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In 1776 the US came into existence [sort of anyway]. The Continental Congress had to buy things to fight the war. It created a currency based on the dollars that had been used before, the Spanish silver dollar [you know them as “Pieces of Eight” because they could be and were cut into 8 bits which is why a Quarter is worth 2 bits].

The problem was that Congress had no pile of gold to back the dollars and it could not levy taxes either. Because of this, the dollar fell in value and most people traded them [for a few pennies on the dollar] to a few rich guys who had faith. After the war the Articles of Confederation still didn't give the Fed. Gov. the power to tax and it still had no way to accumulate a big pile of gold so the Federal dollars were still in limbo.
. . After the new Constitution was adopted the Fed. Gov. finally got the power to levy taxes. It began to build up a pile of gold. It used much of its gold and silver to mint coins, gold coins and silver coins. This put the US finally on a gold standard. The number I learned was $35 = 1 Troy oz. of pure gold where a Troy oz. =1/12 of a pound. I am not sure when this amount was set, but it was in place thru the depression and until Nixon took America off the gold standard.
. . Many modern economists would say that it is not at all surprising that those early un-backed dollars were basically worthless. Without any gold to back them they were just so much fire tinder in the eyes on many. Modern economists would say that if Congress had been collecting taxes regularly from the start then the dollar could have been an early example of a fiat currency. That is, because everyone with much status and money had to pay some dollars to the Gov. in taxes [the Gov. would only accept its own dollars] this would give dollars some reason to have value. All people had dealings with well off high status people (think of the tavern owner who had to pay the whiskey tax) and therefore had a place to go with dollars to trade them for something real [like whiskey].
. . We now know that this is all it takes to give fiat dollars value.

During the 1800s paper money [dollars] came back into existence. During the Civil War the US stopped honoring its dollars and giving gold for them on demand. Foreign nations could still get gold though. Lincoln had many “greenbacks” printed and the Gov. just spent them to support the war effort. Lucky for America gold was discovered in Calif. in 1848 and after the Civil War all over the west. This flow of gold allowed the US to increase its pile of gold that was needed to back the paper dollars it was printing. But, it wasn't printing dollars to cheat the people, it was printing them because paper was much more convenient than heavy gold coins. As long as they were really convertible into real gold on demand the paper was “as good as gold.”

In 1934 FDR stopped the use of gold for Americans and recalled all the gold coins. Americans never got the right to use gold coins again. But the US was still on the gold standard, well except for emergencies like the Depression and WWII. During those times gold payments were suspended.

In 1973 Pres. Nixon took America off the gold standard. America has not gone back on it. And it will not go back on it so long as the US balance of payments [BoP] is negative. The US BoP is negative because we import oil and the rest of the World will do whatever it takes to see to it that they all have a positive BoP with the US. All those positive BoPs add up to a big negative BoP for America. If America were on the gold standard this would mean that year after year gold would flow out of Fort Knox to the nations of the world until there was none left [or until America took steps to have a positive BoP with the world]. There is no way to get around this fact; none, zip zero. The gold standard and a negative BoP do not mix well.
. . Not only that, but all the bank panics, recessions, and depressions of American history were caused and/or made worse by the inflexibility imposed on the finances of the US by being on the gold standard and the then required actions to defend the pile of gold in Fort Knox from being depleted by foreign trade or legally binding demands for actual gold by Americans.
. . It seems to me that the current fiat dollar is better. For instance, in 2008 in the crisis the Fed. Res. Bank and the Treasury Dept. colluded to create $29T that was lent to the at risk financial corps. to make their books pass muster with the law. Without these loans all of those financial corps. would have been liquidated as the law then required. This would have thrown the US into a new Huge Depression and the World would have gone down too. It would have been so much worse than it was, you can't imagine how bad it would have been. [Yes, I said above that it took $29T to save us, 29 trillion dollars is not a shit load of money, it is 100 shit loads of money.]

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The dollar is backed by plutonium and aircraft carriers rather than gold these days
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Fwing wrote:
The dollar is backed by plutonium and aircraft carriers rather than gold these days

I get it.

But then what is the euro backed by?
 
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Steve1501 wrote:
Fwing wrote:
The dollar is backed by plutonium and aircraft carriers rather than gold these days

I get it.

But then what is the euro backed by?


Beats me. But it doesn't really matter. Fiat currencies are more flexible which is good for all sorts of reasons. But it's also more easy to abuse due to that flexibility and we still need some work in that department.
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Like other fiat currencies, the Euro is backed by the economies and civil administrations of the places that use it.

Of course there are issues with the lack of completely consistent regulations for the non-government financial institutions that can "create" Euros, and with the Central/Reserve Banking infrastructure.

If the US Financial Sector was better managed and monitored you might claim the imperfections in the Euro (there are many) were worse than the USD, but the 2008 meltdown suggests that the Euro might be better managed than the USD.
 
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But, what did you guys think of my summary of the history?

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Steve1501 wrote:
But, what did you guys think of my summary of the history?


Very nice. Have a cookie.
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Steve1501 wrote:
But, what did you guys think of my summary of the history?
Summaries are usually dangerous, especially without citations. They are easily bent to the will of the author.
 
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TheChin! wrote:
Steve1501 wrote:
But, what did you guys think of my summary of the history?
Summaries are usually dangerous, especially without citations. They are easily bent to the will of the author.

Before I turned 50 in 1996 the very idea of having to provide citations in a conversation between friends over a beer or 2 was unthinkable.

At 70 now I'm not going to start providing citations. I don't have a list of them in my computer memory and it is far too much effort for this non-computer geek to find them.

You can take my thoughts to heart or you can leave them, I don't really care. I just hope a few people find them of some use.

The will of this author in this case is to show people why going back on a gold standard is a very bad idea for America at this time.

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Steve1501 wrote:
The will of this author in this case is to show people why going back on a gold standard is a very bad idea for America at this time.
While I agree with you on the point, I found myself skimming the history because I'm so far from an expert on the subject, I can't evaluate it with a critical eye for deceit. RSP is riddled with spun positions from all sides and walks of life.

If you would rattle off that spiel in a bar, I don't think you would have a conversation as the other person would just shrug and say, "you may be right".
 
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TheChin! wrote:
Steve1501 wrote:
The will of this author in this case is to show people why going back on a gold standard is a very bad idea for America at this time.
While I agree with you on the point, I found myself skimming the history because I'm so far from an expert on the subject, I can't evaluate it with a critical eye for deceit. RSP is riddled with spun positions from all sides and walks of life.

If you would rattle off that spiel in a bar, I don't think you would have a conversation as the other person would just shrug and say, "you may be right".

Well, that probably explains why I never had a lot of friends, then.

Talking about the mush that most people want to talk about is to me a waste of time. Why should anyone care who won at Wimbledon or the last Super Bowl?

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Steve1501 wrote:
But, what did you guys think of my summary of the history?


You lack a key piece, the Bretton Woods system and Nixon's unilateral repeal of the exchange mechanisms.
 
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This is also very important:
https://en.wikipedia.org/wiki/International_use_of_the_U.S._...

It's also a bit tricky to integrate with MMT, but it should not be ignored.
 
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Fiat currencies are fundamentally dishonest. They distort the values of the market and twist them towards dangerous and destructive consequences. The monetary system will kill every living thing on this planet if we don't abandon it for something real.
 
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viclineal wrote:
Steve1501 wrote:
But, what did you guys think of my summary of the history?


You lack a key piece, the Bretton Woods system and Nixon's unilateral repeal of the exchange mechanisms.

Sorry, but I know almost nothing about that. The only thing I know is that under Bretton Woods the nations with a chronic negative balance of payments were hurting. As they always do in any gold standard system.
 
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LightRider wrote:
Fiat currencies are fundamentally dishonest. They distort the values of the market and twist them towards dangerous and destructive consequences. The monetary system will kill every living thing on this planet if we don't abandon it for something real.

Bullshit.
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Vapix wrote:
This is also very important:
https://en.wikipedia.org/wiki/International_use_of_the_U.S._...

It's also a bit tricky to integrate with MMT, but it should not be ignored.

Sorry, I don't see the problems you see.

The only problems I see with MMT being the theory used by Congress is inflation & hyper-inflation, and the dollar losing its place to the euro as the #1 reserve currency.

Inflation will not be a problem unless Congress goes crazy with spending which it can do now. The worst that will happen if the euro replaces the dollar is that the US will have to make more of the stuff it consumes. Is that so bad?

As for Panama and Ecuador [etc.] that use the dollar, that is not my problem. It is their problem. If it even is a problem.
 
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KissaTaikuri wrote:
LightRider wrote:
Fiat currencies are fundamentally dishonest. They distort the values of the market and twist them towards dangerous and destructive consequences. The monetary system will kill every living thing on this planet if we don't abandon it for something real.
An inanimate object is neither honest nor dishonest. It's simply an object. It's humans that are dishonest and will twist/game any currency that you give them; including bitcoin.


Fiat money isn't an object, it's an idea.
 
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LightRider wrote:
KissaTaikuri wrote:
LightRider wrote:
Fiat currencies are fundamentally dishonest. They distort the values of the market and twist them towards dangerous and destructive consequences. The monetary system will kill every living thing on this planet if we don't abandon it for something real.
An inanimate object is neither honest nor dishonest. It's simply an object. It's humans that are dishonest and will twist/game any currency that you give them; including bitcoin.


Fiat money isn't an object, it's an idea.

I am positive it is both.
 
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Steve1501 wrote:
LightRider wrote:
KissaTaikuri wrote:
LightRider wrote:
Fiat currencies are fundamentally dishonest. They distort the values of the market and twist them towards dangerous and destructive consequences. The monetary system will kill every living thing on this planet if we don't abandon it for something real.
An inanimate object is neither honest nor dishonest. It's simply an object. It's humans that are dishonest and will twist/game any currency that you give them; including bitcoin.


Fiat money isn't an object, it's an idea.

I am positive it is both.


Then explain how credit cards work. Does every swipe magically create some bills and coins in a bank's vault?
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The problem with the Continental (the Continental Congress's US dollar) was that nothing at all backed it, not gold, not a country--nothing.

Once the Revolutionary War was won, the States backed the currency under the Articles of Confederation--when they felt like it. The US, even then, had land, resources, income, and once the US Constitution was written, "All Debts contracted and Engagements entered into, before the Adoption of this Constitution, shall be as valid against the United States under this Constitution, as under the Confederation."

Steve1501 wrote:
The number I learned was $35 = 1 Troy oz. of pure gold where a Troy oz. =1/12 of a pound. I am not sure when this amount was set, but it was in place thru the depression and until Nixon took America off the gold standard.

I believe the $35 was from when FDR suspended the right to exchange dollars for actual gold. Troy measures are different from Avoirdupois (common) weights. A troy ounce is a little bigger, but a troy pound is far smaller.

The gold-bug myth is that gold prevents inflation. It doesn't as the Roman empire and the Spanish conquistadors show: bring in more gold, and you have more gold chasing the same goods, so inflation.

Fiat money is like a stock share: it represents a share in the value of the country. If too much is printed (on paper or electronically) you have inflation and the money is devalues, just as when a company issues too much stock for its value.

LightRider wrote:
Then explain how credit cards work. Does every swipe magically create some bills and coins in a bank's vault?

Effectively, yes. Any loan increases the amount of money in the system. Now, most money exists only as numbers on ledgers, without any physical existence. But the money is still money. I can go to my bank, present my credit card to a banker or an ATM, and get cash (which is just as good as money).

A dollar bill, $1 on a ledger, or $1 of bitcoin are equally artificial, but a US dollar is backed by the United States while bitcoin is a confidence game--it has value only as long as people think it has value. If it were necessary, the US could sell frex the land under Fort Hood to settle some debt; no such alternative exists for bitcoin, and bitcoin doesn't even have a government or leader who could take such a role.
 
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Tall_Walt wrote:
The problem with the Continental (the Continental Congress's US dollar) was that nothing at all backed it, not gold, not a country--nothing.

Once the Revolutionary War was won, the States backed the currency under the Articles of Confederation--when they felt like it. The US, even then, had land, resources, income, and once the US Constitution was written, "All Debts contracted and Engagements entered into, before the Adoption of this Constitution, shall be as valid against the United States under this Constitution, as under the Confederation."

Steve1501 wrote:
The number I learned was $35 = 1 Troy oz. of pure gold where a Troy oz. =1/12 of a pound. I am not sure when this amount was set, but it was in place thru the depression and until Nixon took America off the gold standard.

I believe the $35 was from when FDR suspended the right to exchange dollars for actual gold. Troy measures are different from Avoirdupois (common) weights. A troy ounce is a little bigger, but a troy pound is far smaller.

The gold-bug myth is that gold prevents inflation. It doesn't as the Roman empire and the Spanish conquistadors show: bring in more gold, and you have more gold chasing the same goods, so inflation.

Fiat money is like a stock share: it represents a share in the value of the country. If too much is printed (on paper or electronically) you have inflation and the money is devalues, just as when a company issues too much stock for its value.

LightRider wrote:
Then explain how credit cards work. Does every swipe magically create some bills and coins in a bank's vault?

Effectively, yes. Any loan increases the amount of money in the system. Now, most money exists only as numbers on ledgers, without any physical existence. But the money is still money. I can go to my bank, present my credit card to a banker or an ATM, and get cash (which is just as good as money).

A dollar bill, $1 on a ledger, or $1 of bitcoin are equally artificial, but a US dollar is backed by the United States while bitcoin is a confidence game--it has value only as long as people think it has value. If it were necessary, the US could sell frex the land under Fort Hood to settle some debt; no such alternative exists for bitcoin, and bitcoin doesn't even have a government or leader who could take such a role.


Physical objects do not magically appear when you use a credit card. Banks and governments can choose to create or destroy fiat monetary value at whim. This is because fiat money is an idea imposed on people by force and violence. The amount of bitcoin extant is known publicly, the inflation schedule is known, the total number of bitcoins to ever be created is known and there is no individual or government that can alter these facts. You can only inflate the base currency by expending real resources and providing a useful service in a public and transparent manner. Bitcoin doesn't need to settle any debt because it is not predicated on the crippling and destructive concept of debt. Bitcoin does not require confidence, its operation, code and all transaction history are available for public scrutiny. Government monetary policy and future actions are wholly mysterious to the vast majority of people.
 
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LightRider wrote:
Then explain how credit cards work. Does every swipe magically create some bills and coins in a bank's vault?


You are aware that credit cards are also an object, right?
 
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LightRider wrote:
Tall_Walt wrote:
LightRider wrote:
Then explain how credit cards work. Does every swipe magically create some bills and coins in a bank's vault?

Effectively, yes. Any loan increases the amount of money in the system. Now, most money exists only as numbers on ledgers, without any physical existence. But the money is still money. I can go to my bank, present my credit card to a banker or an ATM, and get cash (which is just as good as money).

A dollar bill, $1 on a ledger, or $1 of bitcoin are equally artificial, but a US dollar is backed by the United States while bitcoin is a confidence game--it has value only as long as people think it has value. If it were necessary, the US could sell frex the land under Fort Hood to settle some debt; no such alternative exists for bitcoin, and bitcoin doesn't even have a government or leader who could take such a role.

Physical objects do not magically appear when you use a credit card. Banks and governments can choose to create or destroy fiat monetary value at whim. This is because fiat money is an idea imposed on people by force and violence. The amount of bitcoin extant is known publicly, the inflation schedule is known, the total number of bitcoins to ever be created is known and there is no individual or government that can alter these facts. You can only inflate the base currency by expending real resources and providing a useful service in a public and transparent manner. Bitcoin doesn't need to settle any debt because it is not predicated on the crippling and destructive concept of debt. Bitcoin does not require confidence, its operation, code and all transaction history are available for public scrutiny. Government monetary policy and future actions are wholly mysterious to the vast majority of people.

Money is not a physical object, it's a conceptual object, whether it's a US dollar or a bitcoin.

Fiat money is as old as lending. Buy this round of drinks and I'll get the next round--that's fiat drinks. If you wanted, you could write down the debt on paper just like a US dollar.

Fiat money and debt aren't forced on people, they're insanely convenient. Debt lets you buy a home now instead of only after decades of savings; or buy a car now, so you can get to work, instead of being put out of work because you can't get to the job. Fiat money lets you pay for either one without transporting physical money, with all the security problems that entails.

Bitcoin lasts only until someone cracks the encryption, which with quantum computers is any time now. And it's not as if bitcoin hasn't had cracks and security problems already, as I'm sure you know. Your insistence that bitcoin is foolproof is disingenuous. It's known to have failed, and in any case fools are too ingenious, as any good software engineer knows.

Bitcoin does require confidence. Does everyone take bitcoin? No. Me, for one. The reason is they don't have confidence in it. The same can be said about Russian Rubles in the US or any number of more obscure currencies, real or fiat.

You have a very distorted idea of what money is. Here you go, bitcoin included:



Good luck getting a game store to take your bitcoin for a game.
 
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"Conceptual object" is an oxymoron, a contradiction and improper conflation you exploit to try and justify your incorrect assumptions and positions.
 
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