re: Is there anyone here who supports fiat curreny/the Federal Reserve?

quote:

---

You're more than welcome to go buy commodities in the market place.

---

I do, but that is beside the point. I though we were talking about currencies.

But maybe I'm mistaken - wouldn't be the first time. Enlighten me, what alternative currencies are legal to use in this country?

quote:

---

I do, but that is beside the point. I though we were talking about currencies.

But maybe I'm mistaken - wouldn't be the first time. Enlighten me, what alternative currencies are legal to use in this country?

---

So you want a currency that's backed by a commodity. Know that a commodity's value will rise and fall with supply/demand for that commodity. So looking at currency, a currency by definition is a store of value and medium of exchange. As a medium of exchange, you can actually buy/own a commodity and sell it on the spot market at T+0/T+1 and get dollars to buy something. Although there is an extra step, I'd argue its fairly meaningless in terms of a medium of exchange if you would rather keep your store of value with a commodity rather than dollars.

Now the store of value issue is different. Commodities are much more volatile than the dollar could ever even hope to be. Actually, the volatility of the dollar index since QE started has been the lowest in history. The store of value for the dollar is based on supply/demand for the dollar. The demand side for the dollar is dominated by the operational use of the dollar as the reserve currency of the world (which by the way, isn't going away any time soon) as well as the relative strength of the US economy and markets (which by the way, is still stronger, deeper, and much more reliable than any other country in the world). The supply/demand mechanics for a commodity, say gold, will be driven by factors that have nothing to do with the relative strength of the US economy and markets.

Now I know your response will be that you're talking about a commodity backed currency, and this is the historical background: Historically, commodity backed currencies were operational pains in the arse. Shipping gold back and forth between countries over time horizons based on relative FX supply, pegging reserves to the point that hindered economic growth, not allowing actual market demand for your country's currency to dominate due to the fact that you were somehow pegged to another country, etc.. The gold standard was an operational pain in the arse, it hindered economic growth, and it actually made currency values much less market driven. True fiat may have its flaws, as does the US economy, but its flaws ,as well as the US economy's, are much more insignificant compared to the gold standard or any other economy in the world.

quote:

---

If they didn't have a dollar backed by something of substantial value, they could create/print the illusion of such in financing wars and other useless endeavors which are based on the implementation of never ending insurmountable debts, deficit spending, taxes, and inflation.

---

Meh.....the issue you are talking about exists, but it's in the congress, senate, and executive branches of government.

The connection that you are trying to make is that the Fed enables the government to do these things, but the issue is much more complicated.

Just one man's opinion, but if you create rules that reign in government spending, force them to have an actual budget, eliminate the defecit spending, and reign in big government you solve the Fiat currency issues and the hidden inflation tax. It's the government you should have a problem with, not the FED.

Now, should they be audited and should there be more transperancy? Yes. However: ask yourself who is preventing this level of transperancy, the FED itself or the government?

Still need a Fiat currency in today's world. Backing it with gold the way we did it before we went to a Fiat currency system doesn't really help.

Reign in government and you solve your issues with a Fiat currency. Key to that will be education of the masses, which will be hard due to the government control of education.

quote:

---

It's the government you should have a problem with, not the FED.

---

It's a hybrid. I don't have a problem with either per se. If our government had full control in the sense of nationalizing the Fed, that would perhaps help solve part of the problem to a large degree. Both should serve the American people and not private interests. Backing the dollar with something of substantial value might further eliminate its ability to continually borrow without equity from those who can lend without equity (fractional reserve banking) with the goal of repaying the debt through taxes and inflation.

Thanks for taking the time to type all that out. I really appreciate your response and I learned something.

I have a few questions.

1) Why are you so sure the operational use of the dollar as the reserve currency of the world isn't going away any time soon? This worries me because if the value of the dollar is based on supply and demand as you say, what is going to happen if/when demand for the dollar around the world goes down after the unprecedented expansion of the monetary base we have seen in the last decade or so?

2) In terms of volatility, what do you say about the cost of consumer goods like shoes and suits in terms of gold vs dollars?

3) In a previous post you talked about low inflation - do you refer to cost inflation like the CPI?

4) I still would like to know why we can't have competing currencies and let the market determine which it likes best.

Goldennugget has a long history of shitty threads

quote:

---

As opposed to what? Carrying around gold bars?

---

You shall not crucify mankind upon a cross of gold!

quote:

---

More importantly, it's backed by the full strength of the U.S. military.

---

So then you advocate the slaughtering of women and children of governments who threaten the dollar?
Not only do you advocate it, you seem to relish in it given your post.

quote:

---

Remind me again, what was used as currency in this country pre-1913?

---

Fiat currency.

In the form of National Bank Notes.

Same system just not centralized.

LINK