What is money? Where does our money come from?

This is a discussion on What is money? Where does our money come from? within the Home Trader forums, part of the Trading Career category; Originally Posted by barjon ooh yes, and if we'd always allowed the free market to run in unfettered glory then ...

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Old Mar 12, 2012, 11:23pm   #323
 
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Re: What is money? Where does our money come from?

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ooh yes, and if we'd always allowed the free market to run in unfettered glory then there'd still be 12 year old kids slaving away for fourteen hours a day for nowt but a slice of bread.

I think I've had it with all you doomsters.

ah, the kingdom was lost
and all for the want of a horseshoe nail

well, I'm sorry, sire, but there weren't any gold ones.
Yes Jon. Now all we need is for the Government to buy everyone a car, a boat, a holiday home and deposit £2million in their bank account and nobody would ever have to work again!
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Old Mar 13, 2012, 1:00am   #324
 
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Re: What is money? Where does our money come from?

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Yes Jon. Now all we need is for the Government to buy everyone a car, a boat, a holiday home and deposit £2million in their bank account and nobody would ever have to work again!
no, no, nt. I should have had all that but the thievin', bandit Government has stolen it all from me while I slept.
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Old Mar 13, 2012, 11:32am   #325
 
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Re: What is money? Where does our money come from?

nt/ducky

Just to make it clear that I'm not seeking to make any sort of point in this post - I'm just curious.

The question I have is: How would we return to the Gold Standard if we wanted to do so?

So far as I know we've about £50 billion circulating and a couple of trillion in the accounts overall. In the vaults is about 300 tonnes or so (worth £14 billion) of gold (thanks, Gordon - smart move ).

How would it work? Would we just divi up the 300 tonnes into the couple of trillion (which would make the redemption promise on the notes look pretty sick - in effect saying "We promise to redeem this £ for something worth a few pennies") or what?

As I said, not trying to make any sort of point here. Just wondering whether it would be possible.

jon
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Old Mar 13, 2012, 5:21pm   #326
 
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Re: What is money? Where does our money come from?

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nt/ducky

Just to make it clear that I'm not seeking to make any sort of point in this post - I'm just curious.

The question I have is: How would we return to the Gold Standard if we wanted to do so?

So far as I know we've about £50 billion circulating and a couple of trillion in the accounts overall. In the vaults is about 300 tonnes or so (worth £14 billion) of gold (thanks, Gordon - smart move ).

How would it work? Would we just divi up the 300 tonnes into the couple of trillion (which would make the redemption promise on the notes look pretty sick - in effect saying "We promise to redeem this £ for something worth a few pennies") or what?

As I said, not trying to make any sort of point here. Just wondering whether it would be possible.

jon

Sure it would be possible.

All that is required is total the money supply. Divide that total money supply by your available gold.

The problems are really in defining what is your true total money supply. If you badly underestimate it, you will create an instant deflation, which would resolve over time, but would be a very brutal way to return to gold.

Far better to accept the current level of inflation, and include some dubious claims to money, which again over time will resolve anyway, and return to gold with the minimum of dislocations in the price system.

The problem would be if a major economy made a unilateral return to gold. The difference in values twixt the say UK's gold money and the market price of gold, would potentially be significant.

Add all these together, divide by gold, and see if the figure comes anywhere close to the market price for gold currently. Of course that misses the mortgages and all manner of other claims to money.

jog on
duc
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Old Mar 14, 2012, 1:18am   #327
 
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Re: What is money? Where does our money come from?

This would just as easily apply to the Pound, apart from the fact that it isn't the worlds reserve currency.

American Monetary Restoration

Five Essential Steps Toward Resumption of the Gold Dollar: Dollar Convertibility to Gold and Multilateral Currency to Gold

1.America leads by the President announcing unilateral resumption of the gold monetary standard at a date certain, not more than four years in the future. Unilateral resumption means that the U.S. dollar will be defined by law as a certain weight unit of gold. The Treasury, the Federal Reserve, and the entire banking system will be obligated to maintain the gold value of the dollar. On the date of congressionally authorized resumption -- that is, unrestricted dollar-gold convertibility* -- Federal Reserve Bank notes and U.S. dollar bank demand deposits will be redeemable in gold on demand at the statutory gold parity. Further use by foreign governments of the dollar as a reserve currency will entail no legal recognition by the United States.

2.The President issues an executive order eliminating every and all taxes imposed on the buying, selling, and circulation of gold. The President issues an executive order providing for the issuance of Treasury bonds backed by a proportional weight of gold. Since Federal Reserve notes and bank deposits (money) are not taxed by any jurisdiction, the executive order specifies that gold may be used as money and thus taxed in no jurisdiction in the United States nor abroad. Gold may be used to settle all debts, public and private. The Treasury and authorized private mints will provide for the minting and wide circulation of legal tender gold coin in appropriate denominations, free of any and all taxation.

3.Shortly after the announcement (step 1), the United States calls for an international monetary conference of interested nations to provide for the deliberate termination of the dollar-based official reserve currency system and the consolidation and refunding of foreign official dollar reserves. The international agreement to be negotiated will inaugurate the reformed international monetary system, that is, multilateral currency convertibility to gold, without official reserve currencies.

4.The conference agreement, attended by representatives of the IMF, WTO, and the World Bank would establish gold as the sole means by which nations would settle residual balance of payments deficits; and designate gold, in place of reserve currencies, as the sole internationally recognized monetary reserve asset. Official foreign currency reserves, to a specified extent, would be consolidated and refunded. Stable exchange rates would result.

5.A multilateral international gold standard -- the result of the convertibility agreement -- would effectively terminate floating and pegged-undervalued exchange rates. The reformed international monetary system would establish and uphold stable exchange rates and free and fair trade -- based on the mutual convertibility to gold of major currencies
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Old Mar 14, 2012, 1:42am   #328
 
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Re: What is money? Where does our money come from?

mmm, does all that mean that the relative wealth of nations would be what gold they happened to have in the vaults when the change was made and the exchange rates adjusted accordingly? ie: if the US divied up their gold and came out that $1 = 1 oz (yeah, I know - ludicrous ) and the result in UK was £1 = 1/10 oz, would that mean the exchange rate became $1 = £10
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Old Mar 14, 2012, 1:53am   #329
 
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Re: What is money? Where does our money come from?

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mmm, does all that mean that the relative wealth of nations would be what gold they happened to have in the vaults when the change was made and the exchange rates adjusted accordingly? ie: if the US divied up their gold and came out that $1 = 1 oz (yeah, I know - ludicrous ) and the result in UK was £1 = 1/10 oz, would that mean the exchange rate became $1 = £10
Essentially - no.

The wealth of any nation is its ability to produce, relatively or otherwise.

The calculation required to return to gold, essentially requires a totting-up of all claims to money. The higher the claims to money based upon fiduciary media, the worse it will be.

In a unilateral return to gold, the market price of gold would be arbitraged away via purchasing of goods/commodities in the unilaterally converting country for gold, thus increasing the supply of gold in that country, which would eventually reach an equilibrium - but the process would be incredibly destructive.

Only in an international return to gold, in the way described by NT could a return to gold be negotiated. Even then, there will be short-term pain as the fiduciary media created has been so egregious.

jog on
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