Economics Questions

Re: GDP as Backing for Currency

JackCuyler — Thu, 12 Jun 2008 15:43:52 GMT

IDigSluts_ky:
I am not arguing from a governmental perspective. Perhaps, I should have clarified. I am an anarchist. I really don't see an issue with fiat currency as long as it is stable, not replicable, market derived, and redeemable.

You can't support a fiat currency without supporting government. By definition. Fiat means "by command" or "by order". In the case of the money, fiat currency is currency thats use is ordered by the government.

IDigSluts_ky:
I disagree with you that the market has consintely preferred gold over the centuries. Many cultures used beads, sea shells, and even animals as currency. To impose a strict gold standard is facist.

To impose anything is fascist, wouldn't you agree? Yet you defend fiat currency, which is by definition imposed. Moreover, granting that many cultures use beads, sea shells, etc., that does not take away from the fact that gold has been used as currency in many more cultures, for thousands of years. And again, most people who support the gold standard would be happy with another commodity. They simply want a commodity as their currency.

IDigSluts_ky:
I don't see how the market has rejected currency backed by gdp. There is a clear relationship between gdp, the money supply, and inflation. Money is valued as a relationship to gdp. Is it not?

It is not. It is valued in its relationship (ability to act as a medium of exchange) to goods and services. That is, $1 buys me a weekday NY Times or a double cheeseburger at McDonalds. The dollar is valuable because I can exchange for either of these goods.

IDigSluts_ky:
Even if we were on a strict gold standard, then a discovery of gold occured. This discovery increased the money supply by two folds. What would happen and how would this be any different if a government doubled its fiat currency overnight? Inflation would happen, but utlimately there would be no difference.

There would be little difference. The owners of the new gold would get more purchasing power out of it, as would those who initially receive the new money, as prices would not begin to rise until the new money is further circulated. Similarly, the recipients of the government's new money would get more purchasing power out of the new money. The end result in each case would be that those who never see the new money would have their own money devalued.

Consider the big difference, though. The scenario you proposed, a huge discovery of gold, so large that it literally doubles the existling gold supply, is rather unlikely. And it's even more unlikely is that it will happen multiple times. The amount of gold is limited by the amount of gold that is discovered, mined and minted, all of which takes time an effort. Contrast that with the current fiat system. The government has doubled the money supply roughly ten times in the last hundred years, and there's no reason to think they won't again and again and again. The amount if fiat currency is limited by... well, it's not really limited at all.

Re: GDP as Backing for Currency

Jon Irenicus — Thu, 12 Jun 2008 15:08:55 GMT

What you mean is FRB. Fiat money is just one form of it - but it is neither market-derived nor stable. It is issued by central banks, and its use is forced upon the populace. Otherwise it would not be fiat money! The term applies only to this form of money, not to FRB in general. Hence it is a contradiction to say it is market-derived.

-Jon

Re: GDP as Backing for Currency

BlackSheep — Thu, 12 Jun 2008 12:46:40 GMT

IDigSluts_ky:
I really don't see an issue with fiat currency as long as it is stable, not replicable, market derived, and redeemable.

I don't even see a problem with fiat currency being unstable, unredeemable and not market-derived. I doubt they'll be able to gain the necessary trust from the people to get them used, but I don't see why they should be forbid. (by the way, is it a fiat currency if it is redeemable?) If they are replicable, then they aren't really currency... Surely, they will be worthless pretty soon... ;)

Re: GDP as Backing for Currency

IDigSluts_ky — Thu, 12 Jun 2008 12:20:21 GMT

JackCuyler:
Ok, so you've listed four properties you'd like to your currency to be: redeemable, not replicable, stable and market derived. The dollar, or any fiat currency backed by government decree or the GDP, fails the latter two, as it is neither stable nor market driven.

I am not arguing from a governmental perspective. Perhaps, I should have clarified. I am an anarchist. I really don't see an issue with fiat currency as long as it is stable, not replicable, market derived, and redeemable.

I'm not sure how the gold standard is "fascist" or in any way forceful.

In my experience, people who typically favor a strict gold standard are often against alternative forms of currency.

The market has, over many centuries, consistently chosen gold as currency. Would it pick something else if we abandoned the current fiat? Perhaps. Would whatever is chosen be a scarce commodity? Without a doubt. Is it "forceful" for an individual participant in the market to express a preference for gold? I don't see how.

I disagree with you that the market has consintely preferred gold over the centuries. Many cultures used beads, sea shells, and even animals as currency. To impose a strict gold standard is facist.

Finally, the market has clearly already rejected currency backed by the GDP, which is why there are laws enforcing its legal tender status.

I don't see how the market has rejected currency backed by gdp. There is a clear relationship between gdp, the money supply, and inflation. Money is valued as a relationship to gdp. Is it not?

Even if we were on a strict gold standard, then a discovery of gold occured. This discovery increased the money supply by two folds. What would happen and how would this be any different if a government doubled its fiat currency overnight? Inflation would happen, but utlimately there would be no difference.

Re: GDP as Backing for Currency

JackCuyler — Wed, 11 Jun 2008 14:51:30 GMT

IDigSluts_ky:

I believe that currency should be left up to the market; as long as currency is redeemable, not replicable, and stable. It is regrettable that I do not share your fascist and noble stance for the gold standard. Shoving gold down my throat as a currency is analogous to shoving your conception god down my throat.

The only one who is being forceful is you.

Ok, so you've listed four properties you'd like to your currency to be: redeemable, not replicable, stable and market derived. The dollar, or any fiat currency backed by government decree or the GDP, fails the latter two, as it is neither stable nor market driven.

I'm not sure how the gold standard is "fascist" or in any way forceful. The market has, over many centuries, consistently chosen gold as currency. Would it pick something else if we abandoned the current fiat? Perhaps. Would whatever is chosen be a scarce commodity? Without a doubt. Is it "forceful" for an individual participant in the market to express a preference for gold? I don't see how.

Finally, the market has clearly already rejected currency backed by the GDP, which is why there are laws enforcing its legal tender status.

Re: GDP as Backing for Currency

jimmy — Wed, 11 Jun 2008 14:33:48 GMT

IDigSluts_ky:
Your comphrehension lacks.

Ah ad hominen retorts - such joys! They tend to say rather more about the person making the retort than the argument or person that they're arguing with though.

IDigSluts_ky:
I guess it is time to concise the argument. You go first.

No point in restating myself:

http://mises.org/Community/forums/p/2538/36422.aspx#36422

Once again, if you have a problem with my argument (rather than a problem with my person) then I'd be interested to hear it. If you have nothing constructive to say though (e.g. phrases like "your comprehension lacks") then I'd suggest you say nothing at all.

Re: GDP as Backing for Currency

IDigSluts_ky — Wed, 11 Jun 2008 10:51:13 GMT

jimmy:
You don't remember writing the following then??? I don't think there's anything wrong with my comprehension skills no...

Your comphrehension lacks. I remember your strawman argument of the Zimbabwean Rand.

But this thread is getting tired. I have the impression that even if you agreed with what anyone (myself included) was saying, you wouldn't admit it at this point for the sake of stubborness.

I guess it is time to concise the argument. You go first.

Re: GDP as Backing for Currency

jimmy — Wed, 11 Jun 2008 10:22:31 GMT

IDigSluts_ky:

jimmy:
What you actually want is a currency that HOLDS IT'S VALUE right? Phew - took you a long time to realize it!

Whenever did I imply differently? It is you realization that is lagging.

You don't remember writing the following then??? I don't think there's anything wrong with my comprehension skills no...

IDigSluts_ky:
don't care if anything backs the dollar or any precious metal. What I do care is that I receive "currency" for my labor to buy goods and services.

But this thread is getting tired. I have the impression that even if you agreed with what anyone (myself included) was saying, you wouldn't admit it at this point for the sake of stubborness.

Re: GDP as Backing for Currency

IDigSluts_ky — Wed, 11 Jun 2008 08:57:08 GMT

jimmy:
What you actually want is a currency that HOLDS IT'S VALUE right? Phew - took you a long time to realize it!

Whenever did I imply differently? It is you realization that is lagging.

Re: GDP as Backing for Currency

ViennaSausage — Mon, 09 Jun 2008 20:13:22 GMT

tim:
How about letting people decide which money they want to use? Why wanting to choose for others what is goo dor not for them? That's what I would have answer to your man.

I agree with you here. Let the market decide it's commodity money.

Re: GDP as Backing for Currency

tim — Mon, 09 Jun 2008 16:31:56 GMT

ViennaSausage:

I am not advocating this position, but I would like to hear your thoughts on GDP as Backing for Currency for the US and for other other countries. I ran into a Cato Economist. He aborred the Gold Standard, and suggested that GDP would be the ideal solution for currency backing. I have never heard that arguement before, so I was not preparred to counter that position. The only thing I could think of at the time was that GDP itself is not a reliable calculation, because of the the plethora of outstanding variables. Suggestions against or perhaps even praise for GDP as a backing?

How about letting people decide which money they want to use? Why wanting to choose for others what is goo dor not for them? That's what I would have answer to your man.

Re: GDP as Backing for Currency

jimmy — Mon, 09 Jun 2008 14:31:53 GMT

IDigSluts_ky:

jimmy:
So you'd be happy to accept, for example, a salary in Zimbabwean Rand? Good on ya mate - take one for the team!

You will be better off accepting your strawmen argument than I will be accepting the zimbabwean rand.

Ah, I see... so you don't want currency? Even if a bunch of guys with guns want you to use it to pay for goods. What you actually want is a currency that HOLDS IT'S VALUE right? Phew - took you a long time to realize it!

Re: GDP as Backing for Currency

IDigSluts_ky — Mon, 09 Jun 2008 08:39:03 GMT

jimmy:
So you'd be happy to accept, for example, a salary in Zimbabwean Rand? Good on ya mate - take one for the team!

You will be better off accepting your strawmen argument than I will be accepting the zimbabwean rand.

Re: GDP as Backing for Currency

IDigSluts_ky — Mon, 09 Jun 2008 08:36:36 GMT

JonBostwick:
You don't care what you recieve so long as someone with guns will force others to take it off your hands. How noble.

This is a flat out lie. I am simply disgusted by your comment.

I believe that currency should be left up to the market; as long as currency is redeemable, not replicable, and stable. It is regrettable that I do not share your fascist and noble stance for the gold standard. Shoving gold down my throat as a currency is analogous to shoving your conception god down my throat.

The only one who is being forceful is you.

Re: GDP as Backing for Currency

Bostwick — Sat, 07 Jun 2008 18:02:46 GMT

IDigSluts_ky:

JonBostwick:
What backs the dollar bill is government guns. Why is the dollar bill worth more than any similar scrap of paper? Answer: guns.

I don't care if anything backs the dollar or any precious metal. What I do care is that I receive "currency" for my labor to buy goods and services.

You don't care what you recieve so long as someone with guns will force others to take it off your hands. How noble.