> > Almost all of the world uses non backed fiat currency. The
> > world has never seen this before Brenton Woods in 1971. Fiat
> > currencies are fraud and theft.
> I've heard statements like this quite a few times now, and it all sounds a
> bit like hot air to me. It doesn't quite make sense. Would you care to
> explain why you think fiat currencies are inherently and completely bad,
> opposed to non-fiat currencies? Such as gold-based ones, I presume?

I've heard fiat currencies called 'fraud' and 'theft' for a long time, too,
and while I can't say for sure that they have these attributes, they do seem
to have some similarities. Let's say that I create a new currency called
'Igits', and I loan you 100 'Igits' with an agreement that you repay me the
100 igits at the end of a year, along with an extra 5 igits in interest.
Without an underlying commodity backing the igits, then how can the borrower
repay the loan, with interest. The borrower must rely on the issuer
distributing other igits to other people, and the borrower hopes to acquire
these new igits in exchange for services he provides. It has the essence of
a con because the issuer must continue to expand the monetary base to keep
his loans from defaulting, and this is exactly what the Federal Reserve,
which issues US dollars, does.

> I don't think gold-based currencies are backed by anything much better
> either. Sure, you can have a ton of gold. But what good is a ton of gold?
> can't use it. There are only a few high-tech industries that make what
> be called constructive use gold, and the rest of it is used for displays
> vanity. To me, a ton of gold means about as much as a ton of hay.

The primary purpose of gold is to hoard it -- not to use it in
manufacturing. This is its purpose as a monetary asset.

> How is that much better than USD?

With an artificial currency, like igits, or US Dollars, the central
authority has the power to destroy the currency by creating an excessively
large supply. Such an authority also has the power to extend credit far
beyond what would be possible with a commodity-backed currency. Gold does
not lend itself to inflation for these reasons, and cannot be debased. You
know, if you have an ounce of gold, that it will be worth as much 100 years
from now, as it is today. The US Dollar is now worth about 1 / 50th of what
it was worth just 70 years ago.

> Suppose someone finds a huge goldmine. Or someone discovers an asteroid
> consists of pure gold, and hauls it to Earth. Or someone discovers a way
> produce gold atoms cheaply. Or, more probably, someone finds a way to
> convert major gold-using industrial processes to use another, cheaper
> material instead. If your fortune is based on gold, it will depreciate in
> value - big time.

Probably not as much as fiat currencies have depreciated in our lifetimes.
Even so, such a new discovery would give people time to adjust, and
ultimately, the value of gold would change to a new level, always one
comensurate with the amount of energy it took to create it from other forms
of matter. Ultimately, what you measure in value, when you measure gold, is
the value of the energy it took to discover it, claim it, mine it, separate
it, assay it, purify it, mint it and coin it -- you measure the value of the
enery it took to extract it from the Earth.

Gold is pure energy.

> I think the concept of currency backed by economy is good. After all,
> is compensation for hours spent working. Money ought to correspond to time
> spent, not to weight of material acquired. So I think it does make great
> sense to back a currency on economy, not on material.

Does this sort of currency lend itself to use in a free market? Could anyone
issue such a currency? If not, then why not? and from where is the authority
derived for one agency, alone, to issue the currency?

> My opinion is therefore that any bashing of "fiat currencies" a priori is
> largely unsubstantiated. It may be true that a gold-backed currency would
> survive an economic recession better than an economy-backed currency; but
> the other hand, an economy-backed currency is resilient to changes which
> cause depreciation in the value of gold. The two types seem to be
> complementary rather than adversary.

The US dollar was on the gold standard until 1971. This means that the US
Dollar was just another name for a specific weight of gold, until 1971.
Therefore it's a bit early to draw the conclusion, that such a fiat currency
as the US dollar, is capable of maintaining its stature and integrity in the
long-run. We'll see...


You are currently subscribed to e-gold-list as: archive@jab.org
To unsubscribe send a blank email to [EMAIL PROTECTED]

Reply via email to