BTW if the fed succeeds in borrowing (printing) 600 billion from
    itself  the value of EVERYTHING you own, except gold, WILL instantly
    depreciate 20%!!!!! THINK OF IT AS A 20% TAX.

    Donald Trump for president.
    http://www.youtube.com/watch?v=kWyDnxmDnXI

    Paul Lamar


The value of things in terms of a particular currency is determined
almost solely by the scarcity of that currency.  If people hoard the
currency - which is what has been going on for the past two years.
People have been afraid, so people (businesses, banks, etc) have been
hoarding currency.  This, in and of itself, has had a destructive
effect on economic activity.  Currency has to be available for
business to be conducted.

If we switch to a gold standard, or enact a tightened monetary policy,
economic activity will be depressed - for quite a while.  There will
be a further transfer of wealth from the people without much currency
to the people that already have quite a bit of currency.  This will be
true even for smart and virtuous people who are willing to work hard.

This is the risk of tying a currency to a commodity (gold, silver,
beads).  Amplified up and down swings.  When the perception is that
the economy is healthy, money floods into the market, blowing the
upside higher.  When the perception of risk increases, money gets
scarcer, driving markets lower faster.  People hoard for better days,
or for when prices will bottom.  And bottom they do.

Fiat money allows the issuing entity the opportunity to try to provide
stabilizing feedback into the economy.  Printing money when times are
tight doesn't directly devalue the currency..  If everyone is stuffing
their mattress with dollars, printing money has no impact on
pricing/value until people actually stop stuffing their mattresses.
We need people to stop stuffing their mattresses.  Printing money is a
disincentive to people stuffing their mattresses.

The distrust of fiat money is centered on a distrust of the issuing
entity.  Going to a gold standard isn't a fix to this problem.  It
just makes the people holding gold more wealthy - concentrating power
further.

You know all this Paul..  I'm just stating the obvious.


Matt-

I agree up to a point but wealth is more than just currency and gold.
Wealth is what you have in the stock market, all the physical
things you own, your social security investment and your retirement
benefits from the company you work for.

If the gov keeps printing money and/or borrowing it the dollar
is bound to depreciate and soon. There is already evidence
of inflation in the rising price of food and gasoline.

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

Company's hoard currency or convert it to gold (if there
is any left) when there is no market for their products. No jobs >
no market so negative feedback is > no company jobs.

The Chinese are manipulating the value of their currency.
One way to do that is to keep the gov controlled  wages low.
The way the gov keep the wages low is at the point of a gun.
Unilateral gov control of guns is necessary to maintain Communism.

It is cheaper to have three guys fill a dump truck outside
my hotel room in eight hours with shovels than buy a Bobcat.
I know... they kept me awake all night in downtown Shanghai
with the noise.

http://www.dailymarkets.com/economy/2010/06/19/chinese-workers-may-force-currency-issue/


Paul Lamar