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> ...some index immune to manipulation. Commodity money and representative money aren't any more immune to manipulation than fiat money. It doesn't matter whet

> ...some index immune to manipulation. Commodity money and representative money aren't any more immune to manipulation than fiat money. It doesn't matter whether you use gold, silver, or marshmallow peeps -- the value of your holdings are pegged to the value of the assets, which sway with the market. And the central bank can still manipulate that value, they just have to buy and sell the asset to do it. Fiat money gives nations a central mechanism to manipulate their own currency without hoarding gold and silver. Commodity & representative currency allow other countries to manipulate the currency. In _any_ monetary system, losing control of your money supply causes bad things to happen (see also: Greece).

fixxer 11y ago
I recognize those flaws as well, so I presume by the author's definition I am a progressive militiaman. Or maybe I'm just an intelligent individual. Big "maybe" there, admittedly.
- ska 11y ago
  You are affirming the consequent, as is the parent.
msandford 11y ago
> And the central bank can still manipulate that value, they just have to buy and sell the asset to do it. Yes, true. But the fact that there is SOME LIMIT is pretty nice. In other words, the Fed could create as many dollars as there are bits to represent them without much effort at all. Only once you start overflowing a 64 bit integer does there start to be any kind of restraint on the amount of dollars created and only for a year or two until all the software gets migrated to use 128 bit long long long longs! Commodities -- especially gold and silver which have widespread historical precedent as money -- can't really just be made up. Yes they're vulnerable to the vagaries of the market, but that market is at least based on some reality! And before you say "but the central bank can just make the prices go to infinity" thus achieving their price goals anyhow, I would respectfully disagree. The point of commodity backing of paper notes is that if you lose faith in the value of the notes you can always demand the commodity and hold that instead.
- gcb0 11y ago
  they can be made up when you have enough of them. just look how usa dictated crude oil prices at will or how the diamond business work for the last couple of centuries.
  - msandford 11y ago
    First thanks for replying instead of just downvoting. I might argue that the commodities you're referencing and precious metals are a little different. What you want to look at is the size of the stores versus the yearly production. I don't know what the crude stockpiles are worldwide above ground, but they don't amount to much more than a few months worth of consumption. So if you were going to pick a single commodity to use, you probably wouldn't pick crude. Because there's very little buffer, supply or demand shocks quickly work their way into prices. This is not ideal. http://en.wikipedia.org/wiki/Global_strategic_petroleum_reserves http://en.wikipedia.org/wiki/Global_strategic_petroleum_rese... Diamonds do satisfy the "large reserves relative to production" as DeBeers supposedly has many decades worth of diamonds locked up in vaults. This is to keep the price higher than it otherwise would, made possible by demand they manufactured through advertising. So while diamonds do have the buffer we want, they aren't divisible. Take a barrel of crude and pour it into two different containers. Each is now worth basically half of the first container. But split a diamond in half, and its value isn't cleanly divided in two. Diamond prices are based more on the carat square or cube (http://forums.udacity.com/questions/100166221/power-law-or-exponential http://forums.udacity.com/questions/100166221/power-law-or-e...) so dividing a diamond in half makes each of the halves worth 1/4 of the whole. Not a good feature of something monetary; getting change for a dollar doesn't destroy any value. Gold and silver on the other hand are divisible, fungible, and have high value relative to size and weight. Gold doesn't tarnish at all and silver very slowly and whatever oxide it does produce is protective. Also the yearly production of gold and silver from mining only represents a few percent of world stockpiles so supply or demand shocks have to be very large indeed to make drastic price changes; also a nice feature. Diamonds aren't fungible nor divisible. Crude doesn't have large stocks and has much lower per-unit value.
- jokr004 11y ago
  It's been well demonstrated that economies with gold standard currencies fall apart.. it played a big role in the global great depression and every affected nation ditched the gold standard before their economies were able to recover. There is no example of this system working well and plenty of examples of it failing.

fixxer 11y ago

I recognize those flaws as well, so I presume by the author's definition I am a progressive militiaman. Or maybe I'm just an intelligent individual. Big "maybe" there, admittedly.

ska 11y ago
You are affirming the consequent, as is the parent.

msandford 11y ago

> And the central bank can still manipulate that value, they just have to buy and sell the asset to do it. Yes, true. But the fact that there is SOME LIMIT is pretty nice. In other words, the Fed could create as many dollars as there are bits to represent them without much effort at all. Only once you start overflowing a 64 bit integer does there start to be any kind of restraint on the amount of dollars created and only for a year or two until all the software gets migrated to use 128 bit long long long longs! Commodities -- especially gold and silver which have widespread historical precedent as money -- can't really just be made up. Yes they're vulnerable to the vagaries of the market, but that market is at least based on some reality! And before you say "but the central bank can just make the prices go to infinity" thus achieving their price goals anyhow, I would respectfully disagree. The point of commodity backing of paper notes is that if you lose faith in the value of the notes you can always demand the commodity and hold that instead.

gcb0 11y ago
they can be made up when you have enough of them. just look how usa dictated crude oil prices at will or how the diamond business work for the last couple of centuries.
- msandford 11y ago
  First thanks for replying instead of just downvoting. I might argue that the commodities you're referencing and precious metals are a little different. What you want to look at is the size of the stores versus the yearly production. I don't know what the crude stockpiles are worldwide above ground, but they don't amount to much more than a few months worth of consumption. So if you were going to pick a single commodity to use, you probably wouldn't pick crude. Because there's very little buffer, supply or demand shocks quickly work their way into prices. This is not ideal. http://en.wikipedia.org/wiki/Global_strategic_petroleum_reserves http://en.wikipedia.org/wiki/Global_strategic_petroleum_rese... Diamonds do satisfy the "large reserves relative to production" as DeBeers supposedly has many decades worth of diamonds locked up in vaults. This is to keep the price higher than it otherwise would, made possible by demand they manufactured through advertising. So while diamonds do have the buffer we want, they aren't divisible. Take a barrel of crude and pour it into two different containers. Each is now worth basically half of the first container. But split a diamond in half, and its value isn't cleanly divided in two. Diamond prices are based more on the carat square or cube (http://forums.udacity.com/questions/100166221/power-law-or-exponential http://forums.udacity.com/questions/100166221/power-law-or-e...) so dividing a diamond in half makes each of the halves worth 1/4 of the whole. Not a good feature of something monetary; getting change for a dollar doesn't destroy any value. Gold and silver on the other hand are divisible, fungible, and have high value relative to size and weight. Gold doesn't tarnish at all and silver very slowly and whatever oxide it does produce is protective. Also the yearly production of gold and silver from mining only represents a few percent of world stockpiles so supply or demand shocks have to be very large indeed to make drastic price changes; also a nice feature. Diamonds aren't fungible nor divisible. Crude doesn't have large stocks and has much lower per-unit value.
jokr004 11y ago
It's been well demonstrated that economies with gold standard currencies fall apart.. it played a big role in the global great depression and every affected nation ditched the gold standard before their economies were able to recover. There is no example of this system working well and plenty of examples of it failing.