Savings and the Gold Standard

[constituent]

I posted this in the politics section but it ain't getting no love. i'm talking w/ a friend about this issue and ron's stance... very intelligent individual so all help would be very much appreciated.... here again, copy and pasted...

On a gold standard, how large of a problem do you think would be created-in time-through wealth consolidation and individual savings?

is the savings issue only really that big of a deal when gov't need to fund wars or is there historical precendent where in times of peace, savings have caused problems in the money supply leading to economic stagnation?


is this why ron paul offers his solution of legalizing competition in currency (as opposed to strictly a gold standard)?

what do you think this type of system would look like? he hasn't really elaborated on this.

would it be a system where one could say, oh... i have 200 tons of steel and 100,000 gallons of fuel and i'll print up certificates entitling individuals to a certain share of the steel or fuel on demand?

and who would regulate this sort of system to ensure that entities do actually have their certificates backed up w/ real goods?

[pyrazole2]

2nd this. I volunteered on emails for HQ today and had to answer a couple about the implementation of the gold standard. Just how would the transition work and what would be the policy? Many agree that the gold standard is the way to go, but RP can't just wave a hand and make it happen. He needs to elaborate on this more. He's written plenty on why we need a gold standard, but now that it has a possibility of happening, HOW do we set up a gold standard?

I'm afraid my answers were weak and deflected most of it to the campaign staff....but I'd really like to know the answers still.

[akovacs]

I'm not quite sure what the first question is, can you elaborate?


would it be a system where one could say, oh... i have 200 tons of steel and 100,000 gallons of fuel and i'll print up certificates entitling individuals to a certain share of the steel or fuel on demand?

I'm not an economist, so if I'm wrong here, someone correct me.

First question: Yes, you could do a system like that. This system actually occurs today, although indirectly. People buy oil and sell it again on paper to make a profit. Same goes for international currency exchange. It's not a new concept, it's just that people don't take notice of it. I'd wager to say that most people would not want to use such volatile commodities as money unless you're investing or betting on a trend. For savings, most will go with gold and silver.


and who would regulate this sort of system to ensure that entities do actually have their certificates backed up w/ real goods?

Simple contract law. If your bank advertises that it does not do fractional reserve banking, and it does, you can sue them just as you can for any other company that breaks its contract. Most will not want a bank that does fractional reserve, so it would be an advantage to advertise that. People will go to banks that are open about their policies. They are competing, after all.

That is my understanding at least.

[murrayrothbard]

On a gold standard, how large of a problem do you think would be created-in time-through wealth consolidation and individual savings?

is the savings issue only really that big of a deal when gov't need to fund wars or is there historical precendent where in times of peace, savings have caused problems in the money supply leading to economic stagnation?


There could never be a problem of too much savings. More savings -> more funds available for investment -> lower of interest rate -> increase in capital -> productivity rise -> standard of living raised for society as a whole.

Please see Man, Economy, and State - Chapter 11 (i.e "the money chapter") @ http://www.mises.org/rothbard/mes/chap11a.asp
(also available as PDF (http://www.mises.org/rothbard/mes/guidechap11.PDF))

The question seems to be more like: "What happens if everyone just stuffs all their money under the mattress? Is that 'bad' for the economy?" This is the old Keynesian bugaboo about 'hoarding'. See page 776 in above link. (No it's not that long...starts on page 755 ;) )

[constituent]

murray... that's exactly what it is.

[jonahtrainer]

I posted this in the politics section but it ain't getting no love. i'm talking w/ a friend about this issue and ron's stance... very intelligent individual so all help would be very much appreciated.... here again, copy and pasted...

On a gold standard, how large of a problem do you think would be created-in time-through wealth consolidation and individual savings?

is the savings issue only really that big of a deal when gov't need to fund wars or is there historical precendent where in times of peace, savings have caused problems in the money supply leading to economic stagnation?


is this why ron paul offers his solution of legalizing competition in currency (as opposed to strictly a gold standard)?

what do you think this type of system would look like? he hasn't really elaborated on this.

would it be a system where one could say, oh... i have 200 tons of steel and 100,000 gallons of fuel and i'll print up certificates entitling individuals to a certain share of the steel or fuel on demand?

and who would regulate this sort of system to ensure that entities do actually have their certificates backed up w/ real goods?

Several good questions. A lot of people advocate going back to the gold standard but few have a plan. I think Dr. Edwin Viera, author of Pieces of Eight who should be President Paul's Treasury Secretary, has the most sensible plan:

1. Remove the 28% rate gain tax on gold and silver bullion
2. Have the States pass laws making gold and silver bullion legal tender
3. Remove the legal tender privilege of Federal Reserve Notes
4. Let the market sort it out at this is carried out over a 6 month period

There would be some adjustment but I doubt it would be that big a deal. The Fed shocks the market in bigger ways with printing $38B in one day to buy Mortgage Backed Securities on toxic waste or fiddling with interest rates. There is now a $500 TRILLLION derivatives market on this garbage. Buffet calls them Financial Weapons of Mass Destruction (http://www.google.com/url?sa=t&ct=res&cd=1&url=http%3A%2F%2Fwww.berkshirehathaway.com%2Flette rs%2F2002pdf.pdf&ei=iaHPRp73CKbMgQTOyomVCA&usg=AFQjCNFmBDJgMzEWeQlpIPHQVa0tkD-5fA&sig2=WVysxpzuqV5UpDxbYSB7yQ).

The concentration of wealth, or in other words increased cash balances, benefits consumers with lower prices. Why do you think the banks are promoting all these 'savings' accounts? To keep inflation down. Really the miser only 'hurts' themselves .... but this is not the case because they are saving it for a reason!

The accumulation of capital is a good thing ... it provides skyscrapers, factories, etc. The problem is the current system which allows a few individuals a Money Trust and federal statutes that prevent others from accumulating similar amounts of capital with Anti-Trust laws. This prevents the Money Trust owners from being challenged in the market (private armies such as Blackwater (http://www.google.com/url?sa=t&ct=res&cd=1&url=http%3A%2F%2Fwww.blackwaterusa.com%2F&ei=ZaHPRuuIOYTAgQTM07SRCA&usg=AFQjCNFSrNS6II4sV_EkZ40IVThu58-lkw&sig2=mavM8sFYk8_58vSlYx3ELg)). A gold standard would help prevent and minimize these effects of 'factions' that the Founders warned against.

There is already an option for a 100% gold currency with no fractional reserve shenanigans. It is called GoldMoney.com (http://goldmoney.com/).

[Wyurm]

Imagine if your employer said: I can pay you in Federal Reserve notes or Gold. If you choose gold, you will get 2 troy ounces a week and if you choose Federal Reserve notes you will get 1000 dollars a week. After one year you will be considered for a percentage raise based on your performance. Which would you choose?

I would choose gold because I know that gold retains its real value while Federal Reserve notes go up and down in value constantly. The Fed is unstable and could drop in value at an insane rate. For example, I make 16 bucks an hour which is alot more than I made in 2000. However, I could do more with my paycheck in 2000 because my dollars bought more. A year from now I might make a dollar more an hour but actually be poorer because of inflation. With gold, what its worth today is what it will be worth tomorrow, as long as you remove fractional reserve banking. There is a little more to it than just this simple explaination provides, but I dont feel like typing that much :p

[Thunderbolt]

...

[pyrazole2]

Several good questions. A lot of people advocate going back to the gold standard but few have a plan. I think Dr. Edwin Viera, author of Pieces of Eight who should be President Paul's Treasury Secretary, has the most sensible plan:

1. Remove the 28% rate gain tax on gold and silver bullion
2. Have the States pass laws making gold and silver bullion legal tender
3. Remove the legal tender privilege of Federal Reserve Notes
4. Let the market sort it out at this is carried out over a 6 month period

There would be some adjustment but I doubt it would be that big a deal. The Fed shocks the market in bigger ways with printing $38B in one day to buy Mortgage Backed Securities on toxic waste or fiddling with interest rates. There is now a $500 TRILLLION derivatives market on this garbage. Buffet calls them Financial Weapons of Mass Destruction (http://www.google.com/url?sa=t&ct=res&cd=1&url=http%3A%2F%2Fwww.berkshirehathaway.com%2Flette rs%2F2002pdf.pdf&ei=iaHPRp73CKbMgQTOyomVCA&usg=AFQjCNFmBDJgMzEWeQlpIPHQVa0tkD-5fA&sig2=WVysxpzuqV5UpDxbYSB7yQ).

The concentration of wealth, or in other words increased cash balances, benefits consumers with lower prices. Why do you think the banks are promoting all these 'savings' accounts? To keep inflation down. Really the miser only 'hurts' themselves .... but this is not the case because they are saving it for a reason!

The accumulation of capital is a good thing ... it provides skyscrapers, factories, etc. The problem is the current system which allows a few individuals a Money Trust and federal statutes that prevent others from accumulating similar amounts of capital with Anti-Trust laws. This prevents the Money Trust owners from being challenged in the market (private armies such as Blackwater (http://www.google.com/url?sa=t&ct=res&cd=1&url=http%3A%2F%2Fwww.blackwaterusa.com%2F&ei=ZaHPRuuIOYTAgQTM07SRCA&usg=AFQjCNFSrNS6II4sV_EkZ40IVThu58-lkw&sig2=mavM8sFYk8_58vSlYx3ELg)). A gold standard would help prevent and minimize these effects of 'factions' that the Founders warned against.

There is already an option for a 100% gold currency with no fractional reserve shenanigans. It is called GoldMoney.com (http://goldmoney.com/).

The 4 step plan of Viera is a little simplistic and theoretic, right? How do you convince (or force) states to pass or repeal legislation for using gold as legal tender? Remove the legal tender priviledge of the FRN...you've just removed all capital, savings, etc., from everyone. And
let the market sort it out...how and where is the gold introduced to the consumer?

I mean, it's obvious there has to be an exchange of some sort, fixed or adjustable. Most of the scholars agree on a fixed rate. But there's a problem with 100% immediate transition:

The Federal Reserve's gold would be transferred to the commercial banks up to the value of their demand deposits by the Federal Reserve's granting a free gift of capital to the banks by that amount. Thus, overall, commercial banks, at the end of December 1981, had demand deposits of $317 billion, offset by reserves of $47 billion. A return to gold at $696 an ounce would have meant that gold transferred to the banks in exchange for their reserve at the Federal Reserve would also have increased their reserves from $47 to $317 billion, via a writing up of bank capital by $270 billion. The criticism would be that the banks scarcely deserve such a free gift, deserving instead to take their chances like all other firms on the free market. The rebuttal argument, however, would stress that, if a 100 percent gold requirement were now imposed on the banks, their free gift would do no more than insure the banking system against a potential holocaust of deflation, contraction, and bankruptcies.

And if we mess with a fixed rate, then we're still basically dealing with a fiat. Still looking for a detailed answer...still not finding it.

[pyrazole2]

To answer this question you need to understand economics. Try What has Government Done to Our Money?
Man, Economy and State
Human Action
Or perhaps you could even try reading Ron Paul's book: The case for gold.

Read them all, and they've convinced me that we need a gold standard. I do not see a forward answer to how we transition to a gold standard.


Any yes, he would eliminate the stranglehold the fed has on money, make it legal for other money to be used and in a flash people would flee from the worthless Federal Reserve Notes as fast as possible. Who wants to be paid with paper?

Who wants to be paid with gold?...we'd be carrying around microscopic pieces to be used for tips and such.


You cannot answer this question in a post however. It takes learning and understanding.

Learning and understanding are postable ;)


You can try The money mystery by Richard Maybury. It is designed for 8th graders, but I doubt any of you would find it beneath you. It is just written simply, but the ideas are complex.

hmmm...I'll give it a try.

[pyrazole2]

Imagine if your employer said: I can pay you in Federal Reserve notes or Gold. If you choose gold, you will get 2 troy ounces a week and if you choose Federal Reserve notes you will get 1000 dollars a week. After one year you will be considered for a percentage raise based on your performance. Which would you choose?

I would choose gold because I know that gold retains its real value while Federal Reserve notes go up and down in value constantly. The Fed is unstable and could drop in value at an insane rate. For example, I make 16 bucks an hour which is alot more than I made in 2000. However, I could do more with my paycheck in 2000 because my dollars bought more. A year from now I might make a dollar more an hour but actually be poorer because of inflation. With gold, what its worth today is what it will be worth tomorrow, as long as you remove fractional reserve banking. There is a little more to it than just this simple explaination provides, but I dont feel like typing that much :p

Gold is just as volatile as any commodity (Case in point, $415 in Feb 1996, $253 in Aug 1999, $666.70 as I post). The FRN doesn't "drop in value at an insane rate" because the Fed screws with rates and quantity, just keeping it afloat. This also destroys it's ability to hold value over time because the adjustments erode any value it could have. Anyway, your dollar doesn't go as far because of the specific commodities you're looking at....milk is way higher, but flat TV's are way lower. Your personal index does not constitute inflation...a large degree of that is just consumer costs...what we're looking for is overall strength of a currency worldwide, and how to transition to a gold standard so that all the crap we get from china doesn't cost us a fortune :)

[pyrazole2]

On another related note, and sorry about taking over the thread....

Is anyone else concerned that the FDIC is right across the street from the campaign offices?

[Revolution9]

And ...how and where is the gold introduced to the consumer?


Gold is not consumed. Gold can be leveraged seven times its fiat currency value.

I am a human being..not a consumer..

Best
Randy

[goldismoney]

There is already an option for a 100% gold currency with no fractional reserve shenanigans. It is called GoldMoney.com (http://goldmoney.com/?gmrefcode=ronpaul/).

FYI, for those interested in opening a Holding at GoldMoney (called a Holding as you own the assets in your Holding, unlike a bank account), I just created a referral link especially for supporters and friends of this forum and Ron Paul.

You will receive 12 months free storage and insurance for gold held and 6 months free storage and insurance for silver. I haven't posted such a link yet because I didn't want to promote GoldMoney until I saw our name mentioned. If you decide to open a Holding, go to: http://goldmoney.com/?gmrefcode=ronpaul

If anyone has any questions in general, feel free to send a message via our website and ask for me.

Go Ron Paul!

Anthem

Link:
GoldMoney.com Ron Paul special (http://goldmoney.com/?gmrefcode=ronpaul)

[pyrazole2]

Gold is not consumed. Gold can be leveraged seven times its fiat currency value.

I am a human being..not a consumer..

Best
Randy

Pardon, how would gold be disbursed to individuals (human beings), such as yourself, many of which consume things like food?

Would you fix the price, and just go gold as the actual money in hand, or back some other form of paper backed by gold (ie., 5 yr treasury notes) on a temporary basis, for a slow re-entry? Either way, how do you offset the FRNs that banks have in reserve? Who wins when that $35B (and other bailouts over the years) that was released last week gets backed up by a firm standard? There are a myriad of issues here. Whatever 'plan' for re-entry to the gold standard is chosen creates a very slippery slope, and could very well ravage the economy for a good long time. I simply wish we could hear a good, solid plan for this...hopefully in the form of a book.

[murrayrothbard]

pyrazole2, have you looked @ Jesus Heurta de Soto's Money, Bank Credit, and Economic Cycles (http://www.mises.org/books/desoto.pdf)? It's a huge text, but chap 9 starting on pg 715 lays out a banking reform plan.

[pyrazole2]

pyrazole2, have you looked @ Jesus Heurta de Soto's Money, Bank Credit, and Economic Cycles (http://www.mises.org/books/desoto.pdf)? It's a huge text, but chap 9 starting on pg 715 lays out a banking reform plan.

I have not. 875 pages was a little intimidating, so it hasn't made my reading list (just about to finish "The Causes of the Economic Crisis"). I'll take a look at your excerpt, and read the whole thing at some point. Thanks!

One pre-emptive question...any feeling on Ron Paul's (or future Sec. of Treasury's) view of the de Soto's reform plan?

Also: Welcome to the forum!

[sickmint79]

the way he has spoken i don't think it would necessarily be gold. you may have better luck contacting the mises institute.

[jonahtrainer]

Pardon, how would gold be disbursed to individuals (human beings), such as yourself, many of which consume things like food?

Would you fix the price, and just go gold as the actual money in hand, or back some other form of paper backed by gold (ie., 5 yr treasury notes) on a temporary basis, for a slow re-entry? Either way, how do you offset the FRNs that banks have in reserve? Who wins when that $35B (and other bailouts over the years) that was released last week gets backed up by a firm standard? There are a myriad of issues here. Whatever 'plan' for re-entry to the gold standard is chosen creates a very slippery slope, and could very well ravage the economy for a good long time. I simply wish we could hear a good, solid plan for this...hopefully in the form of a book.

We can already get physical gold or silver. For example, Apmex.com (http://www.apmex.com) has a great reputation for service.

The $500B bailout by the Fed and ECB last week basically confiscated 2-10%, we don't know for sure because of the lack of transparency, from the value of every dollar. Obviously, those who got their MBS bailed out would not benefit from a firm standard and the holders of dollars who got their value confiscated would benefit.

Returning to a gold standard would be a little rocky for 6 months or so. However, it would be smooth sailing after that (no real unemployment, business cycles, currency driven wars, etc.).

[Revolution9]

Pardon, how would gold be disbursed to individuals (human beings), such as yourself, many of which consume things like food?

Would you fix the price, and just go gold as the actual money in hand, or back some other form of paper backed by gold (ie., 5 yr treasury notes) on a temporary basis, for a slow re-entry? Either way, how do you offset the FRNs that banks have in reserve? Who wins when that $35B (and other bailouts over the years) that was released last week gets backed up by a firm standard? There are a myriad of issues here. Whatever 'plan' for re-entry to the gold standard is chosen creates a very slippery slope, and could very well ravage the economy for a good long time. I simply wish we could hear a good, solid plan for this...hopefully in the form of a book.

I ~eat food~ as I ~breathe air~ and ~drink water~. They are not "consumed". They are simply transformed. Good. Now that we have this basic premise out of the way let me follow up. I am talking through my hat but it is descending into instead of ascending out of my mind.

So much gold has always equaled so much silver has equaled so many iron products of such and such manufacture. Hard goods as it were. The metals themselves were intrinsically valuable for their various properties, such as colloidal silver being an antiviral and a silver dollar in milk prior to refridgeration would slow spoilage. Monoatomic gold had very curious biological and physical properties. It also is the best conductor of electricty and as a benchmark it could not be counterfeited and was non-oxidizable. Copper and iron both had utilitarian uses as weapons and implements. Iron could be magnetized and copper kept arthritis and other disease at bay by wearing bracelets.

For a smooth trasition to take place to start with all coinage needs to revert to .999 fine gold, silver, copper and nickel. All useful substances that can be retooled for other than coinage. Standard weights should be pegged to a percentage for each metal and that standard should have a base configuration that one oz of silver = One(1) Constitutional Dollar. Once these are minted and released to banks all persons or organic humans cashing cheques have a choice to take the Constitutional Dollars or the FRN's.. If you leave the FRNs in circulation there will be those who do not care who will use the paper scrip for convenience sake. Good so far.. Maybe they won't assassinate yet..

Once a threshold is achieved in the savings of these Constitutional Dollars {possibly available to only Americans doing transactions on American soil) then a series of Constitutional Notes comes into play that is backed by the Constitutional Dollars sitting in savings and circulating through the economy as tabulated by Mint output... They are of course immediately redeemable for the metal coins at any point but people are then using the notes referencing hard assets. Loans made on the hard assets can now be drawn to seven times their worth as collateral without affecting the inflationary tax. These Constitutional Dolars would now be pegged to values of international commodities with a small strike price for the Mint and administration for distribution and a tracking system for how much ~weight~ is in the system. FRN's can still be wired anywhere but hard assets must be transported. FRN's would now be in the position of having to be on good behavior and no bubble games or they lose customers and usury fees. As the Constitutional Dollar comes into savings accounts and is held as something keeping its value there will be more ~weight~ accumulating in the system stabilizing the economy. You can now use your hard assets to attain the Allodial Title to your land by paying for it in Constitutionally based hard currency. You will then own the actual title and not have it sit at the County seat.

One BIIIIG rule. No Financial Paper based on fractional banking gains can be converted to Constitutional Dollars. Only manufacture, sweat equity and property or goods and local American soil businesses.

Well.. I cannot write a book but I think each of the sentences above actually deserve a chapter to explain fully how it may organically work out.

Best Regards
Randy

[pyrazole2]

I ~eat food~ as I ~breathe air~ and ~drink water~. They are not "consumed". They are simply transformed. Good. Now that we have this basic premise out of the way let me follow up.

In the context of economics, consumption is the purchase and use of goods. Why is this even an issue? You knew what I meant. But it's ok, since we're having fun with this:
Monoatomic gold had very curious biological and physical properties. It also is the best conductor of electricty In my world, silver and copper are better conductors than gold. http://www.audioholics.com/education/cables/silver-saboteurs-are-silver-audio-cables-better You didn't buy those gold monster wires did you? total rip-off.



For a smooth trasition to take place to start with all coinage needs to revert to .999 fine gold, silver, copper and nickel. All useful substances that can be retooled for other than coinage. Standard weights should be pegged to a percentage for each metal and that standard should have a base configuration that one oz of silver = One(1) Constitutional Dollar. Once these are minted and released to banks all persons or organic humans cashing cheques have a choice to take the Constitutional Dollars or the FRN's.. If you leave the FRNs in circulation there will be those who do not care who will use the paper scrip for convenience sake. Good so far.. Maybe they won't assassinate yet..


Ok, that's good for simple circulation, which really isn't a big issue (in fact, you can do this on your own right now, more or less, as everyone seems to want to point out). What we're really digging into on this thread is the complexities. What about current FRN reserves (i.e., +$35B last week)? What about previously leveraged FRNs? Mortgages? Operation of markets through a transition? FRNs overseas? Are you also suggesting we go on a multi-metal standard (gold, silver, copper, nickel)? Many don't even think a bimetallic standard will hold up well while coming off partial fiat.


Loans made on the hard assets can now be drawn to seven times their worth as collateral without affecting the inflationary tax. These Constitutional Dolars would now be pegged to values of international commodities

Mises, Rothbard, and many others (incl. Ron Paul) believe that 100% reserve is the only way to go. 7x would create the possibility of instability and a run on banks....which is contrary to your "one oz of silver = One(1) Constitutional Dollar". And I don't see how any of that has anything to do with the inflation tax, the money is backed, right?

Look, it goes much deeper than just what color the money is in your pocket, and I'm looking for those thoughts, not trying to shoot anyone down here. Yes, I'm nitpicking, but a crashed economy could really piss us all off. I've been getting some very pointed questions such as these from people who really want to believe in RP, but are suspicious of the depth of his ideas ("just come home" is kind of thin for most people).

Let me pose a more complicated situation with transitioning. Two companies, A and B...A is in the USA, B is in Kazakhstan. A requires raw materials to make a commodity that is in high demand, is required for infrastructure, and it's the only plant in the USA (2-3 days downtime would upset the market, 1 week would create a pretty devastating run on downstream commodities). B needs to be paid daily, due to the cost and volume of the raw materials. If A doesn't get raw materials daily, it requires a shut-down process, which renders it useless for about a month. How does A pay B during transition? after transition? Restriction or ban of gold transfer overseas would probably have to be in place during transition. [This is almost exactly the situation at the company that I work for]. We're also talking large sums ~$8-10M/month. (the details: the raw material is chromite ore, the commodity is 99.99% Cr, downstream commodities are stainless steel, superalloys, electronics, most of which is actually shipped back to China!).

You do make a good point that the full fiat FRN would stabilize somewhat with a sister currency backed by metal. But by that point, what would be the point of having a fiat currency?

[goldismoney]

Unfortunately, I think it will take a complete credit money crisis (the layer above fiat) to bring a gold standard back to the U.S. and make FRNs a less accepted medium of exchange than metals (see Gresham's Law (http://en.wikipedia.org/wiki/Gresham's_Law) ).

I believe you will see a reversion back to unit banking with multiple private metal banks providing the clearinghouse function currently performed by central banks and the FED.

In our world of credit money atop fiat money, payment risk (ability to pay for goods & services) becomes invariably tied to credit risk. My perception is that some banks around the world (probably a large proportion domiciled in Asia) will recognize this fact and will thus incorporate a backup alternative payment system for clearinghouse functions so that they do not lose 100% of their revenue stream (IOW, a safeguard against their credit-derived revenue to nil cannibalizing their payment-derived revenue to nil). Sadly, I think even 1% of banks worldwide having this much foresight is optimistic.

Thus, to answer:

Just how would the transition work and what would be the policy? Many agree that the gold standard is the way to go, but RP can't just wave a hand and make it happen. He needs to elaborate on this more. He's written plenty on why we need a gold standard, but now that it has a possibility of happening, HOW do we set up a gold standard?

The same way RP deals with so many other issues, get the government completely out the picture and let truly private banks (ie., not the gov't-intertwined FED) compete and offer services in the free market (not a market dictated by government-imposed legal tender laws).

[Revolution9]

In the context of economics, consumption is the purchase and use of goods. Why is this even an issue? You knew what I meant. But it's ok, since we're having fun with this: In my world, silver and copper are better conductors than gold. http://www.audioholics.com/education/cables/silver-saboteurs-are-silver-audio-cables-better You didn't buy those gold monster wires did you? total rip-off.



Ok, that's good for simple circulation, which really isn't a big issue (in fact, you can do this on your own right now, more or less, as everyone seems to want to point out). What we're really digging into on this thread is the complexities. What about current FRN reserves (i.e., +$35B last week)? What about previously leveraged FRNs? Mortgages? Operation of markets through a transition? FRNs overseas? Are you also suggesting we go on a multi-metal standard (gold, silver, copper, nickel)? Many don't even think a bimetallic standard will hold up well while coming off partial fiat.



Mises, Rothbard, and many others (incl. Ron Paul) believe that 100% reserve is the only way to go. 7x would create the possibility of instability and a run on banks....which is contrary to your "one oz of silver = One(1) Constitutional Dollar". And I don't see how any of that has anything to do with the inflation tax, the money is backed, right?

Look, it goes much deeper than just what color the money is in your pocket, and I'm looking for those thoughts, not trying to shoot anyone down here. Yes, I'm nitpicking, but a crashed economy could really piss us all off. I've been getting some very pointed questions such as these from people who really want to believe in RP, but are suspicious of the depth of his ideas ("just come home" is kind of thin for most people).

Let me pose a more complicated situation with transitioning. Two companies, A and B...A is in the USA, B is in Kazakhstan. A requires raw materials to make a commodity that is in high demand, is required for infrastructure, and it's the only plant in the USA (2-3 days downtime would upset the market, 1 week would create a pretty devastating run on downstream commodities). B needs to be paid daily, due to the cost and volume of the raw materials. If A doesn't get raw materials daily, it requires a shut-down process, which renders it useless for about a month. How does A pay B during transition? after transition? Restriction or ban of gold transfer overseas would probably have to be in place during transition. [This is almost exactly the situation at the company that I work for]. We're also talking large sums ~$8-10M/month. (the details: the raw material is chromite ore, the commodity is 99.99% Cr, downstream commodities are stainless steel, superalloys, electronics, most of which is actually shipped back to China!).

You do make a good point that the full fiat FRN would stabilize somewhat with a sister currency backed by metal. But by that point, what would be the point of having a fiat currency?

Nice job.. Cut out the meat of my theory and then question the fluff. You do not deserve an answer becaUSE you did not understand the premise and ripped the guts of the ~weight~ out of it whcih answered all your other queries.

Randy

[jonahtrainer]

Unfortunately, I think it will take a complete credit money crisis (the layer above fiat) to bring a gold standard back to the U.S. and make FRNs a less accepted medium of exchange than metals (see Gresham's Law (http://en.wikipedia.org/wiki/Gresham's_Law) ).

I believe you will see a reversion back to unit banking with multiple private metal banks providing the clearinghouse function currently performed by central banks and the FED.

In our world of credit money atop fiat money, payment risk (ability to pay for goods & services) becomes invariably tied to credit risk. My perception is that some banks around the world (probably a large proportion domiciled in Asia) will recognize this fact and will thus incorporate a backup alternative payment system for clearinghouse functions so that they do not lose 100% of their revenue stream (IOW, a safeguard against their credit-derived revenue to nil cannibalizing their payment-derived revenue to nil). Sadly, I think even 1% of banks worldwide having this much foresight is optimistic.

Thus, to answer:


The same way RP deals with so many other issues, get the government completely out the picture and let truly private banks (ie., not the gov't-intertwined FED) compete and offer services in the free market (not a market dictated by government-imposed legal tender laws).

I agree. The Counter-Party risk in Commercial Paper nearly caused a bank run in Europe last week as James Turk talked about.

The tool is already in place (GoldMoney.com, Pecunix, etc.). Really, we need to make sure these do not become the target of governments (e-gold.com). GoldMoney with its internal controls and obedience to Know Your Client BS provides a good connection to the current system (via ACH) that is protected by obedience to law. These are currently disruptive technologies.

Currently, FRN's hold a powerful monopoly on the medium of exchange market. They have lost much confidence as a store of value. Their current monopoly is being attacked on many fronts (oil bourses in Iran, Russia, Norway, etc.).

The Revolution in what is accepted as money is happening. People are looking for an alternative payment mechanism. As the costs of a fiat system continue to grow the DGCs will only become more efficient and cost effective. Paper money supplanted metal money because it was more efficient. DGCs and metal money will supplant paper money because they are more efficient.

Many people do not realize or comprehend the costs of using a fiat currency system. Every physical bank branch costs money which is taken out of the value of the currency through fractional reserve banking practices and monetary inflation. The true costs (as measured in PPP) of fiat currency is negative each year. The most efficient form of money is that which has the lowest negative interest rate. Currently, that is GoldMoney or other DGCs.

[Politeia]

This might be of interest:

http://www.lewrockwell.com/blog/lewrw/archives/014938.html

(Posted at Lew Rockwell blog this morning.)

[pyrazole2]

Unfortunately, I think it will take a complete credit money crisis (the layer above fiat) to bring a gold standard back to the U.S. and make FRNs a less accepted medium of exchange than metals (see Gresham's Law (http://en.wikipedia.org/wiki/Gresham's_Law) ).

I believe you will see a reversion back to unit banking with multiple private metal banks providing the clearinghouse function currently performed by central banks and the FED.

In our world of credit money atop fiat money, payment risk (ability to pay for goods & services) becomes invariably tied to credit risk. My perception is that some banks around the world (probably a large proportion domiciled in Asia) will recognize this fact and will thus incorporate a backup alternative payment system for clearinghouse functions so that they do not lose 100% of their revenue stream (IOW, a safeguard against their credit-derived revenue to nil cannibalizing their payment-derived revenue to nil). Sadly, I think even 1% of banks worldwide having this much foresight is optimistic.

Thus, to answer:


The same way RP deals with so many other issues, get the government completely out the picture and let truly private banks (ie., not the gov't-intertwined FED) compete and offer services in the free market (not a market dictated by government-imposed legal tender laws).

I'm afraid you're right, and that doesn't sit very well with some people. I'm on a quest to reassure a handful of close investor-class friends that they should support RP and the return to gold, but without being able to ensure that their investments will be secure, they're holding back. These are the kind of guys that drop 6, almost 7 figures on important campaigns, which they will probably do once a nominee is chosen. I'm hoping to sway them into contributing before the nomination for RP; they support and agree with just about every other RP view.

I get a lot of q's about puts/calls. What happens to these fairly intangible assets through a transition? Overseas investments...that's a big issue too. The continuation of business as usual in the midst of a transition is what these guys want to be assured of.

I'm well beyond the concept of currency backed by gold...and yes, some issues trickle down from that concept. It's the complexities of the market that really makes people worry about gold standardization. The consumer class will be ok, I think, regardless. However, I'm starting to believe that the investor class will just have to take a hit (which isn't going to encourage them to put campaign money forward).

I'm doing my reading, so I'll come to my own answer eventually.

[ThePieSwindler]

Look, it goes much deeper than just what color the money is in your pocket, and I'm looking for those thoughts, not trying to shoot anyone down here. Yes, I'm nitpicking, but a crashed economy could really piss us all off. I've been getting some very pointed questions such as these from people who really want to believe in RP, but are suspicious of the depth of his ideas ("just come home" is kind of thin for most people).



Whoa whoa whoa wait. So Ron explains his whole position of non intervention in previous debates... and then people say no one will understand because the American people only listen to sound bites. Then he packages a perfect little sound bite... while still not losing any depth from his argument.... and people find it "kind of thin"? What the fuck? Lose lose situation?

[pyrazole2]

Whoa whoa whoa wait. So Ron explains his whole position of non intervention in previous debates... and then people say no one will understand because the American people only listen to sound bites. Then he packages a perfect little sound bite... while still not losing any depth from his argument.... and people find it "kind of thin"? What the fuck? Lose lose situation?

We follow Ron Paul and hear everything he has to say. Some people have only heard that one sound bite. YES, OF COURSE it's thin as hell, IF one is not informed. Assuming everyone knows what you're talking about all the time is where you start heading into 'out-of-touch' country.

IMHO, I don't believe Americans only listen to sound bites. We are selective listeners, but if we give a crap, we still listen. Sound bites are for the latest crap that we 'have' to buy.

What was this thread about again? Can we use this thread for it's intended purpose?

[sickmint79]

This might be of interest:

http://www.lewrockwell.com/blog/lewrw/archives/014938.html

(Posted at Lew Rockwell blog this morning.)

8. The value of the money in your wallet and in savings would gradually go up, not down
If Ron Paul had his way, there would be no Federal Reserve. Without the Federal Reserve printing as much money as they see fit, and in turn devaluing the money that already exists, the money you've worked hard to earn would be worth more over time, not less.

is not deflation also a problem though? wouldn't that discourage spending? i thought the ideal would be flat, or slight inflation.

[pyrazole2]

8. The value of the money in your wallet and in savings would gradually go up, not down
If Ron Paul had his way, there would be no Federal Reserve. Without the Federal Reserve printing as much money as they see fit, and in turn devaluing the money that already exists, the money you've worked hard to earn would be worth more over time, not less.

is not deflation also a problem though? wouldn't that discourage spending? i thought the ideal would be flat, or slight inflation.

You're right. Deflation certainly can be a problem by discouraging spending. It certainly wouldn't create a rapid growth economy. A 100% reserve gold standard would probably sit in deflation mode most of the time, but would be more recession-proof. However, FRN's now are almost always in full-on inflation mode, worsened by manipulation, and very cyclical. So which is the lesser of two evils? I'd say deflation imho.

A good essay on deflation: http://www.polyconomics.com/searchbase/fles12.html

[mconder]

and who would regulate this sort of system to ensure that entities do actually have their certificates backed up w/ real goods?

A private company would be contracted to provide auditing services. Those who participate with the auditing company would get some compliance logo to add to their certificates to show that they are legitimate.

[sickmint79]

is a fully reserved policy the best? or just a better managed fractional reserve? bretton woods seem to be doing ok.. with the asset to restraint monetary creation. it still seems like total stability or a lil inflation would be best.

[constituent]

and who would regulate this sort of system to ensure that entities do actually have their certificates backed up w/ real goods?

A private company would be contracted to provide auditing services. Those who participate with the auditing company would get some compliance logo to add to their certificates to show that they are legitimate.

It's interesting you should say that. I see this sort of thing as the answer to labor issues as well. A non-profit that gives different levels of a "seal of approval" for companies that pay well compared to their competitors, has low turnover, good benefits, etc.