Posted on 11/29/2005 1:19:18 PM PST by hubbubhubbub
A banking crisis wouldn't affect cash on hand. If things got to the point where people were no longer accepting cash for payment, I doubt I could obtain the important things - food, shelter, ammunition - with paper or precious metal money.
The underlying collateral of paper money/Federal Reserve Notes is the Treasury debt held by the Federal Reserve. The collateral on this debt is is "the full faith and credit of the American people" or, more precisely, the power of the government to tax those people to pay its obligations. The collateral for the expansion of the money supply caused by the fractional reserve system is the private debt held by the banks that loan out most of their deposits; in other words, that money is secured by your promise to pay your mortgage, John's promise to make his car payment, etc. So the reserves are backed by government debt, while the remainder of the money supply is backed by private debt.
I thought the advantage of using gold was that the value of the currency would be fixed? If the gold is bouncing around it sounds like you're back to an unstable currency.
My guess is that if problems do occur we'd stand a better chance of obtaining certain goods with gold/silver vs FRN's or stock certificates. What's intriguing here is if you're analysis is correct do we really own anything? Something that's always bothered me is how someone can lose a paid-off house by not paying property taxes........sure those taxes may represent an obligation for which a lien could place against but what gives a gov't taxing unit the right to seize property? Do they have a legitimate claim or are they just taking over something they already own because the peons didn't pay their tribute?
No! The value of gold would not "bounce around." It would be worth what people were willing to sell an asset for it, it finds its own level, as TJ says below:
"Specie is the most perfect medium because it will preserve its own level; because, having intrinsic and universal value, it can never die in our hands, and it is the surest resource of reliance in time of war." --Thomas Jefferson to John Wayles Eppes, 1813. ME 13:430
"Specie is the most perfect medium because it will preserve its own level; because, having intrinsic and universal value, it can never die in our hands, and it is the surest resource of reliance in time of war." --Thomas Jefferson to John Wayles Eppes, 1813. ME 13:430
"Paper is poverty,... it is only the ghost of money, and not money itself." --Thomas Jefferson to Edward Carrington, 1788. ME 7:36
"It is a [disputed] question, whether the circulation of paper, rather than of specie, is a good or an evil... I believe it to be one of those cases where mercantile clamor will bear down reason, until it is corrected by ruin." --Thomas Jefferson to John W. Eppes, 1813. ME 13:409
"That paper money has some advantages is admitted. But that its abuses also are inevitable and, by breaking up the measure of value, makes a lottery of all private property, cannot be denied. --Thomas Jefferson to Josephus B. Stuart, 1817. ME 15:113
"The trifling economy of paper, as a cheaper medium, or its convenience for transmission, weighs nothing in opposition to the advantages of the precious metals... it is liable to be abused, has been, is, and forever will be abused, in every country in which it is permitted." --Thomas Jefferson to John W. Eppes, 1813. ME 13:430
"Scenes are now to take place as will open the eyes of credulity and of insanity itself, to the dangers of a paper medium abandoned to the discretion of avarice and of swindlers." --Thomas Jefferson to Thomas Cooper, 1814. ME 14:189
"Private fortunes, in the present state of our circulation, are at the mercy of those self-created money lenders, and are prostrated by the floods of nominal money with which their avarice deluges us." --Thomas Jefferson to John W. Eppes, 1813. ME 13:276
"It is a cruel thought, that, when we feel ourselves standing on the firmest ground in every respect, the cursed arts of our secret enemies, combining with other causes, should effect, by depreciating our money, what the open arms of a powerful enemy could not." --Thomas Jefferson to Richard Henry Lee, 1779. ME 4:298, Papers 2:298
"I now deny [the Federal Government's] power of making paper money or anything else a legal tender." --Thomas Jefferson to John Taylor, 1798. ME 10:65
"A spirit... of gambling in our public paper has seized on too many of our citizens, and we fear it will check our commerce, arts, manufactures, and agriculture, unless stopped." --Thomas Jefferson to William Carmichael, 1791. ME 8:230
"Our public credit is good, but the abundance of paper has produced a spirit of gambling in the funds, which has laid up our ships at the wharves as too slow instruments of profit, and has even disarmed the hand of the tailor of his needle and thimble. They say the evil will cure itself. I wish it may; but I have rarely seen a gamester cured, even by the disasters of his vocation." --Thomas Jefferson to Gouverneur Morris, 1791. ME 8:241
"All the capital employed in paper speculation is barren and useless, producing, like that on a gaming table, no accession to itself, and is withdrawn from commerce and agriculture where it would have produced addition to the common mass... It nourishes in our citizens habits of vice and idleness instead of industry and morality... It has furnished effectual means of corrupting such a portion of the legislature as turns the balance between the honest voters whichever way it is directed." --Thomas Jefferson to George Washington, 1792. ME 8:344
"We are now taught to believe that legerdemain tricks upon paper can produce as solid wealth as hard labor in the earth. It is vain for common sense to urge that nothing can produce but nothing; that it is an idle dream to believe in a philosopher's stone which is to turn everything into gold, and to redeem man from the original sentence of his Maker, 'in the sweat of his brow shall he eat his bread.'" --Thomas Jefferson to Charles Yancey, 1816. ME 14:381
"The system of banking [I] have... ever reprobated. I contemplate it as a blot left in all our Constitutions, which, if not covered, will end in their destruction, which is already hit by the gamblers in corruption, and is sweeping away in its progress the fortunes and morals of our citizens." --Thomas Jefferson to John Taylor, 1816. ME 15:18
"The banks... have the regulation of the safety-valves of our fortunes, and... condense and explode them at their will." --Thomas Jefferson to John Adams, 1819. ME 15:224
"I sincerely believe... that banking establishments are more dangerous than standing armies, and that the principle of spending money to be paid by posterity under the name of funding is but swindling futurity on a large scale." --Thomas Jefferson to John Taylor, 1816. ME 15:23
"It is said that our paper is as good as silver, because we may have silver for it at the bank where it issues. This is not true. One, two, or three persons might have it; but a general application would soon exhaust their vaults, and leave a ruinous proportion of their paper in its intrinsic worthless form." --Thomas Jefferson to John W. Eppes, 1813. ME 13:426
Many more idiotic quotes by that moron Thomas Jefferson may be found here: HERE.
If you want to get some more laughs, at the expense of that great simpleton. Thank goodness we are SO MUCH SMARTER than him!
Surely, you can provide examples of fractional reserve/fiat money systems leading to stability over the long run, without cracking up in ruin and revolution?
So, does the $500 gold note say, redeemable for 1 oz of gold or does it say $500, redeemable in gold?
Maybe in certain dire situations gold would be a more useful measure of trade than reserve notes, but if things got that bad I'd guess we'd revert to a pure barter system. I would be surprised if many people would be willing to trade necessities of life for precious metals, if those necessities weren't widely available anyway.
As far as owning personal or real property, I think you may be combining the separate issues of property tax liens and government debt. While I do think the federal debt is too high, it remains at a relatively stable 70% or so of GDP, meaning the country produces more value every year than it owes. This debt/GDP ratio is neither historically high nor is it high in comparison with other first-world industrialized economies. Additionally, a significant fraction of the debt is money the government owns to itself through such vehicles as the Social Security "trust fund"; if the SS program were legislated out of existence tomorrow, trillions of dollars of federal debt would cease to exist. Also, as another poster mentioned, the government does not account for its assets in the same way a private company would. Federal land holdings alone are probably worth more than the outstanding federal debt, if they were to be sold on the open market; the government also owns trillions of dollars of military hardware, commercial space, aircraft, vehicles, etc. Finally, while the government debt is "owned" by the people, creditors (T-bill and other federal security holders) cannot collect that debt directly from the people. The government must raise taxes to pay its debt, and as such it is restricted by the realities of politics and the unpopularity of taxation. So in that sense, the government's debt is both smaller than the nation's economy and cannot be taken directly out of that economy by confiscating private property.
Property taxes are a separate issue. First, it's important to remember that those taxes are levied by states and municipalities, not the federal government, so they are collected and enforced by a whole different sovereign entity (actually, 50 of them). They, along with eminent domain, can reasonably be said to prevent true ownership of real property (although they are generally no longer levied on personal property, as they used to be). However, it is important to remember that there have always been some limits on private property rights; one cannot, for example, use one's property illegally. Also, ownership of property frequently is limited by public easements, separate ownership of mineral or water rights, zoning laws, public airspace ownership, etc. Not every state or city assesses property taxes. But I do disagree with the idea of taxing value rather than profit; in my opinion a more fair method of property taxation would be a capital gains tax on any increase in value on real property upon its sale, with no taxes assessed unless or until that property is sold. That method would bring property taxation in line with taxation of other tradable securities and commodities. But in general I don't think the government really "owns" private property; it assesses taxes and files liens when those taxes go unpaid. The IRS can file liens against property for nonpayment of income taxes, too; it's just that with property tax there is a direct connection between the tax and the lien, so it appears perhaps more sinister than it was meant to be.
Banks don't OWN the loans. They repackaged them into SECURITIES and sold them.
It's not bad unless you work for a living to earn money. If you're working for something that is non-existent. Why are you working?
You first two bullets are ass-backwards but good try.
"Unless the money supply can expand at the rate the economy is expanding it will produce deflation which cripples the economy."
How does deflation cripple the economy??????
Deflation cripples debtors only. For everyone else it raises their standard of living. Why do you think we're buying everything from China??
Delation would cripple the US Government because it is the largest debtor in the history of mankind. Is That Your Point???
The greenback is now called "funny money". For a reason.
TJ is Bookmarked. Thank you. Whenever the conversation turns to finance and banking I find that Freepers aren't so conservative after all.
"France existed before any sort of modern understanding of economics or inflationary processes"
Huh?????
The Romans were "clipping" coins and adding other metals before stamping their coins around twelve centuries before France. You must be referring to John Law.
The greenback is now called "funny money". For a reason.
The joke is on us.
I don't know what you do for a living but my paycheck isn't nonexistent. Is your money nonexistent?
The first bullet is absolutely correct. As for the second, it's true that most new cash that goes to the Fed is for the replacement of currency that has worn out in circulation and is destroyed by the Fed, but there's nothing "backwards" about what I said.
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