Patrick,
> >> - an economy cannot function effectively without using fiat tokens. > > > [Note: A few quotes from your posts might help you to understand how I > arrived at certain conclusions.] First of all, in my quotes I talk about 'paper money', not about 'fiat tokens' I have never defended enforcing fiat money, and I also explained different ways how paper money can be created without enforcing it. Stocks is an example of such paper. Secondly, I did not say that an economy cannot function 'effectively' on gold only. I only pointed out that in a paper money system there is more incentive to 'invest' the money. Investing the money means new capital goods are created, which, as Von Mises says, is the foundation of economic progress. Hence a system that stimulates investment, also stimulates economic progress, and that's what I said about a paper economy in these pieces you quoted. > [Note: OK, maybe you're not saying the economy "cannot function > effectively" in absolute terms -- you seem to be saying cannot function > as effectively as it might.] I am saying it will not progress so quickly. But that does not mean it is not functioning effectively. It is perfectly possible to function 'effectively' at a below full capacity level. For a gold only economy to progress as quickly as a paper money economy, people need to continuously lower the prices (in gold) so that the average consumer has gold available to buy the new stuff. Lowering prices is something that doesn't happen very spontaneously. Another disadvantage if prices continuously go down: existing stocks decline in value, but were produced at the old cost price, causing losses. Likely result: shortages > >> - using gold alone would hamper an economy because people would not > >> invest enough. No, the economy may do ok. And it will also depend what you see as 'enough' investment (and that can vary enormously from person to person. Just ask some of the green boys what they see as 'enough investment') I just pointed out that with paper money people will invest 'more', for obvious reason. > "In a gold only economy, with a strictly limited supply of money(gold), > it is > obvious that if more gold goes in vaults there is less gold to serve > transaction in the economy." > > [Note: I have no idea why you attribute this characteristic to gold > system only, when the same could be said for fiat tokens.] 'Paper money'.. In a paper money system you can 'save' your money in the bank, that does not mean there is less liquidity in the system, since the bank will 'invest' it in something. If all the paper money was saved in a vault like with gold, then it would be the same. But paper money gives interest, so most people put it in the bank. That is a big difference with gold only > "Or shorter: > A limited money supply system discourages investment and encourages > saving. > A growing money supply system discourages saving and encourages > investment." > > > [Note: Gee, sounds exactly like one of the "major points" I listed.] Sounds like... > >> - it is important to pump up the money supply to force people to > >> invest. > > > [Note: Oh, excuse me, not "force" -- just "encourage," right? As in I > "encourage" you to invest in order to avoid losing your purchasing > power.] Things work the other way round. There is nobody out there that can directly 'pump up the money supply' It is when a person like you and me goes to the bank for a loan, that the money supply increases. Most of the borrowing is done to purchase some new capital goods, thus for investing... (and that is a good thing according to your Von Miser) So, it is the opposite from what you say: In a paper money system people invest when they see opportunity, and that increases the money supply when they borrow for this investment. At the same time this new money will serve as the extra money that people need to buy the products generated by this investment. Yes, the central bank has some power to set interest rates, but then remember that charging interest is a form of discouragement. What the central bank does is discourage new money creation, they can discourage it more by raising interest rates, or they can discourage it less by lowering them. To really 'encourage' money creation they would have to set the effective rates below zero. > > These are not my points , but what you have made of them.. > > No blame on you. > > > Oh boy, here we go with the patronizing condescending paternalistic pat > on the head. The good old reliable "You just don't get it" approach. "You just don't get it" is only one of the 4 possibilities I aknowledged. I did not give any opinion which of the 4 I think is the case. > > When one is not understood there are four possibilities: > > 1) One has it wrong > > 2) One fails to express it clear enough > > 3) The other simply doesn't get it > > 4) The other doesn't want to get it. > > > You took the time to condescend but not the time to illuminate. Is it my job to illuminate? What I take time for and what not is my business. If you see the above as condescending on you, then that's your opinion. > > It is unfortunate he (and other economists) use the word 'saving' in > > this > > context. > > Not really unfortunate. Saving is a necessary precondition for > accumulating capital, and capital is a necessary precondition for > investing. Yes, in a gold only economy you have to save the gold first before you can invest it in new capital goods. But in a paper money system that is not so. You want to invest in some new machine that will make you more productive? You just borrow the money. That does not necessarily mean you are borrowing the money somebody else has saved. The bank can create the deposit, and this creates new money supply. You use this money to buy the new machine right away and start producing. The new money you used to buy the machine has gone into people's pockets via wages and profits that made up the price of the machine. They can now use this extra money to buy the new stuff you make with the machine. And that's the reason why this paper economy progresses faster. The new investments/capital goods can be created as soon as the technology and the people are available. In a gold only economy one also has to wait till enough gold is accumulated to finance the investment. That can mean a big delay. > > But the capital goods (which are the foundation of civilization, as he > > says), are only created when money is 'spent' on them. > > Nobody thinks he is 'saving' when he goes to the shop to buy a > > computer, or > > a truck, or whatever tools,... > > Computers, trucks, and tools are indeed counted as capital equipment on > the company books. The company is not "saving" when it purchases these > assets, the company is USING savings in order too purchase these assets. In a paper economy the company can also use new money created by a loan to purchase the assets. As long as the productivity gains from the new assets outweigh the cost of the loan (interest), there is no problem at all. No need of savings or somebody else's savings. > But it can also be very good for people to save some extra money in a > vault. It gives them the ability to buy something in the future that > they do not need today. That is a good thing. No economist will agree with you that putting money in a vault or a matress for later is a good thing for the economy. Putting it in the bank is better, and that too will allow you to buy something in the future. While in the bank the money is not dead, it will remain in circulation and facilitate creation of more capital goods. Let me finish by pointing out that in a gold only system, the idea of 'saving' in the sense of saving money, is a myth. You cannot have more or less 'savings money' in a gold only system. Since the amount of gold in the system is fixed, and the gold is always in the hands (or in the vault) of somebody in the country, the total amount of 'savings' never changes. If there is 100oz of gold per person in the system, and everybody decides to save until he has 120oz, it is just impossible. The only way for the average person in this country to become richer is by continuously investing his money in new capital goods, and that means he has to spend his gold on them. These people can blow their gold on whatever crazy and not so crazy investments, and still the average person will have 100oz of gold in his possession. For centuries people have been told that saving is good. It is an ongoing manipulation, because if you can convince 90% of the population that they will become richer if they save money, then the other 10% reap all the profits of investment. If everybody invests, they have to share the cake with everyone. Saving money does not serve any purpose. Continuously invest all the money you don't need. Danny --- You are currently subscribed to e-gold-list as: [EMAIL PROTECTED] To unsubscribe send a blank email to [EMAIL PROTECTED] Use e-gold's Secure Randomized Keyboard (SRK) when accessing your e-gold account(s) via the web and shopping cart interfaces to help thwart keystroke loggers and common viruses.
