Currency backed by gold is an llusion

Another problem with gold, is the lower classes have little-none, so if only money backed by gold was assigned value, the lower classes would go from having little money to having none overnight. Some people say this whole libertarian, gold thing is another swindle, and I’m inclined to agree with them.

Good question, I might answer it in another thread.

This isn’t quite right. No individual, or group of individuals, assigns the value of the dollar. The dollar gets its value based on supply and demand. Demand is guaranteed because the federal government only accepts payment of taxes in dollars, and because people are required to accept it in payment of debts. The supply is a little murkier, but is some function of at least the creation of new dollars by the central bank, by the level of reserve banks are required to hold, by US creditworthiness (since sovereign debt is paid in dollars). So printing new money doesn’t completely determine the value of the dollar, nor does bank lending, nor does a US default on debt.

The value, then, is determined by a loose consensus of everyone who exchanges goods and services in dollars. In fact, nothing has an inherent worth. If a service provider lowers her prices by 10%, is it because the value of that service has gone down, or because the value of the dollar has gone up, or perhaps because transaction costs have decreased? It’s all three. Everything is valued in relation to other things, and in relation to the aggregate desires of the people in the marketplace.

So long as people believe that other people will accept dollars in payment for goods and services, dollars will continue to have value. While it’s true that dollars have no inherent worth (e.g. your desert island example), the fact that other people value them makes their value objective: we can determine how much gold a dollar is worth by attempting to trade dollars for gold. The quantity of dollars that can be exchanged for an ounce of gold is an objective fact about the world in the place and time at which the transaction occurs.

Having fiat currency backed by nothing is what allows banks to inflate the currency beyond reason, to expand the money supply beyond actual value production in the economy. Compare the value (relative spending power) of $1 today with its value 50 years ago.

Gold is inherently valuable, because people will always have use for it. Precious metals are like that. Gold is rare but not too rare, and incredibly useful. Also it’s pretty to look at. Therefore it serves a nice function for monetary backing.

Just because gold is backing currency doesn’t mean poor people who don’t own gold can’t have any currency.

I’m not really opposed to fiat currency without precious metals backing, philosophically speaking, but in a practical sense I am, because obviously this is a power too great for the idiots who happen to be in charge to handle. It’s like having your own credit card that has no spending limit and you can create money for it out of thin air and use that money to “pay it off”, quite absurd. People are too stupid to manage that sort of value-power intelligibly, it seems.

Money is nothing more than symbolic representation of real value created. If you start making more money than actual value being created then you reduce the relative value of your money, and misrepresent your economy to itself. That is stupid. But it’s what leftists do, they always want to follow this stupid Keynesian approach like some poor retard maxing out the credit card cause “like I’ll worry ‘bout it later yo! Duh”.

A gold backed currency could still inflate if banks are allowed to lend more of the currency than they hold, as is the case with fiat currency. If a bank only needs a 10% reserve, they can effectively increase the amount in circulation 10-fold, whether or not the currency is backed by a commodity.

None of these is tantamount to “inherent” value. If some alternative material is found to be better suited to the things we use gold for, if a large gold deposit is discovered, or if gold falls out of favor, the value of gold would be significantly impacted. At various times, silver and even aluminum were considered more valuable than gold. That changed when significant silver deposits were found in Argentina, and when new processes for purifying aluminum were created.

So the value is not inherent, it’s determined by the market. Different people value gold differently, and the market value fluctuates over time. Gold is just another commodity.

Creating new money is effectively a form of taxation. The total pool of value remains constant; in creating new money the existing money is devalued and the new money assumes that value but puts control in the hands of whoever is printing the money (the government for fiat, miners for cryptocurrencies, etc.). It’s certainly a misrepresentation to think that in printing money you are creating new value, but inflation is not inherently a misrepresentation.

Note that it was famed leftist Richard Nixon who took the US off the gold standard…

I never said they couldn’t do that. You want a small amount of inflation as a predictor/attractor point for present value being created in the economy but which is not quite measurable yet as GDP or whatever (you do not want the monetary supply to lag behind growth in real value creation). And beyond that you might even say that the monetary supply can still be increased a little bit for certain purposes, i.e. borrowing as debt from the future of the economy itself. But the sort of inflation we have had in the US since the gold standard was dropped is…literally insane. And not at all sustainable. Hence 21 trillion in debt, hence severely curtailed buying power of the consumer, hence the massive shrinking of the middle class.

Inherent value does not mean “always has a high value”. It means that it always has some value.

You are conflating two things here, the idea of inherency of value and the idea of fixed, absolute or absolutely ‘high’ value. I never said anything about gold not having relative market value. I said it is always inherently valuable, along with other precious metals. And that is true. Not sure why you are arguing the point, since based on your above statements you are not disagreeing with what I actually said.

Point taken. But massive inflation, which I am talking about, is indeed a misrepresentation. Just like if you were to take out five credit cards, now you can spend a lot more money than you actually have, that is a misrepresentation; similarly, when you give people a lot more money because you are flooding the economy with it (subprime loans, for example), this creates the illusion that there exists in the economy more value than there actually does exist. Just because inflation of the monetary supply readjusts the relative value of the individual currency notes in circulation does not belie this fact.

FDR did it first, 40 some years earlier.

I’m a little less sure about this, but I don’t think a gold standard would prevent this level of inflation. The government can still borrow money when there’s a gold standard, by e.g. selling treasury bonds.

I think you are right that the gold standard prevents runaway inflation, by eliminating the possibility that the government will just print money to cover its debts, though it would need to be both a fixed gold peg and a minimum reserve.

My mistake, I think I understand your claim now and agree that my points don’t contradict it.

In that case, I would say instead that gold isn’t special in having inherent value. Rice, lead, and sand have inherent value. Gold is just another commodity. It has properties that made it a useful store of value, but it isn’t inherently more stable than any other metal, or really any physically stable material. Why not back a currency with silicon?

This is an interesting example. If you take out five credit cards, in theory that fact is reported to the credit reporting agencies, and so each card will be issued with a credit limit proportional to your creditworthiness given that you already have four other credit cards. For the average consumer, I think it’s fair to call it a misrepresentation, but to a sophisticated market player, the local inflation of your spending power is understood to decrease your credit worthiness. I think this is also true of an economy printing too much money. Debtors would be miffed if the government printed money to pay off its debts, because that would mean paying a fixed sum with a currency of decreasing value, causing the value of government debt to decrease and making it harder for the government to borrow.

Guess it’s a leftist and a rightist thing then.

Technically all currency runs on the illusion of confidence through value. It’s all a con-fidence game.

What do you mean by the “illusion of confidence”? Confidence plays a role, in that people accept cash because they are confident that they will be able to find others who will accept it in the future. They invest because they are confident that they will see returns from their investment. Is that the confidence you’re referring to? What’s illusory about it?

He acts as if real value created in the real world is just an illusion, because we happen to enable its exchange via fiat money or any kind of currency. Such a claim is a non starter.

Your two options are barter or money. Money is obviously superior. And money is awesome, is a neutral tool like a gun: you can use it for good or ill. Thus it merely exemplifies one’s own values.

Which is exactly why these people oppose it. They don’t like having to face themselves, or take responsibility for their own lives and actions.

That’s all money is, and that’s all guns are too; taking responsibility, facing yourself.

I guess what I am trying to say is the value of currency is all illusory or artificially contrived in that by itself only it has no real intrinsic value where only confidence (faith) in currency creates its applied valuation in practice. This is why more than anything economics is a measure and metric of social confidence or discontent depending on what is more prevalent.

No, I’m just saying all value is artificially contrived. I’m not saying it is meaningless or worthless. I’m not saying is useless either.

Basically I’m saying a lot of what we value is a sort of self reflective and referential mirage that we surround ourselves with.

Actually if we study the sociological underpinnings of currency or money itself it is about social control.

You nailed it! =D>

The idea is to encourage folks to argue for a gold standard OR a central bank because either way those with the gold will be in charge. The last thing they want is for a country to issue its own money, interest free, like Lincoln’s Greenbacks or the Colonist’s Colonial Scrip because it removes control of the money supply from the banksters.

“One man’s trash is another man’s treasure.”

All value is subjective and therefore an illusion. Gold is not intrinsically valuable and is therefore just as fiat (“authoritative sanction,” from Latin fiat “let it be done”) as paper money or tally sticks. You cannot eat gold or use it as an energy source, so it’s just another medium of exchange that is worth only what someone will give you for it… and you need faith that someone will give you something for it in order for it to have any value whatsoever.

I think this sums up the disconnect. Value is intersubjective, it’s based on a widespread social agreement, and the intersubjective facts are empirically demonstrable. You demonstrate the objective value of money every time you exchange it for goods and services, or exchange your labor or its fruits for cash. As such, it’s value is an objective fact about the world.

The fact that its value may change over time, and may differ from place to place, doesn’t make it subjective. Even the fact that one individual may choose to reject all money or to value it differently does not make its value subjective, any more than one person refusing to use a specific word or using a word idiosyncratically deprives that word of its usual meaning.

If the orderbook for a stock has several bids to buy at a range of prices, then what is the value of the stock? One guy says he will buy 100 shares @ $10, but another guy says he will sell 100 shares at $11. What is the value? It isn’t the “last” price because that’s history and is nothing more than a coincidence of subjective valuing.

Value is determined and issued by individuals and not a collective agreement or consensus among them as if buyers and sellers got together to set the price.

That’s right, but the fact that value changes from person to person does.

Sure if a large group of people subjectively value something similarly, then you’ll have a large pool to trade with at a seeming objective value, but that value could suddenly change on the whim of some central banker who chooses the wrong language.

If I would call a person who is 6"2’, “tall”, but you think that someone isn’t “tall” until they are at least 6’3", is “tall” meaningless?

It is both. If I have access to a large number of buyers, then the consensus price of a stock matters greatly: it will affect both the price I can sell it for, and the price others are willing to buy it for. I can sell it to the person who is willing to pay me the most, and that person’s bid will be based in part on the information that others will pay a similar price.

It’s true that each transaction is between two individuals, but then we are just two individuals talking and using words that are defined by the consensus of a speaker population. The individuals in a market make their decisions in the context of consensus around a price, it’s incomplete to look at that transaction as just concerning the two individuals involved and their purely subjective preferences.

But this is true of everything, every concept is subject to sudden changes of meaning on the basis of new information. If we discovered that apples were poisonous, the concept of ‘apple’ would change immediately. When we found out that ‘jade’ was really two different materials, the concept changed immediately. A piece of clothing that was ugly can become attractive and hip if Kim Kardashian (or whoever, I’m not up on who’s hip) suggests it’s the next big thing. A white and gold dress can become blue and black by providing more information about the lighting at the time it was photographed.

Name me an attribute of anything, I’m reasonably confident I can come up with a plausible way in which that attribute could be changed in concept by the introduction of new information. And if that’s so, then this criticism doesn’t undermine the objective truth of the value of money unless it undermines all objective truth.

If you say someone is tall, I can never know what you mean, so it’s objectively meaningless.

There is no consensus price. If I want to sell stock, I don’t ask what everyone else thinks of the idea, but even if I did, that still would be my subjective view that popularity determines value since someone else may not value it with the same method. If many participants value it the same, then it is a co-incidence of subjective valuing. Objective valuing would be more like price dictation by the state so the value would not depend on subjective opinion. For instance when gold was set at $35 by law, then everyone valued gold at $35 and what the dollar was worth was subjective.

Even when buyers bid prices up in competition, they still have a maximum price they are willing to pay. If I value a house at $100k, I can’t pay over that amount. If I get excited by the bidding process and up my bid, then I’ve changed my subjective value of the house depending on what someone else is willing to pay based on his subjective valuing of what others are willing to pay, but it’s not a consensus since many are priced out of the market and their valuing is now inconsequential. If I buy the house, I am the one who solely determined its value with my subjective assessment of things, which may have been misplaced by the excitement of the bidding process itself.

Notice how you said “consensus around a price” and not “of a price”. So the consensus price is fuzzy and not so certain because it’s a pool of subjective opinions.

No, of course, suddenness doesn’t mean anything. I was just describing how fragile subjective valuing is. When the gold price was $35, anybody could say just about anything and it wouldn’t change the price (except announcing the repeal of the law).

Maybe another example is the objective valuing of BMI for what determines “obese”. Or perhaps what BP determines “high blood pressure”, which is somewhat subjective depending which country you ask, but objective concerning all doctors in the country since their opinions don’t matter.