Ex-Fed Chairman Paul Volcker Criticizes Federal Reserve

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"Altogether the 81-year old Volcker can hardly see anything good in the development of the financial system in the last 25 years. The current crisis is only the peak of a development marked by grave crises every five years for 25 years..

Like New York 30 years ago, the whole country has now lived far above its means and is addicted to consuming more than can be produced. The result is the disappearance of private savings, rapidly increasing imports and an enormous trade deficit..

At the end no financial juggling could maintain the intolerable for ever, Volcker concludes. The painful and necessary reorientation must now be forced on the economy."

to read Rainer Sommer's article on Paul Volcker and Moritz Koch's article on Elizabeth Warren, click on

http://dc.indymedia.org/newswire/display/150069/index.php

demandside's picture
demandside
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Don't think that the crises are due to the Fed, they're due to conservative economic theory centered on laissez-faire capitalism. The Fed was created to help avoid crises, but it's policies appear to be to sustain an economic system partial to the desires of the very wealthy rather than the average worker. If you want to see who's at fault for the crises, look at the wealthy who make their money via the financial industry and their politicians, especially the Republicans.

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jeffbiss
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Quote jeffbiss:

Don't think that the crises are due to the Fed, they're due to conservative economic theory centered on laissez-faire capitalism. The Fed was created to help avoid crises, but it's policies appear to be to sustain an economic system partial to the desires of the very wealthy rather than the average worker. If you want to see who's at fault for the crises, look at the wealthy who make their money via the financial industry and their politicians, especially the Republicans.

Respectfully Jeffbliss, the Fed was created to ensure the continued wealth and power of the banking system over the people. The Fed was created in 1913 and instigated the Stock Market crash of 1929 and collected assets for pennies on the dollar. The Fed was modeled after the Bank of England and both are run by private bankers and have exclusive sanction to print and issue money and introduce it into our economy as debt to be repaid with interest. We need public ownership of our printing and distribution of money and money needs to be introduced into circulation as spending on infrastructure, teaching, sciences, technology green and otherwise. We need money working for us not money dumped into military that is primarily used to the benefit of the big oil tycoons and other industrialists who need other governments softened up so that they can do business.

The rest of your statement is valid and I support it.

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Choco
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Jul. 31, 2007 4:01 pm
Respectfully Jeffbliss, the Fed was created to ensure the continued wealth and power of the banking system over the people.

I've heard that, and tend to agree with it. However, one of the things that the Fed was created for and has seemed to do is to reduce fluctuations in the economy and to stabilize the banking system.

The Fed was created in 1913 and instigated the Stock Market crash of 1929 and collected assets for pennies on the dollar.

I'm going to read contrary histories of the Fed, "Secrets of the Temple", and "The Web of Debt", and so should be able to pick this kind of stuff up from them. However, from my readings, the crash was due primarily to a) those that controlled the market as they created the bubble by duping the uninformed masses into thinking that market rise was infinite and (b) margins too low to make any sense. Of course, the Fed may have been able to mop up, but I don't know.

The Fed was modeled after the Bank of England and both are run by private bankers and have exclusive sanction to print and issue money and introduce it into our economy as debt to be repaid with interest. We need public ownership of our printing and distribution of money and money needs to be introduced into circulation as spending on infrastructure, teaching, sciences, technology green and otherwise.

One of the problems with "public ownership" as I see it, the Fed is already ours. From my readings, the Fed is not controlled directly by Congress in an effort to keep its policies from being politically motivated, not that that doesn't happen anyway. The Federal Reserve Act covers the rules and regulations for the Fed and if changes are needed then Congress can enact them. I don't see that as happening because the Republicans to a member are absolutely beholden to wealthy interests and enough of the Democrats must be too that nothing wil change any time soon. The Fed is publically owned, but under control of wealthy interests.

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jeffbiss
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jeffbiss: I don't see that as happening because the Republicans to a member are absolutely beholden to wealthy interests and enough of the Democrats must be too that nothing wil change any time soon. The Fed is publically owned, but under control of wealthy interests. - the most ardent supporter of ending the Fed is Ron Paul, read his book aptly entitled "End the Fed". Bernie Sanders the very progressive Senator that is on Thom's show every Friday, turned Benedict Arnold at the last minute and killed the only hope we had at merely auditing the Fed.

http://www.ronpaul.com/legislation/audit-the-federal-reserve-hr-1207/

If you want to read a book on how insidious the Fed is then read the Creature from Jekyll Island.

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tmoney13
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However, one of the things that the Fed was created for and has seemed to do is to reduce fluctuations in the economy and to stabilize the banking system. - how do you explain this in light of the last 10 years? Do you watch currency or gold prices? Why is gold busting through 1300/oz when it was less than 300 a decade ago? Why is it that the first time I got Euros in 2001 I could get about 1.2 Euro for every dollar but today 1 Euro gets 1.35 dollars? Does that seem stable to you?

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tmoney13
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May. 1, 2010 2:20 pm
how do you explain this in light of the last 10 years?

Deregulation of the financial industry.

Do you watch currency or gold prices? Why is gold busting through 1300/oz when it was less than 300 a decade ago? Why is it that the first time I got Euros in 2001 I could get about 1.2 Euro for every dollar but today 1 Euro gets 1.35 dollars? Does that seem stable to you?

You'd have to show what the Fed has to do with the precious metals market. As far as I can tell, the Fed has nothing to do with gold as the dollar is not tied to gold any more. As for foreign exchange rates, that seems more of a result of how the market sees currencies. As I'm not an expert in the Fed, you'll have to provide some details if you're being rhetorical here.

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jeffbiss
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Quote tmoney13:

However, one of the things that the Fed was created for and has seemed to do is to reduce fluctuations in the economy and to stabilize the banking system. - how do you explain this in light of the last 10 years? Do you watch currency or gold prices? Why is gold busting through 1300/oz when it was less than 300 a decade ago? Why is it that the first time I got Euros in 2001 I could get about 1.2 Euro for every dollar but today 1 Euro gets 1.35 dollars? Does that seem stable to you?

The Fed was established to prevent runs on banks. Banks loan money they don't have. When there is a run on the bank (withdrawls greater than their supply of money) the Fed comes to the rescue.

The Fed controls inflation/deflation somewhat. It raises interest on money it throws at the banks to slow the rate of new loans. To slow the increase in the money supply. To slow inflation.

The Fed decreases interest it charges banks to encourage more lending and heat up the economy with the creation of more money. When there are no borrowers, however, even zero interest can't heat up an economy.

For every $1,000 banks borrow from the Fed, they can issue $9,000 in new loans.

The money system itself and all money creation is controlled by the private banking system. Money for every loan is created out of thin air with fractional reserve banking. The banks merely make an a accounting entry to the borrowers account...bringing "new money" into existence and charging interest for the privilege. They don't loan existing money.

Problem is, the new money covers only the principle...not the interest. There is a shortfall in the money supply. Enough money is created to pay back the principle...and not enough created to pay back the interest. When new debt creation (new loans) aren't continually made, and a continual injection of new money made into the money supply, the system collapses upon itself as now.

Injections of new money (new loans) have to occur more rapidly than the interest extractions. A ponzi scheme, of sorts. New money faster than the payouts.

Money supplies can't remain static. The money supply of the U.S. in 1776 wouldn't be adequate to provide for the daily transactions in today's economy. Gold, as in Spain's experience, isn't the solution to prevent inflation and can be utilized as a hedge against it in a world where money is de-coupled from it. Ditto platinum, etc.

Unless national/ global monetary systems are understood, discussions about them are pretty useless.

How the system developed, how it functions, the consequences, the solutions to the consequences..

http://www.youtube.com/watch?v=vVkFb26u9g8

Retired Monk - "Ideology is a disease"

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polycarp2
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Jul. 31, 2007 4:01 pm

Money supplies can't remain static. The money supply of the U.S. in 1776 wouldn't be adequate to provide for the daily transactions in today's economy. Gold, as in Spain's experience, isn't the solution to prevent inflation and can be utilized as a hedge against it in a world where money is de-coupled from it. Ditto platinum, etc. - I agree that gold/silver/platinum can currently be used as a hedge, however everything else in this quote is not accurate, This is covered in the final chapters of the Creature from Jekyll Island....the idea that money must somehow expand is completely fallacious. Instead of money expanding to meet the economy, the price of items in the economy would go down relative to "money", and what you have would have more purchasing power. It does not matter what the supply of money is, only that there are items that people recongnize as being a medium of exchange. History should be your guide here. I have a box full of funny money from goneby nations some is "worth" 50,000 whatever they are, I don't however have a box of worthless gold Bezants or even silver Mercury dimes. If legal tender laws were repealed you would find out in a hurry what your "money" is "worth"...nothing. I tell you what I will trade you my box of highly denominated funny money for any gold or silver that you might have, deal? In regards to Spain's experience, unless we find another lost continent filled with gold mined by indigenous people that we can rob and rape, I don't expect us to repeat Spain's gold inflation experience anytime soon.

If you want a quick education vs. reading Creature from Jekyll Island, I suggest you read some of the articles on Kitco.com, granted some are written with heavy interest in selling gold so wade through it accordingly, but others are good critiques of the abject failure of fiat money.

polycarp2: Unless national/ global monetary systems are understood, discussions about them are pretty useless. - agreed, and it is obvious that you don't know what you are talking about. You and I have had a similar discussions before.

jeffbiss: Deregulation of the financial industry. - How do you explain the bailouts of the 70 and 80s and the S&L failures prior to deregulation then? Sorry, but your regurgitated Thom Hartmann talking point does not hold water. How do expain that the dollar has dropped approx. 90% in purchasing value since the creation of the Fed?

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tmoney13
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jeffbiss: You'd have to show what the Fed has to do with the precious metals market. As far as I can tell, the Fed has nothing to do with gold as the dollar is not tied to gold any more. As for foreign exchange rates, that seems more of a result of how the market sees currencies. As I'm not an expert in the Fed, you'll have to provide some details if you're being rhetorical here. - You are right that the dollar is no longer linked to gold, this is what allows the Fed to print unlimited amounts of notes thus devaluing the existing notes. This hurts the lower classes of people the most. Pensions, fixed income, those on disability or social security etc, find themselves getting a monthly check that increasingly buys less and less. This is the ultimate in taxation, and robs the least among us. I have said before that you won't care what tax rates are when you have to wheelbarrow your money to the store to get a loaf of bread, and trust me we could get there. If the dollar were tied to gold/silver/platinum it would restrain the Fed from how much "money" they could create, thus saving the least amongst us the burden of taxation through inflation. Even people who pay no taxes, still pay the price of inflation. The Fed is completely uneeded, and this is our 4th attempt at at a central bank. You should read about Andrew Jackson and his fight with Biddle over the Bank of the United States. It is Jackson by the way that gets credit for founding the Democratic Party that we know today.

Right now there is mass intervention in the currency markets by some nations to devalue their currency to keep jobs and increase exports, such as the Bank of Japan. We are headed towards a currency race to the bottom as some are calling it, with each nation, trying to devalue their currency more than the other guy...this is why gold continues to rise. Bernanke is talking QE2 which means or currency will be devalued more if the market hasn't priced it in already which it appears to be doing, hence the rise in Aussie and Canadian dollars. All fiat money and central banking is a combo of shell game and ponzi shceme.

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tmoney13
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Tmoney wrote: "'Instead of money expanding to meet the economy, the price of items in the economy would go down relative to "money", and what you have would have more purchasing power

poly replies: It's called deflation. The twin of Depressions. As purchasing power of the dollar goes up, the relative value of everything else goes down including your house and wages. Don't buy anything today, it will be cheaper tomorrow becomes the order of the day..

The ideal is to create a stable store of value, not one that changes value.

Tmoney wrote: If the dollar were tied to gold/silver/platinum it would restrain the Fed from how much "money" they could create.

poly replies: We;ve been there, done that. We pulled off of the gold standard when foreigners began exchanging dollars for the gold that backed it...draining our gold reserves. Ultimately, we'd have had no gold. No gold, no money. The price of gold fluctuates depending on production/demand opening the way to currency plays and the draining of gold from one nation to another. A gold standard doesn't address interest/finance extractions that make for a diminishing supply of money or gold in the real economy.

Tmoney wrote: Right now there is mass intervention in the currency markets by some nations to devalue their currency to keep jobs and increase exports.

poly replies:And George Soros single handedly brought the Bank of England to its knees with a currency play, driving the Pound down.

Ultimately, currency values are based on goods. If a country produces something others want, they buy the currency to buy the product. It bids the price of the currency up.

If a nation produces little that anyone wants, their currency is dumped in favor of one producing what they want. It drives the currency down. Oil is priced in dollars. If that changes, the dollar will hit bottom. Note Saddam said he would no longer sell oil for dollars and was quickly deposed.

Gold continues to rise because of the glut of dollars internationally. Using the excess to buy gold is helping to keep the U.S. dollar worth more on international markets. It's absorbing them, otherwise the dollar would go into free fall. Three things other nations can use their trade deficit dollars for: U.S. debt, oil, or gold. The goods we produce won't absorb trade dollars. It seems there is a greater world-wide demand for clothing rather than missiles.

If China, Japan, etc. demanded gold because of a convertability rather then plowing their trade surplus dollars into Treasuries, then overtime, they'd have all of our gold and we'd have no currency at all. Without convertability, there is no backing of the paper currency.

Probably using ideas originating in a nonsensical system to explain a nonsensical system isn't the best way to go. Saying red should really be blue when it's actually yellow is sort of what you're doing.

I'd suggest clicking on the clink and understanding how things actually function. It's probably preferable to a complete collapse.

http://www.youtube.com/watch?v=vVkFb26u9g8

Retired Monk - "Ideology is a disease"

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polycarp2
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Jul. 31, 2007 4:01 pm

Poly, I hope this helps!

Tmoney wrote: "'Instead of money expanding to meet the economy, the price of items in the economy would go down relative to "money", and what you have would have more purchasing power

poly replies: It's called deflation. The twin of Depressions. As purchasing power of the dollar goes up, the relative value of everything else goes down including your house. Don't buy anything today, it will be cheaper tomorrow becomes the order of the day.. – it is only as such, in the reality with which we are forced to live in, i.e. central banking and fiat money. Deflation is the nightmare scenario for central bankers, because they rely on an ever expanding amount of credit to keep their ponzi scheme going. If money was based on something that could not be expanded by merely running a printing press, then there would be no fear of deflation.

Tmoney wrote: If the dollar were tied to gold/silver/platinum it would restrain the Fed from how much "money" they could create.

poly replies: We;ve been there, done that. We pulled off of the gold standard when foreigners began exchange dollars for the gold that backed it...draining our gold reserves. Ultimately, we'd have had no gold. No gold, no money. The price of gold fluctuates depending on production/demand opening the way to currency plays and the draining of gold from one nation to another. It doesn't address interest/finance extractions that make for a diminishing supply of money or gold in the real economy. – well you are right about the US getting off the gold standard, but that is where you correctness ends. We got off the gold standard because we tried keeping the dollar pegged to gold at $35/oz (I believe) when foreigners realized that we were printing more money then we had gold to back it, they made the financially sound decision to exchange dollars for gold. Gold has had value for thousands of years, dollars however have lost 93% of their value since the inception of the Fed, huh, go figure?!

poly replies:And George Soros single handedly brought the Bank of England to its knees with a currency play, driving the Pound down. – I am aware, you have mentioned this many times, but what you seem to disregard is that the Bank of England was trying to prop it up, first. It was a game of financial chicken and Soros won. Soros called the bluff of the central bankers and won, I consider this a good thing.

Ultimately, currency values are based on goods. If a country produces something others want, they buy the currency to buy the product. It bids the price of the currency up. – not true. If it were free market money that might be pretty accurate, but when the Fed controls the supply of money, then your assertion is no longer true. In our current state your assertion is incorrect, because of the existence of the Fed. If goods were the only measure you would be able to correlate every currency in lock step with the countries GDP, this is simply not the case. Think of it this way, if the GDP of two trading partners, say the US and Canada were constant, but the US Fed decided to dump trillions of dollars into the system what would happened to that currency pair? Would it stay the same? This is why currency traders will take out million dollar loans in Yen where the interest rate is practically 0, convert it to say AUD (or something else) where the interest is higher and take the difference. I believe this is called the carry trade. If goods produced were the only correlation, then this mechanism simply would not exist.

Polycarp2 :Gold continues to rise because of the glut of dollars internationally. Using the excess to buy gold is helping to keep the U.S. dollar worth more on international markets. It's absorbing them, otherwise the dollar would go into free fall. Three things other nations can use their trade deficit dollars for: U.S. debt, oil, or gold.- So did you ask yourself the obvious question? Why is there a glut of US dollars to begin with? And given the 400% increase in the price of gold since 2000 what do you think those foreigners are doing with their glut of dollars? Buying something that can’t be faked so easily, hmmmm?

Probably using ideas steming from a nonsensical system to explain a nonsensical system isnt the best way to go. Saying red should really be blue when its actually yellow is sort of what you're doing. – Probably rattling off inane statements in defense of inane systems isn’t a way to go either. Again, let history be your guide. What is the Italian lira worth these day? Would you like my old Hungarian 5000 forint note? I will trade it to you for an oz of silver. How many billion Zimbabwean dollars do you get for a US dollar? Did you know that there is more melt value in a nickel than 5 cents? Did you know that the melt value of the Russian Kopek is 45 times the value of the coin itself? Does this seem reasonable? Obviously our financial masters must be smarter than us, because they continue to lose money to create “money”, I mean that makes sense…..doesn’t it?

Polycarp2: I'd suggest clicking on the clink and understanding how things actually function. It's probably preferable to collapse. – I will as soon as you read the Creature from Jekyll Island.

Polycarp2: Injections of new money (new loans) have to occur more rapidly than the interest extractions. A ponzi scheme, of sorts. New money faster than the payouts..- It is clear that you get the basic premise of central banking and you realize that it is a ponzi scheme, so I don’t understand you objection to having a monetary system that can not be gamed. Don’t worry Poly we aren’t going to a gold standard or free market money; that would be admitting defeat for the central bankers and their political cronies. I mean if you can’t even get an audit of the Fed what are the chances that we could ever get rid of it? What the government will do once a continued devaluing of the dollar becomes pointless, and foreigners will no longer accept our debt is to do what FDR did, confiscate gold from the populace. Because hey nothing helps the bankers and protects the sheeple from the “greed of individuals” like stealing from those who were prudent enough to see the game for what it really is; a low grade ponzi scheme sham.

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tmoney13
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All you have to do is have money supply equal the production of goods/services.That has to begin with where you are, not with where you've been. Whether you use cocoa beans (Maya) or carved stones (N. Carolinas) or engraved paper is irrelevant.

Gold standards, as previously shown and experimented with don't work. They don't stem the invariable collapses that occur within our monetry system. They don't stem the flow of interest and financial extractions from the real economy. They don't stem the flow of gold from one country to another. We were on the verge of losing all of our gold and had no choice but to go off of the standard...or cease using paper money (no gold backing) ...and have no gold to use either!.

The glut of dollars in international markets are credit dollars. Trade imbalances. If the dollar wasn't a reserve currency, they'd be useless. We'd have to pay for our imports with exports just as any other nation does. Walmart would become the new Neiman Marcus.

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Note the U.S. along with most industrialized countries was on the gold standard when the Global Great Depression hit. It's irrelevant to a functioning monetary/financial system. The system is designed to require inflation, or it collapses. It requires a continual expansion of credit, or it collapses.

I have read your book. It explains nonsense with more nonsense pretty well.

A monetary system that functioned would make nonsensical explanations irrelevant. Within the nonsense, they appear to make sense. Outside of the nonsense, they don't.

There will be no economic recovery without huge consumer/business debt creation (credit expansion) and the inflation that comes with it. The monetary/financial structures require it. At this point, that can't happen. We are at the beginning of an economic collapse.

http://www.youtube.com/watch?v=vVkFb26u9g8

Retired Monk - "Ideology is a disease"

polycarp2
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Jul. 31, 2007 4:01 pm

Polycarp2: All you have to do is have money supply equal the production of goods/services.That has to begin with where you are, not with where you've been. Whether you use cocoa beans (Maya) or carved stones (N. Carolinas) or engraved paper is irrelevant. – So why do we have legal tender laws that force us to use Federal Reserve Notes then? If it is irrelevant then we should be able to have free market exchange in whatever currency we deem acceptable, right?

Gold standards, as previously shown and experimented with don't work. – They don’t work when they are arranged with in a central banking structure that issues funny money as receipts for gold that may or may not exist…. I agree. The argument you are making is essentially that the dollar which was “linked” to gold didn’t work. So was it gold, or the made up dollar that was at fault? What does history say? They don't stem the invariable collapses that occur within our monetry system. – key words, within our monetary system, i.e. fiat money, and fractional reserve banking. They don't stem the flow of interest and financial extractions from the real economy. They don't stem the flow of gold from one country to another. We were on the verge of losing all of our gold and had no choice but to go off of the standard...or cease using paper money (no gold backing) ...and have no gold to use either!. – Exactly! You seem to grasp the 90% of the problem here, but can’t make the final leap. Why were we losing our gold? Because foreigners knew the value of the dollar was artificial and preferred gold to the dollar hence they sent dollars back to us and we sent them gold. The foreigners were smart; we weren’t. Ask yourself the question why did the Byzantine Empire have 800 years of stable money? And compare that to why we have constant change in ours? If having no gold is an issue, as you alluded to, what does that tell you about the confidence of our currency at the time?

Polycarp2: Note the U.S. along with most industrialized countries was on the gold standard when the Global Great Depression hit. – We also had central banking, maybe it was their fault? It's irrelevant to a functioning monetary/financial system. The system is designed to require inflation, or it collapses. It requires a continual expansion of credit, or it collapses. – All ponzi schemes require inflation that is of course a fact. You talk of the system as if there are no options but people have done without central banking for thousands of years, to ignore that seems short sighted to me.

Polycarp2: I have read your book. It explains nonsense with more nonsense pretty well. – could you elaborate, or do we all just take the sage wisdom of the great Polycarp2 as gospel. What doesn’t make sense? What points do you disagree with? I would be more interested in what you have to say if you would point out what you consider nonsensical.

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tmoney13
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May. 1, 2010 2:20 pm

The whole system is nonsensical. That's why it's collapsing.

The only way a gold standard can function is if the increase in gold production increases at the same rate as goods/services. Neither more nor less..

The price of gold, like any commodity fluctuates. Tying a currency to a fluctuating commodity doesn't work. A spread of pennies can change the value of a currency before central banks can respond.

Soros made a bundle over pennies when he brought the Bank of England to its knees. Trillions of pennies add up. Those trillions of pennies over time will deplete any nation of its gold reserves.

Cocao beans were the "fiat currency" of the Maya. If you want gold as the "fiat currency', go for it....and the currency will fluctuate depending on the supply of gold. Every currency is "fiat'. At one time, England used notched sticks

Fiat currency does nothing more than facilitate barter. The exchange of one good for another.

The ideal is a currency that doesn't fluctuate,,,that is a stable store of value.

The nonsensical system in animated video:

http://www.youtube.com/watch?v=vVkFb26u9g8

Retired Monk - "Ideology is a disease".

polycarp2
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Jul. 31, 2007 4:01 pm

Poly, there are 4 types of money by definition. I think this is a good place to start because you seem to be mixing terms at times.

1. Commodity money – gold, cocoa beans, silver, wheat, etc.

2. Receipt money, - pieces of paper backed by commodities.

3. Fiat money – paper money decreed as legal tender, not backed by anything. Since the money has no intrinsic value, the government must use legal tender laws to force the citizenry to use it.

4. Fractional money –money created out of debt based on reserves. You can have fractional reserve banking based on fiat money or receipt money.

Polycarp2: The whole system is nonsensical. That's why it's collapsing. – What system are you referring to? I would agree that the current fiat money with fractional reserve banking is going to collapse at some point. It is a ponzi scheme. History and logic dictate that it has too.

Polycarp2: The only way a gold standard can function is if the increase in gold production increases at the same rate as goods/services. Neither more nor less..- Could you expound on this farther? I addressed this in an earlier post, but you just seemed to brush it aside.

Polycarp2: The price of gold, like any commodity fluctuates. Tying a currency to a fluctuating commodity doesn't work. A spread of pennies can change the value of a currency before central banks can respond. – I know for fact that it is far more likely that currency fluctuates and the price of gold is reflected as such. I have traded currencies using a mini account on Forex.com. You would be surprised how much currencies change, and they change the most based on government intervention. It’s hard for a government to intervene and create more gold, wouldn’t you agree?

Polycarp2: Soros made a bundle over pennies when he brought the Bank of England to its knees. Trillions of pennies add up. Those trillions of pennies over time will deplete any nation of its gold reserves. – I know, you keep repeating this, and I acknowledged it already, but this statement doesn’t prove anything…other than my point. The Bank of England was trying to prop up its currency; Soros knew this and drove it down. It was a battle of wills and Soros won, he called their bluff. If anything this statement is a REASON why we should not have fiat money as neither side would have been able to manipulate a currency to the extent that they did. Think about that for a minute, the entire British monetary system was the prize between the banking oligarchy/cartel of England and a hedge fund manager. Does that seem like a good thing?

Polycarp2: Cocao beans were the "fiat currency" of the Maya. If you want gold as the "fiat currency', go for it....and the currency will fluctuate depending on the supply of gold. Every currency is "fiat'. At one time, England used notched sticks

Polycarp2: Fiat currency does nothing more than facilitate barter. The exchange of one good for another. – You are confusing the definition of fiat money with a medium of exchange. People used metal coins (or cocoa beans) as a medium of exchange so they could eliminate the double coincidence of wants problem, but this is not the same as fiat money. If we woke up tomorrow and there were no governments (no more fiat money), people would still find a medium of exchange. Over history that medium has been gold, silver, and other metals coins. Commodities can not be by definition fiat money as fiat money has no intrinsic value. There has never been a day on earth where commodities had no intrinsic value.

Polycarp2: The nonsensical system in animated video: - I have seen this already, but I am curious to know what your take away from the video is in regards to fiat money and fractional reserve banking. Do you see them as a problem? And if so what is your solution?

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tmoney13
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May. 1, 2010 2:20 pm

The issue is what to do to a critically ill patient, not how to live a healthy life. That is why the "solutions" defy some principles like only spending what we have. Having to borrow to cure the disaster caused by wasteful spending may seem like just more debt, but the critical difference is what the debt is being used for. If your money spent will prevent much bigger bills down the line, or if you can buy something that will begin returning profits, the use of debt is true fiscal conservativism.

Failure to fix a leaking roof will cost you the whole house, so you borrow to fix it. Deciding not to use the car and walk instead means having a high asset investment lying around uselessly. Not paying more for gas than necessary could make walking a good idea, but some of our most expensive savings are where we fail to use the major investment already there. Running at 90% effective is a huge loss. Not only will the product or service be harmed, but the big historical investments will not be realized.

Financial technique can be employed effectively or used for corrupt purposes. Fractional reserve banking is not the problem. A national bank would be more true to the nature of the value symbolized in the currency than having the banks run their own Fed. This is so because the social vision is democratic rather than neo-feudal economic royalism. It has much less to do with the numbers per se.

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DRC
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Jul. 31, 2007 4:01 pm

DRC: The issue is what to do to a critically ill patient, not how to live a healthy life. That is why the "solutions" defy some principles like only spending what we have. Having to borrow to cure the disaster caused by wasteful spending may seem like just more debt, but the critical difference is what the debt is being used for. If your money spent will prevent much bigger bills down the line, or if you can buy something that will begin returning profits, the use of debt is true fiscal conservativism. – I agree that not all debt is bad, and borrowing some money to fix a problem that might save more money down the road is a good example of going into debt for the right reason, however, I am just not so sure that the financial masters of the universe really know what they are doing. After all they got us to this point.

DRC: Financial technique can be employed effectively or used for corrupt purposes. Fractional reserve banking is not the problem. A national bank would be more true to the nature of the value symbolized in the currency than having the banks run their own Fed. This is so because the social vision is democratic rather than neo-feudal economic royalism. It has much less to do with the numbers per se. - I do agree to an extent but what is keeping the democratically elected majority from running the bank just as poorly as the Fed? If the right wingers were in control it seems we could have unlimited funding for ever expanding wars, by merely printing more money, right? If given the opportunity I would rather have a banking system that did not include a private money cartel, but I don’t know that the performance of a democratically elected majority would really be any better. I do however, think that having money created out of air through fractional reserve banking is an issue, and really that is the point of Poly’s video clip. Debt as Money

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tmoney13
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May. 1, 2010 2:20 pm

tmoney wrote: "If the right wingers were in control it seems we could have unlimited funding for ever expanding wars, by merely printing more money, right? "

poly replies: Actually, no. The economy would quickly collapse unless all consumer production was switched over to war production as in the Third Reich. That would postpone collapse, not stop it. Hitler had to contnually expand Germany's empire to strip other nations of their resources in order to keep Germany from collapse.

Adam Tooze - "Wages of Destruction". Great economic historian.

Retired Monk - "Ideology is a disease"

..

polycarp2
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It’s Time for Bill O’Reilly to Get Real about White Privilege

It’s time for white America to get real about white privilege. Last night, Bill O’Reilly came from back vacation early to host a special edition of “The Factor”, one that he said would “tell the truth” about what’s going on in Ferguson, Missouri.

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