Posted on 07/09/2011 6:34:15 PM PDT by SeekAndFind
Debt-based fiat money, which implies never ending debt and constant inflation, is not a sound, stable or sustainable monetary system. Major economic problems today, such as rising global commodity prices and the sovereign debt crisis, are not aberrations or inherent problems of capitalism, but are the inevitable consequences of a centrally planned system that, by design, produces never ending inflation, ever increasing centralization of financial power and increasingly extreme concentration of wealth.
Monetary systems that rely on debt-based fiat money can be accurately described as confidence games and the global cartel of central banks that exists today is similar to a criminal cartel, such as the drug cartel, except that the banking cartel has been legalized,can extort hundreds of billions from governments with impunity,and can conjure unlimited trillions out of thin air for its own benefit with no accountability. In stark contrast,hapless billions of people labor worldwide for single-digit hourly wages on an ever faster moving hamster wheel of inflation and debt.
Like a commodity, supply and demand is the putative basis for the value of money in the field of economics,but many economists and most investors know very little about the underlying structure of the monetary system. The legal and,in a systemic sense,mathematical structure of money is debt,i.e.,a note or debt instrument, thus money is the liability of its issuer (a government or central bank),rather than a tangible asset.
Money,which is a purely legal construct (rather than a direct representation of a physical asset or an actual commodity),is created ex nihilo through legal agreements,such as mortgage loans,car loans,student loans,credit card charges,business loans,etc.,hence the term “fiat” money. Governments help banks to create money by borrowing for deficit spending (and by paying interest on the debt),but central banks create money directly.
(Excerpt) Read more at businessinsider.com ...
| Gold | Debt-Based Fiat Money | |
| 1. | Gold is a tangible financial asset with no bank or government liability. | Fiat money is a debt instrument or note that is the liability of a government or bank. |
| 2. | Transactions in gold are fully settled. Both parties hold finished goods. There is no outstanding liability. | Transactions in fiat money are not settled. One party always holds a note owed by a bank or government. |
| 3. | Gold certificates or electronic credits in allocated gold accounts are redeemable in a real,physical asset:gold. | Fiat money is not redeemable. While it functions as a medium of exchange,it lacks any backing in terms of real assets. |
| 4. | Gold is,at all times,in all places and under all circumstances,universally accepted as money. | National currencies are accepted according to agreements that,like any contract,can be breached or made legally void. |
| 5. | In extremis,gold is always accepted. | In extremis,such as in a time of war,a national currency (or any form of paper money) may not be accepted. |
| 6. | Gold has intrinsic value. The economic inputs (labor and resources) used to produce a gold bullion coin or bar are still present,preserved as a finished product. | Fiat money has no intrinsic value,except perhaps insofar as paper can be used,for example,as kindling to start a fire. |
| 7. | Gold is rare,valuable and difficult to produce in large quantities. | Fiat money can be printed or instantly created electronically in unlimited quantities and at essentially no cost. |
| 8. | The rate of increase in the above-ground gold supply is,and has been throughout history,roughly the same as the rate human population growth. | The supply of fiat money, because of its inflationary structure,always increases in excess of population growth or sustainable economic activity,thus it is destabilizing |
| 9. | Gold is a consistent measure of value over time and across economies. | No fiat paper currency is or can be a consistent measure of value over time or across economies. |
| 10. | The value of gold,measured in real terms,is stable over long periods of time. | The value of all fiat paper currencies is volatile and always declines in the long run. |
| 11. | Gold is durable and virtually all of the gold ever mined still exists today. | Neither governments,nor banks,nor paper motes,nor even digital media are as durable as gold. |
| 12. | Gold serves as a store of value and a preserver of purchasing power. Its value,in terms of real goods,is about the same today as it was 2000 years ago. | Measured in fiat money, prices inexorably rise. Fiat money inevitably loses value because the supply always increases in excess of population growth and sustainable economic activity. |
| 13. | Under a gold standard,economies can enjoy stability and sustainable growth. Of course they are not automatically immune to economic disruptions,e.g.,due to exogenous shocks. | Money based on debt causes a never ending boom and bust cycle of credit expansion and contraction. Economic disruptions are directly caused by the monetary system itself. |
| 14. | Central banks,sovereign nations and investors of all sizes buy gold because its value is more stable than that of fiat money. | The value of fiat money inevitably degrades over time,thus the wealth of fiat money holders is eroded (by inflation). |
| 15. | Gold has been regarded by virtually all peoples as the highest form of money throughout history (for at least the past 5000 years). | Fiat money became the de facto international standard after 1971,only four decades ago. |
| 16. | As a currency,gold cannot fail because it is a real,physical commodity. | Fiat money systems always, eventually fail. All fiat currency schemes throughout history failed. |
| 17. | Over thousands of years, gold has remained a de facto global standard largely outside the control of central banks or governments. | Fiat money was created because it can be centrally controlled and manipulated by banks and governments to suit their own particular needs. |
| 18. | Gold enables people to shield their wealth from the collapse of governments and financial institutions. | If a government collapses, its currency becomes worthless. Governments cannot truly guarantee the wealth of citizens against a banking system collapse. |
| 19. | Gold enables people to protect the fruits of their labor from confiscation by governments or banks through inflation and,therefore,to pass their wealth down through generations. | Inflation is like a breach of contract where holders of fiat money are robbed of its value over time through inflation. If cash is passed down through generations it becomes less and less valuable over time. |
| 20. | Gold safeguards economic freedom and allows people to hold their wealth outside the reach of governments and banks. | Fiat money allows governments or banks to arbitrarily decide the value of money and the financial fate of every person dependent on the currency. |
| 21. | Gold distributes wealth and financial power to the people. | Fiat money concentrates wealth and financial power in banks and in the government,opening the door to limitless abuses. |
| 22. | Under a gold standard, governments cannot expand disproportionately relative to the underlying economy. The optimal size of government is perhaps 20% of GDP. | Central banking was conceived in part to allow governments to expand,e.g.,to fund foreign wars through debt. Fiat money allows governments to grow to unsustainable levels. In the United States,combined government at all levels is equal to roughly 45% of GDP. |
| 23. | Gold prevents the banking industry from expanding disproportionately relative to the underlying economy. | Fiat money allows the banking industry to expand to a point where it dominates the economy and government, and is a crushing,economic rent seeking burden on the economy. |
| 24. | Gold makes it relatively difficult for countries to pursue military adventures or to fund a large military-industrial complex. | Fiat money allows governments to engage in wars and to build military empires as long as their currencies and debts are accepted. |
| 25. | Gold is a real commodity and naturally supports the free market. | Fiat money entails central planning of the economy,i.e.,“monetary policy,” which opposes free markets. |
26. I have taken a large position in gold, and wish to hold it.
Right now ,I can think of 1543 reasons to have Gold.
Can you sell your holdings quickly if the price trends start to tumble?
Sometimes. Maybe even most times.
27. Nation states such as China and India have bought hundreds of tons of gold, and hence have a vested interest in gold maintaining its value.
28. Certain folks on CNBC, Bloomberg and Free Republic have no vested interest in gold maintaining its value, or have a vested interest in gold declining in value.
29. Despite the IMF selling off hundreds of tons of gold - the price actually continued to skyrocket immediately afterward. "Inoculation" comes to mind.
Two past issues with owning gold are:
1. FDR simply made Americans hand it in at a fixed price.
2. Nixon also ‘massaged’ the value of gold.
After people have been stampeded into gold and silver, wanna bet the Bamster takes it as did FDR?
I have seen elements like Soros try to shake Joe Investor out of the Gold tree a couple times you can see the dips in the price.
Just dealing with your #27, alone: it is not a wise investment strategy to base your purchases on the fact that someone else holds a large position, when there’s nothing to stop them from dumping it at any time.
RE: FDR simply made Americans hand it in at a fixed price.
Will present Congress allow that ? I don’t think so..
And how are they going to enforce it today at the Federal level? Are they going to send agents to go house to house to check on you?
How much ADDITIONAL MONEY will it cost the Feds to enforce this in practice?
Dates? Size of market movements?
Is Silver really underrated and, if so, does that make a safe investment or no?
Obviously, I don't know **** from Shine-ola so any learnin’ would be gratefully accepted.
ping for the crew
Well basically they don't have to because after a certain date it's worthless to you. It's like stealing the "Mona Lisa", who are you going to sell it to without getting pinched?
Silver & Gold prices have been VERY interesting so far this summer. I’ve been at this for 13 years now and I have NEVER seen either gain ground in the summer months in all that time.
Ever.
But, what do I know? *SMIRK*
RE: who are you going to sell it to without getting pinched?
As in Vietnam, when the time came for people to leave Saigon to board the escape boats to escape the Vietcongs, ONLY GOLD WAS ACCEPTED for ticket payments. Cash was worthless.
If God Forbid, we ever reach the point where government makes gold ownership illegal, the USD will have reached that worthless state.
Heck, people might simply trade gold for goods and service.
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