NationStates Jolt Archive

I just found out about the different currency regimes in a book I'm reading. I didn't know it was so diverse. Historically, there have been three main regimes: the gold standard, the golden dollar, and the free float regime of today.
The gold standard, I'll say right now, sounds like my favorite. It was the closest the world ever came to a single world currency. Sure, different currencies were accepted in different countries, but they were all backed by gold, which had the same value throughout the world. At the time it was used, being in the late 19th and early 20th centuries, it was British led. Until WWI, most of the world's gold was controlled from a few banks in London. In fact, the British had, in effect, control of the global currency, as they had so much of it. The downfall, however, was that it was inflexible. More money, if needed be, couldn't be printed, and it was abandoned by the Great Depression.
The second system was the golden dollar, devised by a series of compromies at the Bretton Woods, NH meeting of 1944. WWII made the US the world's premier economy, and thus, the dollar became the world's premier currency. The system was that all gold, anywhere in the world, had a fixed price of $35. All other currencies had a limited fluctuation from the dollar. They could buy dollars, and then redeem them for gold. There were lots of problems with this, however. For one, it left the other countries vulnerable to inflation, but not the US. Even so, the US was vulnerable to deflation, as dollars were bought throughout the world, and money left the US, creating economic downturn.
The big problem came in the 1960s, when the world economy rebounded from WWII faster than expected. There wasn't enough gold for all of the dollars in demand. Then in 1971, the Nixon Administration unilaterally severed the link between gold and the dollar. Shortly after, the free float regimes that we all know today came into existence.
I find their are problems with this, too. For one, there are currency fluctuations for each country. On a gold standard, such fluctuations would be moderated. For another, these different currencies left to float against one another can be an impediment to trade. I'm sure you know about that a country can export more with a weak currency, and import more with a strong currency. Again, the price of gold would help moderate that.
BTW, while I want a gold currency, it doesn't necessarily have to be gold. It can be silver, platinum, or any other precious metal. But it must meet three conditions: it is easily divisible, homogeonous, and precious.

bump

bump for the last time

bump because its a good thread with a good poll.

You can always tell when someone just read a book. Before I even read your post, I could tell you read some type of book. No offense, but when someone gets this burst of knowledge noone else knows, and posts it, I can usually tell. BTW, I have no idea which currency is better, i havent the slightest.

The only things that benefit from a global currency are the corporations. I think a gold backed currency is the best.

Quik! Someone pick #2 and we can have a flatline!

You can always tell when someone just read a book. Before I even read your post, I could tell you read some type of book. No offense, but when someone gets this burst of knowledge noone else knows, and posts it, I can usually tell. BTW, I have no idea which currency is better, i havent the slightest.
Yeah, I just did. I'm considering doing something in my life with economics. It's always fascinated me. I've just also learned that with the gold standard, we were closer to a world currency than ever before. In fact, the 19th century probably deserves the name the "era of globalization" more than the 21st for this reason.
And it's okay, btw, that you don't know. I'm sure most people just care if money exists. But wouldn't it be cool to redeem your cash for gold?

You can always tell when someone just read a book. Before I even read your post, I could tell you read some type of book. No offense, but when someone gets this burst of knowledge noone else knows, and posts it, I can usually tell. BTW, I have no idea which currency is better, i havent the slightest.
Then support Free-Floating currencies. :)

In a system with true free-floating currencies it would naturally balance out trade, wouldn't it? A weaker currency would result from a trade deficit and it would decrease the deficit. A stronger currency would result from a trade surplus and help even the balance too. Of course, for all the things to work it would require free trade and all countries to (completely) follow the system, which dosen't happen today. Obviously governments can manipulate, or try to manipulate, their currency prices to help their economies.

The only things that benefit from a global currency are the corporations. I think a gold backed currency is the best.
They do benefit a lot, but they do because of an increase in international trade. Since the end of WWII, the global economy has increased by six fold, and world trade by sixteen fold. The world population, on the other hand, increased by just three fold. Per capita income doubled because of freeer trade, and the currency fluctuations of today are the last great impediment to that.

Yeah, I just did. I'm considering doing something in my life with economics. It's always fascinated me. I've just also learned that with the gold standard, we were closer to a world currency than ever before. In fact, the 19th century probably deserves the name the "era of globalization" more than the 21st for this reason.
And it's okay, btw, that you don't know. I'm sure most people just care if money exists. But wouldn't it be cool to redeem your cash for gold?

Yeah, I'm taking my first econ class. I already know everything he's tried to teach me, and I have read anything on the subject. By its only the 5th day...

Yeah, I'm taking my first econ class. I already know everything he's tried to teach me, and I have read anything on the subject. By its only the 5th day...
Oh. Well, you must be older than me, perhaps in your senior year of high school. I have to take an economics course to graduate, but I'm only a sophomore.

You can always tell when someone just read a book. Before I even read your post, I could tell you read some type of book. No offense, but when someone gets this burst of knowledge noone else knows, and posts it, I can usually tell. BTW, I have no idea which currency is better, i havent the slightest.

You kinda come off sounding condescending towards purly for posting something he/she read in a book. Personally I enjoy reading these types of tidbits. Which book did you read? Was it a textbook or a paperback? I would be interested in reading the same thing :)

Then support Free-Floating currencies. :)

In a system with true free-floating currencies it would naturally balance out trade, wouldn't it? A weaker currency would result from a trade deficit and it would decrease the deficit. A stronger currency would result from a trade surplus and help even the balance too. Of course, for all the things to work it would require free trade and all countries to (completely) follow the system, which dosen't happen today. Obviously governments can manipulate, or try to manipulate, their currency prices to help their economies.
This, however, is true with the gold standard. If gold leaves a country, prices would deflate, and that country's goods would be temporarily cheaper, until economic equilibrium was restored. The same thing would happen with a country that, in a free floating regime, has a strong currency. But since the price of gold is constant, equilibrium can be restored far more quickly.
Plus, it is also easier to monitor manipulations of the market because their is none. Gold is gold, and will never change in price, unless a gold strike is made. A country can't peg its currency because it is always pegged to the price of gold (or whatever the metal is).

You kinda come off sounding condescending towards purly for posting something he/she read in a book. Personally I enjoy reading these types of tidbits. Which book did you read? Was it a textbook or a paperback? I would be interested in reading the same thing :)
It was actually a boring Political Science book I'm reading for pleasure over the summer (weird but true). It's The Ideas That Conquered The World: Peace, Democracy, and the Free Market in the 21st Century by Prof. Michael Mandelbaum. His thesis is that peace, democracy, and the free market is a trend pioneered by Woodrow Wilson, and today, has no real ideaological enemies. He also explained what Wilsonianism means for the world. Pretty interesting for a geek like me.

No one said that the Gold Dollar was the best system yet? I think it's the worst yet, but I'd love the oppritunity to debate someone who thinks it was the best.

Then support Free-Floating currencies. :)

In a system with true free-floating currencies it would naturally balance out trade, wouldn't it? A weaker currency would result from a trade deficit and it would decrease the deficit. A stronger currency would result from a trade surplus and help even the balance too. Of course, for all the things to work it would require free trade and all countries to (completely) follow the system, which dosen't happen today. Obviously governments can manipulate, or try to manipulate, their currency prices to help their economies.

I.E. Vietnam? The dong (hehe) is worth like a 20th of a penny and that increases tourism like you would never believe. You can get an ass load of shit for a buck there. It's awesome.

No one said that the Gold Dollar was the best system yet? I think it's the worst yet, but I'd love the oppritunity to debate someone who thinks it was the best.

Hah, thats like debating someone who thinks Bush did good for our country.

I.E. Vietnam? The dong (hehe) is worth like a 20th of a penny and that increases tourism like you would never believe. You can get an ass load of shit for a buck there. It's awesome.
Well, at least it means cheap exports from that country.
But all of the Asian currencies are pretty weak. The South Korean Won is like 5,000=$1. Even the yen, considered to be strong against the dollar, still takes 110 of them to equal a dollar.

Hah, thats like debating someone who thinks Bush did good for our country.
Like me?

This, however, is true with the gold standard. If gold leaves a country, prices would deflate, and that country's goods would be temporarily cheaper, until economic equilibrium was restored. The same thing would happen with a country that, in a free floating regime, has a strong currency. But since the price of gold is constant, equilibrium can be restored far more quickly.
Plus, it is also easier to monitor manipulations of the market because their is none. Gold is gold, and will never change in price, unless a gold strike is made. A country can't peg its currency because it is always pegged to the price of gold (or whatever the metal is).
You're obviously not talking about doing all transactions in gold, but if you're not, it could be manipulated just like a free-floating currency system, just not in the same way. You wouldn't necessarily have China pegging its currency to the dollar, but they could still have their currency at a lower value than it should be. The amount of gold can increase. Obviously, most of this increase wouldn't be in real gold, but perhaps in someone or some government adding copper to their gold so that now all their "gold" is 99% gold and 1% copper, but they call it all gold anyway. Who's going to stop them? The gold standard, just like any system, relies on 'trust' between the people and the government and people and governments around the world, and it can be used and abused just like any other system. No one's going to go through the process of essaying gold every time a transaction happens.

You're obviously not talking about doing all transactions in gold, but if you're not, it could be manipulated just like a free-floating currency system, just not in the same way. You wouldn't necessarily have China pegging its currency to the dollar, but they could still have their currency at a lower value than it should be. The amount of gold can increase. Obviously, most of this increase wouldn't be in real gold, but perhaps in someone or some government adding copper to their gold so that now all their "gold" is 99% gold and 1% copper, but they call it all gold anyway. Who's going to stop them? The gold standard, just like any system, relies on 'trust' between the people and the government and people and governments around the world, and it can be used and abused just like any other system. No one's going to go through the process of essaying gold every time a transaction happens.
Actually, I am talking about all transactions done in gold, but the gold is stored away in places like banks, and Ft. Knox. Paper money would represent gold, but I'm sure you know that's what I was talking about: gold-backed cash. Money, of course, can be redeemed for gold.
And btw, I know that cheating can still take place. But that is harder to do if gold is simply shuffled from one bank to the next. Most bankers should have a good understanding of gold: what an ounce looks like, it's density and consistency. Of course, we can always use another metal, perhaps silver. But I think silver may be harder to regulate for purity. Platinum is another option, but it's too rare to be practical. Financial transactions of $1 would equal the transaction of a microscopic portion of platinum. Are there any other precious metals out there? And they have to be pure. They can't be anything like bronze.
*Edit*
Silly me. I forgot that if someone tried to alloy gold with another metal, it'd create more cash, and thus, inflation. Why would anyone want that?

Actually, I am talking about all transactions done in gold, but the gold is stored away in places like banks, and Ft. Knox. Paper money would represent gold, but I'm sure you know that's what I was talking about: gold-backed cash. Money, of course, can be redeemed for gold.
And btw, I know that cheating can still take place. But that is harder to do if gold is simply shuffled from one bank to the next. Most bankers should have a good understanding of gold: what an ounce looks like, it's density and consistency. Of course, we can always use another metal, perhaps silver. But I think silver may be harder to regulate for purity. Platinum is another option, but it's too rare to be practical. Financial transactions of $1 would equal the transaction of a microscopic portion of platinum. Are there any other precious metals out there? And they have to be pure. They can't be anything like bronze.

I doesn't have to be metal, it just has to be valuable and stable. It doesn't even have to be a physical object: The gov't can give you a credit for a pound of gold and if the currency collapses, they refund a much larger amount of money.

I'm new to this, so forgive me if i do it wrong.

While there are no official currency standards, oil serves as a defacto currency for the world. The price of a barrell of Texas crude is what gives the dollar its global strength. Oil can only be traded in dollars. So if a country wants to buy oil (or needs to) then it must first purchase dollars to do so. And that means that an oil exporting country brings in a lot of dollars...and has to spend them. The system allows the US Fed. Res. to basically print more money whenever it wants, releasing the states from having the dollar tied to any actual economic output. It keeps the US economy constantly growing, even when jobs are lost, etc. Sounds like a great deal for the USofA, but its not quite so good. Because the worlds major energy source is traded exclusively in dollars and the world is awash in dollars, the US must be the consumer of last resort for the rest of the world.

But all in all, it works out very nicely for the States. If you ever wondered why such a disparate band of nations were placed together in the "Axis of Evil", the "oil standard" explains it nicely. Iraq had already gone over to using Euros in the oil for food program. Iran has long flirted with the idea of selling its oil in Euros rather than dollars. And N. Korea (an importer) has switched to only purchasing oil with Euros. Until the Euro there was no currency with enough strength and spread to challenge the $. But if OPEC switched to Euros, we'd all see the bottom fall out of the dollar and the miracle economic machine that is the USA overnight. If you hate the US, it sounds great, but it isn't because the shockwaves would have massive effects on a global scale. Mostly because countries like Japan and Korea would no longer have any reason to keep such huge currency reserves in dollars any more. And if you look at the last two years or so, those countries have been buying dollars like they were going out of style to keep it from slipping, to keep the prices of their own goods steady, to purchase energy, to make more goods. But if they need Euros, not dollars, then the dollar would depreciate exponentially: not only would countries not need them, but in selling off their reserves they would create a glut on the world currency market that depreciated the value further. The real WMD that the Bush Admin. was talking about was the Euro.

I'm not saying its right or wrong...this is just how it is.

BTW, the korean won is roughly 1200=1$ (i live there)

I doesn't have to be metal, it just has to be valuable and stable. It doesn't even have to be a physical object: The gov't can give you a credit for a pound of gold and if the currency collapses, they refund a much larger amount of money.
It must be a metal. There are many valuable things, like diamonds. Diamonds, however, do not have their value equally distributed to all parts, nor is it equally distributed.

I'm new to this, so forgive me if i do it wrong.

While there are no official currency standards, oil serves as a defacto currency for the world. The price of a barrell of Texas crude is what gives the dollar its global strength. Oil can only be traded in dollars. So if a country wants to buy oil (or needs to) then it must first purchase dollars to do so. And that means that an oil exporting country brings in a lot of dollars...and has to spend them. The system allows the US Fed. Res. to basically print more money whenever it wants, releasing the states from having the dollar tied to any actual economic output. It keeps the US economy constantly growing, even when jobs are lost, etc. Sounds like a great deal for the USofA, but its not quite so good. Because the worlds major energy source is traded exclusively in dollars and the world is awash in dollars, the US must be the consumer of last resort for the rest of the world.

But all in all, it works out very nicely for the States. If you ever wondered why such a disparate band of nations were placed together in the "Axis of Evil", the "oil standard" explains it nicely. Iraq had already gone over to using Euros in the oil for food program. Iran has long flirted with the idea of selling its oil in Euros rather than dollars. And N. Korea (an importer) has switched to only purchasing oil with Euros. Until the Euro there was no currency with enough strength and spread to challenge the $. But if OPEC switched to Euros, we'd all see the bottom fall out of the dollar and the miracle economic machine that is the USA overnight. If you hate the US, it sounds great, but it isn't because the shockwaves would have massive effects on a global scale. Mostly because countries like Japan and Korea would no longer have any reason to keep such huge currency reserves in dollars any more. And if you look at the last two years or so, those countries have been buying dollars like they were going out of style to keep it from slipping, to keep the prices of their own goods steady, to purchase energy, to make more goods. But if they need Euros, not dollars, then the dollar would depreciate exponentially: not only would countries not need them, but in selling off their reserves they would create a glut on the world currency market that depreciated the value further. The real WMD that the Bush Admin. was talking about was the Euro.

I'm not saying its right or wrong...this is just how it is.

BTW, the korean won is roughly 1200=1$ (i live there)

I bugs me that economics can be so largely based on such an arbitrary notion. Why can't we declare a currency that is based on a pound or kilogram of whatever of something that is closely tied to the strength of the economy, so prices always stay the same. A foot is still the legnth it is if its measured in centameters-- why should a loaf of bread change in value depending on what currency your using?

I'm new to this, so forgive me if i do it wrong.

While there are no official currency standards, oil serves as a defacto currency for the world. The price of a barrell of Texas crude is what gives the dollar its global strength. Oil can only be traded in dollars. So if a country wants to buy oil (or needs to) then it must first purchase dollars to do so. And that means that an oil exporting country brings in a lot of dollars...and has to spend them. The system allows the US Fed. Res. to basically print more money whenever it wants, releasing the states from having the dollar tied to any actual economic output. It keeps the US economy constantly growing, even when jobs are lost, etc. Sounds like a great deal for the USofA, but its not quite so good. Because the worlds major energy source is traded exclusively in dollars and the world is awash in dollars, the US must be the consumer of last resort for the rest of the world.

But all in all, it works out very nicely for the States. If you ever wondered why such a disparate band of nations were placed together in the "Axis of Evil", the "oil standard" explains it nicely. Iraq had already gone over to using Euros in the oil for food program. Iran has long flirted with the idea of selling its oil in Euros rather than dollars. And N. Korea (an importer) has switched to only purchasing oil with Euros. Until the Euro there was no currency with enough strength and spread to challenge the $. But if OPEC switched to Euros, we'd all see the bottom fall out of the dollar and the miracle economic machine that is the USA overnight. If you hate the US, it sounds great, but it isn't because the shockwaves would have massive effects on a global scale. Mostly because countries like Japan and Korea would no longer have any reason to keep such huge currency reserves in dollars any more. And if you look at the last two years or so, those countries have been buying dollars like they were going out of style to keep it from slipping, to keep the prices of their own goods steady, to purchase energy, to make more goods. But if they need Euros, not dollars, then the dollar would depreciate exponentially: not only would countries not need them, but in selling off their reserves they would create a glut on the world currency market that depreciated the value further. The real WMD that the Bush Admin. was talking about was the Euro.

I'm not saying its right or wrong...this is just how it is.
This is somewhat true. Most of the Gulf countries have their currencies pegged to the dollar. However, there is still a lot of oil produced outside of the dollar's control. But I think that, should OPEC sell all oil in euros, or should a true alternative to oil emerge, the US would actually benefit greatly in the short term. The dollar would have a sudden collapse, and I don't see this as a bad thing. Exports from the US would rise exponetentionally. If anything, foreign investors and governments would buy tons of dollars to protect their export sectors.
BTW, even though oil does help to support the dollar a bit, it doesn't economically make sense. Some oil is different than others. Oil from one well has a different chemical composition than oil from another. Some is more viscose or heavier than others. The point I'm making is that, unlike metals, it's not homogeonous in value.
Edit:
It is not a true currency, I just thought out, because it fluctuates in price, even in dollars. If oil were a true currency, the dollar would be pegged to it. It is how the current free floating system survives: taking the approximate value of everything in that currency's control, as well as many, many market factors.
BTW, the korean won is roughly 1200=1$ (i live there)
Thanks.

Could someone explain the strength and weakness of each system in times of emergency? It seems to me that if everyone uses a gold-backed system, that would severely dilute the power of a monetary regulation. For example, in case of terrorism/coup/market collapse/natural disaster...etc. People in a gold backed system will be more likely to instinctly transfert their money into gold to 'ride out the storm', and the price of gold will go up, and the currency will spiral down out of control. Since gold is a commodity, it could be shipped/smuggled without regulation and cause more problems. Would enough trouble spots in the world end up causing so much friction that all nations end up suffering? What would happen in a free floating system?
Also, would a gold standard be a cumbersome unit to use? I know that in financial transactions or manufacturing/shipping, there is frequently dealings in fraction of a cent which cannot be represented by real currency. Would a more free floating system that can use 1/1200 (to use the Korean example) be better suited?

Could someone explain the strength and weakness of each system in times of emergency? It seems to me that if everyone uses a gold-backed system, that would severely dilute the power of a monetary regulation. For example, in case of terrorism/coup/market collapse/natural disaster...etc. People in a gold backed system will be more likely to instinctly transfert their money into gold to 'ride out the storm', and the price of gold will go up, and the currency will spiral down out of control. Since gold is a commodity, it could be shipped/smuggled without regulation and cause more problems. Would enough trouble spots in the world end up causing so much friction that all nations end up suffering? What would happen in a free floating system?
I'm not exactly sure about the price of gold going up if people transfer cash for gold. The two are pegged to eachother. As for smuggling, that'd be unlikely, if the gold itself was kept in a few safe locations. Very little gold, for example, would be stored in a warzone. However, it'd be stored in a heavily guarded bank, or somewhere like Ft. Knox. The cash itself would go to a warzone or something like that, but not the actual gold.
Also, would a gold standard be a cumbersome unit to use? I know that in financial transactions or manufacturing/shipping, there is frequently dealings in fraction of a cent which cannot be represented by real currency. Would a more free floating system that can use 1/1200 (to use the Korean example) be better suited?
I don't think it would be once all currencies using gold were fixed to eachother.

Silly me. I forgot that if someone tried to alloy gold with another metal, it'd create more cash, and thus, inflation. Why would anyone want that?
Because A.) Any government wants a little bit of inflation, because a small amount is good. If there's absolutely none, there's a problem. A devaluation of your own currency, especially compared to others, would make your goods cheaper, too. Obviously there needs to be some sort of stability, or else the home country's economy would collapse, or be in danger of it, but I don't think it would be impossible to manipulate the markets under the gold standard just like a country can today. There's a host of other problems too. If some governments decided to be irresponsible or cave into (uneducated) public pressure, it could take the easy way out by making new "gold", having more money, and it would disrupt the world economy, like Spain 'exported' inflation in the 16th century.

Because A.) Any government wants a little bit of inflation, because a small amount is good. If there's absolutely none, there's a problem. A devaluation of your own currency, especially compared to others, would make your goods cheaper, too. Obviously there needs to be some sort of stability, or else the home country's economy would collapse, or be in danger of it, but I don't think it would be impossible to manipulate the markets under the gold standard just like a country can today. There's a host of other problems too. If some governments decided to be irresponsible or cave into (uneducated) public pressure, it could take the easy way out by making new "gold", having more money, and it would disrupt the world economy, like Spain 'exported' inflation in the 16th century.
Back during the original gold standard, most of the world's gold was in London. Even if the British didn't own it, it was in London. As I've said before, if gold is concentrated in a few areas around the globe (but not the cash it backs), it'd be easier to monitor.
As for the inflation in Spain due to new world gold supplies, I see how that is a problem. It will be, therefore, necessary to keep an international regulation body, like the IMF, to monitor the gold supply. If new gold comes in, raise the value of all gold to prevent rapid inflation. It might cause deflation in other countries, but I fail to see why deflation is bad. I know it was dreaded when we had our bout of deflation back in 2002, but I don't see why.

Would countries and governments really allow for these anti-cheating mechanisms to be put in place? In the end, they can load the dice on the free float system, they can load the dice on the gold standard system, unless all the gold is placed in the hands of a few very trustworthy places. You'd get rid of many of the potential problens but bring up the bigger one of the fact that countries simply wouldn't make the switch for it. In theory? Yeah, it could work. Then again, the free float would as well. In reality, I don't think countries would give up their safety valves.

Deflation is bad for a number of reasons. Back in 2002, our economy (and even still today) wasn't in great shape, so we needed consumers to spend now and often. Deflation encourages people to hold out buying stuff because they know it'll be cheaper in a week, a month, or a year. Consumer spending falls, the economic conditions get worse, so spending falls further, etc, the cycle continues, and deflation only amplifies the downward portion of it. Another big thing, speficially with the way the US and other Western economies work, is that we're a nation of debtors. The government is in debt. More importantly, the people and their businesses are in debt, farmers are in debt, ect. If I took a loan out at $5,000 and deflation occured, I still have to pay back $5,000, plus interest, even though thats worth much more now than it was back when I took the loan. I can't pay that, especially if the economy is in the crapper and I either had to take a pay cut or a pink slip. The financial instutions (banks) are then in trouble, and it leads to a chain reaction. Sometimes this is less extreme than others, the Great Depression being the most extreme example of economic collapse, and a little bit of deflation isn't going to cause another depression or force mass bankruptcies, but the prospect of more deflation and the realization of this possibility will.

Would countries and governments really allow for these anti-cheating mechanisms to be put in place? In the end, they can load the dice on the free float system, they can load the dice on the gold standard system, unless all the gold is placed in the hands of a few very trustworthy places. You'd get rid of many of the potential problens but bring up the bigger one of the fact that countries simply wouldn't make the switch for it. In theory? Yeah, it could work. Then again, the free float would as well. In reality, I don't think countries would give up their safety valves.
I agree the switch would be hard. The switch to the gold dollar occured only in 1944, when the world was damaged by war, or in the seventies, resulting in the infamous stagflation.
Also, I will concede that it'll unfairly benefit a few nations at first. The US has 260 million fine troy ounces of gold held in banks. The next largest, Germany, has just 95 million. Also, South Africa would, again, be put in a tricky situation, having the largest gold mines in the world. But as I said, it doesn't necessarily have to be gold, just a metal.

Deflation is bad for a number of reasons. Back in 2002, our economy (and even still today) wasn't in great shape, so we needed consumers to spend now and often. Deflation encourages people to hold out buying stuff because they know it'll be cheaper in a week, a month, or a year. Consumer spending falls, the economic conditions get worse, so spending falls further, etc, the cycle continues, and deflation only amplifies the downward portion of it. Another big thing, speficially with the way the US and other Western economies work, is that we're a nation of debtors. The government is in debt. More importantly, the people and their businesses are in debt, farmers are in debt, ect. If I took a loan out at $5,000 and deflation occured, I still have to pay back $5,000, plus interest, even though thats worth much more now than it was back when I took the loan. I can't pay that, especially if the economy is in the crapper and I either had to take a pay cut or a pink slip. The financial instutions (banks) are then in trouble, and it leads to a chain reaction. Sometimes this is less extreme than others, the Great Depression being the most extreme example of economic collapse, and a little bit of deflation isn't going to cause another depression or force mass bankruptcies, but the prospect of more deflation and the realization of this possibility will.
Oh, okay. I understand now.
And btw, a smidgen of deflation did occur in the second quarter, I heard on CNBC. It probably wasn't enough to notice, as prices for everything rose because of demand. But it was still there. But I still think that a bit of deflation isn't as bad as, say, runaway inflation.

Since no one said the gold dollar yet, I'm gonna play devil's advocate. I like doing that occaisonally.
It was a good system. While it ensured that the world's strongest economy would have lots of protection, the dramatically weakened economies of Western Europe, East Asia, and the Middle East would be insured a flow of cash. This was especially true since the Marshall plan helped redevelope the continent, or American GIs were stationed all over the globe, making purchases in dollars.
The problem was that the cure was misdiagnosed as the disease. We know in hindsight that even today, the US is the country with the single largest economy, and will remain so for at least a few more decades. With the fall of the Soviet Union, it was essential that more of the world's cash could flow to these developing areas. But the main problem was the low pricing of gold. The main solution, of course, was that gold was to be priced in ever increasing increments year by year. This would slow inflation, but it'd ensure that this centralized monetary system wouldn't fall.
Overall, it was a pretty good system, moderating the flow of cash, while making sure that currency did recognize the US as the world's most important currency. It wasn't bad until Nixon came along.

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I'm surprised only one person has said the golden dollar was the best regime.

You know, I was wondering if mercury could be used as a precious metal, should we use the gold standard. For one, it is classified as a metal, and thus homogeonous and divisible. For another, it has a silvery luster to it. And for another thing, it is easy to test it for purity. Mecury is more dense than most liquids, and is the only metal that is a liquid at room temperature. Impurities would stick out like a sore thumb.
The only problem, however, is that humans have to find it valuable enough to have. But as I've said, it does have a silver luster to it.

No comments at all? That really is a shame. After all, this is the main basis for any of the world's monetary system. In terms of globalization, the current currency regime is probably the worst for it. During the first era of globalization, in the 19th century, currencies were easily convertable everywhere because they were backed by the same, and often constant price of gold.

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Okay everyone. Just to let you know, I do support a gold standard, or any metal standard. However, I'm saying old because I lustily want it. There is a time in every person's life where they are captured by the allure of gold, and want it. I want it. It is my dream to one day own a gold ingot, and keep it in my room with me.

So, no one cares if we use garbage for currency, do we? C'mon! Someone, please debate me. This issue has been nagging at me like a freakin' two year old.

Bump just for the night watch. And I want to ask a question that is baffling me, as I grasp the idea of inflation/deflation. Everytime money is introduced into an economy, inflation occurs. But that just simply makes any new money worthless, and an economy is just as wealthy as before. So how does an economy make money? Why is the US wealthier than Burkina Faso? Even though the US is a trading power, and Burkina Faso has little trade, any money introduced in the US economy simply devalues the existing money. So what I'm saying is that with the corrective power of inflation, every nation should be equally wealthy. Why is this not so? Why are some nations wealthier than others? And I wanted to ask if it is possible to actually generate wealth, without contributing to inflation.

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Bump just for the night watch. And I want to ask a question that is baffling me, as I grasp the idea of inflation/deflation. Everytime money is introduced into an economy, inflation occurs. But that just simply makes any new money worthless, and an economy is just as wealthy as before. So how does an economy make money? Why is the US wealthier than Burkina Faso? Even though the US is a trading power, and Burkina Faso has little trade, any money introduced in the US economy simply devalues the existing money. So what I'm saying is that with the corrective power of inflation, every nation should be equally wealthy. Why is this not so? Why are some nations wealthier than others? And I wanted to ask if it is possible to actually generate wealth, without contributing to inflation.

There is more money, but also more goods and services. Inflation only skyrockets if more money is produced with nothing to spend it on.

Yes, wealth can be created; it is not limited.

So, no one cares if we use garbage for currency, do we? C'mon! Someone, please debate me. This issue has been nagging at me like a freakin' two year old.

Um, it is not valuable.

Here's how it works - people used to trade valuable metals for goods and services. But then they decided it would be easier to keep all this heavy material at a central location and just trade receipts of ownership. Viola - money was created.

So do you see that happening with garbage?

In Virginia, they used to have a "tobacco standard."

Um, it is not valuable.

Here's how it works - people used to trade valuable metals for goods and services. But then they decided it would be easier to keep all this heavy material at a central location and just trade receipts of ownership. Viola - money was created.

So do you see that happening with garbage?

In Virginia, they used to have a "tobacco standard."
More recently, actually, cigarettes were an informal form of currency in post War Europe.

There is more money, but also more goods and services. Inflation only skyrockets if more money is produced with nothing to spend it on.

Yes, wealth can be created; it is not limited.
Thanks. That clears up a lot of questions that I had about money.

More recently, actually, cigarettes were an informal form of currency in post War Europe.

yep, like in prisons

yep, like in prisons
I wasn't serious, btw, on using a garbage standard. I was just saying that to try to get people's attention. I know it'd have to be a precious metal, because they are divisible, homogeonous, and as long as humans consider them a luxury, in demand. I was actually gonna say piss instead of garbage, but I knew the mods would hate me for that.

I wasn't serious, btw, on using a garbage standard. I was just saying that to try to get people's attention. I know it'd have to be a precious metal, because they are divisible, homogeonous, and as long as humans consider them a luxury, in demand. I was actually gonna say piss instead of garbage, but I knew the mods would hate me for that.

That's one reason why I'm against the gold standard - I don't give a crap about gold. It's useless. But I suppose what matters is that others value it.

That's one reason why I'm against the gold standard - I don't give a crap about gold. It's useless. But I suppose what matters is that others value it.
Well, as I've said, other metals can be used, like silver or platinum. They have to be metals, however.
And like you said, you don't value it, but many do. Currently, gold costs around $405/troy oz. That must mean that many desire it. I have just been struck with gold fever, and in time, any human is. You probably will be, too. It happens at different times for every human, but it happens. By then, gold looks like it should be more valuable than what it's currently priced at.

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Well, as I've said, other metals can be used, like silver or platinum. They have to be metals, however.
And like you said, you don't value it, but many do. Currently, gold costs around $405/troy oz. That must mean that many desire it. I have just been struck with gold fever, and in time, any human is. You probably will be, too. It happens at different times for every human, but it happens. By then, gold looks like it should be more valuable than what it's currently priced at.

Or, as they say in the stock market - It isn't what you think is valuable, it's what other people think is valuable. It could be a huge case of exactly that...because honestly, gold has very little practical value.

Or, as they say in the stock market - It isn't what you think is valuable, it's what other people think is valuable. It could be a huge case of exactly that...because honestly, gold has very little practical value.
That's what makes it so good, though. There's no chance of it being used to build things, like aluminum or copper.

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It was actually a boring Political Science book I'm reading for pleasure over the summer (weird but true). It's The Ideas That Conquered The World: Peace, Democracy, and the Free Market in the 21st Century by Prof. Michael Mandelbaum. His thesis is that peace, democracy, and the free market is a trend pioneered by Woodrow Wilson, and today, has no real ideaological enemies. He also explained what Wilsonianism means for the world. Pretty interesting for a geek like me.
Peace and the free market don't exist today, probably because they are incompatible with democracy (and so much the worse for democracy, say I). Which president was Woodrow Wilson? Was he the one that didn't get involved in any wars?

Peace and the free market don't exist today, probably because they are incompatible with democracy (and so much the worse for democracy, say I). Which president was Woodrow Wilson? Was he the one that didn't get involved in any wars?
They don't exist in nations on the world's perephy, but in the core, they certainly do. And since the core is the planet's main idea creator, and we all follow this model, for the first time in history, no serious competition to it exists.
And Woodrow Wilson, btw, reluctantly got into WWI after the Germans started targeting our ships, and the Zimmerman note. He had ideas on how to create lasting peace in Europe, but no one wanted to listen to him. What he did create, the League of Nations, was rejected by his own nation.

They don't exist in nations on the world's perephy, but in the core, they certainly do. And since the core is the planet's main idea creator, and we all follow this model, for the first time in history, no serious competition to it exists.
And Woodrow Wilson, btw, reluctantly got into WWI after the Germans started targeting our ships, and the Zimmerman note. He had ideas on how to create lasting peace in Europe, but no one wanted to listen to him. What he did create, the League of Nations, was rejected by his own nation.

He also quit teaching at a women's college because he thought they were inferior and incapable of learning. And he was a big fan of the racist pro-klan movie, "Birth of a Nation."

Ah, and who can forget the first graduated federal income tax in 1913...worst of all - prohibition

He also quit teaching at a women's college because he thought they were inferior and incapable of learning. And he was a big fan of the racist pro-klan movie, "Birth of a Nation."

Ah, and who can forget the first graduated federal income tax in 1913...worst of all - prohibition
This is like the same arguement about the Founding Framers, that we should discredit them because they owned giant plantations and slaves. However, that is simply not true. Wilson may have not been moral, but there is no denying his genius. Many of his ideas on how the world ought to be are true today, or at least in the core nations. Better yet, his ideas have no real rival on the planet. He didn't create them, of course, but he was the first person in power to realize that these ideas would sweep the world.
The income tax, btw, was needed because the government had limited options to fund itself. However, I disagree with how high it currently is. As for Prohibition, that was looney, but like the income tax, they were constitutional amendments. The president had no authority over them. Besides, the feminist insurgency of Wilson's era may help to explain why Prohibition came into being.

Both currency and régimes are stupid, so none.

Both currency and régimes are stupid, so none.

Currency is incredibly useful...next time you need a new computer, try bringing in a couple cows to Best Buy and see how it goes...

Currency is incredibly useful...next time you need a new computer, try bringing in a couple cows to Best Buy and see how it goes...
No, that's to close to currency for him. I've heard him say that we should instead move to a gift economy.

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No, that's to close to currency for him. I've heard him say that we should instead move to a gift economy.

Ah, even better...he can just walk in and they'll give him a new computer...

Sort of like making theft legal

Ah, even better...he can just walk in and they'll give him a new computer...

Sort of like making theft legal
In a way, yes. Hell, in his ideal economy, he'd get whatever he wanted for free. There'd be no incentive to work at all, and therefore, nothing can work, or be produced. But we'd all be pretty damn happy, because it would abolish capitalism, and create anarcho-communism :).

In a way, yes. Hell, in his ideal economy, he'd get whatever he wanted for free. There'd be no incentive to work at all, and therefore, nothing can work, or be produced. But we'd all be pretty damn happy, because it would abolish capitalism, and create anarcho-communism :).


That would be cool for a little while...until we ran out of beer...

That would be cool for a little while...until we ran out of beer...
I'm only 15, and have never been to a party with alcohol in my life. I can imagine life without beer because I don't drink it :). Just root beer.

In a way, yes. Hell, in his ideal economy, he'd get whatever he wanted for free. There'd be no incentive to work at all, and therefore, nothing can work, or be produced. But we'd all be pretty damn happy, because it would abolish capitalism, and create anarcho-communism :).
Is making fun of another poster's ideological stance really that fun?

Is making fun of another poster's ideological stance really that fun?

Yes

Is making fun of another poster's ideological stance really that fun?
When it's as baseless and thoughtless as Letila, yes. If you think my ideaology is the same way, be my guess, go make fun of me. But at least I think about my positions.

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