CDZ How our Monetary System Works

[JimBowie1958]

This is, believe it or not, a simplification of our monetary system and how it works.There are some erroneous notions, but overall it is accurate and visually entertaining, as I understand it.



Where it is kind of inaccurate is where the notion of 'currency' comes from and what those little pieces of paper most of us call US dollars actually are.

!. 'Currency' is whatever a bunch of people are willing to trade for other forms of wealth. If there was a constant demand for sea shells, and I had every confidence that their value would continue to increase, I might take some sea shells in trade for my car or a book, etc. Those sea shells are then 'currency' because of their relatively small size that allows me to carry them conveniently and trade with other people. Gold, silver, jewels, titles of ownership of real estate and credit notes (even zeroes in an online credit ledger like Bitcoin) are forms of currency used today.

2. 'Legal Tender' are those forms of currency that the government says one must honor no matter what your perception of their value actually is. If you owe me a debt for land I sold you, perhaps in trade for sea shells, lol, I cannot refuse to accept the legal tender in exchange for it. All I can do is haggle over the price which the court system or some arbitration company/court has to sign off on if we cannot reach agreement. I can refuse barrels of oil, silver bullion, fur skins, etc for whateer reson I want, but I cannot turn down payment of the debt owed to me in the legal tender which is FRNs (Federal Reserve Notes).

3. a US Federal Reserve bank note is not a dollar, but the promise of a dollar in credit.
Note the difference between the current USD note and older paper certificates.

The US dollar was defined by law to being seven tenths of an ounce of silver and a 'silver certificate' was essentially a pledge that the silver was on deposit in the US Treasury. You could take your silver certificate to the Treasury or local bank and get your silver in the form of coins made of silver alloy that was 70% silver.

So around 1964 we went from using certificates to using Federal Reserve credit for US dollars and stopped making our coins out of silver. From 1913 there had been little inflation till 1964 as the value of the currency was tied to this ratio of silver and 25 dollars per ounce of gold.

Now, as I perceive it, there are strengths to this FR system in that it is using a group of professionals to make and manage our currency for us at a small interest rate of 6% profit on the transactions. Essentially we are 'outsourcing' our monetary system to experts who specialize in this sort of thing, and everybody charges for their services and the banks are no different.

Strength number one: These banks have an incentive to keep value in the US dollar. A 2% inflation rate is a monetary goal to allow them room to fight deflation by lowering interest rates. Not having that room is referred to as a liquidity trap. This situation is to be avoided at all costs and the last 20 years of Japanese economy is evidence for that as it has been stuck toggling between anemic growth and recession for that whole time. These pros have no incentive to destroy their own wealth.

Strength number two: If anyone can spin confidence in a system of credit, these Houdini's can. They are the best confidence men in the world when it comes to currency and perceived value. This helps to maintain the currency value though it can be oversold and flirt with hyperinflation if that confidence is suddenly lost. They can chat other experts around the world into nearly anything and have been for about 80 years now.

Strength three: as the legal tender of the largest economy in the world by far, the US Federal Reserve Note will always be in demand, especially with the cooperation of the Arab oil nations that demand all payments for oil in the form of these Reserve notes.

So what gives the US dollar (aka Federal Reserve Notes) their value?
a) confidence in their value. This is sort of a tautology but it works in the field of currency by definition.
b) The management of that currency by the Federal Reserve which has a stake in the continued success of the currency system.
c) the demand for USD as the world reserve currency keeps demand for the USD high.
d) the position the FRN has as legal tender in the worlds largest economy also boosts this demand and thus it's value.

Now the proof of the strength of this system is that we have had sustained economic growth since 1913 with relatively little inflation as compared to the other currencies around the world (Germany, Isreal, Argentina for example), and the USD today is worth about 1/20th what it was in 1913 or 1964, as valued in silver ( old USD = 0.7 ounces of silver as compared to 0.07). While that complicates my retirement money calculations, it is over all fairly respectable.

So while the Federal Reserve banking system has its issues, success is not one of them.

 

[JimBowie1958]

The video is also a little inaccurate about how fractional reserve lending works, as I understand it.

The minimum Asset to debt ration is expressed as a percentage of the total debt a bank has loaned out, or credit it has extended, however you want to look at it, So if banks can loan out ten times as much money as they actually have in their ledgers as assets in their total checking, savings accounts, sold CDs etc then it is meeting a 10% fractional reserve lending standard. If it is 20:1 then that is a 5%, or if 50 to one it is a 2% fractional reserve.

So a bank doesnt try to loan out $90 of a $100 deposit. It just loans money at interest to whoever will take it, the only limit being the reserve limit and the credit worthiness of the person talking the loan. That is the core of the cancer that is still troubling our financial system in that the use of CDS and subprime loans, banks have exposed themselves to exponentially growing obligations. But that is a different topic.

So when a bank 'fails' it is going out of business usually due to an audit while underwater on its required reserve, or a collapse int he public's confidence in it. The latter is known as a 'bank run' and they used to happen all the time. If someone heard that their bank was going to fail, they would hurry down to the bank to take out their money (even at work you left and didnt worry about it because your coworkers and bosses were hurrying down to the bank as well). Thus it was called a bank run and the birth of the phrase 'He who panics first panics best' because only the early withdrawals got their money out in time as the bank would soon close its doors. Sometimes the rumors were pernicious lies targeting the bank by its competitors, sometimes they were true, but most often they became true if they were not to begin with.

So FDR got passed into law the FDIC that insures our deposits up to a certain amount that most people dont need to worry about. And we dont have these self=fulfilling bank runs any ore, mostly.

 

[JimBowie1958]

Great Goose why is the OP funny?

I get more funnies when I am trying to be serious, lol.

 

[usmbguest5318]

Informative OP, OP-er.

What is it you want to discuss in this thread? What follows are thoughts I have regarding the question I've posed and why I've posed it. I don't know what specifically you want to discuss in this thread. And by now, you surely know that I don't much care for vaguely/ambiguously defined topics of discussion. Thus because it's not clear to me what you want to discuss, I have no idea of which of the thoughts expressed below be even obliquely related to the topic you desire the discussion to address.

I ask first and foremost because unless parties to exchanges agree that gold, or some other medium of exchange, has a given value of "X" that is representative of wealth/worth, it's of no use as a medium of exchange, and we see clear evidence of that in the way Native Americans valued gold -- a thing to be used to make/decorate objects -- in comparison with how Europeans construed gold's worth. To the Aztecs and Incas, gold was merely another commodity to be bartered; to the Europeans it was money. A commodity's value is what it is, but the commodity itself is not money. [1]

I ask also because:

• The origin of money is well understood, though insofar as most people don't go to college and study either economics, governance or anthropology, perhaps not widely known.
  
  (Money was invented by ancient bureaucrats so they could keep track of resources they moved from one place in the government to another. In other words, it was invented to make more efficient accounting for things and activities. It didn't take long for folks to figure out that money facilitated exchange and that doing so was a boon not only to government bureaucrats, but to commercial and individual exchange. Huge oversimplification, but that's the nutshell of it. One can take my word for it, or one can click the link and read all the gory details for oneself.)
• The pros and cons of fiat currency/money (For a more basic discussion, see: Gold Standard ProCon.org) are well understood, though again, perhaps not widely known. [2]
• Shifts from commodity money to fiat money and and back to commodity money and to fiat money, and so on and so on have occurred variously over the ages. Neither money type is a new idea now nor was it any of the key points in time noted or implied in the OP video.
• Why gold, copper and silver were most commonly designated as the surrogate (money) for measuring true wealth ((1) the nature, extent and timing of human labors physical and mental, and (2) land) is also no mystery) is also well understood: they're relatively abundant, obtainable, easily measured, and, most critically, elemental.
• To the extent that something is going to function as a surrogate for real value (wealth, or in one prefers, worth, realizing wealth a positive aspect of value and worth is a normative one), it doesn't matter much what that something be. At the moment, faith is that something, and unlike gold or another tangible item, faith can be created; there need be no limit on how much of it exists. In other words, in any system that uses a tangible article as the basis for its medium of exchange, wealth creation is zero-sum game; two people cannot own/possess the same atom of gold. Quite simply, the "shell game" the video describes is what allows increasingly more people to obtain wealth and thereby enjoy increasingly more of the "stuff" humanity has created.
• The "value" and tactic of devaluing currency (allowing prices to rise) so as to finance governmental activity has been used at least since the Roman Empire. It happened then -- the denarius started out as 100% silver and gradually contained less and less silver, all the while its face value remained the same -- the same way it happens now in spite of Rome having had commodity money.

Insofar as all that and more is well known and understood, what aspect(s) of money, economics and monetary systems is it you desire the discussion here address? Was your rhetorical goal for the OP to be informative and that's it? If so, okay. I understand that. The OP is, for some folks, surely informative. I declare on that basis that the goal has been achieved.

Some other documents regarding the nature of money:

• On Simplifying the Theory of Fiat Money
• A Contribution to the Theory of Money
• What Is Bitcoin – History, How It Works, Pros & Cons | HistoryNet
  
• Should Fiat Money be Replaced with Virtual Currencies?

BTW, I concur with your concluding editorial statement.

while the Federal Reserve banking system has its issues, success is not one of them.

Notes:

1. I suspect you aren't entreating for a discussion on comparative theories of wealth creation, and I'm aware that my remark practically "shoves" the conversation in that direction. Even if you want to, I don't care to engage on a discussion of the theory and practices of wealth creation. I merely wanted to make point out that insofar as among the different cultures that collectively led us to the world in which we live, their differing assessments of what does and does not have value and how much value any given item or activity has a huge impact on what people will offer and accept in what they view as mutually beneficial exchanges. To wit, Native American peoples didn't mind giving up gold because they didn't value it the same way Europeans did.
   
   We have illustrations of that notion even in modern times. For example, Picasso's "Bull's Head" is one such example. One can be sure that to whomever gave up that bicycle seat and handlebars did not place on them the same value that Pablo did, and that individual certainly did not conceive that those objects had the value they now do.
   
   That example is useful too because it illustrates your video narrator's most important statement: real worth is found in human labors. In the case of "Bull's Head," the thing of value is the, for lack of a better word, "entertainment" value Picasso recognized (mental labor) as extant and shared with the world by transforming two mundane objects into a new object that satisfies a desire held by at least one other individual. That is the very essence of entrepreneurship: taking something and turning into something that has value to one or more others who are willing to give up a thing of value in order to receive the object/service someone else (an entrepreneur) created.
2. Insofar as I have twice used the "perhaps not widely known" qualifier, I want to point out that, AFAIC, to the extent these things aren't widely known, the reason for that is individuals' not having bothered to find out. It's not as though anyone has kept the information secret. Even the narrator in the video cites that the Fed itself has been quite clear about how money is created. The Fed is not alone in doing so, and one need only read one of the many texts on money creation to know as much.

 

[JimBowie1958]

Informative OP, OP-er.

What is it you want to discuss in this thread? What follows are thoughts I have regarding the question I've posed and why I've posed it. I don't know what specifically you want to discuss in this thread. And by now, you surely know that I don't much care for vaguely/ambiguously defined topics of discussion. Thus because it's not clear to me what you want to discuss, I have no idea of which of the thoughts expressed below be even obliquely related to the topic you desire the discussion to address.

I ask first and foremost because unless parties to exchanges agree that gold, or some other medium of exchange, has a given value of "X" that is representative of wealth/worth, it's of no use as a medium of exchange, and we see clear evidence of that in the way Native Americans valued gold -- a thing to be used to make/decorate objects -- in comparison with how Europeans construed gold's worth. To the Aztecs and Incas, gold was merely another commodity to be bartered; to the Europeans it was money. A commodity's value is what it is, but the commodity itself is not money. [1]

I ask also because:

• The origin of money is well understood, though insofar as most people don't go to college and study either economics, governance or anthropology, perhaps not widely known.
  
  (Money was invented by ancient bureaucrats so they could keep track of resources they moved from one place in the government to another. In other words, it was invented to make more efficient accounting for things and activities. It didn't take long for folks to figure out that money facilitated exchange and that doing so was a boon not only to government bureaucrats, but to commercial and individual exchange. Huge oversimplification, but that's the nutshell of it. One can take my word for it, or one can click the link and read all the gory details for oneself.)
• The pros and cons of fiat currency/money (For a more basic discussion, see: Gold Standard ProCon.org) are well understood, though again, perhaps not widely known. [2]
• Shifts from commodity money to fiat money and and back to commodity money and to fiat money, and so on and so on have occurred variously over the ages. Neither money type is a new idea now nor was it any of the key points in time noted or implied in the OP video.
• Why gold, copper and silver were most commonly designated as the surrogate (money) for measuring true wealth ((1) the nature, extent and timing of human labors physical and mental, and (2) land) is also no mystery) is also well understood: they're relatively abundant, obtainable, easily measured, and, most critically, elemental.
• To the extent that something is going to function as a surrogate for real value (wealth, or in one prefers, worth, realizing wealth a positive aspect of value and worth is a normative one), it doesn't matter much what that something be. At the moment, faith is that something, and unlike gold or another tangible item, faith can be created; there need be no limit on how much of it exists. In other words, in any system that uses a tangible article as the basis for its medium of exchange, wealth creation is zero-sum game; two people cannot own/possess the same atom of gold. Quite simply, the "shell game" the video describes is what allows increasingly more people to obtain wealth and thereby enjoy increasingly more of the "stuff" humanity has created.
• The "value" and tactic of devaluing currency (allowing prices to rise) so as to finance governmental activity has been used at least since the Roman Empire. It happened then -- the denarius started out as 100% silver and gradually contained less and less silver, all the while its face value remained the same -- the same way it happens now in spite of Rome having had commodity money.

Insofar as all that and more is well known and understood, what aspect(s) of money, economics and monetary systems is it you desire the discussion here address? Was your rhetorical goal for the OP to be informative and that's it? If so, okay. I understand that. The OP is, for some folks, surely informative. I declare on that basis that the goal has been achieved.

Some other documents regarding the nature of money:

• On Simplifying the Theory of Fiat Money
• A Contribution to the Theory of Money
• What Is Bitcoin – History, How It Works, Pros & Cons | HistoryNet
  
• Should Fiat Money be Replaced with Virtual Currencies?

BTW, I concur with your concluding editorial statement.

while the Federal Reserve banking system has its issues, success is not one of them.

Notes:

1. I suspect you aren't entreating for a discussion on comparative theories of wealth creation, and I'm aware that my remark practically "shoves" the conversation in that direction. Even if you want to, I don't care to engage on a discussion of the theory and practices of wealth creation. I merely wanted to make point out that insofar as among the different cultures that collectively led us to the world in which we live, their differing assessments of what does and does not have value and how much value any given item or activity has a huge impact on what people will offer and accept in what they view as mutually beneficial exchanges. To wit, Native American peoples didn't mind giving up gold because they didn't value it the same way Europeans did.
   
   We have illustrations of that notion even in modern times. For example, Picasso's "Bull's Head" is one such example. One can be sure that to whomever gave up that bicycle seat and handlebars did not place on them the same value that Pablo did, and that individual certainly did not conceive that those objects had the value they now do.
   
   That example is useful too because it illustrates your video narrator's most important statement: real worth is found in human labors. In the case of "Bull's Head," the thing of value is the, for lack of a better word, "entertainment" value Picasso recognized (mental labor) as extant and shared with the world by transforming two mundane objects into a new object that satisfies a desire held by at least one other individual. That is the very essence of entrepreneurship: taking something and turning into something that has value to one or more others who are willing to give up a thing of value in order to receive the object/service someone else (an entrepreneur) created.
2. Insofar as I have twice used the "perhaps not widely known" qualifier, I want to point out that, AFAIC, to the extent these things aren't widely known, the reason for that is individuals' not having bothered to find out. It's not as though anyone has kept the information secret. Even the narrator in the video cites that the Fed itself has been quite clear about how money is created. The Fed is not alone in doing so, and one need only read one of the many texts on money creation to know as much.

I would like to discuss the advantage and disadvantages of the Federal Reserve and the system for creating our money via the use of bank notes and credit.

While it does seem open to abuse, I do not think that the FR has any incentive to do so and quite the opposite in fact; they are making a good amount of wealth and why would they kill the Golden Goose?

There are some flaws and one a I think is the bifurcation of the Feds purpose; it should be simply tasked with maintaining the value of the currency and supplying it, not in keeping maximum employment, though that is entailed in the first goal to some extent.

Thank you for your thought and time in answering, Xelor. While i disagree with you most of the time, you do present well constructed and delved responses.

 

[usmbguest5318]

you do present well constructed and delved responses.

Thank you.

 

[usmbguest5318]

I would like to discuss the advantage and disadvantages of the Federal Reserve and the system for creating our money via the use of bank notes and credit.

Instead of my launching into a lengthy exposition on that, I'm going to point you to some documents that address that topic. I'm doing that because there's no shortage of really good content on that topic.

• Purposes and Functions of the Federal Reserve system -- This is a good place to start. I suspect that any reasonable discussion of the pros and cons of how the U.S., via the Fed, creates money has to be founded on what the Fed is aims expressly to do. One can't hold an organization culpable for undesired outcomes of its acting to achieve the goals it defined for itself, though one can identify the "knock on" consequences of those actions and propose the deeds be done differently so as to reduce or eliminate their undesired/unintended consequences.
  
  As any pharmaceutical add illustrates, sometimes "cures" cause outcomes that didn't express themselves prior to the cure's application and that also aren't well liked. "We have a drug that will get rid of your cancer, but as a result of taking the cure, you'll for the rest of your life piss and vomit uncontrollably." Most things have side effects and we have to choose between solutions and their consequences. That is a normative discussion.
  • See also: Government Performance and Results Act Planning Document 1997-2002
• Essays on Federal Reserve Bank Evolution, Transparency and Market Interaction
  
• The Macroeconomic Effects of the Federal Reserve’s Unconventional Monetary Policies
  
  • The above document is relevant because those policies are the non-interest techniques the Fed and other central banks use to create money. (See also: Money creation in the modern economy)

Now as for the short of what I think about the way modern banking systems create money, thereby making wealth obtainable by citizenries, well, I already introduced that idea, so I'll just repeat it for now.

To the extent that something is going to function as a surrogate for real value (wealth, or in one prefers, worth, realizing wealth a positive aspect of value and worth is a normative one), it doesn't matter much what that something be. At the moment, faith is that something, and unlike gold or another tangible item, faith can be created; there need be no limit on how much of it exists. In other words, in any system that uses a tangible article as the basis for its medium of exchange, wealth creation is zero-sum game; two people cannot own/possess the same atom of gold. Quite simply, the "shell game" the video describes is what allows increasingly more people to obtain wealth and thereby enjoy increasingly more of the "stuff" humanity has created.

It's not that I view the Fed system as perfect, but rather than I view it as perfect enough. It allows for folks like you and me to acquire wealth and our doing so does not necessarily mean we have to make someone else less wealthy. Also, I'm okay with the current system because how to build wealth in it is widely communicated. Follow the rules of the game, play the game well, and one will have enough of money.

The video's narrator accurately stated that true wealth lies in human effort. (He left out that land and its resources are the other elements of true wealth. I don't know why he did.) The implication of true wealth being in human effort is that creating more humans creates more wealth and possessing more land creates more wealth. (The narrator didn't spend much time discussing that fact and its key implication for money and wealth creation, and, IMO, he should have.)

Don't read the above to mean that every human created adds incrementally to the planet's wealth. That's definitely not so. What is so is that as long as we maintain political divisions, borders, all other things being more or less equal, the more people a nation has, the more opportunities that nation has to innovate new objects and ways of doing things. More opportunities for innovation essentially translates to more innovation. The stuff created via the innovations, in turn, become things/services for which other people are willing to exchange for some quantity of their resources. To the extent that Nation A has more innovators than does Nation B, Nation A has more true wealth. [1]

That true wealth lies also in land and its resources means that the other way for a nation state to garner more wealth (more wealth for its people) is for the state and its people to control more land. [2] Now one might think "well, duh," about my having said that, but before doing so, think about this: When the Fed was created, and later when the U.S. went from commodity-based money to fiat money, how much unclaimed land remained on the planet? The short answer is "little to none."

Given the two means of true wealth creation -- population growth and land acquisition -- and looking at the state of the world's population in the 1960s (when earnest discussions of doing so commenced) and population trends and claims to land, when the U.S. abandoned commodity money, it achieved one key thing: it put a huge delay of sorts on China's ability to overtake the U.S. in the zero-sum game that is commodity backed currencies.

• The 1960s was the era in which Mao told his people to breed like rabbits, and they did.
• Culturally, Chinese people, unlike Americans are patient. Mao and his cohorts knew that securing China's dominance wasn't going to happen in their lifetimes -- it couldn't China was too technologically backward and the populace educationally backward -- but they knew they could lay the foundations that would make it possible one day.
• Non-Socialist (ostensibly, non-Communist) heads of state (their economic advisors) were well aware of the implications of China's population boom.
• Shifting to a fiat currency essentially and greatly diminished the value of China's immense population. At the end of the day, given how U.S. leaders saw the world, what they saw in it and human nature, it came down to:
  • Stay on the gold standard and, by default, acquiesce to the U.S. losing its world dominating position, the question being that of how long it'd take to do so, not whether that outcome would happen. Just as it took China time to build its population, it took time for the economic dominance of fiat money to take hold.
  • Adopt a fiat money and lengthen the time it'd take China to bring to bear the full weight and power of its huge headcount.

As for the ponzi scheme aspects of the fiat money money system we've adopted, well, yes, eventually, it'll collapse. When? When we can no longer afford to pay the interest on our debt. The general idea is that in the interim, we can manage the debt/interest and money supply so as to buy time to figure out a better solution, one that doesn't force a zero-sum game and one that doesn't have the "ponzi" characteristics.


Note:

1. The economic leaders/thinkers who advise legislative and executive leaders in every nation know that true wealth lies in land and people. I can't say why it may be that most people don't know the same. Prior to the modern era, literally everyone know it.
   
   After all, at the outset of human civilization, the only reason kings were kings is because by physical force they were able to obtain and maintain control over land and its use. What provided them with the force to be able to do that? Breeding. Quite literally, it worked much the same as certain types of canine species do, as the pride grows in number, so too does the area of land it controls grow. What makes humans different is that unlike, say, wolves and Cape hunting dog packs, people from one "pack" expressed a willingness to combine forces with other prolifically breeding families. Arriving at an agreed upon interfamilial construct (we today call that construct international law, but in effect, international law regarding border definition serves the same purpose as piss and other scent markings, and, as Russia's incursion into the Ukraine shows us, it works about as (in-)effectively) defining the geographic limits of respective groups' territory established the idea of a nation state and fomented a relative state of peace among them. From there, literally, the rest is history.
2. The truth of what makes for real wealth is even represented the computer game Civilization. Players of it will observe that the way to win is, in essence, to have more land and people than does one's computerized opponent. The reason for that being so, is very straightforward vis a vis this topic.

 

[JimBowie1958]

I would like to discuss the advantage and disadvantages of the Federal Reserve and the system for creating our money via the use of bank notes and credit.

Instead of my launching into a lengthy exposition on that, I'm going to point you to some documents that address that topic. I'm doing that because there's no shortage of really good content on that topic.

• Purposes and Functions of the Federal Reserve system -- This is a good place to start. I suspect that any reasonable discussion of the pros and cons of how the U.S., via the Fed, creates money has to be founded on what the Fed is aims expressly to do. One can't hold an organization culpable for undesired outcomes of its acting to achieve the goals it defined for itself, though one can identify the "knock on" consequences of those actions and propose the deeds be done differently so as to reduce or eliminate their undesired/unintended consequences.
  
  As any pharmaceutical add illustrates, sometimes "cures" cause outcomes that didn't express themselves prior to the cure's application and that also aren't well liked. "We have a drug that will get rid of your cancer, but as a result of taking the cure, you'll for the rest of your life piss and vomit uncontrollably." Most things have side effects and we have to choose between solutions and their consequences. That is a normative discussion.
  • See also: Government Performance and Results Act Planning Document 1997-2002
• Essays on Federal Reserve Bank Evolution, Transparency and Market Interaction
  
• The Macroeconomic Effects of the Federal Reserve’s Unconventional Monetary Policies
  • The above document is relevant because those policies are the non-interest techniques the Fed and other central banks use to create money. (See also: Money creation in the modern economy)

Now as for the short of what I think about the way modern banking systems create money, thereby making wealth obtainable by citizenries, well, I already introduced that idea, so I'll just repeat it for now.

To the extent that something is going to function as a surrogate for real value (wealth, or in one prefers, worth, realizing wealth a positive aspect of value and worth is a normative one), it doesn't matter much what that something be. At the moment, faith is that something, and unlike gold or another tangible item, faith can be created; there need be no limit on how much of it exists. In other words, in any system that uses a tangible article as the basis for its medium of exchange, wealth creation is zero-sum game; two people cannot own/possess the same atom of gold. Quite simply, the "shell game" the video describes is what allows increasingly more people to obtain wealth and thereby enjoy increasingly more of the "stuff" humanity has created.

It's not that I view the Fed system as perfect, but rather than I view it as perfect enough. It allows for folks like you and me to acquire wealth and our doing so does not necessarily mean we have to make someone else less wealthy. Also, I'm okay with the current system because how to build wealth in it is widely communicated. Follow the rules of the game, play the game well, and one will have enough of money.

The video's narrator accurately stated that true wealth lies in human effort. (He left out that land and its resources are the other elements of true wealth. I don't know why he did.) The implication of true wealth being in human effort is that creating more humans creates more wealth and possessing more land creates more wealth. (The narrator didn't spend much time discussing that fact and its key implication for money and wealth creation, and, IMO, he should have.)

Don't read the above to mean that every human created adds incrementally to the planet's wealth. That's definitely not so. What is so is that as long as we maintain political divisions, borders, all other things being more or less equal, the more people a nation has, the more opportunities that nation has to innovate new objects and ways of doing things. More opportunities for innovation essentially translates to more innovation. The stuff created via the innovations, in turn, become things/services for which other people are willing to exchange for some quantity of their resources. To the extent that Nation A has more innovators than does Nation B, Nation A has more true wealth. [1]

That true wealth lies also in land and its resources means that the other way for a nation state to garner more wealth (more wealth for its people) is for the state and its people to control more land. [2] Now one might think "well, duh," about my having said that, but before doing so, think about this: When the Fed was created, and later when the U.S. went from commodity-based money to fiat money, how much unclaimed land remained on the planet? The short answer is "little to none."

Given the two means of true wealth creation -- population growth and land acquisition -- and looking at the state of the world's population in the 1960s (when earnest discussions of doing so commenced) and population trends and claims to land, when the U.S. abandoned commodity money, it achieved one key thing: it put a huge delay of sorts on China's ability to overtake the U.S. in the zero-sum game that is commodity backed currencies.

• The 1960s was the era in which Mao told his people to breed like rabbits, and they did.
• Culturally, Chinese people, unlike Americans are patient. Mao and his cohorts knew that securing China's dominance wasn't going to happen in their lifetimes -- it couldn't China was too technologically backward and the populace educationally backward -- but they knew they could lay the foundations that would make it possible one day.
• Non-Socialist (ostensibly, non-Communist) heads of state (their economic advisors) were well aware of the implications of China's population boom.
• Shifting to a fiat currency essentially and greatly diminished the value of China's immense population. At the end of the day, given how U.S. leaders saw the world, what they saw in it and human nature, it came down to:
  • Stay on the gold standard and, by default, acquiesce to the U.S. losing its world dominating position, the question being that of how long it'd take to do so, not whether that outcome would happen. Just as it took China time to build its population, it took time for the economic dominance of fiat money to take hold.
  • Adopt a fiat money and lengthen the time it'd take China to bring to bear the full weight and power of its huge headcount.

As for the ponzi scheme aspects of the fiat money money system we've adopted, well, yes, eventually, it'll collapse. When? When we can no longer afford to pay the interest on our debt. The general idea is that in the interim, we can manage the debt/interest and money supply so as to buy time to figure out a better solution, one that doesn't force a zero-sum game and one that doesn't have the "ponzi" characteristics.


Note:

1. The economic leaders/thinkers who advise legislative and executive leaders in every nation know that true wealth lies in land and people. I can't say why it may be that most people don't know the same. Prior to the modern era, literally everyone know it.
   
   After all, at the outset of human civilization, the only reason kings were kings is because by physical force they were able to obtain and maintain control over land and its use. What provided them with the force to be able to do that? Breeding. Quite literally, it worked much the same as certain types of canine species do, as the pride grows in number, so too does the area of land it controls grow. What makes humans different is that unlike, say, wolves and Cape hunting dog packs, people from one "pack" expressed a willingness to combine forces with other prolifically breeding families. Arriving at an agreed upon interfamilial construct (we today call that construct international law, but in effect, international law regarding border definition serves the same purpose as piss and other scent markings, and, as Russia's incursion into the Ukraine shows us, it works about as (in-)effectively) defining the geographic limits of respective groups' territory established the idea of a nation state and fomented a relative state of peace among them. From there, literally, the rest is history.
2. The truth of what makes for real wealth is even represented the computer game Civilization. Players of it will observe that the way to win is, in essence, to have more land and people than does one's computerized opponent. The reason for that being so, is very straightforward vis a vis this topic.

I really enjoyed that post. Thank you. I agree with almost all of it, and I appreciate the links you provided. Once I read them I will come back to the thread, Lord Willing, and make further comments.

As much hate as the Fed is getting today, I think it over all was a very wise move and a kind of 'third way' between having a government run central bank and nothing at all.

1) I take your reference to 'land' as synecdoche to also include resources of all types whether yielded by land, sea or even outer space. Land with little or no resources is not much wealth, or if the nation does not have the capability of retrieving the resources. The Saudis are an example of this in that until they had the capability of retrieving their oil and a market grew for it, all their petroleum was really good for was an easy source of pitch.

2) Technology is a huge wealth multiplier. The Germans had few resources until they developed modern chemistry and dyes, which caused their economy to literally explode, lol, in the 1800s. Their development of new crucible techniques increased the quality and demand for their steel, and thus their wealth.

3) I play Civ as well, Civ V lately, and it is a good very simple model of the many faceted aspects of an ethnic group as a nation. While you sound like a Mongol fan, I prefer to build cities at a rate controlled by my technology, civic policies and ability to keep the population happy. Having my capital on a river and coastline is pretty much a basic requirement for me. Trade and economic development keep my military units ahead of my competitors in experience and capability. I have a few but they are usually twice the capability of my competition and the use of siege weapons seals the military advantage. So yes, I go for science victories, lol.

 

[usmbguest5318]

I would like to discuss the advantage and disadvantages of the Federal Reserve and the system for creating our money via the use of bank notes and credit.

Instead of my launching into a lengthy exposition on that, I'm going to point you to some documents that address that topic. I'm doing that because there's no shortage of really good content on that topic.

• Purposes and Functions of the Federal Reserve system -- This is a good place to start. I suspect that any reasonable discussion of the pros and cons of how the U.S., via the Fed, creates money has to be founded on what the Fed is aims expressly to do. One can't hold an organization culpable for undesired outcomes of its acting to achieve the goals it defined for itself, though one can identify the "knock on" consequences of those actions and propose the deeds be done differently so as to reduce or eliminate their undesired/unintended consequences.
  
  As any pharmaceutical add illustrates, sometimes "cures" cause outcomes that didn't express themselves prior to the cure's application and that also aren't well liked. "We have a drug that will get rid of your cancer, but as a result of taking the cure, you'll for the rest of your life piss and vomit uncontrollably." Most things have side effects and we have to choose between solutions and their consequences. That is a normative discussion.
  • See also: Government Performance and Results Act Planning Document 1997-2002
• Essays on Federal Reserve Bank Evolution, Transparency and Market Interaction
  
• The Macroeconomic Effects of the Federal Reserve’s Unconventional Monetary Policies
  • The above document is relevant because those policies are the non-interest techniques the Fed and other central banks use to create money. (See also: Money creation in the modern economy)

Now as for the short of what I think about the way modern banking systems create money, thereby making wealth obtainable by citizenries, well, I already introduced that idea, so I'll just repeat it for now.

To the extent that something is going to function as a surrogate for real value (wealth, or in one prefers, worth, realizing wealth a positive aspect of value and worth is a normative one), it doesn't matter much what that something be. At the moment, faith is that something, and unlike gold or another tangible item, faith can be created; there need be no limit on how much of it exists. In other words, in any system that uses a tangible article as the basis for its medium of exchange, wealth creation is zero-sum game; two people cannot own/possess the same atom of gold. Quite simply, the "shell game" the video describes is what allows increasingly more people to obtain wealth and thereby enjoy increasingly more of the "stuff" humanity has created.

It's not that I view the Fed system as perfect, but rather than I view it as perfect enough. It allows for folks like you and me to acquire wealth and our doing so does not necessarily mean we have to make someone else less wealthy. Also, I'm okay with the current system because how to build wealth in it is widely communicated. Follow the rules of the game, play the game well, and one will have enough of money.

The video's narrator accurately stated that true wealth lies in human effort. (He left out that land and its resources are the other elements of true wealth. I don't know why he did.) The implication of true wealth being in human effort is that creating more humans creates more wealth and possessing more land creates more wealth. (The narrator didn't spend much time discussing that fact and its key implication for money and wealth creation, and, IMO, he should have.)

Don't read the above to mean that every human created adds incrementally to the planet's wealth. That's definitely not so. What is so is that as long as we maintain political divisions, borders, all other things being more or less equal, the more people a nation has, the more opportunities that nation has to innovate new objects and ways of doing things. More opportunities for innovation essentially translates to more innovation. The stuff created via the innovations, in turn, become things/services for which other people are willing to exchange for some quantity of their resources. To the extent that Nation A has more innovators than does Nation B, Nation A has more true wealth. [1]

That true wealth lies also in land and its resources means that the other way for a nation state to garner more wealth (more wealth for its people) is for the state and its people to control more land. [2] Now one might think "well, duh," about my having said that, but before doing so, think about this: When the Fed was created, and later when the U.S. went from commodity-based money to fiat money, how much unclaimed land remained on the planet? The short answer is "little to none."

Given the two means of true wealth creation -- population growth and land acquisition -- and looking at the state of the world's population in the 1960s (when earnest discussions of doing so commenced) and population trends and claims to land, when the U.S. abandoned commodity money, it achieved one key thing: it put a huge delay of sorts on China's ability to overtake the U.S. in the zero-sum game that is commodity backed currencies.

• The 1960s was the era in which Mao told his people to breed like rabbits, and they did.
• Culturally, Chinese people, unlike Americans are patient. Mao and his cohorts knew that securing China's dominance wasn't going to happen in their lifetimes -- it couldn't China was too technologically backward and the populace educationally backward -- but they knew they could lay the foundations that would make it possible one day.
• Non-Socialist (ostensibly, non-Communist) heads of state (their economic advisors) were well aware of the implications of China's population boom.
• Shifting to a fiat currency essentially and greatly diminished the value of China's immense population. At the end of the day, given how U.S. leaders saw the world, what they saw in it and human nature, it came down to:
  • Stay on the gold standard and, by default, acquiesce to the U.S. losing its world dominating position, the question being that of how long it'd take to do so, not whether that outcome would happen. Just as it took China time to build its population, it took time for the economic dominance of fiat money to take hold.
  • Adopt a fiat money and lengthen the time it'd take China to bring to bear the full weight and power of its huge headcount.

As for the ponzi scheme aspects of the fiat money money system we've adopted, well, yes, eventually, it'll collapse. When? When we can no longer afford to pay the interest on our debt. The general idea is that in the interim, we can manage the debt/interest and money supply so as to buy time to figure out a better solution, one that doesn't force a zero-sum game and one that doesn't have the "ponzi" characteristics.


Note:

1. The economic leaders/thinkers who advise legislative and executive leaders in every nation know that true wealth lies in land and people. I can't say why it may be that most people don't know the same. Prior to the modern era, literally everyone know it.
   
   After all, at the outset of human civilization, the only reason kings were kings is because by physical force they were able to obtain and maintain control over land and its use. What provided them with the force to be able to do that? Breeding. Quite literally, it worked much the same as certain types of canine species do, as the pride grows in number, so too does the area of land it controls grow. What makes humans different is that unlike, say, wolves and Cape hunting dog packs, people from one "pack" expressed a willingness to combine forces with other prolifically breeding families. Arriving at an agreed upon interfamilial construct (we today call that construct international law, but in effect, international law regarding border definition serves the same purpose as piss and other scent markings, and, as Russia's incursion into the Ukraine shows us, it works about as (in-)effectively) defining the geographic limits of respective groups' territory established the idea of a nation state and fomented a relative state of peace among them. From there, literally, the rest is history.
2. The truth of what makes for real wealth is even represented the computer game Civilization. Players of it will observe that the way to win is, in essence, to have more land and people than does one's computerized opponent. The reason for that being so, is very straightforward vis a vis this topic.

I really enjoyed that post. Thank you. I agree with almost all of it, and I appreciate the links you provided. Once I read them I will come back to the thread, Lord Willing, and make further comments.

As much hate as the Fed is getting today, I think it over all was a very wise move and a kind of 'third way' between having a government run central bank and nothing at all.

1) I take your reference to 'land' as synecdoche to also include resources of all types whether yielded by land, sea or even outer space. Land with little or no resources is not much wealth, or if the nation does not have the capability of retrieving the resources. The Saudis are an example of this in that until they had the capability of retrieving their oil and a market grew for it, all their petroleum was really good for was an easy source of pitch.

2) Technology is a huge wealth multiplier. The Germans had few resources until they developed modern chemistry and dyes, which caused their economy to literally explode, lol, in the 1800s. Their development of new crucible techniques increased the quality and demand for their steel, and thus their wealth.

3) I play Civ as well, Civ V lately, and it is a good very simple model of the many faceted aspects of an ethnic group as a nation. While you sound like a Mongol fan, I prefer to build cities at a rate controlled by my technology, civic policies and ability to keep the population happy. Having my capital on a river and coastline is pretty much a basic requirement for me. Trade and economic development keep my military units ahead of my competitors in experience and capability. I have a few but they are usually twice the capability of my competition and the use of siege weapons seals the military advantage. So yes, I go for science victories, lol.

I take your reference to 'land' as synecdoche to also include resources of all types whether yielded by land, sea or even outer space.

You are correct to do so.

Technology is a huge wealth multiplier.

To an extent, yes; however, in the super-fundamental level of "true wealth is found in human labor and land," it is a product of those two things, not a third thing from which "true wealth" derives because technology is product of human innovation and resources drawn from the land (or sea, or land under the sea, or outer space, etc.) I'm not disagreeing with your comment. I'm only noting that insofar as part of the video narrator's argument for what, at it core, is the return to a gold or other commodity based standard for money creation. Well, there simply is no way around the fact that on a commodity standard, there are only a two ways to increase the total supply of money:

• find more of the commodity(s) on which money is based
• increase the value of the commodity(s)

If you innovate or innovatively use technology to create/provide something something many people demand enough to yield to you, some of their commodity backed money, more of the commodity becomes yours, and until and unless something comes along that gives you are reason to yield that gold to others, your becoming monetarily wealthier means someone else is monetarily poorer, even though the few bits of commodity-backed money they gave you is ostensibly worth whatever be the "widget" you gave them in return.

Why? Because the "widget" they got from you (1) in most instances is not an accepted medium of exchange (i.e., as accountant say "cash or cash equivalent"), and (2) in most instances, the "widget" ages or gets consumed and can thus no longer be re-exchanged for the same quantity of money you paid for it.

(Why did I caveat the statements above with "in most instances?" Because money can be used to buy cash and cash equivalents. Regardless of what backs money, one can use it to buy other forms of what is effectively money -- cash equivalents -- such as gold, silver, diamonds, palladium, rhodium, etc....pretty much anything that is tangible, has a readily agreed upon value at any given point in time, and that is elemental. Quite simply, willing parties can trade trees for sheep, alarm clocks, or oil, but none of them is any good as a medium of exchange or as the commodity that backs mediums of exchange.

you sound like a Mongol fan

I haven't played that game in ages, but I seem to recall rather liking the Egyptians.

 

[gipper]

I would like to discuss the advantage and disadvantages of the Federal Reserve and the system for creating our money via the use of bank notes and credit.

Instead of my launching into a lengthy exposition on that, I'm going to point you to some documents that address that topic. I'm doing that because there's no shortage of really good content on that topic.

• Purposes and Functions of the Federal Reserve system -- This is a good place to start. I suspect that any reasonable discussion of the pros and cons of how the U.S., via the Fed, creates money has to be founded on what the Fed is aims expressly to do. One can't hold an organization culpable for undesired outcomes of its acting to achieve the goals it defined for itself, though one can identify the "knock on" consequences of those actions and propose the deeds be done differently so as to reduce or eliminate their undesired/unintended consequences.
  
  As any pharmaceutical add illustrates, sometimes "cures" cause outcomes that didn't express themselves prior to the cure's application and that also aren't well liked. "We have a drug that will get rid of your cancer, but as a result of taking the cure, you'll for the rest of your life piss and vomit uncontrollably." Most things have side effects and we have to choose between solutions and their consequences. That is a normative discussion.
  • See also: Government Performance and Results Act Planning Document 1997-2002
• Essays on Federal Reserve Bank Evolution, Transparency and Market Interaction
  
• The Macroeconomic Effects of the Federal Reserve’s Unconventional Monetary Policies
  • The above document is relevant because those policies are the non-interest techniques the Fed and other central banks use to create money. (See also: Money creation in the modern economy)

Now as for the short of what I think about the way modern banking systems create money, thereby making wealth obtainable by citizenries, well, I already introduced that idea, so I'll just repeat it for now.

To the extent that something is going to function as a surrogate for real value (wealth, or in one prefers, worth, realizing wealth a positive aspect of value and worth is a normative one), it doesn't matter much what that something be. At the moment, faith is that something, and unlike gold or another tangible item, faith can be created; there need be no limit on how much of it exists. In other words, in any system that uses a tangible article as the basis for its medium of exchange, wealth creation is zero-sum game; two people cannot own/possess the same atom of gold. Quite simply, the "shell game" the video describes is what allows increasingly more people to obtain wealth and thereby enjoy increasingly more of the "stuff" humanity has created.

It's not that I view the Fed system as perfect, but rather than I view it as perfect enough. It allows for folks like you and me to acquire wealth and our doing so does not necessarily mean we have to make someone else less wealthy. Also, I'm okay with the current system because how to build wealth in it is widely communicated. Follow the rules of the game, play the game well, and one will have enough of money.

The video's narrator accurately stated that true wealth lies in human effort. (He left out that land and its resources are the other elements of true wealth. I don't know why he did.) The implication of true wealth being in human effort is that creating more humans creates more wealth and possessing more land creates more wealth. (The narrator didn't spend much time discussing that fact and its key implication for money and wealth creation, and, IMO, he should have.)

Don't read the above to mean that every human created adds incrementally to the planet's wealth. That's definitely not so. What is so is that as long as we maintain political divisions, borders, all other things being more or less equal, the more people a nation has, the more opportunities that nation has to innovate new objects and ways of doing things. More opportunities for innovation essentially translates to more innovation. The stuff created via the innovations, in turn, become things/services for which other people are willing to exchange for some quantity of their resources. To the extent that Nation A has more innovators than does Nation B, Nation A has more true wealth. [1]

That true wealth lies also in land and its resources means that the other way for a nation state to garner more wealth (more wealth for its people) is for the state and its people to control more land. [2] Now one might think "well, duh," about my having said that, but before doing so, think about this: When the Fed was created, and later when the U.S. went from commodity-based money to fiat money, how much unclaimed land remained on the planet? The short answer is "little to none."

Given the two means of true wealth creation -- population growth and land acquisition -- and looking at the state of the world's population in the 1960s (when earnest discussions of doing so commenced) and population trends and claims to land, when the U.S. abandoned commodity money, it achieved one key thing: it put a huge delay of sorts on China's ability to overtake the U.S. in the zero-sum game that is commodity backed currencies.

• The 1960s was the era in which Mao told his people to breed like rabbits, and they did.
• Culturally, Chinese people, unlike Americans are patient. Mao and his cohorts knew that securing China's dominance wasn't going to happen in their lifetimes -- it couldn't China was too technologically backward and the populace educationally backward -- but they knew they could lay the foundations that would make it possible one day.
• Non-Socialist (ostensibly, non-Communist) heads of state (their economic advisors) were well aware of the implications of China's population boom.
• Shifting to a fiat currency essentially and greatly diminished the value of China's immense population. At the end of the day, given how U.S. leaders saw the world, what they saw in it and human nature, it came down to:
  • Stay on the gold standard and, by default, acquiesce to the U.S. losing its world dominating position, the question being that of how long it'd take to do so, not whether that outcome would happen. Just as it took China time to build its population, it took time for the economic dominance of fiat money to take hold.
  • Adopt a fiat money and lengthen the time it'd take China to bring to bear the full weight and power of its huge headcount.

As for the ponzi scheme aspects of the fiat money money system we've adopted, well, yes, eventually, it'll collapse. When? When we can no longer afford to pay the interest on our debt. The general idea is that in the interim, we can manage the debt/interest and money supply so as to buy time to figure out a better solution, one that doesn't force a zero-sum game and one that doesn't have the "ponzi" characteristics.


Note:

1. The economic leaders/thinkers who advise legislative and executive leaders in every nation know that true wealth lies in land and people. I can't say why it may be that most people don't know the same. Prior to the modern era, literally everyone know it.
   
   After all, at the outset of human civilization, the only reason kings were kings is because by physical force they were able to obtain and maintain control over land and its use. What provided them with the force to be able to do that? Breeding. Quite literally, it worked much the same as certain types of canine species do, as the pride grows in number, so too does the area of land it controls grow. What makes humans different is that unlike, say, wolves and Cape hunting dog packs, people from one "pack" expressed a willingness to combine forces with other prolifically breeding families. Arriving at an agreed upon interfamilial construct (we today call that construct international law, but in effect, international law regarding border definition serves the same purpose as piss and other scent markings, and, as Russia's incursion into the Ukraine shows us, it works about as (in-)effectively) defining the geographic limits of respective groups' territory established the idea of a nation state and fomented a relative state of peace among them. From there, literally, the rest is history.
2. The truth of what makes for real wealth is even represented the computer game Civilization. Players of it will observe that the way to win is, in essence, to have more land and people than does one's computerized opponent. The reason for that being so, is very straightforward vis a vis this topic.

I really enjoyed that post. Thank you. I agree with almost all of it, and I appreciate the links you provided. Once I read them I will come back to the thread, Lord Willing, and make further comments.

As much hate as the Fed is getting today, I think it over all was a very wise move and a kind of 'third way' between having a government run central bank and nothing at all.

1) I take your reference to 'land' as synecdoche to also include resources of all types whether yielded by land, sea or even outer space. Land with little or no resources is not much wealth, or if the nation does not have the capability of retrieving the resources. The Saudis are an example of this in that until they had the capability of retrieving their oil and a market grew for it, all their petroleum was really good for was an easy source of pitch.

2) Technology is a huge wealth multiplier. The Germans had few resources until they developed modern chemistry and dyes, which caused their economy to literally explode, lol, in the 1800s. Their development of new crucible techniques increased the quality and demand for their steel, and thus their wealth.

3) I play Civ as well, Civ V lately, and it is a good very simple model of the many faceted aspects of an ethnic group as a nation. While you sound like a Mongol fan, I prefer to build cities at a rate controlled by my technology, civic policies and ability to keep the population happy. Having my capital on a river and coastline is pretty much a basic requirement for me. Trade and economic development keep my military units ahead of my competitors in experience and capability. I have a few but they are usually twice the capability of my competition and the use of siege weapons seals the military advantage. So yes, I go for science victories, lol.

I take your reference to 'land' as synecdoche to also include resources of all types whether yielded by land, sea or even outer space.

You are correct to do so.

Technology is a huge wealth multiplier.

To an extent, yes; however, in the super-fundamental level of "true wealth is found in human labor and land," it is a product of those two things, not a third thing from which "true wealth" derives because technology is product of human innovation and resources drawn from the land (or sea, or land under the sea, or outer space, etc.) I'm not disagreeing with your comment. I'm only noting that insofar as part of the video narrator's argument for what, at it core, is the return to a gold or other commodity based standard for money creation. Well, there simply is no way around the fact that on a commodity standard, there are only a two ways to increase the total supply of money:

• find more of the commodity(s) on which money is based
• increase the value of the commodity(s)

If you innovate or innovatively use technology to create/provide something something many people demand enough to yield to you, some of their commodity backed money, more of the commodity becomes yours, and until and unless something comes along that gives you are reason to yield that gold to others, your becoming monetarily wealthier means someone else is monetarily poorer, even though the few bits of commodity-backed money they gave you is ostensibly worth whatever be the "widget" you gave them in return.

Why? Because the "widget" they got from you (1) in most instances is not an accepted medium of exchange (i.e., as accountant say "cash or cash equivalent"), and (2) in most instances, the "widget" ages or gets consumed and can thus no longer be re-exchanged for the same quantity of money you paid for it.

(Why did I caveat the statements above with "in most instances?" Because money can be used to buy cash and cash equivalents. Regardless of what backs money, one can use it to buy other forms of what is effectively money -- cash equivalents -- such as gold, silver, diamonds, palladium, rhodium, etc....pretty much anything that is tangible, has a readily agreed upon value at any given point in time, and that is elemental. Quite simply, willing parties can trade trees for sheep, alarm clocks, or oil, but none of them is any good as a medium of exchange or as the commodity that backs mediums of exchange.

you sound like a Mongol fan

I haven't played that game in ages, but I seem to recall rather liking the Egyptians.

Agree with you both, that SOME aspects of the central bank are effective. That said, many aspects of it are not and they are terribly harmful. At least, as they apply to the American people. One of the major drawbacks of the system, is it has allowed the central government to grow in size and power.

One can't evaluate the central bank, without also looking at ALL of it's consequences. Would we have a progressive enormously powerful and huge central government, without the central bank? Would we have a imperialist and interventionist foriegn policy seeking control over the world and causing non-stop war, without the Fed? Many say no.

I think this column spells it out rather well....

Then there is the 16th Amendment. It introduced the progressive income tax, one of the most prominent jewels in the progressive crown. Changing the federal government's revenue base from tariffs, which are largely self-limiting, removed a fundamental limit to the growth of federal power. In 1910, the government's revenue looked much like how it did in the time of George Washington: about 3 percent of GDP, earned primarily through tariffs. The 16th Amendment overthrew the limited government of the Founders by opening the door to the unlimited revenue needed to finance the central government's unending expansion into every area of American life.

It also corrupted the federal government. The federal government once had a reputation for being fairly free of corruption. In part, this was simply because it was limited government. The bigger it got and the more areas of life and the economy it entered into, the greater were the opportunities for corruption. Today, the fantastic corruption of the Clintons is only the tip of the iceberg. Their brazenness tells you what you already know: Washington is corrupt on a scale undreamed of by the Founders.

As it happens, this is precisely the point where the 16th and the 17th Amendments shake hands. You can understand this better if you ask yourself why the federal tax code in 2016 swelled to 75,000 pages. Those pages are filled with favors and special deals. As a result of the 17th Amendment, senators must chase after individual voters just as their colleagues in the House have always done – but in all but the few least populated states, they have to chase millions more voters. That costs money. Instead of watching out for their states' interests, as was originally intended, senators now must keep their focus on raising truly fabulous sums to run for office under the new system. This is where lobbyists come into the picture. They have clients with money who need favors and special deals, and senators need money, and lots of it.

Also in the banner year of 1913, Woodrow Wilson signed the Federal Reserve Act, creating a central bank. The progressives proposed the central bank as a government solution to bank panics. A bank panic occurs when too many depositors want their money at the same time. Banks had always managed bank panics among themselves, sometimes heroically, not always perfectly. The central bank was going to change this by providing a government solution. The Fed failed at the first crisis, and failed spectacularly. What it did then and what it did not do in that crisis seem inexplicable. You or I could have done a better job. In any case, bungling by the Federal Reserve helped to turn an economic downturn into the Great Depression.

The Federal Reserve Act did accomplish something: it opened the door to the complete socialization of America's currency. Instead of providing liquidity to sound banks during a panic as the legislation provided for, the Fed has taken control of the currency, an enormous, essentially unchecked, and unconstitutional power over your wealth. And although it failed spectacularly at the job it was supposed to do, the Federal Reserve did succeed in debauching the American dollar. The value of the dollar has collapsed; one 1910 dollar would be worth $24.89 in 2017. According to my calculations, that means your dollar today is worth about 4 cents compared to the days when people used to say "sound as the dollar."

The Fed has been using excess money creation as a hidden way of collecting taxes for the central government. The total amount of wealth the Fed has confiscated in this way is breathtaking.

John Maynard Keynes did a great deal of harm, but he did say at least one true thing:

By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens. By this method they not only confiscate, but they confiscate arbitrarily; and, while the process impoverishes many, it actually enriches some.

Read more: Articles: 1913: The Turning Point
Follow us: @AmericanThinker on Twitter | AmericanThinker on Facebook

 

[usmbguest5318]

I would like to discuss the advantage and disadvantages of the Federal Reserve and the system for creating our money via the use of bank notes and credit.

Instead of my launching into a lengthy exposition on that, I'm going to point you to some documents that address that topic. I'm doing that because there's no shortage of really good content on that topic.

• Purposes and Functions of the Federal Reserve system -- This is a good place to start. I suspect that any reasonable discussion of the pros and cons of how the U.S., via the Fed, creates money has to be founded on what the Fed is aims expressly to do. One can't hold an organization culpable for undesired outcomes of its acting to achieve the goals it defined for itself, though one can identify the "knock on" consequences of those actions and propose the deeds be done differently so as to reduce or eliminate their undesired/unintended consequences.
  
  As any pharmaceutical add illustrates, sometimes "cures" cause outcomes that didn't express themselves prior to the cure's application and that also aren't well liked. "We have a drug that will get rid of your cancer, but as a result of taking the cure, you'll for the rest of your life piss and vomit uncontrollably." Most things have side effects and we have to choose between solutions and their consequences. That is a normative discussion.
  • See also: Government Performance and Results Act Planning Document 1997-2002
• Essays on Federal Reserve Bank Evolution, Transparency and Market Interaction
  
• The Macroeconomic Effects of the Federal Reserve’s Unconventional Monetary Policies
  • The above document is relevant because those policies are the non-interest techniques the Fed and other central banks use to create money. (See also: Money creation in the modern economy)

Now as for the short of what I think about the way modern banking systems create money, thereby making wealth obtainable by citizenries, well, I already introduced that idea, so I'll just repeat it for now.

To the extent that something is going to function as a surrogate for real value (wealth, or in one prefers, worth, realizing wealth a positive aspect of value and worth is a normative one), it doesn't matter much what that something be. At the moment, faith is that something, and unlike gold or another tangible item, faith can be created; there need be no limit on how much of it exists. In other words, in any system that uses a tangible article as the basis for its medium of exchange, wealth creation is zero-sum game; two people cannot own/possess the same atom of gold. Quite simply, the "shell game" the video describes is what allows increasingly more people to obtain wealth and thereby enjoy increasingly more of the "stuff" humanity has created.

It's not that I view the Fed system as perfect, but rather than I view it as perfect enough. It allows for folks like you and me to acquire wealth and our doing so does not necessarily mean we have to make someone else less wealthy. Also, I'm okay with the current system because how to build wealth in it is widely communicated. Follow the rules of the game, play the game well, and one will have enough of money.

The video's narrator accurately stated that true wealth lies in human effort. (He left out that land and its resources are the other elements of true wealth. I don't know why he did.) The implication of true wealth being in human effort is that creating more humans creates more wealth and possessing more land creates more wealth. (The narrator didn't spend much time discussing that fact and its key implication for money and wealth creation, and, IMO, he should have.)

Don't read the above to mean that every human created adds incrementally to the planet's wealth. That's definitely not so. What is so is that as long as we maintain political divisions, borders, all other things being more or less equal, the more people a nation has, the more opportunities that nation has to innovate new objects and ways of doing things. More opportunities for innovation essentially translates to more innovation. The stuff created via the innovations, in turn, become things/services for which other people are willing to exchange for some quantity of their resources. To the extent that Nation A has more innovators than does Nation B, Nation A has more true wealth. [1]

That true wealth lies also in land and its resources means that the other way for a nation state to garner more wealth (more wealth for its people) is for the state and its people to control more land. [2] Now one might think "well, duh," about my having said that, but before doing so, think about this: When the Fed was created, and later when the U.S. went from commodity-based money to fiat money, how much unclaimed land remained on the planet? The short answer is "little to none."

Given the two means of true wealth creation -- population growth and land acquisition -- and looking at the state of the world's population in the 1960s (when earnest discussions of doing so commenced) and population trends and claims to land, when the U.S. abandoned commodity money, it achieved one key thing: it put a huge delay of sorts on China's ability to overtake the U.S. in the zero-sum game that is commodity backed currencies.

• The 1960s was the era in which Mao told his people to breed like rabbits, and they did.
• Culturally, Chinese people, unlike Americans are patient. Mao and his cohorts knew that securing China's dominance wasn't going to happen in their lifetimes -- it couldn't China was too technologically backward and the populace educationally backward -- but they knew they could lay the foundations that would make it possible one day.
• Non-Socialist (ostensibly, non-Communist) heads of state (their economic advisors) were well aware of the implications of China's population boom.
• Shifting to a fiat currency essentially and greatly diminished the value of China's immense population. At the end of the day, given how U.S. leaders saw the world, what they saw in it and human nature, it came down to:
  • Stay on the gold standard and, by default, acquiesce to the U.S. losing its world dominating position, the question being that of how long it'd take to do so, not whether that outcome would happen. Just as it took China time to build its population, it took time for the economic dominance of fiat money to take hold.
  • Adopt a fiat money and lengthen the time it'd take China to bring to bear the full weight and power of its huge headcount.

As for the ponzi scheme aspects of the fiat money money system we've adopted, well, yes, eventually, it'll collapse. When? When we can no longer afford to pay the interest on our debt. The general idea is that in the interim, we can manage the debt/interest and money supply so as to buy time to figure out a better solution, one that doesn't force a zero-sum game and one that doesn't have the "ponzi" characteristics.


Note:

1. The economic leaders/thinkers who advise legislative and executive leaders in every nation know that true wealth lies in land and people. I can't say why it may be that most people don't know the same. Prior to the modern era, literally everyone know it.
   
   After all, at the outset of human civilization, the only reason kings were kings is because by physical force they were able to obtain and maintain control over land and its use. What provided them with the force to be able to do that? Breeding. Quite literally, it worked much the same as certain types of canine species do, as the pride grows in number, so too does the area of land it controls grow. What makes humans different is that unlike, say, wolves and Cape hunting dog packs, people from one "pack" expressed a willingness to combine forces with other prolifically breeding families. Arriving at an agreed upon interfamilial construct (we today call that construct international law, but in effect, international law regarding border definition serves the same purpose as piss and other scent markings, and, as Russia's incursion into the Ukraine shows us, it works about as (in-)effectively) defining the geographic limits of respective groups' territory established the idea of a nation state and fomented a relative state of peace among them. From there, literally, the rest is history.
2. The truth of what makes for real wealth is even represented the computer game Civilization. Players of it will observe that the way to win is, in essence, to have more land and people than does one's computerized opponent. The reason for that being so, is very straightforward vis a vis this topic.

I really enjoyed that post. Thank you. I agree with almost all of it, and I appreciate the links you provided. Once I read them I will come back to the thread, Lord Willing, and make further comments.

As much hate as the Fed is getting today, I think it over all was a very wise move and a kind of 'third way' between having a government run central bank and nothing at all.

1) I take your reference to 'land' as synecdoche to also include resources of all types whether yielded by land, sea or even outer space. Land with little or no resources is not much wealth, or if the nation does not have the capability of retrieving the resources. The Saudis are an example of this in that until they had the capability of retrieving their oil and a market grew for it, all their petroleum was really good for was an easy source of pitch.

2) Technology is a huge wealth multiplier. The Germans had few resources until they developed modern chemistry and dyes, which caused their economy to literally explode, lol, in the 1800s. Their development of new crucible techniques increased the quality and demand for their steel, and thus their wealth.

3) I play Civ as well, Civ V lately, and it is a good very simple model of the many faceted aspects of an ethnic group as a nation. While you sound like a Mongol fan, I prefer to build cities at a rate controlled by my technology, civic policies and ability to keep the population happy. Having my capital on a river and coastline is pretty much a basic requirement for me. Trade and economic development keep my military units ahead of my competitors in experience and capability. I have a few but they are usually twice the capability of my competition and the use of siege weapons seals the military advantage. So yes, I go for science victories, lol.

I take your reference to 'land' as synecdoche to also include resources of all types whether yielded by land, sea or even outer space.

You are correct to do so.

Technology is a huge wealth multiplier.

To an extent, yes; however, in the super-fundamental level of "true wealth is found in human labor and land," it is a product of those two things, not a third thing from which "true wealth" derives because technology is product of human innovation and resources drawn from the land (or sea, or land under the sea, or outer space, etc.) I'm not disagreeing with your comment. I'm only noting that insofar as part of the video narrator's argument for what, at it core, is the return to a gold or other commodity based standard for money creation. Well, there simply is no way around the fact that on a commodity standard, there are only a two ways to increase the total supply of money:

• find more of the commodity(s) on which money is based
• increase the value of the commodity(s)

If you innovate or innovatively use technology to create/provide something something many people demand enough to yield to you, some of their commodity backed money, more of the commodity becomes yours, and until and unless something comes along that gives you are reason to yield that gold to others, your becoming monetarily wealthier means someone else is monetarily poorer, even though the few bits of commodity-backed money they gave you is ostensibly worth whatever be the "widget" you gave them in return.

Why? Because the "widget" they got from you (1) in most instances is not an accepted medium of exchange (i.e., as accountant say "cash or cash equivalent"), and (2) in most instances, the "widget" ages or gets consumed and can thus no longer be re-exchanged for the same quantity of money you paid for it.

(Why did I caveat the statements above with "in most instances?" Because money can be used to buy cash and cash equivalents. Regardless of what backs money, one can use it to buy other forms of what is effectively money -- cash equivalents -- such as gold, silver, diamonds, palladium, rhodium, etc....pretty much anything that is tangible, has a readily agreed upon value at any given point in time, and that is elemental. Quite simply, willing parties can trade trees for sheep, alarm clocks, or oil, but none of them is any good as a medium of exchange or as the commodity that backs mediums of exchange.

you sound like a Mongol fan

I haven't played that game in ages, but I seem to recall rather liking the Egyptians.

Agree with you both, that SOME aspects of the central bank are effective. That said, many aspects of it are not and they are terribly harmful. At least, as they apply to the American people. One of the major drawbacks of the system, is it has allowed the central government to grow in size and power.

One can't evaluate the central bank, without also looking at ALL of it's consequences. Would we have a progressive enormously powerful and huge central government, without the central bank? Would we have a imperialist and interventionist foriegn policy seeking control over the world and causing non-stop war, without the Fed? Many say no.

I think this column spells it out rather well....

Then there is the 16th Amendment. It introduced the progressive income tax, one of the most prominent jewels in the progressive crown. Changing the federal government's revenue base from tariffs, which are largely self-limiting, removed a fundamental limit to the growth of federal power. In 1910, the government's revenue looked much like how it did in the time of George Washington: about 3 percent of GDP, earned primarily through tariffs. The 16th Amendment overthrew the limited government of the Founders by opening the door to the unlimited revenue needed to finance the central government's unending expansion into every area of American life.

It also corrupted the federal government. The federal government once had a reputation for being fairly free of corruption. In part, this was simply because it was limited government. The bigger it got and the more areas of life and the economy it entered into, the greater were the opportunities for corruption. Today, the fantastic corruption of the Clintons is only the tip of the iceberg. Their brazenness tells you what you already know: Washington is corrupt on a scale undreamed of by the Founders.

As it happens, this is precisely the point where the 16th and the 17th Amendments shake hands. You can understand this better if you ask yourself why the federal tax code in 2016 swelled to 75,000 pages. Those pages are filled with favors and special deals. As a result of the 17th Amendment, senators must chase after individual voters just as their colleagues in the House have always done – but in all but the few least populated states, they have to chase millions more voters. That costs money. Instead of watching out for their states' interests, as was originally intended, senators now must keep their focus on raising truly fabulous sums to run for office under the new system. This is where lobbyists come into the picture. They have clients with money who need favors and special deals, and senators need money, and lots of it.

Also in the banner year of 1913, Woodrow Wilson signed the Federal Reserve Act, creating a central bank. The progressives proposed the central bank as a government solution to bank panics. A bank panic occurs when too many depositors want their money at the same time. Banks had always managed bank panics among themselves, sometimes heroically, not always perfectly. The central bank was going to change this by providing a government solution. The Fed failed at the first crisis, and failed spectacularly. What it did then and what it did not do in that crisis seem inexplicable. You or I could have done a better job. In any case, bungling by the Federal Reserve helped to turn an economic downturn into the Great Depression.

The Federal Reserve Act did accomplish something: it opened the door to the complete socialization of America's currency. Instead of providing liquidity to sound banks during a panic as the legislation provided for, the Fed has taken control of the currency, an enormous, essentially unchecked, and unconstitutional power over your wealth. And although it failed spectacularly at the job it was supposed to do, the Federal Reserve did succeed in debauching the American dollar. The value of the dollar has collapsed; one 1910 dollar would be worth $24.89 in 2017. According to my calculations, that means your dollar today is worth about 4 cents compared to the days when people used to say "sound as the dollar."

The Fed has been using excess money creation as a hidden way of collecting taxes for the central government. The total amount of wealth the Fed has confiscated in this way is breathtaking.

John Maynard Keynes did a great deal of harm, but he did say at least one true thing:

By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens. By this method they not only confiscate, but they confiscate arbitrarily; and, while the process impoverishes many, it actually enriches some.

Read more: Articles: 1913: The Turning Point
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One of the major drawbacks of the system, is it has allowed the central government to grow in size and power.

Be that as it may, in the context whereby, as the OP video presents it, there are two choices: fiat money or commodity money. Quite simply, fiat money makes it possible for more people to peaceably obtain wealth and enjoy the fruits thereof. Accordingly, even though/if fiat money may permit (encourage?) increased government size and power, I see that as an acceptable trade-off for more people having greater access to and opportunity to obtain or create wealth for themselves and others.

 

[usmbguest5318]

The Federal Reserve Act did accomplish something: it opened the door to the complete socialization of America's currency. Instead of providing liquidity to sound banks during a panic as the legislation provided for, the Fed has taken control of the currency, an enormous, essentially unchecked, and unconstitutional power over your wealth.

OT:
I won't lie. I've about "had it up to here" with people banding about the "it's unconstitutional" line. I have because the fact of the matter is that what is and is not constitutional is whatever the SCOTUS, either explicitly, by inference or acquiescence, says is or isn't. Period. Accordingly, I construe such claims as merely inflammatory, I construe their makers, at least in part, as demagogues. And I have no time and little patience for demagoguery and demagogues.

Obviously, one can believe X or Y is or isn't constitutional, but absent one making one's own legal-scholar-grade argument with reference to specific case law and precedents, or presenting a constitutional scholar's argument (or legal brief) to support one's "it's unconstitutional" claim, I will fully ignore "it's not constitutional" arguments and/or claims that materially rely in part or totally one such an assertion being so. The exception being that it so and the SCOTUS has ruled thus.

 

[JimBowie1958]

Well, there simply is no way around the fact that on a commodity standard, there are only a two ways to increase the total supply of money:

• find more of the commodity(s) on which money is based
• increase the value of the commodity(s)

Well you could also expand what commodities back your currency, like we did when we began using silver in addition to gold to back the USD.

What would be a very workable system, IMO, would be to use a basket of precious metals that the nation honoring their currency can set at the time of redemption. Say the issuing nation also backs its currency with ingots of ruthenium, rhodium, palladium, osmium, iridium, copper, brass/bronze, nickel, even special alloys of stainless steel that are highly useful in industry but difficult to manufacture. The nation could peg their currency to one of these and promise to redeem their currency in equivalent value at current market conditions of these various precious metals.

So some billionaire wants to redeem his currency in metal commodities, the Treasury gives him an amount of a combination on hand of these metals that total the worth of the currency redeemed. This precludes the kind of crap deGaul tried to pull on us in the late '70s.

If you innovate or innovatively use technology to create/provide something something many people demand enough to yield to you, some of their commodity backed money, more of the commodity becomes yours, and until and unless something comes along that gives you are reason to yield that gold to others, your becoming monetarily wealthier means someone else is monetarily poorer, even though the few bits of commodity-backed money they gave you is ostensibly worth whatever be the "widget" you gave them in return.

Why? Because the "widget" they got from you (1) in most instances is not an accepted medium of exchange (i.e., as accountant say "cash or cash equivalent"), and (2) in most instances, the "widget" ages or gets consumed and can thus no longer be re-exchanged for the same quantity of money you paid for it.

While I agree that commodities need to have a durability of some length of time, in a barter system it is not such a problem in itself as most traders already recognize the temporary nature of what they receive. Hence breedable cattle are worth more than a manufactured widget.

(Why did I caveat the statements above with "in most instances?" Because money can be used to buy cash and cash equivalents. Regardless of what backs money, one can use it to buy other forms of what is effectively money -- cash equivalents -- such as gold, silver, diamonds, palladium, rhodium, etc....pretty much anything that is tangible, has a readily agreed upon value at any given point in time, and that is elemental. Quite simply, willing parties can trade trees for sheep, alarm clocks, or oil, but none of them is any good as a medium of exchange or as the commodity that backs mediums of exchange.

But even the widget has some value or else why would people trade cash for them? In the long run they are always on a losing end of the trade.

If you took X number of sheep in exchange for Y cash, you come out ahead in the long run as you can easily X more sheep and sell again while your cash is growing at current anemic interest, lol.

you sound like a Mongol fan

I haven't played that game in ages, but I seem to recall rather liking the Egyptians.

Interesting, as I am currently playing a game with the Egyptians right now.

Civ5 and Galactic Civilization are very interesting games that keep me awake all hours of the night.

 

[JimBowie1958]

The Federal Reserve Act did accomplish something: it opened the door to the complete socialization of America's currency. Instead of providing liquidity to sound banks during a panic as the legislation provided for, the Fed has taken control of the currency, an enormous, essentially unchecked, and unconstitutional power over your wealth.

OT:
I won't lie. I've about "had it up to here" with people banding about the "it's unconstitutional" line. I have because the fact of the matter is that what is and is not constitutional is whatever the SCOTUS, either explicitly, by inference or acquiescence, says is or isn't. Period. Accordingly, I construe such claims as merely inflammatory, I construe their makers, at least in part, as demagogues. And I have no time and little patience for demagoguery and demagogues.

Obviously, one can believe X or Y is or isn't constitutional, but absent one making one's own legal-scholar-grade argument with reference to specific case law and precedents, or presenting a constitutional scholar's argument (or legal brief) to support one's "it's unconstitutional" claim, I will fully ignore "it's not constitutional" arguments and/or claims that materially rely in part or totally one such an assertion being so. The exception being that it so and the SCOTUS has ruled thus.

What the FR is doing is not unconstitutional because they are not making USD but only CREDIT for USD instead. I only assume that they have bullion or equities of some percentage to back their credit somewhere if it ever came to an outside audit.

 

[usmbguest5318]

Well, there simply is no way around the fact that on a commodity standard, there are only a two ways to increase the total supply of money:

• find more of the commodity(s) on which money is based
• increase the value of the commodity(s)

Well you could also expand what commodities back your currency, like we did when we began using silver in addition to gold to back the USD.

What would be a very workable system, IMO, would be to use a basket of precious metals that the nation honoring their currency can set at the time of redemption. Say the issuing nation also backs its currency with ingots of ruthenium, rhodium, palladium, osmium, iridium, copper, brass/bronze, nickel, even special alloys of stainless steel that are highly useful in industry but difficult to manufacture. The nation could peg their currency to one of these and promise to redeem their currency in equivalent value at current market conditions of these various precious metals.

So some billionaire wants to redeem his currency in metal commodities, the Treasury gives him an amount of a combination on hand of these metals that total the worth of the currency redeemed. This precludes the kind of crap deGaul tried to pull on us in the late '70s.

If you innovate or innovatively use technology to create/provide something something many people demand enough to yield to you, some of their commodity backed money, more of the commodity becomes yours, and until and unless something comes along that gives you are reason to yield that gold to others, your becoming monetarily wealthier means someone else is monetarily poorer, even though the few bits of commodity-backed money they gave you is ostensibly worth whatever be the "widget" you gave them in return.

Why? Because the "widget" they got from you (1) in most instances is not an accepted medium of exchange (i.e., as accountant say "cash or cash equivalent"), and (2) in most instances, the "widget" ages or gets consumed and can thus no longer be re-exchanged for the same quantity of money you paid for it.

While I agree that commodities need to have a durability of some length of time, in a barter system it is not such a problem in itself as most traders already recognize the temporary nature of what they receive. Hence breedable cattle are worth more than a manufactured widget.

(Why did I caveat the statements above with "in most instances?" Because money can be used to buy cash and cash equivalents. Regardless of what backs money, one can use it to buy other forms of what is effectively money -- cash equivalents -- such as gold, silver, diamonds, palladium, rhodium, etc....pretty much anything that is tangible, has a readily agreed upon value at any given point in time, and that is elemental. Quite simply, willing parties can trade trees for sheep, alarm clocks, or oil, but none of them is any good as a medium of exchange or as the commodity that backs mediums of exchange.

But even the widget has some value or else why would people trade cash for them? In the long run they are always on a losing end of the trade.

If you took X number of sheep in exchange for Y cash, you come out ahead in the long run as you can easily X more sheep and sell again while your cash is growing at current anemic interest, lol.

you sound like a Mongol fan

I haven't played that game in ages, but I seem to recall rather liking the Egyptians.

Interesting, as I am currently playing a game with the Egyptians right now.

Civ5 and Galactic Civilization are very interesting games that keep me awake all hours of the night.

While I agree that commodities need to have a durability of some length of time, in a barter system it is not such a problem

Okay....But aren't we discussing monetary systems and exchange within them, not barter systems? Obviously, one can engage in barter without regard to whether one dwells in a monetary economy, but that'd be bartering transactions made by parties within a monetary system, not bartering transactions made by parties within a barter system.

In the long run they are always on a losing end of the trade.

Whether that's so depends on the long run utility each party obtains from the transaction. How much utility would you and I get from buying pea plants/seeds? How much utility might Gregor Mendel have obtained from buying them?

(Assuming he bought plants/seeds -- I don't know how he got his first pea plants, but I do know he wasn't born with them. LOL Whether he purchased the things isn't the point.)

 

[usmbguest5318]

an outside audit.

I'm not biting on that crumb. LOL

• Board of Governors of the Federal Reserve System Financial Statements as of and for the Years Ended December 31, 2014 and 2013, and Independent Auditors’ Reports
  
• System Open Market Account Holdings
• Reviews of the Fed

 

[SYTFE]

Pretty interesting topic. But it comes down to this...we still are just printing money out of thin air. Our system only works because we as Americans collectively (by force) agree to the dollars value. Backed by gold or not -- it doesn't matter, it's all based on what value we give to our currency as a society. It's almost like a voluntary delusion...we know that our money isn't actually worth anything, it's just paper with nothing behind it, or more often these days just numbers on a screen. It works because we all just go along with it, and because it's enforced. It's very much cultural. No different from an isolated tribe who use rocks as currency.