The most dangerous time since the Civil War

[Kinser79]

(01-14-2018, 02:51 PM)David Horn Wrote:

(01-13-2018, 09:09 AM)Kinser79 Wrote:

(01-13-2018, 07:41 AM)David Horn Wrote: The USD is as powerful as it is because it's reliable.  Everyone needs a reserve currency to have for trade and a store of value.  Eventually, it may be the Renmimbi rather than the USD, but not now or soon.

The reserve of choice for the past several thousand years has been gold and suplimented with silver.  The use of a fiat currency as reserves is an adoration of those economic norms.  If the Chinese manage to make RMB fully convertable to gold the USD will lose that "reliability" over night.  But then again fiat currencies are reliable in only one thing...failing eventually.

There aren't enough precious metals in the world to act effectively as a reserve.

Actually the scarcity of precious metals make them almost perfect as a reserve. Even better as a backing for a represetational currency which for the majority of history all various monies were.

Quote:Currencies -- all currencies -- act as transactional lubricants and short term stores of value. Note: they are not intended to provide long term store of value, because that defeats their function as trade enablers. In fact, they need to decline in value slowly over time: fast enough to motivate trade but slowly enough to maintain discipline.

Central banks have proved that they do not have the capacity to enforce discipline economically. Since 1914 the USD has lost almost 94% of its value. A currency system that does not maintain a relatively stable store of value is essentially useless in lubiricating transactions, unless the goal is to speed up the accumulation of goods. After all if a dollar today will be worth 75 cents tomorrow I may as well buy up as many things as I can as those goods will maintain their value in the main.

I'm not opposed to backing currency in other things besides precious metals. The RMB is for example essentially backed up by the fact that China essentially produces just about everything. For example I recently bought new leather boots (OSHA requires non-slip "restaurant shoes" and I prefer work boot styles) directly from China. The US primarily exports lumber, grain, and soybeans with some technological and military hardware. In effect the US is a third world country except for the fact that oil is priced in our currency.

When a dollar today is worth a dollar tomorrow then then it can act as a lubricant. Inflation is an invisible tax on every transaction, and like all taxes it rests as a dead weight on economic activity.

Quote:You were into MMT, that takes this idea to its extreme, yet now you pretend it's toxic or something. The truth is in the middle, as it usually is.

I was never "into MMT". Rather I thought MMT could be used as a means to an end. Since the material conditions required for a Marxist style revolution do not exist now, and probably cannot exist in the future there is no reason for me to "cling" to MMT. Unlike Playdude I don't need to attempt to convince myself that my economic prescriptions are the only means to the end of mass prosperity. Do I think that the US could scrap the fed and issue debt free fiat currency? Absolutely. We have before they were called US Notes and rested on the Treasury's ability to collect taxes to cover their value. Believing that this is a possibility does not necessitate me to subscribe to MMT. US notes were issued for a century, a century that far preceded the very first stirrings of anything remotely resembling MMT.