Danny, You know I am someone who says that when all is said and done, I still pay my bills with fiat and it's pretty difficult, even in Malaysia to buy a piece of land paying in gold coins and bars (no, joke, I tried - and succeeded, after going to a bank and getting the gold valued in the local fiat currency). So, I'm with you to some extend. > > A money can have value, just based on its widespread acceptance and a sound > 'open books' management. > What is 'sound open books', please? Widespread acceptance is a tricky subject because people do 'NOT' really have a choice. More on the instances where people DO have a choice, below. But I am honestly interested to know what you mean by 'open book management'? Who decides which is the right amount of additional currency to spend into circulation and why does in an overheated economy get cooled off by raising interest rates, rater than taking money out of the circulation? The macro economic effect would in theory be same, reduced growth with possibly a brief flirt with deflation. Wouldn't that be sound fiscal policy as opposed to playing with interest rates and seeing what happens and how the market reacts?
> If the free market accepts the US dollars and prices its commodities in this > currency, then by this very acceptance the currency becomes backed by these > commodities and by all of them, not only by the gold. And that is one of the items you are on shifting ground. The FREE market does NOT accept US dollars for its commodities. Instead it is being forced to accept US dollars so that it can pay the interest on loans their governments took two generations ago - in goods, priced by American suppliers, in US dollars. And if a free market pushes it's government to shift from dollars to another currency, say EUROs, then weird things happen. Venezuela might be the most striking example for that one. Hasn't anyone wondered why Bush endorsed a military coup of a known slaughterer general over a democratically elected governemnt there? Luckily the people didn't go for it and brought their government back. Then, out of the blue, those same people who first elected the governemnet, then staged an uprising to bring it back to power started to strike. Weird? Well, let's consider this: As soon as elected, the new government announced that Venezuelian oil would be sold in EUROs. The generalissimo who staged the coup, reverted to US dollars, the returning government reverted back to EUROs and as soon as they changed their policies and announced that US dollars were just fine, the strikes stopped. Free market? Think again. > It means that you can go to the market and exchange your dollars for these > commodities. > The users back the currency by offering goods and services in exchange for > it. It is based on trust. > I accept dollars because I know I can go to the market and exchange them for > something else, even for gold if I want. If you go to many African countries today, you will notice that money changers, antic dealers and allegedly even prostitutes ask if you have EUROs when you offer dollars. > > Bad management of the money can break this trust of course, and that's the > main disadvantage of the system. Whic is what has happened in the case of the US dollar. And I believe that EUROs are only accepted to some extend for lack of an alternative. > But when there is a free market nobody is forced to keep all his wealth in > the same currency, and plenty of stores of value are available as well. > Again, that is not entirely true. Outside Europe and America, choices and alternatives are limited. Thais treat gold like cash and and dollars like something that needs to be exchanged before the rate changes. In the Middle East, depending on the degree of freedom, the dollar is accepted (though the EURO is more and more preferred), in oppressed nations (Iran, Syria, Israel) but less welcome in countries with a stable currency where people have an actual choice (UAE, Bahrain, etc.) I am pretty sure that this is only the beginning. People are just starting to realize that have been taken for a ride because the supply of US dollars in the Third World is somewhat limited. Most notably, when Americans started to flood Iraq with dollars, Iraqis happily reverted back to essentially valueless Saddam Dinars. If dollars are freely available in a country, people tend to shun it - especially if the own currency is not being devalued every couple of years. Interestingly, all the countries in which dollars are not overly welcome, have no tax on gold and count gold imports as a major trade. That does suggest that the FREE market has chosen gold, does it not? Cheers, Robert. budget & privacy website hosting http://www.cyberica.net e-commerce & e-business services http://www.cyfrocash.net budget domain registrations http://www.u2planet.com --- You are currently subscribed to e-gold-list as: [EMAIL PROTECTED] To unsubscribe send a blank email to [EMAIL PROTECTED] Use e-gold's Secure Randomized Keyboard (SRK) when accessing your e-gold account(s) via the web and shopping cart interfaces to help thwart keystroke loggers and common viruses.
