Libertarian666 wrote:
As for money, of course it will fluctuate in value. There is no such thing as stability of value, because value is subjective; this is also why economics cannot ever be a quantitative science.
Well, tickle me silly! I would have sworn you thought gold was 100% stable in value, hence your fetish for it.
But if you can't see the economic difference between something that can be created out of thin air (paper "money") or created in enormous abundance (toilet paper) and something that is in limited supply (gold), then you are the one who is ignorant of the facts of history.
I do see the difference in terms of what makes gold
a relatively better medium of exchange due to its durability properties, but you give off the impression that only gold has ever been a form of money and is the only form of money that ever will be. Both are historically false. Money is whatever people have confidence in. Thus it is so. Its a free market thing. Governments can certainly help in the regard but its just technically exploitation. Bitcoins could become the next dominant form of money because markets don't care about what form money is, only that it keeps short-term value for transanctional purposes. Money is not an asset because it always loses its value over time (government is not necessary to help that along).
Those facts show that for anything to retain its usefulness as money, people must believe that its supply is limited. There are no exceptions to this rule, which is why the Federal Reserve must continue its charade of saying "we're going to stop printing unlimited amounts of money real soon now...".
Ahha, this is where you haven't adapted yet. We don't operate under a fixed-exchange rate system ("gold standard") anymore where a limited supply of physical commodities was implicit to prevent inflation. That's called the Philips Curve where real wages rising (i.e. in gold) is inflationary. That no longer holds true under a floating exchange rate system that we've been under since 1968-1971. Also, inflation rose and fell quite extensively under the "gold standard" as new discoveries were made or not made to the money supply, so it wasn't always due to government borrowing and spending unproductively in excess of its tax revenues. And the other side of the coin (pun intended) is the deflationary chokehold that you can't get out from under without the ability to increase the money supply and/or liquidity when a economy in crisis demands it. A physical commodity being used such as gold constrains that. To be honest, that was really the driving impetus for abandoning the fixed exchange rate system. England was to first to jettison the "gold standard" during the Great Depression and not coincidentially, they were first to have an economic recovery. Those who stubbornly held on were like Greece today.
So if you want to make an argument that people will turn to gold and silver coins as a temporarily replacement for money when they lose confidence in their existing money, no argument from me and that's why I hold it in the PP. But, as a civilization we're just not going back to an austerity-implicit, resource-constrained, defaults-galore, free wildcat banking financial monetary system ever again. It simply doesn't work to deal with economic crisises and its also too politically risky in terms of risk invoking revolution and insurrection from pissed off, impoverished people, slaving under deflationary austerity. We like a growing economy and a little inflation just for behavorial reasons. The EU is instructive in this example of what not to do.
Also, I get the impression you may think the Federal Reserve creates all the money used in our economy. That's not the case. They're only concerned with keeping the member bank clearinghouse operating smoothly and providing liquidity to member banks that run into difficulties. There's no transmission mechanism between the Fed creating internal bookkeeping "bank reserve" entries that is then forcibly swapped for physical Treasuries from its member banks, out to the real economy. No, the real money creation is in the free market and is orders of a magnitude larger than the so-called "money printing" of the Fed (or Treasury in case of actual FRNs and coins). Since debt (i.e. FRNs, coins, Treasuries) is used as money now, an extension of credit or a loan anywhere in the economy also creates an increased money supply. The only transmission the government has with the real economy is in providing the private sector with "savings vehicles" under guise of Treasuries when it borrows to spend more than it has coming in from tax revenues. So you can even say that it is actually the free market that drives the continuing need for a deficit.
We don't have to agree with the above operational reality on an ideological basis. I actually would prefer something more just and efficient along the lines of Riegel's Valun system where private credit is only created on demand as needed, but the current hodge podge system isn't that far off, except far too many people believe the Fed is The Wizard of Oz and that somehow fiat money is innately dangerous. Fiat money has existed long, long before gold was used as money and always will. That's not the real problem. The real problem is the unconstrained growth in debt by economic ignoramuses. So long as it doesn't go grow past the demand for "saving vehicles", all is well. We're a long ways off from that point and Japan is our canary in the coal mine.
Did Great Britain collapse? It's still going strong last I looked. And in the past, nations were not currency issuers as the major ones are today; not being one which is largely a reason why they did run into serious trouble with their dual silver and gold forms of money. There was no relief valve for labor and wage injustices.
