Friday, September 15, 2006

Fiat money

In the United States and in many nations, we have embraced the notion of fiat money,(link included for those who do not know what fiat money or gold standard are) leaving behind the classic gold standard. Most citizens in this nation know that only the United States Treasury has the ability to increase the amount of currency, but I, like many others I am sure, have that there has been a form of currency that has been minted, the "Liberty Dollar". It is made of silver and gold, bringing back the gold standard. The only problem, it was not minted by the U.S. Treasury. So what seems to be the problem, does the government want to have a monopoly in the form of payments we must submit? By this new form of currency, we create another competitor to the dollar. The website for Liberty Dollar claims that it is "America's Inflation Proof Currency" as it is backed by real gold and silver.

With fiat money, central planners within the government are able to increase inflation or decrease inflation depending on the amount of money they mint or on selling and buying government bonds. With the Liberty Dollar it depends on the amount of gold that enters or exits their vaults. A point for Liberty Dollar.

Many organizations have a form of play money. I have been to one church who sells coupons for money, these coupons are used as real currency that would be accepted at a nearby participating store, yet the coupons have never came into scrutiny as illegal. Why not have some competition to the might U.S. dollar. It will keep the central planners from playing with inflation so much. Besides, it would be a price to pay for the citizens to choose to have the Liberty Dollar as not all stores may accept it, let alone any banks would accept its. Does government just have a fear of losing its monopoly, but aren't they against monopolies? Perhaps just another question of morals and values...

12 comments:

Anonymous said...

http://www.amazon.com/gp/product/0865715408/ref=pd_rvi_gw_1/102-4808165-4396947?ie=UTF8

You might like this.

Anonymous said...

If the Liberty Dollar really is to be backed by silver, then there cannot be a 1:1 parity with the US dollar. The Liberty Dollar is pegged to silver and thus its real value will fluctuate in tune with the real value of silver. The market provides us with an indication of silver's real value by providing its price in US dollars. So... For the sake of argument, let us assume that NORFED can be relied upon to redeem any and all of its "silver certificates" for the promised amount of silver. All the same, there is nothing backing the Liberty Dollar except the amount of silver it represents. Silver is presently trading for about US$ 10.75. The Liberty Dollar is pegged at 20 LDs per ounce of silver. Consequently, the real exchange rate is US$ 1.00 = 1.86 Liberty Dollars.

Alternatively, if we are to accept a 1:1 parity between the Liberty Dollar and the US dollar, then we must accept a non-market silver price handed down by NORFED.

There's your dilemma. Either the Liberty Dollar floats relative to the US dollar or you must accept a non-market (fantasy) price for silver.

Anonymous said...

Here it is stated with bare mathematics...

L$ 20.00 = ounce of silver = US$ 10.75

That is,

L$ 20.00 = US$ 10.75

Divide each side by 10.75 (elementary math) and we get...

L$ 1.86 = US$ 1.00

Anonymous said...

It's also worth noting that in a real-world currency market there would be two US$/L$ exchange rates:

One would be for actual silver Liberty Dollars (ie, the coins); this rate would purely be a function of the silver price in US$.

The other rate would be for paper Liberty Dollars -- that rate would depend on the US$ silver price and the market's confidence (or lack thereof) in NORFED's ability (or willingness) to redeem paper Liberty Dollars for silver.

Idunois said...

anon12:35
Thanks for the link for the book. Its seems interesting, but I am not so much of a conspiracy theorist. Also, oil is not necessarily running out, it is just not cost effective yet to dig in certain areas where it may be found, plus technology that further decreases those cost to dig or find the oil. But interesting conspiracy theory that the book approaches although I am sure it won't be the only book to touch upon 9-11. Thank you though.

Idunois said...

anon 1:48:
I think you are utterly brilliant especially in completing the mathematics to show the comparison between the two monetary values. Although, the problem of the Liberty Dollar is not simply stated, or at least I don't believe it is. I have never used one nor know of anyone who has, but if I were to have a form of currency that was different from the U.S. dollar I would want to pay a different price. Therefore stores who wish to accept the Liberty Dollar should have a Liberty Dollar price. It would not be benifitting to consumers to spend $1.86 on a product that is only $1. So you are absolutely right as long as the price is maintained the same, but your conclusion would be wrong if the sellers applied to a set of prices, those for the Liberty dollar and for the U.S. Dollar. Yes, it may be more work for the seller, but if he wishes to accept due to a rise of customers who wish to use it, then why should he not... Thanks for your comments though I do want to say I am not sure if sellers do use a new set of prices for the Liberty Dollar. If not, then lets cheer on the U.S. dollar. Thanks again.

Anonymous said...

idunois:

The actions of the U.S. government seem to indicate that the oil is, indeed, running out. First Afghanistan, then Iraq, and quite soon, Iran. See a pattern?

There's nothing conspiratorial about the book (if you read it, you'd likely agree). I think it's the most important book I've ever read, and I've read quite a few.

Anonymous said...

How much oil is out there ? The surprising answer is that it depends on the price. It might not be profitable to drill a particular well when oil is at $18 but may be highly profitable with oil at $60 or $70. That said, production may be peaking while demand remans high and gets higher (new consumers like India and China plus the US). Technology can mitigate this to some extent. If price forces people to drive more fuel-efficient vehicles, then demand for oil will be reduced that much. Back in the '70s, macho types mocked conservation, but the fact is, it worked. When people started driving econoboxes and started putting insulation in their attics, it made a difference.

If Iraq was really about oil -- while I'm rabidly opposed to the war, I'm not so sure oil is as a big factor as people think -- it was a pretty stupid way to get our hands on oil. Vast amounts of oil could have simply been purchased from Iraq for considerably less than the $300+ billion the war has (thus far) cost.

We'll see about Iran. Bush may do something crazy. Or maybe when he said that Iran wouldn't build nuclear weapons on his watch, he meant that (on the presumption that Iran is years away from the bomb, or the option) it's a problem that will be left to his successor -- so yes, indeed, Iran wouldn't build a bomb on Bush's watch !

Anonymous said...

anon 8:51-

The oil isn't so much needed right now, as much as the area of the oil needed to be controlled. Oil is a strategic resource.

If we do invade Iran, which I think we will, it will be all about the oil there. If we don't, and we're just rattling our sabres in an attempt to scare them into economic concessions, then it will be about oil too.

Idunois said...

I want to thank all of you for your comments and views. The book for those who can not hit the link is called Crossing the Rubicon: The Decline of the American Empire at the End of the Age of Oil by Michael C. Ruppert.
I have not read the book just read the reviews and the synopsis of the book that I found on the web. It appears to show the inefficiency of the United States Government who as Anon 2:51 has implemented towards their actions in the Middle East. Although the U.S. government believes oil is running out and becoming a major crisis, we know that there are alternatives although more costly at the moment. Let us recall that throughout history have "experts" claimed we were running out of resources like certain ores; as time has shown, we have not.

Every review you can find upon this book is praising it and giving it high remarks, but from the reviews I believe the book only helps the arguement upon the government's inadequacy to control the economy.

Also on another note to Anon 8:51, upon watching CNN this morning I saw on the ticker that Iran is in talks with President Hugo Chavez of the socialistic country of Columbia. He is giving support to President Chavez in building oil fields, warehouses, factories, etc. In exchange, the media believes Iran is trying to receive the opportunity to mine for Uranium to support their production of a nuclear power plant. The reason why Iran is supporting Columbia, is the Hugo Chavez has a passion against the U.S. and as the U.S. has begun to decline any offers from Iran (telling their allies to decline them as well); Iran has turned to the U.S.'s enemies for support. Columbia is rich in minerals, oil, and many other natural resources; could this be the beginning of the United States entering a war in South America as well? Lets hope not.
I still thank all of you for your comments and views. I actually enjoy them, which by the way although I still do not agree with everything that has been said, I don't believe I am necessarily right. As my title says, I am Searching For Truth, therefore I am no expert, nor think anyone can surely claim, but hopefully through each other we can learn more to enable us to understand this world a little more.

Anonymous said...

idunois:

The problem with peak oil isn't that no energy alternative will be found; I'm sure one (or many different options) will be available and eventually implemented.

The problem lies in implementing the infrastructure necessary to have these alternative energy sources replace oil. It's very expensive, and would be very difficult for our country to achieve, let alone a country like China or India.

Another big part of the problem is that oil companies need to lie about the extent of oil reserves under their control for economic reasons. New oil discoveries are much rarer now than in the past, and honestly revealing a company's shrinking oil reserves is economic and career suicide for anyone involved.

So, I think that, whenever it happens, infrastructure will need to be replaced quickly (5 years or less, probably). It might not cause anyhting other than economic problems for Americans, but it could cause severe famine in developing nations.

Also, as to your point about Venezuela, I believe Venezuela controls more oil than any other non-mideast country currently (oilfields I mean, not counting reserves). So, if we end up fighting multiple wars in the mideast and "just happen" to extend that fight to Venezuela, the ruse will be up, hopefully.

Idunois said...

Thanks Anon 8:07 haha I like your point on "the ruse will be up," but I do agree the cost is high for any other type of energy resource. Many of things were created by accident, so although it appears we are far from anything there is always that possibility. But thanks for explaining the problem with peak oil in more depth.