End of US dollar dominance?

[Jerome Scuggs]

this is not a thread about gold.

[Eeks]

I havent read this thread thoroughly, so i apologize if someone else picked up on this:



If there is an economic collapse, do you really think gold would be able to retain any kind of real ´monetary´value?

#1 there isn't enough gold in the world to cover your debt.
#2 the "value" of everything would have to be completely retooled
#3 noone would be able to buy/sell gold anyway since the assumed value would be far too great, and you sure as hell can't eat it :turned:

You've misunderstood. The value of currency would get tied to gold. People wouldn't be actually trading gold to buy stuff. lol...

[Displaced]

no, i havent misunderstood.

in a complete economic collapse, gold would also effectively lose its value, might as well tie the value of money to horseshit.

#1 to tie the currency to gold, you would have to have actual gold reserves to tie to, and to stabilize currency.
How many trillion is the current US debt? :fear:

#2 hence if you cannot tie currency to the amount of gold that you have, you need to either raise the value of said gold, or lower the value of your currency.

#3 other countries could also just demand back current us debt as gold, thus effectively crippling the value of the currency yet again. Its totally unfeasible, and you cant feed starving ppl with gold nuggets.

[Jerome Scuggs]

why would gold lose its value? what inherent properties of gold - its luster, malleability, etc - are tied up in the health of the economy? when the dow drops 2k points, does gold become less shiny? what do you mean by "value"? as far as i know, you mean "value in american dollars". well, duh. that's sort of what happens when currencies collapse. saying "in a collapse, gold will lose its value in paper dollars!" is like saying "if that person dies, he will stop breathing!" - you're confusing cause and effect as well as making a completely useless statement.

you can't feed people with pieces of paper, either. but if i were to offer someone with food some gold, or some paper - what do you think he'd take? this isn't rocket science.

[Nycle]

I have more trust in a government-backed bill to buy me bread than its equivalent weight in gold.

Also, don't you think trading in gold would be kind of... well, medieval? Why don't we re-introduce the feudal system while we're at it. That'll surely prevent economic crashes from ever happening again.

[Jerome Scuggs]

I have more trust in a government-backed bill to buy me stuff than its equivalent weight in gold.

http://www.lewrockwell.com/north/north687.html

it's a quick dialogue in the style of socrates on the "government trust" myth. he breaks in down into 5 parts covering the various claims made in favor of it.

Also, don't you think trading in gold would be kind of... well, medieval? Why don't we re-introduce the feudal system while we're at it. That'll surely prevent economic crashes from ever happening again.

This would be clever, if "feudalism" involved the trade of gold (or anything resembling economics). No, I think the "feudal" aspects of our society are presenting themselves in non-economic matters. Your post would be more clever if you made a reference to "mercantilism" - but it would then be non-unique because we are regressing to mercantilism - specifically because of government fiat money.

Historically speaking, socialism as a theory was developed before free market economics, so the current solutions would be more "medieval" than anything I advocate.

[Jerome Scuggs]

anyways, all of that is more or less besides the point. here's my two cents as to why the dollar will collapse - it's because the US markets have been raped. to quote bob murphy:

People need to stop wondering, “When will the market find its bottom? This month? Next?” The federal government has already done an incalculable amount of damage to the American financial sector, and the insults keep growing. Think of it: Besides the unpredictable “sometimes we seize you, sometimes we take billions of bad assets off your books, sometimes we let you fail” strategy with respect to major financial institutions, the government has also done childish things such as ban short-selling of financial stocks. No one knows what the rules will be next week in these markets. Only a fool would expose new capital to the American financial sector at this point – and the politicians have the gall to wonder, “Why are the laissez-faire credit markets frozen?”

the government, in its short-sightedness, has grabbed at anything that sounds like a good idea. the ADHD fucks in office don't see the long-run effect of their meddling. it's not one thing, or another - it's all of it. investors simply don't know who's going to be taking, giving, or seizing what. why would anyone put money in a system that they can't trust?

that's why banks aren't lending - they're scared. as fuck. and all the government keeps doing is giving them more money - maybe hoping they can literally stuff the vaults so full that money will spill out and into the hands of the consumer? but they're not spending - yet. and one day they will, and suddenly these trillions will flood into the economy. as per Keynes, that figure will multiply by a max factor of 10. so the second we stop worrying about the complete freeze of markets, all we have to worry about is, once again, hyper-inflation.

[Nycle]

The spirit behind Socratic questioning might be a noble one, but if it's used wrongly it walks a fine line between reasoning and brainwashing. If the link you provided changed its questions slightly it might just as well have achieved the person picking currency over gold.

I referenced to feudalism because the economy in that time was not based on money. The only thing a gold standard or even pure trade in gold might be able to prevent is monetary inflation because it's an inherently finite resource. In no way does it protect you from economic volatility caused by, for example, bubbles. Bubbles occur when people deem something more worthy than it actually is, compared to other economic indicators. Gold cannot prevent this and the volatile effects it will have on an economy when the bubble bursts. So then, what miseries that come with economic downturn will you have prevented in the end?

I like to think of myself as a person progressive in nature. In an ever changing and more complex society I just don't think going back to old methods is going to solve anything. Not only because the situation nowadays is entirely different than it has been in the past, but also because newer methods tend to be better and render classical ones obsolete.

[genocidal]

In an ever changing and more complex society I just don't think going back to old methods is going to solve anything. Not only because the situation nowadays is entirely different than it has been in the past, but also because newer methods tend to be better and render classical ones obsolete.

At best this entire statement is vague and meaningless. But more probably it's just wrong.

[Jerome Scuggs]

apparently, nycle knows more than socrates and the writers of our Constitution. please enlighten us.

[Nycle]

That statement might be just as vague as the one geno referred to.

[Eeks]

Well gold price will peak upwards during depression...

[deathking]

I have more trust in a government-backed bill to buy me bread than its equivalent weight in gold.
Also, don't you think trading in gold would be kind of... well, medieval?

Gold is traded because of its scarcity. It is one of the few precious metals to be traded as such, and it's not medieval.

1) It keeps its value during recessions as its value is not tied down to the market (rather to basic supply&demand)

2) it's a hedge against inflation. If you take out a $20, you'd note that it is stated to be "legal tender". This means that this $20 is worth as much as a $20 in the US dollar system. In normal times, the $20 is worth $20. In hyper-inflation, it's next to worthless. As well, Gold is not tied down to any currency, meaning that the instability of the dollar does not affect the price of gold.

3) Because of the above trends, gold is counter-cyclical, trading at a higher price when markets are bear.

I'd think twice before investing in a a t-bill. Sure you might get your money back, but how much will the real value of that money be? Rating companies are already starting to downgrade their ratings on the US treasury.

[Fluffz]

if there is competing currency, then the global currency will be inherently vulnerable to fluctuation - meaning that the goal of an inflationary-free currency is impossible. if there is not competing currency, then there is no possible rational basis for valuation, and economic calculation becomes impossible - because of market and political issues.

If there is not competing currency the rational basis would be the actual goods.

[Exalt]

I think you're missing the point. It's not about China calling in on US debt, it's about China wanting to reform the world's economic system and ditch the central role that the dollar plays in it. The consequences of this would be huge for the US, the dollar, and more or less the world.

You talk about being realistic, but ask yourself whether it's realistic that China and other countries will be prepared to finance Uncle Sam's deficits till the end of days.

They want the one world currency like most europeans and conspiracy theorist all claim will happen. Who cares. No matter what you do, it will happen or wont, and it will affect everyone not just the US.