I watched a portion of Weekly Business Review or something like that this evening. They had three guests on there and asked different questions about the economy, how to get it under control, suggestions to Mr. Obama, etc.
One guest, Allan xxxxxx (sorry, last name slips me) was asked how the economy would get over this recession and he replied that it would have to be with a different currency. Don't know if he referred to gold and silver or the Amero. I suspect it was a hint concerning the Amero or a Freudian slip. Either way, he assured us it won't be the dollar!
Comments? Especially from others who may have watched.
Didn't watch but the only way to restore confidence in the currency is to make it convertible into a metal, usually gold. That is what Bretton Woods was all about. Unbacked paper currencies have been tried many times and always fail eventually.
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If my data is correct world gold production (2007) was 47.5 Moz @ current prices about 38.6 billion dollars. Exxon total earnings (2007) was about 40.6 billion.
I assume you're talking about Nightly Business Report on PBS, right? And Allan Sloan, an old editor at _Fortune_, is probably who you're talking about. This is the episode:
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Allan's comment appears at 17:08 into the broadcast. It was a wry and sarcastic comment that followed his description of his retirement "plan," which is to live in his three children's basements, moving from one to the other in rotation, since his 401K has diminished to a 101K.
His remark about a "real currency" didn't appear to have any particular reference -- especially since there isn't one. He was just remarking about the fact that the dollar will take a beating if the economy continues to decline, which he said as a counterpoint to the remark made by one of the other journalists, that the surprising thing is that the dollar is increasing in value relative to other currencies even as this crisis continues.
He's smart enough to realize that gold and silver are not real currencies, that gold hasn't been since the 1930s, that they haven't even been used in central bank transactions since 1971, and that there's no possibility (and no desirability) that they ever should be currencies again.
The Amero is a fantasy coin minted as a novelty collectors' item by a company called Designs Computed. It doesn't exist otherwise, nor could it, except in the minds of various Internet psychotics who have made a minor industry of passing along conspiracy theories.
Rest easy, Al. Although the NBR piece was a useful, condensed summary, it's just an example of breezy journalism by some breezy journalists.
Besides everyone knows electronic transactions are tracked by the government which is thier objective anyhow. Why mint coins that give people ananimity. Amero Debit Cards !!!!!
------------------ Problem is that every monetary system since the dawn of time has gotten itself into problems, no matter what the foundation, gold, silver, paper, cowry shells, "beanie babies" etc.
When you have honest men engaged in honest activities, anything seems to work, but as soon as dishonest men begin engaging in dishonest activities [with a feed back loop in operation] the problems start, and nothing seems to work. The only difference seems to be the length of time it takes for the bubble to inflate/burst.
Commodity backed monetary systems [gold, silver, grain, etc.] are not without problems. They just have *DIFFERENT* problems than the fiat "managed" currencies. Indeed, even barter systems have periodic "exchange" problems in determining the "fair" exchange rates between sheep and goats, goats and pots, cows and wives, etc.
The current problem seems to reflect several factors including the historical tendency for all monetary systems to collapse with time, and the new factors of the extreme complexity, communications speed, and international nature [no controlling legal authority] of the "brave new world order."
OK, but keep in mind that no specie-backed currency has ever survived. Every one is defunct. And every currency system today, at a time when, despite our economic troubles, the world produces more output at higher rates of productivity than at any time in history, is a fiat system.
Nope. And there never was. Between officially held monetary gold (around
30,000 tonnes -- a tonne being a metric ton, around 2200 lb) and estimates of gold held privately as jewelry, coins, etc. (up to 70,000 tonnes, depending on who's counting), the total value of gold in the world is just under $3 trillion at today's prices.
That's only a tiny fraction of what it would take to back the world's currencies. Calculating what it would take is a very iffy proposition, but some experts have calculated that the current "value" of gold, if it backed all currencies 100%, would be in the neighborhood of $14,000/ounce.
At that value, everyone would stop producing real goods and services and start digging holes in the ground.
Actually you don't need to have a dollar for dollar amount, just a law that limits the amount of paper money to a given multiple of the gold on hand. Any inflation automatically makes the gold more valuable and it is the redeemed, forcing the multiple amount of currency to be withdrawn from circulation.
Two problems: (1) When a credit contraction hits, the gold tends to be redeemed, forcing the removal of yet more currency from the system -- good to control inflation but a major contributing factor to the contraction of the US money supply and the great depression.
(2) In the current economy, most of the "money" does not exist beyond a computer entry. Any effort to move to a more honest base means that a few keystrokes can convert the capital to a more "user friendly" denomination.
The early economist Gresham developed a series of economic laws, one of which states "bad money drives out good money." He appears to have been largely correct.
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Gresham had several other insightful observations, frequently elevated to the status of laws.
What is striking is Gresham clearly stated these basic principals over 400 years ago, these have been proven for over
400 years in every economic system, and still the politicians ignore them, and are always in the position of sweeping s**t against the tide [and failing].
Ed, As you know, I have almost no knowledge where these things are concerned. Would you, or could you, explain in a few words exactly what a fiat system is? All I can think of is the import auto. Leaves a great deal to be desired.
Don't feel bad; you aren't alone. And it's not as simple as it sounds. So, no, I can't do it in a few words. Here's a middling-sized bunch of words. d8-)
A fiat currency is one that's backed by nothing but faith ("the full faith and credit of the United States") that the government will take it for tax payments, that it will be accepted in exchange for goods and services by the domestic population and by foreigners, and so on. It's what we've had since
1971. The whole world operates now with fiat currencies. They've been in and out of use for many hundreds of years. To make a fiat based currency work, a government has to impose its use on its citizens. To make it work internationally, a government needs to be a fair and honest trader with other currencies. As for what really "backs" them all, I'll just touch on it in a minute.
The two major currency systems we've had in history are fiat systems and commodity-backed systems. The gold standard is a form of a commodity-backed system. Other commodities have been used, most notably silver, but in antiquity they used a variety of commodities to back currency.
Beyond that, the subject is one of the most complicated and controversial in all of economics. Studying it is a career unto itself. The basic argument has to do with stability of values, and that, itself, is a controversial subject. I'll just make two small points about them to explain where the fiat money comes from, and to give one example of why gold is so controversial.
First, fiat money in a well-run economy (ours, for example, before the last decade or so) really is "backed," in a sense. The great insight about this was the key point of Adam Smith's _Wealth of Nations_, published in the mid-1770s. He said that a country's wealth isn't based on the amount of gold in its treasury, but rather on the output of goods and services of that country over a period of time; say, a year.
The amount and value of that country's money should be equal to that amount of output (we'll skip over velocity multipliers and other distractions). If there is too little money in an economy, you have deflation. If there's too much, you have inflation. The amount of money in circulation should reflect what that country is producing. Without further elaboration, let's just assume it does, in well-run economies. Ours has been pretty good in that regard throughout most of our history. That's a key reason that the dollar has been accepted as a world standard. If a Frenchman gets his hands on $100 and comes here to spend it, he'll get a solid $100 worth of value in goods or services. Just tell him not to hold it too long before coming over. d8-) That's the kind of thing that makes fiat currencies tick.
Hoarding gold, or, in Smith's example, cooking pots, just gets you a lot of...shiny metal. Or a lot of pots. Hoarding a commodity is not good for stability or growth. The amount of a commodity a country has shouldn't have anything to do with how much money they have in circulation, because growth and stable prices, again, are based on how much money you have in circulation *in relation to how much you're really producing*.
The example of how a gold standard does *not* necessarily lead to stability is the fact that, during the Great Depression, the countries that had fiat money were able to dodge the depression's effects better than those, like the US at the time, that were on a gold standard. That's because the gold standard tends to be deflationary in bad economic times. It also tends to get out of whack as the business cycle goes up and down, which it does no matter what you have backing your currency. It always has, even when our currency was 100% gold-backed.
There are several types of gold standards and I won't go into them. If you're interested in getting into the complexities of it, there are books and Web sites all over the place. Just stay clear of the Austrian School and the libertarian crackpots until you have a solid, mainstream understanding of it under your belt, or they'll drive you nuts chasing your tail.
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