Economics Questions

Re: Non-Gold currencies?

Manny Mars — Wed, 06 May 2009 16:51:08 GMT

The interest rate would then totaly depend upon savings. Yes Credit cards would be used less, but remember, under a gold standard, its the purchasing power that makes all the difference. So, under a gold standard, and 100% reserve banking, we would swipe less, and at the same time being able to purchace the same, if not more.

Re: Non-Gold currencies?

Fox McCloud — Tue, 28 Apr 2009 21:44:29 GMT

Hmm, I'd venture to guess that the usage of credit cards would be considerably lower under fractional reserve banking, as well...either that, or interest rates would be particularly high.

Not that I have a problem with that.

Re: Non-Gold currencies?

Juan — Tue, 28 Apr 2009 21:39:22 GMT

scineram:

krazy kaju:
Full reserve banking would mandate that some need to save so that others can borrow.
Is that not tautology?

Yeah. If X doesn't exist, it doesn't exist. If there are no savings there can be no credit. You might want to disparage that as a 'tautology' but it looks as if some people can't understand the 'tautology' well enough.

They could still spend the credit.

Looks as if you are having problems with definitions and tautologies...or consistency.

Re: Non-Gold currencies?

scineram — Tue, 28 Apr 2009 14:56:53 GMT

krazy kaju:
Full reserve banking would mandate that some need to save so that others can borrow.

Is that not tautology?

krazy kaju:
Since some save, thereby refraining from consumption, there is no inflationary effect from lending, since the borrowers are simply spending what the creditors didn't spend.

They could still spend the credit.

Re: Non-Gold currencies?

realbuffet — Fri, 24 Apr 2009 01:22:34 GMT

because the ownership of the goods is claimed by two parties (depositor and bank acting as loan giver). in fully backed reserve system depositors would have a bank statement instead of notes representing money craeted out of thin air whereas the notes (backed by gold) would stay with debtor.

*pls correct me if wrong*

Re: Non-Gold currencies?

krazy kaju — Thu, 23 Apr 2009 23:30:34 GMT

How won't it change under a gold standard?

A true gold standard would mandate full reserve banking. Full reserve banking would mandate that some need to save so that others can borrow. Since some save, thereby refraining from consumption, there is no inflationary effect from lending, since the borrowers are simply spending what the creditors didn't spend.

Re: Non-Gold currencies?

realbuffet — Thu, 23 Apr 2009 04:45:24 GMT

exactly

any bank which loans out causes inflation because it loans what it does not own. Thus there are 2 notes representing the same comodity

1st - bank ows saves

2nd - debtor ows bank

fundamently all banks cause inflation. This wont change even in gold standard.

Re: Non-Gold currencies?

Fox McCloud — Wed, 22 Apr 2009 03:03:54 GMT

krazy kaju:

Gold doesn't need to be money for full reserve banking.

Anyway, consumer loans would still exist. Why wouldn't they? As long as they commanded a respectable return similar or greater to producer loans.

I never said it did; I merely said under a situation where gold is money and we simultaneously have fractional reserve banking...

Anyway, I'm sure they would exist, but would not they be considerably lessened? After all, they'd be inherently riskier than loans for industry/capital.

Re: Non-Gold currencies?

krazy kaju — Tue, 21 Apr 2009 22:08:28 GMT

Gold doesn't need to be money for full reserve banking.

Anyway, consumer loans would still exist. Why wouldn't they? As long as they commanded a respectable return similar or greater to producer loans.

Re: Non-Gold currencies?

Fox McCloud — Tue, 21 Apr 2009 21:22:00 GMT

krazy kaju:

In a full reserve banking system, someone has to save in order for you to borrow. Several people might have to save a couple thousand each for you to be able to borrow $100,000 for a house. That means that several people are collectively not consuming $100,000 of products, lowering prices, thereby enabling you to borrow $100,000 and purchase a product without inflation. However, when $100,000 is created out of thin air and then lent out, since nobody saved a corresponding $100,000, there is bound to be price inflation, all else being equal.

correct me if I'm wrong, but assuming a Full Reserve banking system and only gold is used as money, wouldn't bankers have little to no incentive to give out consumption based loans? Not that I have a problem with that, just a question.

Re: Non-Gold currencies?

liberty student — Tue, 21 Apr 2009 20:39:44 GMT

Fox McCloud:
of course, I just wanted your personal opinions/thoughts on the matter. It would be interesting, though, if the market would pick gold and silver again, or something else? Naturally, as you've stated multiple times, there's no way of knowing, but, at the same time, history seems to be on the side of gold and silver.

Bi-metallism poses its own problems, namely both currencies (gold and silver) would have to exchange on floating rates, which would cause daily pricing fluctuations between the two methods of payment.

If I am a vendor, I don't see a lot of value taking a currency that could lose 5% of it's exchange value by the end of the week. This is why here on the CDN/US border, we take American currency, but punish it with lousy exchange rates, so the vendor is unlikely to lose value in exchange short of a dollar collapse. When we ask non-specialists (shoe stores for example) to perform currency exchange, we will not get good rates as consumers, and this will discourage us from using foreign monies in local exchange.

Thats my 2 cents.

Re: Non-Gold currencies?

krazy kaju — Tue, 21 Apr 2009 20:28:32 GMT

In a full reserve banking system, someone has to save in order for you to borrow. Several people might have to save a couple thousand each for you to be able to borrow $100,000 for a house. That means that several people are collectively not consuming $100,000 of products, lowering prices, thereby enabling you to borrow $100,000 and purchase a product without inflation. However, when $100,000 is created out of thin air and then lent out, since nobody saved a corresponding $100,000, there is bound to be price inflation, all else being equal.

Re: Non-Gold currencies?

Fox McCloud — Tue, 21 Apr 2009 20:00:52 GMT

liberty student:

Fox McCloud:
I know it's impossible to predict what the market will do, but is it likely, in any sense, that the market would support more than 10 currencies in a given area? I ask because, as you said, it seems to be a bit impractical.

I don't think a market could support more than a couple/handful in the same region. I don't think it would be practical, efficient or desirable.

The notion of free market money is to have money chosen by the market, that can be changed by the market. It is not to make everything money. That would bring us back to barter.

of course, I just wanted your personal opinions/thoughts on the matter. It would be interesting, though, if the market would pick gold and silver again, or something else? Naturally, as you've stated multiple times, there's no way of knowing, but, at the same time, history seems to be on the side of gold and silver.

I'd say additional evidence for the market picking gold is Nixon axing the gold-exchanged standard in 1971. Friedman predicted gold's price would drop like a rock because the only reason it was valuable is because the government tied it with the dollar....well, that obviously proved him wrong, as the price increased and continued to do so until the Fed was forced to reign in inflation in the late 70's.

Re: Non-Gold currencies?

liberty student — Tue, 21 Apr 2009 19:49:06 GMT

Fox McCloud:
I know it's impossible to predict what the market will do, but is it likely, in any sense, that the market would support more than 10 currencies in a given area? I ask because, as you said, it seems to be a bit impractical.

I don't think a market could support more than a couple/handful in the same region. I don't think it would be practical, efficient or desirable.

The notion of free market money is to have money chosen by the market, that can be changed by the market. It is not to make everything money. That would bring us back to barter.

Re: Non-Gold currencies?

Fox McCloud — Tue, 21 Apr 2009 19:22:23 GMT

I know it's impossible to predict what the market will do, but is it likely, in any sense, that the market would support more than 10 currencies in a given area? I ask because, as you said, it seems to be a bit impractical.