But heaven forbid that someone suggest that we cut taxes and cut out waste because they are branded as heartless.
When you say "cut out waste" ask around and see exactly what "waste" is. You're likely to get dozens of different answers - hell, hundreds if you're talking specifics. It's not all that easy.
Here's a suggestion - not that it would be my only one, or that I'm all that hard fast on it. Let's leave Iraq (billions and billions of dollars there), cut defense spending (our biggest chunk), use what defense spending we have left on actual defensive technology (i.e. far less boots on the ground), and implement a draft everytime we go to war. I guarantee you we'll get involved in less wars, and we'll save shitloads.
When you say "cut out waste" ask around and see exactly what "waste" is. You're likely to get dozens of different answers - hell, hundreds if you're talking specifics. It's not all that easy.
You just answered your own question. Give the money back and let those "hundreds" decide for themselves.
Here's a suggestion - not that it would be my only one, or that I'm all that hard fast on it. Let's leave Iraq (billions and billions of dollars there), cut defense spending (our biggest chunk), use what defense spending we have left on actual defensive technology (i.e. far less boots on the ground), and implement a draft everytime we go to war. I guarantee you we'll get involved in less wars, and we'll save shitloads.
You're more than welcome to do that with your money.
I'm speaking for reality. Most Americans do not want to be actively involved in running their government. Only 60% or so even vote in the presidential elections.
I'm speaking for reality. Most Americans do not want to be actively involved in running their government. Only 60% or so even vote in the presidential elections.
Perhaps only "60% or so" vote because they don't see a vote as "running their government".
You just answered your own question. Give the money back and let those "hundreds" decide for themselves.
You're more than welcome to do that with your money.
I know we've gone round and round on this before, but I happen to like my roads, fire departments, police departments, rescue squads, education departments, social safty nets, fighter planes, judges, departments of health, NPR, coast guard, parks services, and l really like the idea of you having to pay for it. You are living in my country after all.
I know we've gone round and round on this before, but I happen to like my roads, fire departments, police departments, rescue squads, education departments, social safty nets, fighter planes, judges, departments of health, NPR, coast guard, parks services, and l really like the idea of you having to pay for it.
Perhaps only "60% or so" vote because they don't see a vote as "running their government".
Perhaps, but I doubt it. I see no evidence that would show the majority of the population is seriously invovled with activist/lobby work or whatever else you can think of that would be considered "running the government".
Slumlord isn't exactly fair. Afterall, while you have to pay taxes, you don't have to live in the slums.
I live in your country, and your country is not in very good shape right now. Your country is in bad shape right now because you forgot that the logic that forces me to pay for your Coast Gaurd also works for people like Donald Rumsfeld.
Perhaps, but I doubt it. I see no evidence that would show the majority of the population is seriously invovled with activist/lobby work or whatever else you can think of that would be considered "running the government".
Yes, I'm sure that the American public really wants a world in which they must lobby something to govern their lives.
The system is such that we have a government and then we have people. It's no surprise that the people act accordingly.
I live in your country, and your country is not in very good shape right now. Your country is in bad shape right now because you forgot that the logic that forces me to pay for your Coast Gaurd also works for people like Donald Rumsfeld.
For that, I blame the voting population, not the taxes themselves - which also pay for the printing and backing of that money we're debating about.
Certainly. And we all know that's the only possible way to print and back money.
Yeah, it pretty much is. Especially if you want that money to be recognized as legal tender everywhere in the country. And if you want it to remain accessible to everyone - not everyone is capable of existing solely on a barter system. Stability is kinda cool too.
Yeah, it pretty much is. Especially if you want that money to be recognized as legal tender everywhere in the country. And if you want it to remain accessible to everyone - not everyone is capable of existing solely on a barter system. Stability is kinda cool too.
So $1 in 1800 is the equivalent of $10 now. It was 200 years ago. I'd still put more faith in our U.S. dollar than the private equivalent of Disney Fun Bucks.
So $1 in 1800 is the equivalent of $10 now. It was 200 years ago. I'd still put more faith in our U.S. dollar than the private equivalent of Disney Fun Bucks.
Congratulations. You've beat out "Disney Fun Bucks". Way to choose a high standard there. You've also beaten the Venezualan currency!!! Awesome.
Gold and Economic Freedom
by Dr. Alan Greenspan, 1966
An almost hysterical antagonism toward the gold standard is one issue which unites statists of all persuasions. They seem to sense - perhaps more clearly and subtly than many consistent defenders of laissez-faire - that gold and economic freedom are inseparable, that the gold standard is an instrument of laissez-faire and that each implies and requires the other.
In order to understand the source of their antagonism, it is necessary first to understand the specific role of gold in a free society.
Money is the common denominator of all economic transactions. It is that commodity which serves as a medium of exchange, is universally acceptable to all participants in an exchange economy as payment for their goods or services, and can, therefore, be used as a standard of market value and as a store of value, i.e., as a means of saving.
The existence of such a commodity is a precondition of a division of labor economy. If men did not have some commodity of objective value which was generally acceptable as money, they would have to resort to primitive barter or be forced to live on self-sufficient farms and forgo the inestimable advantages of specialization. If men had no means to store value, i.e., to save, neither long-range planning nor exchange would be possible.
What medium of exchange will be acceptable to all participants in an economy is not determined arbitrarily. First, the medium of exchange should be durable. In a primitive society of meager wealth, wheat might be sufficiently durable to serve as a medium, since all exchanges would occur only during and immediately after the harvest, leaving no value-surplus to store. But where store-of-value considerations are important, as they are in richer, more civilized societies, the medium of exchange must be a durable commodity, usually a metal. A metal is generally chosen because it is homogeneous and divisible: every unit is the same as every other and it can be blended or formed in any quantity. Precious jewels, for example, are neither homogeneous nor divisible. More important, the commodity chosen as a medium must be a luxury. Human desires for luxuries are unlimited and, therefore, luxury goods are always in demand and will always be acceptable. Wheat is a luxury in underfed civilizations, but not in a prosperous society. Cigarettes ordinarily would not serve as money, but they did in post-World War II Europe where they were considered a luxury. The term "luxury good" implies scarcity and high unit value. Having a high unit value, such a good is easily portable; for instance, an ounce of gold is worth a half-ton of pig iron.
In the early stages of a developing money economy, several media of exchange might be used, since a wide variety of commodities would fulfill the foregoing conditions. However, one of the commodities will gradually displace all others, by being more widely acceptable. Preferences on what to hold as a store of value, will shift to the most widely acceptable commodity, which, in turn, will make it still more acceptable. The shift is progressive until that commodity becomes the sole medium of exchange. The use of a single medium is highly advantageous for the same reasons that a money economy is superior to a barter economy: it makes exchanges possible on an incalculably wider scale.
Whether the single medium is gold, silver, seashells, cattle, or tobacco is optional, depending on the context and development of a given economy. In fact, all have been employed, at various times, as media of exchange. Even in the present century, two major commodities, gold and silver, have been used as international media of exchange, with gold becoming the predominant one. Gold, having both artistic and functional uses and being relatively scarce, has significant advantages over all other media of exchange. Since the beginning of World War I, it has been virtually the sole international standard of exchange. If all goods and services were to be paid for in gold, large payments would be difficult to execute and this would tend to limit the extent of a society's divisions of labor and specialization. Thus a logical extension of the creation of a medium of exchange is the development of a banking system and credit instruments (bank notes and deposits) which act as a substitute for, but are convertible into, gold.
A free banking system based on gold is able to extend credit and thus to create bank notes (currency) and deposits, according to the production requirements of the economy. Individual owners of gold are induced, by payments of interest, to deposit their gold in a bank (against which they can draw checks). But since it is rarely the case that all depositors want to withdraw all their gold at the same time, the banker need keep only a fraction of his total deposits in gold as reserves. This enables the banker to loan out more than the amount of his gold deposits (which means that he holds claims to gold rather than gold as security of his deposits). But the amount of loans which he can afford to make is not arbitrary: he has to gauge it in relation to his reserves and to the status of his investments.
When banks loan money to finance productive and profitable endeavors, the loans are paid off rapidly and bank credit continues to be generally available. But when the business ventures financed by bank credit are less profitable and slow to pay off, bankers soon find that their loans outstanding are excessive relative to their gold reserves, and they begin to curtail new lending, usually by charging higher interest rates. This tends to restrict the financing of new ventures and requires the existing borrowers to improve their profitability before they can obtain credit for further expansion. Thus, under the gold standard, a free banking system stands as the protector of an economy's stability and balanced growth. When gold is accepted as the medium of exchange by most or all nations, an unhampered free international gold standard serves to foster a world-wide division of labor and the broadest international trade. Even though the units of exchange (the dollar, the pound, the franc, etc.) differ from country to country, when all are defined in terms of gold the economies of the different countries act as one-so long as there are no restraints on trade or on the movement of capital. Credit, interest rates, and prices tend to follow similar patterns in all countries. For example, if banks in one country extend credit too liberally, interest rates in that country will tend to fall, inducing depositors to shift their gold to higher-interest paying banks in other countries. This will immediately cause a shortage of bank reserves in the "easy money" country, inducing tighter credit standards and a return to competitively higher interest rates again.
A fully free banking system and fully consistent gold standard have not as yet been achieved. But prior to World War I, the banking system in the United States (and in most of the world) was based on gold and even though governments intervened occasionally, banking was more free than controlled. Periodically, as a result of overly rapid credit expansion, banks became loaned up to the limit of their gold reserves, interest rates rose sharply, new credit was cut off, and the economy went into a sharp, but short-lived recession. (Compared with the depressions of 1920 and 1932, the pre-World War I business declines were mild indeed.) It was limited gold reserves that stopped the unbalanced expansions of business activity, before they could develop into the post-World Was I type of disaster. The readjustment periods were short and the economies quickly reestablished a sound basis to resume expansion.
But the process of cure was misdiagnosed as the disease: if shortage of bank reserves was causing a business decline-argued economic interventionists-why not find a way of supplying increased reserves to the banks so they never need be short! If banks can continue to loan money indefinitely-it was claimed-there need never be any slumps in business. And so the Federal Reserve System was organized in 1913. It consisted of twelve regional Federal Reserve banks nominally owned by private bankers, but in fact government sponsored, controlled, and supported. Credit extended by these banks is in practice (though not legally) backed by the taxing power of the federal government. Technically, we remained on the gold standard; individuals were still free to own gold, and gold continued to be used as bank reserves. But now, in addition to gold, credit extended by the Federal Reserve banks ("paper reserves") could serve as legal tender to pay depositors.
When business in the United States underwent a mild contraction in 1927, the Federal Reserve created more paper reserves in the hope of forestalling any possible bank reserve shortage. More disastrous, however, was the Federal Reserve's attempt to assist Great Britain who had been losing gold to us because the Bank of England refused to allow interest rates to rise when market forces dictated (it was politically unpalatable). The reasoning of the authorities involved was as follows: if the Federal Reserve pumped excessive paper reserves into American banks, interest rates in the United States would fall to a level comparable with those in Great Britain; this would act to stop Britain's gold loss and avoid the political embarrassment of having to raise interest rates. The "Fed" succeeded; it stopped the gold loss, but it nearly destroyed the economies of the world, in the process. The excess credit which the Fed pumped into the economy spilled over into the stock market-triggering a fantastic speculative boom. Belatedly, Federal Reserve officials attempted to sop up the excess reserves and finally succeeded in braking the boom. But it was too late: by 1929 the speculative imbalances had become so overwhelming that the attempt precipitated a sharp retrenching and a consequent demoralizing of business confidence. As a result, the American economy collapsed. Great Britain fared even worse, and rather than absorb the full consequences of her previous folly, she abandoned the gold standard completely in 1931, tearing asunder what remained of the fabric of confidence and inducing a world-wide series of bank failures. The world economies plunged into the Great Depression of the 1930's.
With a logic reminiscent of a generation earlier, statists argued that the gold standard was largely to blame for the credit debacle which led to the Great Depression. If the gold standard had not existed, they argued, Britain's abandonment of gold payments in 1931 would not have caused the failure of banks all over the world. (The irony was that since 1913, we had been, not on a gold standard, but on what may be termed "a mixed gold standard"; yet it is gold that took the blame.) But the opposition to the gold standard in any form-from a growing number of welfare-state advocates-was prompted by a much subtler insight: the realization that the gold standard is incompatible with chronic deficit spending (the hallmark of the welfare state). Stripped of its academic jargon, the welfare state is nothing more than a mechanism by which governments confiscate the wealth of the productive members of a society to support a wide variety of welfare schemes. A substantial part of the confiscation is effected by taxation. But the welfare statists were quick to recognize that if they wished to retain political power, the amount of taxation had to be limited and they had to resort to programs of massive deficit spending, i.e., they had to borrow money, by issuing government bonds, to finance welfare expenditures on a large scale.
Under a gold standard, the amount of credit that an economy can support is determined by the economy's tangible assets, since every credit instrument is ultimately a claim on some tangible asset. But government bonds are not backed by tangible wealth, only by the government's promise to pay out of future tax revenues, and cannot easily be absorbed by the financial markets. A large volume of new government bonds can be sold to the public only at progressively higher interest rates. Thus, government deficit spending under a gold standard is severely limited. The abandonment of the gold standard made it possible for the welfare statists to use the banking system as a means to an unlimited expansion of credit. They have created paper reserves in the form of government bonds which-through a complex series of steps-the banks accept in place of tangible assets and treat as if they were an actual deposit, i.e., as the equivalent of what was formerly a deposit of gold. The holder of a government bond or of a bank deposit created by paper reserves believes that he has a valid claim on a real asset. But the fact is that there are now more claims outstanding than real assets. The law of supply and demand is not to be conned. As the supply of money (of claims) increases relative to the supply of tangible assets in the economy, prices must eventually rise. Thus the earnings saved by the productive members of the society lose value in terms of goods. When the economy's books are finally balanced, one finds that this loss in value represents the goods purchased by the government for welfare or other purposes with the money proceeds of the government bonds financed by bank credit expansion.
In the absence of the gold standard, there is no way to protect savings from confiscation through inflation. There is no safe store of value. If there were, the government would have to make its holding illegal, as was done in the case of gold. If everyone decided, for example, to convert all his bank deposits to silver or copper or any other good, and thereafter declined to accept checks as payment for goods, bank deposits would lose their purchasing power and government-created bank credit would be worthless as a claim on goods. The financial policy of the welfare state requires that there be no way for the owners of wealth to protect themselves.
This is the shabby secret of the welfare statists' tirades against gold. Deficit spending is simply a scheme for the confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights. If one grasps this, one has no difficulty in understanding the statists' antagonism toward the gold standard.
Congratulations. You've beat out "Disney Fun Bucks". Way to choose a high standard there. You've also beaten the Venezualan currency!!! Awesome.
Next time try beating out gold.
Gold has value only because we place value on it. It's pretty and it's rare. It's also not a stable way of running an economy - unless you like Depressions, that is.
However, there's nothing stopping you from spending all your fiat backed dollars on gold - it makes for a solid investment - just not a stable economy.
Everything "of value" only has value because we place value on it.
It's pretty and it's rare. It's also not a stable way of running an economy - unless you like Depressions, that is.
Gold is what stops Depressions, not what causes them.
However, there's nothing stopping you from spending all your fiat backed dollars on gold - it makes for a solid investment - just not a stable economy.
I'm not surprised that you see solid investments and stable economies as completely different things.
Gold is what stops Depressions, not what causes them.
I'm not surprised that you see solid investments and stable economies as completely different things.
I'm just going to have to admit that economics is far to complicated a subject to debate in detail between meetings and other work related duties - but if I get the chance, I'll read the Greenspan article you posted. However, I will say that investment isn't the same as economy anymore than tires are a car.
It doesn't. It needs to be something of universal real value, meaning that men find value in it and it is limited in supply.
As for the Venezuela currency comment from before, we also beat just about every other economy as well.
Again, congratulations. Feel free to celebrate with a $2 bottle of water.
I'm just going to have to admit that economics is far to complicated a subject to debate in detail between meetings and other work related duties - but if I get the chance, I'll read the Greenspan article you posted. However, I will say that investment isn't the same as economy anymore than tires are a car.
Tires are not a car. You're entirely right. The fact that you think an economy is something to be singularly built and managed (like a car) is pretty much my point in the previous post.
But heaven forbid that someone suggest that we cut taxes and cut out waste because they are branded as heartless.
...
Not the 'Chicken or the Egg' thing... CUT SPENDING is the beginning. Less SPENDING means less taxes... not a tough situation to assess. What is more important... 400 billion poured into Iraq or 400 bilion poured into America?
And people who say, 'Let the Private Sector pay for it' usually means, 'Let someone other than me pay for it'. You know that if those people didn't have to pay taxes... they wouldn't pay shit. They 'SAY' they would donate to charity... but, that's just empty words... anyone can say they'll do something and not follow through with it. It just makes a better arguement for themselves and gives them an out.
I believe that the collective whole could take care of those whom have fallen on hard times... for WHATEVER reason. I believe the strong should protect the weak and not neglect them... survival of the fittest works on the Serengetti with Cheetahs and Thompsons Gazelles... we are humans.
I wish I could just tell you, "Okay, you're exempt... keep your fucking money... now, shut the fuck up and let the rest of us deal with the country's problems". Money is very important to you... it's just fucking money to me.
Allen Fieldhouse, home of the 2008 NCAA men's Basketball Champions! Go Jayhawks!
Hail, Hail!!!
Not the 'Chicken or the Egg' thing... CUT SPENDING is the beginning.
Both can happen at once. Tie spending to taxes directly. Then cutting either forces the other to go down as well.
Less SPENDING means less taxes... not a tough situation to assess. What is more important... 400 billion poured into Iraq or 400 bilion poured into America?
Neither.
And people who say, 'Let the Private Sector pay for it' usually means, 'Let someone other than me pay for it'.
Of course! What's wrong with that?
You know that if those people didn't have to pay taxes... they wouldn't pay shit. They 'SAY' they would donate to charity... but, that's just empty words... anyone can say they'll do something and not follow through with it. It just makes a better arguement for themselves and gives them an out.
Certainly! But just because they can lie doesn't mean they are lying.
I believe that the collective whole could take care of those whom have fallen on hard times... for WHATEVER reason. I believe the strong should protect the weak and not neglect them...
I believe that too. However, I believe the strong should have every right to ask "what's in it for me?"
survival of the fittest works on the Serengetti with Cheetahs and Thompsons Gazelles... we are humans.
Congratulations.
I wish I could just tell you, "Okay, you're exempt... keep your fucking money... now, shut the fuck up and let the rest of us deal with the country's problems". Money is very important to you... it's just fucking money to me.
If money is so unimportant, how come you want $1,000,000,000,000 of it collected per year from the rest of us? If money is "just money", then you shouldn't need it. It's just paper, right?
Both can happen at once. Tie spending to taxes directly. Then cutting either forces the other to go down as well.
Neither.
Of course! What's wrong with that?
Certainly! But just because they can lie doesn't mean they are lying.
I believe that too. However, I believe the strong should have every right to ask "what's in it for me?"
Congratulations.
... No responses to any of the above.
If money is so unimportant, how come you want $1,000,000,000,000 of it collected per year from the rest of us? If money is "just money", then you shouldn't need it. It's just paper, right?
...
One Trillion Dollars can be put to good use. Why isn't it?
And it's the COLLECTIVE WHOLE that makes up that sum of one trillion... i'm guessing that you did not contribute one trillion in revenues collected.
The idea or the whole contributing to the success of the society is a good one.. but, the way we've implemented it isn't working.
Democrats are Tax and Spend and Republicans are Don't Tax and Spend... it's the Spending that's the problem. Anyone that disagrees needs only to look at the current administration and the Patron Saint of Republicans, Ronald Reagan's spending. Spending what we don't have on shit we don't need.
Cut the spending and we won't need to collect as much.
...
P.S. I believe that 400 Billion tax payer dollars is better used building schools and mass transit systems here in America, than paying the salaries of Iraqi politicians and hoping they'll grow up to be just like us. But, that's just me.
P.P.S. Regarding this... "I believe that too. However, I believe the strong should have every right to ask "what's in it for me?""
If you are helping out those less fortunate than yourself and are looking for your own personal gain... you are not strong. Just step aside and let the strong spirited do the work.
Allen Fieldhouse, home of the 2008 NCAA men's Basketball Champions! Go Jayhawks!
Hail, Hail!!!
...
One Trillion Dollars can be put to good use. Why isn't it?
It is. It's just not your definition of "good". It's someone else's. See, what we've done here is build a system of wealth distribution based on the "common good". The fundamental flaw there is that the words "common good" have no meaning as prescribed by a system that guarantees you no good but only sacrifice.
And it's the COLLECTIVE WHOLE that makes up that sum of one trillion... i'm guessing that you did not contribute one trillion in revenues collected.
No. I said "us", not "me"
The idea or the whole contributing to the success of the society is a good one.. but, the way we've implemented it isn't working.
Absolutely agree! It's because we've setup a social contradiction: sacrifice for benefit. It makes no sense.
Democrats are Tax and Spend and Republicans are Don't Tax and Spend... it's the Spending that's the problem. Anyone that disagrees needs only to look at the current administration and the Patron Saint of Republicans, Ronald Reagan's spending. Spending what we don't have on shit we don't need.
Cut the spending and we won't need to collect as much.
...
I agree with that too. But we shouldn't allow the government to get away with just "cut the spending". Tie them both together. I don't want this government producing a surplus any more than I want them producing a deficit.
P.S. I believe that 400 Billion tax payer dollars is better used building schools and mass transit systems here in America, than paying the salaries of Iraqi politicians and hoping they'll grow up to be just like us. But, that's just me.
Once you eliminate the choice of the men and women who earned that money in the first place, you've already lost my support, regardless of how you spend that stolen loot. I have sympathy for neither Robin Hood or the Sheriff of Nottingham.
Comments
Here's a suggestion - not that it would be my only one, or that I'm all that hard fast on it. Let's leave Iraq (billions and billions of dollars there), cut defense spending (our biggest chunk), use what defense spending we have left on actual defensive technology (i.e. far less boots on the ground), and implement a draft everytime we go to war. I guarantee you we'll get involved in less wars, and we'll save shitloads.
You just answered your own question. Give the money back and let those "hundreds" decide for themselves.
You're more than welcome to do that with your money.
I'm speaking for reality. Most Americans do not want to be actively involved in running their government. Only 60% or so even vote in the presidential elections.
Perhaps only "60% or so" vote because they don't see a vote as "running their government".
Of course you do.
As far as slumlords go, you could be worse.
Perhaps, but I doubt it. I see no evidence that would show the majority of the population is seriously invovled with activist/lobby work or whatever else you can think of that would be considered "running the government".
I live in your country, and your country is not in very good shape right now. Your country is in bad shape right now because you forgot that the logic that forces me to pay for your Coast Gaurd also works for people like Donald Rumsfeld.
Yes, I'm sure that the American public really wants a world in which they must lobby something to govern their lives.
The system is such that we have a government and then we have people. It's no surprise that the people act accordingly.
I'm sure no one wants to have to lobby and be active either, but that's reality.
Agreed. It is reality.
Of course you do.
Certainly. And we all know that's the only possible way to print and back money.
Yeah, it pretty much is. Especially if you want that money to be recognized as legal tender everywhere in the country. And if you want it to remain accessible to everyone - not everyone is capable of existing solely on a barter system. Stability is kinda cool too.
Yes we are.
You've done great work at that "stability" thing.
http://www.westegg.com/inflation/
Congratulations. You've beat out "Disney Fun Bucks". Way to choose a high standard there. You've also beaten the Venezualan currency!!! Awesome.
Next time try beating out gold.
by Dr. Alan Greenspan, 1966
An almost hysterical antagonism toward the gold standard is one issue which unites statists of all persuasions. They seem to sense - perhaps more clearly and subtly than many consistent defenders of laissez-faire - that gold and economic freedom are inseparable, that the gold standard is an instrument of laissez-faire and that each implies and requires the other.
In order to understand the source of their antagonism, it is necessary first to understand the specific role of gold in a free society.
Money is the common denominator of all economic transactions. It is that commodity which serves as a medium of exchange, is universally acceptable to all participants in an exchange economy as payment for their goods or services, and can, therefore, be used as a standard of market value and as a store of value, i.e., as a means of saving.
The existence of such a commodity is a precondition of a division of labor economy. If men did not have some commodity of objective value which was generally acceptable as money, they would have to resort to primitive barter or be forced to live on self-sufficient farms and forgo the inestimable advantages of specialization. If men had no means to store value, i.e., to save, neither long-range planning nor exchange would be possible.
What medium of exchange will be acceptable to all participants in an economy is not determined arbitrarily. First, the medium of exchange should be durable. In a primitive society of meager wealth, wheat might be sufficiently durable to serve as a medium, since all exchanges would occur only during and immediately after the harvest, leaving no value-surplus to store. But where store-of-value considerations are important, as they are in richer, more civilized societies, the medium of exchange must be a durable commodity, usually a metal. A metal is generally chosen because it is homogeneous and divisible: every unit is the same as every other and it can be blended or formed in any quantity. Precious jewels, for example, are neither homogeneous nor divisible. More important, the commodity chosen as a medium must be a luxury. Human desires for luxuries are unlimited and, therefore, luxury goods are always in demand and will always be acceptable. Wheat is a luxury in underfed civilizations, but not in a prosperous society. Cigarettes ordinarily would not serve as money, but they did in post-World War II Europe where they were considered a luxury. The term "luxury good" implies scarcity and high unit value. Having a high unit value, such a good is easily portable; for instance, an ounce of gold is worth a half-ton of pig iron.
In the early stages of a developing money economy, several media of exchange might be used, since a wide variety of commodities would fulfill the foregoing conditions. However, one of the commodities will gradually displace all others, by being more widely acceptable. Preferences on what to hold as a store of value, will shift to the most widely acceptable commodity, which, in turn, will make it still more acceptable. The shift is progressive until that commodity becomes the sole medium of exchange. The use of a single medium is highly advantageous for the same reasons that a money economy is superior to a barter economy: it makes exchanges possible on an incalculably wider scale.
Whether the single medium is gold, silver, seashells, cattle, or tobacco is optional, depending on the context and development of a given economy. In fact, all have been employed, at various times, as media of exchange. Even in the present century, two major commodities, gold and silver, have been used as international media of exchange, with gold becoming the predominant one. Gold, having both artistic and functional uses and being relatively scarce, has significant advantages over all other media of exchange. Since the beginning of World War I, it has been virtually the sole international standard of exchange. If all goods and services were to be paid for in gold, large payments would be difficult to execute and this would tend to limit the extent of a society's divisions of labor and specialization. Thus a logical extension of the creation of a medium of exchange is the development of a banking system and credit instruments (bank notes and deposits) which act as a substitute for, but are convertible into, gold.
A free banking system based on gold is able to extend credit and thus to create bank notes (currency) and deposits, according to the production requirements of the economy. Individual owners of gold are induced, by payments of interest, to deposit their gold in a bank (against which they can draw checks). But since it is rarely the case that all depositors want to withdraw all their gold at the same time, the banker need keep only a fraction of his total deposits in gold as reserves. This enables the banker to loan out more than the amount of his gold deposits (which means that he holds claims to gold rather than gold as security of his deposits). But the amount of loans which he can afford to make is not arbitrary: he has to gauge it in relation to his reserves and to the status of his investments.
When banks loan money to finance productive and profitable endeavors, the loans are paid off rapidly and bank credit continues to be generally available. But when the business ventures financed by bank credit are less profitable and slow to pay off, bankers soon find that their loans outstanding are excessive relative to their gold reserves, and they begin to curtail new lending, usually by charging higher interest rates. This tends to restrict the financing of new ventures and requires the existing borrowers to improve their profitability before they can obtain credit for further expansion. Thus, under the gold standard, a free banking system stands as the protector of an economy's stability and balanced growth. When gold is accepted as the medium of exchange by most or all nations, an unhampered free international gold standard serves to foster a world-wide division of labor and the broadest international trade. Even though the units of exchange (the dollar, the pound, the franc, etc.) differ from country to country, when all are defined in terms of gold the economies of the different countries act as one-so long as there are no restraints on trade or on the movement of capital. Credit, interest rates, and prices tend to follow similar patterns in all countries. For example, if banks in one country extend credit too liberally, interest rates in that country will tend to fall, inducing depositors to shift their gold to higher-interest paying banks in other countries. This will immediately cause a shortage of bank reserves in the "easy money" country, inducing tighter credit standards and a return to competitively higher interest rates again.
A fully free banking system and fully consistent gold standard have not as yet been achieved. But prior to World War I, the banking system in the United States (and in most of the world) was based on gold and even though governments intervened occasionally, banking was more free than controlled. Periodically, as a result of overly rapid credit expansion, banks became loaned up to the limit of their gold reserves, interest rates rose sharply, new credit was cut off, and the economy went into a sharp, but short-lived recession. (Compared with the depressions of 1920 and 1932, the pre-World War I business declines were mild indeed.) It was limited gold reserves that stopped the unbalanced expansions of business activity, before they could develop into the post-World Was I type of disaster. The readjustment periods were short and the economies quickly reestablished a sound basis to resume expansion.
But the process of cure was misdiagnosed as the disease: if shortage of bank reserves was causing a business decline-argued economic interventionists-why not find a way of supplying increased reserves to the banks so they never need be short! If banks can continue to loan money indefinitely-it was claimed-there need never be any slumps in business. And so the Federal Reserve System was organized in 1913. It consisted of twelve regional Federal Reserve banks nominally owned by private bankers, but in fact government sponsored, controlled, and supported. Credit extended by these banks is in practice (though not legally) backed by the taxing power of the federal government. Technically, we remained on the gold standard; individuals were still free to own gold, and gold continued to be used as bank reserves. But now, in addition to gold, credit extended by the Federal Reserve banks ("paper reserves") could serve as legal tender to pay depositors.
When business in the United States underwent a mild contraction in 1927, the Federal Reserve created more paper reserves in the hope of forestalling any possible bank reserve shortage. More disastrous, however, was the Federal Reserve's attempt to assist Great Britain who had been losing gold to us because the Bank of England refused to allow interest rates to rise when market forces dictated (it was politically unpalatable). The reasoning of the authorities involved was as follows: if the Federal Reserve pumped excessive paper reserves into American banks, interest rates in the United States would fall to a level comparable with those in Great Britain; this would act to stop Britain's gold loss and avoid the political embarrassment of having to raise interest rates. The "Fed" succeeded; it stopped the gold loss, but it nearly destroyed the economies of the world, in the process. The excess credit which the Fed pumped into the economy spilled over into the stock market-triggering a fantastic speculative boom. Belatedly, Federal Reserve officials attempted to sop up the excess reserves and finally succeeded in braking the boom. But it was too late: by 1929 the speculative imbalances had become so overwhelming that the attempt precipitated a sharp retrenching and a consequent demoralizing of business confidence. As a result, the American economy collapsed. Great Britain fared even worse, and rather than absorb the full consequences of her previous folly, she abandoned the gold standard completely in 1931, tearing asunder what remained of the fabric of confidence and inducing a world-wide series of bank failures. The world economies plunged into the Great Depression of the 1930's.
With a logic reminiscent of a generation earlier, statists argued that the gold standard was largely to blame for the credit debacle which led to the Great Depression. If the gold standard had not existed, they argued, Britain's abandonment of gold payments in 1931 would not have caused the failure of banks all over the world. (The irony was that since 1913, we had been, not on a gold standard, but on what may be termed "a mixed gold standard"; yet it is gold that took the blame.) But the opposition to the gold standard in any form-from a growing number of welfare-state advocates-was prompted by a much subtler insight: the realization that the gold standard is incompatible with chronic deficit spending (the hallmark of the welfare state). Stripped of its academic jargon, the welfare state is nothing more than a mechanism by which governments confiscate the wealth of the productive members of a society to support a wide variety of welfare schemes. A substantial part of the confiscation is effected by taxation. But the welfare statists were quick to recognize that if they wished to retain political power, the amount of taxation had to be limited and they had to resort to programs of massive deficit spending, i.e., they had to borrow money, by issuing government bonds, to finance welfare expenditures on a large scale.
Under a gold standard, the amount of credit that an economy can support is determined by the economy's tangible assets, since every credit instrument is ultimately a claim on some tangible asset. But government bonds are not backed by tangible wealth, only by the government's promise to pay out of future tax revenues, and cannot easily be absorbed by the financial markets. A large volume of new government bonds can be sold to the public only at progressively higher interest rates. Thus, government deficit spending under a gold standard is severely limited. The abandonment of the gold standard made it possible for the welfare statists to use the banking system as a means to an unlimited expansion of credit. They have created paper reserves in the form of government bonds which-through a complex series of steps-the banks accept in place of tangible assets and treat as if they were an actual deposit, i.e., as the equivalent of what was formerly a deposit of gold. The holder of a government bond or of a bank deposit created by paper reserves believes that he has a valid claim on a real asset. But the fact is that there are now more claims outstanding than real assets. The law of supply and demand is not to be conned. As the supply of money (of claims) increases relative to the supply of tangible assets in the economy, prices must eventually rise. Thus the earnings saved by the productive members of the society lose value in terms of goods. When the economy's books are finally balanced, one finds that this loss in value represents the goods purchased by the government for welfare or other purposes with the money proceeds of the government bonds financed by bank credit expansion.
In the absence of the gold standard, there is no way to protect savings from confiscation through inflation. There is no safe store of value. If there were, the government would have to make its holding illegal, as was done in the case of gold. If everyone decided, for example, to convert all his bank deposits to silver or copper or any other good, and thereafter declined to accept checks as payment for goods, bank deposits would lose their purchasing power and government-created bank credit would be worthless as a claim on goods. The financial policy of the welfare state requires that there be no way for the owners of wealth to protect themselves.
This is the shabby secret of the welfare statists' tirades against gold. Deficit spending is simply a scheme for the confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights. If one grasps this, one has no difficulty in understanding the statists' antagonism toward the gold standard.
However, there's nothing stopping you from spending all your fiat backed dollars on gold - it makes for a solid investment - just not a stable economy.
Alert the media!
Everything "of value" only has value because we place value on it.
Gold is what stops Depressions, not what causes them.
I'm not surprised that you see solid investments and stable economies as completely different things.
I'm just going to have to admit that economics is far to complicated a subject to debate in detail between meetings and other work related duties - but if I get the chance, I'll read the Greenspan article you posted. However, I will say that investment isn't the same as economy anymore than tires are a car.
It doesn't. It needs to be something of universal real value, meaning that men find value in it and it is limited in supply.
Again, congratulations. Feel free to celebrate with a $2 bottle of water.
Tires are not a car. You're entirely right. The fact that you think an economy is something to be singularly built and managed (like a car) is pretty much my point in the previous post.
Not the 'Chicken or the Egg' thing... CUT SPENDING is the beginning. Less SPENDING means less taxes... not a tough situation to assess. What is more important... 400 billion poured into Iraq or 400 bilion poured into America?
And people who say, 'Let the Private Sector pay for it' usually means, 'Let someone other than me pay for it'. You know that if those people didn't have to pay taxes... they wouldn't pay shit. They 'SAY' they would donate to charity... but, that's just empty words... anyone can say they'll do something and not follow through with it. It just makes a better arguement for themselves and gives them an out.
I believe that the collective whole could take care of those whom have fallen on hard times... for WHATEVER reason. I believe the strong should protect the weak and not neglect them... survival of the fittest works on the Serengetti with Cheetahs and Thompsons Gazelles... we are humans.
I wish I could just tell you, "Okay, you're exempt... keep your fucking money... now, shut the fuck up and let the rest of us deal with the country's problems". Money is very important to you... it's just fucking money to me.
Hail, Hail!!!
Both can happen at once. Tie spending to taxes directly. Then cutting either forces the other to go down as well.
Neither.
Of course! What's wrong with that?
Certainly! But just because they can lie doesn't mean they are lying.
I believe that too. However, I believe the strong should have every right to ask "what's in it for me?"
Congratulations.
If money is so unimportant, how come you want $1,000,000,000,000 of it collected per year from the rest of us? If money is "just money", then you shouldn't need it. It's just paper, right?
One Trillion Dollars can be put to good use. Why isn't it?
And it's the COLLECTIVE WHOLE that makes up that sum of one trillion... i'm guessing that you did not contribute one trillion in revenues collected.
The idea or the whole contributing to the success of the society is a good one.. but, the way we've implemented it isn't working.
Democrats are Tax and Spend and Republicans are Don't Tax and Spend... it's the Spending that's the problem. Anyone that disagrees needs only to look at the current administration and the Patron Saint of Republicans, Ronald Reagan's spending. Spending what we don't have on shit we don't need.
Cut the spending and we won't need to collect as much.
...
P.S. I believe that 400 Billion tax payer dollars is better used building schools and mass transit systems here in America, than paying the salaries of Iraqi politicians and hoping they'll grow up to be just like us. But, that's just me.
P.P.S. Regarding this... "I believe that too. However, I believe the strong should have every right to ask "what's in it for me?""
If you are helping out those less fortunate than yourself and are looking for your own personal gain... you are not strong. Just step aside and let the strong spirited do the work.
Hail, Hail!!!
It is. It's just not your definition of "good". It's someone else's. See, what we've done here is build a system of wealth distribution based on the "common good". The fundamental flaw there is that the words "common good" have no meaning as prescribed by a system that guarantees you no good but only sacrifice.
No. I said "us", not "me"
Absolutely agree! It's because we've setup a social contradiction: sacrifice for benefit. It makes no sense.
I agree with that too. But we shouldn't allow the government to get away with just "cut the spending". Tie them both together. I don't want this government producing a surplus any more than I want them producing a deficit.
Once you eliminate the choice of the men and women who earned that money in the first place, you've already lost my support, regardless of how you spend that stolen loot. I have sympathy for neither Robin Hood or the Sheriff of Nottingham.
Amazing point.