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You could go live in France. Then you would feel free to hate America as much as you want.
Actually in all liklihood, s/he could not live in France. They don't want us living there without proving 1. We can speak French and 2. We can afford to live in France/Work or 3. You are there temporarily/ student
Money is a medium of exchange. It has no intrinsic value. Truthfully, the only things that have real value are items you use and consume (food, housing, labor, etc.). Gold, silver, diamonds, etc. have no real value as they are essentially useless unless they are used in industry to create something that is actually useful. With any type of money, you must "believe" that it is worth something. This concept is no different whether the currency is fiat, gold backed, or potato backed. The reason that the dollar is no longer based in gold is for the mere fact that there isn't enough gold in the solar system to back the productivity of the US. The asset value is now based on a basket of factors (commodities, real estate, labor, finished goods, etc.) just as it should be. In a modern economy, there is no one element which can or should be reserved as an ultimate dictator of value.
Money comes from your willingness to work for that money. The fact that you will work for the money gives the money its value. Everything else is secondary. It doesn't matter how much money is printed, nothing really matters for as long as those pieces of papers can be used to extract your labor. Gold has no intrinsic value either, it's valuable because it can be used to make you jump just like paper money makes you jump. The exact history of how paper money (or gold) become valuable is irrelevant for as long as paper money can be used to make you jump. Equally, the history of paper money will be irrelevant at the point it can no longer be used to entice you to do (unpleasant) labor .
Last edited by RememberMee; 03-04-2014 at 10:18 AM..
So what would happen to the US if people "stop believing in the value of the dollar"? Letsay, if suddenly it stop being a petrodollar.
Faith in money is usually facilitated by taxes. If government decides to collect taxes in dead squirrels, the value of the dead squirrels immediately goes up, dead squirrels become "money". It's not just about faith. No marginally stable government ever failed to introduce fancy printed money, it's easy, they just need to collect taxes using colored pieces papers they just minted.
Who here believes Nixon's decision to remove us from the gold standard was a good move for this country? Why?
It was a great move. First, we didn't have enough gold to back the money in circulation, so the gold standard was based on a lie. Second, US gold reserves were being siphoned off at fire sale prices. Gold is a strategic metal. For one thing, every computer in the world has gold contacts. Third, at $32/toz., nobody was interested in producing gold. Letting the dollar price of gold rise did wonders for US gold reserves by promoting mining and recycling. Fourth, letting the dollar float against world currencies meant the exchange value dropped, which did wonders for our exports.
Yes, there were some down sides. The Arabs didn't like it, and embargoed oil exports, which threw America into an energy crisis. Thanks to loose monetary policy, inflation took off, and the cure was a terrible recession. After the recession was over, Reagan figured out that borrow and spend was better politics than tax and spend. We're still dealing with that, which is the direct fallout of the eased rules for money creation.
The bottom line is, floating the dollar was unavoidable. Most of the fallout was our own dumb fault.
Hyperinflation is caused by political turmoil and a breach in a country's full faith and credit.
Yes and No, printing money doesn't necessary lead to hyperinflation, but it can. In fact countries have tried to used counterfeit money to ruin another countries economy in the past.
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Reagan figured out that borrow and spend was better politics than tax and spend.
Reagan had a two part plan. The first was a general tax reduction, that part was passed by congress. The second were spending cuts that matched the reduction in income, that part was blocked by congress.
It is even a myth that "printing" money is a major root cause of inflation as a whole. It is more the scarcity of an item that causes its price index to rise than it is the amount available to purchase it with. Ex: If I have a million dollars, I won't pay more for bananas as a result. However, I will pay more for bananas if I need them and they are scarce.
It can easily be argued that the more cash liquidity there is, the more willing a manufacturer or service provider will be to produce whatever they make or provide thereby keeping the cost index of the good or service at a regular rate. Markets want production stability. Production stability doesn't happen without ample credit or cash on hand. Liquidity traps are caused by very low aggregate demand, economic panic, and wars. The resulting, rebound inflation occurs when the supply of goods dies off as a result and the scarcity of what is needed begins to rise. Hence, the term liquidity "trap." There are no goods to buy even though the demand exists. No goods can be produced because there are no goods are being bought and, therefore, no profits. The only thing that can really break the cycle is the loosening of credit markets. Without it, inflation spirals out of control even though the money supply has not increased.
Yes and No, printing money doesn't necessary lead to hyperinflation, but it can. In fact countries have tried to used counterfeit money to ruin another countries economy in the past.
How did that work out? Oh, right, it didn't.
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Reagan had a two part plan. The first was a general tax reduction, that part was passed by congress. The second were spending cuts that matched the reduction in income, that part was blocked by congress.
The SDI and the "War On Drugs" were spending cuts? Sorry bud, history simply doesn't match your Reaganomics rhetoric.
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