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

Soviet Union wins Cold War!

Would that mean they're the richest, or that their currency is the strongest? And explain it to me, what is the difference between the two. *is stupid*

It just suggests it's the biggest country, I wasn't being serious.

I suppose the value of a land would be based on the value of natural resources that country possesses. Which would be pretty much identical to what we have now, except Japan would be a third world nation.

1. Gold has far more uses then the lot of you can think of. It is a big component in any electronically based industry and is used as a conducting agent.

2. Focusing your value of your currency on a single type of object is a sure fire way to have it bite you in the ass. A diverse currency of precious metals would be a better choice. Like say gold, silver, and Palladium.

Fun Fact Canada has Palladium Coins. (Non Currency)

edited 2nd Apr '11 2:39:45 PM by TuefelHundenIV

Oh I will admit Gold has its uses in the electronics industry, its just that it would take a LOT of electronics to get through (say) fort knox.

Oh indeed it would. It also has a lot of use in various industries as a flux, it is reasonably corrosive resistant. Gold's value lies more in it's increasing value as an industrial material.

^ I pointed it out on the original topic: the gold standard is problematic because it's new uses mean it makes industries which use gold somewhat impaired.

^^ But it's main use economically is still jewelry, particularly in India.

Anyway, even with a commodity based currency like gold, it would still largely be fiat, except with the extra disadvantage of constraining supply of the given commodity for actual uses.

Everyone has a point. Gold has value because well we say it does. Same goes for the dollar.

The difference is that "we" doesn't refer to the global population when you're looking at the dollar, because it's relative to other currencies.

Gold, on the other hand, has the "we" refer to the world. It is the world that sees gold as valuable or not. The point of a gold standard is that our currency will always have a flat value relative to other currencies.

Which is basically just a really great way to get into a liquidity trap.

Gold seems to be a bit too rigid to be a reliable currency. I would still prefer if we go with precious metal based values to use more then simply gold. Gold, Silver, Platinum, and Palladium are all excellent candidates.

That and gold as a historical currency had quite a few problems internationally.

edited 2nd Apr '11 4:32:40 PM by TuefelHundenIV

You guys are missing the forest for the trees, here.

The problem isn't that there is fiat money, the problem is that the fiat money is the ONLY money and the government issues it.

Free competition in currencies would be even better than a gold standard. A gold standard is only a temporary solution, as it definitively slows down government growth and prevents politicians, bankers, etc from inflating as a way to avoid the pain of raising taxes. Ideally, there would be no Legal Tender, no central bank, just privately issued currency backed by whatever the issuer wanted (nothing, diamonds, gold, discounts at Costco, etc). Admittedly there would be some chaos for the first month or so as people tried to figure out exchange rates and everyone would be stuck holding potentially worthless money, but eventually clear exchange rates would emerge. Furthermore, if anyone tried excessive inflation, they would be forced out of the market, leading to a small ripple at worst as other currencies took over.

As for America we'd need an ammendment for that because of the commerce clause.

Free competition in currencies? Is that basically not the collective world economy?

I'm just saying that for the US it would need an ammendment because right now it would be in violation of the commerce clause. only the federal government has the power to print and coin money. That power isnot granted to the states.

Free competition money has been done before and created a whole host of problems. Namely the incredibly wild fluctuations of values between the various currencies.

As for the economy being that. Not that I know of.

The reason that power is no longer with the states is the failure of the articles of the confederation. At that point the states all had their own monies.

edited 2nd Apr '11 5:02:23 PM by TuefelHundenIV

^^ I wasn't talking to you, but I recall something about a currency being established in America purely because there were competing currencies in America. American economics in America is not my strongpoint.

^ Also, this. Stability is paramount.

edited 2nd Apr '11 5:03:06 PM by AllanAssiduity

Fiat money.

Libertarians will note that any advantages it has over the gold standard are dependent on the state not devaluing it through bad behavior. But when the state goes bad, you have much bigger problems than inflation anyway.

Rott: Hello there haven't seen you around lately. Good point by the way.

Privately issued currency? When (beside the medieval ages and Switzerland)?

Also, stability is not necessary, nor is it guaranteed by fiat currency, anyway. The current economic situation in terms of currencies is anything but stable, largely because central banks can (and almost always will) manipulate things to their own benefit without much repercussion.

Nothing controlled by market forces is stable, yet they work themselves out to be functional and dynamic. Food prices sure aren't stable, but I don't think many people here want to set up a single "Central Food Bureau" in all countries to ensure food stability.

Also, if you really wanted too, I suppose you could keep regular Central Bank fiat money around alongside the private sector currencies. It is pretty obvious, however, that the fiat money would become practically worthless after a couple years. Central bankers know this quite well (as can be seen by the arrest of the fellow who started "Liberty Dollars").

Finally, the current economic system is not the same at all. Yes, there are lots of currencies. They are all backed by nothing except each other, and actual competition is not allowed.

Privately issued currency would fail even faster. There is no guarantee of the value of the currency other then what the maker says it is. All you would be doing is creating a new business market. That of currency production and issue and all the problems that go along with it.

There was also privately issued currency by some parties in the American Confederation and was part of the whole issue of competitive currencies. Not very large scale but it happened. Also it was long ago established that no private individual or company shall issue their own currency. Not only is his money effectively worthless other then selling it for the gold it is not a recognized currency. He used tactics that were deliberate deception to make them seem to have recognized value.

We also tried it later on broader scale.

The other issue is if the issuing agency goes under every single dollar of theirs is worthless.

Ok found something that you might be interested though.

Functional private currency backed by the U.S. dollar is used though. In Berkshire county, Mass. Also there is something called Ithaca Hours an exchange of labor for hours also exchangeable for U.S. dollars.

Hmm I could see this maybe working on small local scales backed by banks and the dollar.

Aside from the liberty dollar which had pretty no realistic backing to make it acceptable I guess I could concede the possibility of private currencies working as long as they are backed sufficiently.

edited 2nd Apr '11 6:39:00 PM by TuefelHundenIV

Rott's made a good point, when fiat money goes bad you've got other issues.

I like the idea of a land standard, though. You have, say, an acre of undeveloped land chosen and owned by the state in an accessible location. The basic unit of currency is, say, 10,000 of what that land would be worth on the open market. And it stays that way.

Actually, you are messing up what defines value. The value would be what the market gave to it, as in how much people would be willing to pay for it and how much the maker would sell it for (in goods). All value is subjective, so it wouldn't make much of a difference. It would be worth what people considered it to be worth, which would depend on the reliability of the producer and on who would accept it. This would be a good incentive for it to NOT be fiat money, but backed by something (by gold would be the obvious option, but it could also be created by a corporation as a discount at their stores like Canadian Tire money).

In the US, there are any number of issues stemming from the constitutional controls on money. It explicitly states that the only form of legal tender can be gold and silver backed money, making the current system unconstitutional. It does not state that there must be legal tender, but it states that the US states can't issue their own money. It wasn't privately issued money that caused problems, it was the states issuing their own fiat money.

The notion that something is worth what people think it is worth suggests that there's really no such thing as fraud. That is, Head-On Apply Directly to the Forehead is a perfectly viable product.

Yeah, not really buying that definition of market value.

All value IS subjective, though. It is one of the major things that defines almost all major economic schools, called "Marginalism". There is no other way to define it objectively.

If some guy sells his mansion and cars for twenty bucks, then that is what they are worth, regardless of what people would or could buy it for. However, it isn't worth anything unless someone is actually willing to buy (so a person who tries to sell his shoes for a billion dollars isn't making that particular brand of shoe worth a billion dollars unless someone actually buys it)