Where Does Your Money Come From (cont'd)

You keep insisting that more monetary units leads to more productivity. There is no logical or empirical evidence for that.

 

I just showed you what happened in California. What more proof do you need that more monetary units can lead to productivity? The more gold they found in California the more they produced. That is why over 300,000 people came from all over the world and the United States to California. That is why they built a rail system to connect the East Coast to California because everyone wanted gold. Since there was so much room for productive growth, the more gold that was found the more stuff was produced.

I am saying that an economy can sustain more monetary units as long as they lead to an increase in productivity. Which is very evident by the success and productivity of California.

 

Post hoc ergo propter hoc fallacy. You haven't demonstrated a causal relationship.

 

More monetary units, in the form of an increase in the circulation of those could be plausible.

 

Why wouldn't solving for a natural rate of unemployment accomplish something similar?

 

Gold is NOT a monetary unit. Altho you probably still insist the the Federal Reserve Note, a simple promissory note, is backed by the US Government gold reserves. That has not been true for many many years, but you still seem unaware of that fact.

Gold has value. Currency is a promise. Promises have been broken and WILL be broken again. Likely the Euro will become a broken promise.
If TOO much gold were found, gold could lose value. Just as the insane overprinting of currency causes currency to lose value.

 

^^^this.

Akphidelt will refuse to acknowledge.

 

I thought everyone knew that our federal Congress is delegated the power to "magically" create fiat money out of thin air, with a printing press at an official mint.

 

I think that point is arguable. However, even if it were true, my proposal to legalize gold and silver as money stands.

 

Why do you consider that point arguable? It is specifically enumerated as a power delegated by the People to our federal Congress.

Do you object to any commodity being used as a form of money? Why if it is commodity money that can be used as a market friendly medium of exchange in any given social transaction?

What if it were claimed that gold and silver are currently to involved in markets and public sector intervention in that market would only disrupt that market without necessarily adding any more market friendliness.

Would you object to titanium being used instead, as a form of commodity money from a newer Age that may be able to provide better public service at potentially lower prices, and claiming it as a form of supply side economics in a natural public sector monopoly?

 

HAHAHAHAHA, what makes you think for one second I believe Federal Reserve Notes are backed by our gold reserves? Only $11 billion of our notes are backed by our gold reserves. Come on, that was an insult!

Lol, gold does not have any more special "value" than printed paper does when it comes to a currency. And gold as a medium of exchange is a monetary unit.

 

LOL!!! So there is no relationship between the massive production and development of San Francisco and California during the gold rush?

You simply are too stubborn to ever admit you are wrong. Almost any sane person understands that more money/gold does not = less purchasing power.

And I showed you a perfect logical and empirical example of how that is so.

In fact the finding of a large amount of gold can actually be thought of as increasing your purchasing power because of the increases in productivity from an increase in demand. As in, the more watches you build the faster and more efficient you become, which can translate to more watches at cheaper prices.

 

I always wondered why they call it a boom.

 

Two main things that many of you do not comprehend... Velocity and Productivity. More money can definitely lead to more productivity and more money can definitely lead to greater purchasing power.

It is an absolute lie to say that more money leads to less purchasing power and more money steals from those that have money.

More money "can" lead to less purchasing power or it "can" lead to more purchasing power.

In the case of California and the gold rush, more money lead to massive amounts of productivity.

 

Now he's off on his nonsensical "Velocity of money" THEORY! Repeat THEORY!

 

Gold and silver are already money. The US Mint issues gold and silver coins that are legal tender. But anyway, going back to a money supply fixed to gold is a bad idea for numerous reasons. A compelling one is that 40% of the world's gold supply is in private hands in India.

For another, a fixed money supply is a recipe for economic stagnation. It works like this:

With a fixed money supply a growing economy leads to deflation as more and more goods chase less and less money. Prices decline. Producer profits are risky because they pay for raw materials and labor in todays dollars but sell their products at tomorrows lower prices. Investing in productivity improvements becomes an ever losing proposition.

Banks will not lend and borrowers will not borrow. The prospects of a loan being repaid while prices and wages decline is bleak. Since banks are not lending they cannot pay interest on deposits but must charge for them. People will keep their savings in their mattresses.

This leads to another situation, why spend today when your money will buy more tomorrow? Savings will rise but the money will not be recirculated into the economy through bank lending. This results in a decline in the amount of money circulating in the economy which further reduces prices, discouraging producers and banks even further.

Eventually the economy stops growing and then declines into a period of low economic stagnation. Many factories and a lot of productive farmland lay idle as it becomes impossible to produce at the prices offered. The dearth of goods leads to temporary price increases that quickly disappear as idle producers reenter the market. The economy cycles feebly up and down around a norm dictated by the supply of money.

The US economy cycled like this in the 1800s, espeically in the latter half of the century. The things that broke or precluded the cycle were the massive inflation of the money supply in the early 1800s created by the private bank note industry which led to a hugely unstable economy and later in the century when the $US predominated, by the discovery of new gold.

A big gold stike meant a lot of things that ordinary people were well aware of. It meant wages and farm prices rising again. It meant the ability to borrow and pay off a loan. The excitement and euphoria that a new gold strike engendered in the 1800s was not an outbreak of unreasonable mass hysteria. The people had every reason to become hysterical. New gold meant more money in the economy immediately, issued by the government through spending and the payment of government debt.

New money would flood into an economy desperate for it. Prices and wages would begin to rise almost overnight. Demand would skyrocket. Idle producers would flood into the market and be unable to meet demand. Investment in land and business would take off. Banks would begin lending again and savers would take the money from their mattresses and put it into land and business and banks and the market. The economy would take off like a bat out of hell, vastly overreach, and collapse as economic growth once again outran the ability of a fixed supply of money to support it. But even so, this collapsed economy would end up with vastly improved and extended railroads and other infrastructure. A hugely expanded, even if mostly idle, manufacturing base. A larger middle class. And most of all the universal belief that the next boom will bring it all back.

By the end of the 1800s it had become apparent to many that this economic boom and bust cycle was not especially desirable for continued social and political stability. It had already been determined by many economic studies that economic growth was intrinsicly tied to growth in the supply of money and that if the money supply could be managed the boom and bust economy, and with it social and political volatility, could be tamed.

It has almost worked.

 

GOLD and SILVER are NOT money. The minted coins are MONEY. In many cases the coins have greater value melted down for the metal than they do as minted money.

 

The difference is that found gold is something of value like found oil or found copper or found fish. It is a natural resource that has intrinsic value. It adds to the money supply.

Printing money that is backed by nothing only dilutes the existing money, making it less valuable. In other words it inflates the currency.

Hope it was worth the wait.

 

Haha, it's what I expect from the uneducated conservatives. Gold is nothing like fish. Gold has no intrinsic value other than some immaterial uses in some electronics (which weren't even around pre-1900s) and jewelry. Otherwise it is a useless hunk of metal.

Nice try...

 

Velocity of money isn't a theory, lol. It's just basic mathematics.

 

Money doesn't have velocity unless it's in my pocket when I'm driving.

 

Hmmm, coins made from silver and gold are not money???
That makes no sense at all.

Anyway, given that gold is trading at around $1800 an ounce, how would you use it to buy a cup of coffee at Dunkin Donuts?

 

Use smaller coins?

 

Use silver coins.

 

Use electronic transfer orders. Use written transfer orders. Use warehouse receipts. The list goes on.