From: Danny Van den Berghe [EMAIL PROTECTED]
If the bank is known to be in serious trouble, everybody will want to cash
out his gold on deposit, no matter what interest rates they promis.
In fact, the very high interest rates will be taken as an indication that
the bank is in big trouble.
snip: long description how banks work in a **paper dollar** system
but the fundamental point is that
it is *possible* to get liquidity from sources other than reserves, i.e.
from selling assets.
In a paper money system it is *possible*, yes.
But not in fixed money supply 'gold only'
Hmmm, you talk about banks offering interest rates, so why the gold
would
NOT be in the banks?
Probably 90% of the gold will be in the bank.
If 20% of the 8000oz bank deposits in your example are to be cashed out,
there is simply not enough gold on your little planet.
So if paying
People do not buy 10 times more shoes with the extra money.
___Explain that to my wife please :o)
They buy one pair of shoes, just like 50 years ago, but now they have money
left for a mobile phone, a PC, a mountain bike, a massage,...
___ It is not entirely true though. The shoes
From: [EMAIL PROTECTED]
Many people make examples such as this to argue against either a
commodity-backed currency, the concept of credit and interest, or both.
It is a mistake to consider it a clever or wise argument, however.
The illustration presents an impossible problem, not
So far so good.
But now you have arrived at 8000oz in bank deposits while there is only
1000oz in real gold (coins).
These banks will be forced to do the same what the USA did: announce
that
bank deposits are no longer redeemable for real gold.
If people come to cash out 20% of their
Hmmm, you talk about banks offering interest rates, so why the gold would
NOT be in the banks?
Probably 90% of the gold will be in the bank.
If 20% of the 8000oz bank deposits in your example are to be cashed out,
there is simply not enough gold on your little planet.
So if paying interest
Now suppose that 19 other banks do the same thing and have the entire gold
stock in their vaults. Bank deposits are used as money rather than coins
as
before. (i.e. the 10 000 oz of deposits act as the medium of payment
rather
than the 1 000 oz of coin).
How does this affect the balance
So the ultimate result is pretty much the same.
Without extra money supply the average person would now be able to buy
10
times more shoes for his money, because they have become cheaper.
With the extra money supply the average person now has 10 times more
money
to buy these shoes which
So far so good.
But now you have arrived at 8000oz in bank deposits while there is only
1000oz in real gold (coins).
These banks will be forced to do the same what the USA did: announce that
bank deposits are no longer redeemable for real gold.
If people come to cash out 20% of their bank
This becomes interesting. From what the banks will pay the interest rate?
Where it is going to come from? In your example the banks offer an
attractive interest rate, say 6%, to seduce people like gates to bring
their gold to the bank as deposit.
[and so on for several more paragraphs]
Many
From: Danny Van den Berghe [EMAIL PROTECTED]
This becomes interesting.
From what the banks will pay the interest rate? Where it is going to come
from?
In your example the banks offer an attractive interest rate, say 6%, to
seduce people like gates to bring their gold to the bank as deposit.
Danny,
So the ultimate result is pretty much the same.
Without extra money supply the average person would now be able to buy 10
times more shoes for his money, because they have become cheaper.
With the extra money supply the average person now has 10 times more money
to buy these shoes
From: Robert B.Z. [EMAIL PROTECTED]
Danny,
So the ultimate result is pretty much the same.
Without extra money supply the average person would now be able to buy
10
times more shoes for his money, because they have become cheaper.
With the extra money supply the average person now has 10
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