4T? What 4T?

[Kinser79]

(05-22-2016, 01:23 AM)pbrower2a Wrote: The backing of any currency is what one can buy with it, whether it is oil, steel, wheat, electrical power, motion pictures, porcelain, or weapons. Gold is arbitrary, fitting certain values well and others badly.

Gold has several advantages to other commodities for the backing of a currency, though theoretically one could back their currency with oil, or steel or even electrical power.  The main advantage with gold is that it is easily fungible, is relatively rare and has intrinsic value beyond its industrial uses.  And yes gold has industrial uses, one can obtain more gold by recycling 1 ton of used cell phones than running 1 ton of gold bearing ore.

Quote:South Korean currency is valuable. North Korean currency is worthless. That has nothing to do with gold reserves.

The South Korean Won is backed by a combination of USD, GBP, Euro, JPY and RMB (commonly called the Yuan).  By being directly convertible the South Koreans can purchase raw matterials and will accept those currencies in exchange for finished goods--as well as their own of course.  The SKW is typically not used by a reserve currency except by countries who do extensive trade with South Korea so it is internationally speaking statistically irrelevant.

The North Korean Won is not convertible with any other currency though they will accept RMB for their primary exports which isn't much.

You're comparing apples to potatoes here.

Quote:The US dollar as a fiat currency has done adequately on the whole -- but better as people got used to it. Within ten years America got near-zero inflation.

The US has near-zero inflation by using a measure of cooked books (CPI does not include the following sectors Fuel and Food, which are major economic sectors), and by exporting inflation--that is releasing Dollar Denominated Bonds for foreign consumption because in comparison to Euro, Yen, Pounds or RMB  it has less convertibility problems, also the US is a major trading country, and also oil can only be bought from the Saudis in Dollars.

Quote:Petrodollars?

Oil, aka petroleum, is bought and sold on world markets in USD.  It does not matter if it is bought in Shanghai or sold in Caracas.  Right now the only countries accepting anything else for oil is Russia--they will accept Dollars or Rubles, and Iran who is accepting gold, RMB and Indian Rupees (which I'll probably refer to as INR for the rest of the thread).

Quote:Those have themselves been shaky

This statement indicates that you are out of your depth.  The price of oil doesn't matter, it is that the price of oil is in USD that does matter.  It is only as shakey as the willingness of the US Military to force oil exporting countries to use USD.  I have news for you...we're not going to war with Russia.  Unlike Iraq and Libya they can defend themselves.  The Saudis, Kuwaitis and Venezuelians are on the take, and Nigeria has no better offers (though there have been rumors circulating that they have been getting real cozy with Beijing).

Quote:, depending heavily upon the price of oil.

It doesn't matter except to exporting countries what the price of oil is, as long as it is in dollars everyone needs to buy dollars to put gas in their tanks, buy jet fuel, and fuel their tractors--and in more backwards parts of the world light their homes.  This doesn't even take into consideration that oil is a component factor either in production or transportation of most goods, plastics are almost entirely created from oil.

 

Quote:Cold War? It's over.

Yes, but when the Dollar was unpegged from gold the threat of the big scary USSR made Europe and Japan fall into line.  The end of the Cold War was a major blow to the fiat Dollar as a reserve currency, particularly as Japan and Germany liberalized their financial markets.  That said the Germans would prefer that the Euro never becomes a reserve currency excluding countries that primarily trade with the Euro Zone.  Having a reserve currency has some clear problems associated with it.

Quote:There is no magic in gold. Bismuth would do just as well.

I'm afraid that the industrial uses of bismuth outweigh its potential as a medium of exchange. At least with gold most of the applications it is used for can be covered with by Copper.  Also bismuth does not have a tradition of being used as a medium of exchange unlike precious medals (platinum, gold and silver).