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HR5818 or the Coin Act of 2006


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People who think we should leverage our economy off of a pile of metal rather than its inherent productive capacity should not write about economics :ninja:

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People who think we should leverage our economy off of a pile of metal rather than its inherent productive capacity should not write about economics :ninja:

 

 

Ditto. A big reason why modern economies work is because there's enoungh money for it to function. If money was strictly defined as gold and silver, there'd be some very serious problems due to lack of money.

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Let me begin this by saying that I am not attempting to defend the U.S. Government.

 

It makes at least one point I take great issue with:

 

> With no inflation, you wouldn’t have to get rid of the penny

> because the melt value would never exceed the face value.

 

I don't think that's true. If some non-inflationary force caused the price of copper or zinc to skyrocket (for example, true demand for zinc and copper), then the melt price could certainly exceed the face price.

 

I am not comforted by backing our money with metal any more than I am comforted by backing our money with "faith". Governments have and will manipulated the price of money either through interest rates or through how money is 'pegged' to the metal that allegedly protects its value.

 

I'm not sure how I feel about the Federal Reserve being in change of the BEP and the Mint. I'm biased against the people in charge of "how much" money is out there being involved in the actual printing and minting of the units of cash. Also, while I've had my issues with both the BEP and Mint, i'm not sure what is so deeply broken about their leadership that it requires reassignment.

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Ditto. A big reason why modern economies work is because there's enoungh money for it to function. If money was strictly defined as gold and silver, there'd be some very serious problems due to lack of money.

 

Yes, how true! In modern times, our economies cannot possibly function unless someone in government has the power to create unlimited amounts of currency from nothing. After all, look at the barbaric times of the industrial revolution and what the peg to gold and silver brought!

 

The idea that a peg to gold or silver would result in there "not being enough money" for the world economy to function is just pure BS. As a unit of account, money can be of any form or unit. Whether I am paid a salary of 50 British Pounds or $100 or 1,100 pesos, or 215,000 Venezuelan Bolivars it's all the same amount of money. Yet by your logic, the person worst off in this is the British subject since they have the least currency, and the best off is the Venezuelan. Clearly this is idiotic. The same is true under the gold standard, whether I am paid $624 in FRNs or a $20 gold piece weighing 0.9675 oz. of pure gold, it's the same. The main difference is that the amount of gold mined each year roughly corresponds with population growth, ensuring stability, where the 8-11% increase in money supply by the major industrialized nations ensures inflation and a constant decline in the purchasing power of the currency. So tell me again which is the more serious problem? "Lack of Money" or plenty of currency that is guaranteed to be worth less every year you hold it?

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Go back and read up on why Nixon made the change. While crooked, the man was a much smarter president than the yahoos we've had recently.

 

This is not to say that inflation is good or that the government can makea s much money as it wants. That's not the point at all. The goal is to provide flexibility and the ability to leverage growth without needing to find some metal in a Swiss bank every year.

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This bill was introduced on July 17th and sent to committee. It has picked up a few(5) co-sponsors but will die in committee when this session of congress ends. With Kolbes retirement someone else will have to pick up his cause if the bill is to be reintroduced in the next session.

I really think that being an election year gave this bill no chance.

It covered lots of bases but would have been too risky for someone seeking reelection.

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Go back and read up on why Nixon made the change. While crooked, the man was a much smarter president than the yahoos we've had recently.

 

This is not to say that inflation is good or that the government can makea s much money as it wants. That's not the point at all. The goal is to provide flexibility and the ability to leverage growth without needing to find some metal in a Swiss bank every year.

 

Sure, Nixon was smart, but can you come up with one example of a successful fiat currency system in all of recorded history? They all ended badly, and they all ended up with a return to a gold or silver based system. Even the paper money of the Mongols under Ghengis Khan ended badly despite the penalty of death for not accepting the currency.

 

The real point is that a gold or even silver based currency provides CONSTRAINTS, which is something you do not have currently, hence the ability of the Federal Government to run unimaginable deficits, and the US to run a trade deficit larger than the world has ever known. A gold based system would allow neither to persist over extended periods. Then instead of having to find gold in a Swiss bank or even the ground beneath California, the economy would be forced to obtain the gold to balance payments by forcing the nation to produce something of value that other nations would be willing to trade for their surpluses of gold. Some of the greatest economic grwoth in history has occurred under a gold standard, while nearly every major financial crisis in history has occurred under a fiat standard.

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I agree, the gold standard definitely makes it much, much harder for the govrnment to get into trouble with deficit spending. On the other hand, I don't know that we would've won the Cold War as quickly if we hadn't left the constraints of gold behind.

 

But yes, by abandoning the standard we as a society must be constantly vigilant and hold our government accountable for spending excesses. Our state, and I think many, must have a balanced budget every year so it must be doable. At least we should adopt a fixed debt ceiling (lower in peacetime than in war) at 60-70% of GDP.

 

We do need to rein in the tborrowers and spenders in D.C. but I don't think we need to use gold to do so.

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Hi Jtryka:

 

I don't consider "can you come up with one example of a successful fiat currency system in all of recorded history? They all ended badly" to be compelling. I could use the same argument to say that representative governments are for chumps, because the Roman republic clearly failed and an empire took over that lasted longer than the republic. Pretty much every republic other than our modern day examples failed rather spectacularly at some point, and we have some pretty solid examples of modern republics imploding also. What's more, if you use "now" as a benchmark, then every non-fiat currency that I know of has "ended badly".

 

I also don't see what constraints are enforced by basing our currency on gold, other than to fool the public into thinking that the government won't change the "peg" of the currency to gold as it chooses. Want to raise the money supply? Simply "adjust" the number of dollars per unit of gold. I don't relish the idea of our currency to have more to do with the availability of a commodity than our fiscal policies and economic status either.

 

I also don't like the idea of having to maintain gold reserves to prevent a sudden shrink in the money supply. Imagine the kooky "homeland security" provisions that might be needed to prevent terrorists from fooling with the gold reserves. I don't see why it'd be necessarily "free-er" than our current system.

 

Trade deficits shouldn't be affected either way by a metal backed currency. Britain was hemmoraging money to China during the 18th century due to a massive trade decficit. All of their silver was flowing into China for tea and spices, and Britain wasn't allowed to sell goods there. The trade deficit did end, but not due to metal-backed money. Opium and the 19th century opium wars took care of that.

 

What about the idea of allowing the market to set the price for the currency? If a government prints money like mad, let the market punish them by devaluing its currency. The fiscal policies of our government are being punished by the market as we speak, to the point that the Euro may become the standard, not the dollar.

 

Commodity-backed money will be resistant to inflation, but they are quite susceptible to deflation. By the same token, "fiat" currencies are resistant to deflation but susceptible to inflation, especially if you're Argentina in the 1970s. I don't see anything compelling to make me love one over the other - I'm more worried about the economic policies of our government than what backs the buck.

 

Incidentally...

 

Some of the greatest economic grwoth in history has occurred under a gold standard, while nearly every major financial crisis in history has occurred under a fiat standard.

 

...Does not match my understanding of history at all. There were eight U.S. recessions that deepened into depressions under commodity-currency; while modern fiat money in the U.S. has had several recessions none deepened into depression. The 1950s were great, but the fiat money years of 1940-1945 saw the U.S. economy double.

 

Now, perhaps you'd include "fidicuiary money" fractionally backed by gold as fiat money; those instruments seemed to worsen bank panics and sudden contractions in the money supply. Perhaps they're the stock options and futures derivatives of the gilded age. I might agree that fidicuiary money is the worst of both worlds, something similar to California's now dead electricity "deregulation".

 

---

Fjord

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Yes, how true! In modern times, our economies cannot possibly function unless someone in government has the power to create unlimited amounts of currency from nothing.

 

I don't know about the U.S., but in Canada there's about 20 times more money as "bank deposits" as there is "cash" in circulation. Perhaps I should clarify my point as being a reference to fractional banking (which has long existed, and which IMO allows an economy to expand beyond its limitations if it were solely limited to whatever "cash" was available. There can be an increase of money in circulation without having an actual increase in the supply of "cash")

 

The idea that a peg to gold or silver would result in there "not being enough money" for the world economy to function is just pure BS.

 

See above. My apologies for not wording my thoughts properly.

 

The idea that a peg to gold or silver would result in there "not being enough money" for the world economy to function is just pure BS. As a unit of account, money can be of any form or unit. Whether I am paid a salary of 50 British Pounds or $100 or 1,100 pesos, or 215,000 Venezuelan Bolivars it's all the same amount of money. Yet by your logic, the person worst off in this is the British subject since they have the least currency, and the best off is the Venezuelan. Clearly this is idiotic. The same is true under the gold standard, whether I am paid $624 in FRNs or a $20 gold piece weighing 0.9675 oz. of pure gold, it's the same.

 

Again, a misunderstanding. That is not what I meant at all. If that's how I think, then I would had long ago converted all my money to (now old) Turkish Lira just because they happen to have more zeroes at the end. :ninja:

 

The main difference is that the amount of gold mined each year roughly corresponds with population growth, ensuring stability, where the 8-11% increase in money supply by the major industrialized nations ensures inflation and a constant decline in the purchasing power of the currency. So tell me again which is the more serious problem? "Lack of Money" or plenty of currency that is guaranteed to be worth less every year you hold it?

 

An increased money supply generally results from banks lending more so than a central bank issuing more cash. Money supply can be increased (to an extent) without a need to actually increase the amount of cash. Of course, too much lending out by banks can result in bank runs leading to possible failures, resulting in a shrinkage to the money supply, bringing about trouble. (deflation)

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In short, Lee Rogers is ignorant on the subject and needs some basic economics. (I tried not to use harsher language)

 

His little blurb about the Dollar Coin and Two Dollar bill notes this fact.

Inflation has nothing to do with the dollar coin and two dollar bill part of the bill. Common sense is a last art it seems...

 

Ciao, and Hook 'em Horns,

Capt-AWACS, Honk if you love Capt-AWACS

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