Article I found from 2004 on fiat money systems... (1 Viewer)

[Jayrod]

Link

The main reason that the masses ignore the inevitable failure of fiat money systems, such as that which is employed by the US and virtually the rest of the world today, is because just prior to their demise, they have more recently been remembered for generating a widespread period of prosperity that has enriched its supporters, if not the masses as well.

The fundamental flaw in a fiat money system can be summed up as human nature. When the going gets rough, the rough start printing. Governments cannot be trusted, to not print too much money when it is not linked to a scarce commodity such as gold. How much is too much money? There are many debates about that but the unqualified answer is when the system is brought down. It should be obvious to even the casual observer that we have reached a point in time where even the slightest economic disappointment is met with a deluge of additional paper. .....

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It is most difficult to judge exactly when this system will implode; but is most certain that it will. There is a limit to how far this type of system can be pushed. Robert Prechter, in his February issue of "The Elliott Wave Theorist", gives the example of lowering the price of a Jaguar car to stimulate purchases, with deeper and deeper discounts, until you could not pay someone to take a Jaguar; everyone has all they need. It is the same with money and credit and the Fed. They lower rates and lower rates; stores provide financing with no money down and no payments until January 2006; car companies provide money back, etc. etc. God help us when January 2006 arrives, these retailers will not be paid in anything resembling the prior value of the dollars they charged for an item, if at all. There has been an unprecedented amount of debt and credit extended, far in excess of anything we have seen in prior fiat money systems, and the eventual result will be defaults, deflation, and depression. There will also be an accelerating redistribution of wealth, most surely to result in social unrest. The extremes reached under this fiat money system has been perpetuated much longer and deeper than any I have studied, and I believe this is due to the fact that it is consumption-based, and Joe Six-pack whom represents the masses, has been sucked in by the lure of easy, unearned consumption. He is totally uneducated in economic matters, trusts his government, and is dangerously over-exposed financially as is the entire nation.

Like I said written in 2004....article is primarily about buying gold and the gold standard (which had you done in 2004, you're portfolio would look pretty good right now).But the sections I've bolded basically predicted exactly what we have now.

 

[renesauz]

Link

The main reason that the masses ignore the inevitable failure of fiat money systems, such as that which is employed by the US and virtually the rest of the world today, is because just prior to their demise, they have more recently been remembered for generating a widespread period of prosperity that has enriched its supporters, if not the masses as well.

The fundamental flaw in a fiat money system can be summed up as human nature. When the going gets rough, the rough start printing. Governments cannot be trusted, to not print too much money when it is not linked to a scarce commodity such as gold. How much is too much money? There are many debates about that but the unqualified answer is when the system is brought down. It should be obvious to even the casual observer that we have reached a point in time where even the slightest economic disappointment is met with a deluge of additional paper. .....

....

It is most difficult to judge exactly when this system will implode; but is most certain that it will. There is a limit to how far this type of system can be pushed. Robert Prechter, in his February issue of "The Elliott Wave Theorist", gives the example of lowering the price of a Jaguar car to stimulate purchases, with deeper and deeper discounts, until you could not pay someone to take a Jaguar; everyone has all they need. It is the same with money and credit and the Fed. They lower rates and lower rates; stores provide financing with no money down and no payments until January 2006; car companies provide money back, etc. etc. God help us when January 2006 arrives, these retailers will not be paid in anything resembling the prior value of the dollars they charged for an item, if at all. There has been an unprecedented amount of debt and credit extended, far in excess of anything we have seen in prior fiat money systems, and the eventual result will be defaults, deflation, and depression. There will also be an accelerating redistribution of wealth, most surely to result in social unrest. The extremes reached under this fiat money system has been perpetuated much longer and deeper than any I have studied, and I believe this is due to the fact that it is consumption-based, and Joe Six-pack whom represents the masses, has been sucked in by the lure of easy, unearned consumption. He is totally uneducated in economic matters, trusts his government, and is dangerously over-exposed financially as is the entire nation.

Like I said written in 2004....article is primarily about buying gold and the gold standard (which had you done in 2004, you're portfolio would look pretty good right now).But the sections I've bolded basically predicted exactly what we have now.

Nope...what we have now is just the tip of the iceberg. The kind of problems he is talking about topple governments.

 

[[icon]]

People laughed at me when I asked if the US was going to see her 50th President take office...

Just sayin... this article is exactly what I had in mind when Istarted that thread...

 

[videoguy505]

Like I said written in 2004....article is primarily about buying gold and the gold standard (which had you done in 2004, you're portfolio would look pretty good right now).

Serious question: What makes gold worth anything as a monetary system? I mean, sure it has uses, but, most people who trade it aren't plating anything. Isn't gold a fiat system of sorts--it's only worth something because someone else thinks it is to someone else?

 

[OC Zed]

Like I said written in 2004....article is primarily about buying gold and the gold standard (which had you done in 2004, you're portfolio would look pretty good right now).

Serious question: What makes gold worth anything as a monetary system? I mean, sure it has uses, but, most people who trade it aren't plating anything. Isn't gold a fiat system of sorts--it's only worth something because someone else thinks it is to someone else?

And yet I still think a gold standard makes a hell of lot more sense than what we have now. At least pegging your currency to an outside standard provides governments greater incentives to have fiscal restraint instead of printing their way out of every mess.

 

[[icon]]

Like I said written in 2004....article is primarily about buying gold and the gold standard (which had you done in 2004, you're portfolio would look pretty good right now).

Serious question: What makes gold worth anything as a monetary system? I mean, sure it has uses, but, most people who trade it aren't plating anything. Isn't gold a fiat system of sorts--it's only worth something because someone else thinks it is to someone else?

Gold is finite in supply as a currencyFiat money systems primary flaw is that you can just "print more"...resulting in an infinite supply of currency.

 

[Jayrod]

Like I said written in 2004....article is primarily about buying gold and the gold standard (which had you done in 2004, you're portfolio would look pretty good right now).

Serious question: What makes gold worth anything as a monetary system? I mean, sure it has uses, but, most people who trade it aren't plating anything. Isn't gold a fiat system of sorts--it's only worth something because someone else thinks it is to someone else?

In addition to being finite as icon pointed out, it is also globally recognized. Not that our dollar isn't now, but if the dollar crashes, gold will retain its value in Euros, yen, etc. It is tied to the global economy as opposed to a national economy.

 

[cstu]

So, one fundamental point - increasing the supply of money can and sometimes does simply print real value into existence. Men's demand for money is not directly inversely proportional to the quantity of it in existence. The demand curve for money is not a straight line, but curves, and also moves with time, as all other demand curves do.

Very interesting article on the money supply.

 

[Dinsy Ejotuz]

So, one fundamental point - increasing the supply of money can and sometimes does simply print real value into existence. Men's demand for money is not directly inversely proportional to the quantity of it in existence. The demand curve for money is not a straight line, but curves, and also moves with time, as all other demand curves do.

Very interesting article on the money supply.

That's a good article.

All prices are a fraction -- namely item / dollars (in the US).

But the value of neither of those items is fixed -- supply and demand for both the item and for dollars fluctuates.

Item value up / dollar value up (say because of rising wealth in the US generally) and prices stay the same.

Item value steady / dollar value up (because we're in an EOTWAWKI scenario where investors are killing to get out of risky financial assets and into dollars because non-dollar assets are suddenly perceived as risky -- 2008 for example) and prices fall.

Item value steady / dollar value down (typically referred to as 'inflation') and prices go up for no reason except a devaluing of the unit in which they're denominated.

Item value down / dollar value steady (often because of technological progress -- think of computers) and prices fall.

And etc.

 

[DaVinci]

Like I said written in 2004....article is primarily about buying gold and the gold standard (which had you done in 2004, you're portfolio would look pretty good right now).

Serious question: What makes gold worth anything as a monetary system? I mean, sure it has uses, but, most people who trade it aren't plating anything. Isn't gold a fiat system of sorts--it's only worth something because someone else thinks it is to someone else?

In addition to being finite as icon pointed out, it is also globally recognized. Not that our dollar isn't now, but if the dollar crashes, gold will retain its value in Euros, yen, etc. It is tied to the global economy as opposed to a national economy.

But when the zombie apocalypse comes gold will be as worthless as paper money. That's why I'm converting my portfolio to bullets and canned beans.

 

[cstu]

Like I said written in 2004....article is primarily about buying gold and the gold standard (which had you done in 2004, you're portfolio would look pretty good right now).

Serious question: What makes gold worth anything as a monetary system? I mean, sure it has uses, but, most people who trade it aren't plating anything. Isn't gold a fiat system of sorts--it's only worth something because someone else thinks it is to someone else?

In addition to being finite as icon pointed out, it is also globally recognized. Not that our dollar isn't now, but if the dollar crashes, gold will retain its value in Euros, yen, etc. It is tied to the global economy as opposed to a national economy.

But when the zombie apocalypse comes gold will be as worthless as paper money. That's why I'm converting my portfolio to bullets and canned beans.

Honey will be the gold of the apocalypse.