In defense of the bailout and the Federal Reserve

[Doctor Pot]

LOL now thats funny!

Doc.. what he is trying to say is you are looking at the value of gold in relation to the dollar.. now due to market forces, and speculators the value of gold may not always stay stable simply because it is used as a buffer against inflation which can give it spikes from time to time... and your a smart guy im sure you know this so its unfair to take the spikes out of context like your car analogy.

what he is saying is if you look historically, what an ounce of gold could buy you in relation to GOODS stays relatively stable over the course of a long period of time (especially pre fed. reserve) the only thing that changes is the valuation against the dollar which changes every other goods value in relation to the dollar.. in other words back in the early 1900s a gold coin would buy you same goods it would today relatively speaking, minus a few upgrades in technology.

and a ounce of gold would not buy you a house back then doc, in the bible (if you believe it) it talks about an ounce of gold buying a nice tunic belt, robe, and sandals. ill see if i can find the verse.

I actually have a pretty good understanding of Roman currency. Back when I was working, I collected them, although just the bronze ones. Anyway, the aureus was the gold Roman coin, and it was worth about three months pay for a legionnaire. An aureus weighed about a quarter ounce, so an ounce of gold was worth about a year's pay back then, for a legionnaire. He made considerably more than the average peasant, who would surely be willing to build you a house for that money. Things were valued differently back then though, so price comparisons aren't worth much.

That's all interesting but beside the point. One of my points is that it doesn't actually matter if the dollar slowly devalues over time. Nobody with any sense saves their money by shoving cash under their mattress, so money can be invested in other things that don't devalue over time. This is actually a good thing, since it gets people to invest their money. My second point is that if people could trade in their dollars for gold at the bank, they'd do this a lot during tough economic times. Investment would plummet, the price of gold would skyrocket, and banks would go under. My third point is that gold changes in value based on market forces, independently of the value of the dollar. If the dollar's value was based on gold, the value of the dollar would change along with it.

 

[hom36rown]

Two months ago, my car was worth four ounces of gold. Two weeks ago, it was worth five and a half. Did my car increase in value? That's your own logic, mind you.

No, the value of the dollars you bought your car with went up(this wont last long though). The dollar is unstable...not gold. Just because things like eggs and milk and clothes and cars don't jump or drop in price drastically over the short term, does not make the dollar stable...obviously we are not trying to find the fair maket price of eggs and milk and clothes by means of the stock market everyday, which is what we do with gold. THe rise in the price of gold, represents a devaluing in the dollar...not a rise in the the value of gold, likewise a drop in the price of gold represents the value of the dollar going up(as it has been lately.) Same thing with oil....if you look at the price of oil in gold, the price stays almost constant...so it is the dollar that is constantly changing in value...gold is stable.

 

[medicineman]

No, the value of the dollars you bought your car with went up(this wont last long though). The dollar is unstable...not gold. Just because things like eggs and milk and clothes and cars don't jump or drop in price drastically over the short term, does not make the dollar stable...obviously we are not trying to find the fair maket price of eggs and milk and clothes by means of the stock market everyday, which is what we do with gold. THe rise in the price of gold, represents a devaluing in the dollar...not a rise in the the value of gold, likewise a drop in the price of gold represents the value of the dollar going up(as it has been lately.) Same thing with oil....if you look at the price of oil in gold, the price stays almost constant...so it is the dollar that is constantly changing in value...gold is stable.

Damn, I traded all my gold for Dinars.

 

[hom36rown]

Damn, I traded all my gold for Dinars.

wait, arent dinars gold?

 

[hom36rown]

That's all interesting but beside the point. One of my points is that it doesn't actually matter if the dollar slowly devalues over time.

Maybe not to you, but I would like to keep the value of my savings account.

Nobody with any sense saves their money by shoving cash under their mattress, so money can be invested in other things that don't devalue over time.

You mean like gold?

This is actually a good thing, since it gets people to invest their money.

You mean so they can lose half of their savings like all the people who were invested invested in mutual funds? I mean the smart investor definitely would not be putting money in the market right now, atleast not in american companies(and investment in foreign companies definitely doesnt help us)...unless of course they are a day trader and know exactly what they are doing...but of course most people are not. So what are you left with? Precious metals and other certain commodities, that make money through inflation but really only actually keep their value, or low interest bearing accounts that are actually devalued overtime through inflation.

My second point is that if people could trade in their dollars for gold at the bank, they'd do this a lot during tough economic times.Investment would plummet, the price of gold would skyrocket, and banks would go under.

Ok this statement has a lot of probelms. First, if the dollar was fixed at a set amount of gold, why would people trade in there dollars for gold during economic slowdowns if theyre dollar is going to stay the same value anyway. Investment always goes down in times of ecomic slow down, but why would tying the dollar to gold cause investment to plummit...the laws of supply and demand would still function wouldnt they? Not only that, they wouldnt be distorted by inflation, so we would recover quicker from natural economic slowdowns. How would the price of gold skyrocket if it is tied to the dollar, the dollar/gold amount would be constant, that is the whole point of the gold standard.

My third point is that gold changes in value based on market forces, independently of the value of the dollar. If the dollar's value was based on gold, the value of the dollar would change along with it.

But the value of gold hardly changes at all, the value of the dollar is fluctuating all the time...so this is a flawed argument. If gold were our currency, there would be a constant demand, and obviously the supply side changes very little...so its value remains constant.

 

[Doctor Pot]

No, the value of the dollars you bought your car with went up(this wont last long though). The dollar is unstable...not gold. Just because things like eggs and milk and clothes and cars don't jump or drop in price drastically over the short term, does not make the dollar stable...obviously we are not trying to find the fair maket price of eggs and milk and clothes by means of the stock market everyday, which is what we do with gold. THe rise in the price of gold, represents a devaluing in the dollar...not a rise in the the value of gold, likewise a drop in the price of gold represents the value of the dollar going up(as it has been lately.) Same thing with oil....if you look at the price of oil in gold, the price stays almost constant...so it is the dollar that is constantly changing in value...gold is stable.

Hmm, history begs to differ:
http://www.hardassetsinvestor.com/component/content/article/3/972-gold-vs-oil.html?year=2008&month=07&Itemid=39

The number of barrels of oil that can be bought by an ounce of gold has varied between 6.5 and 12.5 over the past two years. Why do you think gold is the one thing that has a stable value? That doesn't make any sense.

 

[Doctor Pot]

Maybe not to you, but I would like to keep the value of my savings account.

You mean like gold?

Yes, nothing is stopping you from investing in gold. I did.

You mean so they can lose half of their savings like all the people who were invested invested in mutual funds? I mean the smart investor definitely would not be putting money in the market right now, atleast not in american companies(and investment in foreign companies definitely doesnt help us)...unless of course they are a day trader and know exactly what they are doing...but of course most people are not. So what are you left with? Precious metals and other certain commodities, that make money through inflation but really only actually keep their value, or low interest bearing accounts that are actually devalued overtime through inflation.

People are free to invest in whatever they want. CDs almost always beat inflation, for one.

Ok this statement has a lot of probelms. First, if the dollar was fixed at a set amount of gold, why would people trade in there dollars for gold during economic slowdowns if theyre dollar is going to stay the same value anyway. Investment always goes down in times of ecomic slow down, but why would tying the dollar to gold cause investment to plummit...the laws of supply and demand would still function wouldnt they? Not only that, they wouldnt be distorted by inflation, so we would recover quicker from natural economic slowdowns. How would the price of gold skyrocket if it is tied to the dollar, the dollar/gold amount would be constant, that is the whole point of the gold standard.

That's the issue, the dollar can never stay worth exactly the price of gold, unless we use only gold coins for money. But even in this case, there is the issue of bank runs, where people withdraw their money because they think a bank will fail, and these people withdrawing their money ends up causing the banks to fail, because banks invest their money. Ever watch "It's a Wonderful Life"? It should be on fairly regularly this time of year.

But the value of gold hardly changes at all, the value of the dollar is fluctuating all the time...so this is a flawed argument. If gold were our currency, there would be a constant demand, and obviously the supply side changes very little...so its value remains constant.

The value of gold hardly changes relative to what? Other gold? It changes relative to just about everything but other precious metals. See the link I just posted.

And no, the value of gold would increase, not stay the same, provided there isn't a substantial increase in the gold supply to offset the deflation.

 

[hom36rown]

Yes, nothing is stopping you from investing in gold. I did.

That is true...but some people dont even have savings, and depend on their wages, which are also being robbed through inflation.

People are free to invest in whatever they want. CDs almost always beat inflation, for one.

Well if you believe the cpi, but most people dont have the money for cd's anyway.

That's the issue, the dollar can never stay worth exactly the price of gold, unless we use only gold coins for money. But even in this case, there is the issue of bank runs, where people withdraw their money because they think a bank will fail, and these people withdrawing their money ends up causing the banks to fail, because banks invest their money. Ever watch "It's a Wonderful Life"? It should be on fairly regularly this time of year.

If the dollar is set at say $500= 1 ounce of gold.., or whatever we'd set it to...than how can the price of gold change, that doesnt make any sense...I think you are assuming we'd still be practicing fractional reserve banking, which I'm also advocating we get rid of, maybe I should have made that clear. If we dont make money out of thin air like we've been doing, than the dollar/gold value stays the same...and if people practiced sound banking practices, then bank runs wouldnt even matter becuase they would have everyones money, and we wouldnt even have to worry about bank runs. FRB is what makes bank runs dangerous.

The value of gold hardly changes relative to what? Other gold? It changes relative to just about everything but other precious metals. See the link I just posted.

Value is determined through supply and demand....the supply of gold barely changes, and if it were our currency the demand would be relatively constant, hence you have relatively constant value.

And no, the value of gold would increase, not stay the same, provided there isn't a substantial increase in the gold supply to offset the deflation.

ok, even better.

 

[Doctor Pot]

That is true...but some people dont even have savings, and depend on their wages, which are also being robbed through inflation.

Well if you believe the cpi, but most people dont have the money for cd's anyway.

If the dollar is set at say $500= 1 ounce of gold.., or whatever we'd set it to...than how can the price of gold change, that doesnt make any sense...I think you are assuming we'd still be practicing fractional reserve banking, which I'm also advocating we get rid of, maybe I should have made that clear. If we dont make money out of thin air like we've been doing, than the dollar/gold value stays the same...and if people practiced sound banking practices, then bank runs wouldnt even matter becuase they would have everyones money, and we wouldnt even have to worry about bank runs. FRB is what makes bank runs dangerous.

Value is determined through supply and demand....the supply of gold barely changes, and if it were our currency the demand would be relatively constant, hence you have relatively constant value.

ok, even better.

*sigh*

This keeps going in circles. Anyway, here's a more informative article:

http://meganmcardle.theatlantic.com/archives/2007/09/theres_gold_in_them_thar_stand.php

 

[hom36rown]

I have a very good feeling you'll see over the coming months and years the result of our ridiculous monetary policy through a dramatic drop in standard of living, and I'll just that let that speak for itself, although you might just try to blame it all on bush...and if not, and we somehow manage to spend our way to prosperity on the sacrifice of foreign countries, then I'll eat my hat and accept obama as the messiah.

 

[ViRedd]

Exactly. They have computer programs that can look through all those in the system for aberrations, Like comparing your companies tax pay ins to the filings by SS numbers etc. If something is out of sync, it pops up in the check this column. Once you have filed, you're in a word, screwed.

Med ...

Not dissing you here at all ... but I would like an explanation on something.

You have continually railed against the Bush administration's "domestic spying" since 9-11, and yet you have been an avid supporter of our present tax system and all the domestic spying that that entails, as you have pointed out above. You have also been dead set against the Fair Tax, which would end the IRS goon-squad from looking into our private financial transactions. Please explain. Thanks ...

Vi

 

[ViRedd]

Ok Medicine man I know you asked Doc how we would get rid of the system as it stands. I am going to take the liberty and explain it the way Ron Paul did with a little add on by me. You use executive order 11110 that JFK put in place. You order the treasury dept. To begin printing US notes ( I believe these were Silver certificates, RP would probably have used a stable basket of commadatities or just gold). Then what you do is allow the market to decide which is better. By allowing people to be payed in and conduct business with these US Notes. The central banking scam has happened before in this country both Jefferson and Jackson defeated it. JFK gave it a go, until somebody killed him. (not implying anything here). Priced in gold a model T ford cost 385 bucks or about 19 one ounce gold double eagles in the 20s. The cost of a modern F-150 pick-up is about 15000 dollars in todays money, but priced in gold its about 20-21 1 ounce gold (at 750$ an ounce)double eagles or about 400 Bucks. Which would you rather buy??

The real problem with Gold is that If you have a war (or massive social welfare programs)you have to pay for it. Thats where the problem historically has come up. A nation decides let us have a jolly good war. Then spending goes through the roof and you need to make money out of nothing thats were these bankers come in. Lincoin instead of taking the Bankers loan at about 36% interest printed debt free Greenbacks. Saved the nation a whole lot of grief.

Bank runs wouldn't be a problem if banks were not using a fractional reserve banking scam. Creating currency out of thin air and then expecting us to pay interest on it, what a great idea, for them.

Look I know allot of people don't like religion and religion and politics are to things you never bring up in polite society. But Christ used force only one time in the bible, once. Who did the Son of God, the one person who has created one of the largest bases of followers in the world today by advocating peace love and blaa blaa blaa. Who??? People who were playing games with money. Thats what the Fed does, it plays Games with money. The Crooks have only gotten smarter Invented new games and told us we are all to stupid or uneducated to understand what they are doing. That is why it is Counter intuitive because people with Common sense and who pay attention realise its a scam. A scam that incourages greed and excess by the government and all the way down to the people.

Doc what is it gonna take for you to see what most of us are saying?? When you lose your job, when your money is worthless. Your a smart, well read guy, I can tell your smarter then me (And I don't say that often) But the system you adocate is wrong. (IMHO) But I guess time will tell. All I'm saying is If this system of total fiat currency goes bust think before you just let them set up a new central bank scam and get back to real money. Its an option thats all I'm saying. I'm not going to lecture you about reading Austrian economics, nuff said.

I know one thing, I'm gonna be pissed if they use this as an excuse for a North American Union or the Amero (or what ever name they want to give it even if it is gold backed).

Long Live the Republic And RP 2012!!

^^^ What an excellent post!


I highlighted the part about building the welfare state because that's exactly why FDR's administration confiscated all the citizen's gold and cancelled gold clauses in contracts in 1933. FDR was actually a socialist of the fascist stripe and one of the worst presidents in our history from a loss of liberty standpoint.

Its going to be interesting to see if the new administration follows FDR's lead and creates massive make-work projects in an attempt to ease the current financial fiasco. I sure hope not ... the results, as proven by FDR, will be disastrous.

Vi

 

[Doctor Pot]

I have a very good feeling you'll see over the coming months and years the result of our ridiculous monetary policy through a dramatic drop in standard of living, and I'll just that let that speak for itself, although you might just try to blame it all on bush...and if not, and we somehow manage to spend our way to prosperity on the sacrifice of foreign countries, then I'll eat my hat and accept obama as the messiah.

I'm not saying we don't have problems, we do. We have an enormous trade deficit for one. But bringing back the gold standard won't do a thing to help that. Government programs to improve infrastructure just might.

Did you read that article about the gold standard? What about this one?

http://www.nytimes.com/2008/12/01/opinion/01krugman.html?em

 

[FLoJo]

this thread is going nowhere lol... the future will tell us all we need to know

 

[hom36rown]

I'm not saying we don't have problems, we do. We have an enormous trade deficit for one. But bringing back the gold standard won't do a thing to help that. Government programs to improve infrastructure just might.

Did you read that article about the gold standard? What about this one?

http://www.nytimes.com/2008/12/01/opinion/01krugman.html?em

Of course we can't bring back the gold standard now, that would be a disaster...had we never left it though, we would not be in the predicament we are in now. I could reply to your articles with another article, or whole books for that matter...but that doesnt make for a very good debate now does it.

 

[hom36rown]

Peter schiff is a prophet [youtube]pGHODRNJqRo[/youtube]

 

[FLoJo]

now thats a man that knows whats up... that bald dude must be dr pot (no offense.. fundamentally speaking)

i need more gold!!

 

[max420thc]

Peter schiff is a prophet [youtube]pGHODRNJqRo[/youtube]

plus rep for you...but this guy isnt the only one who has been saying this same shit for YEARS..almost every billionaire in the country has been saying this also..and some outside the country..such as jim rogers....and marc faber...and ross perot..ive been making money shorting the market and playing ups and downs..in gold and silver...printing money by its very nature is inflationary....this is the biggest fuck job i have ever seen in my life about to happen..watch this stupid monkey trick....but..ill make some money on it..i might even get rich....http://www.monex.com/expert/how-much-gold-is-enough.html

 

[max420thc]

http://www.monex.com/expert/how-much-gold-is-enough.html