It would be best if the legal tender status of the dollar were repealed.

[glenn1]

Deflation is good and inflation is bad. Gold is actually pretty stable, and it just increases in value over time.

I don't see how being a paleolibertarian makes me crazy.

I have no strong feelings either way about re-instituting a gold standard, but am a bit unsure about what problem you're trying to solve. Unlike in the FDR days, gold ownership is legal so people could use it as currency instead of federal reserve notes (FRN) if they wished. Your problem seems to be that people aren't using gold despite your expressed wish for "currency competition," which is leading you to advocate instead for the abolition of fiat money/FRN's in favor of gold, which is the exact opposite of competition.

 

[LegendKiller]

Here is how it's theft and/or fraud.

Let's say we all open up banks in a free banking competitive economy.

You have $100 worth of gold in your vaults deposited from person A - you lend person B $1,000. That person deposits the $1,000 of notes in my bank. I do not have faith in your reserves and go to you to provide the actual backing. You're now insolvent and person A lost his deposit.

Banks have been given immunities from other banks to have this done to them because fractional reserve banking must be enabled by governments.

Aside from that - fractional reserve banking gives banks the control of the money supply. If they give out bad loans which created money in the economy and decide they no longer can afford to give those bad loans, the money supply contracts and you face a severe credit recession or depression.

Still not theft or fraud, everybody knows how the system of deposits and reserves works, including other banks. Further, the second bank cannot go to the first, they can only go to the depositor. Who is being stolen from?

FRB doesn't need to be enabled by governments, it's simply a function of the bank and has been happening for hundreds, if not thousands, of years.

Who would you rather have control over the money supply? Aren't the banks the "free market"?

So what? The money supply expands, it contracts, that's the natural business cycle.

 

[glenn1]

Gold is far from stable. You have seen the price graphs from the 80s right? You do realize that the price right now is propped up by derivatives, right?

Depends on which end of the telescope you're looking into - in choosing which side of the trade to baseline your comparison, you could just as easily say that the price of dollars is highly unstable compared to gold.

 

[LegendKiller]

Depends on which end of the telescope you're looking into - in choosing which side of the trade to baseline your comparison, you could just as easily say that the price of dollars is highly unstable compared to gold.

That's why you measure it in terms of a basket of goods.

Dollars in terms of houses, tech stocks, LBOs, gold, stocks, tulip bulbs were worth less in those given times too. Doesn't matter much which "side" of the scope you look at ONE asset compared to the dollar, especially one which can be levered to shit through futures.

 

[momeNt]

Still not theft or fraud, everybody knows how the system of deposits and reserves works, including other banks. Further, the second bank cannot go to the first, they can only go to the depositor. Who is being stolen from?

FRB doesn't need to be enabled by governments, it's simply a function of the bank and has been happening for hundreds, if not thousands, of years.

Who would you rather have control over the money supply? Aren't the banks the "free market"?

So what? The money supply expands, it contracts, that's the natural business cycle.

If banks were allowed to compete over the physical specie, we would not have fractional reserve banking. You do know that is why the USA went off the gold standard, nations exporting to the USA demanded the physical and the USA could not redeem. One bank cannot switch a nation over to a fiat currency if they are insolvent, but the largest economy in the world can switch the world to fiat.

Also, what I bolded of your post is the entire crux of the Austrian business cycle theory. Dismissing this phenomenon is exactly what banks and the fed want - they want a "so what" attitude to recessions and depressions caused by expansion of credit.

 

[JSt0rm]

I propose we use fingernail clippings instead of gold. This way each person will get new money every week.

 

[momeNt]

I propose we use fingernail clippings instead of gold. This way each person will get new money every week.

When was the last time you offered useful insight?

 

[Sinsear]

Is this theory another backed by the esteemed "Dr." Paul ?

 

[momeNt]

Is this theory another backed by the esteemed "Dr." Paul ?

No. He wants gold to also be considered legal tender to compete with the dollar, along with this it would mean gold would have to be sold free of sales tax.

 

[First]

Thanks Marx for ruining a potentially great mind. LegendKiller has been forever lost to the abyss of blaming fractional reserve banking system transferring wealth from debtors to creditors as the fault of the free market.

Many people here, with First being the most outspoken generally, confuse sound money with sound banking. With gold being what I consider sound money, that does not mean that the banking system is sound. Credit is created in both a gold standard and a fiat standard. In a fiat standard it is endorsed by a central bank that gives license to a select few banks that control the amount of money in a system. But in a gold standard the same can happen. Loans that are not backed by specie in a gold standard happened and created the same type credit bubbles that we experience now.

I suppose that many people believe that banks inherently deserve the right to control the money supply, they deserve to accumulate wealth by constantly seeking to expand credit to become more profitable, regardless of the consequences when bad decisions are eventually made and those debts are called then on the banks as opposed to the people.

Let me say that I do NOT agree with supporters of a gold money who do not also support full reserve banking. Credit bubbles can exist in any form of currency so long as banks are allowed to lend in excess of their reserves. Central banks issuing fiat currency merely legitimize that process.

Banks have lent beyond their reserves for centuries, it was a common practice with Roman denarius and sestertius, common in the late 18th and early 19th century in the U.S. before fractional reserve banking was officially legalized and common all over the world today because the benefits far outweigh the risks. The benefits being millions upon millions of businesses with far, far more access to capital to hire new workers and start new businesses, with the risks being far too much debt. But facts are that credit squeezes cause far more recessions than they create, that's just a statistically verifiable fact and your notion that full reserve banking would be superior to fractional reserve banking in this regard is simply false and entirely (verifiably) illogical; the math is impossible to escape, you can't lend to other banks or lend to other businesses if you are far more limited in how much you can lend with full reserve banking. The number of people that fear a debt-fueled collapse of the global economy (which would result in no more than a temporary recession) pales in comparison to the number of people that would fear the far worse and permanent impact of not being able to get access to significant amounts of capital because banks must have 100% reserve. It's asinine, and it's why no one does it. Austrian's have no statistically verifiable data on why the business cycle is caused by fractional reserve banking, because they don't believe in econometrics. They're a bunk field of economics and that's why they're a dead-end in all research departments where they exist; because in reality, they can't prove any of the shit they claim.

 

[momeNt]

Banks have lent beyond their reserves for centuries, it was a common practice with Roman denarius and sestertius, common in the late 18th and early 19th century in the U.S. before fractional reserve banking was officially legalized and common all over the world today because the benefits far outweigh the risks. The benefits being millions upon millions of businesses with far, far more access to capital to hire new workers and start new businesses, with the risks being far too much debt. But facts are that credit squeezes cause far more recessions than they create, that's just a statistically verifiable fact and your notion that full reserve banking would be superior to fractional reserve banking in this regard is simply false and entirely (verifiably) illogical; the math is impossible to escape, you can't lend to other banks or lend to other businesses if you are far more limited in how much you can lend with full reserve banking. The number of people that fear a debt-fueled collapse of the global economy (which would result in no more than a temporary) pales in comparison to the number of people that would fear the far worse and permanent impact of not being able to get access to significant amounts of capital because banks must have 100% reserve. It's asinine, and it's why no one does it.

I don't have time to respond to this right now in full. Giving banks the power of fractional reserve lending leads one to respond the way you do, incapable of understanding a situation where capital can be attained from any other source than a bank because those quantities of money can only created by a bank, and they dwarf lending from savings.

BTW a stock market is an example of raising capital from savings as opposed to credit creation. When markets are driven by those buying on margins and commercial banks with investment bank arms. You have stock market bubbles that not only wipe out those that invested with savings, but also wipe out actual credit money.

 

[First]

I don't have time to respond to this right now in full. Giving banks the power of fractional reserve lending leads one to respond the way you do, incapable of understanding a situation where capital can be attained from any other source than a bank because those quantities of money can only created by a bank, and they dwarf lending from savings.

Huh? Detail who lends out money in a full reserve banking system to a startup? Your whole notion is such nonsense even Hayek dismissed it, as he himself supported fractional reserve banking. You can't run an economy on full reserve, because you can't get away from the exceedingly simple math in this chart: http://en.wikipedia.org/wiki/File:Fractional-reserve_banking_with_varying_reserve_requirements.gif

BTW a stock market is an example of raising capital from savings as opposed to credit creation. When markets are driven by those buying on margins and commercial banks with investment bank arms. You have stock market bubbles that not only wipe out those that invested with savings, but also wipe out actual credit money.

Except, in reality, equity has yielded 6%+ compounded annually over any 30 year period in American history going back to 1806. 404 no lost savings from equity found, and that includes the most recent 30 year 1981-2011 period.

 

[dawp]

money has value because we have agreed that it has value. That can work with anything, coins, shells, or pretty stones. As long as the parties involved have agreed on a preset value, trade works. The same thing with a barter system. If you assign value to something the other party has to agree to that value or there is no agreement.

 

[Keeper]

I think we should use bottle caps as legal tender.

Make it those little pully thingys on the tops of beer cans and you got my vote.
Drink beer... GET MONEY.....
NOW WE ARE TALKING.


My word. This thread was like a bad bad car wreck. I just couldnt look away.