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AJS-

Original Poster:

11,439 posts

116 months

[news] 
Saturday 5th May 2012 quote quote all
http://etfdailynews.com/2012/04/19/utah-goes-rogue...

I have a feeling this could be significant. It probably won't happen this year, but it's a step towards developing an alternative system that could have it's day in the not too distant future.

davepoth

22,618 posts

79 months

[news] 
Saturday 5th May 2012 quote quote all
http://money.cnn.com/2011/03/29/news/economy/utah_...

this story is more than a year old. Be careful when quoting "tinfoil hat" news sources... wink

-edit-

Seems that this is actually a further loosening of the law from a year ago, apologies.

Edited by davepoth on Saturday 5th May 11:34

AJS-

Original Poster:

11,439 posts

116 months

[news] 
Saturday 5th May 2012 quote quote all
Wonder if I can get my deposit back on that shack in the woods I just bought.


Seriously though, an alternative system of exchange that is more difficult to pervert at the behest of politicians sounds like a good idea to me.

Steffan

8,183 posts

108 months

[news] 
Saturday 5th May 2012 quote quote all
There seem to me to be a whole variety of explanations as to what a fiat currency actually is.

Some observers seem to believe that virtually all modern currencies are fiat currencies in the basis that none of the currencies are actually supported by the actual wealth of the country concerned. There is virually no gold standard or similar physical support.

I would be interested to see whether the majority can actually agree what constitutes a fiat currency, and whether in fact there is in reality any other paper currency, than a fiat currency.?

Any thoughts?

AJS-

Original Poster:

11,439 posts

116 months

[news] 
Saturday 5th May 2012 quote quote all
I think the definition is pretty clear, it's money that isn't backed by anything, and doesn't have any value other than government decree, i.e. fiat.

So yes, all paper money is fiat.
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RichardD

3,371 posts

125 months

[news] 
Saturday 5th May 2012 quote quote all
AJS- said:
...

Seriously though, an alternative system of exchange that is more difficult to pervert at the behest of politicians sounds like a good idea to me.
An interesting topic and in terms of currency I'd phrase it as :-

"The battle for sound money" - which countries like Germany are trying to implement, instead of borrow and spend (ponzi / pyramid) economics.

How can something be a store of value when a central bank can magic out of nothing enough money that would take an average person thirty million years (taking £300b and £30k to make the maths easy) of wage slavery to earn !!

So no wonder people want to convert any surplus capital into something of greater substance!


Steffan

8,183 posts

108 months

[news] 
Saturday 5th May 2012 quote quote all
AJS- said:
I think the definition is pretty clear, it's money that isn't backed by anything, and doesn't have any value other than government decree, i.e. fiat.

So yes, all paper money is fiat.
I rather thought you might: I entirely agree with that definition.

In which case the must beg the question, are there any other international currencies? Is there an active real value international currency?

If not then all currencies are suspect, some more than others.

How does this affect economics if all the currencies are inflicted with the same real weakness of being fiat currencies? Does this mean that this is no longer a matter of concern because all the worlds currencies are in the same difficulty?


RichardD

3,371 posts

125 months

[news] 
Saturday 5th May 2012 quote quote all
Steffan said:
In which case the must beg the question, are there any other international currencies? Is there an active real value international currency?
The Special Drawing Rights (SDR) of the IMF ?

I don't suppose it could be called active though?

964Cup

460 posts

117 months

[news] 
Saturday 5th May 2012 quote quote all
Gold certs are effectively a form of wealth-backed paper money. It's how paper money started.

AJS-

Original Poster:

11,439 posts

116 months

[news] 
Saturday 5th May 2012 quote quote all
Steffan said:
AJS- said:
I think the definition is pretty clear, it's money that isn't backed by anything, and doesn't have any value other than government decree, i.e. fiat.

So yes, all paper money is fiat.
I rather thought you might: I entirely agree with that definition.

In which case the must beg the question, are there any other international currencies? Is there an active real value international currency?

If not then all currencies are suspect, some more than others.

How does this affect economics if all the currencies are inflicted with the same real weakness of being fiat currencies? Does this mean that this is no longer a matter of concern because all the worlds currencies are in the same difficulty?

confused
It comes back to the question of what you use money for. As I understand it there are two main uses

1) A means of exchange
2) A story of value

As a means of exchange fiat currencies work fine. A price level develops, and even with a bit of inflation it isn't too much trouble to keep track.

As a store of value fiat currencies can, with good governance, work. The caveat of "with good governance" though, is not to be taken lightly. The German Bundesbank was the benchmark. The ECB was copied almost wholesale from it. The US Federal Reserve was run by monetarists for decades. The Bank of England was made independent in the late 90s with similar goals. All of them have failed miserably in the goal of maintaining a stable price level and promoting growth simultaneously.

Typically, low interest rates are politically good, so politicians have a bent towards that. However high inflation is bad. And since the two tend to go together it is always a balancing act. Unfortunately many muddle headed people believe that inflation is necessary for growth. Their reasoning being people will bring forward purchases if they believe the price will rise. Thus inflation stimulates consumer spending and boosts growth. A less kind way of putting this is that people substitute out of money and into goods and services, and then we start to see that this isn't such a good thing. Money is failing in it's purpose as a store of value.

It's not a coincidence either. Leaving politicians with the opportunity to collect revenue without overtly raising taxes is just too great a temptation. It's like leaving your dog in charge of your dinner. Teaching him a combination of positive and negative consequences corresponding to his stewardship might work for a while, but sooner or later you will come back to a happy dog and an empty plate.

I'm not one of those who has some misty eyed worship of gold, and I'm not even necessarily in favour of a return to the gold standard, but I can see a very strong argument in favour of a currency backed by some commodity that politicians have no control over.


Incidentally, one of the reasons I'm not wholly pro gold standard is that during much of the time we had it, governments devoted a great share of their energy to securing greater gold supplies. It was at least tangible, as compared with faith in the financial system of any given country, but the consequences were a lot more bloody than bank runs and bouts of inflation.

Steffan

8,183 posts

108 months

[news] 
Saturday 5th May 2012 quote quote all
964Cup said:
Gold certs are effectively a form of wealth-backed paper money. It's how paper money started.
My real interest in the fiat question is simply this.

Does this actually make a practical difference to the way that currencies work? If it does, then is there, in existence, a readily available wealth backed paper money? And does this mean that transactions and investments in that currency are any less liable to default?

In reality I do not think there is such a currency. In reality I believe all currency in circulation in the western world is fiat money. To my mind therefore all of us are permanently at risk of a currency collapse.

Academic economics is too theoretical and insufficiently practical to interest me as a subject. I accept in academic economics there is such a distinction. But in reality, IMO, if all the paper currencies in the world are fiat currencies, then, there is no really usable alternative, which De Facto must mean all the usable currencies are fiat currencies.

Therefore all the the usable currencies are inherently unsafe and unstable, and becoming progressively more so as greater and greater government borrowing and Quantitative Easing continues worldwide.

Hence my original question of how do we define fiat currencies.

If this in fact includes all the tradable currencies in the world can someone explain to me why it matters? If they can, can someone explain to me how any normal businessman could protect himself from the risk? If they can then I am sure we would all like to know.

From my point of view, which is not that of an academic economist, there is no difference with fiat currencies, for the average person, than there is with the situation of the Worlds Banks where no Bank can actually trade at all without government guarantees in place to give confidence.

But for the taxpayers of the World undertaking to support all the Banks, in 2007, the entire World Banking system would have collapsed. It did not do so because of the taxpayer ensuring the confidence continued. Successfully.

I see no difference therefore, to the practicalities of fiat currency discussions because of this.

In a complex multicultural, multicurrencied,,mulistructured world economy, totally interdependent on confidence worldwide, the entire system is entirely dependent on confidence in the governments guarantees anyway. Is the fiat currency question really relevant?

Which begs the question IMO.

1point7bar

1,091 posts

28 months

[news] 
Saturday 5th May 2012 quote quote all
The Kublai Khan decreed the printing of 'Chao', the first official bank notes used as the predominant means of exchange in 1273AD, at the beginning of the Yuan dynasty.
The previous paper money was a solution to the scarcity of copper for coins and was used concurrently.
Paper money's track record over the subsequent 7 centuries is unblemished by success.
Today there are some scandinavian currencies that are very firm from good management and resource abundance. Unfortunately, this is IMO a late stage speculation.

12gauge

1,274 posts

54 months

[news] 
Sunday 6th May 2012 quote quote all
Govts love FIAT, it gives them the ability to thieve with impunity.

The only reason i can see that they want it to collapse is so they can do with paper money altogether and raplace it with 100% credit card/electronic transactions, so that whatever you buy or sell, wherever you are, the govt will know about.

FIAT paper Cash is almost as dangerous as gold to the globalist elite, in the sense that transactions go unrecorded.


12gauge

1,274 posts

54 months

[news] 
Sunday 6th May 2012 quote quote all
1point7bar said:
The Kublai Khan decreed the printing of 'Chao', the first official bank notes used as the predominant means of exchange in 1273AD, at the beginning of the Yuan dynasty.
The previous paper money was a solution to the scarcity of copper for coins and was used concurrently.
Paper money's track record over the subsequent 7 centuries is unblemished by success.
Today there are some scandinavian currencies that are very firm from good management and resource abundance. Unfortunately, this is IMO a late stage speculation.
Was it debt bearing paper money?

1point7bar

1,091 posts

28 months

[news] 
Sunday 6th May 2012 quote quote all
12gauge said:
Was it debt bearing paper money?
No, but a proclamation imposed the death penalty on all who refused to accept the new currency.

Oh, the good old days..

DRCAGE

270 posts

45 months

[news] 
Monday 7th May 2012 quote quote all
If paper dosh was linked to gold or something, what would happen if someone found loads of it?


Engineer1

9,971 posts

89 months

[news] 
Monday 7th May 2012 quote quote all
I can't see Fiat currency ending without a massive world shattering event to drive it, how would the general public and banking survive if the currency had to be revalued? Mortgages, car loans may be ok, but unsecured loans and credit cards etc would be a nightmare.

AJS-

Original Poster:

11,439 posts

116 months

[news] 
Monday 7th May 2012 quote quote all
DRCAGE said:
If paper dosh was linked to gold or something, what would happen if someone found loads of it?

That happened with the Spanish conquest of South America. Basically as logic predicts, a one off and finite round of inflation. A bit chaotic, but far better than continuous and infinite inflation.
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