Thread: Каддафи хотел заменить доллар золотом

Originally Posted by Crocodile

The long story short,

That's your idea of short?

Originally Posted by Crocodile

I hope I answered your question. Phew!

Croc, I would hate to disappoint you, but that really was a rhetorical question. (trollface). Thanks for the story anyway, thought it's a bit naive and incorrect, but it describes the main things pretty well.

Now, I'll try to cover what's missing in your story.

You were right when you said that people started to use promissory notes as the prototype of paper money. You were right when you covered where inflation comes from.
Everything is correct, but just one thing. The situation you've described has nothing to do with the principles the modern banking system works on). Before the middle of XX century, the powers used paper money simply because they were more convenient than carrying a heavy bag of gold with you, BUT if you really needed, you could ALWAYS exchange your paper money for a FIXED amount of gold (or any other value which was used to secure the paper). This was stamped on any banknote of every state. That stood for reason and helped to avoid the inflation.

Even in your story, every paper (or legal obligation) used for a payment was backed up with something. Something fixed. That tailor knew exactly what was the price for that dress and when he exchanged that paper for gold coins he willingly accepted the discount. It was his choice. Feel the difference with the present situation - money are just paper and nobody guarantees you that tomorrow they will be worth something useful.
When I say about golden currency I don't actually suggest that people deal again with real golden coins and/or bars. You can still use paper or even electronic money, but they must have a FIXED value. FIXED, something that cannot be changed in time and there must be a free acceptance of the discount. If the market situation changes, it's not money which should be depreciated, but goods and services instead. That's the idea.

P.S. And a final side note - in Middle Ages, usury was considered morally wrong, it was a state crime as well as a religious sin.

Originally Posted by Ramil

That's your idea of short?

It's really short considering the length of the entire story,

Originally Posted by Ramil

Croc, I would hate to disappoint you, but that really was a rhetorical question. (trollface).

Yes, I got that. I'm only saying the system we see today has evolved historically. It's not like someone evil had something really bad for breakfast, felt sick and started to cut the paper into pieces, write some arbitrary numbers on them and sign them by "666".

Originally Posted by Ramil

Thanks for the story anyway, thought it's a bit naive and incorrect, but it describes the main things pretty well.

Мысль изречённая - есть ложь. А мысль изречённая, сильно укороченная и с вырезанным контекстом - есть короткий рассказ.

Originally Posted by Ramil

Before the middle of XX century, the powers used paper money simply because they were more convenient than carrying a heavy bag of gold with you, BUT if you really needed, you could ALWAYS exchange your paper money for a FIXED amount of gold (or any other value which was used to secure the paper). This was stamped on any banknote of every state. That stood for reason and helped to avoid the inflation. Even in your story, every paper (or legal obligation) used for a payment was backed up with something. Something fixed.

Aha! Got you! The golden equivalent was already inflation prone. What you're saying helped to avoid a CATASTROPHIC inflation to a certain extent, but nothing more than that. It's true the gold stood behind the paper, but what stood behind the gold? In my example that was the CROP! That was the ultimate value which stood behind the golden bars. Or the villages as the direct means to produce the crop. For example, I personally do not like to wear gold, so the gold by itself worth nothing to me. However, if I can exchange the otherwise useless gold for food (as promised by the government) then I would agree to do some work for you in exchange for gold as I know that is just a temporary measure. And when the food is scarce, it would worth 10 golden bars and not 1 golden bar (=>inflation!) as those who have the food would prefer to eat it rather than share it with me. However, if I'm optimistic and I believe that the scarcity of food would be over then in the meantime I could eat the bark off the trees as well as the unlucky snails and snakes and do not exchange my 10 golden bars for food. And if that happens and the food scarcity is over, the food would cost 1 golden bar again. And I would be able to exchange them for 10 times more food that when the food was scarce. Yay! That is the only fundamental difference between the golden currency and the paper currency. In theory. But in practice, people are not ready to eat the bark and they prefer to stop spending and start collecting the golden bars because maybe the food scarcity would become worse and they would need more golden bars to pay for it in the near future thus effectively removing the golden bars from the circulation. So if you're the government what would you do? You have no golden bars to pay those in your service, and you have no golden bars to exchange for food and feed them directly. What are you going to do? You can either start promising them everything will be ok (=start issuing "promissory notes" = paper money) or stop paying. The later option was exactly the situation in the Middle Ages. They could afford themselves to call the usury the sin, because they got the service done for them FOR FREE!! Most of their servants (the ordinary people) were obliged to do free work for their masters or be imprisoned (=made to work for free anyways) or being killed. As soon as the serfdom was left behind (due to some other reasons) the governments were left without that cool choice, so they had to start issuing promises (=the paper). It had just happened historically that way. Whatever is the most practical survives in the long term.

Originally Posted by Crocodile

Aha! Got you!

Croc, I think it's pointless to compete in casuistry with you. If you have the arguments which can prove to me that the modern banking system belonging to FRS is better than the fixed value currency I'm ready to hear them.

Originally Posted by Hanna

Ok, I am pretty sure Eric C. is not a native speaker of English now.

He's Russian. I'm 99% sure of it judging by some mistakes he makes. And I get the feeling that he's been known here before by a different nick.

Originally Posted by Eric C.

That's awful. But how many people had been killed by "the initiator of the golden dinar" before that? He had to be stopped...

Much less. According to the various news sources the number is about 27 people. Even the most anti-Lybian news sources say only about less than 200 people killed.

Originally Posted by Ramil

Croc, I think it's pointless to compete in casuistry with you.

Ahm... casuistry... sophistry... I would prefer you address the points I'm making rather than sticking the labels. That would help the discussion move forward.

Originally Posted by Ramil

If you have the arguments which can prove to me that the modern banking system belonging to FRS is better than the fixed value currency I'm ready to hear them.

Wait-wait-wait... I was under impression we were discussing the pros and cons of the golden currency and not the FRS ownership of the entire world, so to speak. What Hanna usually refers to as Bretton Woods system is actually not part of the Bretton Woods accord, but was introduced much later in the 70s and is known as Nixon Shock (the unilateral disconnect between the USD and the golden standard). And that was a very bad thing at the time. And I'm not arguing about that. What I'm trying to say is that for the ordinary people (the producers and the consumers) it DOESN'T MAKE ANY PRACTICAL DIFFERENCE whether the governments use the golden standard or don't. All I'm asking you to realize that the golden standard made sense as long as gold ACCUMULATED the value HISTORICALLY as a capacitor of all previously produced goods and services. But as soon as the disconnect between the paper money and the golden standard had happened (and many people lost the value associated with their legal tender), there's no practical point to go back. Just to remind why that disconnect had happened: in the 1970-71 the US was in the Vietnam war and had a lot of expenses (and people were collecting the paper USDs as they knew the USDs were covered by the golden standard), so the US had to print more dollars thus diluting (=>inflation!) the golden value. And when people saw that, they started to accumulate more USDs just to make the government print more and causing more inflation. So, in the end the US had no choice, but to just stop the coverage and plain promise things would turn out well. That was a catastrophic point and the US deserved to being military punished at that point, but as soon as that point was over, there would be much greater issues to go back. How on Earth the conversion to golden standard would happen today without a great devaluation of all the currencies worldwide?! That situation would inevitably cause those tho won and those who lost. And those who lost would want their money back: first the economic war and the the military campaign. And the worst point is that as soon as the countries would start the war and run out of cash, they would start to print more money diluting their golden backing and so the situation would happen once again! So, what's the point to go back at this point? Just to benefit the raw material-exporting countries? That would make the goods-producing countries lose and inevitably start the war. Why to go to that trouble? Just to punish the evil FRS? If you call that simple and history-proven layout a casuistry I'm not sure what's not casuistry.