Essential Economics for Politicians

espola said:
If a big economic collapse occurs, what would you do with a closet full of gold coins or bullion? You can't eat it, you can't wear it, you can't burn it for heat or to move a car or generate electricity... Anyone who would accept it in trade for useful items would be relying entirely on its symbolic value.
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How much do you want for your gold? I'll give you a paper dollar to snack on.
 
Bruddah IZ said:
Fiat money gives the Fed the ability to manipulate the supply of money through either the purchase or sale of Treasury bonds. The Fed purchasing bonds from our Treasury increases the money supply and the opposite is true with the sale of Treasury bonds. Fractional Reserve banking is what happens within the actual commercial banks that you and I use. Chapter 16 contained some simplified balance sheets that may help. Fundamentally, boom and bust is caused by an increase in the money supply. An example of commodity money is what you see in post #7 (silver certificate commodity) as opposed to post #6 (fiat) on page 1 of this thread. Commodity money does not magically prevent fractional reserve banking or financial crisis. Commodity money is the check on fractional reserve banking that mitigates or reduces the effects of a financial crisis. How would you know if fractional reserve banking was happening with Silver Certificates that all look the same? And how would you respond to that knowledge?
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For it to be true, the Feds would have to increase the money supply by a substantial amount, wouldn't it?
 
espola said:
If a big economic collapse occurs, what would you do with a closet full of gold coins or bullion? You can't eat it, you can't wear it, you can't burn it for heat or to move a car or generate electricity... Anyone who would accept it in trade for useful items would be relying entirely on its symbolic value.
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That just shows that the "intrinsic value" of commodity money is not so "intrinsic" after all. Value comes from demand and faith.
 
Laced said:
That just shows that the "intrinsic value" of commodity money is not so "intrinsic" after all. Value comes from demand and faith.
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You are confusing fiat money which has intrinsic value that relies on supply and faith/ignorance with commodity money that you can trade for silver with a certificate like the one you see in post #7.
 
...the paper currency in your purse or wallet is a liability of the Federal Reserve, legally speaking. After all, these green pieces of paper have "Federal Reserve Note" written on them. This is an accounting fiction, of course, a throwback to the days when the notes were simply claims to actual gold or silver. It's hardly a liability to have billions of dollars in "claims" against the Federal Reserve floating around, when they are claims to nothing. (If you tried to present a $20 bill for redemption at a Federal Reserve Office, you would be able to get two $10 dollar bills, or four $5 dollar bills, but certainly no other type of asset.)--HPBRW
 
Just as a free press is necessary for a free citizenry, so too is sound money necessary for a free economy. All other aspects of what is meant by the term "economic freedom" in conventional circles--low tax rates, mild regulation, no trade barriers -- are a moot point if the government has a printing press at its disposal.

That is why education is the first and most important step--people need to understand the importance of sound money, and the dangers of fiat money and central banking
 
Bruddah IZ said:
Just as a free press is necessary for a free citizenry, so too is sound money necessary for a free economy. All other aspects of what is meant by the term "economic freedom" in conventional circles--low tax rates, mild regulation, no trade barriers -- are a moot point if the government has a printing press at its disposal.

That is why education is the first and most important step--people need to understand the importance of sound money, and the dangers of fiat money and central banking
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I like that you started to state your position in your own words.

Shall we start a discussion about the latter, i.e., economic freedom and government's role?
 
Bruddah IZ said:
...the paper currency in your purse or wallet is a liability of the Federal Reserve, legally speaking. After all, these green pieces of paper have "Federal Reserve Note" written on them. This is an accounting fiction, of course, a throwback to the days when the notes were simply claims to actual gold or silver. It's hardly a liability to have billions of dollars in "claims" against the Federal Reserve floating around, when they are claims to nothing. (If you tried to present a $20 bill for redemption at a Federal Reserve Office, you would be able to get two $10 dollar bills, or four $5 dollar bills, but certainly no other type of asset.)--HPBRW
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You could ask for coins.
 
I'm just curious if you have a full understanding of currencies and complex banking. We know your opinion on fiat money and fractional reserve banking, can you show us both the advatages and disadvantages?
 
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