production, which is another independent parameter.
  - philwelch 13y ago
    I don't see your point here. Hypothesis: Gold economies are more stable than fiat currency economies. Expected observation: Gold economies have fewer economic crises and panics than fiat currency economies. Actual observation: They don't. Any recession is caused by "expanding production", the whole point of a recession is that it's a correction that happens after a boom cycle.
    - coldtea 13y ago
      When did the actual observation that gold economies are not more stable happen? The list provided only shows that they also have crises -- it doesn't show how those crises measure (respective to fiat currency economies) in magnitude, frequency and consequences.
      - philwelch 13y ago
        Well, go on and make your point then. They seemed pretty frequent, consequential, and high-magnitude to me, certainly comparable to the 20th and 21st centuries (and even the Great Depression began under the gold standard).

smsm42 13y ago

Better for what? If you want to have stable money supply, commodity money is better. If you want to manipulate money supply in order to achieve political purposes - of course fiat money is better. BTW, if fiat money are so great and gold money is so inferior, why exactly the government snatched the private gold in the 30s[1]? Did they want the inferior thing so much that they had to force people to give it up because they wouldn't voluntarily exchange it for the much better thing? I imaging they were rescuing those people, that's what it was. A sacrificial act by the Feds. [1] https://en.wikipedia.org/wiki/Executive_Order_6102 https://en.wikipedia.org/wiki/Executive_Order_6102

philwelch 13y ago
The gold standard wasn't as "stable" as you think. There were severe inflation crises during the California and Alaska gold rushes, while the Nevada silver rush made bimetallism untenable. Your other argument is incoherent--there's no fundamental reason to build monetary policy such that it favors individual investors over the health of the economy as a whole. In fact, if people simply hoard money rather than spending and investing it, that's generally an indicator of a poor economic system that can cause the type of deflationary spirals that caused the Great Depression in the first place.

phyalow 13y ago

Not sure if your serious or not... Here's an absolutely classic piece from the austrian view point. Take a read, it might expand your narrow views even if you don't agree! http://www.amazon.com/The-Monetary-West-Jacques-Rueff/dp/B0006DYVOC http://www.amazon.com/The-Monetary-West-Jacques-Rueff/dp/B00... https://mises.org/books/monetarysin.pdf https://mises.org/books/monetarysin.pdf