2008-2-26 14:15:00
Larry quoting JJ:
"Exactly what do you mean by the gold standard? Does this mean each dollar is backed up by a dollar's worth of gold or is the money fractionalized so one dollar's worth of gold backs up a number of dollars. If this is your belief what ratio do you support?"
Larry then writes:
"The answer to your question is clearly, and unambiguously stated in the Alan Greenspan article I posted a few days ago:
"'Gold and Economic Freedom by Alan Greenspan'
" http://groups.yahoo.com/group/Keysters/message/33644 "
JJ:
As you said you already posted this and I already read it. I was not aware that you based your thinking on Greenspan. The problem is that Greenspan only partially answered my question. He does not clearly define what he means by the gold standard. He seems to support fractional banking with gold but does not say what ratio he supports as the optimum.
I would prefer to hear your thoughts in your own words. What do you mean by a gold standard? Do you support fractional banking as does Greenspan? If so what ratio do you see as workable?
If the ratio is ten to one for example this means that 90 percent of the money would still be still fiat money. Does this not bother you?
Larry quoting JJ:
"What if we lived in a land where there was no gold or precious commodity that would be practical to use to back up money? Would you support fiat money in this case? If not what would you support?"
Larry:
"Cigarettes. Sea shells. As has been stated to you repeatedly, people have used any number of things for money."
JJ:
Yeah, right, we've going to use the whole state of Texas to store seashells as a backing for money. The only thing that would work as a standard is something very valuable and compact such as gold or platinum. Even silver would be pretty bulky to store if we had to gather up 13 trillion dollars worth to back up our money.
Larry:
"I see no reason to work on creating a solution for a problem that does not exist simply because it is the only scenario you can find where you believe you ideas are compelling."
JJ:
If the principles of your philosophy is truly workable then it could work in all situations. If the gold backed philosophy does not work in my parable then it has a flaw that is exposed and a better system needs created that does not have this flaw.
Our government only has about $132 billion dollars worth of gold in Fort Knox yet there is over 13 trillion dollars in circulation. If we used the gold in Fort Knox to back our money then each ounce would have to be valued at over $88,000 dollars. Maybe this explains why Greenspan didn't say a peep about switching to the gold standard when he became Federal Reserve Chairman.
Larry:
"So, I guess you can't actually answer the question as to how your system would work? I guess that is why you simply answered with questions?"
JJ:
The answer is very simple. Use the principles outlined in the parable with the dollars added to the money supply governed by the projected increase in demand for goods and services. If the projected amount is incorrect then adjust periodically as needed.
As far as correcting our system today Dennis presented a formula that would work better than any gold standard of the past or the current fiat system of today.
A number of different fiat approaches could succeed as long as we prevent excessive debt and interest payments.
A prime key to making any money system work is to make sure that the money supply increases in proportion to the need for goods and services. New money should be added to create useful products rather than to finance social services as has been the case.
A pure fiat system where spending is controlled by law has never been implemented on a long term basis. Greenspan also says the gold standard as he envisions it has never been implemented so if you see as Greenspan does then gold has never had the chance to prove itself. BUT neither has a responsible fiat system.
I do not have time today to write a book giving a plan in detail, but I am sure I will write more on this subject later.
Global Warming Enlightenment
Looks like the short lived global warming scare may be over. Now we have to worry about global cooling.
http://www.dailytech.com/Temperature+Monitors+Report+Worldwide+Global+Cooling/article10866.htm
http://www.nationalpost.com/opinion/columnists/story.html?id=332289
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