The US currency vs. ...

rich, i am not attempting to allude to any grand conspiracy here. i am merely pointing out that the Federal Reserve and its endless line of credit extended to the united states government has allowed it to spend itself (and our grandchildren) into some very serious debt.

the ever increasing money supply and the resulting inflation (currency devaluation) is nothing more than a patch to keep this ship afloat.

i agree that economics and "Currency creation, valuation and flow" is indeed complicated, which makes it even easier for the few to scam the many. Fractional reserve banking always has and always will be a scam. the love of money is the root of all evil.

kinda like the guy with ten maxed-out credit cards, what happens when the us government (ie we the people) has its debts called in? all of us go down with the ship.

someone someday will have to pay the piper
 
redhawk41 said:
rich, i am not attempting to allude to any grand conspiracy here.
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Agreed and apologies if I gave that impression.

Wallew or others will correct me if I'm way off here. But "fractional banking" is not an invention of the powerful. It's a measure of change in economic conditions; just as acceleration is to speed or flow is to volume. It's a natural (and required) artifice of man's universal agreement to rely on a piece of paper, cup of rice or sliver of metal to "value" a days work or a product.

Now add 1,000 different paper, rice or metal valuations to the mix. What you have is a global economy; you trading your gold coin for someone else's bowl of rice. What's each worth?

I know it all sounds pretty metaphysical....it is. Because it relies on a necessary agreement to artifice and fantasy. Manipulation for personal profit? For everone trying to manipulate the Euro down to buy it cheap with Dollars, there are those trying to manipulate the Dollar down to buy it with Euros. It requires a pretty organized world-wide conspiracy agreement to make any real difference in the long run.

The major powers can't even agree on how best to rip off UN money; let alone organize a lock-step currency scam.


TAXES....now there's much more fertile area for robbing from the poor and giving to the rich. :D
Rich
 
Rich Lucibella said:
it's been this way since the days of John Maynard Keynes.
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Just goes to show how rusty that education really is. I obviously was thinking of Adam Smith.....who only predated Keynes by TWO CENTURIES! :eek:
Rich
 
Goat standard
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:D

the way i have come to understand "fractional banking" is this:

back in the day people use to use gold coins as money. if you had any significant amount it would be quite heavy to carry. this is where the goldsmiths came in: take them your gold and they would give you a paper receipt. now if you needed to purchase a goat or something, you could give the person your receipt for your gold and he could pick it up from the goldsmith at his convenience.

well it did not take long for the shrewder goldsmiths to figure out that not every one was redeeming their gold receipts at once, so he could actually write receipts for gold that he did not actually have. the goldsmith could now use other folks' gold to further his own. also he could make loans using other peoples money beyond what commodoties he had to back them up, and charge interest on those loans.

http://www.the-privateer.com/gold1.html
 
If you want to absolutely crush the ability of American companies to compete in a worldwide market, the best way to do it is put the dollar back on the gold standard while the rest of the world isn't.

The gold standard will only work if most of the world's economic powerhouses adopt it, and the chances of that happening are nil.

You also need to remember that economies based on the gold standard are extremely suceptible to wild short-term price fluctuations and economic "panics."

The gold standard is not the panacea/solution to all ills that many people believe it to be.


Also, are people here willing to pay the enormous costs associated with maintaining the gold standard?

From http://www.econlib.org/library/Enc/GoldStandard.html

"Finally, any consideration of the pros and cons of the gold standard must include a very large negative: the resource cost of producing gold. Milton Friedman estimated the cost of maintaining a full gold coin standard for the United States in 1960 to be more than 2.5 percent of GNP. In 1990 this cost would have been $137 billion."

2.5% of the GNP just to maintain the monetary system? Holy crap!
 
While it makes U.S. goods cheaper to those overseas, there is a diminishing number of goods we export due to the fact that our manufacturing base has been largely exported to begin with. Because currency values can fluctuate wildly, no one with big money is going to suddenly start building factories or plants to make the goods we used to make just because the dollar is down against the euro, because the risk is that the value may suddenly swing the other way.

It also makes us pay a higher price for imports - imports that we have been forced to rely on thanks to our globalists in Washington who exported the manufacturing base to begin with, and have done a fine job of keeping us from using our own natural resources, such as oil, which would reduce the need for importation.
 
OK, I don't seem to be doing a very good job in explaining this.

Once more into the breech.

redhawk,

Money that is considered DEBT or 'money loaned' is strictly an accounting procedure. If you buy a new car, you 'borrowed' the money to 'buy' the new car.

No hard currency changes hands. Generally, depending upon whom loans out the money to you, it's just an electronic debit against the bank or credit union 'paying' for your new car.

It is up to you, via a lengthy legal contract that you signed, to 'repay' that 'debt'. And let me make this all just a little dizzier by reminding everyone that money 'borrowed' will be 'repaid' with FUTURE dollars that are worth less than the dollars you 'borrowed' to begin with.

Anyway, you work at your job, who 'pays' you with either direct deposit (an electronic digit) or you take a check to your bank who accepts it in good faith. At no time does MONEY (folding or hard metals) come into play.

It's ALL just a concept.

So, you take the money you deposited into your account and then you either pay your bill electronically or you write out a check to pay for your new car loan. Again, no money actually changes hands.

The amount of the 'deficit' is just a way to represent to the people that we have 'spent' more than we took in. The GOVERNMENT does that by selling bonds, among other things. Which are good faith legal instruments, saying if you give me a dollar today, I will pay you back ten dollars in a week. Kind of like what a loan shark does, but on a MUCH LARGER SCALE.

The Federal Reserve Bank requires each of it's MEMBER banks to keep so much hard currency on deposit with them, thereby allowing them to 'hold' enough hard currency in case of 'emergency situations'.

Note - LOTS of banks ARE NOT MEMBERS of the Federal Reserve Bank. Some banks are regulated at the individual STATE level, some banks are regulated by The Office of the Comptroller of the Currency (OCC), while yet others fall under the jurisdiction of the Federal Deposit Insurance Company (FDIC), or Office of Thrift Savings (OTS - Savings and loans), National Credit Union Association (Credit unions - NCUA), and I think I'm leaving out one or two others.

As an example. I owe you ten dollars for gas that I bought at your gas station. I left my wallet at home. But you know me, we go to church together, our kids go to school together and we are in the same bowling league. I write you an IOU $10 and sign my name. I promise to pay you back, but don't come back until next week. By then, you passed my IOU on to RICH who cut your hair. We both know Rich for all of the above reasons. Rich passed my IOU on to Mike Irwin when he ate at Mikes Diner for lunch. Again, Mike knows Rich, he knows you and he knows me. SO HE KNOWS that I will pay him the $10 I owe him.

Given the above example, did we actually 'CREATE MONEY'. Yes, but not really. Because if I CHOSE to not honor my note, then someone get's stiffed. But being I always honor my notes, I pay Mike the $10 when we see each other in church the next week. The circle is complete and I take the IOU and tear it into little tiny pieces and throw each piece into the fire that night after dinner. Did I just 'DESTROY MONEY'. Yes, but not really, because again, it was JUST A CONCEPT. You trusted me, Rich trusted you AND ME and Mike trusted RICH, YOU AND ME. So as long as the money is used in good faith, everything is OK.

It's when you get people who no longer have 'faith' in my ability to repay my IOU that problems occur. Think pre-WWII Germany where a loaf of bread could cost 1000 deutsch marks. The currency devalued so quickly it took wheel barrow loads full of it just to do your shopping.

chorlton,

Sure, lowering the value of US curremcy helps exports, but what happens when other countries dump the dollar in favor of the euro? Who will loan the US money? Who will buy the bonds?
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That is an EXCELLENT question. The honest answer is we will probably just loan it to ourselves. IF (when?) the US falls out of favor as the worlds currency, then we might have a problem. Does anyone remember all those boxes of US DOLLARS that were removed from storage vaults around Sadaam's palaces? Why did he keep those? Why didn't he keep diamonds, or gold, or pick your pleasure/poison?

Mainly because RIGHT NOW, the US DOLLAR is percieved to be one of the main currencies that is still viable and can always be redeemed for something of value. If that changes then money will flow to European countries. However, THE ONLY WAY that will occur is WHEN European countries STOP taxing their citizens to death OR our government raises our taxes to the same level as those paid by Europeans. It's down right scary how much most Europeans pay their government of the money they earn on a daily/weekly/monthly/yearly basis. Everyone says 'socialized' medicine is great because everyone gets what they need and it's free. Please. It's 'free' because they have paid for it a million times over in taxes ON EVERYTHING. SO, until the US either raises taxes on everything, just like Europe, MOST money will stay here. And if WE fall, like in a MAJOR depression, the world falls with us.

LAK,

While it makes U.S. goods cheaper to those overseas, there is a diminishing number of goods we export due to the fact that our manufacturing base has been largely exported to begin with.
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Ok, now I'm gonna ruin every ones day. MOST goods made overseas and IMPORTED back here to the US are made by US companies that have factories overseas. Do you think that HEINZ really NEEDS to make ketchup (or pick one of their other fifty seven factories they moved overseas) to sell it in Europe ONLY? Nah, it's just cheaper to produce it over there. China and Russia MAY be one of the few exceptions. Though Russian is being 'AMERICANIZED' on a daily basis.

SO, just because WE use foreign workers and foreign materials to produce what we here in the US consume, does not mean that we are 'losing' the ability to produce a product. We just no longer manufacture some hard goods. WE, the good old USA are the bread basket to the world. That has NOT CHANGED since we moved away from being an agrian society where EVERYBODY was a farmer. Did we cease eating our own products? No. Are there SOME places that produce specific products that are imported that we now consume. SURE. But by far, the majority of 'food products' go overseas. And that is just one industry.

Perhaps the other thing to consider is that we are a 'developed' nation that MOST nations either envy (bad) or want to emulate our little slice of heaven - that would be good old capitalism (good for them). That is because we have the most freedoms, the ability to live and succeed or die trying. Which gives our citizens the best life of all. The ability to make money and spend it on anything their heart desires.

Last, but certainly NOT LEAST, without the American CONSUMER driving this economy or worse, if the American consumer lost faith in our governments ability to back our currency, then we are all screwed. The run on banks now would make the depression in the thirties look like a cake walk.

Their is about $60 billion in currency in circulation on a daily basis. IF memory serves correctly, there is about another $40 billion in reserve, spread across this country. With our GDP being what 3.8 TRILLION dollars a year, $100 billion in hard currency just won't cover it. SO, if we the consumer ever lose faith in our own money, hang on cause it'll be a bumpy ride.

I am stepping off my soap box now. Sorry for being so long winded.
 
redhawk,

1) whom ever holds the US Treasury Bonds or any other instrument of debt issued by US government (everyone from Grandma and Grandpa to nations like Saudi Arabia)

2) the federal government is RESPONSIBLE for paying it back - where will they get that money - MOST likely from US - but make no mistake, WE are NOT the only source of revenue for the US government - for example, THE FEDERAL RESERVE sends money to the Treasury EVERY YEAR because unlike any other agency, THEY ACTUALLY are profitable

again - go rent the movie "Rollover" with Jane Fonda and Kris Kristoferson - it will give you minor insight into our 'economic' system, who controls it (not you or I for sure) and what happens IF it ever collapses
 
wallew, ok, two more questions:

1) where do "Grandma and Grandpa to nations like Saudi Arabia" get the money to buy bonds?

2) where does the money the us government gets from taxpayers, and the money the federal reserve gives to the treasury, come from?
 
Wallew-
Wow....great explanation and insights. Thanks much.

One observation.....your example of the $10 changing hands from you to Redhawk, to me to Mike is a perfect example of how natural "fractional deposits" and the "multiplier " really is. Before that single $10 bill is handed to Mike in settlement of that single IOU, it's created $30 in "money". Proof: Redhawk, Rich and Mike each book $10 income (or loan asset) on that day's books. All based on one $10 IOU.

Increase the velocity of exchange and that IOU may have changed hands 10X. Thus, $10 "creates" $100.
Rich
 
rich, is the $10 income not balanced by the $10 expense, thereby resulting in no net gain?

wallew - gas - $10 expense

redhawk - gas - $10 income
redhawk - haircut - $10 expense

rich - haircut - $10 income
rich - dinner - $10 expense

mike - dinner - $10 income

all we did here was move the $10 from wallew to mike, using redhawk and rich as proxies. no money was created or destroyed.
 
http://en.wikipedia.org/wiki/Deposit_creation_multiplier

The following steps describe one way that new money can be created. It is an example from the US.

1. The government prints a treasury bond. This is simply an IOU, a promise to pay the holder a specified sum of money on a particular date. In this example, let’s say the government issues $1,000,000 worth of bonds. Individual investors, pension funds, mutual funds, insurance agencies, banks, foreign government central banks, can all buy the bonds, effectively loaning money to the federal reserve. They do this to invest their money and receive interest in return.

2. The Federal Reserve prints a check, in the amount of $1,000,000 and makes it payable to the government. This check is the proceeds from the sale of the bonds.

3. The $1,000,000 is recorded as an asset by the Fed. (money owed to the central bank is called an "asset" by the bank) It is assumed the government, with its power to tax, will make good on its debt (this is why the people buying the bonds from the fed consider it a risk free investment. The government deposits the check in its own account.

what makes me view this as a scam:
i buy a government bond for my retirement. it collects interest. when i retire i cash the government bond. where does the money i get come from? IT CAME FROM ME because i payed the taxes that were used to redeem the bond. I PAID THE GOVERNMENT TO TAX ME!!! Not to mention the fact that someone somewhere actually profited not only from my initial bond purchase (interest) but also from the taxes that i paid (interest). if i take the income from the bond and compare it to the expense of the taxes i paid, I REALLY DIDN'T GAIN ANYTHING. plus, the money i get out is WORTH LESS THAN THE MONEY I PUT IN due to inflation. I ACTUALLY LOST MONEY! i am sorry but i can view this as nothing more than an extremely complicated ponzi scheme, A SCAM. the only folks who benefit from this are the ones at the top, the ones who create the money from nothing, create the CONCEPT, initially book the ACCOUNTING PROCEDURE.

me, i just work my whole life to hopefully break even. that is made even less likely when the value of the currency is dropping like a rock, my savings becoming more and more worthless.

the great depression of the '30s is a perfect example. many many many americans were made to suffer, while a few ACTUALLY PROFITTED from this misery. :barf: :barf: :barf:

i do indeed feel like dumping the tables of the money changers
 
redhawk41 said:
i buy a government bond for my retirement. it collects interest. when i retire i cash the government bond. where does the money i get come from? IT CAME FROM ME because i payed the taxes that were used to redeem the bond.
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You're mixing issues Red. For instance, assume you're a dyed-in-the-wool Ford F250 fan. You buy a new one every 3 years....part of the price going to pay off debts owed by Ford to Bond creditors.
Today you buy a $100K Ford Bond for your retirement. When you redeem it 40 years hence, would you argue that they paid you with your own money? Of course not: You received fair value for your purchases of those trucks.

Same with Taxes and Government Bonds (almost). The fact that you paid Taxes and bought a Bond are separate issues. Cerainly you can argue that you don't get "Fair Value" for your taxes in the form of national defense, the Justice system, roads, utilities, insurance etc....and I'd probably join you. But that hardly means there's a Ponzi scheme linkage between Taxes and the Fed system.

It simply means that you weren't getting your money's worth for all those F250 purchases. Has nothing to do with the fact that you bought the Bond and redeemed it.

See the difference?
Rich
 
rich, considering that the us government is $7,717,009,809,507.08 and growing in debt, i don't see how our taxes can be paying for anything.

except the interest on said debt. we are in big trouble here. and all the bigwigs (warren buffet) who are dropping the dollar for foreign currency know it. who will be left holding the bag? who will end up profiting?
 
Rh,
You are getting closer, but don't forget that any debt instrument issued by the US government is a fairly safe, albeit low interest producing monetary vehicle.

all we did here was move the $10 from wallew to mike, using redhawk and rich as proxies. no money was created or destroyed.
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You are correct that there was neither ANY money created NOR any money destroyed. But you are still hanging onto the definition of money as something you can fold or jingle in your pocket. From that standpoint you are 100% correct. However, from the stand point that all parties involved in my $10 scenario did receive something of value and gave something of value in return. Does that help?

Finally, if you want to know who's REALLY creating money today, you will have to skip OVER the US government and go directly to the world wide banking system. WHY?

Because in our current credit/debit society, the banks are 'creating' money out of thin are. HOW? Credit cards are the biggest culprit.

Let's say that I take B of A up on their offer of a credit card at a LOW INTEREST RATE OF 1% FOR TEN YEARS (yeah, like that's ever gonna happen). Anyway, I take that credit card that has a $5000 limit and spend it all tomorrow fixing my F250 truck.

B of A just 'created' $5000 that the FRB not only did not have a hand in it's creation, it has NO ability to control B of A and how MUCH money they chose to create in any given quarterly period.

So, there are LOTS of monetary instruments that the US government can and does sell. The US government also collects IMPORT duties on all sorts of foreign goods. This is one of the FEW duties it is actually supposed to be doing as the Constitution is currently written.

Stepping off the soap box.
 
Mike Irwin,

Indeed it would be foolish to issue currency based on the gold standand - because it is europeans that basically control the gold market. Since they own most of the mines and can control supply. The "cross of gold" was the proverbial red herring when the Owen Glass Act was passed; nothing was said about silver.

However, we do have plenty of silver, and it is something that we Congress could, as they are mandated to, regulate the value of as our currency.

Lincoln did it to avert being endebted to the central banks of europe. Kennedy did it for similar reasons. Of course both didn't live very long, and their successors quickly eliminated that.

Wallew
Secondly, the Federal Reserve Bank DOES NOT print money. They only DISTRIBUTE what the MINT makes in coin and the Bureau of Engraving prints in folding money (both TREASURY Department - my wife corrected me). They also set the prime interest rate. That's the interest rate that the FRB loans money to banks at.
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The Federal Reserve Bank issues the currency notes. The Treasury in this regard is little more than a printing facility. The interest rate also applies to what our government loans from the same corporation - our national purse does not get a discount on credit.

Careful in mixing up your federal government agencies. And yes, though the FRB IS a privately owned bank, it is OWNED by the federal government.
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Actually, it is not only a private corporation, it is owned by private individuals. Shareholders. It is not owned by the Federal government - it is chartered by the United States government. Like a private contractor.

Very cozy arrangement.
 
But you are still hanging onto the definition of money as something you can fold or jingle in your pocket.
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that is the definition of money:
mon·ey - A medium that can be exchanged for goods and services and is used as a measure of their values on the market, including among its forms a commodity such as gold, an officially issued coin or note, or a deposit in a checking account or other readily liquifiable account.
http://dictionary.reference.com/search?q=money (edit:added source)

don't forget that any debt instrument issued by the US government is a fairly safe, albeit low interest producing monetary vehicle.
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that was used to purchase a debt instrument issue by a central bank.

the point that i am trying to make is that the beginning and end of all money, credit etc in the world economy is a central bank that "are 'creating' money out of thin are[sic]". in the end we as american taxpayers are paying interest to the central banks for their profit. we are getting poorer, they are getting richer.

credit cards are just another part of this SCAM.
the declining value of the dollar is just another part of this SCAM.
 
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"Do you think that HEINZ really NEEDS to make ketchup (or pick one of their other fifty seven factories they moved overseas) to sell it in Europe ONLY?"

Wallew,

There's something else going on there, and I don't think a food manufacturer such as Heinz is a particularly good example.

It makes a lot more sense for a food company to establish plants in nations where they the perishable commodity is in good supply. That kicks the transportation costs way down.

In other words, if I can purchase tomatos in Britain for roughly what it would cost me to purchase them in the United States, it's a bonus to me if I manufacture the product in Britain as I don't have to worry about transportation costs or importation duties.

This came up some months ago when someone was whining about Heinz "outsourcing" jobs. No such thing, really, because the majority of the food products Heinz makes overseas STAY overseas.

The products that are brought back into the US from Heinz's overseas operations are normally those whose main ingredients are not produced in the US in quantities sufficient to make product here reasonable.

The number of products produced overseas and imported here for that reason is really quite small.
 
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