Local Currency, World Currency or Gold Currency?
Submitted by fyl on Mon, 2012/06/11 - 08:03.
For at long as there have been fiat currencies there has been a debate over whether they can be stable. The most accepted answer is "temporarily" which could mean years, tens of years or hundreds of years but not forever. The question then becomes one of how to manage your wealth. This is particularly important if you have moved to a place such as Nicaragua who tends to be a victim of floating exchange rates.
There are many articles, generally written by someone with a vested interest in how you manage your money, that will tell you what they feel is best. Gold, stocks, bonds, real estate and more are typical answers. Well, there is an interesting article in Forbes titled If the Gold Standard Scares You, How About a Parallel Currency Option? that makes a very interesting argument for a third alternative.
The author's proposal is to establish a choice—that is another currency, backed by gold—and let individuals freely pick what they feel is best for them.
The basic problem facing a country like Nicaragua, Pakistan, Cambodia — or China — is that the major international currencies, such as the dollar, euro, pound and yen, are highly variable compared to gold.
You can argue – correctly, I would say – that this represents the unsteady value of these floating currencies, while gold itself is relatively inert, a constant of stable value. Gold has served this role for centuries. It’s not gold that is “volatile,” but rather these chaotic bits of fiat paper.
King of the World Economies
Nicaragua, or any other small (or large) country in the world, could immediately become the "new Switzerland", in a very simple way.
Gold is not an "investment". It is not a "commodity". It is money. Were Nicaragua to purchase enough gold to back it's currency, over a period of time, and then announce that the new "Gold Cordoba" was the currency of the country, money would flow into Nicaragua like Niagara Falls.
The problem is, of course, that all politicians love the ability to steal from savers (which is what all currency debasement - "printing" - is). It would be very difficult to restrain them from doing this, as long as the currency were "government issued". On the other hand, if all the government did was ensure the weight and measure of the gold (which is exactly what they US Constitution was supposed to do, but didn't), and allowed private currencies to circulate, several things would happen.
1) all "boom and bust" business cycles would cease 2) everybody in the world would want to use the currency as a trading vehicle 3) prices in Nicaragua would drop like a stone. 4) business activity in Nicaragua would increase at an astonishing pace.
Will it happen? No. Would it be good for everybody if it did? Yes.
Gold is a religion or a element that conducts electricity well
We could decide like Sparta did, that iron was the money, or that any number of things were the base for trading.
I've been thinking about buying the ebook version of DEBT, which comes from a Marxist perspective and which talks about how people lived before currency as we knew it -- apparently, if the writer is right, an interlocking set of obligations and duties and memory. Could be done again perhaps, now that we have computers.
Rebecca Brown
That's Two But Not all
I recommend measuring worth for a better look at reality or us inflation calculator as an alternative. You will also need 200 year gold history.
From those items you can pick a starting year, buy some gold, wait, sell it today (or whenever you want) and see how much currency you get in return. You may be surprised.
This is not to say gold is a good investment. It just happens to be generally a better thing to hold on to than US$.
If I go back to Paleolithic times,
I suspect that over 10,000 years, mammoth ivory beads were a good investment. Thing is the value of gold is what it is only because we've all decided that it's valuable. It never was currency in the Americas before contact, but people used a lot of it for decoration.
200 years, 1,000 years is nothing. Seriously, gold looks rather temporary as a measure of value. Archeologists discovered caches of hundreds of mammoth ivory beads.
Gold's pretty and crazy people like Eurasians used it for currency. Its value is a consensual hallucination.
More seriously, China had paper money earlier than the western part of Eurasia, and a more developed culture at that point. Sometimes, it was backed with silk and sometimes with gold.
Rebecca Brown
Getting off the gold
Getting off the gold standard was a whole lot easier than getting back on it! Neither Nic nor any other country could afford to go back at $1600 an ounce, especially when it only costs $300-400 to make the stuff. Gold is on a speculative bubble but will eventually drop back down to the cost of production.
And modern governments have gotten too used to the printing presses.
"You can avoid reality, but you cannot avoid the consequences of avoiding reality." Ayn Rand
You missed the point
The point of the article is that fiat currencies are the speculative side of things. Right now, the US$, the € and lots of other currencies are low because their bubble burst. If you look at the long-term value of what a gram of gold could buy, it is clearly what is stable.
Every time you say the price of beans, electricity, clothing or cars went up you are pretending the number of fiat currency bills is the standard. We eat beans, consume electricity, wear clothing and drive cars. Their price didn't go up, the value of your measuring stick went down.
Now, the author suggested that if you just establish the parallel currency standard than everyone is free to pick which one they want and when they want to change. In other words, you have a choice.
My idea of long term is 50,000 years.
and in that period, the Eurasian fetish for gold could very well be history.
My own personal history is maybe another 20 years or less. Worst case scenario is I die sooner than later. Best case scenario is I don't have a lot of pain in doing that.
Rebecca Brown
i want to live 40 more years
to see it when H. sapiens hits the 12 billion mark and everything from the environment to the economy imploads.
"You can avoid reality, but you cannot avoid the consequences of avoiding reality." Ayn Rand
Life in a cashless society
He's selling a book but so are a lot of people...
David Wolman says cash is dirty, expensive and should just be pushed off the cliff.
He describes his new book, "The End of Money: Counterfeiters, Preachers, Techies, Dreamers - And The Coming Cashless Society"
http://www.bbc.co.uk/news/magazine-18401164
For one stop "what if"
For one stop "what if" blogging, from everything from economic implosion to environmental disaster (sorry no zombie apocalypse), I recommend http://www.peakprosperity.com/. The newsletters, titled the Martenson report, cover a gamut of topics, how to hedge against economic disaster to survival gardening. If you can get past the doom and gloom stuff there is actually a lot of useful information there covering a huge range of topics, gold being one of them.
Sorry newsletter is title
Sorry newsletter is title "Daily Digest"