Ed G:
> I agree with you regarding the pervasiveness of the US $.
>
> The one thing about a dominant currency (dominant money) is that nobody is
> permitted to audit the collateral value that supposedly substantiates it.
Ed W:
Though I'm not and expert on money, it would seem to me that the collateral
that substantiates a currency exists in two forms. One would be the goods
and services that an economy produces during a given period, measured as
GNP. The other would be the assets or, perhaps, net wealth, that a country
is able to use to produce goods and services. Taken together, these two
things should, in some sense, determine the value and stability of a
currency. The currencies of highly productive and wealthy countries such as
the US and Canada should have high values relative to the currencies of
countries which are not as wealthy or productive, and that does indeed tend
to be the case.
Ed G:
> Regarding absolute value, we have to keep in mind that money is not a
value
> in itself but an abstract value. As ther market value of what it is
> abstracted from changes, so does the value of the money.
Ed W:
But isn't the value of anything an abstraction in that sense. The
difference between money and other things available in an economy is that
money is highly "liquid". It is universally "transactable". It is the one
commodity which, by officialized agreement, you can exchange for anything
else.
Ed G:
> It does boil down to trust. The choice is between trusting our elected
> representatives or those private corporations (profit driven) who create
> the money. Yes, the private profit driven corporations (I do favour profit
> by the way) , without government oversite, can arbitrarily ascribe any
> value they wish to anything and get away with it so long as no one audits
> their appraised value of the underlying collateral.
Ed W:
I agree that it boils down to trust, but trust that has been legislated and
institutionalized. With the exception of a good Minister of Finance, money
is not something you leave to the politicians. It's far to complex and
corruptible. That is why you have central banks which operate at arms
length from the politicians.
Ed G:
> If I were a banker, I could facillitate the exchange of two $100,000 cats
> for a $200,000 dog.
Ed W:
You have me here. If two cats are worth as much as one dog, it would seem
to depend on which of the two kinds of animals one fancied.
Ed G:
> Thats why the bank act changes (1968) were so important. It allowed the
> private banks, for the first time since the depression, to own property.
> That allows them to bypass the market if there are any non performing
> loans. They just hold the goods 'til they can inject enough mioney into
the
> market (inflation) to move the goods.
Ed W:
Or they might simply sell the goods and get their money back that way. But
here you have me again. I'm not familiar with the history of the Bank Act,
so I don't know what banks can or can't do.
Ed G:
> It also allows them to use money they created to cloak the ownership of
> immense quantities of property, turning most of us into renters, if not of
> property, then renters of money.
Ed W:
And for the third time I have to plead unfamiliar ground. I believe you are
referring to collateral such as real property which banks require against
mortgages and other types of loans. I might put it as follows: We need
money, they need security. In principle there is nothing wrong with that.
In practice, given the enormous power of banks in small and fragmented
markets, things can go very wrong. One recalls the classic picture of the
mother down on her knees in front of her children while the big, fat, stogie
smoking meanie from the bank forecloses on the farm. But it's because banks
have a great deal of economic power that legislation protective of the
borrower has gradually been built up and, in at least a considerable part,
that you have central banks. Power has to be challenged with power. And
one doesn't really have to deal with banks. Many people do their banking
with a co-op.
Best,
Ed W
