It doesn't matter who is teaching the course. Once you logically consider the vulnerabilities of a commodity backed currency, it becomes immediately apparent that our market will be prone to frequent collapses under such a system. The only way to enjoy the economic expansion that we have and the degree of globalization enjoyed by the world is to function on a fiat currency system.
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Liquidity injection by central banks
- Thread starter kashirin
- Start date
It doesn't matter who is teaching the course. Once you logically consider the vulnerabilities of a commodity backed currency, it becomes immediately apparent that our market will be prone to frequent collapses under such a system. The only way to enjoy the economic expansion that we have and the degree of globalization enjoyed by the world is to function on a fiat currency system.
One thing that people often forget when they criticize a fiat currency is that no form of money is real. Opponents scream that we should be back on the gold standard. Well who decides that gold is worth anything? No form of currency has any inherent value. A chunk of gold is only worth as much as the market agrees it is worth. The same goes for the $. It is worth what the market prices it at.
So in that respect, either of them is fake and essentially creating money out of nothing. But generally accepted currencies allow for more efficient trade. The barter system has an incredible amount of friction and inefficiencies. Gold has some of these inefficiencies also.
Gold drops in price when there are new gold mines discovered. So yes gold is also prone to inflation, but this inflation is not controllable.
A fiat currency allows for incredible efficiency in international trade and very little friction. This is evident by the lack of arbitrage opportunities in the FX markets.
In the end it all comes down to the fact that the fiat currency allows for greater expansion and innovation with fewer collapses.
So in that respect, either of them is fake and essentially creating money out of nothing. But generally accepted currencies allow for more efficient trade. The barter system has an incredible amount of friction and inefficiencies. Gold has some of these inefficiencies also.
Gold drops in price when there are new gold mines discovered. So yes gold is also prone to inflation, but this inflation is not controllable.
A fiat currency allows for incredible efficiency in international trade and very little friction. This is evident by the lack of arbitrage opportunities in the FX markets.
In the end it all comes down to the fact that the fiat currency allows for greater expansion and innovation with fewer collapses.
Quote from Cache Landing:
It doesn't matter who is teaching the course. Once you logically consider the vulnerabilities of a commodity backed currency, it becomes immediately apparent that our market will be prone to frequent collapses under such a system. The only way to enjoy the economic expansion that we have and the degree of globalization enjoyed by the world is to function on a fiat currency system.
I don't have to go to an economics course taugh by some egghead with no real world experience who just parrots what he read in some book.
If you go to Panama, you've got a country which has not had a central bank for more than 100 years. And they've had one of the lowest inflation rates in the world over this period. Even lower than the US. And surprisingly for most people, they have not had any single financial crisis. The only problem they had was due to economic sanctions imposed by the US during Noriega.
Granted, they use U.S. dollars, but the point is, the quantity of money in their economy is determined by the demand side through the free market, not by some monetary central planner. It would work the same if it's dollars, euros or gold certificates. But why using dollars? Isn't it a 'bad' currency? Unfortunately, it makes easier international trade.
So there you have it, go to your econ professor and ask if Panama is not a counterexample to his fraudulent theories.
You completely miss the point.Quote from Cache Landing:
One thing that people often forget when they criticize a fiat currency is that no form of money is real. Opponents scream that we should be back on the gold standard. Well who decides that gold is worth anything? No form of currency has any inherent value. A chunk of gold is only worth as much as the market agrees it is worth. The same goes for the $. It is worth what the market prices it at.
So in that respect, either of them is fake and essentially creating money out of nothing. But generally accepted currencies allow for more efficient trade. The barter system has an incredible amount of friction and inefficiencies. Gold has some of these inefficiencies also.
Gold drops in price when there are new gold mines discovered. So yes gold is also prone to inflation, but this inflation is not controllable.
A fiat currency allows for incredible efficiency in international trade and very little friction. This is evident by the lack of arbitrage opportunities in the FX markets.
In the end it all comes down to the fact that the fiat currency allows for greater expansion and innovation with fewer collapses.
It's not that money is made of paper or gold or plastic. The point is who decides how much money should circulate. In a central banking system, there are central planners deciding the amount of liquidity in an economy. The commodity backed currency is one of the systems where there are true free financial markets.
It's not a discussion of gold vs fiat money. It's a discussion of socialism vs free markets.
Quote from buzzy2:
So there you have it, go to your econ professor and ask if Panama is not a counterexample to his fraudulent theories.
I'm not trying to be rude but are you really trying to use Panama as an example opposing a fiat currency?
They use the US$. Their Balboa was tied to the US$ and OUR federal reserve system determines their money supply.
Quote from buzzy2:
You completely miss the point.
It's not that money is made of paper or gold or plastic. The point is who decides how much money should circulate. In a central banking system, there are central planners deciding the amount of liquidity in an economy. The commodity backed currency is one of the systems where there are true free financial markets.
It's not a discussion of gold vs fiat money. It's a discussion of socialism vs free markets.
It isn't a matter of socialism. It is a matter of globalism and efficient trade. Our system allows for the economy that we enjoy without as much threat of huge collapse.
The idea that free markets tend to self-destruction was first suggested by Karl Marx. Therefore, all socialists believe that, without government intervention, we are all doomed.Quote from Cache Landing:
It isn't a matter of socialism. It is a matter of globalism and efficient trade. Our system allows for the economy that we enjoy without as much threat of huge collapse.
Thanks, you just proved my point.
screw all this academic stuff about money....
the BNP deal is the fact where they refused to bid quote their sub prime funds since they would then reveal the value of the other 50 billion euro of crap they cant unload.....
a bank that wont give their customers money back should be shut down.....
Bernanke better set up a Fed. Pawn Shop for the mountains of paper on the truck with Greenspan's picture on it
the BNP deal is the fact where they refused to bid quote their sub prime funds since they would then reveal the value of the other 50 billion euro of crap they cant unload.....
a bank that wont give their customers money back should be shut down.....
Bernanke better set up a Fed. Pawn Shop for the mountains of paper on the truck with Greenspan's picture on it
Quote from buzzy2:
The idea that free markets tend to self-destruction was first suggested by Karl Marx. Therefore, all socialists believe that, without government intervention, we are all doomed.
Thanks, you just proved my point.
I'm not arguing that our system doesn't have socialist aspects. Simply put, we are trying to have the best of two worlds.
A system that functions in the way ours does, but also includes upright banking institutions would allow for exceptional growth with a very smooth risk curve.
Unfortunately our system doesn't encourage banks to act prudently. It in fact does the opposite. I agree with that point.