Utah plans on going for Gold and Silver standards

[The Spartan]

One of their fears is the loss of confidence of the dollar. Well, wouldn't people abandoning the dollar for their gold standard nonsense speed that along?

[Broomstick]

One of their fears is the loss of confidence of the dollar. Well, wouldn't people abandoning the dollar for their gold standard nonsense speed that along?

Self-fulfilling prophecy.

How many pure gold or silver coins are out there, anyway? U.S. silver colored coins haven't actually been silver for a long time, and gold dollars aren't pure either, IIRC.

Coins don't have to be pure and seldom are - alloys of silver (and gold) have been around for ages because they're more durable than coins of the pure metal.

Through the 1960's US coins still contained some silver, though by the latter end of the period not a whole lot. The US (and several other governments) still strikes silver and gold bullion coins. In the US, at least, these must contain 1 troy ounce of silver, but they can and often do contain other metals as well. Bullion, however, does not routinely circulate.

(It has become something of a tradition for anonymous donors to donate bullion to charity at Christmas time, however. Presumably well-heeled donors.)

[Starglider]

Every fiat currency in history was eventually inflated into worthlessness by greedy governments (or banks, even worse) printing too much. The US dollar has lost somewhere between 90 and 99% of its value since the US came off the gold standard, depending on which goods/commodities you are measure against. The posters in this thread seem to be pretty typical modern Westerners, in that they have grown up in this system and can't even conceive of what else money could be. I am sure you can come up with a trite rationalisation for why central banks around the world are buying large amounts of this 'silly economic relic' at the moment, that doesn't threaten your unquestionable faith in the US dollar.

To be fair, I was like that before I started working in the finance sector. Seeing just how horrible the ingredients of the sausage are prompted me to do the research, and realise that blind trust in central-bank-sanctioned money is just another way banks drain wealth out of the rest of the economy.

Well, wouldn't people abandoning the dollar for their gold standard nonsense speed that along?

No. A few people messing about with bullion coins is a drop in the ocean compared to the global gold market (the vast majority of which is gold ETFs, gold-denominated savings accounts and interbank trading of good delivery bars). The gold market itself, while economically important, is tiny compared to the massive global FX markets, in which the dollar dominates (one of the pair in ~80% of transactions). The life and death of the dollar will be determined by global macroeconomic forces, not some backwater state legislators.

[PhilosopherOfSorts]

How many pure gold or silver coins are out there, anyway? U.S. silver colored coins haven't actually been silver for a long time, and gold dollars aren't pure either, IIRC.

Coins don't have to be pure and seldom are - alloys of silver (and gold) have been around for ages because they're more durable than coins of the pure metal.

Through the 1960's US coins still contained some silver, though by the latter end of the period not a whole lot. The US (and several other governments) still strikes silver and gold bullion coins. In the US, at least, these must contain 1 troy ounce of silver, but they can and often do contain other metals as well. Bullion, however, does not routinely circulate.

(It has become something of a tradition for anonymous donors to donate bullion to charity at Christmas time, however. Presumably well-heeled donors.)

I know that coins are normally alloys, that's kinda my point. The amount of silver in, say, a quarter, is tiny, small enough that it wouldn't surprise me if the value of the metal is actually less than the face value of the coin. If that's the case (and I could be wrong, that's ususally a safe assumption) then who would be dumb enough to insist on using the metal value? Prices of things are going to be the same weather they're paid for in metal or money, wages will be the same regardless of method of payment, and its not like Utah mints its own currency, so how much effect is this really going to have? Not many people have stockpiles of gold and silver just sitting around to pay for groceries, after all.

[J]

Every fiat currency in history was eventually inflated into worthlessness by greedy governments (or banks, even worse) printing too much. The US dollar has lost somewhere between 90 and 99% of its value since the US came off the gold standard, depending on which goods/commodities you are measure against. The posters in this thread seem to be pretty typical modern Westerners, in that they have grown up in this system and can't even conceive of what else money could be. I am sure you can come up with a trite rationalisation for why central banks around the world are buying large amounts of this 'silly economic relic' at the moment, that doesn't threaten your unquestionable faith in the US dollar.

Well, you could say fiat money systems are much like democracy; it's the worst monetary system we have except for all the others we've tried. Other systems may not have inflated into worthlessness but they have disadvantages of their own, the main one being severe short to middle term fluctuations in value. It's not unusual to see 10% inflation for a year followed by 20% deflation the following two years then another bout of inflation to bring it back to even.

These swings in inflation & deflation makes it very difficult for businesses to finance their activities and lay out long term plans as their costs & revenues are all over the place from year to year and this has bankrupted countless otherwise sound enterprises in the past. With a central bank and fiat money there's a fairly constant rate of inflation from year to year most of the time which makes it easier for everyone to finance their plans, it just has the unfortunate result of devaluing money into toilet paper after a hundred years or so.

---

Going back to the beginning, I have no idea what Utah is doing, it does not make sense.

[Starglider]

These swings in inflation & deflation makes it very difficult for businesses to finance their activities and lay out long term plans as their costs & revenues are all over the place from year to year and this has bankrupted countless otherwise sound enterprises in the past.

That was before the invention of modern, highly sophisticated and flexible derrivatives. It is now possible to hedge just about anything, via a variety of mechanisms and with a wide range of possible cost/risk profiles. In fact it would be nice to see more of this much-ballyhooed 'financial innovation' being used to actually help businesses instead of every better ways to hide risk and rip people off.

With a central bank and fiat money there's a fairly constant rate of inflation from year to year most of the time

I wouldn't ascribe that to fiat money. I'm sure you aware that in our current fractional-reserve banking system the vast majority of money creation is via lending. The M3 money supply (most relevant for inflation) is driven by different factors than M0, and much more lag and buffering between those two measures than there used to be in the past. Central banks are much more willing and (they claim) adept at using interest rates, reserve requirements and other M3-impacting measures to control inflation; monetisation is about maintaining ridiculous government deficits and stealing money from savers, nothing else. There is already a massive fractional-reserve system associated with precious metals (interbank lending, ETFs, unallocated accounts, overwhelming preference for cash-settlement of derrivatives etc etc), so this will clearly not be affected by putting the monetary base on a PM standard. Whether fractional reserve lending (or no-reserve, just-convince-the-politicians-you're-solvent in Europe/UK) is a good idea or not is another debate. Ending fiat money specifically addresses the problem of wealth destruction due to government and/or central bank printing, and forces everyone to confront problems as they occur rather than hiding them for decades and causing a systematic crash.

[bobalot]

I wouldn't ascribe that to fiat money. I'm sure you aware that in our current fractional-reserve banking system the vast majority of money creation is via lending. The M3 money supply (most relevant for inflation) is driven by different factors than M0, and much more lag and buffering between those two measures than there used to be in the past. Central banks are much more willing and (they claim) adept at using interest rates, reserve requirements and other M3-impacting measures to control inflation; monetisation is about maintaining ridiculous government deficits and stealing money from savers, nothing else. There is already a massive fractional-reserve system associated with precious metals (interbank lending, ETFs, unallocated accounts, overwhelming preference for cash-settlement of derrivatives etc etc), so this will clearly not be affected by putting the monetary base on a PM standard. Whether fractional reserve lending (or no-reserve, just-convince-the-politicians-you're-solvent in Europe/UK) is a good idea or not is another debate. Ending fiat money specifically addresses the problem of wealth destruction due to government and/or central bank printing, and forces everyone to confront problems as they occur rather than hiding them for decades and causing a systematic crash.

I really don't see this as much of a problem. Since World War II, how many countries have devalued their money into nothing? We have a few examples like Argentina and Zimbabwe, but these countries had social and political instabilities (that would apply even if they had a Gold Standard) that helped these problems along.

I can't think of one Democractic and stable country encountering these problems with fiat money.

[Starglider]

I really don't see this as much of a problem. Since World War II, how many countries have devalued their money into nothing?

This is a strawman. Firstly central banks are controlled by bankers, either directly (US) or indirectly (EU), and they don't want to see the currency devalued into nothing. What they want to do is transfer as much money as possible from you to them. The motive to ramp up inflation was limited when the primary activity of banks was to lend money to individuals and businesses; inflation reduced the real value of their liabilities (deposits at the bank) but also reduced the real value of their assets (loans) and cash reserves. This is not the case any longer; since the financial crisis lending activity has collapsed and reserve requirements are not an issue, thanks to bailouts and regularoty laxness. Investment banking now utterly dominates retail and commercial banking in terms of controlling policy decisions. Money can now be invented out of thin air and directly chanelled into speculation across virtually all asset classes (ultimately to bonuses and shareholders). The ideal is a moderately high real rate of inflation, a somewhat lower reported rate of inflation (so as not to spook people) and near-zero interest rates. Not coincidentally, this is exactly the situation in the US; the banks are screwing the real economy using capital stolen from both taxpayers and savers. We don't need a currency collapse to condemn fiat money as unfair and unsound.

If it were the banks alone screwing things up this situation would be nasty, but relatively stable; no-one wants to kill the golden goose (of an ignorant populace conditioned to accept Fed-created money and constant inflation eating at their savings as the 'status quo'). However government deficit growth and hence monetisation are driven by a combination of long-term trends - demographic collapse, peak oil, globalisation, income inequality etc - and a childish refusal to accept any sort of cuts. They can and will continue all the way to currency collapse as no politician will be able to raise taxes or cut spending enough until it's too late. These trends have been building for decades, which leads to my second point; fifty years of relative calm (since the US went off the gold standard) are not enough to draw any kind of historically meaningful conclusion. We are not going through a minor upset to the status quo, we are going through an unprecedented set of challenges to modern technological civilisation. Fiat money is one of the mechanisms allowing us to deny the problems and pretend everything is fine for just a bit longer, which of course makes things worse in the long run.

[Zed]

Instead, we need to pick a random (preferably shiny) material compound and arbitrarily assign a value to it. That'll solve the issue!

[J]

That was before the invention of modern, highly sophisticated and flexible derrivatives. It is now possible to hedge just about anything, via a variety of mechanisms and with a wide range of possible cost/risk profiles. In fact it would be nice to see more of this much-ballyhooed 'financial innovation' being used to actually help businesses instead of every better ways to hide risk and rip people off.

In theory. Over in the real world counterparty risks exist which can't be hedged against in addition to inefficiencies in the system, that is every party which touches a pile of money or money equivalents takes a cut of the pie since no one works for free. For every derivative & structured finance product there's a counterparty or counterparties which need to pony up should the event which is being insured or hedged against takes place, if that counterparty isn't solvent (ie. Bear Stearns) the hedge doesn't work and we have a problem. The additional complexity in the system resulting from the counterparty networks required to support these products also makes it more prone to cascade failures. I can think of several ways to make it work but they all require fairly draconian regulations along with regulators who aren't asleep at the wheel.

I'm sure you aware that in our current fractional-reserve banking system the vast majority of money creation is via lending. The M3 money supply (most relevant for inflation) is driven by different factors than M0, and much more lag and buffering between those two measures than there used to be in the past. Central banks are much more willing and (they claim) adept at using interest rates, reserve requirements and other M3-impacting measures to control inflation; monetisation is about maintaining ridiculous government deficits and stealing money from savers, nothing else. There is already a massive fractional-reserve system associated with precious metals (interbank lending, ETFs, unallocated accounts, overwhelming preference for cash-settlement of derrivatives etc etc), so this will clearly not be affected by putting the monetary base on a PM standard. Whether fractional reserve lending (or no-reserve, just-convince-the-politicians-you're-solvent in Europe/UK) is a good idea or not is another debate. Ending fiat money specifically addresses the problem of wealth destruction due to government and/or central bank printing, and forces everyone to confront problems as they occur rather than hiding them for decades and causing a systematic crash.

Well, yes, we in the real world have a credit-money system with a small fiat money component, and where credit and money are fungible. Thus the actual monetary supply is the amount of money in circulation plus the total value of all assets which various parties are willing and able to borrow against. For example if someone is willing to take one of my bras as collateral for a $1000 loan then it too is part of the monetary supply, as are my earrings since I can pawn them for cash.

Now that we've established what the monetary base is we can explore the effects of various policies. We can control the amount of credit in the system by limiting the items which are eligible for loans, for instance, no bras and no washing machines. We can further tighten the supply by setting out regulations for the loans which remain, for instance all mortgages must be 25% downpayment/30% DTI with income being verified against tax returns, all unsecured loans (credit cards, etc.) must be reserved against dollar for dollar with cash and so on & so forth. With proper regulations in place we can limit growth in the credit part of our credit-money system to the actual growth rate of the real economy. The fiat money component can then be adjusted accordingly via central bank & government policies, giving an overall money supply which grows at the same rate as the economy, presto, zero inflation!

[bobalot]

I really don't see this as much of a problem. Since World War II, how many countries have devalued their money into nothing?

This is a strawman.

Why? As far as I can tell, it is a straight forward observation.

This is a strawman. Firstly central banks are controlled by bankers, either directly (US) or indirectly (EU), and they don't want to see the currency devalued into nothing.

Prove to me that central bankers in the EU, Australia, Canada, New Zealand, Singapore, Japan, Korea, etc have direct control or some sort of shadowy control over the decisions of their central banks. I see no such control in Australia.

What they want to do is transfer as much money as possible from you to them.

Evidence? Prove to me that all those countries central banks behave that way.

The motive to ramp up inflation was limited when the primary activity of banks was to lend money to individuals and businesses; inflation reduced the real value of their liabilities (deposits at the bank) but also reduced the real value of their assets (loans) and cash reserves.

Okay.

This is not the case any longer; since the financial crisis lending activity has collapsed and reserve requirements are not an issue, thanks to bailouts and regularoty laxness. Investment banking now utterly dominates retail and commercial banking in terms of controlling policy decisions.

I hate to break this to you, but the United States is not the entire Western world.

Money can now be invented out of thin air and directly chanelled into speculation across virtually all asset classes (ultimately to bonuses and shareholders). The ideal is a moderately high real rate of inflation, a somewhat lower reported rate of inflation (so as not to spook people) and near-zero interest rates.

Since I was talking about countries without serious political or social problems (i.e. the Western World), please provide evidence for your implication that real inflation is high (around the Western world, i.e. Australia, New Zealand, etc.) and that there is some secret conspiracy to hide inflation from the rest of us.

Not coincidentally, this is exactly the situation in the US; the banks are screwing the real economy using capital stolen from both taxpayers and savers.

No shit, sherlock. That is also because of a massive political failure, not simply because the U.S uses a fiat currency. Massive political failures effecting the economy can easily happen under a Gold Standard. Any government could overnight devalue the gold standard.

We don't need a currency collapse to condemn fiat money as unfair and unsound.

True, but you have yet to date show that it is more unfair and unsound than other monetary systems (i.e the Gold Standard). The numerous problems of the Gold Standard have been listed before.

If it were the banks alone screwing things up this situation would be nasty, but relatively stable; no-one wants to kill the golden goose (of an ignorant populace conditioned to accept Fed-created money and constant inflation eating at their savings as the 'status quo').

Wow, more conspiracy theory sounding bullshit. Coincidently adding nothing to your argument. Congratulations on wasting bandwidth.

However government deficit growth and hence monetisation are driven by a combination of long-term trends - demographic collapse, peak oil, globalisation, income inequality etc - and a childish refusal to accept any sort of cuts. They can and will continue all the way to currency collapse as no politician will be able to raise taxes or cut spending enough until it's too late.

What the fuck does this have to do with possible issues with fiat currency? There are plenty of countries with moderate or low debt levels, that also use fiat currency (See Australia). PROVIDE ME WITH A DIRECT FUCKING LINK BETWEEN THE TWO. Show me one leads to the other in all cases, otherwise this long verbose post of yours is bullshit.

All those problems listed there are major American problems. Other countries have cut their budgets and lifted taxes to pay down debt (see Canada, Australia, etc). What this has to do with intrinsic problems with fiat currency is anybodies fucking guess. All you have listed is major problems arising from America's retarded political system.

These trends have been building for decades, which leads to my second point; fifty years of relative calm (since the US went off the gold standard) are not enough to draw any kind of historically meaningful conclusion.

During these 50 years, there were many countries that have had fiat currency which don't have massive levels of growing levels of debt. Your theory is bullshit.

We are not going through a minor upset to the status quo, we are going through an unprecedented set of challenges to modern technological civilisation. Fiat money is one of the mechanisms allowing us to deny the problems and pretend everything is fine for just a bit longer, which of course makes things worse in the long run.

More claims with little evidence. It does not even meet the test of reality. There are plenty of countries which use fiat currency without those problems.

[bobalot]

Correction, It should read:
Prove to me that central bankers in the EU, Australia, Canada, New Zealand, Singapore, Japan, Korea, etc have direct control or some sort of shadowy control over the decisions of their central banks. I see no such control in Australia.

[cosmicalstorm]

This is a strawman. Firstly central banks are controlled by bankers, either directly (US) or indirectly (EU), and they don't want to see the currency devalued into nothing. What they want to do is transfer as much money as possible from you to them. The motive to ramp up inflation was limited when the primary activity of banks was to lend money to individuals and businesses; inflation reduced the real value of their liabilities (deposits at the bank) but also reduced the real value of their assets (loans) and cash reserves. This is not the case any longer; since the financial crisis lending activity has collapsed and reserve requirements are not an issue, thanks to bailouts and regularoty laxness. Investment banking now utterly dominates retail and commercial banking in terms of controlling policy decisions. Money can now be invented out of thin air and directly chanelled into speculation across virtually all asset classes (ultimately to bonuses and shareholders). The ideal is a moderately high real rate of inflation, a somewhat lower reported rate of inflation (so as not to spook people) and near-zero interest rates. Not coincidentally, this is exactly the situation in the US; the banks are screwing the real economy using capital stolen from both taxpayers and savers. We don't need a currency collapse to condemn fiat money as unfair and unsound.

If it were the banks alone screwing things up this situation would be nasty, but relatively stable; no-one wants to kill the golden goose (of an ignorant populace conditioned to accept Fed-created money and constant inflation eating at their savings as the 'status quo'). However government deficit growth and hence monetisation are driven by a combination of long-term trends - demographic collapse, peak oil, globalisation, income inequality etc - and a childish refusal to accept any sort of cuts. They can and will continue all the way to currency collapse as no politician will be able to raise taxes or cut spending enough until it's too late. These trends have been building for decades, which leads to my second point; fifty years of relative calm (since the US went off the gold standard) are not enough to draw any kind of historically meaningful conclusion. We are not going through a minor upset to the status quo, we are going through an unprecedented set of challenges to modern technological civilisation. Fiat money is one of the mechanisms allowing us to deny the problems and pretend everything is fine for just a bit longer, which of course makes things worse in the long run.

I think you recently mentioned that you believe/suspect that the United States might collapse in a Soviet Union-fashion in a not too distant future. Do you have time to elaborate that belief for me? I very much enjoy reading what you have to write both here and on other parts of the internet.

[aerius]

Prove to me that central bankers in the EU, Australia, Canada, New Zealand, Singapore, Japan, Korea, etc have direct control or some sort of shadowy control over the decisions of their central banks. I see no such control in Australia.

I can't speak for the other countries, but the Governor and Board of Directors of the Bank of Canada have full control of its monetary policies. They have a full meeting every few months to discuss economic conditions and make changes to the interest rate and other policies as required for the good of the economy. In theory the government can override the Bank of Canada's decisions, but this has never happened.

This is not the case any longer; since the financial crisis lending activity has collapsed and reserve requirements are not an issue, thanks to bailouts and regularoty laxness. Investment banking now utterly dominates retail and commercial banking in terms of controlling policy decisions.

I hate to break this to you, but the United States is not the entire Western world.

Here in Canada banking income is still decently split between retail & investment banking, but if you pull up the quarterly reports for banks in the UK and Europe they're much like their US counterparts. Deutsche Bank, Credit Suisse, HSBC, Barclays, and Credit Agricole among others all get most of their income from profits from investment banking. I don't know about Asia though.

Money can now be invented out of thin air and directly chanelled into speculation across virtually all asset classes (ultimately to bonuses and shareholders). The ideal is a moderately high real rate of inflation, a somewhat lower reported rate of inflation (so as not to spook people) and near-zero interest rates.

Since I was talking about countries without serious political or social problems (i.e. the Western World), please provide evidence for your implication that real inflation is high (around the Western world, i.e. Australia, New Zealand, etc.) and that there is some secret conspiracy to hide inflation from the rest of us.

This gets messy. The answer you get depends on how inflation is defined.

If it were the banks alone screwing things up this situation would be nasty, but relatively stable; no-one wants to kill the golden goose (of an ignorant populace conditioned to accept Fed-created money and constant inflation eating at their savings as the 'status quo').

Wow, more conspiracy theory sounding bullshit. Coincidently adding nothing to your argument. Congratulations on wasting bandwidth.

You do realize that every first world country has had a constant 1-5% inflation rate every year for at least the last 30 years. No 1st world country I know of has had 0% inflation unless its economy is in severe recession. Here in Canada they target around 2% inflation every year, it doesn't sound like much but punch it into your calculator and see what it does to the purchasing power of your savings after 25 years.

[Illuminatus Primus]

Jesus, Starglider? You believe in LOL GOLD conspiracism now? The politics of this place have really gone down the tubes.

In any case, why, can you explain to me, is it a virtue a priori for currency to keep its value over time over other empirical considerations (as J pointed out)? So long as human development and such can be kept up, periodically re-setting the currency, relative rises in wages, and the like, and it doesn't occur so far as to have hyperinflationary effects, than who cares if a currency unit loses its value over time? This is just one of those imbecilic things that GOLD clowns say as if God handed it down on a tablet, but never justify this value judgment intrinsically.

[bobalot]

Prove to me that central bankers in the EU, Australia, Canada, New Zealand, Singapore, Japan, Korea, etc have direct control or some sort of shadowy control over the decisions of their central banks. I see no such control in Australia.

I can't speak for the other countries, but the Governor and Board of Directors of the Bank of Canada have full control of its monetary policies. They have a full meeting every few months to discuss economic conditions and make changes to the interest rate and other policies as required for the good of the economy. In theory the government can override the Bank of Canada's decisions, but this has never happened.

We have a very similar system in Australia. However, I was responding to Stargilder's bullshit about the "banks" ( commercial/investment banks) having undue influence over the Reserve/Central Bank. I have looked and found no such influence in Australia or New Zealand or most of the Western world for that matter. Starglider was just talking out of his arse.

This is not the case any longer; since the financial crisis lending activity has collapsed and reserve requirements are not an issue, thanks to bailouts and regularoty laxness. Investment banking now utterly dominates retail and commercial banking in terms of controlling policy decisions.

I hate to break this to you, but the United States is not the entire Western world.

Here in Canada banking income is still decently split between retail & investment banking, but if you pull up the quarterly reports for banks in the UK and Europe they're much like their US counterparts. Deutsche Bank, Credit Suisse, HSBC, Barclays, and Credit Agricole among others all get most of their income from profits from investment banking. I don't know about Asia though.

Starglider was whining about "regularoty laxness" and how Investment banking dominates retail and commercial banking. I can see that in the U.S but I see little evidence for that elsewhere as an overall trend. Wikipedia (I know, lame source, but best I have at the moment) has investment banking at 32% of the total banking income in Europe, which is high but not dominating.

Money can now be invented out of thin air and directly chanelled into speculation across virtually all asset classes (ultimately to bonuses and shareholders). The ideal is a moderately high real rate of inflation, a somewhat lower reported rate of inflation (so as not to spook people) and near-zero interest rates.

Since I was talking about countries without serious political or social problems (i.e. the Western World), please provide evidence for your implication that real inflation is high (around the Western world, i.e. Australia, New Zealand, etc.) and that there is some secret conspiracy to hide inflation from the rest of us.

This gets messy. The answer you get depends on how inflation is defined.

You have a very good point, however Starglider was alluding to some international conspiracy to hide real inflation, which I see no evidence of.

If it were the banks alone screwing things up this situation would be nasty, but relatively stable; no-one wants to kill the golden goose (of an ignorant populace conditioned to accept Fed-created money and constant inflation eating at their savings as the 'status quo').

Wow, more conspiracy theory sounding bullshit. Coincidently adding nothing to your argument. Congratulations on wasting bandwidth.

You do realize that every first world country has had a constant 1-5% inflation rate every year for at least the last 30 years. No 1st world country I know of has had 0% inflation unless its economy is in severe recession. Here in Canada they target around 2% inflation every year, it doesn't sound like much but punch it into your calculator and see what it does to the purchasing power of your savings after 25 years.

I'm quite aware of that. A small amount of inflation keeps the economy ticking over. Real wages for the average person have grown in most western countries (U.S excluded because of its fucked up political system), so peoples purchasing power is far greater than 25 years ago.

Starglider was alluding some grand conspiracy to keep inflation low while "constant inflation eating at their savings" (even though for most countries real interest rates have been positive for decades), while it is open policy to have low inflation. I see no evidence or some grand international scam or peoples savings being stolen throughout the western world.

He's just full of shit.

[aerius]

We have a very similar system in Australia. However, I was responding to Stargilder's bullshit about the "banks" ( commercial/investment banks) having undue influence over the Reserve/Central Bank. I have looked and found no such influence in Australia or New Zealand or most of the Western world for that matter.

That's because you don't have a former Goldman-Sachs executive running your central bank. Canada does and while we haven't gone the way of the US where they have a rotating door between banks and policy makers we're slowly headed in that direction thanks to our Conservatives and the G-S mafia.

A small amount of inflation keeps the economy ticking over. Real wages for the average person have grown in most western countries (U.S excluded because of its fucked up political system), so peoples purchasing power is far greater than 25 years ago.

Starglider was alluding some grand conspiracy to keep inflation low while "constant inflation eating at their savings" (even though for most countries real interest rates have been positive for decades), while it is open policy to have low inflation. I see no evidence or some grand international scam or peoples savings being stolen throughout the western world.

There's actually a couple parts to this, because of technological progress its resultant efficiency gains we end up with price deflation over a period of time, thus it's natural for purchasing power to go up over time. The best example of this is in electronics, when I was in university a computer good enough to run all the programs I needed cost around $3000-3500, I can now get a computer to do all the stuff I need for a CompSci class for 1/3 of that cost. Flat screen TVs used to cost $5000, I can now get one that's the same size and with way better picture quality for $1200 or so.

Now the reason that we like to keep a small amount of inflation in the system is because it makes it more attractive on paper to lend money. With inflation, everyone makes a larger amount of money in nominal dollars every year which makes it easier to pay off loans. Or at least that's what everyone thinks. In reality the banks & other lenders know this so they'll charge a higher interest rate to make up for the losses due to inflation so there's no difference between 0% inflation and 2% inflation, it doesn't make lending & borrowing any easier or cheaper. What it does do is goad people into taking out loans since they think they're getting a bargain, but they're not. In the meantime their savings are slowly eaten away by inflation. Banks get to make more loans and collect more fees from making those loans, they're the winners in the deal.

[bobalot]

We have a very similar system in Australia. However, I was responding to Stargilder's bullshit about the "banks" ( commercial/investment banks) having undue influence over the Reserve/Central Bank. I have looked and found no such influence in Australia or New Zealand or most of the Western world for that matter.

That's because you don't have a former Goldman-Sachs executive running your central bank. Canada does and while we haven't gone the way of the US where they have a rotating door between banks and policy makers we're slowly headed in that direction thanks to our Conservatives and the G-S mafia.

That's interesting. I would have thought the United States epic failure would have the opposite effect in Canada.

A small amount of inflation keeps the economy ticking over. Real wages for the average person have grown in most western countries (U.S excluded because of its fucked up political system), so peoples purchasing power is far greater than 25 years ago.

Starglider was alluding some grand conspiracy to keep inflation low while "constant inflation eating at their savings" (even though for most countries real interest rates have been positive for decades), while it is open policy to have low inflation. I see no evidence or some grand international scam or peoples savings being stolen throughout the western world.

There's actually a couple parts to this, because of technological progress its resultant efficiency gains we end up with price deflation over a period of time, thus it's natural for purchasing power to go up over time. The best example of this is in electronics, when I was in university a computer good enough to run all the programs I needed cost around $3000-3500, I can now get a computer to do all the stuff I need for a CompSci class for 1/3 of that cost. Flat screen TVs used to cost $5000, I can now get one that's the same size and with way better picture quality for $1200 or so.

Now the reason that we like to keep a small amount of inflation in the system is because it makes it more attractive on paper to lend money. With inflation, everyone makes a larger amount of money in nominal dollars every year which makes it easier to pay off loans. Or at least that's what everyone thinks. In reality the banks & other lenders know this so they'll charge a higher interest rate to make up for the losses due to inflation so there's no difference between 0% inflation and 2% inflation, it doesn't make lending & borrowing any easier or cheaper. What it does do is goad people into taking out loans since they think they're getting a bargain, but they're not. In the meantime their savings are slowly eaten away by inflation. Banks get to make more loans and collect more fees from making those loans, they're the winners in the deal.

I dispute that, how can people's savings be eaten away by inflation if real interest rates are positive? On average we have had positive real interest rates for the last two decades in Australia.