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Economics: Gold Standard, Silver Standard, Fiat, Miscellaneous?

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AllanAssiduity Since: Dec, 1969
#1: Apr 2nd 2011 at 12:51:35 PM

Topic from the derail in tnu's U.S. Constitution thread.

Continue at will. My latest post post from there:

What is wrong with fiat money? What is wrong with Keynesian economics?

If you do not believe that an economy should be based on the shared dream of what everyone thinks the currency is worth, it strikes me that perhaps you should reason for a barter-based economy. Both gold and silver standards restrict the use of their respective precious metal, which is an inherent disadvantage.

Furthermore, inflation is not always bad. It is encouraged by politicians because a) it encourages people to spend rather than save *

which is good for the economy, * b) people like rising wages, which is linked to inflation and c) in modern economies, it encourages companies to invest in new technologies.

tnu1138 Dracula Since: Apr, 2009
Dracula
#2: Apr 2nd 2011 at 12:58:08 PM

Here's another one the Fed can pretty much without a set standard printi t at will. Hand it out to corperet friends and continue behind closed doors. There is little to no transparnecy in our system and its only serving to feed the fat cats on wall street instead of creating a dynamic human economy.

We must survive, all of us. The blood of a human for me, a cooked bird for you. Where is the difference?
johnnyfog Actual Wrestling Legend from the Zocalo Since: Apr, 2010 Relationship Status: They can't hide forever. We've got satellites.
Actual Wrestling Legend
#3: Apr 2nd 2011 at 12:58:15 PM

Hold on. Amateur question time. How does the gold standard run opposite to Keynesianism? After all, the Bretoon Woods system didn't end until the Nixon Shock ('71).

I'm a skeptical squirrel
JosefBugman Since: Nov, 2009
#4: Apr 2nd 2011 at 1:05:59 PM

Because gold has no ability to increase its quantity, Keynsian economics requires people to continue to gain more money at boom times in order to store it away and invest it. It also means that there is only a certain amount of capital that can exist at any one time.

lee4hmz 486-powered rotating frosted cherry Pop-Tart from A shipwreck in the tidal Potomac (Before Recorded History) Relationship Status: Chocolate!
486-powered rotating frosted cherry Pop-Tart
#5: Apr 2nd 2011 at 1:07:23 PM

If you think about it, gold is just another commodity (albeit a highly-valued one) and as such is still subject to things like market manipulation, bubbles and dumping. Unlike the platinum-iridium rod, its worth is not immutable, and if push comes to shove, you can't eat it like you could, say, wheat grains.

online since 1993 | huge retrocomputing and TV nerd | lee4hmz.info (under construction) | heapershangout.com
AllanAssiduity Since: Dec, 1969
#6: Apr 2nd 2011 at 1:08:45 PM

^^^^ Are you implying that the way to make a dynamic economy is to fix your economy, locking it down?

^ This was another point. Gold's value is not fixed - indeed, a return to the gold standard forces a change in it's value!

edited 2nd Apr '11 1:09:44 PM by AllanAssiduity

JosefBugman Since: Nov, 2009
#7: Apr 2nd 2011 at 1:11:06 PM

Which is why we should put our currency on the robot standard.

Usht Lv. 3 Genasi Wizard from an arbitrary view point. Since: Feb, 2011
Lv. 3 Genasi Wizard
#8: Apr 2nd 2011 at 1:12:14 PM

Whelp, Japan has it in the bag then.

The thing about making witty signature lines is that it first needs to actually be witty.
AllanAssiduity Since: Dec, 1969
Jordan Azor Ahai from Westeros Since: Jan, 2001
Azor Ahai
#10: Apr 2nd 2011 at 1:13:06 PM

@Josef- Is that like the golem-based currency in Discworld? In that case, Japan would be the wealthiest country, since they have the most robots.

Edit- Ninjaed.

On topic, having fiat currency is what allows their to be a substantial middle class. If America was on the gold standard, the level of economic inequality would be much much worse.

edited 2nd Apr '11 1:14:17 PM by Jordan

Hodor
Karalora Manliest Person on Skype from San Fernando Valley, CA Since: Jan, 2001 Relationship Status: In another castle
Manliest Person on Skype
#11: Apr 2nd 2011 at 1:15:14 PM

The gold standard is a form of fiat currency. Gold is only valuable because we think it is, just like cotton-linen bills and electronic money. As lee points out above, we can't even eat gold, and I would add that its few utilitarian uses are not available to the average citizen, who does not manufacture space helmets.

If you ever want to read a terrific layman-directed summary of why the gold standard is not actually necessary, read Making Money. It comes with a funny story included for free!

edited 2nd Apr '11 1:16:48 PM by Karalora

Stuff what I do.
lee4hmz 486-powered rotating frosted cherry Pop-Tart from A shipwreck in the tidal Potomac (Before Recorded History) Relationship Status: Chocolate!
486-powered rotating frosted cherry Pop-Tart
#12: Apr 2nd 2011 at 1:17:21 PM

Jordan: Not only that, but it would be much easier to crash the world economy, 2008-style: If you have a lot of gold, just sell all of it at fire-sale prices (i.e "dumping").

online since 1993 | huge retrocomputing and TV nerd | lee4hmz.info (under construction) | heapershangout.com
JosefBugman Since: Nov, 2009
#13: Apr 2nd 2011 at 1:19:00 PM

Yep, the discworld "golem standard" would be what I would like to put RL currency on. But then again I would like Vetinari to be running my country.

Ratix from Someplace, Maryland Since: Sep, 2010
#14: Apr 2nd 2011 at 1:21:48 PM

Since even gold is fiat-value, we need something that has intrinsic value. Hello oil standard!

lee4hmz 486-powered rotating frosted cherry Pop-Tart from A shipwreck in the tidal Potomac (Before Recorded History) Relationship Status: Chocolate!
486-powered rotating frosted cherry Pop-Tart
#15: Apr 2nd 2011 at 1:22:59 PM

Also, gold isn't a particularly good metal for utilitarian purposes; it's pretty, relatively rare, and doesn't tarnish, but it's also heavy and soft like lead. If you wanted something that was pretty, didn't tarnish and didn't bend just by looking at it sideways, titanium or one of the aluminum alloys (or hell, even stainless steel) would be a better choice.

online since 1993 | huge retrocomputing and TV nerd | lee4hmz.info (under construction) | heapershangout.com
tnu1138 Dracula Since: Apr, 2009
Dracula
#16: Apr 2nd 2011 at 1:23:21 PM

That's actually a pretty damned good idea.

We must survive, all of us. The blood of a human for me, a cooked bird for you. Where is the difference?
Karalora Manliest Person on Skype from San Fernando Valley, CA Since: Jan, 2001 Relationship Status: In another castle
Manliest Person on Skype
#17: Apr 2nd 2011 at 1:29:28 PM

Any sort of metal is a bad idea for an "absolute" currency unless the population at large are metal-workers. Unless your standard for currency is something that the average citizen can make use of on its own, then the only reason most people will carry it is for its barter value, and then you're right back to fiat money. I guess the lesson here is that fiat money is no bad thing.

Stuff what I do.
TheyCallMeTomu Since: Jan, 2001 Relationship Status: Anime is my true love
#18: Apr 2nd 2011 at 1:31:06 PM

I have yet to hear any convincing argument or evidence to suggest that a more Keynesian model should not be implemented, rather than a less Keynesian model.

Jordan Azor Ahai from Westeros Since: Jan, 2001
Azor Ahai
#19: Apr 2nd 2011 at 1:31:16 PM

So, is barter currency seen as a good thing by supporters of the gold standard? That would make sense, because I was thinking about clipping of coins during the time that gold and silver coins were used in Europe, and with the steel example, I'd imagine that a stainless steel watch might be more valuable if there was a steel-based currency.

Hodor
Karalora Manliest Person on Skype from San Fernando Valley, CA Since: Jan, 2001 Relationship Status: In another castle
Manliest Person on Skype
#20: Apr 2nd 2011 at 1:38:49 PM

By "barter value" I meant that with pure money, such as gold coins or the money we use in the modern day, the only thing you can do with it is trade it for something you can use directly. I wasn't referring to direct barter of one useful good for another.

Although it might be more accurate to say that the most efficient thing you can do with money is trade it. I could jot down my grocery list on a dollar bill, but it would be a more efficient better use of said bill to buy a pad of 50 slips of paper with it, and have grocery lists for almost the entire year. The bill's value transcends its use as a physical paper object.

A blacksmith would be able to get direct use out of their money if we had a steel-based currency: they could take it into their workshop and make tools out of it, which they could then use. But I'm not a blacksmith. The only thing I could do with a steel bar is trade it. As far as I am concerned, that steel bar would be fiat money, valuable because other people agree that it is valuable and will give me stuff in exchange for it.

Stuff what I do.
lordGacek KVLFON from Kansas of Europe Since: Jan, 2001
KVLFON
#21: Apr 2nd 2011 at 2:02:34 PM

You know, I was wonderin', can a currency be based on land? Not on a given mass of gold, but on a set area of state-owned land. I am neglecting here the issue of where it is and what is the quality of it. Could it work? Quick peek at The Other Wiki says it's been done once at least, but only as a transition currency to beat the hyperinflation, at which point it was replaced by gold standard.

"Atheism is the religion whose followers are easiest to troll"
JosefBugman Since: Nov, 2009
#22: Apr 2nd 2011 at 2:06:03 PM

The problem with land is that it to is not going to last forever and the best way to acquire more usually requires taking other peoples.

lordGacek KVLFON from Kansas of Europe Since: Jan, 2001
KVLFON
#23: Apr 2nd 2011 at 2:09:16 PM

Yeah, another thing I neglect is whether it would lead to wars over territory.

"Atheism is the religion whose followers are easiest to troll"
Tzetze DUMB from a converted church in Venice, Italy Since: Jan, 2001
DUMB
#24: Apr 2nd 2011 at 2:17:13 PM

Nevermind, dumb.

edited 2nd Apr '11 2:17:40 PM by Tzetze

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AllanAssiduity Since: Dec, 1969
#25: Apr 2nd 2011 at 2:21:02 PM

Would that not just mean "biggest country is the richest"?


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