You are right. The dollar level of universality is not the topic here.
But thank you anyways for reminding me the sky is blue. [:)]
I think the OP is saying that as long as
- The Fed doesnt print more dollars, so that inflation doesn’t strike,
and as long as
- The rest of the world uses dollars as the medium of exchange in certain trades,
then what do we need gold for? Look at the great advantages of the dollar, mainly those stemming from 2.
Yes, it all sounds great. It’s all logically true.
But it is like standing under a roof that is about to cave in any second and saying:
- As long as the roof doesn’t cave in, so we don’t all die,
and as long as
- the roof protects us from the rain
then what need to move to a house with a solid roof. We are better off here.
The flaw is pretty clear, I hope. The roof IS about to cave in. A decent house would have a solid roof. This one is about to cave in and get everyone killed.
Similarly, the whole point of having paper money [from the point of view of those who print it] is to be able to print more and more forever and ever. They will, trust me. Or better yet, look at what they have been doing every single day till now. Nothing can stop them, except a gold standard.
Another example; It’s like saying, as long as we ignore the fact that he has no hands, a double amputee has it better than someone with hands. He doesn’t have to wash them, no need to buy gloves, it’s great.
Fact: Everyone else needs US dollars to buy good/services in the international market. I don’t think you will ask me to explain this fact either.
FACT: Because everyone needs to buy US dollars they MUST trade with the US to obtain US dollars so they can trade with third parties.
I have been to foreign countries, and I didn’t have to use US dollars to buy stuff there*. I didn’t need US dollars to trade with third parties, and therefore did not need to trade with the US.
If you begin with a false premise “everyone needs US dollars to buy g/s in the international market”, you will end up with a nonsensical conclusion.
*When I went to Australia, I exchanged NZD for AUD. When I went to Vanuatu, I exchanged NZD for VATU. Japan: NZD, yen. etc
You do know that one ounce of gold is worth 1,120.90 dollars right?
Because dollars are legal tender.
If we went on a gold standard tomorrow, how would we all lose?
The US government does not really borrow US dollars from US banks to pay for its expenses. The US congress passes laws that authorize Federal Reserve Board (via Chairman Ben Bernanke) to buy some paper and then print a bunch of new interest bearing paper currency instruments in varying amounts with the promise of US government repaying these loans in US dollars at the future dates specified (when they become due). The FED then auctions off these freshly printed US Bonds, or other Securities at US Federal Reserve Bank public auctions (at discounts less than face value and/or less than present worth) to mostly foreign manufacturers, foreign banks and foreign individuals in China, India, Brazil, Pakistan, and other industrialized countries in return for the US dollars that these foreigners earned by making consumer goods for US citizens. The US government then spends these US dollars, plus US dollars collected by taxation, on various government expenses.
These freshly printed paper US Bonds and other security instruments that the US government sells to people in industrialized nations HAVE ABSOLUTELY NO VALUE WHATSOEVER, except that they are redeemable for title to privately owned businesses, factories, casinos, hotels, farms, land, ports, breweries, refineries, forests, ports, breweries, refineries, and other privately owned assets located in the USA that were created by previous US generations instead of Gold. Some US government sources estimate that the title to 25% of our assets with recorded deeds and titles are now listed as foreign owned (http://economyincrisis.org/articles/show/1072) and this percentage is increasing rapidly. Our payments to foreign oil and foreign raw material suppliers are paid with title to US assets in essentially this same manner. Most other foreign nations redeem their currency with gold**.**
Future generations of our children and our unborn grandchildren will have to work hard to pay off these US bonds and T-Bills when they become due and also buy back these privately owned assets if that is even possible. US citizens apparently believe that we are entitled to sit idle and not work in some dirty factory making the things that US citizens consume, when US citizens can obligate our grandchildren to work and pay for our easy non-productive lifestyle. This situation might end when the USA runs out of privately owned US property and other assets that foreigners will accept in return for the cash that US citizens paid to foreign workers in foreign factories to make the things that US citizens purchased and consumed.
We have met the enemy and it is ourselves. There is nothing more saddening or devastating than mass unemployment such as exists in countries such as Mexico or India. I have visited Asia many times on Business in the last century. Crime, family abandonment, divorce, selling your 12 year old (and younger) daughters to brothels, selling your 12 year old sons to rug weavers, and other bad things increase during these periods of unemployment. The poor families sell their children as indentured servants (the same as slaves) in order to feed the remaining children. Our basic industries such as steel, computer chip manufacturing, petrochemical refining, appliance manufacturing, tire manufacturing, automobile parts manufacturing, aircraft manufacturing, textiles, and etc. have been decimated and/or totally eliminated from this country by US government created Free Trade policies and Environmental policies.
The US International Trade Deficit must be corrected by any means possible! This is the basic structural economic foundation problem that will destroy the US economy in the very near future.
You mentioned “inflation” a couple of times during this thread, and seem to associate it with negative consequences for the dollar. What do you believe is the cause of inflation? What is “inflation” as you understand it?
Let me get one thing straight here.
I am not “America.” You are not “America.” We’re not even the “US.”
A country’s Government is not, I repeat NOT, equivalent to its citizens. The state’s ability to print off dollars like mad may be good for the state, but it is not good for you or me.
You are completely, one hundred percent right on this. I am so proud of you, in an act of unabashed generosity I will gladly take your golds in exchange for my monies.
Do you think that this is a permanent or even stable condition? Do you think that lawyers who run for political office can control the subjective calculations of billions of individual’s? Billions, around the world, are trapped in poverty because of our current international monetary system. There is perpetual capital flight, illusory comparative advantages (result of massive inflation), deficits, trade imbalances, international bubbles, periodic hyper-inflation’s, currency and interest speculation (financial instability), all because of this international arrangement.
In fact you’re wrong. The United States currently has a 10% trade imbalance, which is utterly unsustainable.You simply don’t know what you’re talking about. This system lacks counter-balancing forces, which causes perpetual international spatial and inter-temporal disequilibria. Prices are not arbitrary and ad-hoc; they coordinate production.
We’re not the first nation to forcefully implement this kind of economic hegemony. The vehicle currency status has toppled every empire, every powerful nation; it’s like giving a black card to a 12 year old.
Are you saying it is better for the U.S. government, which can print out money, and basically do whatever it wants, from welfare projects, bridges to nowhere, fight wars, and spend untold millions to explore space?
Or for the U.S. citizen who, when the dollar supply is increased looses the value of the money he has already earned?
Sure the Dollar is the international medium of exchange, but is it really better for the American? the other countries aren’t stupid, they know the value is falling, thats why they keep raising their prices. Gold on the other hand, if it were to become once again the international medium of exchange as prior to the first World War, it would increase in value, meaning that instead of an American having to very carefully and precariously invest his earnings into IRA’s and the like, he could just save, and have plenty to retire on.
The OP misses the point that the dollar’s “power in trade” only exists in as much as other nations have the confidence to continue its usage. He also ignores the fact that China pegs their currency onto the dollar, artificially devaluing it to maintain competitive trade even as the value of the dollar tanks.
This is kind of like saying the Titanic is still the mightiest ship ever built… as it sinks into the Atlantic.
Wolfman, you’re right that it is better for the government. and if you consider all those programs as a boon for the American, then as far as one considers this the case, you are right, however I would contest that, and even if it is conceded it is all washed away by the fact that the purchasing power of the dollar dwindles with inflation whereas with gold there would be slight deflation over time. It makes no difference what the medium of exchange is, it is better to have a stable amount than one that increase at 25, 50 and 100% in a year.
This is good! very good.
To the OP:
You for some reason believe that the USD will be the reserve currency of the world forever; as if it is some universal given that just happened to come about and will always stay. You seem to completely ignore any possibility (really inevitability) that this will cease to be the case. I have a couple questions for you:
-
You claimed it gives the US trade advantages. Please explain where these advantages are, because I see the US as having the highest current account deficit on the planet with the next closest being Spain who is far ahead of the US.
-
If you are so confident in the US dollar I have a proposition for you. Let’s assume that the Fed still exists and continues to create Federal Reserve Notes. The only thing that changes is that legal tender laws are abolished and we can use competing currency. Under this scenario, do you honestly believe that the dollar would be in use for longer than a month? Thanks.
Best regards,
Chris
GOLD is just a metal. A commodity we use for many purposes. its value against the us dollar is meaningless.
Thank you for your explanation of us dollar creation. I think you are right in every point. I was never my intention to defend the current system, I simply made a point. Americans are better off using US dollars than using gold or anything else. Why??? Because there is a huge demand for US currency and the US has a monopoly over the creation of such currency.
But…as you well know…the system is on the way for a painful crisis if not collapse.
It’s value against the dollar is far from meaningless. Ten 100 dollar bills will get you barely an ounce of the stuff.
There is vastly more demand for that silly shiny metal than you think, precisely because everybody knows the dollar is doomed. Still think it’s a good idea for Americans to “stick” with the dollar then? [;)]
Tues. 10/03/09 08:59 EST
.post #6
“Better off”…according to whom? Value is subjective.
“Worth more”…to whom? Value is subjective.
“To keep this going the printing press must be turned off”?
And, I suppose, “to stop this, the printing press must be turned on”?
Gibberish.