Bitcoin Forum

So everyone seems to take for granted that gold is superior and people only use fiat because of government suppression.

But it occurred to me that this is blatantly false as someone mentioned "gold has already failed".

What backs up this statement? Well for one not a single country I know of uses gold or other metals for money. Is it really feasible that government suppression would be so powerful? Keep in mind quite a few non-oppressive and very peaceful countries with inflation STILL use fiat.

There is also lots of stories of countries using dollars instead of the sanctioned money.


So I think its safe to say that gold is not out because of suppression when you think about it.


Okay so whats the deal then, fiat clearly degrades at 1-5% (avg: 3%) a year in most countries - yet at some point the whole world decided to boot out the metals. Why?

Well a simple explanation would be that gold is simply worse in a free market.


Which turns out to be true when you run the numbers:
Lets say you are saving 20.000$, a decent chunk of savings for most people, considering how many are in debt instead these days and the poor of the world.

Well you will need to first buy the gold at a loss. You will probably have to drive to pick it up and you need to test it a bit to insure its good.
For this amount you will have to go to maybe two different guys found online to pick it up at least.
I think its safe to say buying and selling the gold will cost you at least 3% each time in transportation, offer-research, time used, risk of fraud and so on.

Okay not that bad, since you have value dense gold and not THAT much to store you now get a small safe at 200$ - quite cheap, yet that works out to another 1% cost. You skimp on alarms and other stuff.

So now you're set to go, after just a little more than 2 years you start to save money on inflation.


So on a 10 year basis it does okay - but if that is your time frame why not invest in something more productive like stocks, bonds etc., buy a car with better mileage, insulate your house? I mean gold will NEVER pay your day to day bills, gold does not climb in real value - its not a real investment!

This is supposed to be superior money and all that jazz right and this is a buffer savings so lets look at that instead. So lets say you loose your job and have to live off your savings a while after 2 years, now you pay that 3% again on at least some of your savings amount and you haven't made anything yet!

Keep in mind that you skimped on security and you safe is so small anyone could kinda just grab it and run so on a 10 year time frame what is the risk of burglary - 1% again in a nice neighborhood (that's an avg, could be 100% for YOU)?

So gold is a bad investment and bad as a buffer savings. Even during hyperinflation or the zombie apocalypse a few cigarettes will do you just as well or better.


So now the final one: Is gold good as MONEY and for EXCHANGE?
Not really: Imagine your local supermarket taking gold; total widespread acceptance. You stand there with your groceries and you have to lob like 3 grams off your "shopping nugget" and you brought your own weight to not get cheated...
I mean just play that out in your head and its obvious its a little funny.
Just to start with its a hassle to you AND the supermarket who will need more cashiers to deal with the slower transactions. They will also have a headache doing accounting with grams of gold and silver and all with different grades of purity.
They will have to move a lot of gold around the country every day from all their stores in trucks... its horrible.

But then you say "Realpra, that's not what the goldbugs mean! They mean a gold-BACKED currency you dunce, it can be digital and all!". Well then that is fiat. Fiat is kinda always backed by something (I have yet to hear of actual government "IOUs") but they always print more.
It is still fiat if its backed by gold and you hold the paper - that's how fiat started!

So clearly "barter < shells < gold/silver < fiat < crypto-currency" and NOT "shells < fiat < gold < crypto-currency". (turns out that is the historical order too!)

So what is gold good for? Well basing huge banks off of, backing fiat currencies or clearing rare debts between countries or other huge entities - which is exactly what we see today albeit not even that much (American Chinese debt is denoted in dollars for instance).


I will follow my own realization and prioritize gold/silver savings much less.
(I still need a safe for my paper wallets though...)

EDIT:
SHIT! I forgot my punch-line: "Notice how the gold cost works out to about the same as the cost of inflation for most fiat? Not coincidence! That is free market competition at work between gold and fiat!"

ta-ta-ta-daaaa......  ::)

Yes, there are fees involved when you're buying gold and the gold fixing makes it seem unfair nowadays, but you're not describing problems related to the monetary use of gold here.  What you're describing is a problem about how governments restrict other types of money: In most countries you have to pay employees in fiat money... (only a few companies are paying in Bitcoin or partly in Bitcoin so far)

I gave up with gold because the "spread" is ridiculous here in Malaysia.

Dunno about elsewhere but here it's 35%

That's plain robbery really. How is something that loses 35% of it's value the moment you buy it any kind of protection against inflation?

I could walk into a local gold store, and in the small town i live in there must be at least 20 of the things, buy $1000 of gold, walk out, walk into a different gold store - or even walk back into the same one - and only get $650 for that gold.

Pathetic.

The good thing about it was it's so hard to actually 'spend' gold that it did a great job of encouraging me to save, so I got the boat I was after. Would I do it again? NO! Not now I know how ludicrous the spread is!

It gets worse..

Silver. Rarer than gold, gonna explode any moment now.. Right?

So I tried buying some. Wandered into a few goldsmiths, none had any silver coins or bars, just some silver jewelry. Determined to get me some 'real' silvery money I ended up buying 10 little 1 OZ bars off Ebay of all places.

During the boat-buying and accessory-buying phase, decided to cash in my silver. No, it hadn't gone up any in price but holds it's value, right?

Right?

So I stroll into a goldsmith, just to check the current price, you know, the street price, the on-the-spot, at this moment price?

"No, we don't buy silver, sorry."

Next goldsmith.. "You wanna buy silver? Oh sell silver? No, we no buy silver, so sorry"

I tried around 6 goldsmiths and even a couple of jewelry stores selling silver jewelry - "No, we not buying silver, sorry."

No questioning the authenticity, or unsure about it being in bars rather than recognizable coins, they just don't want silver. Didn't even ask which coins or bars or anything. Didn't care.

It's somewhat ironic because the local Chinese here (around 40% of the population) are indeed very keen on buying gold as a long-term saving method, they buy it for wedding gifts, for baby's first birthdays and all that. It's BECAUSE it's so popular that the local stores can get away with such a huge spread.They know you're gonna buy it and at full market rate - but sell it? Then they'll kick you in the balls and offer 65%.

I'm sure in most Western countries there's a smaller spread but for it is NOT a simple matter of buy at $1000, cash it for $1000, plus as pointed out you need to secure it and no, you certainly cannot spend it as money.

("You can't eat gold!" - You can't eat Federal Reserve notes either. But at least you can spend them...)

To me bitcoin is digital gold, without the crazy spread and just as easy to transfer or store digitally as any other currency.

It's gold 2.0

As I described, not all governments are doing this. The problem is with gold itself. I could buy gold any day and my government would not bother me at all or take a nickle.

You are correct that acquiring gold for savings and selling it again later would be easier if gold was the standard of exchange as even your neighbor would have some - HOWEVER as I outline later in my post it does not make sense for gold to be the standard because it is a hassle to use gold every day.

This is why it costs 3%, I assure you that cost would still be 0-25%-1% or so in the middle ages when metal money was prevalent and there was no government suppression - except you would pay it every time you paid for something - also instead of the acquisition cost being higher your security costs would be higher instead (I wonder what a swordsman would cost or bribing the local chief?).
Transportation costs may also have been vastly higher given you would have no car.

Even if gold was reintroduced we would still need government "Coinage" and banks (for digital payments) to allow easy everyday use. The banks are fiat all over again and the government coins would probably be diluted, as history has shown, which brings you back to just fiat OR miserably carving gold at the cashier.


The simple truth, Occam's razor, is that gold is bad money hence it is not used as money anymore.

If gold is so great, but just held back only by governments then why isn't the national currency of the Cayman islands or Las Vegas?


Until like 2 weeks ago I was kinda a goldbug, but now.. just accept it; "gold sucks" and stop being wrong.

I may actually buy like 1000$ of gold and silver for my son, just in case I get hit by a car and Bitcoin is replaced by a new crypto-currency. If you don't want to take risk at all and it won't move for 20 years, gold still makes a little sense to me.

(Maybe it would be 100% BTC if Bitcoin was fully fleshed out and near full adoption.)

PS: Great post BTW.

You can't use this as an argument because you could use the same argument against dollars. It is a hassle to use cash every day. Gold is no worse than fiat in this case.


You simply don't understand the meaning of the word "fiat". Please look it up.


Gold is no longer used because governments are incapable of sound fiscal management. At the time, it was a simple choice of defaulting or dumping the gold standard. The best choice would have been to default, but governments chose to follow the long-standing tradition of fiscal irresponsibility and dump the gold standard instead.

"great post" - thanks!

When Realpra said 'Banks are fiat again' I think he meant they go back to fractional reserve banking, ie issuing more receipts than they actually have gold 'backing'.

This is a major reason I love the concept of bitcoin. Even if Ron Paul were elected in the US and somehow got that nation onto a 'gold standard', you know it wouldn't last. Secretly or blatantly, they're produce more "money" than they had gold.

It's human nature, especially when you consider the nature of politicians. You simply can't give power-crazed thieves and bandits the keys to a printing press and then be surprised when they print, and print, and print some more.

With bitcoin you trust the math, not politicians or bankers.

You can't transmit gold. Sooner or later you end up with tokens or digits or paper or some such that is meant to 'represent' the gold - but never does, or not for long. A bitcoin is a bitcoin, just an entry in a ledger but the entry is the money. I see it as genius. The creator turned the whole thing on its head and said 'OK then, if modern money is just digits, let's make digital money'.

Love it, just love it  8)

Dumping the gold standard was defaulting. The loans were denominated in dollars when a dollar meant a specific amount of gold. Going off the gold standard meant the payments were in redefined "dollars" worth far less than those originally promised. The loans were never actually repaid per the original terms.

The fiscally responsible choice would have been to not take out the loans in the first place. Short of that, admitting that they were in default would at least have had the virtue of honesty.

Yes, gold is horrible as an investment. It is a hedge against inflation and that's it. Gold also tends to do well when the economy is doing poorly because more people fear a collapse of society and buy gold, thus driving up demand.

If you know what you are doing, you buy and sell gold with a flat fee per ounce (like $20 or so). There is no reason to pay 3% or more, you are getting ripped off. Real gold dealers operate on very thin margins because there is a lot of competition.

My real problem with gold is the way it is taxed in the US. Gold is ALWAYS taxed as a collectable, so it is taxed at 28% if you are a middle income person. There is no 15% long term capital gains rate for gold! Most people don't seem to realize this. A lot of states have their own tax too. For example, where I live in Massachusetts, you pay short term capital gains ALWAYS on gold, which is 12%. That is horrible! So you pay 12% state plus 28% fed for any appreciation on the gold you own when you sell it, no matter how long you've owned it.

Also, I believe gold is in a bubble now and is due for a correction. Maybe around $1000/ounce is more reasonable than the $1400-$1600 it's been recently.

In short, only buy gold with bitcoins if you are looking for a quick way to cash out your bitcoins and don't have a the highest level of verified mt gox account. Or maybe if you are trying to evade taxes on your bitcions, not that I'd ever recommend doing that. And even then, sell your gold right away once you get it.

Both gold and silver have performed very well as speculative assets at times over the past decade although in the past two years a definite pull back has set in, but that doesn't change the fundamental premise for anyone holding either gold or silver. If you are buying physical hold in yer hand gold and silver, you are essentially storing wealth for the long long term. Perhaps even wealth that you will never sell.

If/when the USD crashes through hyperinflation, the value of all currencies will turn to dust. Especially Bitcoins, whose entire value is based upon the ability for people to readily turn them into local currencies around the world. In a situation such as this, nominal or notional wealth will mean nothing. All that will mean something is real raw materials and resources and who owns or controls them. If such a situation occurs, then anyone holding gold or silver will be thanking the heavens that they do. This explains why China, Russia, and various other central banks around the world are busy stocking up on as much gold reserves as they can get their hands on, and perhaps explains why their is increasing talk of 'gold repatriation'.

After the crash, it will not be a bunch of internet geeks who decide what the new global currency will be and what it will be based on. It will be those holding all the real resources who decide and I doubt Bitcoins will be flavour of the month with them. A return to a gold standard is unlikely, but the whole world will be demanding a currency backed by commodities as opposed to paper promises.

Their have been numerous instances of a nations Fiat currency failing through either hyper inflation or an outright collapse of the issuing government.  In none of these case was Fiat money it's self abandoned and replaced with precious metal, the replacement money system was always a new Fiat rolled out to stabilizer the national economy after a period of bartering in common domestic consumables.

Using common domestic consumables (liquor, cigarettes etc) has several major advantages over gold.  First you CAN eat (or drink, or smoke) it, so it has very high use value in an economic collapse which makes short term drinking and smoking yourself to death very desirable for most of the out of work population (example post-Soviet Russia) and lawlessness makes wearing jewelery rather dangerous.  Second consumer products are nigh impossible to counterfeit because simple things like product packaging are almost as sophisticated as any printed paper money and would take a large industrial operation to create.  Likewise the quantity of most consumer goods is guaranteed to be identical and the ubiquitous tamper proof seal will prevent 'shaving' product.  Consumer products are also much closer to desired denominations for small transactions because these are the items that small denomination bills would have been bought with, precious metals are too valuable to be subdivided for small transactions.  Lastly consumer goods have a huge first mover advantage, everyone in a nation already has some, they are being produced and consumed locally in every community and they will emerge spontaneously as a medium of quasi-barter exchange without central authority dictating it.  Precious metal is just too rare, most is inside of a vault somewhere unlikely to circulate after a collapse and what little is held by the public is mostly in jewelry which is very hard to appraise due to the huge amount of costume jewelery out their with it.  This leaves only the smattering of privately held coins which are in hands of scattered ideologies who through the magic of the internet think themselves legion will find too few like minded folks in their locality to exchange it with physically after a collapse.

Another strong proof that gold is not rejected because of government suppression.  What community is the most heavily suppressed, in which authority figures actually outlaw all money and all commerce, in which the money that is used must be smuggled in at great difficulty, or made by hand.  Do they use gold, no they use consumer goods.  What is this strange community you ask, it should be obvious, its a Prison, about the most dystopian kind of society imaginable and which likely reflects what we can expect in a Mad-Max total collapse.

Most of the issues in the OP seem to be slightly off, but the one about ease of use is right on. Trying to deal with small amounts of gold or silver in traditional bullion forms is significantly more difficult than paper notes. And trying to have the notes backed by gold will just lead to more corruption of the currency. The solution IMHO is Shire Silver (of course), which has the backing embedded in the note. No need to trust a central bank or government to redeem, and its as convenient as paper notes.

Of course bitcoins are still better for many use cases, but for in-person anonymous non-electronic transactions Shire Silver is currently the best thing out there.

That would be bad enough if the tax was just on increases in actual value, but don't forget that the tax is assessed on the nominal price difference in USD, so when they devalue the dollar you pay taxes on the relative "appreciation" of the gold even if its purchasing power hasn't changed.

You're using the wrong tool for the job. Try Gresham's Law instead.
Gold isn't used as money because there is shittier money being accepted.

To the OP; you are correct that Gold is not an investment. Investments are basically gambles with the intent that the return is far greater than the initial loss. Gold doesn't function that way (with some small temporary exceptions). It is however, a store of purchasing power. The idea being one can lock up excess funds into Gold and then when those funds are needed they still buy the same amount of goods and services regardless of which direction the original currency went in the meantime.

Finally, to the poor sap who can't buy or sell metal without losing his ass; it isn't the metals that suck it is you who sucks at moving in and out of metals.

Hi, I didn't read your entire post because it was verbose.  But judging by your posting history you have significant experience in the bitcoin discussion.

I would like to point out these things with direct response to your initial post:

1) when the US was on the gold standard this was before the US was the number 1 economy in the world and the USD was the number 1 international reserve currency.  The gold standard was stopped prior to this.
2) Lots of your other commentary reflects issues that are handled by the fractional reserve system.  Specifically, the fractional reserve system allows some central authority to adjust monetary supply in reaction to economic conditions.

In the case of BTC, once we hit 21 million total BTC in the 22nd century, the only way that the currency will stay relevant at that time is if there is a regulated authority who will control the money multiplier applied to BTC.

In other words, my view is if BTC doesn't establish a respected monetary lending system by the end of the decade, it will soon die thereafter.

You might want to check your info. Dollars were convertible to gold until 1971.

Thanks for clarifying my error, but I must clarify your error as well:

US became the top economy in around 1920s: "The United States has been the world's largest national economy since at least the 1920s"

http://en.wikipedia.org/wiki/Economy_of_the_United_States

US came off the gold standard in 1933: " On June 5, 1933, the United States went off the gold standard, a monetary system in which currency is backed by gold, when Congress enacted a joint resolution nullifying the right of creditors to demand payment in gold."

http://www.history.com/this-day-in-history/fdr-takes-united-states-off-gold-standard

So I was incorrect in saying that gold standard was stopped prior to US taking #1 globally.  Actually US took #1 a decade before. 

That being said, the main idea is that being off the gold standard has been optimal.

just learning

Having read through most of the posts in this thread, I have come to the following conclusion.

With the odd exception, most people on this thread, and therefore most people interested in Bitcoins, are fkn idiots, most of them passing of how they wish the world was as solid established fact, without even bothering to do a quick google to get some very easy to find data (such as on the USA's economic prominence throughout the 20th century which was cemented by the Bretton Woods system) in order that they avoid revealing themselves as an idiot who is content to splurge any old bollocks out on their keyboard and post it online.

This makes me worried for the future of Bitcoin

Whilst a bunch of idiots may collectively have luck on their side on certain occasions, luck tends not to be consistent and since a bunch of idiots can never actually hold a correct view on a complex matter with many nuances to consider, I suspect yet another rather rude reality check is still in line for all those economic experts who understand so much about how Bitcoin and how the world in general works.

I think that the mainstream of halfwits on this forum, are going to become another one pf my 'contrarian indicators'. i.e how y'all say the world is and how the world will be, is exactly how the world is not and how it won't be.

The problem with the bitcoin community is it is biased toward people who know less about economics and more about technology.  This is changing though as bitcoin gets more noticed by the financial community.

Who cares if one person or two missed a couple wiki links? Yes, people should do homework to back up statements, but also mistakes are made, share the links, and move on.  I have no problem being wrong, and will change my mind about anything I state through reasoned discussion.  I hope others will do the same.  I'm treating this forum as a learning tool and to express my ideas. 


regardless of your or my view about the future of Bitcoin on this thread, its future is going to be determined by its supply and demand.  The supply is following a fixed formula.  Assuming the demand grows healthily, the problem is when the supply stops at 21 million BTC, it enters a deflationary spiral.  Demand up, supply fixed.  Real BTC values (how many apples can one BTC buy) enters a vicious spiral upward.  As this happens, people hoard BTC (why spend today when you could spend tomorrow, or next year).  Then transactions grind to a halt and the real market backed by BTC grinds to a halt.

The only way to stop this from happening in that century is with the fractional reserve system, which allows banks to control the multiplier for the BTC supply.  This is exactly what they do with the USD.  And the US central bank controls the multiplier and interest rate which dictate how the overall USD supply changes. 

I want the BTC to succeed.  It is better than gold because it's lighter and faster as a transactional unit.  It doesn't need a central authority to manage convertibility.  In a nuclear holocaust situation, people can use it to barter.  (instead of guns and gold, think guns and gpus)

I don't have answer to how to move it to a fractional reserve system.  We need entrepreneurs and governments to address this in the next century.  Once they do, BTC's long term potential will be cemented.

The USD is not going to crash through hyperinflation.  People who like gold tend to worry about government actions and central banks.  The Fed is doing the right thing by printing money like crazy right now.  They know that the economy MUST avoid deflation.  Downward spiral and hoarding must be avoided, with the USD and with BTC in the 22nd century.

Bitcoins entire value is not based on people's ability to readily turn them into local currencies.  It's value is based on it's usefulness as a transactional unit of barter via the internet without a central authority to regulate the transaction histories.  If there are no government sanctioned currencies one day, it is very feasible that I send my BTC to your BTC address, and you give me your apple.

and the lead jester takes the stage!

Treason! ;)

Great post. You are right.

gold  - fiat - cryptocurrency

support? I mean that is my one word way of saying, can you elaborate on your implication that my post is logically incorrect?  I don't think you can, but would love to enter a reasonable discourse with you because if I am wrong I will learn and be enlightened by your un-conveyed knowledge.

If that is true then bitcoin is a bad idea because no one can print more of it at will, and so sharp deflationairy contractions will happen from time to time, and will destroy the economy! 


This is not true. Hoarding, or saving, is exactly what needs to be done MORE in times of crises. And is exactly what was done too little in times of prosperity leading to malinvestments and loses. Crises serves to learn people that risk does not always pay and investments should be done with your brains. This way less capital is wasted on useless ventures.

The whole keynesian philosophy that people should SPEND more during crises is invented by bureaucrats serving the masters who are always happy to find moral arguments to fill their pockets (money being printed to 'save the economy' goes directly to the ruling elite: governments and bankers).

I've been buying silver since it was $4 an ounce 10 years ago.  I'm way ahead and will continue to buy.  This is a minor setback, the rally will continue.

The fed is printing money at a record pace, degrading your dollars daily.

in the 1940s, the silver content in three mercury dimes would buy you a gallon of gas.  Today..  it will still buy you a gallon of gas.  Seems like a pretty effective hedge to me :)

What are the economic implications, if every person, corporation, bank were to hoard.  Ie, put cash under mattress, banks would keep cash in their vaults.  The extra cash that otherwise would have been used on discretionary spending.  That would not get spent.  On the aggregate, the deflation breeds recession.  And the resultant recession breeds more deflation.
http://en.wikipedia.org/wiki/Deflationary_spiral#Deflationary_spiral

I agree that this is debatable and different views exist.  I am just expressing what I think is the more common view which is supported by what people learn in macroeconomic policy courses.  

Regarding your comment about our current macroeconomic situation.  It's all about timing.  I agree that the most recent crises was caused by excessive investment.  Central banks are supposed to raise rates to slow down the economy during times of boom, and decrease interest rates to lift up economies during times of crises.  And regulations need to be part of the picture.  They are printing money now because the target interest rate is below zero in their models.  They have the goal of promoting long term economic stability.  They don't always get it right and tend to err on the more stimulative side (as history has shown.)

The reason I bring up the implied deflationary spiral issue associated with BTC in the 22nd century is purely a comment on the design of the currency.  It is a major flaw with BTC that must be addressed eventually otherwise the system will blow up once people realize the issue.  It appears that I have a stronger view than the people who wrote the below wiki page.
https://en.bitcoin.it/wiki/Deflationary_spiral

Regardless of whether it's 1979, 1989, 1999, 2009, or 2019.  I would make the same commentary on the BTC protocol.  If you have a fixed supply at 21 million and the demand for BTC supply is increasing at that time, the price will rise.  People will buy more since it's going up and the BTC usage for real transactions would grind to a halt.
http://en.wikipedia.org/wiki/Quantity_theory_of_money

There are two ways this can be avoided IMO
1) somebody starts an entity that lends BTC with the fractional reserve system
2) have the ability to change BTC money velocity

I don't have much understanding of whether or not either of these are achievable.

2 thoughts
1. has the supply of silver ceased?
2. if the silver standard was used, how do you think the economy would have performed in the last 100 years?  Would the same thing hold?

#2 is obviously a difficult question but would be interesting to think about.

Let's say there are fixed 21 million silver coins in the US government vault.  As the US population grows, each person has their own economic activity (they need to eat and buy stuff).  In other words total aggregate real GDP should grow.  As this happens how much should 1 silver coin buy?  If you have 21 million silver coins and 21 million population, does that mean roughly 1 coin per person?  Ok, we simply split up the silver coin into smaller pieces and spend it faster, that way we can keep the silver price stable.  What if somebody gets impatient and just pays more to buy a silver coin because they are so scarce in this situation?

Then you get deflation (silver prices go up) and a spiral starts.

Gold is superior in holding value simply because it is a product of labour, just like bitcoin, you must pay some effort to produce it, either exchange it with your labour, or you mine it with your labour

Before 1971, fiat is a debt note backed by the amount of gold that central banks hold, you can always use fiat to exchange gold at central bank. But after 1971, the gold standard ended, the back of the fiat was removed, so essentially all the fiat is backed by nothing, its value purely decided by supply and demand

From labour based value theory to supply and demand based value theory, that is the trend in mainstream economics

But this change brought a foundamental change: Now the central bank can create money as they will without having any asset backing. Before, under a gold standard, the central banks are not any different than anyone else, they should also work/exchange to get the gold and then they can issue the notes backed by their gold

Because their money is not generated by work, they will tends to abuse it. No matter how many beautiful and complex theories they can find to disguise their action, people will sooner or later find out this biggest problem since 1971

It's been 42 years and most of this scheme still holds tight, it clearly showed how a money without any real value can have constant exchange value purely based on consensus

I'm familiar with the views you express. It's called Keynesianism and it's a false theory.

Bitcoin is proving that in practice.

Participants of bitcoin have no interest in converting it to an inflationary currency.  

You can however start your own inflationary crypto currency.

You will quickly discover how many people really like participating in that.

The flaw is the part that asks, "what if every person ...". It is ridiculous to assume that this would be a normal outcome. There is no evidence that shows that low deflation causes a deflationary spiral.

Also, while a sudden deflationary event might cause a recession, long-term low deflation does not necessarily cause recession. It does, however, help efficient and productive businesses replace inefficient and unproductive businesses.

Loved your article OP

One thing that is better than fiat though is 'gold backed fiat'. Because it's easy/cheap to use AND does not lose it's value (But indeed you have also storage & insurance costs for the gold backing it, however this would only be around 0.5% per year).

Today fiat loses more than 3% per year in value. It's around 5%. That's been the case since 1972. Also the past 10 years prices have gone up on average around 5% per year. Correct to say that bank interest rates covered a big chunk of that, but today that's over with interest rates only around 1-2%.

The reason why there is no fiat currency backed by gold is not because the free market does not prefer that but because it is prohibited by law to offer 'gold backed fiat' to people. e-gold that got shut down is a good example. The cancellation of goldmoney's gold backed fiat attempt another.

So my point is, there is a good reason why gold has remained popular as a store of value, in the fiat world we live in. In the long term it preserves it's purchasing power much better than fiat.

Bitcoin is such a success because it has many improvements over fiat. It's transportable like fiat, but it will preserve it's value, like a 'gold backed fiat' would do. It does this without needing storage/insurance for the gold and without needing to trust the issuer of the 'gold backed fiat'. And it gets even better, gold is mined at an annual rate of 1-2% in infinity, so over the long term it is NOT going up in value because the supply grows equally fast as the growth of the economy/goods/services offered.

In contrast, starting 2030, Bitcoin's is mined less and less over time. This means that bitcoins are much cheaper than gold. Because with gold the users need to continually pay 2% per year to the miners. With bitcoin we will have to pay less and less to the miners, reducing it to only 0.1% per year in 2040.

Baseball cards would have probably worked much better than silver. Had they chosen silver the art of fine dining would have been tragically degraded forever and banksters would be losing hair and sleep worrying about getting caught for hypothesizing rented out sugar bowl contracts..

Obviously nobody here has the FIRST CLUE about the difference between "WEALTH" and "MONEY".  

Colbert, the Malthusian Physiocrats and the "Xxx World Order" Freidmanist Mercantilists never did and still clearly don't (https://en.wikipedia.org/wiki/Mercantilism), but almost every other valid, classical and neo-classical economist from Julius Caesar, Henry 1st, John Locke and Adam Smith to Keynes (http://criminalbankingmonopoly.wordpress.com/category/tally-sticks/) always (more or less) have.

FREE MARKET ECONOMICS isn't about what or how much a money is, nor really about how much or little of it is lying around. It's all about the very most important matter of "Who owns, controls the values and supplies of, rents-out and profits from it?"

When we use the word "wealth" all it means is "a lot of" any "one sort of" or "many sorts of" COMMODITY or RESOURCE.

Commodity = some sort of a generic asset (as in "fungible" meaning things that are "all the same".)

Resource = some sort of an action or limitation, a "renewable or non-renewable" source, asset or supply.

When we use the word "money" we are discussing some medium of VALUE exchange. (eg What'll we use for "money?")

Value = either or all of the intrinsic, utilitarian or exchange natures of any asset.

The first reason people confuse wealth with money has to do with assets. Since any asset can be a "money" for a given transaction this is understandable, so we need a more narrow definition of an "only-money" to distinguish it from other stuff.

The second reason people confuse wealth with money has to do with the confusion between Resource-assets and Commodity-assets. Very often we see them lumped together as "Commodity-Resources" which is also rather understandable but is DEFINITELY NOT all well and good!

In fact it is a fact of life that there is BUT ONE "Resource" that is SUPREME! All other resources are secondary.

Without the PRIME RESOURCE nothing happens, ever, at all, anywhere, to anything or to, for or between anyone, period!

Once again we return to Locke and Smith's three distinctly separated concepts of the loose-term "value". These are differentiated as utility-value, exchange-value and intrinsic-value. If we consider the Medium of Investment commodity of water and the Medium of Savings commodity of "emeralds"(gold) as examples, you can see where each can end up isolated into a single category depending entirely upon conditions of chance. During a long drought in a desert water has all three values, emeralds only one. At a feast next to the fountains of a palace garden, emeralds have all three values and water only maybe one.

In both cases above the "Prime Resource of Labour" alone ALWAYS stably retains at least two if not all three of the natures of value, as it usually does in most all scenarios. It is usually the prime function of a "money" that it be a suitably stable and reliable "Medium of Labour Exchange" value, first and foremost!

A good and useful "money" is always, first and foremost, a token of the Prime Resource, or, in other words a "standard" MEDIUM OF LABOUR EXCHANGE.

NATIONAL-SOCIALIST (NAZI) ECONOMICS 101:

1: Most economies are local. More-local economies of scale exist within them but the delineating factor that comprises them has usually been the "commonwealth" national, public Medium of Labour Exchange "currency" token that they share. International trade-exchanges themselves are NOT "global economy" they are a collection of marketplaces or the Global Marketplace that the New Economic World of the BTCitcoin Nation now truly first represents in "human economic", as opposed to mercantile "national-socialist (NAZI) or transnational-socialist (Bilderberg-Fascist) economic" history.

2: All labours and the (renewable) fruits of all labours are the Prime Economic Resource. Only "menial labours" can be regarded as a "commodity".

5: The main and principle mediums of all commercial exchange are local, public (national) Labor Exchange “Currencies”(money-tokens) which, although they may be possessed by all, are ALWAYS the sole and exclusive "properties" of the (trade-) wealths of national economies.  The conventional old-world Medium of Exchange which are a public economies "labor exchange currency" tokens, can be possessed by individuals but they are never "owned" by those individuals (only their exchange values are). To privately impose and "own, value/devalue and/or issue" the sole lawful Medium of Labour Exchange is to impose slavery.

3 The Prime Commodities (Labors and Labor’s-Fruits) are “fiat”, unlimited, and ever-growing in a healthy, growing economic system. Growth is a "fiat" choice. As the size and exported productivity of an economies labor force vary so must the well-proportioned quantities of it's labor exchanging tokens, otherwise inflation or deflation of the absolute value of those tokens occur. This well-regulation of a "money supply" is the duty and responsibility of a well-accountable system of public governance.

4: All Non-Renewable Commodity Resources OTHER than ever-growing Labor and its Renewable Fruits are finite, limited and ever-shrinking in proportion, due to economic and labor population growth itself. All these "others" are, to certain labor and demand conditions, exchangeable "Mediums of Investment".   A medium of investment's commodity-resource value may increase or decrease, regardless of supply or demand, due to a host of other market factors. Certain exclusive, limited and highly specialized skilled-labor "specialties" are also "more finite resource" Mediums of Investment, but still, their added-values are still subject to market factors.

6: Rare Commodity Resources (arts, antiques, fuels, metal and mineral rarities) are less-exchangeable, but certain to appreciate in value "Mediums of Savings". Their long term values are far less affected by market conditions due to their exclusive irreplaceability and non-renewability.

7: The current value of a local (Central Bankster) Labour Exchange “Currency” token is the sum of the values of it’s exportable labours and labours fruits, divided by it's quantitive availability among and size of labour value exchanging populance. Its absolute "current" value is determined by its foreign exchange worth in/to the global marketplace. The New Economic World of the BTCitcoin Nation employs an "Over The Counter (OTC)" Derivative Swap Token who's ultimate (hopefully trading-convention stabilized) exchange value will be determined solely by the Global (or a local) Marketplaces demand for them.

8: One cannot represent the exchange value of an infinite, ever growing fiat quantity of the utility-value worths of all the labourers and all of their labours fruits with the increasingly rarer ever-shrinking intrinsic-value of any finite one, hence, the growth of the Medium of Labour Exchange "currency" money-supply (or at least growth of it's exchange value like BTCitcoin) must also be “fiat” or ever-growing along with the ever-growing economic outputs it represents (rather than ever shrinking!). This means that penny that's worthless and obsolete now might buy you a half a book of matches again if it wasn't for Ben Bernanke financing wars, till quarters are relics.

One must have adequate tokenage to put a bit into every labourers pocket, in exchange for their labours for them to conduct commercial exchanges with other labourers for their needs. At the same time, it is always valid to compare the value of the money supply to the value of "Mediums of Savings" such as gold, as a regulatory tool to discipline government socialists and their well regulating management and open public coinage of the public's own money supplies

9: A local Labor Exchange Currency is owned, issued and its value determined solely by and for the utility of the economic populance to who’s economy it belongs, It is NEVER owned by those who merely possess (hoard) it, such a "crony-capitol" tyranny is enslavement, save for the exception of the BTCitcoin "over the counter" (OTC) derivative swap which is private, worldwide and totally decentralized.

10: The prime socioeconomic conflict and corruption is always between the evil greed and corruptions of parasitic, unwilling to invest, commodity-monopolizing, lazy, unproductive usurers with hoarded “old” wealth (gold) who are desperate to "usure", hypothesize and re-hypothesize and thus parasitically live off the avails of their greed  and the good, freed market public economy’s continuous, accountably well-regulated public needs for a growing, steady and reliable supply of “new” money/credit for the values of their labors.  

--The public commonwealth's goodly national need for the profits from renting  (loaning as an investor of last resort)  such new money that it alone creates in the public's name, and its ever-growing requirement to responsibly and accountably maintain a  predictably stable token-utility supply with which to exchange  labors values and the fruits of labors with, is in direct conflict with the selfish (hoarded liquidity) interests of parasitic private bond-Shylocking usurers. The right to issue a national public labor exchange currency-token is a public right and responsibility that must never be delegated to any small corrupting, insider-manipulating and unaccountable gaggle of private-boardroom-socialist Pharaohs. (currently nobody could loan BTC since nobody knows what it will be worth in 15 minutes and it takes an hour to use it)

11: It is the Net Export Product that is the key economic indicator, not the Gross Domestic Product. The "currently internationally relativistic commonwealth value" (or "currency" value) of a national economy's Labor Exchange Currency tokens is determined by the comparative to import wealth of its EXPORTS alone. The relativistic global-market day to day value of a given "currency" vaies by the current (net-positive or net-negative) values of it's trades with other national economies in the global marketplaces, and can never be "pegged" to the value of anything else but what that current value is (unless it is just pegged to the supply and demand for it like BTCitcoins!).

The Prime Economic Lesson:

In the economics lesson in Genesis, we read of the 7 years famine in Egypt.  Joseph, a Tory-Bilderberg Trotskyite boardroom-socialist crony of his Pharaoh conveniently (greedily) sells Pharaoh’s stored grain so that Pharaoh accrues all of the gold which was then the only form of "money" in the first year of the famine. In the second year, the people were then forced to barter their animals and other holdings for the grain and then, thereafter, they end up bartering themselves as slaves for grain merely to survive the famine as they are all then finally left gold-rent-token debt-enslaved and "bonded in indenture" to Pharaoh for eternity.

Fortunately this "eternity" only lasted until a later, not too up on current events (King) George (or "W") Pharaoh mistakenly adopted himself a Crown Prince out of the bull rushes named thut-Moses....

Precious finite gold or any "rare finite something" like DaVinci paintings or '57 Chevy Bel Airs could not ever be used as a Free Market "Labor Exchange Currency" in any growing freed market economic system. A finite and privately hoarded “old money” (gold, silver, Quagga-skins etc) public Labor Exchange Currency supply system is slavery. In any commercial system by means fair or foul a "commercial" winner (or winners) will always eventually emerge to own nearly all of the available, finite Labor Exchanging "currency" resource (all the gold, DaVinci paintings, silver, Quagga skins etc) after which point the rest of the economy (all property) becomes their private chattel collateral, and all of it's participants become their rent-debt-slaves. In a private, finite currency system after that point everyone else has to go to them, cap in hand, to rent some flake of paint off one of their loaned-out and re-hypothesized a thousand times DaVinci paintings even just to use a pay-toilet!

Even if everyone had some tiny reserve of gold or DaVinci painting scraps set aside as savings the debt enslavers could drive prices up by raising rent-debt-prices (usury) or printing-dilution money-supply (monetization) inflation and thus force all the small gold holders to be forced to exchange their paltry holdings to eat or heat their homes or fuel their cars. (hoarded false-scarcities, engineered famines or pandemics). If you own an ounce of gold you ALREADY have more than your human lifetime of labours "share" of it. It's utility value as a money actually ended in the 17th-18th century, it just took it till the 20th to finally go off and die. It is still however still a fair third rate "bulk" Medium of Savings next to Antiques, Fine Art and Gems or truly rare metals. Even baseball cards are worth more than silver.

One "winning" consumer (Gold Pharaoh), no matter how audacious his corruptly consumptive lifestyle cannot "urinate down" a "Free Market" economy getting his yards cut or renovating his palaces. The power to counterfeit, loan and issue (from nothing) a fiat Labor Exchange Currency token is the power to corrupt. The Wealth of Nations is their public property expressed and represented by the foreign-export fruits of all labors value of their publicly owned and issued "Medium of Labor Exchange Currency".  Maintaining and growing the ongoing exchange-value of its own economic "currency" is the public work of a nation, it is not ever to be regarded as the private toy-hobby of some "beneficent" private gang of wealthy-socialist Pharaohs.

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The stupidly foolish Mercantile "Austrian Fascist" notion of (only) using and hard-coding a limited, finite, precious resource (like DaVinci paintings, gems, antiques or gold) to represent the limitless ever-expanding and growing resource value of our Prime Resource (the "current national token" of our individual labor properties and the limitlessly ever-expanding fruits thereof)IS A RECIPE FOR GUARANTEED, INEVITABLE ECONOMIC SLAVERY AND EXHAUSTION FOR ALL, FOREVER.

To use a limited, finite resource like gold (global Medium of Savings)  as money (national economic Medium of Labor Exchange) all nations wages and incomes would have to continually decline to allow for any and every new person or economic growth.

WHAT IT IS, IS WHAT IT IS, - IT CANNOT ALSO BE SOMETHING ELSE THAT IT IS NOT!

The value of nation’s Labor Exchange Currency is a fractional token of the values of all of it’s laborers EXPORTABLE labors – PERIOD!

There would never have been the tyrannical corruption of an unconstitutional private Federal Reserve "They-Owe-Us Note" printing company if the criminal, treasonous, global Trotskyite moron Wilson had ever understood the intrinsic difference between gold wealth and human resource "money".

It you want to save your nations "medium of labour exchange" tokens you must exchange it's current value for the current value of a "Medium of Savings", if you want to spend it you spend the labor (Prime Resource) it represents. You must never be forced to go cap in hand to some Gold-Pharaoh to beg or borrow some of "his tokens" of his hoard (private FED currency) just so you can use a pay-toilet..

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The global depression we all now must face is one created solely by and for the benefit of the private old-money (private Gold Fed-Pharaoh paper labor-exchange "currency") usurer-hoarders, WHO KNEW that it was totally obvious and inevitable that from the moment that they, themselves treasonously coined and disseminated the depraved, corrupt imperial-global-corporate--Shylock-fascist political expressions "Deregulation", Global Economy"  and “Free Trade”, to corruptly sell us, for the sole benefit of them and to finance their soulless corporatist transnational-socialist fascist cronies, that we and our Labor Exchange Currencies would be dead. When a Free Market's economic outputs and means of production are maliciously and deliberately exported to slave labor camps and shrunken by corruptly ill-regulated policies, growth of a nation's currency supply, growth of Keynesian public infrastructure stimulus spending, growth of war-communism spending, growth of destructive, parasitic war-communist-debt and the growth of labor populance and debt-tax enslavements are all totally inflationary.

Even the growth of consumer spending on foreign slave goods and growth in hiring people to use cheap foreign slave-tools and slave-goods to build things at home is pure inflation.

The corrupt private Fed "old-money" Gold Mafia knew they were engineering this result. Due to their maliciously inflationary program everything else shall ultimately deflate except "Mediums of Savings"...

If you have nothing unique nor in broad foreign demand built at home to export, nobody needs your currency and it is thus devalued.

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The “globe” cannot have a “global economy” nor (save until BTCitcoin came along) its own labor exchange “currency” since it has no unified labor participants (save for us independent "New Economic World" BTCitcoiners) of its own nor does it produce nor exchange anything for nor with any other globe. A world of economies enslaved into exporting all of their economies net-new wealth profits to a group of tax evading, debt not printing Gold Pharaohs in Switzerland, Liechtenstein and the Cayman Islands is not "trading with" some other "globe". ((excuse this older pre-BTCitcoin generality of mine, but it's nonetheless still meaningful to mercantilist Tory-Trotskyite Nazis and Pentagon-Communists)

Greedy, corrupt, ennobled Pharoah-welfare parasites who merely lend-out worthless tokens for  the "old money" that they have happened to possess the most of and criminally buy themselves our politicians with are not another economic planet. The ludicrous notion of a "GLOBAL ECONOMY" is the BIGGEST LIE ever sold. We Humans of the Nation of BTCitcoin however, are a whole other New World again! But they, the parasitic global-mercantilist tax-evading money-bond enslaving Shylocks are not "another planet".

Gold, as a very finite resource and rare antiques and art are always certain to appreciate "mediums of savings" that merely suffer from being somewhat more illiquid forms of real, portable, own-able asset possessions. By contrast, as common "mediums of exchange" in ever-growing exchange systems, publicly owned and issued Labor-Exchange "Currencies" must always consistently marginally decline in "gold" value over time since they also must represent the ever-growing anticipated future Prime Commodity-Resource of "the new fruits of all new labors" as well as those extant. This provides the incentive to invest or save, rather than to hoard or live off the avails of the usury of "labor exchanging currencies".

The problem with the private Fed Mafia is not with what it happens to be doing today, it's with its corrupt insider-secrecy and with those who corruptly claim to illegally "own" our public Labor Exchange Currency and by extension all of us, all of our properties and all of our labors. It is an unconstitutional, private, insider-trading and gold enslavement monopoly! If our government was abiding by the Constitution and doing these (money-issuing and money renting) things itself for all of our common good and profit the abominations of taxation would be unnecessary and obsolete.

What The Private Fed Mafia Dictatorship are doing with their criminally forged They-Owe-Us Notes is selling us into slavery to their fellow Rothschild/Bilderberg Bretton Woods Gold Pharaoh cronies, and we are paying for it with our great, great, great grandchildren's slavery.

It's about which Old Gold Pharaohs are getting away with "owning" and have stolen most all of our nation's people's "Labor Exchange Currencies", dummies.

Adam Smith noted at the core of the mercantile system was the "popular folly of confusing wealth with money,"

And so finally it is that all of we, ourselves alone, digitally become the prime resource of all real wealth that shall never ever again be wrongfully confused with "any other wealth" that's far too often "confused with money".

BTCitcoins finally happen to be what we are doing about THEM, using their own OTC Derivative legal-loopholes, and it has been the genius of Sitoshi that we must jealously now all carefully improve, protect and defend that has created us all a New Economic World with the power to save us all from those who would enslave us by defrauding us all of the fruits of our labours, and corrupting our governments on their profits.

;D ;D ;D ;D ;D

Somebody said the US went off the gold standard in 1933. The US didn't go off the gold standard in 1933. FDR basically just confiscated people's bullion temporarily in order to repeg the price of gold at a higher dollar price. This was nothing but a bank bailout. The banks were broke because they issued too many notes during the 20's which were defaulted on, and all the gold was at risk.

The path away from the gold standard is really a series of morally hazardous bank bailouts, ending globally in 1971. The major events was FDR executive order in 1933, Bretton Woods in 1944, and Nixon severing dollar from gold completely in 1971. The banking system now essentially uses monetized government debt as "reserves" which is kind of a hilariously conflicting hybrid between real fiat and a commodity reserve system.

Since there is no true physical reserve backing all the "money" floating around, then there is no way to honestly contain the amount of money in the world, nor any way to continue bailing out the irresponsible and insolvent banking system other than more government borrowing, taxes, asset confiscation, austerity, and money printing. There is no way this is going to last. This is not even a real system. This is a broken farce that is going to cause a lot of pain as it disintegrates.

A precious metal standard is superior the this current farce as long as we don't slide off of it to bail out banks, but we already did. A cryptocurrency can serve as a reserve, as it is fungible and not arbitrarily inflatable. It is actually superior to metal in some ways in that it is more easily redeemable and transportable, which could keep banks more honest than they would be with metal.

Debt free, government issued fiat might be superior even to a reserve standard, whether it is gold or bitcoins, controlled by private entities. We just need to try it. It will give us our democracy back. A lot of people think that's what we have now and the government already issues our fiat money supply. They don't. The government is actually the finance bloc's bitch and needlessly borrows money from it and takes orders from it, which undermines the democratic process. Money is created by private sector banking corporations as debt, so basically we all pay rent simply to use money. The gold standard works the same way, but at least with a finite reserve with no bailouts, the banks are kept honest, and the money supply has a lid on it.

The Soviet Union kicked out Trotsky and did it, fortunately none of them got assassinated, because they killed the banksters first. Julius Caesar, Abe Lincoln and John F Kennedy weren't so lucky...

BTCitcoin finally uses their own Over the Counter Derivative "Credit Swap" (http://en.wikipedia.org/wiki/Commodity_Futures_Modernization_Act_of_2000) medicine against them. It is all always solidly "backed" when we buy it.

If we had just heeded andrew jackson...

indeed A.J. held them off, and gold was still a far more seriously threatening economic disease back then too. Endogenous money is the only way to go. Sure I have savings in gold, but that's because it's a giant pain in the butt to spend it :D

Well the people of Iceland did it, but you have to keep thinking to stay alive there.

The core question is: Who give them the right to print fiat money without anything valuable backing it?

If one party have a promise of always print money with some real value backing, that party will surely win lots of votes. But unfortunately the money printing is central bank's monopol, and they have invented so many misconceptions that are enough to confuse even the smartest people from economy schools

That's a matter of opinion.

Do you say that when any person does any work of any value that is not represented by what he is payed?

When you get paid your valuable efforts alone are all that is needed to "back the value" of the Medium of Labour Exchange token that you receive for it. Everyone else who works for those same tokens will recognize your work that your "money" represents, by virtue of it being in your possession to use.

Do not confuse wealth (diamonds, emeralds, rubies, daVinci paintings, 57 Chevy BelAirs, gold, silver, Quagga skins) with "money"!

A "money" is simply a medium of exchange that is "the" Medium of Labour Exchange "Currency" that your local economy uses and supports the value of, by the values of all that it's labour's produce.

Rare, antique "wealths" are uncommon (hoarded and monopolized) Mediums of Savings-Curiousities, not common (broadly strewn about) Medium of Exchange-Tokens

Face it, very, very few "jobs" anyone ever does, are ever worth a "wealth"!  ::)

Why not "back" your sort of "loaned-wealth-money" with sirloin steaks, or concrete, or gasoline, or Viagra, or steel, or leather, or travertine marble, or Toyotas, or Rolls-Royce Wraiths? Why does a Labour Exchange Currency also need to be something else, that it is not, to you?

The PRIME RESOURCE is labour and that is what a "money" pays for, and that alone is what "backs it" and what it represents. Being able to exchange it for other things both common and rare is just a bonus. Utilizing a "money" affords all with a choice of what "wealths" they prefer to earn for themselves through their labours.

Would you rather that your employer paid you in scrap aluminum or vegetable oil?

Believe it or not lots of people have zero use for gold, they don't need it, don't like it, don't want any and would much rather have their "money backed by" something they can watch The Simpsons on. (like a wikked GPU)

You know I've been considering this definition of yours and I don't think Labor exchange is really the defining quality of money.  Simply consider the case of an economy ware no one is a wage earner, everyone is self employed and sells goods or services to each other (such as a butcher, a backer and a candle-stick maker).  No one pays or receives wages but money is self evidently possible.

Rather I favor the definition as "A universally accepted extinguisher of all dept in a society", now the universal part is key because that means it's accepted in payment of taxes and in reality taxes will always be the driver behind a money system.  Any society with enough complexity to need money is going to have some kind of taxation even if it's very informal like "The chieftain calls upon the people to give", and you need to have some liquid token you can pay that debt in.  And once the chieftain will take it then everyone else will too because everyone's going to eventually have a need to pay a dept to said chieftain.

Sure in TODAY'S economy the buying and selling of labor is the single largest 'market' in the whole economy, so big we don't even recognize it as such and nothing could be considered money if it didn't exchange for labor but it needs to be bigger then that to really be money.  If I could get payed in a token but not pay my taxes in it then its not money.  Many old turn of the century mill operators would pay employees with some kind of company script that was not usable to pay taxes and was not by my definition money (such practices are fortunately outlawed now).

I didn't either until I sat back and considered that the hypothesis of labour is the foundation of all economic activities. Without it alone, nothing ever "happens".

Your butcher must obtain handle and store carcasses, carve cuts of meats from them, sell them and package them for his customers and pay his store's bills etc, regardless of wether it's just his name over the door or not. Bakers and Candle makers are no different. Hiring somebody to do your job is labour too, just like shopping for a house or a car is. Not all "labours" are rewarded and certainly few are "equal" but that does not impact on their "values". Indeed the costs of all labours needed to produce a product are not and often need not be reflected in it's price, as when a Cadillac AC system finds it's way into a cheap Chevy

Doesn't a great stock pick "cost you more" because you had to do more labours finding out about it? Even pushing a button, firing a bum, selling a BTCitcoin or finding a fishing lure is a labour. Most labourers have to do 5 or 10 labours a day before they can even get out of the house to go off and slavishly "bruncheon" in their boardrooms.

Indeed many labours are not actually even "productive" in most any regard. Most tank and ICBM and bomb makers still nonetheless produce outputs that have intrinsic, utilitarian and most definitely value-added "exchange" values regardless of the market demands of those who depend upon or "benefit" from their uses...


The sort of tax-money you speak of was already invented by King Henry 1st back in the 1100 it was done to foil the counterfeiting bankster-goldsmiths and built Britain until the Rothschild bankster coup in 1826 finally pushed it back into abject economic "counterfeit rented-gold-debt receipt" slavery.



Henry was the first dude to figure out the best reason to "also" make a "money" represent something else that it was not.

...And he was no doubt greatly pleased to see "his slaves" spending all those "tax receipts" of His, too.  ;D ;D

In every part and aspect of all economic activities you will find and/or exploit the hidden values of past, present and/or future labours.

The PRIME RESOURCE of "all labours" is what an "economy" is. All else is just "stuff labours bring or do with them".


Even writing you this answer is a labour, but you certainly earned it  LOL

I'm not sure this is exactly what you guys are talking about (since i just glanced through)but one of the interesting things I learned in econ class was aggregate income = aggregate expenditure
http://en.m.wikipedia.org/wiki/Aggregate_expenditure

It took me some time to wrap my head around when I first learned it

I think dimes and quarters are pretty easy to handle and sufficiently small for everyday transactions.

For the average person, perhaps. But what about folks with poor hand/eye coordination or arthritis? And then there's the whole problem of how to carry them. Sure, you can toss a few in the wallet with your paper, but if you don't hold the wallet upright they can fall out - you never hear of people finding dollar bills in couches, but finding coins is a common theme.

People hate coins so much that there's entire industries built on it. March of Dimes and other charities can collect a lot of donations in retail settings because people would rather give a dime away then have to deal with change.

That is the misconception I was talking about, it is the other way round

It is true that "my valuable efforts are all that is needed to back the value of the Medium of Labour Exchange token", but that is when I issue that token, not receive the token

Can you see the difference? When I issue money, I own both money and my product. When I receive money, I own money but lose my product

A money issued by me should be no different than the money issued by any other workers, they all backed by valueable efforts, just like gold always value the same no matter who mined it

But if I receive a government issued money which is backed by nothing, then it becomes a "find the next fool" game, I hope the next guy that I pay using this money will believe that paper holds value (indeed most of them believe). So the exchange value of fiat money is purely backed by belief and consensus

Under a gold standard, this belief have some fundamental support: you can always exchange gold with paper money at central bank. But now, if people lose the belief of it, it worth nothing. So wise people try to spend it as fast as they can, they even take a loan to keep the cash balance negative

People hate coins because they have so little value and not because of their form. Who would prefer paper pennies, nickels, dimes, and quarters over coins?

Well that has developed into a "GDP/NX dynamics theory" of BOTH the classical and monetarist schools of thought that leads to an entirely different misinterpretation than what it rather clumsily attempts to point out. The problem comes from mis-stating it's deeply flawed temporal and qualitative false assumptions. It would do better to scientifically restate their flawed notions in this way:

aggregate past/potential incomes =< (tend to limit or "kinda must be sorta" less than or equal to) aggregate past/potential expenditures

On the surface you may rationalize such a weak premise to be somewhat generally true, but in fact even stated in this far more refined manner it is still not only a temporally false assumption, it totally ignores the entirely separate commodity-resource class of savings wealths.

A non-income or a non-expenditure that is drawn from or placed into reserve or pool of savings-wealth presents a huge surplus or defect that falls entirely outside of it's temporally myopic suppositions. Ergo any "snapshot" of "aggregation" is merely a "fly by survey" of only what newly or recently appears to be blowing around on the surface, ignoring all that is in the vaults.


This arises from both theories (ironically Smith and Keynes) hypothetical avoidance of not only the distinction between a wealth and a money, it also reflects their failure to distinguish a Labour from a Saving or an Investment. Keynes at least tried to distinguish an (only public) Investment from the three.

Leaning on the supply or the demand side of the income or expenditure aggregation potentials is based entirely on the false assumption of the "limits" supposedly imposed by not properly differentiating savings-wealths, investment-wealths and (labour-exchange)money-wealths. That confusion arose from bankers alone falsely claiming to have a "monopoly on the current savings component" of the "aggregate's" data.

People save Labour Exchange Tokens in mattresses and cookie jars as well as in fine art, antiques, collectables, emeralds, fast cars, big boats, fried chicken recipes and even gold. Not just in bigger taxed palaces or bank accounts.

As a "money" is a Labour Exchange Medium because labours are the Prime Resource it's exchange-valuation represents, that aggregate valuation must be "elastic" to a market driven supply/demand price.

As a "rare commodity resource" is a Savings Medium because it's rare components are ever-rarer diminishing supplies with regard to the ever expanding demands of the Prime Resources, it's aggregate's valuations are always certain to increase.

As a "general commodity resource" is a speculative Investment Medium because it's supplies and demands are valued by other supplies and demands it's past present nor future aggregate values are never certain nor stable.  

( aggregate potential incomes &&|| (and/or) aggregate potential expenditures ) <= (tend to limit or are always less than or equal to) aggregate real wealths

Since nobody really knows or can honestly guesstimate the "aggregate sums" of all "real" reserved, illiquid, liquid or borrowed/borrowable wealths there is essentially no "hard" limit to either of the other two "contained potential aggregates".

It all depends upon the applications and ingenuities of the flourishing (or atrophying) of the Prime Resources, which means "are you empowering or enslaving people?".

Sorry, too long-winded so I didn't read it all, can you subtract out the fluff and tell me how when I buy an apple with x monetary units, the x monetary units doesn't enter the income line on the seller's accounting ledger?

This one is not theory, it is just accounting.

Here is another link that states this accounting rule.
http://wiki.answers.com/Q/Why_aggregate_income_is_equal_to_aggregate_expenditure

I don't dispute that labor (along with nature-given capitol) is the source of ALL PRODUCTION.  But this dose not mean that the sources of production need to ever be transacted at all.  As I said in my example if the good produced are traded but no one works for a wage then you have no labor market even though people LABOR as an action, they do not SELL LABOR.  Your entire response missed the point in trying to argue a something I am not disagreeing with and which is irreverent to my criticism.  The proper defining quality of money is that it is a universal extinguisher of debt, IF a labor market exists then by the universal provision it is used their, but labor markets are not necessary for money to exist.

Exactly; coins' values is not worth their overhead (storage, safekeeping, protection from theft and loss, etc).  A penny isn't worth picking up because it's relative value in society. A dime just barely so.  But if your dime is worth $2.00, it becomes much more valuable and worth the trouble.

Likewise, money can exist without debt.

But I agree with you. Money is a poor representative of labor because it represents the result of the labor and not the labor itself.

Money represents the result of labor in a determined lapse of time which equals purchasing power.

We're not very far from this http://en.wikipedia.org/wiki/Power_(physics) (http://en.wikipedia.org/wiki/Power_(physics))

It would take 1 minute to dig a hole with a backhoe that would take an hour to dig with a shovel. The amount of labor is different but the result is the same. Furthermore, the value of the hole does not depend on how much labor it took to dig it.

Don't make it more complicated  :D

We can agree that backhoe driver has a different salary when compared with the shovel guy, he uses a more advanced tool hence is more efficient doing the same work in less time = greater pay. This is valid when comparing CPU, GPU and ASIC in bitcoin mining too.

So much bullshit in one thread!

First: Growth was and is and will be never infinite! It was never, it is not and it won't never! But some people try to look like that growth is infinite.

The only reason Gold/Silver and so on (rare metals) are not a good idea atm are those stupid Speculators, who try to manipulate prices by hoarding! We don't have 3,4,5 or 6 people, we have whole stupid goverments with tons of gold/rare metalls manipulating the price! I mean 80/90% of gold hoarders are not private consumers lol!
Hoarding is an enemy of an economic system!
NO system with hoarding does function properly (tell me one) and this is why any kind of investment fails and will fail! Gold WAS stable but after allowing any kind of usury, speculation even gold/silver were attacked so they got unstable.

ANYONE remeber the tragedy with the silver speculation and about the story about a bank who manipulated it that hard? It was ONLY silver, but this is proof enough for any inteligent guy to see that nothing is stable as long as manipulation from usury, speculation, daytrading, short sell is possible!
The only kind of investment is investment for your life and not for your economy! [House, Energy ressource(earth,water,solarenergie), etc.]
Therefore people would not use money or any kind of currency to hoard, but instead any other ressource which does not break/stop/nerv the economic system! The money must flow, like a river , and hoarding or some kind of stupid bank stops the flow and this creates a cause for a currency beeing unstable!
Money was NOT made to be hoarded but to be used for changing! For trade, so goods can be assigned to another identity! With hoarding you break all the good rules of an economic system ,thats it!

Money was made to represent value.  What I do with that value that I accumulate is my business.  If an economic system cannot withstand people accumulating value to spend during a time of need or to pass to another generation then it is a bad economic system IMHO.

One side argues that spending makes the world go around, until we leverage ourselves so far that we have to contract.  The other side argues for austerity to the point where people are starving so governments can pay back pension loans.  I say you are all throwing shit at a wall and expecting it to stick.

You can't force people to NOT hoard, there is a demand for saving due to safety concern. Of course, people will be less likely to hoard a currency that is losing value constantly, that is the design principle behind today's inflative fiat money system

But, did fiat money really solve the hoarding problem? No, after financial crisis, people all started to hoard money so that even FED printed 4x more money, they all get hoarded, even with 0 interest

So, to have a stable economy, you must first fullfil the demand for hoarding, if everyone had enough saving, the spending will be much more stable

Who says that you can't? ;)

There was a really nice experiment in austria about money which looses its worth quickly the longer you hoard! The experiment was called miracle of wörgl or the wörgl experiment!
What was the result? Unemployment began to sink drastically! The country got rhich! Not the government, nor the banks, but PEOPLE got HAPPY!

But this experiment has been stopped from a bank! HAHAHA! :D
What a miracle, guess why!

So my point is, if you can generate a system with a currency which loses its worth the longer you have it, people will automaticly use the money instead of hoarding and DAMAGING the economic system ;)
The qualityloss system is NOT touched by any human manipulation! It must be a natural phenomenom! NOR the worth does not sink ABOSOLUTELY, its only on the behavior of the hoarder himself, by using money the money gets its usual worth!

Interesting, I read some articles about wörgl experiment, it seems that was exactly what FED is doing right now, provide inflative money to stimulate spending, but the result is totally different

There could be many reasons, but I think the biggest difference is: At the beginning of the wörgl experiment, the mayor had 40,000 schilling to start with (he only need to prevent these money to be hoarded by people after he spend them), but now government have nothing to start with, even worse, they have to cut spending ;)

Where was that 40,000 schilling came from? Through saving

The Worgl experiment never lasted long enough to be a good test case. Just like when the Fed inflates the currency there is often a temporary boost to the economy, it actually does long term harm to the system; and the same probably would have been true in the Worgl case if it had run long enough.

Let people freely decide what they want to use, and let the market sort it out. That's the only fair way, and the only logical way. Go ahead and try using stuff like freicoin if you want, but I am going to stay as far away from that as I can because I personally want my money to work for me, not for someone's twisted idea of "the good of society".

At a small town scale, it might work very well, people will spend all their earned depreciating money quickly, thus create lots of spending. But in a larger economy, people will have the possibility to save in other form, this will push up the price of potential saving medium like gold/silver/bitcoin while the real effect of stimulate spending becomes less, especially when living condition is already at a decent level

Coins aren't such a fine idea...

I'm not sure about how well now days the absolute silver and other metal contents could be detected, reliably on the site by anyone. In past currency debasement was rather common I have understood. And it's rather hard to track various circulating currencies in such case and there will be many.

I used to believe in gold until i learned that its price is controlled by 5 UK gold brokers (banks), a couple of which are responsible for things like LIBOR.

https://en.wikipedia.org/wiki/Gold_fixing

Yes, debasement was common historically, but it's difficult to mint coins as an individual and small denominations (in silver) aren't usually worth the trouble.  The bigger problem was shaving; where someone would shave little bits off of every coin and save that.  This was mitigated by having reeded edges, so you could see if they'd been shaved.

You can hear the sound of a silver coin vs a coin in other metal if you listen for it.  

Very reliably with precision scales and a test kit.

Look, don't lose your faith.  After all, what would you believe in?  Gold is good, and it's shiny and heavy and women love it.  What's not to like about gold?  As for the price, it can only go up.  You have only had a fleeting moment of doubt.  We all do, but those moments are moments of weakness.  Now what will you do, embrace, and fall into weakness, and fail, or stand up strong, and believe?

Trust me.   I'm here to help you.  Now go ahead and give me all that cold hard cash in your wallet.  Here are your yellow coins.

And remember - believe!

There wouldn't be a fee to exchange gold if it was a country's main currency, because you would be trading directly for gold. That's like an American saying the USD is better than the EUR solely because he has to pay an exchange fee each time he spends it.

Dollars are more convenient than gold for other reasons: Less bulky, you don't have to exchange them before you spend them, everyone is paid in them and you are legally obligated to accept them as payment for debt. In order to have the same benefits (besides the last one) gold needs to be commonly accepted and available in certificate form, in other words, the way the Dollar used to be when it was backed by gold.

If everyone can generate their own dollar like dig out gold, then it is true, otherwise there is a question why only a few selected person can do that

For example, in an election one party promise to not print more money and another party promise to print 4x more money, then you have a choice. Bitcoin is such kind of choice, and it is not backed by any political organization

I'm not saying I like the Dollar, I'm just saying that it is more popular than gold not because it's a better currency, but because of what we're allowed to do with it.

Imagine you have a system similar to that omnipresent dollar, and it has the properties of a good currency at the same time. How would you value that system?

Dollar, gold , bitcoin you name it is only a system that passes on information, and rather important one, that goes about real work value in certain amount of time. Mess up with it and you control how people act or live their lives. Btw, I don't see how anyone can impede you do things with any good tool, like a hammer for example which it can build or kill for it's owner, so why money should be different? I don't subscribe to "we're allowed to do things with it".

Exactly, at a higher abstraction level it does not matter what kind of physical or digital form it takes, it's all about the properties of the system. I think a good system should be able to present some kind of general fairness, gold is much better in this regards, at least anyone can dig out gold without become the central bank, and the labour inputed in creating money is equal to the worth of money itself

A 1 hour shovel sized hole will cost far less to be dug by the man with the shovel than by the man with backhoe. The man with the backhoe has equipment overhead that must be paid for. Which digging implement is better suited is based on scale and circumstances. For instance, the man with the shovel can dig that same hole in your basement without destroying any structure. On the other hand the man with the backhoe can dig a 4,000 sqft foundation in the time it takes the man with the shovel to dig out a septic tank.

So, no, the results are not necessarily the same and your original supposition was off by a significant margin with regards to cost vs scale.

First, my argument is crystal clear. The value of something does not depend on the amount of labor it takes to produce it. The value of a hole does not depend on how it was dug. You are trying to muddy this with irrelevant scenarios.

Second, the costs of the backhoe and the shovel are not labor. They are capital.

It takes astronomically more labor to produce a backhoe over a shovel. Your argument tries to abstract the fact that great deal of manhours actually were involved in reducing the amount of time it took for the man with the backhoe to dig that hole. You abstract it by removing from the equation and calling it "capital" as if it doesn't contribute. Fact is a hole that can be dug in one hour with a shovel will always be far more expensive to dig with a backhoe and it is not economically feasible, ever, to do so.

What you call irrelevant I call factoring in reality instead of ideal abstractions with no basis in reality.

You can trade your labor for capital, and capital for labor, so the transitive property loosely applies.

+1

I'll go and let the golden friend Ron Paul read this thread.

+1

The value of the hole is what you'll make out of it. More labor cost cannot be an exuse for claiming it has more value in dollar, or gold, or silver, or bitcoins, or alt coins etc.

BitBar solves all the problems :D
An cryptocurrency bar with a higher value than bitcoin in theory.

visit bitbar.info for more information

Wow. This is pretty much the worst. This should have a negative value. You should pay me to hold "BitBars".