Money

[SeanEdwards]

What is sound money?

The idea is that the currency represents a claim to something of real value. Such as a precious metal, like gold. Each unit of currency is a tiny contract of ownership of something materially valuable.

Modern fiat currency represent a tiny contract of ownership, except it represents ownership of faith, and not an actual material thing.

A complaint against classic commodity backed curency is that manipulation of the physical commodity that backed the currency could lead to disastrous effects on the economy. A simple way to visualize this is to imagine how the relative value of gold might change if a technology to cheaply create gold out of dirt was discovered.

Another argument against the commodity standard is that it does not adequately index the real material wealth of a society. It artificially restricts the economy to the quantities of shiny metal that can be dug out of the ground, and does not reflect the wealth growth created by sectors of the economy that are not part of precious metal mining.

So what is the best way to create sound money that represents true material wealth, without arbitrarily basing it on a potentially dangerous foundation such as a single precious metal? This is what I'm thinking, and I'm interested to hear what others think:

What if U.S. currency essentially represented stock shares in what amounts to a holding corporation that is the U.S. Federal government? The idea is that the relative value of that currency would be linked to the assets of this holding corporation. The Federal government would be tasked with managing this wealth much as corporate boards manage the wealth of public corporations. Congress would create commitees to make decisions regarding the distribution of this wealth, some of which could exist as reserves of precious metals, some as long-term industrial contracts, some as contracts of debt with private banks and individuals, some as shares in valuable physical entities like bridges, utilities, and other infrastructure. The important thing would be that the relative value of that currency would be managed in open public fashion, with all holders of the currency treated similarly to how shareholders are treated by corporate entities.

Corporations can not just make stock shares out of nothing without recognizing the effect that this value dilution has on existing shareholders. I'm thinking that Government monetary policy should follow a similar principle. Am I way off base here? Any economists in the room want to chime in? :D

[Ponce]

What really backs up money is the labor and goods that a paticular nation places behind it and under those conditions then gold is not needed, that's why the fiat is dead because we no longer produced anything that the world wants, all that we produce is paper work.

A nation can only die if it is killed from the inside and the pulse of ours is weak thanks to those allowed to control it.

The trust of other nations for our dollar can return only if we first place our on trust on it and that can only be done when we start oppening new factories to replace those that has gone overseas........ little factories with little peoples stays home and are the heart of a pioneering America and not gready large companies that all they care about is the LARGE profits for the few.

[Bradley in DC]

Some good sites:

FAME.org

CMRE.org (http://cmre.org/)

Mises.org

http://www.ex.ac.uk/~RDavies/arian/libertarian.html

and just for fun:
http://www.wccusd.k12.ca.us/elcerrito/history/oz.htm

[Oddball]

http://www.realityzone.com/creature.html

[Brandybuck]

What really backs up money is the labor and goods that a paticular nation places behind it...
Money is a medium of exchange, nothing more. It isn't backed by labor, that's a rather Marxist idea. It can be backed by commodity goods, but even that isn't necessary. All that is required is that people trust it to hold its value long enough in order to use it for the purpose of exchange.

Of course, we want the value of money to be extremely stable. That why so many of us want to move away from fiat money, away from fractional reserve banking. Some of us want to go to a gold standard, or other commodity backing, but that isn't strictly necessary. A "free market" in money could very well choose something else.

[Ponce]

Lets face it, the problem of money started when the money keepers found out that they could give out more IOU's than the gold that they were holding and then collecting the isterest with out giving anything to anyone else.

As you know for every dollar of yours that a bank is holding that's equal to ten dollars that they can give out out on loans, I forgot exactly how it works but I read somewhere that that one dollar could go as high as twenty one to twenty six dollars.

What really killed the US $$$ was when the Federal Reserve was formed behind the back of the mayority of congress being present and were giving the RIGHT to print money out of nowhere.

JFK was the first president that tried to get rid of the Federal Reserve by printing real money....... by the way that law is still in the books.

Brandy? you say ......It isn't backed by labor....... do you mean that no one should work and simply go on welfare?, even that would not work because the welfare money would have to come from those who are producing something.