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Discussion in 'Political Issues' started by Ruble Noon, Apr 26, 2012.
Let's do it!! Thanks for the link LRC always tells it straight.
Somebody has been drinking tea party koolaid.
Like it or not, you can't un-ring a bell. The U.S. is no longer on a specie standard. No other economy is on a specie standard. All the emotion and protest to the contrary not withstanding, the needs of private and public commerce cannot be met by a specie system. The world has moved on. Of course those who want to pretend they can "protect" themselves from market vagarities are comforted by specie. But, they are vulnerable to what they fear.
Once again, Lew nailed it.
So every government on Earth has royally screwed up by issuing meaningless paper bills, us included, therefore we should continue down this path because "everyone else is doing it". Nice fifth-grade economic philosophy you have there.
A fed. reserve note is a promise to pay. That is all. It is not a silver or gold certificate. F.R. notes are the legal tender for all debts public and private in the U.S. That is reality. Specie is worth what someone says it is worth... what someone is willing to give in return. That is all.
If someone considers FR notes worthless, they will of course have to find some other medium of exchange. But the world is not going to go back to the quaint old days of merchants weighing little bits of metal on scales to determine payment for goods and services. And people are not going to accept returning to a limited money era when restricted availability of money constricted opportunity.
Specie has always appealed to those who are advantaged by such a traditional means of exchange. However the days are long gone when such persons can make decisions as they will. Now, if they want to advocate for a specie based currency, they are free to do so. And if they can persuade a majority to support their position, fine. But, they must first persuade a majority to support their position. Until then, they will have to deal with an economy wherein the sole recognized medium of exchange is the fed. reserve note... i.e., the dollar.
Actually "protection from market vagaries" was the reason given to justify the Fed in the first place but it's those vagaries - that primal fear of the consequences of failure - that keeps the market honest and which the Fed seeks to mitigate. Now we need protection from *its* vagaries. I mean i know we need market makers but good grief everytime Bernanke sneezes the market heaves one way or another, it makes rational price discovery difficult.
There's a way to do fiat if one is gonna do it. The goal is to make it work like specie without the limits of specie, ie: to provide adequate liquidity while making it impossible to have "unfunded mandates" which cost more than the freaking GDP and are funded by the backdoor taxation of currency dilution.
Lysander Spooner, whose anarcho-capitalist creds are impeccable, proposed an idea for such currency which one may or may not endorse (this particular one is tied to what he calls "productive stock") but it emphasises what should be the goal for any currency, whatever backs it, or even if nothing does (it could simply be tied to a population ratio, GDP or whatnot). Here's the "money quote" so to speak:
"The currency would be stable in value. The system is Capable of furnishing so much currency, that a large demand could be supplied as easily as a small one, and without causing any variation in the market value of the currency, or raising the rate of interest.
The presence or absence of specie in the country, would have no effect, either upon the amount of currency, or upon the stability of its value.
The prices of property would be stable, so far as their stability should depend upon the stability of the currency."
That's the short version, the full text to it and volumes of other valuable insight into the pros and cons of all manner of mediums of exchange can be found here: http://lysanderspooner.org/node/4
I don't necessarily endorse any particular proposal there, but he shares the realisation of many of us of the importance of a stable currency to a healthy market and provides tons of food for thought. Worth a click for sure.