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Next Currency … A Real One?
Pretend for a moment that the US $dollar is no longer useful. With what could we settle transactions?
Obvious answers are a new fiat currency from a new Central Bank;
currency issued directly by the government, such as US Treasury-issued
Greenbacks; precious metals in raw, coin, or certificate form; various forms of
local or private coupons or currencies; novel concepts, like various forms of
digital currency; and certificates of claims on present or future assets,
baskets of goods, commodities, energy, or even other currencies.
Currency is managed scarcity. The
complaint against fiat currencies is that it is managed poorly. Precious metals are by their nature scarce,
but have practical issues associated with mass, competition with industrial
consumption, speculation, coin clipping, and assorted predatory market
manipulation.
Clearly a society can have some level of success trading in feathers,
seashells, salt, precious metals, government coupons, and even fiat
currencies. Of course, systems tend to
fail with surplus or scarcity shocks, either through natural disruptions, or more
commonly through management-induced changes in currency supply when the Wizards
of Smart are found to be lacking.
However, most would probably agree that historically the most successful
currencies have been through precious metals and fiat currencies (depending on
a definition of “success”, and to some extent, the motives for maintaining a
currency).
For fun, let’s assume for a moment that we want to try something
different.
In our pretend example, we would like to have our currency “backed” by
something, thus fulfilling the fundamental requirement of scarcity: Since nothing is infinite, a currency backed
by something cannot itself be infinite (short of accounting fraud). It would be nice if the market determined the
value of that backing, and (of course) that backing will change over time
relative to other things society values, but we generally want that something
to have a somewhat “stable” value.
What about a basket of stocks and bonds?
Remember that a “stock share” is a share
of all future profits. While some
pretend it is represents a percentage of ownership of a company (which is sort-
of true), and it may represent a claim on the company in liquidation, remember
that the company’s bondholders and creditors fill their claims from a company’s
assets first. While most shares today are
purchased for speculation (e.g., the
share is desired because the buyer expects its future price will be higher),
this is somewhat of a distortion because its fundamental value as an investment is merely the value of all
future profits delivered.
Now we’re ready: Many investment
companies offer a “Total Stock Market” investment fund with low expenses. The fund purchases shares on the open market
to maintain a balance that resembles a market index, but which is distributed
among all the stocks on the market.
Thus, this fund is backed by shares in companies that are regulated,
audited, and exposed to public scrutiny.
Individual companies may be performers or stinkers, but the public (at
some level) can scrutinize and value the individual company’s worth. These same investment companies offer a
“Total Bond Market” investment fund with low expenses, and the public can
similarly perform due diligence on individual bonds that comprise that fund.
Next, we have the magic of a Money Market Fund, originally designed to
provide liquidity and price stability at one dollar. It pays dividends to the fund with increased
shares, but the shares themselves remain at one dollar (i.e., one nominal
unit).
Combine all three (Total Stock Market Index, Total Bond Market Index,
and Money Market Fund), and we now have a Money Market Fund backed by the Total
Stock Market and Total Bond Market (at a 50% / 50% ratio, to pick a ratio, with
history suggesting such a balance is more stable and productive than all of one
or the other). Let us call this fund,
the “Bocks” (for “bonds/stocks”, since that’s easier to pronounce than “Stonds”
[for “stocks/bonds”]). Another cool name
might be the “Sibs” (for “stocks-index-bonds”), but I must admit I was never
very cool, and probably should not be permitted to coin such terms.
The final requirement is the issuance of “Bearer’s Bonds”. If you bought one share of Bocks, it is worth
one share of Bocks. Its value is
somewhat stable at the nominal Money Market one dollar. However, on deposit at an institution, the
institution would receive the dividends from the underlying assets that back
that share of Bocks (and that institution may be kind enough to split that
dividend with you).
It’s true that bearer’s bonds of Bocks in circulation (equivalent to
today’s M1 printed money supply) would produce no dividend (because to where
would the dividend be sent?), but that is a relatively small number of Bocks related
to the total money and credit supply, and that merely increases the dividend distribution
to deposited Bocks (where we actually have an address to which we can send the
dividends).
[Side note: The US banned new
issuance of bearer’s bonds in 1982 to inhibit tax avoidance, but even a
personal check can be considered a “bearer instrument”, which can be used
legally. While it may be possible for an
investment company to establish a Bocks system today, a legislative change may
make this easier.]
Thus, we could still have anonymous transactions without centralized
control (e.g., the private trading of goods-and-services for bearer’s bonds, or
printed Bocks), and Bocks found buried in a back yard after a decade would
still hold the face Bocks value (although the dividends would have been
forgone, since they were not on deposit).
The issuing agency would “benefit” from Bocks that were lost or
destroyed (since these shares effectively were dropped from circulation,
resulting in a reverse-dilution for the remainder of Bocks holders), and the
issuing institution would remain viable just as they are today by charging a
“management fee” to be paid from the dividends produced by the underlying stock
and bond assets. Theoretically, the
underlying companies issuing the stocks and bonds themselves could be priced in
Bocks, with the relative value of the company being determined by its
competitive place against other companies:
One company could not grow-in-value ten times overnight without
similarly lowering the rest of the market by that value in that same night.
This is as it should be: The
value of all houses in my city is fundamentally determined by the incomes of
all the people that live in my city. The
value of all products produced is determined by the purchasing power of all
people that consume products. The value
of the entire stock and bond market is determined ultimately by the value of
all future profits, which themselves are determined by the value of all future
productivity.
This system also honors the fundamental “time value of money”: One dollar tomorrow is not as good as one
dollar today, so when I loan you my money today, I want you to give me back
more tomorrow (e.g., “interest”). One
Bocks on account is worth more tomorrow simply because of the dividend it can
claim through its underlying assets, the stock and bond markets.
Further, we need not grant a single institution monopoly control in
issuing Bocks: Many investment companies
exist today with these market funds, each with their own structure. One Bocks is worth one Bocks, no matter who
was the issuing company. Counterfeiting
is only possible through fraud, in the event Bocks are created without
purchasing the underlying stocks and bonds on the open market.
What about speculation? Stock
market crashes? Secular cyclical changes
in the markets?
First, these swings principally relate to the expansion and contraction
of credit. Society must make its own
decisions regarding fractional reserve lending, leverage limits, auditing
guidelines, government fiscal discipline, and any other mechanized fraud. That has nothing to do with the currency
itself, or the fundamental “worth” of anything.
Second, our fictional Bocks currency itself doesn’t care about the price
of the stock or bond markets. Ten
thousand? Three thousand? One zillion thousand? Who cares?
We don’t care because the Bocks is itself merely a unit of exchange, and
its instantaneous “worth” is merely its fundamental claim on future dividends. When the market crashes, conceivably the
Bocks is worth more, in the event future dividends are expected to be
relatively high compared to the current market “share” price.
Nothing is “fixed” forever, as things constantly change relative to each
other. We need only consider as currency
something that is “relatively” stable, and “relatively” worth something. We can agree the dollar (or any national
currency) has had volatile swings in valuation over the decades, with the US
dollar currently devalued in excess of 95% from its inception. It is hardly the poster child for a more
stable system. In fact, no unit of
exchange satisfies this “super-stable” concept.
Thus, the best we can do is pick a backing that is of relative stability
and value, and which represents the productive capacity of society: The stock and bond markets.
Fundamentally, all other markets are ephemeral: Wealth is stuff people want, and society
creates wealth through the productive capacity of the stock and bond markets. Holding a share of all future profits from those
may be the best we mere mortals can do.
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Let's turn coin-clipping and other forms of currency debasement on its head: base the currency on something we want more of globally. Examples include desalinated water or electricity sold back to the grid. Figure out a way to generate fresh water or electricity cheaply on a local scale and use that technological advantage to print all the money you desire.
Given human nature and it's value, gold as a primary currency will have an unacceptably large number of us digging for it or worse stealing it rather than using our brains to earn it through different kinds of productive work apart from digging. Fiat currency and other financial instruments like bonds distract us from stealing or digging for gold. The lack of this distraction will focus the minds of many more among us on digging for gold or stealing it driving up the cost oif storing it or insuring it if indeed it is anymore possible. Of course some might say that it can still be acquired with honest work but the connection between wealth and gold will be even more stark and it's allure that much stronger. I think we remember that only recently manhole covers were disappearing for the iron to be sold to the chinese.
I believe Observer is stating the gold has similar issues to mishandled, corrupted fiat currency. The 80s -00s were a time when banksters spent too much time and effort "mining" our fiat currency and going from 4 precent to 20 percent of our economy no better than the gold scenaro rightly pointed out by Observer. When venture capital could have been going to develop new ag tech, new car engines, computer chips, new building materials etc, much of it was diverted to financial "innovation" and the fake collateral to that, US housing market.
I'm generally with poster of this article on this one, as well as with Ellen Brown (Web of Debt), we need a fiat currency, just not one created by and for financial parasite banks that get to keep all the value of writing the currency into existence. The interest we pay to them is a hidden tax on our commonwealth. Gold limits possibilties of massive inflation, but also overly limits money supply. Fiat currencies created by banks are parasitic. Fiat currencies run be irresponsible governments can be hyper-inflationary (although this is usually only done to default from foreign debt, ala Zimbabwe).
Lincolns greenbacks worked and saved US from having to pay 30 percent interest to British banks...we can do something like this or we can continue to get screwed by the privately held central banks.
we need a fiat currency, just not one created by and for financial parasite banks that get to keep all the value of writing the currency into existence.
It's surprising that you fail to see how your first phrase is completely excluded by the impossibility of the second coming true. You are saying, in effect, we need a responsible and incorruptible small group of men and women who will have the power of life and death itself through manipulating the value of the medium of exchange. How can you even imagine that such a group or system could be possible? Rent-seekers will co-opt it between its announcement and implementation. You seem to acknowledge this later in the same paragraph:
Fiat currencies created by banks are parasitic. Fiat currencies run be irresponsible governments can be hyper-inflationary (although this is usually only done to default from foreign debt, ala Zimbabwe).
Yes, of course they are. Name me one responsible government that has demonstrated the self-control to successfully run a fiat currency?
Lincolns greenbacks worked and saved US from having to pay 30 percent interest to British banks...we can do something like this or we can continue to get screwed by the privately held central banks.
One of the beauties of the gold standard is that it makes war more difficult to fund; under a gold standard, "Guns and Butter" is impossible. The warring nations' populaces shares the pain of war and want it brought to a quick resolution. Imagine that. Want to invade Iraq? Immediate drop in living standards. Still wanna do it?
Lincoln invaded a sovereign nation and needed to inflate the money supply to pay for it. The first thing he did was print money. Shocker; the only thing more shocking is your use of his example to justify it.
If the expense of money stopped people from fighting wars, I would agree with you...but we are happy to fight wars even when the debt is costly. Would 30 percent interest stopped the civil war, I think not, it would have just saddled the nation with more debt and interest to be paid to British bankers for that money.
By your logic anything that makes things cheaper automatically means govt is more likely to war. So should we keep oil expensive to stop wars, how bout jacking up the price of food to soldiers are expensive to feed? So keeping money "expensive" hurts good economic endeavors as well as war machine, just like high cost of energy or food would. And just 'cause money is cheaper, we will fight wars with it but never do good with it? Of course, things cut both ways. And did money being tight and deflation occurring in 30s stopped us from WWII? Have countries fought no wars when on gold standard?
Personally, if I have to choose between secret private banking cartels controlling and benefiting from our currency and another option of having the interest paid on money created by fractional reserve debt transferred to public hands, I'll take my chances with the public hands even though I fully know they can be horribly corrupted.
To the extent the people have gotten information on the Fed, we have benefited from it and used democratic processes to reform them slightly, like they now have to return some of the gain the make from printing our currency to the Treasury (i think this occurred in the 70s), and that only happened because of democratic, political agitation.
How much better off would be if we had transparent, democratic control on our money/credit creation system?
Sure politicians could try to realize the same parasitic gain that currently private hands take, but at least, I, as a voter, have some chance of holding the politician accountable, I have NO chance with the private secret orgs.
Not that I think govt is certainly always good and always better than private businesses, but what's the alternative to striving for democratic control over national affairs including money? Royalty, oligarchies, private business cartels and trusts? Democracies can be corrupted and can do horrible imperialistic things, but that does not mean we should just stop with this whole democracy idea and go to dictators, kings, or secret, private societies instead.
It seems to me there are three things we know: 1) financial parasites with little democratic controls or public reporting get the benefit of our current fractional reserve/money/credit creating system, not the commonwealth, while we still incur all the dangers of a fiat system, 2) fiat currencies allow for possibility of irresponsible monetary policy by government and 3) when precious metals have been used to back money and to avoid such fiscal irresponsibility, it has caused economic problems due to tight money supply, and that situation has also benefited banksters and hurt common working folks.
....past these three issues that seem fact to me, IMHO... I can see merit in all the different solutions/points presented here (in this excellent milka post and these excellent comments) to address these issues, but keeping money supply tight just to stop govts from fighting wars is not something I can agree with, not something that seems to have a historical basis.
Exhibits: Lusitania, Pearl Harbor, Tonkin Gulf, 9/11. Follow the money - cui bono? You mentioned the rascals in your post.
The Emancipation Proclamation was propaganda for the war effort:
Young men from the North had no passion to fight for the end of slavery. It was forced upon them:
http://en.wikipedia.org/wiki/New_York_Draft_Riots
Slavery was dying under its own crushing weight. Productivity increased when you paid your workers. The Civil War was about economics, not slavery. The South found prices in Europe to be more favorable than what the North was offering - especially after the North began to enact legislation that harmed Southern business interests in favor of the North. Succession was the first test of the "goodness" of the Constitution. It was overturned militarily by the tyrant Lincoln. The fiat currency allowed Lincoln to fund the war. Would there have been peace and free trade in the place of war if the endgame were not control?
Read my reply to you above. You don't need an unbacked currency (fiat) to have fractional reserve banking. Ellen Brown argues for sound banking...well duh. She also seems to believe the state is good, makes sound decisions, and has the best interest of it's citizens in mind at all times. I think that's wishful thinking.
thanks, will keep studying this
I think you are making an assumption that is not true.
This entire website is full of people that understand that our current problems are caused by a large portion of our population "stealing" and "digging" for our current currency in unproductive ways. You think the current currency is better?
well intellectual exercises are fun..
p.s. gold is....
take the current fait stuff divided it by on oz of gold ,, and we have $10,000 aprox .
i ma perfectly aware of the history of gold.. clipping coins .. yadda
still what works is best .. as simple as possible
so inda buys gold .. china ,russia, move on nothing there.
centrl banks now net buyers of gold
governments will be buying gold as we screem past 1600 on to 2000,,
you all can beat a dead horse.. but the proof will be in the pudding .
visit the gold issue in three years .. .
many at 250 gold laughed that we were going lower.
at 400 same .. at 600 same at 1000 same .
somethings afoot ,, and it is not intellectual games .
other than that ,, we shall see what we shall see.
in the mean time have a napkin handy to wipe the egg off the face.
Intellectual contortions aside, obtusely, this article describes current national floating currencies, an exchangeable share of a nation's goods and services. Not one of them can be regarded as a safe store of labour or wealth. Under this current monetary system, savers of past earnings are penalized by the creation of new currency and are forced to continuously search for the holy grail of paper money. That is the endless pursuit of a yield that overcomes the destructive nature of the printing press and ledger entry creation of money. It is of course a near impossibility, which is what keeps the banker elite in a job and pensioners in the poor house. When will the masses wake up?
Let's make this simple....
Country A has 1000 businesses that make things....
It has 1000 businesses that do not make things....
Neither business can exist without the other....
The govt. lives off the profit generated by both to the
tune of 30%....
This means that 70 cents is left to build more businesses....
...........................................
Country B is the same except for the tax structure requires 15% of the value of tangible sales....which is reflective of consumption....
This means that the opportunity for Country B to grow is far greater than that of Country A....Furthermore....The required prices in country A will always be higher than country B.....which means that country B will grow even faster....and country A will fall even faster....
...........................................
The point being is that a country's currency is a reflection of itself.....
This is not about gold....
THIS IS ABOUT SUSTAINABLE COMMERCE.....
Do not confuse FIAT with gold.....FIAT represents that country's commerce and its prospective growth ahead....
10,000 an ounce. Now that's a unicorn swims pig flys moment.
i bet your young .. have no clue . and are bashing hot air. even sprott says 6000. sinclair is into 5000 and higher . martin armstrong 5000 and above .
and this one point unicorn you ride on lol // bet it is paper
Certainly a thoughtful articvle. But still, why reinvent a perfectly good wheel, i.e., gold? Just adapt it to current circumstances.
The "adapting", I think, can be tricky.
Google alone has market capitalization beyond all gold ever mined; I don't see how anyone could trust paper-backed PMs; and transacting with PMs or any commodities has historically been incredibly violent itself through changes in underlying valuation (as mentioned in the article, "...practical issues associated with mass, competition with industrial consumption, speculation, coin clipping, and assorted predatory market manipulation.").
I agree that any nominal unit on which we agree would be fine, ideally one that has scarcity and fundamental value. The "Bocks" is another arbitrary unit, but one tied to societal productivity (to include the time-value-of-money). For example, if super-big gold supplies were found, or super-big industrial consumption were discovered for gold, the money supply shock would be tremendous. While that's probably (mostly) unlikely, in contrast index funds merely track what society is really producing (give-or-take some level of accounting fraud), as opposed to an "accident" of growth, like 2% mining increase annually for gold, which is probably a pretty good correlation with actual society GDP (if you discount changes in debt).
Sadly, at present, IMHO the accounting fraud we have with corporate books (really bad) is probably dwarfed in relative weight to accounting fraud we have in the commodities markets, including gold. Scary stuff. As bad as it is, there's no way I'd own a share of GLD in preference to a share of Total Market.
This really is an intellectual exercise: This is the forum to highlight viability of this and other systems, and forums of economically-literate readers are uncommon.
"Google alone has market capitalization beyond all gold ever mined"
First, that's inaccurate. Google has a market cap of $170 billion. The US alone holds approximately 8000 tons of gold in reserve - 8000 tons = 16000000 lbs = 256000000 oz x 1100 = about $280 billion (at current prices.)
Second, it doesn't matter, even if it was true. Raise the price of gold to what the market needs and we have plenty of it.
To your larger point - why do we even need a government currency? Why not let people write contracts payable in gold and silver (or whatever they want). Freedom - it works.
Thanks on the market cap correction in relation to gold (my numbers were dated, I'll not make that mistake again).
On the second point, we *could* raise the price of gold to balance all other wealth on the planet, but IMHO it would be too expensive to use. It's possible to value a box of cereal at 0.00000001 ounces of gold, but I don't think people will do that. Even barter would be easier than that, especially since measurement error with a fairly precise scale could be off by several cases of cereal.
I agree with you that we don't need a government currency.
silver.
why own gld it is a paper promise .. and playing games with gold .
buy the real deal . in two years you will wish you had in my opinion.
but deaf ears will soon awake to the promise of real money.
diss gold and silver at your own economic future .
Gold supply IS tied to societal productivity, always has been. The better technology we have the more accessible additional reserves get.
One other problem I see with stocks-bonds, I think accounting fraud would go up the instant an index became "currency".
You say, 'no way I'd own a share of GLD in preference to a share of Total Market.'
I agree (I'd rather have a gold coin in my pocket) but here is some food for thought: What is a share in 'total USA' worth. That's what we argue our current currency is backed by. Is it more stable than 'public companies of the USA'? Who is in charge of printing the difficult to counterfeit 'total market' notes that will change hands as legal tender? Will legal tender laws be abolished? Will there still be a central bank?
I only marginally agree with this, so I guess that means I disagree. In contrast, I assert gold is tied to gold supplies (it has to be there for you to dig it up), which gives some countries a fundamental advantage, and price distortion in others. Similarly, I could assert that gold supply is tied to environmental regulations (good luck digging it up in the US these days).
Accounting fraud is here now, and we have much larger problems with fraud through leverage. Those have nothing to do with total-market-as-currency. Rather, our complaint is with useless and corrupt institutions like the SEC and FINRA (this won't change that).
However, I do agree with you regarding some moderate concern about the "indexing bonus", where a stock spikes merely because it was added to some index. Over-all, though, this should be in the noise since we're talking about the whole market index (anything traded on the public market is implicitly included), and the "spike" happens at IPO and then gradually over time.
Should companies be also valued in "Bocks", you'd actually get more stability and less fraud: Right now, all stocks can go up on the same day (everybody is richer!). If everything were priced in Bocks, a stock could only go up because it was perceived as more valuable than the rest of the market, which must be adjusted down by the same amount on that day. Over time, the increase in Bocks supply could only happen as actual assets and dividend flows increased.
Over-all, though, it's the credit market that dwarfs the currency market for these fluctuations, so that's where you should worry about fraud (and I worry too).
I'll take a quick shot at your other thoughts, which raise good points:
Stocks and bonds are backed by assets and the promise of future dividends. The residing country may impact stability and risk, but no, government doesn't really back the currency (rather, countries have the promise of future taxes).
From this stand point, no, I see no use for government future promises, and would prefer to roll the dice with bonds and stocks that have some place in the current market (because they exist only because they are perceived as having some value now).
Investment companies manage their portfolios now, and send you checkbooks for the money market you just opened. Each could print, or they could get together to share printing costs, but it doesn't matter because it would be paid for out of the management fee deducted from the dividend stream.
I defer. I think both of those become irrelevant -- you and I can settle by personal check if we want (legal tender laws don't interfere). You and I will simply by-pass the nominal unit issued by the current central bank and trade some other unit.
Of course, I think the question will be moot quite soon. ;-)
well if you REALLY want to change things.. let's change our DNA to become vampires and the only currency would be blood!
isn't Goldman progressing to that anyway?
why try to make up stuff.
gold is money,, value the gold .. issue pieces of paper that reflect this value,
with gold at $10,000 an oz.. x amount of fiat can be produced ,, use the paper in increments to buy stuff..
just like before.. yet if you will,,, this paper can \\be turned in for gold.
gold has a 2% growth rate.. so more fiat can be printed ..
silver also will work .. a dime in silver is now going for
a buck seventy ..
just go back to the constitution .. those boys who wrote it.. had seen about every money game in existence..
most who write and give opinion seem to have been born in one season of history,, and learn not from the past.. yet want to play the paper games ..
gold works silver works just to much pavlovian brain washing going on,, and not enough understanding
you can't eat gold lol nor can you eat a $20
no problems with a basket of bonds stocks lol history is teaching us right now they are pure .. and honest..
please no front running this new basket of paper stocks , bonds .. what a pipe dream
I agree with dumpster. PM is the only way to go.
But in this myth, where are all the future profits coming from? There is no guarentee that they will exist.
Very lightweight in unintended consequensis.
Ask those in Zimbabwe about paper money versus gold. See video at www.youtube.com/watch?v=s3LdNxV0yPM
Zim used hyperinflation via govt printing to default on foreign loans....while it was horribly painful at the time, they now are a completely debt free country (nationally and privately) so they sort of had a biblical jubilee...and are starting to recover nicely, thankyou, with no debt dragging out them. If they had not done this, the IMF type plan would have them in austerity for 30 years.
Just because some countries hyper-inflate to default on foreign loans does not mean all fiat currencies go this route.
But the thing that irritates me the most is we in US have the bad of fiat currency in that the FED/banks, by creating debt, get to "print" money and get to keep that "principle" but we get none of the good of a fiat currency...like the money created being use for public works instead of having to tax people etc...we "give" all this money to a private banking cartel and can still suffer all the ill effects of a fiat currency.
The problem with using PM's exclusively is that population grows faster than production, so your currency is in a perpetual state of deflation.
Frankly, I don't know if this a legitimate problem or not.
The Swiss Franc was "only" backed by 40% gold for years, so there no reason why we couldn't do something similar.
Right now the Euro is the only even partly PM-backed currency, but at a paltry 15% (although if it keeps tanking like it is, that could present a problem for the EU.. And some forced gold buying, haaa!).
The US probably back it's currency by 20% PMs (silver and gold both) right now, that would certainly put the squeeze on the rest of the world, and probably get some treasuries movin'.
while precious metals limit inflationary tendencies of fiat currencies, they have their own problems as currency. Too tight money supply can be a problem just as surely as too much money...farmers were hurt but gold back money in the 1800s...and gold is not some steady state value either, it can fluctuate quite wildly...consider Vietnam where they price real estate in ogld for awhile and gold should way up in price..
Elle Brown has a good piece on issues with gold as currency:
http://webofdebt.wordpress.com/chapter-37-goldbugs-and-greenbackers-debate/
I agree. Our ultimate currency should be FRN's backed by gold. The money supply should be flexible using fractional reserve banking with the reserve percentage being a variable set by an independent Fed. Congress should pass a law that sets the lowest legal percentage at 10%. The Fed should police this and should have it's own gold reserve that backs the banks reserves. The guillotine should be used on bankers that exceed the low limit. Besides the guillotine, sound's familiar, doesn't it?
don't agree with the FED part, think it should be a indepedent, democratic instituion with some sort of controls to stop politicians fron abusing it for short term gains which cause long-pain. I don't have a problem with fiat currency, its just that private bank cartels should not get to realize the principle created out of thin air that credit/debt in our fractional reserve system currently gives them...if nothing else, if we do fractional reserve, the money created by debt should be the public's just as surely is oil under Alaska or our public airwaves are. We can have private entities "bid" on distributing and retailing these national resources to keep competitive markets, but we should not let finanacial parasites banksters just drill and keep all the profits without "paying"...that oil in the ground, or the money created out of thin air, should subsidize common good projects, or remove tax burden, rather than go to elite parasites.
dumpster: why bother trying to (fruitlessly) bash a fantastic thought piece on the future of currency by showing your own lack of historical knowledge.
p.s. gold does not have a growth rate, interest coupon or anything else attached to it but collectively imbued wont; and for those who'd lto ike use Au & silver coins for barter, good luck with that ~ how'd it work out alongside non-usury for those few hundred years in Europe ??
An awesome piece, mikla.
you say that you're not cool but your writing is Elvis. a truly great show, sir. please do keep 'em coming.
Excellent stroke chopshop. Just don't aim at your eyes, I heard it burns.
Gotta defend dumpster a bit here. I don't think he is bashing, he just has a better understanding of history.
Too many people think we're smarter or better now. More sophisticated and that technology can solve everything.
Lot's of things have been used as currency. Throughout history, gold has proven to be the best. Just a fact of history. It's utility (or lack of) quantity, desirability, difficulty to extract, etc. seem to fit our human condition.
Dumpster therefore has a point. A basket of stocks and bonds, I don't think, would provide a magic bullet. You could even argue that our stocks and bonds are a portion of what backs our current currency, full faith and credit and all, (along with our real estate, political stability, ability to solve problems, work ethic, ability to dominate in war if necessary, and everything else that makes this country great/not great). Will getting rid of the other stuff help?
The longest stable period for commerce for the comman man was the talley stick system, lasted almost 800 years. The key to any lomg lasting system of currency is to not be debt based. Unfortunatley, Gold money systems always end up being debt based. Talley sticks worked like Lincoln's greenbacks, they were spent into existance by the governent. W/out interst payments, you do not get the perpetual siphoning of interest that always leads to a wealth concentration based on currency manipulation and usury
www.secretofoz.com
and a whole lot better understanding of austrian economics
a dated article on gold ..http://www.lewrockwell.com/orig3/reisman6.html
The new currency will be something drastic the likes the world has not seen. No longer will price based economies exist, as a mattter fact paper currencies will end as a consequence but as you all are aware carbon based rationing system of the world's available energy allocated for use among the world's popluation. This will be the new currency. In force of law this will be quite valuable and this will be the new currcency.(Tally-sticks anyone)
Carbon based rationing of world's resources will drive us faster out of carbon based production or atleast will greatly reduce the use of carbon and there will depreciate 'carbon' based currency. we need a currency that is true to it's function which is as a store of value-doesn't increase or decrease on it's own but reflects the productive value of the economy. gold and carbon in different ways have the same problem. they are not neutral but are valuable on their own, carbon more so as it is the basis of life. however the danger is if we move out of carbon based production, then carbon is effectively kaput as currency though it is a lot harder and less likely than gold being atleast partly replaced in our affections. the best currency will be tied to our production and will be dynamic reflecting the market needs. that is why i like mikla's bocks which has value in storage as well as in circluation. of course the market can work only if we as people demand rule of and by law, not rule of and by people. that is the flaw of democracy. it quite often leads to the tyranny of the 51%. we have rule by flaw now, not law!
its not gonna fly. too many people have woken up to the co2=climate change scam .
Well, that would be a quick way to get more nuclear power plants built.
I leave to elsewhere the discussion of precious metals as a store of value, and as a currency.
This post is an intellectual exercise: The novel components are (1) the time-value of money (addressed through future dividends), and (2) money supply tied to productivity (specifically money supply tied to growth/collapse in the stock and bond markets).
Precious metals or commodities as a store of wealth, and possibly as a currency, are irrelevant to those two points.
However, I *do* take your point that gold has managed scarcity far better than has fiat currencies.
Err. Gold manages scarcity far better than fiat currencies?
Reeealllly?
Let's imagine there were no gold... Would the nuclear bomb ever been invented? Air conditioning? Satellites? The internet?
Where was gold at any point where, in the past 100 years that allocated capital?
Gold FAIL
Yes and babies wouldn't be born anymore either.
The future of currency is Digital, Anonymous, and has an "open window call" on gold (or some similarly tangible "asset") to keep it honest. Some emerging examples:
Hong Kong's Octopus Cards:
http://en.wikipedia.org/wiki/Octopus_card
DigiCash (David Chaum)
http://en.wikipedia.org/wiki/DigiCash
Others:
http://en.wikipedia.org/wiki/Electronic_money
The key to this tech taking off is pocket sized "wallet/debit/credit" devices for enabling person-to-person anonymous exchanges of MULTIPLE d-cash denominations. A device as thin as a credit card with a small keypad/readout and a UBS port for docking to the Net would be trivial to make NOW.
It's only a matter of time before myriad private, competing, rebel digital currencies arrive. Several will become trusted/popular.
They may be outlawed or coopted by the bankster elites, but will flourish anyway. Their presence will be a force that keeps central/national/bankster currencies in line.
And don't forget Ithaca Hours: a legal, thriving, low-tech local currency in the USA:
http://en.wikipedia.org/wiki/Ithaca_Hours