Gyroscopic Investing

Sounds like a plan to end private money and fractional reserve banking.
http://www.imf.org/external/pubs/ft/wp/2012/wp12202.pdf

I'm guessing this would throw a wrench into MMT... and maybe the PP.

I need to read this, but from first glance, what I find bizare is that they are talking about this as though the current system was some eternal, natural, occurence whilst debt free fiat money was a mere concept. Debt free fiat money has been widely used historically. The tally stick system was the monetary system in England for centuries. Debt as money gets reinstated time and again because monied people want to extract privilages and exert influence. Debt as money also enables trade deficits to fund wars etc. Perhaps "debt as money" is also less strongly/immediately reliant on taxation as the backstop to confer value to fiat money.

stone wrote:Debt free fiat money has been widely used historically.

Yeah.  Debt-free fiat was what enabled the great success of the Wiemar Republic and other notable 20th century currency collapses, culminating with Zimbabwe at the turn of the 21st.

Not that it couldn't work.  Just that every time it has been tried, it has failed (I think with hyperinflationary collapse every time, but I could easily be forgetting...).

As for tally sticks, they are probably the best example as noted.  They were used in England as currency for about 700 years because of their use to pay taxes.  By the time of the formation of the Bank of England, such tally sticks issued by the monarchy were discounted to less than half of their supposed tax value and they were burned as worthless a generation later.

Tally sticks were much harder to make than printing press fiat.  Was that what enabled their comparative success?

AgAuMoney wrote:

stone wrote:Debt free fiat money has been widely used historically.

Yeah.  Debt-free fiat was what enabled the great success of the Wiemar Republic and other notable 20th century currency collapses, culminating with Zimbabwe at the turn of the 21st.

Not that it couldn't work.  Just that every time it has been tried, it has failed (I think with hyperinflationary collapse every time, but I could easily be forgetting...).

As for tally sticks, they are probably the best example as noted.  They were used in England as currency for about 700 years because of their use to pay taxes.  By the time of the formation of the Bank of England, such tally sticks issued by the monarchy were discounted to less than half of their supposed tax value and they were burned as worthless a generation later.

Tally sticks were much harder to make than printing press fiat.  Was that what enabled their comparative success?

No.. I don't think the speed in rattling off tally sticks was the issue. If I recall, the sticks were relatively easy to make and their denomination was easy to mark. And Greenbacks were a successful example of fiat money and Greenbacks did not end in hyperinflation. Sparta and Rome are also a good examples of societies that flourished with fiat money that lasted for hundreds of years.

But, I think you may have figured it out, perhaps unintentionally. Theoretically, fiat money should be manageable in a way that prevents inflation (MMT is one theoretical roadmap that attempts to do this). The problem is that governments tend to act stupidly. We all agree on this. Weimar and Zimbabwe aren't examples of fiat money causing inflation. Weimar and Zimbabwe are examples of governments causing inflation because fiat money enabled them to make stupid decisions.

The distinction sounds like semantics, but I think you figured it out when you said that tally sticks were used for taxes. Consider the following perspective on Hitler's fiat 'Labor Treasury Certificates' that he used to build up the Nazi military during the '30s...

"Another cautionary note from the German experience is the consideration of how spending money that is not raised from the taxpayer effectively releases the government from it's obligations to the taxpayer. We can wonder if the German people would have gone along with Hitler if they had been bearing the full cost of the military buildup. These examples are extreme examples because of the degree of fiatization involved - virtually 100%."
Source: http://bobgreeninnes.hubpages.com/hub/H ... Fiat-Money

Think about that for a second. In a pure fiat monetary system, taxes don't actually fund anything. But, perhaps taxes do play an important role in holding the government accountable to taxpayers who think they are funding the government?

Gumby wrote: Think about that for a second. In a pure fiat monetary system, taxes don't actually fund anything. But, perhaps taxes do play an important role in holding the government accountable to taxpayers who think they are funding the government?

I think that's very true. Most people who don't appreciate some bit of government spending are able to make the very visceral and moral argument of my tax dollars shouldn't be paying for this outrage!, even though in a fiat system, their tax dollars are just shredded or deleted. I guess it underscores the degree to which unbacked money is just an elaborate social game that we all sort of collectively agree to uphold because of its value to us.

Rational people like us tend to underestimate the strength and durability of social constructions, even though in theory it could all collapse in an instant if everybody suddenly woke up and realized they were ascribing real value to worthless green pieces of paper and numbers in a big spreadsheet. In practice, mass realizations like that don't just randomly happen, they are always precipitated by a crisis that has real causes that are actually scary. You'd be able to see it coming from a ways away, and hey, that's why we hold gold.

Pointedstick wrote:

Gumby wrote: Think about that for a second. In a pure fiat monetary system, taxes don't actually fund anything. But, perhaps taxes do play an important role in holding the government accountable to taxpayers who think they are funding the government?

I think that's very true. Most people who don't appreciate some bit of government spending are able to make the very visceral and moral argument of my tax dollars shouldn't be paying for this outrage!, even though in a fiat system, their tax dollars are just shredded or deleted. I guess it underscores the degree to which unbacked money is just an elaborate social game that we all sort of collectively agree to uphold because of its value to us.

Rational people like us tend to underestimate the strength and durability of social constructions, even though in theory it could all collapse in an instant if everybody suddenly woke up and realized they were ascribing real value to worthless green pieces of paper and numbers in a big spreadsheet. In practice, mass realizations like that don't just randomly happen, they are always precipitated by a crisis that has real causes that are actually scary. You'd be able to see it coming from a ways away, and hey, that's why we hold gold.

Yes, yes. Exactly!

Perhaps the key reason why the tally stick system worked for so long was because the supply was not expanded and all of the tally sticks were regularly recalled as taxes. Is it really accurate to say that they were burnt because they were "useless". I thought it was the opposit- they were burnt because they posed a threat to the power of the Bank of England.

stone wrote: Perhaps the key reason why the tally stick system worked for so long was because the supply was not expanded and all of the tally sticks were regularly recalled as taxes. Is it really accurate to say that they were burnt because they were "useless". I thought it was the opposit- they were burnt because they posed a threat to the power of the Bank of England.

Actually they were used as capital to found the BoE (discounted to some rate, IIRC over 50%).

Being used as taxes is only part of it.  That's the case with every fiat system I've ever studied.

The failure comes when the rate of production significantly exceeds the amount needed to pay taxes.

Obviously a printing press makes production very easy to scale to whatever number you need (and computer digits even easier).  Tally sticks were limited in production to finding appropriate hawthorne sticks in the right sizes, cutting the notches, and splitting the stick without ruining it.  The monarch was then supposed to hold half and "spend" half.  Towards the late 1700's and mid-1800's the system started falling apart and the discount rate on tally sticks started to soar.  Perhaps it was because of too much production, perhaps both halves were being spent, perhaps it was simply a confidence (the lack of) issue which increased the velocity thus decreasing the value.  No matter the cause, tally sticks lost most of their value by the start of the 19th century and what little was left soon thereafter, thus ushering in the great age of the gold standard in world trade.

Gumby wrote:

Pointedstick wrote:

Gumby wrote: Think about that for a second. In a pure fiat monetary system, taxes don't actually fund anything. But, perhaps taxes do play an important role in holding the government accountable to taxpayers who think they are funding the government?

I think that's very true. Most people who don't appreciate some bit of government spending are able to make the very visceral and moral argument of my tax dollars shouldn't be paying for this outrage!, even though in a fiat system, their tax dollars are just shredded or deleted. I guess it underscores the degree to which unbacked money is just an elaborate social game that we all sort of collectively agree to uphold because of its value to us.

Rational people like us tend to underestimate the strength and durability of social constructions, even though in theory it could all collapse in an instant if everybody suddenly woke up and realized they were ascribing real value to worthless green pieces of paper and numbers in a big spreadsheet. In practice, mass realizations like that don't just randomly happen, they are always precipitated by a crisis that has real causes that are actually scary. You'd be able to see it coming from a ways away, and hey, that's why we hold gold.

Yes, yes. Exactly!

That's good thinking and good writing.  There is a lot packed into the words above.

AgAuMoney wrote:

stone wrote: Perhaps the key reason why the tally stick system worked for so long was because the supply was not expanded and all of the tally sticks were regularly recalled as taxes. Is it really accurate to say that they were burnt because they were "useless". I thought it was the opposit- they were burnt because they posed a threat to the power of the Bank of England.

Actually they were used as capital to found the BoE (discounted to some rate, IIRC over 50%).

Being used as taxes is only part of it.  That's the case with every fiat system I've ever studied.

The failure comes when the rate of production significantly exceeds the amount needed to pay taxes.

Obviously a printing press makes production very easy to scale to whatever number you need (and computer digits even easier).  Tally sticks were limited in production to finding appropriate hawthorne sticks in the right sizes, cutting the notches, and splitting the stick without ruining it.  The monarch was then supposed to hold half and "spend" half.  Towards the late 1700's and mid-1800's the system started falling apart and the discount rate on tally sticks started to soar.  Perhaps it was because of too much production, perhaps both halves were being spent, perhaps it was simply a confidence (the lack of) issue which increased the velocity thus decreasing the value.  No matter the cause, tally sticks lost most of their value by the start of the 19th century and what little was left soon thereafter, thus ushering in the great age of the gold standard in world trade.

World trade was on a silver standard.

The Bank of England was a confidence trick IMO. It came about because of bamboozlement, the founders of the Bank of England concocted the impression that their "creating credit money" somehow gave the government more ability to spend. As you say, the capital used to start the Bank of England was in the form of tally sticks. I don't think "spending both halves" of a tally stick is an issue. They are asymetrical. The long half is the "stock" and the "short end of the stick" is the bit held as a record of a liability.

Is there any example of precious metals successfully being widely used as money for an extended period without massive mining or conquests? The "pieces of eight" use of silver as a global currency depended on the massive silver mines in Mexico and Bolivia (and abundant slave labour). The gold standard period in the 1800s depended on the various "gold rush" discoveries of gold in North America and then South Africa (on confiscated conquored land). It seems as though once the existing stock of precious metals in circulation all gets accumulated (as Church art or whatever) the system falls apart. I don't see any historical evidence to suggest that long term use of precious metals as currency is any less dependent on taxation (that doesn't happen) than long term use of fiat currency is.

stone wrote:

AgAuMoney wrote:tally sticks lost most of their value by the start of the 19th century and what little was left soon thereafter, thus ushering in the great age of the gold standard in world trade.

World trade was on a silver standard.

"was" being before the mid- to late-19th century.  The transition to gold began in the early 19th century and by 1850 the U.S. was effectively on a gold standard.  Other countries continued to join the gold standard to reduce silver volatility and world trade continued to grow until WW-I.  Silver was infeasible to support the level of trade that was happening by the 20th century.  Even gold wouldn't have worked well, but for real bills.

By WW-I gold had been the standard for decades, but never really again after that.  Several nations tried to go back onto gold after WW-I, a few succeeded.  But not after WW-II.  The U.S. was tied to gold and other nations tied to us until we forced everyone onto floating exchange rates starting 40 years ago.

stone wrote: Is there any example of precious metals successfully being widely used as money for an extended period without massive mining or conquests?

I doubt it.

1) Without mining there would be no significant precious metals.  From the first discovery of gold, silver, electrum, platinum, etc. in streams, cultures around the world have figured out where it came from and started digging it out.  Even copper (and bronze and brasses) have been mined for many millenia.

2) The history of the world is a history of conquest.  Has there ever been an "extended period" without conquest in the history of any culture?  Whether for precious metals, food, land, or women, the only non-conquest driven cultures were either wiped out or totally isolated after having wiped out all reachable competitors.

AgAuMoney, I guess what I was getting at was that whenever an extended peaceful period occurs, all the precious metal seems to end up as temple roofs, statues of Budda, Church art etc and so people have to abandon using precious metals for everyday monetary use. Gold and silver mining has continued throughout history as you say BUT there have been occasional massive surges in production. To me it is very striking that widespread use of monetary precious metals only seems sustained during those surge periods. That makes me think that precious metals offer no panacea for providing/enabling a viable long term currency. They have entirely depended on looting in the past. People today seem to think that precious metals would avoid the need for redistributive taxation today (looting if you like). I wonder whether the gold standard debate is a red-herring. Irrespective of whether gold, silver, debt as money, tally sticks, bitcoins or whatever gets used as money; the same underlying issue applies.

I guess the collapse of the silver standard system was because Spain lost her Naval power at the battle of Trafalgar http://www.bbc.co.uk/radio4/thethingswe ... pip/3ctep/ That meant that the ship loads of silver coins could no longer be transported from Bolivia and Mexico to China and Europe. I don't think it was anything intrinsic about the nature of silver or gold. If Bolivia and Mexico had had gold mines and not silver and Australia, South Africa and North America had had silver and not gold, then I think gold would have been the global currency when Spain was the global super-power/chief looter.

A lot of the time the "gold" standards weren't actually based on the metal content. There were nominal amounts stamped on the coins that were of higher value than the metal content (imagine if the 1oz eagles had a face value of $5000). The use of gold was simply an extra step in counterfeit prevention. If you didn't accept the nominal amount on the coin as payment from the king you could be killed. I think the "pure" commodity form of money is a relative historical rarity.

melveyr wrote: A lot of the time the "gold" standards weren't actually based on the metal content. There were nominal amounts stamped on the coins that were of higher value than the metal content

Usually (all I remember right now) they started with the value being the metal content (and in fact the name of many currencies was the measure of the metal they contained or the trustworthy source that made them to contain the correct amount).

The sovereign stamp was initially just a guarantee that the coin contained the metal it was supposed to contain.  As time passed, those that controlled the coinage (and the army) discovered they could debase the coinage (alloy it) and create more coins which would each spend for the value of the original.  Usually at about the same time or shortly after they also claimed that making money was exclusively a sovereign right.  This resulted in the situation you describe.

One of the best documented and longest running examples of this is the history of coinage during the rise and fall of the Roman empire.  Byzantine empire is less well documented but shows the same trend.

But the same pattern is apparent in innumerable examples much more recently.

The british pound was originally one pound of sterling (92.5%) silver.  Seen one lately?  Not so much...

The German silver Thaler (named after the valley where the silversmiths lived which created a trustworthy coin, and which became anglicized as "dollar") became the pattern for the spanish reale (pieces of eight) which formed the basis of money for hundreds of years, especially in the Americas, precisely because they were modeled after and contained silver content similar to the what had preceded them and been known as trustworthy.

At the start of the 19th century from canada to the tip of south america reales were recognized and similar coins were minted by many nations and they traded almost without distinction here and in much of the world (China being a notable exception, they weren't appreciative of silver alloy even at 90%).

At the beginning of the 20th century Canada silver dollars, U.S. silver dollars and Mexican silver Pesos were all more similar to each other than different, and all still followed the same pattern established by the 300-400 year old Spanish reale in regards to silver content and purity.

By 1960 Mexico had crashed her currency, the U.S. hadn't minted silver dollars since the 1920's (the paper dollar was still a silver certificate though) and the other silver coinage was diminished (so 10 dismes no longer had the same silver content as one dollar) and Canada had alloyed their dollar to have 10% less silver and the smaller coinage even less.

By 1970 none of them had precious metal coinage any longer, and legal tender laws forced acceptance of the new money as if it were the same as the old, and in less than 5 years had proven false Johnson's claim:

Lyndon Johnson, 23 July 1965 wrote: Our present silver coins won't disappear and they won't even become rarities. ... they will be used side-by-side with our new coins. ... If anybody has any idea of hoarding our silver coins, let me say this. Treasury has a lot of silver on hand, and it can be, and it will be used to keep the price of silver in line with its value in our present silver coin. There will be no profit in holding them out of circulation.

Anybody who had been following the silver market knew Johnson was lying or ignorant.  The reason why silver was being removed from coinage was because the Treasury could no longer obtain silver for anywhere near the value of the coinage.  (About 0.77oz to make a silver dollar, or 0.725oz total in smaller coins per dollar.)  And neither could anyone else.  Silver coinage was the cheapest way to acquire silver.  Who wouldn't hoard them off the market with that knowledge?

It's the same situation as in the early 1980's when we switched to a copper-coated zinc slug for the penny, and again recently when that same zinc penny cost more than penny and a nickle over 7cents in materials.  (Currently prices are lower, especially copper, see coinflation.com)

And the same situation now with the sovereign powers claiming to have the sole right to issue money.  Yet another example of gov't incompetence.

Edit:  Removed a guy with sunglasses and a grin up there where it says (pieces of eight). I used originally the number 8...  Didn't notice in preview.

Some links about pieces of eight:
http://www.bbc.co.uk/ahistoryoftheworld ... stjbE4EEmg

Pieces of eight were the world's first global currency. As the coins of Spain they were used across the vast Spanish Empire, stretching from South America to the Philippines, but were also used outside the empire as well. In 1600 one coin would have been worth the equivalent of a modern £50 note. The front of the coin is decorated with the coat of arms of the Habsburgs, the rulers of Spain and the most powerful family in Europe.

Where did the silver for pieces of eight come from?

The inscription on this coin - King of the Spains and the Indies - refers to European Spain and the great new Spanish Empire in the Americas. The silver used to create the coins and finance Spain's armies and armadas came, above all, from the 'silver mountain' of Potosi in Bolivia. This wealth came at a terrible cost to human life. Thousands of indigenous American Indians and African slaves died in the brutal conditions of the mines to support Spain's thirst for silver

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

The Manila galleons transported Mexican silver to Manila in Spanish Philippines, where it would be exchanged for Philippine and Chinese goods, since silver was the only foreign commodity China would take. In Oriental trade, Spanish dollars were often stamped with Chinese characters known as "chop marks" which indicate that particular coin had been assayed by a well-known merchant and determined to be genuine.

Thanks to the vast silver deposits that were found in Mexico (for example, at Taxco and Zacatecas) and Potosí in modern-day Bolivia, and to silver from Spain's possessions throughout the Americas, mints in Mexico and Peru also began to strike the coin.

Millions of Spanish dollars were minted over the course of several centuries. They were among the most widely circulating coins of the colonial period in the Americas, and were still in use in North America and in South-East Asia in the 19th century.

Although I am not on a fan of the rigid gold standard for many reasons, I have long argued that if we ever did decide to go back on a hard money system it would be much more practical to use a silver standard than gold.

Ad Orientem wrote: Although I am not on a fan of the rigid gold standard for many reasons, I have long argued that if we ever did decide to go back on a hard money system it would be much more practical to use a silver standard than gold.

Care to share why?

I believe silver has more industrial uses currently than gold. Wouldn't the hoarding of it be kind of a drain on industry?

melveyr wrote:

Ad Orientem wrote: Although I am not on a fan of the rigid gold standard for many reasons, I have long argued that if we ever did decide to go back on a hard money system it would be much more practical to use a silver standard than gold.

Care to share why?

I believe silver has more industrial uses currently than gold. Wouldn't the hoarding of it be kind of a drain on industry?

Silver is far more abundant than gold. You actually could mint silver coins and circulate them as money. Gold is so rare that it is utterly impractical as a global currency in the modern world. Even if you decided to issue paper money backed by a fractional amount of gold you don't have true convertibility. And without that we are back to "trust us, we are the government, would we lie to you?"

melveyr wrote:

Ad Orientem wrote: Although I am not on a fan of the rigid gold standard for many reasons, I have long argued that if we ever did decide to go back on a hard money system it would be much more practical to use a silver standard than gold.

Care to share why?

I believe silver has more industrial uses currently than gold. Wouldn't the hoarding of it be kind of a drain on industry?

The term "hoarding" often has negative connotations and the way you used it implies that those negative connotations are your concern.  Yet "hoarding" is a natural behavior for many species and is necessary for survival.  Just like any form of class warfare, "hoarding" is a political tool used to demonize groups or individuals in order to politically justify their persecution or elimination.  It can be applied to almost anyone.  Your portfolio is an example of "hoarding" as is your 2nd and subsequent pair of shoes or any food you keep beyond what is needed for the next few hours.  You "hoarding" such could be used against you should "hoarding" what you hold become an issue.

As for silver specifically...

You mean "hoarding" it more than current investment demand in the various ETFs, etc and physical being held by individual investors?

If silver is currency or is tied fast to the value of money, then in essence the price of silver will be fixed in a very narrow band which will likely diminish "hoarding" by investors to a fraction of today's interest just like today most investors do not "hoard" a significant quantity of currency but rather invest it in business or lend it to others.

But if "hoarding" continues...

Given that new supply is continually being brought to market, "hoarding" will only raise the price in the short term.  Given that for most industrial uses the cost of the silver is a minor or even insignificant part of their overall cost of materials and manufacture this price increase will have little or not impact.

Even with JIT manufacturing, every business "hoards" some supply of materials, and warehouses "hoard" additional to make it available when needed.

In the same way, "hoarding" by individuals/investors creates additional available inventory which will likely serve to stabilize industrial prices for silver, making long-term planning even easier in those cases where the cost of silver is material.  It does this by the additional inventory being put on the market should prices rise.  Every "hoarder" has their price at which they will diminish their inventory.

BTW, I agree that silver is a better choice for currency due primarily to the quantity needed to represent value in everyday transactions.  But if transactions do not need currency (e.g. digital in any form) then currency doesn't matter and things could be denominated in gold to as many decimal places as needed.  Historically silver was money for the people and gold for aristocracy.  If it is cash we might continue to need both.  But hopefully we will not make the same old mistake of trying to fix the ratio between them.  For that matter, we could continue to use any commodity easily carried and divided and today's tech could easily convert prices on the fly to whatever you wished to pay that the recipient will accept.

AgAumoney, you are sensible and so would probably be selling into a silver price spike but every speculative bubble also has chaos makers who exacerbate it- that's why speculative bubbles happen. They wouldn't if they didn't.

I thought I read something somewhere about the platinum miners actually discouraging people from holding platinum as a financial asset. They wanted to avoid the speculative manias that disrupt the silver supply chain. I guess they worry that industrial users of platinum would try and find alternatives if occasional speculative manias were to cause a drought in availability.


Aggressive speculation has a long history of disrupting the real economy. Isn't there some  tale of grain speculators in Chicago ages ago reimporting grain that had been exported to Europe along with icebreaker boats so as to get it back to Chicago in midwinter so as to get out of a short squeeze. There was no real use for the grain in Chicago. Once the financial schenanagans had been delt with it was re-exported back to Europe for the second time. A more recent fiasco was the widespread starvation in 2009 due to a speculative bubble in grain.
http://www.independent.co.uk/news/world ... 06263.html

stone wrote: AgAumoney, you are sensible and so would probably be selling into a silver price spike but every speculative bubble also has chaos makers who exacerbate it- that's why speculative bubbles happen. They wouldn't if they didn't.

Thanks.  I'm not sure I can agree that I'm sensible given my wife's contradictory opinion, but I do try...

I do however disagree with your thesis on speculative bubbles in commodities and especially as the popular media around the world portrays such financial speculation.  It happens, but rarely.  The frequent bubbles talked about are all concerning futures, not "hoarding" of the actual goods.

People don't eat futures, businesses do not build real products out of futures, and nobody burns futures to keep warm or putter about the country.

To the extant that a futures market participant is NOT a producer and NOT a consumer of the commodity in question (i.e. they never intend to deliver or take delivery) they are a speculator.

Speculators typically only control the futures market.  There is a third market, the spot market.  The futures market developed as a way to hedge the spot market and many producers and consumers still use it that way.  But almost no business is stupid enough to hedge their entire production/consumption when the futures market looks bad or even when it looks good.  Most understand they might be wrong.  (Barrick, I think it was, a few years ago hedged about 50% of their production and was considered a fool, turned out they were.  Southwest Airlines is often held as a good example of hedging.)  Any business can make a mistake, but if they do it too often they will go under.

The spot market is not controlled by the futures market, and it often gets out of sync with future prices when the speculators run amok in either direction.  You can see this behavior quite regularly with spot either above or below "normal" depending on what direction the speculators have driven themselves.

In short, the only real way for speculators to cause market disruption is for them to play on the spot market or to let their futures contracts expire so they actually take delivery and hold it (there being essentially no way to sell short, you HAVE to deliver if you sell).  Taking delivery requires storage space which costs money, and requires paying settlement fees for every contract and possibly delivery and transport fees.  It is not at all cheap.  Then when time comes to sell many of the same fees and often other fees have to be paid.  Again, not cheap.  This is why such speculation is rare.  It is so rare it has a name, to "corner the market."  For an example, see Bunker Hunt and silver ca. 1980.

Absent ability and willingness to take delivery, the futures market and spot market simply get out of step and when it happens you see futures being forced back into compliance as the remaining term to delivery shortens.  The press seldom covers that aspect.

And BTW, the problem with starving 3rd world countries is almost never a shortage of actual food.  It is almost always distribution, or the inability to get food from where it is to where it is needed.  Oftentimes this is just the "last mile" problem, leaving food piled on docks or trainyards in the "starving" country, either because of lack of transport, but too frequently bureaucratic red tape, fraud or other corruption.  Much of the food too frequently ends up spoiling because of time or improper storage conditions (e.g. leaving grain too long out in the weather or where vermin infest it).  My extended family being farmers have been involved in many humanitarian relief efforts sending food over the past 50 years.  We've contributed primarily various grains, legumes, and potatoes but some smaller branches have been involved in efforts sending apples (a major challenge) and various tree nuts.  Such efforts have delivered, in each instance, shiploads of food.  Each effort was considered a success if only 20% of the food was known to have reached its intended needy.

Another example, my church has been providing clothing and toys to an orphanage in Ghana.  The last trip had almost 100 dresses and 100 pants and shirts and almost 300 pair of shoes plus lesser quantities of other items (like blankets).  There have been several deliveries over the past year, and each time they are hand carried because shipments are seldom received.  On each trip everything is literally dumped on the ground and pawed thru and items of interest to the gov't officials is taken.  This usually happens 2 or more times before they finally get thru customs and all the check points en route to the orphanage.  The people making the trip do not carry any personal property of interest either (such as phones or mp3 players or fancy cameras) because those frequently end up confiscated or "lost".

Speculators in the futures market rank about the same level as high-frequency trading on my list of concerns.

Ad Orientem wrote:

melveyr wrote:

Ad Orientem wrote: Although I am not on a fan of the rigid gold standard for many reasons, I have long argued that if we ever did decide to go back on a hard money system it would be much more practical to use a silver standard than gold.

Care to share why?

I believe silver has more industrial uses currently than gold. Wouldn't the hoarding of it be kind of a drain on industry?

Silver is far more abundant than gold. You actually could mint silver coins and circulate them as money. Gold is so rare that it is utterly impractical as a global currency in the modern world. Even if you decided to issue paper money backed by a fractional amount of gold you don't have true convertibility. And without that we are back to "trust us, we are the government, would we lie to you?"

Regards silver being more abundant than gold: I think you are correct concerning what's in the earth's crust and in garbage dumps, but not in available above-ground supply. Regards above-ground supply, all the articles I've seen state just the opposite to be the case.

Regards convertibility to gold, I agree if gold is priced under $2000/oz. However, if its priced @ $12k/oz, the dynamic is very different. Its just a matter of getting the peg reasonable. Jim Rickards has addressed this specific question.

AgAuMoney, I thought that the investment banks DID now have controling stakes in the physical storage and delivery system for commodities:
http://www.forbes.com/sites/greatspecul ... man-sachs/

I thought that the basis for their mode of operation was the way that physical supply can be used to realign the derivative markets for commodities. They have huge positions in the options markets. I thought at certain times they can make "sacrificial" trades in the physical delivery spot market that move the market price such as to make the (much larger in USD terms) options trades profitable.