What is money? Where does our money come from?

[ducati998]

Ahh, now I think I'm getting somewhere, at least you agree there has been a fairly dramatic change in circumstances since coming off the gold standard! :clap:

I might leave this one for the duc!

Done.

jog on
duc

 

[ducati998]

I have found your posts very interesting, please continue.

Are you one of the undecided?

If you are, and there is an area that needs clarification, just post your question and we will try to answer it, or at least point you in the right direction.

jog on
duc

 

[darktone]

Jon

.

Your lack of historical knowledge is lamentable.

This of course is exactly how paper money certificates, the precursor of fiat money, came into existence.

Goldsmiths, provided secure storage for gold deposited, charging a small fee, and issued paper deposit certificates that would later be redeemed in gold upon demand.

jog on
duc

Can you point out exactly which part of Barjons post demonstrates his 'lack' of historical knowledge!?
Have you considered a career in politics by any chance?

 

[ducati998]

Can you point out exactly which part of Barjons post demonstrates his 'lack' of historical knowledge!?
Have you considered a career in politics by any chance?

On the origins of fiat money. The shift to fiat was in stages. The first stage was the issuance of a warehouse receipt for gold via the goldsmiths.

A career in politics? Such a slur upon my character.

jog on
duc

 

[darktone]

On the origins of fiat money. The shift to fiat was in stages. The first stage was the issuance of a warehouse receipt for gold via the goldsmiths.

A career in politics? Such a slur upon my character.

jog on
duc

But his post had nothing to do with the origins of fiat money, that made me curious as to your reply. Why you chose to label his knowledge of the goldsmiths as 'lamentable'?
It makes no sense.

 

[barjon]

Jon

.

Your lack of historical knowledge is lamentable.

This of course is exactly how paper money certificates, the precursor of fiat money, came into existence.

Goldsmiths, provided secure storage for gold deposited, charging a small fee, and issued paper deposit certificates that would later be redeemed in gold upon demand.

jog on
duc

Ducky

of course it is, but that doesn't alter the point that it didn't "work" until people were prepared to trust it. Nor does it alter my contention that it is trust in the money system rather than the system itself that is important.

Jon

 

[ducati998]

But his post had nothing to do with the origins of fiat money, that made me curious as to your reply. Why you chose to label his knowledge of the goldsmiths as 'lamentable'?
It makes no sense.

Oh but it does, here is the original statement from Jon:

Quote:
I have also argued that, whatever system you have, it comes down to peoples TRUST in it. I would hazard a guess that if you and ducky pooled your gold resources and issued notes backed by that gold you would not get many shopkeepers prepared to accept your money in exchange for goods because they would not trust it (ignoring legalities). You could print whatever promises you liked on your notes and have the fact that you had the gold certified by the most eminent figures in the land and your money still wouldn't be accepted until people came to trust it

As you see, Jon suggested that if NT & myself wanted to market our own money, that building the 'trust' necessary would be difficult.

History demonstrates that this is exactly how fiat money was initiated and progressed via government propaganda & coercion to where we are today with fiat money unbacked by anything save 'faith'.

jog on
duc

 

[ducati998]

Ducky

of course it is, but that doesn't alter the point that it didn't "work" until people were prepared to trust it. Nor does it alter my contention that it is trust in the money system rather than the system itself that is important.

Jon

With regard to the initial switch to warehouse receipts for deposited gold, certainly an element of time and trust is involved.

With regard to your further argument that there are no quantitative or qualitative differences in the two money systems you are incorrect.

When money is gold, a commodity, that commodity has value as a commodity in addition to a separate value as a 'money'. Thus, even if the entire money system based on gold was to lose all trust overnight, then the value that gold held as money would be worthless, however the commodity value would remain.

With fiat money, all that would remain would be the 'paper' or in terms of coins, their commodity value, and electronic entries, zero.

jog on
duc

 

[barjon]

.............I can see from your various responses on this thread that you have difficulty with abstract theory. That is understandable, it is a problem for many.

ducky

I have no difficulty with abstract theory - I just don't don't like it getting in the way of the facts.

You provide some stats concerning 'Capacity Utilization' which are all well and good until you then lay the change squarely at the change in the money system without consideration for any other factors - increasing globalisation being one. Within the whole capitalism equation it's not surprise to see shifts in the capital provider, producer/manufacturer ratio.

In any event my argument with you was not about the relative merits of the money systems, but your assertion that the purpose of fiat was to rob the State's citizens. I do not believe that. You may call it my safety blanket faith - in fact it is an understanding of how Government works which seems to have escaped you entirely.

It is a poor debater who resorts to belittling his opponent - you must do better

jon

 

[ducati998]

Jon

I have no difficulty with abstract theory - I just don't don't like it getting in the way of the facts.

Classic.

What do you think abstract theory is? A theory is a set of deductions derived from an axiom, or, an incontrovertible 'fact'.

You provide some stats concerning 'Capacity Utilization' which are all well and good until you then lay the change squarely at the change in the money system without consideration for any other factors -

Well because you stated that you were an ex-statistician, I thought that would help clarify your understanding.

It is the 'money system' because old chap, that is what the world has calculated economically in for several thousand years now. All the factors of production are calculated in 'money'. This rather goes to the importance and purpose of the thread in the first place with regard to the question of money?

increasing globalisation being one.

Indeed, which is absolutely a function and consequence of the division of labour, comparative advantage, according to that Ricardo chappie.

Now I could argue your point of globalization, as I think I know where you are heading with this objection, but, assumptions can lead to errors, so, I shall let you present your argument of globalization in refutation of the empirical data presented, rather than your non-specific, generalization that you have presented.

Within the whole capitalism equation it's not surprise to see shifts in the capital provider, producer/manufacturer ratio.

Which rather supports my initial gut feeling as to where you are headed with this. As already stated, present your argument old chap, let's have at it.

In any event my argument with you was not about the relative merits of the money systems, but your assertion that the purpose of fiat was to rob the State's citizens.

And I have already refuted your objection. If you can prove otherwise, present your argument.

I do not believe that.

Of course you don't. Like any religious zealot, you maintain your faith into the teeth of reason. That of course is your choice, but, at least have the intellectual integrity to state as much.

You may call it my safety blanket faith - in fact it is an understanding of how Government works which seems to have escaped you entirely.

Really?

Then present your argument. Just posting opinion, does not really advance your case very far.

It is a poor debater who resorts to belittling his opponent - you must do better

That was me trying to be 'understanding'. To date, there is no 'debate'. All we have is reasoned logical argument being presented on one side, and the other side responding with - "I don't believe you". Hardly a debate old chap.

jog on
duc

 

[counter_violent]

Surely the point is quite simple.

If the banksters in cahoots with the govt can simply print worthless paper willynilly under the guise of "a useful economics tool" (easy option), then the temptation to use the tool as opposed to dealing with economic problems in a fit and proper manner (hard option) they will take the easy option every time. It is in fact fraudulent because they are devaluing everyones position at a stroke.

 

[ducati998]

Surely the point is quite simple.

If the banksters in cahoots with the govt can simply print worthless paper willynilly under the guise of "a useful economics tool" (easy option), then the temptation to use the tool as opposed to dealing with economic problems in a fit and proper manner (hard option) they will take the easy option every time. It is in fact fraudulent because they are devaluing everyones position at a stroke.

And there it is, in a nutshell, the pragmatic approach.

jog on
duc

 

[counter_violent]

BBC iPlayer - Search :not the solution

Available soon on iplayer.

I did listen to it and although it was not a great programme, it did at least give a
general overview of US politics.

What was interesting. How govt tries to legitimise its very existence with first of all "soundbites", preparing the ground for things like "war on drugs" "war on terror". So next time you hear a government declaring "war on", think about what this actually means ! It's simply their way of justifying themselves to whoever will listen.

 

[darktone]

Oh but it does, here is the original statement from Jon:



As you see, Jon suggested that if NT & myself wanted to market our own money, that building the 'trust' necessary would be difficult.

History demonstrates that this is exactly how fiat money was initiated and progressed via government propaganda & coercion to where we are today with fiat money unbacked by anything save 'faith'.

jog on
duc

You really should consider a career in politics!

Re the history thing. FR started with the goldsmiths, Id say bank over government propaganda. Todays money, backed by faith and debt.

 

[darktone]

Surely the point is quite simple.

If the banksters in cahoots with the govt can simply print worthless paper willynilly under the guise of "a useful economics tool" (easy option), then the temptation to use the tool as opposed to dealing with economic problems in a fit and proper manner (hard option) they will take the easy option every time. It is in fact fraudulent because they are devaluing everyones position at a stroke.

It can only happen imo because the public are unaware of how money is currently created / the scale of the problem.

 

[barjon]

Ducky,

In response to NT who quoted Ron Paul saying "when government is granted an unlimited power to create money out of thin air as the Federal Reserve has, that power is always abused." I made the following points:

1. I have argued that they are both just money systems and both workable. It is not the fiat system itself that is at fault, but the ABUSE of it.

2. Now you may argue that a gold system cannot be abused, but can't it? After all, you could fiddle the books if you were so minded and never have enough gold in the vaults to meet the promises on your notes.

3. You may similarly argue that abuse is inherent in a fiat system, but is it? After all you can provide accounting checks and balances if you are prepared to obey them.

I wonder if you would care to comment on each point?

jon

 

[counter_violent]

UNDERSTANDING THE MODERN MONETARY SYSTEM | PRAGMATIC CAPITALISM

 

[ducati998]

Jon,

1. I have argued that they are both just money systems and both workable. It is not the fiat system itself that is at fault, but the ABUSE of it.

Your argument is really that 'money' is a workable system. Agreed. You then seek to introduce through the back-door as it were, that gold and fiat are equivalent, thus if money is a viable proposition, then, both gold and fiat are workable.

This is an illegitimate argument for the following reason. The argument rests on the truth of the following statement: an apple is an orange. Clearly this is false, in the same way as gold is not fiat. They are different, as different as an apple & orange. Both are fruit, or money, but they are nonetheless different.

It is these differences in properties that constitute the differences in function.

2. Now you may argue that a gold system cannot be abused, but can't it? After all, you could fiddle the books if you were so minded and never have enough gold in the vaults to meet the promises on your notes.

This is an important point: a gold based money system cannot be abused.

Why?

Simply because if a bank, or any depositary institution, were to fail in providing upon demand the gold, due to fraud, the institution would endure a 'bank run' which would bankrupt and liquidate the institution.

Only 'honest' banks, or institutions would survive and thus be under constant and unrelenting scrutiny by the market.

3. You may similarly argue that abuse is inherent in a fiat system, but is it? After all you can provide accounting checks and balances if you are prepared to obey them.

Accounting checks & balances. You must have heard the joke about the 3 accountants. I can find within, oh, about 10mins, the public financial statements of any US Corporation that utilizes aggressive accounting, that while strictly speaking are legal, are designed to mislead.

Let me provide one example immediately. US Corporations are allowed to prepare two sets of financial statements, legally: the first goes to IRS, and are designed to minimise income, and hence reduce tax liable.

The second are the financial statements released to the financial markets, which, of course maximise income, so as to create increased multiples on the earnings.

The market, with gold, needs no rules, regulations, or financial releases. All that is required is that 'demand deposits' are fully paid upon demand. Nothing could be easier.

I wonder if you would care to comment on each point?

My pleasure old chap.

jog on
duc

 

[ducati998]

UNDERSTANDING THE MODERN MONETARY SYSTEM | PRAGMATIC CAPITALISM

CV,

This is nothing but Chartalism
which is once again nothing but an inflationary fiat system.

jog on
duc

 

[new_trader]

And there it is, in a nutshell, the pragmatic approach.

jog on
duc

This thread makes the following observation obvious.

This inflationary charade was played to buttress Britain's fading dreams as an imperialist world power. But also involved was the rise of the new doctrines of John Maynard Keynes, who by the early 1920s had become a foe of the "barbarous relic"' gold and extolled instead the alleged virtues of a politically managed paper currency. That these ideas became so influential so fast in London banking circles was due in no small part to the catastrophic loss suffered during World War I of truly the finest minds of a generation. These would have normally become leaders during the 1920s. This left a gap which affected Britain as it did few other countries. For at the risk of broad-brush painting, the British are a people that have always put more stock in practical knowledge than the more philosophical French or Germans. But pragmatism depends less on book knowledge than on skills handed down orally. The annihilation of a generation thus created a gap in the continuity of knowledge those more bookish nations escaped. So as one contemporary observer of London financial circles perceptively explained, by the mid-1920s, there would be few remaining grandfathers who remembered the virtues of sound money. And there would be their grandsons "miseducated by Keynes/' Between them was a gap, which created such "a barrier in ideas that it was not easy for tradition and practical knowledge to pass."

Ron Paul-"The Case for Gold"