jon_perez explain yourself

[Bradley in DC]

[Dr. Paul's agenda for a gold standard] actually sounds more dastardly than a debt-based, fiat-money supply.

In several threads, we have refuted your premises (banks, like other businesses, service their customers, pay interest to depositors, salaries to employees and dividends to shareholders).

Why is Dr. Paul's agenda "more dastardly" when gold is used as money in place of unbacked paper?

Please refute our arguments citing some basic understanding of the works we've cited.

[jon_perez]

Now*this* is trolling.

[WilliamC]

Greetings All,


Now*this* is trolling.

No, it's just avoiding the question.

William C Colley

[jon_perez]

Sorry, Bradley is putting words in other people's mouth... plus I don't know what the whole point of starting a new thread is with my handle in it other than to show the world what a childish jerk he is...

[hard@work]

Please answer his questions. As much as we enjoy your petty insults I think you should at least attempt to repudiate the positions presented to you if you disagree. Otherwise your childish behavior is nothing more than a non-contributive irritant.

Thanks.

[Green Mountain Boy]

In several threads, we have refuted your premises (banks, like other businesses, service their customers, pay interest to depositors, salaries to employees and dividends to shareholders).

Why is Dr. Paul's agenda "more dastardly" when gold is used as money in place of unbacked paper?

Please refute our arguments citing some basic understanding of the works we've cited.

Isn't Ron Paul only advocating an end to the Federal Reserve monopoly and not necessarily a return to the gold standard?

[Bradley in DC]

Sorry, Bradley is putting words in other people's mouth...

The full unaltered quotation:


A possible major flaw with the gold standard?
If an economy were operating on the gold standard and banks loaned out the gold at an interest rate higher than the rate increase of the total gold supply, what's to prevent the bankers from eventually owning all the gold?

This actually sounds more dastardly than a debt-based, fiat-money supply.

There, just your own words now. My question stands, "Why is Dr. Paul's agenda 'more dastardly' when gold is used as money in place of unbacked paper?"


... plus I don't know what the whole point of starting a new thread is with my handle in it other than to show the world what a childish jerk he is...

A new thread because you fail to answer any of our questions. I thought your obfuscation required a singularity of clarity on your point. We await your answer.

[Spirit of '76]

As an impartial observer, it seems to me that Bradley is justified in making this thread.

So far jon_perez has persistently avoided addressing any actual policy issues, but seems to have simply set up shop in the Sound Money forum and spent an inordinate amount of time saying that everything Bradley posts is wrong.

The problem is that, even when pressed, he won't say why it's wrong. That comes across as trolling.

Now's your chance to redeem yourself, jon_perez, and actually put forth some real arguments instead of obfuscation and bluster.

I for one am looking forward to your answer to Bradley's questions.

[Bradley in DC]

Isn't Ron Paul only advocating an end to the Federal Reserve monopoly and not necessarily a return to the gold standard?

Yes, Dr. Paul's policy prescription would be to have competing currencies (which I support). For a look at his personal preference, please see the links in my signature (or at least Dr. Paul's books, The Case for Gold and Gold, Peace and Prosperity). ;)

[jon_perez]

I'm sorry, i think it is quite plain to see that it is my question that has been left unanswered.

The actual quote, in case you were too dim to realize, also contains my reason why a gold standard might be even less desirable than a fiat one.

Bradley has certainly had a chance to give his rebuttal in the original thread (consisting almost entirely of copy-pasted material I might add), so I fail to see what this exercise is about other than to confirm who is the real troll around here.


...have simply set up shop in the Sound Money forum and spent an inordinate amount of time saying that everything Bradley posts is wrong.Oh great, another disingenuous liar putting words in people's mouth. Are you sure you're not a sock puppet?

[jon_perez]

Yes, Dr. Paul's policy prescription would be to have competing currencies (which I support). For a look at his personal preference, please see the links in my signature (or at least Dr. Paul's books, The Case for Gold and Gold, Peace and Prosperity). ;)So which is "Dr. Paul's agenda" Bradley, competing currencies or a gold standard?? You can't seem to speak with one tongue here...

And also, how can you claim to speak for Dr. Paul at this point in time?

[Bradley in DC]

I'm sorry, i think it is quite plain to see that it is my question that has been left unanswered.

The actual quote, in case you were too dim to realize, also contains my reason why a gold standard might be even less desirable than a fiat one.

Bradley has certainly had a chance to give his rebuttal in the original thread (consisting almost entirely of copy-pasted material I might add), so I fail to see what this exercise is about other than to confirm who is the real troll around here.

I started a new thread to ask my own question, thank you very much. I am eager for the answer. No, you do not at all make clear why using gold as money is "more dastardly." No one else seems to understand your point either. Please educate us. :rolleyes:

My answers to your questions, as you point out, are in your thread. ;) If you don't understand them, please ask.

[jon_perez]

I started a new thread to ask my own question, thank you very much. I am eager for the answer. No, you do not at all make clear why using gold as money is "more dastardly." No one else seems to understand your point either. Please educate us. :rolleyes:

My answers to your questions, as you point out, are in your thread. ;) If you don't understand them, please ask.I do have one question, Bradley, and that is: when are you going to grow up?

[Spirit of '76]

Oh great, another disingenuous liar putting words in people's mouth. Are you sure you're not a sock puppet?

Quite certain I'm not, nor am I a disingenuous liar.

I'm just an observer waiting for you to address the issues instead of calling people names, questioning your opponents' credibility, and generally avoiding putting forth any sort of cogent argument.

Do try to stick to the topic, won't you?

[hillertexas]

Answer his question, jon_perez.

[Bradley in DC]

So which is "Dr. Paul's agenda" Bradley, competing currencies or a gold standard?? You can't seem to speak with one tongue here...

Just as Dr. Paul is personally opposed to abortion and is pro-life but offers a bill to return the issue to the states as the best Constitutional approach, Dr. Paul is personally in favor of a gold standard (as explained clearly in my post with links to Dr. Paul's own books) but Constitutionally favors a Hayekian, or "free banking" approach of competing currencies (which, ideally, would be 100% reserve gold backed for him). There is no confusion on his or mine or most other readers' parts. If you need me to break it down more simply for you, please ask. That's why we're here. We still question why you're here.

If you don't understand the difference between "policy prescription" and "personal preference," please ask.


And also, how can you claim to speak for Dr. Paul at this point in time?

I claim to represent my own views, which happen to be shared by Dr. Paul. He chose me over nearly 1,000 others for my position; I've stayed in close contact with fellow friends in the Congressional office now handling these issues as well as with Dr. Paul himself. He LOVES discussing these issues, and I take some personal pride he's advocating my Hayekian preference over his personal preference as his policy prescription in this campaign. I have claimed that I do understand his views when I wrote them for him and when I cite them, sure.

Please answer my question: Why do you find Dr. Paul's goal of a gold standard inherently "dastardly"?

[jon_perez]

Please answer my question: Why do you find Dr. Paul's goal of a gold standard inherently "dastardly"?Still haven't learned to stop putting words in people's mouths, eh? Nice try at the strawman.

I bet you idolize Karl Rove.

[hillertexas]

Still haven't learned to stop putting words in people's mouths, eh? Nice try at the strawman.

Wow, Jon....
can you not answer a question?

[Bradley in DC]

Still haven't learned to stop putting words in people's mouths, eh? Nice try at the strawman.

I bet you idolize Karl Rove.

The full unaltered quotation:

Quote:
Originally Posted by jon_perez
A possible major flaw with the gold standard?
If an economy were operating on the gold standard and banks loaned out the gold at an interest rate higher than the rate increase of the total gold supply, what's to prevent the bankers from eventually owning all the gold?

This actually sounds more dastardly than a debt-based, fiat-money supply. Unquote.

There, just your own words now. My question stands, "Why is Dr. Paul's agenda 'more dastardly' when gold is used as money in place of unbacked paper?"

[mordechai]

Man, lay off perez. So what if he finds the gold standard "dastardly"? He doesn't like what's going on right now. And he didn't exactly say that he thinks gold sucks as a store of value, or anything else. He simply questioned credit policies in a gold standard system.

Actually, that's the type of questions that need to be asked.

Now, I do remember jon_perez saying at one point he didn't see why we were all putting so much significance in a "heavy yellow metal" I think it was. (correct me if I'm wrong). And he pointed out gold's limited uses. That implies he doesn't see the value of gold. And?

Who are we to write the rules of what someone values? If he doesn't like gold, fine. He'll suffer the consequences, whether they be good or bad. Not up to us to determine value for somebody.

Finally, is perez a troll? No, he isn't. He's a guy that has questions, and so far hasn't seen a good reason to support part of Paul's personal ideas. Whoopty doo. Paul wouldn't force gold on him.

As has already been acknowledged, Paul supports the Hayekian "free banking" model. If perez decides to invest in dollars, yen, Euros, yuan, francs, whatever, it's his decision.

His questioning the gold standard is wise. His wanting answers is wise. You trying to alienate a Paul supporter is not.

[Spirit of '76]

Man, lay off perez.

[snip]

Finally, is perez a troll? No, he isn't. He's a guy that has questions, and so far hasn't seen a good reason to support part of Paul's personal ideas.

Having "questions" is a far cry from posting in every thread on this subforum ridiculing the ideas as stupid without ever explaining why.

Whether he's intentionally trolling or not, that's what his behavior thus far amounts to.

Again, he could pose his questions and express his doubts about the ideas contained in various posts without calling everyone names and ridiculing the ideas without once actually addressing them.

I for one would love to see some real debate on these issues, but so far all we have is Bradley posting articles and perez laughing about how stupid he thinks they are. That's not debate or discussion. That's trolling.

[Bradley in DC]

Man, lay off perez. So what if he finds the gold standard "dastardly"?

Finally, is perez a troll? No, he isn't.

His questioning the gold standard is wise. His wanting answers is wise. You trying to alienate a Paul supporter is not.

I want to know WHY he finds the gold standard "dastardly"? Or more correctly, why using gold is inherently more "dastardly" than unbacked paper.

His posts and threads are negative, rude and disruptive more than questioning. Hence our view he is a troll.

Presuming the "you" is I since I started the thread, and my apologies if I'm wrong, I am not at all convinced he is a Paul supporter and lean much more strongly that he is one here trying to confuse and alienate Paul supporters from Dr. Paul's agenda.

[mordechai]

Then why? Is perez a secret agent? He works for Guiliani?

Come on. Those two are egging each other on. It's just a little argument that got out of hand. Both of y'all should just smoke the peace pipe, bury the hatchet, and go on your merry.

[fsk]

The gold standard, as implemented in the past, failed due to regulation of banking. The solution was even more regulation of banking, until you arrive at the current system.

There is no reason to hold gold out as superior to silver, copper, or other metals. You can have a multi-metallic standard PROVIDED the exchange rate among metals is set by the market.

A gold standard fails miserably when you have government regulation of banking AND a cartel nearly monopolizes the gold supply. Banks can only misbehave and act as a cartel when banking is regulated.

Mainstream orthodox Keynesian economics says that the gold standard has been discredited by history. That is complete and utter nonsense, but it is psychologically hard to overcome the hurdle that every mainstream economist and newspaper is full of lies.

If every newspaper and TV station is full of lies, that leads to the idea "Maybe there's some nasty conspiracy preventing them from telling the truth?" Why is it considered offensive to even suggest that something really nasty might be going on? I'm not absolutely certain. I don't have absolute proof. There is a lot of circumstantial evidence.

[kylejack]

Now*this* is trolling.

You asked about issues with the gold standard after being told several times that Ron Paul does not favor a return to the gold standard but rather legalization of alternative currencies.

Why?

[Bradley in DC]

Still haven't learned to stop putting words in people's mouths, eh? Nice try at the strawman.

I bet you idolize Karl Rove.

No, the question is mine based on your statements. The question stands, regardless of your thoughts on idolatry. Why is using gold inherently "more dastardly" than unbacked paper?

[jon_perez]

Man, lay off perez. So what if he finds the gold standard "dastardly"? He doesn't like what's going on right now. And he didn't exactly say that he thinks gold sucks as a store of value, or anything else. He simply questioned credit policies in a gold standard system.

Actually, that's the type of questions that need to be asked.

Now, I do remember jon_perez saying at one point he didn't see why we were all putting so much significance in a "heavy yellow metal" I think it was. (correct me if I'm wrong).I was exaggerating a bit to make the point that, considering gold's rather limited industrial uses, it also counts as a more-or-less arbitrary measure of wealth just like fiat money. Like fiat money, gold's value is largely derived from people's perceptions of it. Of course, intrinsically speaking, gold does have a lot more value than paper, but the price it commands I believe is still out of proportion to its industrial utility/rarity.




So what if he finds the gold standard "dastardly"?See, Bradley is trying to twist what I said to make it seem like I'm being far more accusatory than is the case. What I said was that if the gold standard would allow bankers to eventually own all the gold then it would indeed be dastardly and arguably far more so than a fiat money system. If people were forced to use gold and only gold as money, then I don't see why such a scenario can be so easily discounted.

Bradley did make an effort to rebut this via his copy-pasted articles, so this thread of his has to count as nothing but juvenile vindictiveness.

Someone else answered that if gold were hoarded, the market could choose to switch to an alternative, more plentiful commodity as money. So that's food for thought right there from someone who was, unlike Bradley it seems, able to come up with an interesting and relevant answer.

[mordechai]

That isn't what perez said. He said allowing banks to use artificial interest rates to get control of all gold is wrong, and "more dastardly".

He wondered how to avoid that. (we've thrown out the only way to have that happen is government regulation).

perez can either believe it, or not.

[fsk]

One advantage of gold compared to unbacked paper is that gold can't be faked.

If the government is running a deficit, eventually its paper will trade at a discount to gold. That's what happened in 1913, 1933, and 1971 when the USA defaulted on the gold standard.

Under a gold standard, there's a limit to how much debt a government can run up. With unbacked paper, there's no limit to the inflation rate.

A gold standard means that real interest rates can't go below 0%, because people could just hold onto physical gold to preserve their purchasing power.

There is a problem if someone happens to monopolize gold. That's why you allow a multi-metallic standard and don't regulate money at all.

[jon_perez]

You asked about issues with the gold standard after being told several times that Ron Paul does not favor a return to the gold standard but rather legalization of alternative currencies.

Why?Mmmm... because it was an interesting issue... ?

But hold on. Now I'm confused, because we have Bradley here saying verbatim that "Ron Paul's agenda is for a gold standard" and then we have you saying that Ron Paul "does not favor a return to the gold standard".

I guess it's my turn to ask you guys to explain yourselves. Which is it, Bradley?

Is a gold standard Dr. Paul's agenda, or is it merely his preference (like you say in a succeeding post), or does he not favor it at all (as kylejack seems to be saying)???

Better get your story straight Bradley, or I will assume you are just trolling here.... :rolleyes:

[mordechai]

It is quite dificult to monopolize all gold without government help.

And virtually impossible with silver or copper (because of how much exists in the world)

[jon_perez]

Again, he could pose his questions and express his doubts about the ideas contained in various posts without calling everyone names and ridiculing the ideas without once actually addressing them.Oh, ridiculing ideas like, for example:

"You are free to believe that the Federal Reserve was *NOT* designed to loot the USA. You are also free to believe that the Earth is flat.

If you go around espousing flat-earth theory around a bunch of scientists, don't be surprised if they accuse you of trolling."

I'm sorry, but I can't help but notice that objectivity is in short supply here in "Sound Money".

[WilliamC]

Greetings All,




So which is "Dr. Paul's agenda" Bradley, competing currencies or a gold standard?? You can't seem to speak with one tongue here...

And also, how can you claim to speak for Dr. Paul at this point in time?

Well now, from the US Constitution, Article I, section 10

"No State shall enter into any Treaty, Alliance, or Confederation; grant Letters of Marque and Reprisal; coin Money; emit Bills of Credit; make any Thing but gold and silver Coin a Tender in Payment of Debts; pass any Bill of Attainder, ex post facto Law, or Law impairing the Obligation of Contracts, or grant any Title of Nobility."

Seems that the Constitution advocates using gold and silver as money.

As to Ron Pauls position he has clearly stated on multiple interviews that in the short term he favors legalizing competing currencies. Listen to

http://69.65.26.137/~ronpaula/RonPaulKorelinEconomicsReport111907.mp3

for one example.

William C Colley

[AoiMasamune]

I have to step in to stand up for this guy. He raises a valid question that I've wondered about myself.

It's important to remember in this debate that money has no inherent value, it is just the measure of value we place on goods or services provided. Much like an inch, pound, pint or degree, money doesn't exist without something to measure with it.

A gold standard has the benefit that it cannot be controlled by a creator, aka, a central bank, because it is not created, it just exists. However this is also it's greatest weakness, because by it's nature it is a limited supply. Any banking institution that is allowed to charge interest and make profit will eventually gain control over the whole resource, or at least enough of it to become dangerous. After this happens, they now have enough power to exert their will on lawmakers, and thus the cycle repeats.

Even with competing currencies, eventually one will drown out the others because money must be universally accepted, and for convenience, people will gravitate towards only one. This is especially true with a precious metal based system, because exchange rates will have to be checked before each transaction to ensure a fair tranfer of value.

I believe that what is more important than choosing what form money will appear in is choosing what it's nature will be. Currently, money comes into existence through the creation of debt accompanied by interest which does not exist. The only alternative is to spend it into existence and ALWAYS ensure that there is the same amount of money in the economy as is going out of the economy to avoid the compounding, non-existent interest dilemma.

So with that in mind, I propose the following hybrid system:

A: Monetary Policy
Money begins it's existence as silver coins (silver being far more common than gold, thus much harder to gain a monopoly over) kept by the US Treasury, these will be initially be created from silver borrowed from one of our few remaining allies.

The US Treasury loans (at interest) these coins to each state treasury.

The state treasury then loans the coins (at interest) to private banks.

B: Government Funding
The Federal government pays it's expenditures from a combination of trade tariffs for imported goods, and the interest gained from these loans.

Trade tariffs should be set high on pre-manufactured items to ensure a flourishing industrial sector in the US, tariffs should be low on incoming raw materials, to keep our industrial goods prices low.

The state government pays it's expenditures from a combination of interest from loans to banking institutions and fines imposed for breaking petty laws.

C: Business Law
Corporate personhood should be completely abolished, and a new law put into place stating that only humans can own land or property. This new law should say that the owner of the land on which a company is operating is ultimately responsible for any mistreatment of the land or unethical actions of the company in general.

Minimum wage laws should be repealed and scrapped. Replace them with laws stating that no individual person associated (this includes the owner) with a company can make more than four times the amount of money paid to the lowest paid employee.

This is unfortunate because it restricts the direct growth of the individual, but it seems to be necessary to prevent the exploitation of the working class and the rise to power of ruling elites.

Companies can contract out for low paying work to work around this law, for services such as janitors and farm hands, but those companies will be subject to it as well.

~fin~

To summarize, this plan will eventually end all debt in the US, ensure that there is always enough money in the economy to pay off any interest, and keep the power of monetary control out of the hands of any individual or group for as long as possible.

This STILL wouldn't solve the problem completely though, because after enough generations of children inheriting money from their parents and then passing it on in greater amounts to their children, the money supply would end up being drained, causing deflation, recession, and finally depression. With depression, comes the rise of the Elites once again.

I still haven't figured out a perfect solution, but this is the best I could come up with so far.

[Spirit of '76]

Oh, ridiculing ideas like, for example:

"You are free to believe that the Federal Reserve was *NOT* designed to loot the USA. You are also free to believe that the Earth is flat.

If you go around espousing flat-earth theory around a bunch of scientists, don't be surprised if they accuse you of trolling."

I'm sorry, but I can't help but notice that objectivity is in short supply here in "Sound Money".

"But, mom! He started it!" is not a substitute for argument.

Take the high road.

[jon_perez]

I have to step in to stand up for this guy. He raises a valid question that I've wondered about myself.

It's important to remember in this debate that money has no inherent value, it is just the measure of value we place on goods or services provided. Much like an inch, pound, pint or degree, money doesn't exist without something to measure with it. Careful about disagreeing with him... you might have Karl err... Bradley calling you a traitor to the Ron Paul cause for doing so... :mad:

Anyway, after reading through the rest of your post, I feel justified in reiterating my point of view that while the Fed may have its flaws, it was not an institution borne out of "evil, diabolic" intentions. These are tough, complex problems related to the money system and the idea of central banking has been offered as a solution to such.

If the Fed were as corrupt and damaging as the propaganda du jour makes it out to be, the US would not have become a superpower for the hundred years or so since it was created. Some people seem to forget this little fact.

The first and foremost problem really is overspending by Congress. Immediately turning the Fed into scapegoat makes us overlook where the most pressing problem lies.

[Meatwasp]

Bradley can you help me on this . Why did Roosevelt confiscate all private gold in 1933? The the miners around here told me it was for the war effort. He was planning on printing money
Only jewelrers were allowed ownership of gold.

[Bradley in DC]

Mmmm... because it was an interesting issue... ?

But hold on. Now I'm confused, because we have Bradley here saying verbatim that "Ron Paul's agenda is for a gold standard" and then we have you saying that Ron Paul "does not favor a return to the gold standard".

I guess it's my turn to ask you guys to explain yourselves. Which is it, Bradley?

Is a gold standard Dr. Paul's agenda, or is it merely his preference (like you say in a succeeding post), or does he not favor it at all (as kylejack seems to be saying)???

Better get your story straight Bradley, or I will assume you are just trolling here.... :rolleyes:

One form of trolling contrary to the guidelines is highjacking a thread. The topic of this thread: why do you think using gold as money is "more dastardly" than unbacked paper?

[fsk]

No State shall ... make any Thing but gold and silver Coin a Tender in Payment of Debts;

Here's a subtle technicality. This is a prohibition on the behavior of *STATES*. There is no prohibition on the Federal Government declaring on unbacked paper as money.

You might say "It's obvious that is intended to also apply to the Federal Government", but what you think is irrelevant.

[fsk]

Bradley can you help me on this . Why did Roosevelt confiscate all private gold in 1933? The the miners around here told me it was for the war effort. He was planning on printing money
Only jewelrers were allowed ownership of gold.


The USA wasn't at war in 1933.

In 1933, President Roosevelt defaulted on the dollar and declared the USA bankrupt. (http://fskrealityguide.blogspot.com/2007/09/did-usa-declare-bankruptcy.html)

If President Roosevelt didn't outlaw private ownership of gold, people would have started using gold as money instead of irredeemable Federal Reserve Notes. The "official" gold price was $20/oz, decreased to $35/oz after the gold confiscation. However, with private citizens unable to own gold, people wouldn't notice that was a bunch of lies.

If Roosevelt didn't confiscate the gold in 1933, gold and Federal Reserve Notes would have circulated side-by-side. It took 40 years for people to be brainwashed so that Federal Reserve Notes are money and gold is not.

President Roosevelt's gold confiscation in 1933 was outright stealing. To declare it as anything other than stealing is being dishonest.

[Bradley in DC]

I have to step in to stand up for this guy. He raises a valid question that I've wondered about myself.

It's important to remember in this debate that money has no inherent value.

Welcome to the forum. Interesting first post.

In this case, starting from the wrong premise inevitably leads to your other problems. It's better to understand how we got money and what we choose as money are goods with a higher "use value."

For a good, readable introduction, start with Menger's Principles of Economics:
http://www.mises.org/etexts/menger/eight.asp

And Mises himself here in Monetary Services and the Value of Money (note the difference between money having an "intrinsic value" and an "intrinsic exchange value"):
http://www.mises.org/mmmp/mmmp4.asp
It is clear that the naive conception of the layman that things have value in themselves, i.e., intrinsic value, necessarily leads to a position which draws the dividing line between money and money substitutes differently from the position according to which the value of a thing is derived from its usefulness. Those who conceive of value as the result of properties inherent in things must necessarily make a distinction between physically valuable money and means of exchange which provide monetary services but are without material value. This approach inescapably leads to a contrasting of normal money with bad and abnormal money, which, in reality, is not money at all.

Today there is no need to deal with this theory. For the modern subjective theory of value, the question has long been decided. No one would still openly defend a concept according to which the whole or a portion of value and price theory was based upon intrinsic exchange value, i.e., independent of the valuations of acting men. Once this is admitted, one has already adopted the fundamental principle of subjective value theory, i.e., the theory of marginal utility.

[Meatwasp]

Thank you Fsk. I know all the big mines around here were shut down and falling to rust.

[AoiMasamune]

Careful about disagreeing with him... you might have Karl err... Bradley calling you a traitor to the Ron Paul cause for doing so... :mad:

Anyway, after reading through the rest of your post, I feel justified in reiterating my point of view that while the Fed may have its flaws, it was not an institution borne out of "evil, diabolic" intentions. These are tough, complex problems related to the money system and the idea of central banking has been offered as a solution to such.

If the Fed were as corrupt and damaging as the propaganda du jour makes it out to be, the US would not have become a superpower for the hundred years or so since it was created. Some people seem to forget this little fact.

The first and foremost problem really is overspending by Congress. Immediately turning the Fed into scapegoat makes us overlook where the most pressing problem lies.

I agree that congressional overspending is a significant part of the problem, and not one to be overlooked, however I will insist that the whole of the economic system is at fault, and the federal reserve rests at the heart of the system.

The major problem I see with the federal reserve if all other factors were not broken is this: it's not federal. The fact that it is privately owned and operated without true government oversight or transparency of any kind makes it possible for them to do things like trigger recessions and depressions for profit. Even if it has never been exercised, that power must be removed from private hands.


And about a 'gold backed, paper dollar'. This is going to lead to problems. A gold or silver coin dollar is fine, but gold backed paper, is a disaster waiting to happen. Paper gets lost, stolen, washed in the laundry, and otherwise destroyed with no evidence of it's existence. If the two (paper and gold) are supposed to exist on a 1 for 1 basis... It seems to me that an imbalance is inevitable. Either there will be gold in storage that no one can claim, and no way to know how much no one can claim, or someone will over react and print too much of it's paper cousin, leading to runs on banks and economic failure.

[fsk]

I know all the big mines around here were shut down and falling to rust.


Without the ability to sell gold at a fair free-market price, whoever owned the gold mines was acting in their rational self-interest. It made perfect economic sense to stop mining gold until gold was allowed to be sold at the fair free-market price.

[Bradley in DC]

If the Fed were as corrupt and damaging as the propaganda du jour makes it out to be, the US would not have become a superpower for the hundred years or so since it was created. Some people seem to forget this little fact.

We have been prosperous DESPITE the advent of central banking here. Had you read my posts and links and explanations, you'd understand this.

Again: http://economics.about.com/cs/moffattentries/a/scot_banking.htm
Between 1716 and 1845 the country of Scotland experienced a period of banking that was unlike any other ever seen. Banks were virtually unregulated, constrained only by the rule of law at the time. Each bank, and the system as a whole, created solutions to the general banking hazards that we still attempt to resolve through regulation today.

Banks also engaged in practices that were complementary with stability and efficiency in the market. Furthermore, banks were profitable, not shown to categorically take on excess risk and loss to the public during failures was greatly minimized. During its time of free banking Scotland's economy grew much quicker than England's, which had a more regulated and failure-prone system. Even though England was in the midst of its first industrial revolution during this period, Scotland's approximate per capita income went from half of England's in 1750 to being virtually equal to it in 1845. Supported by a banking system marked by innovation, reliability, and stability, Scotland transformed from a poor agricultural and household economy to an advanced industrial economy specializing in iron production, shipbuilding, and engineering. (Cameron, 1967).


The first and foremost problem really is overspending by Congress. Immediately turning the Fed into scapegoat makes us overlook where the most pressing problem lies.

It is the monetizing of the debt by the Fed that is the cause of inflation and our main problem with the institution. If you agreed with that, you'd understand that it is the Fed that enables what you see is the foremost problem.

My question, jon_perez, stands, why do you think using gold as money is inherently "more dastardly" than unbacked paper?

[WilliamC]

Greetings All,


Here's a subtle technicality. This is a prohibition on the behavior of *STATES*. There is no prohibition on the Federal Government declaring on unbacked paper as money.

You might say "It's obvious that is intended to also apply to the Federal Government", but what you think is irrelevant.

Very true. Then let's have the several States issue gold and silver backed money as legal tender to circulate along with the Federal Reserve Notes. That way we can use commodity backed money to purchase goods and services and Federal Reserve Notes to pay Federal taxes.

William C Colley

[Bradley in DC]

Bradley can you help me on this . Why did Roosevelt confiscate all private gold in 1933? The the miners around here told me it was for the war effort. He was planning on printing money
Only jewelrers were allowed ownership of gold.

Hi,

The best short, readable examination I found on that is here:
http://www.mackinac.org/article.aspx?ID=4013

In short, yes, definitely that is a great part of the answer. Monetary gold was confiscated and redeemed at 1/3 less value for FRNs in part to help pay for war and the New Deal. That confiscation contributed to a contraction of the economy. That experience is similar to other countries that have acted similarly. I first got interested in monetary policy because of my experience in Peru on Garcia (the first time).

[fsk]

Very true. Then let's have the several States issue gold and silver backed money as legal tender to circulate along with the Federal Reserve Notes. That way we can use commodity backed money to purchase goods and services and Federal Reserve Notes to pay Federal taxes.


I believe some state attempted doing this, and the Supreme Court ruled they weren't allowed to. I forget the ruling.

[Bradley in DC]

It is quite dificult to monopolize all gold without government help.

And virtually impossible with silver or copper (because of how much exists in the world)

Thanks, Mordechai. That is my point and that of all other posters save jon_perez, and the point of this thread is to have him explain why he disagrees with you and considers that idea "dastardly (http://www.thefreedictionary.com/dastardly)."

Jon_perez, what is "cowardly and malicious" about the idea of using gold as money?

[fsk]

I first got interested in monetary policy because of my experience in Peru on Garcia (the first time).


What's the story of Peru on Garcia? Do you have a link?

[Bradley in DC]

Here's a subtle technicality. This is a prohibition on the behavior of *STATES*. There is no prohibition on the Federal Government declaring on unbacked paper as money.

You might say "It's obvious that is intended to also apply to the Federal Government", but what you think is irrelevant.

Yes, good point. And given the enumerated powers clause, the Federal Government was only granted the power to "coin" money which was akin to establishing proper weights and measures. However, it has been "broadly construed (http://caselaw.lp.findlaw.com/data/constitution/article01/37.html)" beyond all recognition.

[AoiMasamune]

I think there is a great deal of over reaction going on here...

<quote>
If an economy were operating on the gold standard and banks loaned out the gold at an interest rate higher than the rate increase of the total gold supply, what's to prevent the bankers from eventually owning all the gold?

This actually sounds more dastardly than a debt-based, fiat-money supply.
</quote>

I think all he is trying to say is that the same loophole will still exist which allows bankers to amass great wealth and drain out the economy. In a fiat money system, the money supply is continuously replenished (causing inflation, but thats another topic), whereas in a gold-based economy, it would not be. In either case the root of the problem, banking, must be addressed.

He has reacted defensively, true, but in his defense he was attacked pretty harshly by some posters in both this thread, and the original as well. It could simply be he doesn't have the vocabulary to describe the problem sufficiently.

[Bradley in DC]

Still haven't learned to stop putting words in people's mouths, eh? Nice try at the strawman.

I bet you idolize Karl Rove.

Your thoughts on idolatry notwithstanding, do you think using gold as money is more "dastardly" than unbacked paper?

[fsk]

If an economy were operating on the gold standard and banks loaned out the gold at an interest rate higher than the rate increase of the total gold supply, what's to prevent the bankers from eventually owning all the gold?


It is very hard to monopolize all the gold if there is UNREGULATED banking. If you allow a multi-metallic standard, then it's hard to monopolize ALL the metals.

It is a REGULATED gold standard that allows banks to suck up all the world's wealth. An unregulated gold standard works fine. The only restrictions on banks' behavior should be that they don't defraud their customers.

[Bradley in DC]

I think all he is trying to say is that the same loophole will still exist which allows bankers to amass great wealth and drain out the economy.

With all due respect, you misread his quotation by leaving out the "more" dastardly. That is the point of THIS thread. We want to know why he finds gold inherently "more dastardly." For jon_perez's case, that means more "cowardly and malicious" since there's a consensus he's not got his vocabulary down.

[Bradley in DC]

What's the story of Peru on Garcia? Do you have a link?

Um, no. :o (Searching Google now...)

Long story short, Garcia (http://countrystudies.us/peru/93.htm) printed money as if, well, as if it grew on trees to fund his social welfare programs, etc. Off the top of my head, there was a cumulative inflation rate of 1.2 billion percent over his five-year administration. Mario Vargas-Llosa gave an impassioned speech in Lima's town square, after Garcia announced his intention to nationalize the banks, which eventually turned the tide.

I had a very personal epiphany that governments didn't have a right to do "this" to their people (but didn't understand what the "this" was at that time) and found the gold dealers as the last and only functioning and honest financial system left. So, in short, yes, I take the gold is "more dastardly" comment very personally.

Peruvian economist Hernando de Soto (http://en.wikipedia.org/wiki/Hernando_de_Soto_(economist)) has written about these issues tangentially in "The Other Path (http://www.amazon.com/Other-Path-Economic-Answer-Terrorism/dp/0465016103)" and "The Mystery of Capital (http://www.amazon.com/Mystery-Capital-Capitalism-Triumphs-Everywhere/dp/0465016146)."

EDIT: "The five-year García administration (http://www.idea.int/elections/upload/peru_candidate_bios_2006.pdf) was also marked by hyperinflation and sporadic shortages of basic food items. Peru fell behind on its external debt payments when García limited them to 10 percent of GDP, and international lenders cut the country off from further loans. In 1987, García made an effort to nationalize banks and the insurance industry." (I was there in 1987--Machu Picchu was great, the hepatitis was not).

"However by 1988 the economy had collapsed and high inflation had turned into hyperinflation. Generally wages and salaries did not keep up with the inflation of prices." Table here (http://www.sjsu.edu/faculty/watkins/peru.htm).

[AoiMasamune]

It is very hard to monopolize all the gold if there is UNREGULATED banking. If you allow a multi-metallic standard, then it's hard to monopolize ALL the metals.

It is a REGULATED gold standard that allows banks to suck up all the world's wealth. An unregulated gold standard works fine. The only restrictions on banks' behavior should be that they don't defraud their customers.


Well, I partially agree with this. While the banks would attempt to gain control of a currency, gold for instance, it's value would skyrocket as supply diminished. This would cause a shift from gold to say silver, so the banks sell a little over valued gold for normal valued silver, and begin the process over again until silver becomes over valued, moving on to copper, so on and so forth.

This situation actually FAVORS banks. Not only do they collect the origional interest owed on the debt, but as the value of the metal goes up, their stocks become more valuable. This gives banks an additional incentive to fight for ever growing control over metal markets.

Also, don't discount the effect of alliances between banks artificially fixing interest rates and wielding collective power to buy out non-member banks, a la 'secret societies'.


With all due respect, you misread his quotation by leaving out the "more" dastardly. That is the point of THIS thread. We want to know why he finds gold inherently "more dastardly." For jon_perez's case, that means more "cowardly and malicious" since there's a consensus he's not got his vocabulary down.

I concede the point, terrible wording on his part. Perhaps if he apologized?

[fsk]

Also, don't discount the effect of alliances between banks artificially fixing interest rates and wielding collective power to buy out non-member banks, a la 'secret societies'.


With UNREGULATED banking, this cannot happen. As fast as they can buy out non-member banks, new competitors would enter the banking industry.

The problem with hoarding physical metal is that you lose out on interest payments. If you do have a surplus of physical metal, you're better off investing it in income-producing assets instead of hoarding it. Interest payments are a disincentive to gold hoarding.

In the present, it pays for individuals to hoard gold and silver because there's no trusted bank to store it in.

[Bradley in DC]

I concede the point, terrible wording on his part. Perhaps if he apologized?

That is the question: was it terrible wording for which he should just apologize, or, given he started the thread as one of his first acts here is he just a troll? His name calling and obfuscation lead one to a likely answer.

[AoiMasamune]

With UNREGULATED banking, this cannot happen. As fast as they can buy out non-member banks, new competitors would enter the banking industry.

The problem with hoarding physical metal is that you lose out on interest payments. If you do have a surplus of physical metal, you're better off investing it in income-producing assets instead of hoarding it. Interest payments are a disincentive to gold hoarding.

In the present, it pays for individuals to hoard gold and silver because there's no trusted bank to store it in.

I don't understand how paying interest on savings to consumers discourages the hoarding of currency...
I think you are underestimating the ingenuity and ... dare I say, genius of the banks.

About the secret society thing...

A) Once this "society" manages to saturate the market with their banks, there wouldn't be enough un-entangled demand to justify competition springing up, it's even possible that they would spearhead the move to new metals voluntarily to consistently stay cheaper than any competition that could move in.
What I mean by un-entangled is this:
What if someone signs a legally binding 30 year loan, for $1000 gold dollars, and it (the contract) was worded exactly like that, you owe 1000 gold coins... The overpricing of gold occurs and one gold coin is suddenly worth 2000 silver coins. Gold is no longer circulated and silver is the new currency of choice for most businesses. You are entangled, and legally obligated to repay according to the terms of the contract.

B) Where would the new competition get the raw metal required to start a competing bank if not from the "society"? Your average Joe, under any circumstances, will not have the assets required. To get a loan, to open a competing store, you have to demonstrate to the existing banks that you are qualified to make a profit. The quickest way to ensure this is to be in their pocket.

C) The situation you are describing is the origin of the banking system, and where it flourished historically. Government regulation and control was meant to hold back it's power but failed.

D) You have any idea how much havok multiple floating currencies would cause in the retail business? How much is a shirt worth in gold... silver... copper... brass... iron... wood... paper... etc?


I am arguing against free market decided currency, thats true, I have yet to be convinced that it does anything to prevent the creation of, or rise to power of, ruling elites.

[fsk]

That's a common fallacious counter-argument: Government is needed to prevent someone from seizing control of the world's resources.

It's too late for that. Government is the tool that enables a handful of people to control the entire world.

Bottom line: given the choice of a REALLY free market or a government bureaucracy, I'd choose the free market anytime. Why should a handful of people get absolute control of the money supply? That's communism, not a free market.

[jon_perez]

Jon_perez, what is "dastardly" about the idea of using gold as money?I have already expounded on what I meant:

... if the gold standard would allow bankers to eventually own all the gold then it would indeed be dastardly and arguably far more so than a fiat money system and that if people were forced to use gold and _only gold_ as money, then I don't see why such a scenario can be so easily discounted.

Why do you keep insisting on your insinuations and misrepresentations of what I was trying to say? Are you trying to prove to the world what a child you can be? Or maybe you find it difficult to follow what other people are trying to say without inserting your own subjective meanings and biases into them.. ?

[Bradley in DC]

I have already expounded on what I meant:

... if the gold standard would allow bankers to eventually own all the gold then it would indeed be dastardly and arguably far more so than a fiat money system and that if people were forced to use gold and _only gold_ as money, then I don't see why such a scenario can be so easily discounted.

Why do you keep insisting on your insinuations and misrepresentations of what I was trying to say? Are you trying to prove to the world what a child you can be? Or maybe you find it difficult to follow what other people are trying to say without inserting your own subjective meanings and biases into them.. ?

Look, you give a conditional hypothetical that has been disproved by others in our subforum. Honestly though, even in your mythical example, for the sake of being internally consistent, WHY would gold be more "dastardly" than FRNs?

[jon_perez]

I had a very personal epiphany that governments didn't have a right to do "this" to their people (but didn't understand what the "this" was at that time) and found the gold dealers as the last and only functioning and honest financial system left. So, in short, yes, I take the gold is "more dastardly" comment very personally.Well, considering it was never meant as such, I guess you're the one with the problem here, not me.

What I take umbrage at is the attempt to censor views by calling people trolls and that was certainly personal.

[Bradley in DC]

What I take umbrage at is the attempt to censor views by calling people trolls and that was certainly personal.

Censor? I started a whole new thread with a single question addressed personally to you.

[noztnac]

Hey jon_perez

Could you just explain your point in detail?

[jon_perez]

Look, you give a conditional hypothetical that has been disproved by others in our subforum. Honestly though, even in your mythical example, for the sake of being internally consistent, WHY would gold be more "dastardly" than FRNs?You're not going to give this a rest, are you? :D

I would've thought that anyone who was aware of the history of how deflation came about and the effects of a constriction on money supply would not even need to ask that.

Most people don't like inflation and think that deflation is a good thing. But deflation can be just as insidious and oppressive as inflation. If your business relies on credit, deflation and high interest rates hurt just as bad (worse even) than rampant inflation. Again, I thought I had explained this already.

The "helicopter" comment of Bernanke shows just how worried today's central bankers still are regarding deflation. They would much rather err on the side of inflation rather than deflation and this is yet one more explanation for why we have had high inflation in the fiat money period. You have to ask yourself, which was more painful? The Great Depression or the stagflation of the 70s? Anyway, this is what I had learned when I tried to study the other side of the argument. (And bear in mind, chancing upon the writings of Rothbard, Mises, etc... was what initially stoked my interest in these issues... I was never a Keynesian, still am not, and only refuse to be narrow-minded)

You may argue that this is Keynesian 'propaganda', but short of saying there is a worldwide socialist conspiracy to fleece the common man (which I assert is patently ridiculous), I don't see how you can account for the dominance of Keynesian thought in the first half to the middle of the 20th century other than that it was a bloody good theory.

You seem to be saying that even just considering what Keynes has said counts as trolling and is not allowed in these forums (wtf?!?). I would say that any discussion of "Sound Money" is sterile if we don't consider the arguments of that other major school of economic thought besides Austrian/Classical economics.

[jon_perez]

I think there is a great deal of over reaction going on here...

<quote>
If an economy were operating on the gold standard and banks loaned out the gold at an interest rate higher than the rate increase of the total gold supply, what's to prevent the bankers from eventually owning all the gold?

This actually sounds more dastardly than a debt-based, fiat-money supply.
</quote>

I think all he is trying to say is that the same loophole will still exist which allows bankers to amass great wealth and drain out the economy. In a fiat money system, the money supply is continuously replenished (causing inflation, but thats another topic), whereas in a gold-based economy, it would not be. In either case the root of the problem, banking, must be addressed.I guess if it would make Bradley stop his childish whining, I could replace the word "dastardly" with "pernicious".

My theoretical concern as devil's advocate was that a "non-free" gold-as-the-only-money standard would enable dastardly acts of hoarding by those who control the money supply. This was certainly the sentiment expressed by some back in the late 19th century which led to the call for bimetallism.

Check out http://en.wikipedia.org/wiki/Bimetallism and in fact we see here that pinning down money to commodities is no panacea against inflation or rampant monetary expansion either. We can also see here in this wikipedia article on the "Coinage Act of 1873" http://en.wikipedia.org/wiki/Crime_of_1873 that the conspiracy theory during that time was that it was in bankers' interests to want to switch to a gold-only standard (because gold is rare and they control most of it). This explains why "Money Masters" advises against a gold standard. In fact, after considering many sides, I'm actually inclined to believe that a properly managed fiat money supply is at least as good as any, if not having its own advantages. People assume that fiat is inherently expansionary but forget that, with political will, you also have great power to contract if necessary.

It does puzzle me why Bradley has dismissed bimetallism as inflationist in one of his posts in another thread and yet at the same time claims to champion the idea of a multi-commodity 'privately regulated' money system (when he is not alternatively defending the idea of a pure gold standard, that is... :rolleyes:).

[Bradley in DC]

I guess if it would make Bradley stop his childish whining, I could replace the word "dastardly" with "pernicious". My theoretical concern as devil's advocate was that a "non-free" gold-as-the-only-money standard would enable dastardly acts of hoarding by those who control the money supply.

"Childish whining" aside, take your statement and reverse the statements switching fiat with gold. What, inherently to you, makes using gold as money instead of fiat "pernicious" then? Couldn't banks, under your scenario, "hoard" the fiat money the same way? Seriously, what makes gold inherently different? What the heck is a "'non-free' gold-as-the-only-money standard" supposed to mean? You throw out terms that seem to make sense to you but aren't really used in monetary circles.

I've explained to you, and backed up my arguments, why I know your devilish statement to be false based on economic theory, history and personal experience.


Check out http://en.wikipedia.org/wiki/Bimetallism and in fact we see here that pinning down money to commodities is no panacea against inflation or rampant monetary expansion either.

I've not argued that anything is a panacea. In fact I've often repeated my argument that only socialists argue a fallacy that if something doesn't guarantee Heaven on earth it ought to be opposed. The question here is whether fiat or gold is more likely to be inflationary. Unless you think we're in an environment similar to that of Imperial Spain in the 17th century (http://www.amazon.com/history-money-1450-1920-Foundations-library/dp/0902308181), I would be interested to hear that argument. I can't find on your popular site where it says what you seem to think it says. It does expressly make my point about it being problematic, "This monetary system is very unstable. Due to the fluctuation of the commercial value of the metals, the metal with a commercial value higher than the currency value tends to be used as metal and is withdrawn from circulation as money (Gresham's Law). This occurred in the United States throughout the 19th century as the official bimetallic standard became in effect a silver standard." The lesson is to keep the government from undermining market processes.


We can also see here in this wikipedia article on the "Coinage Act of 1873" http://en.wikipedia.org/wiki/Crime_of_1873 that the conspiracy theory during that time was that it was in bankers' interests to want to switch to a gold-only standard (because gold is rare and they control most of it). This explains why "Money Masters" advises against a gold standard.

Conspiracy theories aside, I'm arguing for the separation of money and the state within the confines of the rule of law (see, for the upteenth time, Hayek's Denationalization of Money (http://www.amazon.com/Denationalization-Money-Analysis-Concurrent-Currencies/dp/0255360878) and other works, Vera Smith (http://www.amazon.com/exec/obidos/ASIN/0865970874/cryptix/002-0000930-9601433), Larry White's works and excellent website of links (http://www.umsl.edu/~whitelh/links.html), Judy Shelton (http://www.amazon.com/Money-Meltdown-Judy-Shelton/dp/0684863944), et al (http://iang.org/free_banking/).)

I'm patiently trying, logically, reasonably, historically and theoretically, to show you why the The Money Masters is theoretically flawed, historically inaccurate and logically self-contradictory. If you believe unquestioningly in TMM as your bible, then no, you certainly don't belong in a sound money forum, by definition, and your views and goals are incompatible with those of Dr. Paul and the expressed agenda of this forum. (unless of course you're referring to the good (http://www.fff.org/freedom/fd0701f.asp) The Money Masters (http://www.amazon.com/review/product/0887309704?sortBy=bySubmissionDateDescending) book, not the movie.)

If you are genuinely intellectually curious and interested in respectful debate and willing to both back up your arguments and keep an open mind, let's have it. If you're just trolling against Dr. Paul's agenda, take it somewhere else. The link you illustrate again makes my point that we need to get away from the system where the government rewards protected special interests. It is your site that explains that the advocates of your arguments were "conspiracy theorists."


It does puzzle me why Bradley has dismissed bimetallism as inflationist in one of his posts in another thread and yet at the same time claims to champion the idea of a multi-commodity 'privately regulated' money system (when he is not alternatively defending the idea of a pure gold standard, that is... :rolleyes:).

Rolling eyes aside, all changes are on the margin. To go from a one commodity money standard that had been adopted through a market process to a government forced bimetalist standard is relatively inflationary. On that point, there is no disagreement. Bimetalism was in fact the goal of the contemporary inflationists. (Just for fun, see here (http://www.wccusd.k12.ca.us/elcerrito/history/oz.htm).)

On the other hand, to go from an unrestrained fiat money system to a bimetalist system is relatively more sound.

[jon_perez]

... and your views and goals are incompatible with those of Dr. Paul and the expressed agenda of this forum. Oh so now you're saying this forum has an agenda that posters have to "be compatible with". Pardon me, but I saw no such notice and thought that this was a free discussion.


If you are genuinely intellectually curious and interested in respectful debate and willing to both back up your arguments and keep an open mind, let's have it. If you're just trolling against Dr. Paul's agenda, take it somewhere else.Nice tactic to control the content of the 'debate' to suit your views. If it doesn't fit within the narrow confines of your personal beliefs, then someone has no business discussing here and they are considered trolls.

We'll let the forum administrator decide that, not you.

What's with all the defensiveness and desire to control the framework of the discussion anyway? My guess is that apart from parroting and copy-pasting from existing sources, you are actually hard-pressed to come up with good, original answers to questions that don't fit your preconceived notions. You'd prefer that the discussion be rigged towards a direction which you can handle. I guess that's one way to make yourself look smarter. Ah well...

[jon_perez]

Check out http://en.wikipedia.org/wiki/Bimetallism and in fact we see here that pinning down money to commodities is no panacea against inflation or rampant monetary expansion either.
I've not argued that anything is a panacea. In fact I've often repeated my argument that only socialists argue a fallacy that if something doesn't guarantee Heaven on earth it ought to be opposed.Sorry about that, I meant "no guarantee"... as in "commodity money is no guarantee against inflation or monetary expansion".

[Bradley in DC]

Oh so now you're saying this forum has an agenda that posters have to "be compatible with". Pardon me, but I saw no such notice and thought that this was a free discussion.

Nice tactic to control the content of the 'debate' to suit your views. If it doesn't fit within the narrow confines of your personal beliefs, then someone has no business discussing here and they are considered trolls.

We'll let the forum administrator decide that, not you.

I'm saying the administrators say it:

"This forum is dedicated to pursuing the agenda of Dr. Paul and seeing his campaign win the 2008 presidential election, the forum[']s structure and guidelines are designed to fulfill this purpose while allowing as much latitude in posting as possible and de-empowering agent provocateurs." (http://www.ronpaulforums.com/showthread.php?t=22)


What's with all the defensiveness and desire to control the framework of the discussion anyway? My guess is that apart from parroting and copy-pasting from existing sources, you are actually hard-pressed to come up with good, original answers to questions that don't fit your preconceived notions. You'd prefer that the discussion be rigged towards a direction which you can handle. I guess that's one way to make yourself look smarter. Ah well...

Defensive? I'm the one challenging you to debate. I started this thread and continue to challenge you now not to "rig" anything but to have you make your case. Please do.
[EDIT: if it would intimidate you less, I could leave out the scholarly citations defending my personal thoughts.]

[jon_perez]

I'm patiently trying, logically, reasonably, historically and theoretically, to show you why the The Money Masters is theoretically flawed, historically inaccurate and logically self-contradictory.No, you haven't. The very first post that came out of you was that I was a troll for even giving Keynesianism, fiat money and the Fed the benefit of the doubt.

Perhaps you were talking about a different post of yours in response to someone else. But really, after looking at your debating tactics, I doubt I'd be interested in what you have to say.

[Chester Copperpot]

Sorry about that, I meant "no guarantee"... as in "commodity money is no guarantee against inflation or monetary expansion".

how can I say this nicely... oh yeah... PISS OFF..


REally man just piss off... its the nicest way I can put it.. Youre a moron.. and your attempt to delude and confuse will not help you

[Bradley in DC]

Sorry about that, I meant "no guarantee"... as in "commodity money is no guarantee against inflation or monetary expansion".

[EDIT: apology accepted.] Good. So we've started an outline of where we agree. That's something. :)

[Bradley in DC]

No, you haven't. The very first post that came out of you was that I was a troll for even giving Keynesianism, fiat money and the Fed the benefit of the doubt.

Perhaps you were talking about a different post of yours in response to someone else. But really, after looking at your debating tactics, I doubt I'd be interested in what you have to say.

You somewhat fairly describe my initial reaction to your, as you now say, poorly worded posts.

However I used the present tense as to what I'm saying now: if you are not a troll and here for honest debate, let's have it.

[jon_perez]

Defensive? I'm the one challenging you to debate. I started this thread and continue to challenge you now not to "rig" anything but to have you make your case. Please do.In case you haven't noticed, I have been making my case in the last several posts. Most of my points in fact you have chosen to ignore and instead elect to badger me and try to pin me down as a "troll".

Yawn...

[jon_perez]

how can I say this nicely... oh yeah... PISS OFF..


REally man just piss off... its the nicest way I can put it.. Youre a moron.. and your attempt to delude and confuse will not help youAnd warm and hearty greetings to you too... :D

[Bradley in DC]

In case you haven't noticed, I have been making my case in the last several posts. Most of my points in fact you have chosen to ignore and instead elect to badger me and try to pin me down as a "troll".

Yawn...

Yes, this is exhausting, but, no, you have not made your case, at least not well. If, when you posit gold is "pernicious," one substituted fiat money in its place, what is the inherent distinction? If you think you've got some idea in your head, please share it, sell it, convince us! [trying to contain my defensiveness]

[Hancock1776]

"Hoarding" is just an economic central planner's pejorative word for "saving." If the money is yours, you are free to spend it or not spend it how you see fit. If it is not yours, then you are a thief. And we already have laws for that.

Market driven interest rates react to the people's saving/spending. The reactions of banks as they try to serve their customers with competitive interest rates on loans or bonds can help keep the people from teetering over into extremes.

Even when the market "doesn't" do its job, it still does. The hard times that result when a bank goes under or the people save or spend too much is all part of the larger market organism pruning out the reckless elements that endanger its health.

The real fallacy was in thinking a little pruning now and again was a bad thing and that we needed a central bank to protect us from the consequences of bad investments. Will there be hard times under a gold standard? Absolutely, but liberty is fundamentally healthier than tyranny, even in economics.

[Bradley in DC]

I missed this post (after I went to bed last night and didn't see it this morning until just now), please put my responses to yours in that order. :o


You're not going to give this a rest, are you? :D

No, I'm not going to give it a rest. :D And I've explained why (devotion to Dr. Paul, personal experience in Peru and because it's the single most important public policy issue).


I would've thought that anyone who was aware of the history of how deflation came about and the effects of a constriction on money supply would not even need to ask that.

Most people don't like inflation and think that deflation is a good thing. But deflation can be just as insidious and oppressive as inflation. If your business relies on credit, deflation and high interest rates hurt just as bad (worse even) than rampant inflation. Again, I thought I had explained this already.

Different people (savers v. debtors) gain or lose, on net, from inflation or deflation. We're all, I should think, in agreement there. Clarifying that we're talking about changes in the general price level (not the CPI) or purchasing power of money, prices should, under a market economy, gently fall over time. Look at the price of computing power to give an easy example staring at you in the face right now. If an economy is growing, and prices are gently falling, the price level is somewhat stable. (Price "stability" is emphatically NOT the goal, but we can pick that up or not as you want.)

More important, IMHO, is the analysis of the Austrian Business Cycle Theory (Hayek's triangles, etc.). Under a fiat system, but generally not with gold (Imperial Spain notwithstanding), we suffer the boom and bust cycle of the economy and the resulting malinvestment and relative net loss because of the artificial credit creation.


You have to ask yourself, which was more painful? The Great Depression or the stagflation of the 70s? Anyway, this is what I had learned when I tried to study the other side of the argument. (And bear in mind, chancing upon the writings of Rothbard, Mises, etc... was what initially stoked my interest in these issues...

There are, of course, many factors to consider in the historical examples. In the 1930s we went off the gold standard domestically and embarked on protectionist trade policies, abandoned our previous underpinnings of the rule of law, negated contractualism, increased central planning and corporatist economic policies of the most wild dirigiste dreams. The 1970s under Carter (http://www.mises.org/story/535), weirdly, ushered in a period of great economic deregulation (http://www.amazon.com/Prophets-Regulation-Charles-Francis-Brandeis/dp/0674716086/ref=sr_1_1?ie=UTF8&s=books&qid=1196697695&sr=1-1) and an end to war finance with the eurodollars being different as well.

[Rothbard and Mises were people, not things, it's "et al." not "etc." ;)]


I don't see how you can account for the dominance of Keynesian thought in the first half to the middle of the 20th century other than that it was a bloody good theory.

Without trying to be dismissive but I've got to get going, please check out The Commanding Heights. In short, Keynes won the battle, Hayek is winning the war. Viva Hayek! :)

[jon_perez]

If, when you posit gold is "pernicious," one substituted fiat money in its place, what is the inherent distinction?You have yet to make a convincing argument why gold, under situations of short supply, will not have a destructive deflationary/recessionary effect. With a fiat money supply, this is not as serious a problem, because, as central bankers have said, "they can always print more money"...

You are operating under the assumption that inflation is bad but choose to ignore the fact that deflation can be just as bad, if not worse (as so many episodes in history can attest to). Inflation eats away at savings, but as long as you have a job you can survive. Deflation, on the other hand, has historically resulted in massive loss of livelihood.

This, of course, is the Keynesian thesis under consideration. What would be the Austrian response to this?

[jon_perez]

Without trying to be dismissive but I've got to get going, please check out The Commanding Heights. In short, Keynes won the battle, Hayek is winning the war. Viva Hayek! :)Sure, I loved the PBS documentary. You seem to think that I am taking sides, I am not. My point has ever been to appreciate where we have come from. As "Commanding Heights" presents it, Keynesianism did seem to work quite well in the past, only to run out of steam after a while and needed a fresh injection of ideas.

Also, what I picked up from CH (the video, haven't read the book) is not of antagonism between one theory that was right versus another theory that was wrong, but rather a portrayal of the evolution of economic thought. Friedman, for example, critiques Keynesianism on its own terms. This would seem to be an acknowledgement that the ideas and concepts developed by Keynes were valid.

[jon_perez]

(Price "stability" is emphatically NOT the goal, but we can pick that up or not as you want.)Does/Can the central banker's concept of 'price stability' account for the fact of varying supply and demand?

I would think that is an implicit assumption otherwise it would be a bogus concept...

[Bradley in DC]

You seem to think that I am taking sides, I am not.

Also, what I picked up from CH (the video, haven't read the book) is not of antagonism between one theory that was right versus another theory that was wrong, but rather a portrayal of the evolution of economic thought. Friedman, for example, critiques Keynesianism on its own terms. This would seem to be an acknowledgement that the ideas and concepts developed by Keynes were valid.

You introduce yourself to the forum basically saying Dr. Paul's agenda is "dastardly" which, yes, gives one strong first impression that isn't going to subside quickly or easily. <makes "I'm watching you" finger gestures>

The CH book is excellent too. Hugely impressed with the documentary--that had to have been difficult given the breadth of the subject. Friedman and Keynes are both positivists. We're market process. Better, IMHO, is to understand from the CH lesson is that we took a detour that didn't work as planned (sorry for the pun) and then corrected course. (Keynes of course was all over the map over the decades.)

[Bradley in DC]

You have yet to make a convincing argument why gold, under situations of short supply, will not have a destructive deflationary/recessionary effect. With a fiat money supply, this is not as serious a problem, because, as central bankers have said, "they can always print more money"...

You are operating under the assumption that inflation is bad but choose to ignore the fact that deflation can be just as bad, if not worse (as so many episodes in history can attest to). Inflation eats away at savings, but as long as you have a job you can survive. Deflation, on the other hand, has historically resulted in massive loss of livelihood.

This, of course, is the Keynesian thesis under consideration. What would be the Austrian response to this?

[Really gotta jet now but putting a placeholder here. In short, ABCT.]

[Bradley in DC]

Does/Can the central banker's concept of 'price stability' account for the fact of varying supply and demand?

I would think that is an implicit assumption otherwise it would be a bogus concept...

That would have to be a new thread, which is fine.

[jon_perez]

prices should, under a [true] market economy, gently fall over time.This would indeed be a kind of utopia. But why should this be necessarily so? Supply and demand do not move monotonically and this would certainly not apply to non-replenishable natural resources and the products based on them.

[fsk]

Does/Can the central banker's concept of 'price stability' account for the fact of varying supply and demand?


Under the Federal Reserve, there is no real "price stability". You have a steady inflation rate of 6%-15%, which is entirely different from price stability.

With unregulated free banking, banks can issue trusted paper promises for gold to expand the money supply. This is *NOT* inflationary if those loans are backed by actual goods and services. In a free market, if a bank tries to issue too many paper promises for gold, it will find itself flooded with redemption requests.

[jon_perez]

You introduce yourself to the forum basically saying Dr. Paul's agenda is "dastardly" which, yes, gives one strong first impression that isn't going to subside quickly or easily.I am quite sure you read much more into that statement than was intended. As well, part of the exercise was to try to be devil's advocate and get more robust answers.

Frankly speaking, I was rather disappointed by the attitudes I encountered. But maybe there were indeed some misunderstandings.

[Lord Xar]

Without reading all 9 pages, can someone tell me the following.

1. Did jon_perez answer the original questions put forth by bradley?
a. If not, why is this thread 9 pages long?

He didn't take you all on a wild goose again, did he?

[fsk]

1. Did jon_perez answer the original questions put forth by bradley?
a. If not, why is this thread 9 pages long?

He didn't take you all on a wild goose again, did he?


The trolls are winning.

The real problem is that this forum needs some sort of moderation feature. I was thinking of writing my own forum engine at some point.

When people make a biased false argument, I feel morally obligated to respond, because otherwise people will see the false reasoning and assume it's right.

[angelatc]

If an economy were operating on the gold standard and banks loaned out the gold at an interest rate higher than the rate increase of the total gold supply, what's to prevent the bankers from eventually owning all the gold?

Duh. Demand. None of the factors in your equation is static.

[jon_perez]

When people make a biased false argument, I feel morally obligated to respond, because otherwise people will see the false reasoning and assume it's right.Right, the argument is "biased and false and trolling" because it doesn't jive with your own beliefs and because you say so... :rolleyes:

[jon_perez]

With unregulated free banking, banks can issue trusted paper promises for gold to expand the money supply. This is *NOT* inflationary if those loans are backed by actual goods and services.Backed by "actual goods and services" or backed by gold? Which is it? How would a mechanism wherein notes are "backed by actual goods and services" work? How would one redeem the latter?


In a free market, if a bank tries to issue too many paper promises for gold, it will find itself flooded with redemption requests.And are you saying that you do not consider fractional lending of gold to be a problem?

[jon_perez]

If an economy were operating on the gold standard and banks loaned out the gold at an interest rate higher than the rate increase of the total gold supply, what's to prevent the bankers from eventually owning all the gold?Duh. Demand. None of the factors in your equation is static.How would 'demand' prevent the bankers from eventually accumulating/owning all the gold? More demand for gold would actually put the bankers in a stronger position to raise interest rates for the lending of gold and speed up such a process.

[angelatc]

How would 'demand' prevent the bankers from eventually accumulating/owning all the gold? More demand for gold would actually put the bankers in a stronger position to raise interest rates for the lending of gold and speed up such a process.

Have you taken even one basic level economics class?

[Bradley in DC]

[Prices naturally falling over time] would indeed be a kind of utopia. But why should this be necessarily so? Supply and demand do not move monotonically and this would certainly not apply to non-replenishable natural resources and the products based on them.

Stop thinking like a socialist. Not a personal attack, but seriously: instead of macro, join us and think micro. The fallacies of oversimplified "aggregate supply and aggregate demand" (and yes, this one time, I'm putting words in your mouth) are well established.

Go to the example I used with computing power. Think about any other one thing. In a normal production cycle there are (to some degree) fixed costs, start up costs, etc. If one understands marginal cost pricing (Google it or look at the book I linked to previously under the Carter deregulation section), you'd understand that prices should gently fall over time for all goods. Yes, of course, new products will come on the market (HD TVs are more expense than my old ones), but for each product, yes, the real prices should fall over time (yes, in a market economy as you clarified).

[Bradley in DC]

Without reading all 9 pages, can someone tell me the following.

1. Did jon_perez answer the original questions put forth by bradley?
a. If not, why is this thread 9 pages long?

He didn't take you all on a wild goose again, did he?

There has definitely been a wild good chase again, yes. That said, with great teeth-pulling, he's refining his answer marginally. But, no, not really, not to my satisfaction at least.

[Lord Xar]

There has definitely been a wild good chase again, yes. That said, with great teeth-pulling, he's refining his answer marginally. But, no, not really, not to my satisfaction at least.

See, this is a big issue. This what the 'trolls' do. I say "troll", at this point, because when given questions and you just keep playing round robin or deflecting with questions or steering the conversation is dishonest.

I would say, 'IF' he doesn't answer your question point blank. Then you should dismiss him as he dismisses your questions.

Liberals/socialists do this alot. Do you think he actually read ANY of your resources or references? It is like a neocon. You use references to foreign policy, and writings that support your argument and they still parrot their same position. I think his ONLY reason here is to dissuade those from following or believing in Ron Paul's monetary policy, OR just any opposition to the 'current' money policy implementation.

See, he controls the threads because he uses your passion for monetary policy against you. He/she knows that you will get sidetracked by his/her nicely veiled attaks and insinuations.

[Bradley in DC]

See, this is a big issue. This what the 'trolls' do. I say "troll", at this point, because when given questions and you just keep playing round robin or deflecting with questions or steering the conversation is dishonest.

I would say, 'IF' he doesn't answer your question point blank. Then you should dismiss him as he dismisses your questions.

Liberals/socialists do this alot. Do you think he actually read ANY of your resources or references? It is like a neocon. You use references to foreign policy, and writings that support your argument and they still parrot their same position. I think his ONLY reason here is to dissuade those from following or believing in Ron Paul's monetary policy, OR just any opposition to the 'current' money policy implementation.

See, he controls the threads because he uses your passion for monetary policy against you. He/she knows that you will get sidetracked by his/her nicely veiled attaks and insinuations.

He has not read the references provided, no. That is pretty obvious. Nor do his responses generally acknowledge an understanding of the explanations I give, no. He was, I suspect, frustrated that I restated my singular question in every post when I answered.

[AoiMasamune]

I would like to interject at this point that I am not a troll as fsk has indirectly refered to me. I jumped in to defend jon_perez because I felt his concern held merit. I am a long time lurker, this was merely the catalyst that caused me to start posting.

That being said, I'm going to attempt yet another thread to address this in a civil manner because I really want to find a solution.

I still don't think jon is a 'troll'. I don't think he is an economist, I'm not either. I'm a normal joe computer programmer, who also has a love for philosophy and economics, in that order. After going back and reviewing way too many pages of posts, I am going to suggest once again that what is going on here is entrenched defense positions causing both sides to not listen to the other. Theres too much debate of semantics and vocabulary going on to allow for a meaningful discussion of ideas.

[Bradley in DC]

Theres too much debate of semantics and vocabulary going on to allow for a meaningful discussion of ideas.

Or, jon_perez could just stop obfuscating and answer direct questions. ;)

[jon_perez]

We could go back and forth about who is trolling who, but the simple fact is that I was the one who asked the question first and instead of getting some real answers, what I got was malicious innuendo regarding my motives and more questions in return.

I asked: In a gold-only standard, what would prevent bankers from charging an interest rate higher than the rate of increase in the gold supply and gaining proportionally more and more control of the supply?

There were in fact, a couple of replies which were worthy of consideration, but I notice that the people who resorted to hasty innuendo were the ones who did not bother answering the question satisfactorily in the first place. Simple question deserved a simple answer.

In fact, I finally came up with one myself that I could tentatively accept: bankers would compete with each other to offer the lowest lending rate. But that presumes that cartels and monopolies would not arise. One successful example - Scottish banking of a particular period - is not enough because it might have been an exception. Just like we could allow for the fact of high inflation arising in a gold-money regime (Spanish empire) might have been an exception.

Also, another important question went unanswered:

How would it be feasible for the US to unilaterally go on a gold standard? Wouldn't this allow other countries on fiat to drain US gold reserves?


Stop thinking like a socialist. Not a personal attack, but seriously: instead of macro, join us and think micro. The fallacies of oversimplified "aggregate supply and aggregate demand" (and yes, this one time, I'm putting words in your mouth) are well established.Ok, at least we've established something. You are of the opinion that the field of macroeconomics is largely bogus. Macroeconomics, to go by that, is a tool of socialism (and so even Friedman would count as a socialist... :eek: )

This is probably the reason why the whole debate is such a nonstarter. Your viewpoint is so far to the "right" that you refuse to even engage using the vocabulary of current monetary thinking. I can appreciate to some extent why, but you have to realize this is why you have your work cut out for you.

May I suggest then that you ought to try harder and not resort to unsavoury tactics next time? More power to you in your quest, and I mean that sincerely. But I'm sure you recognize other people's right to remain agnostic about the issue and have the freedom to ask questions.

[TaxSlave]

I'll try to answer your question, from an amateur's view:

A gold-only standard would be the same as a fiat money standard, except with a limitation on inflation.

Which one is more dastardly? A banking system hoarding gold (and putting itself out of business in the process if it takes it all out of circulation), or valueless debt money that is created with unpayable interest? I'd say the nonlinear increase in interest debt is the more dastardly because of the fact that not only is the creation of the notes without value a crime, but charging the bearer interest on them indebts us in perpetuity. And it is the more dastardly because ever greater amounts of new debt money must be lent to satisfy the interest payments, so recession or collapse is inevitable, and in either event the bankers end up with all of the money and all of the property.

As has been explained in other posts, the removal of government force, to allow competing or alternative currencies, provides a market mechanism to stop hoarding of gold. If gold becomes very rare from hoarding (prices fall), people will stop selling their goods for such a small amount of gold if they can do better with debt instruments or other metals. I'll add to that my opinion that the government's constitutional role in all this is to maintain a standard of weights and measures. The constitution allows states to make their own coins, as long as they are of gold and silver. And it allows the states to make their own legal tender laws (which might be subject to abuse).

If wealth keeps getting created and the supply of metals were static, it simply results in lower prices, same as or better than getting taxable interest on deposits. But as long as other metals or debt instruments can be traded, the public is protected from the theft of all of their wealth. Debt instruments can be and are traded as money, and if the terms are better than borrowing gold at interest, who would borrow gold?

On the other question, as to whether other countries' fiat money could drain gold reserves (whose reserves?). Only if the gold were traded for the fiat currency at a fixed rate. Why would you sell your gold for paper that falls in value?

I'm nowhere near as well schooled as Bradley on this subject, but that's an honest attempt by me to examine the issues you raised.

That said, I don't believe you have been very diligent at explaining the basis for your positions. Why don't you at least attempt to answer the question?

[jon_perez]

I'll try to answer your question, from an amateur's view:

A gold-only standard would be the same as a fiat money standard, except with a limitation on inflation.True. The theoretical danger with a gold standard that I posited was the opposite: deflation, high interest rates and massive unemployment brought about by *too little* a money supply. My question that remains unanswered: What free market mechanism(s) would prevent cartels and monopolies from arising that artificially constrict the gold supply?


Which one is more dastardly? A banking system hoarding gold (and putting itself out of business in the process if it takes it all out of circulation), How easily you forget history, Americans have railed against a pure gold standard in the past and blamed "foreign bankers" for constricting the gold money supply. This made life extremely difficult for businesses who owed banks money. Falling prices meant lower income for businesses, which means less money with which to pay the bank's interest. And if businesses are unable to pay the interest, foreclosure results:

See http://en.wikipedia.org/wiki/Bimetallism, http://en.wikipedia.org/wiki/Coinage_Act_of_1873 and http://en.wikipedia.org/wiki/Panic_of_1893



I'll add to that my opinion that the government's constitutional role in all this is to maintain a standard of weights and measures. The constitution allows states to make their own coins, as long as they are of gold and silver.Of course the problem of bimetallism crops up again. What is the proper ratio between gold and silver? The answer is the government cannot/should not set such a ratio and would instead have to let supply and demand set it.

Why so? Because if the government made silver and gold coins that, for example are worth 25 cents (silver) and 5 dollars (gold) respectively, for a ratio of 1:20, when gold prices are above 20x silver, people will be encouraged to hide (or melt) their gold dollars and the economy will effectively move towards monometallism. Gresham's Law - "bad money drives out good". This *has* happened in the past.

This is why the most conservative step that can be taken is merely to remove capital gains taxes on holding of gold and silver and not necessarily create gold/silver coins or even back FRNs with silver/gold. Untaxed gold/silver transactions would act as a warning canary for when the Fed inflates the money supply. This, of course, already occurs today, but taxes add a fair bit of 'friction' to the process.



Debt instruments can be and are traded as money, and if the terms are better than borrowing gold at interest, who would borrow gold?FRNs can be thought of as debt instruments, but due to fractional lending, grossly inflated ones.

Why can FRNs be loosely considered as "debt instruments"?

First of all, contrary to any misrepresentations that you may have heard, the Fed does not create money 'at will'. Money is created when banks or the government borrow from the Fed, hence 'debt-based money'. The Fed lends to the banks presumably with the bank's assets as collateral and to the government presumably with the nation's assets (incl. taxes) as 'collateral'. Stop the government from borrowing too much from the Fed and you will have removed much of the impetus for the creation of new money.

The real power of the Fed is in setting interest rates. The Fed cannot increase the money supply if no one borrows from them, *however*, if it sets interest rates at a very low level, it would encourage a lot of borrowing and *this* is what will possibly lead to an inflated money supply. Throw in situations where the Fed engineers bailouts of financial institutions that are deemed 'too big to fail' by 'injecting liquidity' or by aggressively lowering interest rates and you get your recipe for inflation.




On the other question, as to whether other countries' fiat money could drain gold reserves (whose reserves?). Only if the gold were traded for the fiat currency at a fixed rate. Why would you sell your gold for paper that falls in value?I'm thinking of the situation wherein USD notes are redeemable for (e.g. backed by) gold but other countries' currencies aren't. Example: The US imports from China and pays for it with gold-backed USDs. China can then opt to either spend its USDs by buying US assets or can exchange it for gold. Now, if the yuan weren't redeemable for gold, the gold flow would essentially be one-way.

[TaxSlave]

I didn't advocate for a gold-only or bimetallism-only standard. Either creates an artificial standard of value by fiat. If the government plays its role by setting standards for weights and measures, but doesn't use legal tender laws to make other forms of currency illegal, then it will be unproductive to try to artificially restrict the gold or silver supply. Coins can be by weight and purity of whatever metal, and taxes can be percentage of value, expressed in conversion to any of a number of different value units.

I already know FRN's are debt instruments. When I spoke of debt instruments, I meant debt instruments backed by something other than faith and a gun, with unpayable interest attached to its creation and spent into the economy without any value creation first. A mortgage, bond, or IOU would be a legitimate debt instrument with real value. As opposed to FRN's which put us in perpetual debt servitude to those who create nothing of value.

If China has paper money and sells goods for real money, it seems that the paper money would quickly collapse. Why would people there sell for paper when they can get value instead? And what good would it do for Chinese people to just hoard gold rather than spend it? If we continue to outlaw production here as we do at present, and the trade imbalance continues, and the Chinese want to buy U.S. assets, who here is going to sell them for yuan?

It's been awhile since I self-schooled in this stuff. Anyone with better knowledge, please correct me.

[TaxSlave]

In other words, with competing forms of currency, if one becomes rare, people will switch to others, and those holding the rare form will have every incentive to spend it after its relative value goes up.