OOTS #1089 - The Discussion Thread

[georgie_leech]

I wasn't going to harp on this, but you keep bringing up people working against their morals for gain. Your source from earlier is directly enriched by people thinking gold is valuable. What makes you so sure this isn't her "price?"

[The MunchKING]

"Don't forget the best advice: everybody has got a price." -Steve Taylor.

"Everybody's got a price. Everybody's going to pay. Because the Million Dollar Man ALWAYS gets His Way!"

[georgie_leech]

"Everybody's got a price. Everybody's going to pay. Because the Million Dollar Man ALWAYS gets His Way!"

And here I thought Steven Universe managed to be a little more ridiculous than reql life in the wrestling episode

[The MunchKING]

And here I thought Steven Universe managed to be a little more ridiculous than reql life in the wrestling episode

I am sometimes surprised at how often cartoon wrestling is LESS crazy than the real stuff. :p

[Erys]

I wasn't going to harp on this, but you keep bringing up people working against their morals for gain. Your source from earlier is directly enriched by people thinking gold is valuable. What makes you so sure this isn't her "price?"

Good question.

Honestly, I would be a fool to think otherwise. If you hold a lot of gold you already have a lot of wealth, even in a fiat world. That wealth becomes a currency... $$. Though, naturally, you wouldn't likely own the currency. Governments should be making unique coins and enforcing counterfeiting laws.

On the flip side, you shouldn't disregard the overall message and warnings about fiat money and toss out the real, tangible benefits of an intrinsic currency. Being able to summon large amounts of new money in very little time allows quick economic booms, but it also hastens corruption. Not only can you find those magic numbers that makes men question their integrity, faster; you can afford more people as well.

"Everybody's got a price. Everybody's going to pay. Because the Million Dollar Man ALWAYS gets His Way!"

Fun fact. That came out in the late 80's. For him to have the same buying power as then, today; he would have to be the Two Billion Dollar Man.

Interestingly enough, a million dollars worth of gold in 1987 is worth 2.5 billion today.

[georgie_leech]

Good question.

Honestly, I would be a fool to think otherwise. If you hold a lot of gold you already have a lot of wealth, even in a fiat world. That wealth becomes a currency... $$. Though, naturally, you wouldn't likely own the currency. Governments should be making unique coins and enforcing counterfeiting laws.

On the flip side, you shouldn't disregard the overall message and warnings about fiat money and toss out the real, tangible benefits of an intrinsic currency. Being able to summon large amounts of new money in very little time allows quick economic booms, but it also hastens corruption. Not only can you find those magic numbers that makes men question their integrity, faster; you can afford more people as well.



Fun fact. That came out in the late 80's. For him to have the same buying power as then, today; he would have to be the Two Billion Dollar Man.

Interestingly enough, a million dollars worth of gold in 1987 is worth 2.5 billion today.

Okay, so bearing in mind that people can push Precious metal based currencies for personal reasons, what does it mean to have an "intrinsic" currency? What distinguishes it from "Unintrinsic" currencies?

[Erys]

Okay, so bearing in mind that people can push Precious metal based currencies for personal reasons, what does it mean to have an "intrinsic" currency? What distinguishes it from "Unintrinsic" currencies?

Everything we create requires work.

If I make a table, I worked. If I write a book, I worked.

Gave IT support, fixed a power-line, baked cookies, tended crops, flipped burgers, painted a ceiling, trained lions... whatever- I worked.

Pulling metal from the ground requires work as well.

This makes it intrinsic.

It is a physical embodiment of real labor. You are literally trading work for work.

[woweedd]

Everything we create requires work.

If I make a table, I worked. If I write a book, I worked.

Gave IT support, fixed a power-line, baked cookies, tended crops, flipped burgers, painted a ceiling, trained lions... whatever- I worked.

Pulling metal from the ground requires work as well.

This makes it intrinsic.

It is a physical embodiment of real labor. You are literally trading work for work.

How does paper/plastic money not take real labor to produce?

[Svata]

Money is an abstract concept anyway. It is the service by which goods are exchanged. It in and of itself is not a good. It has always been an IOU, just one that everyone accepts as payment, because they can also use it as one. Making it able to be expanded by not tying it to an un-renewable resource is a positive. Yes, if people all decide paper money is worthless, it becomes worthless. Outside of people using it in circuitry/transistors, the same is true of gold. I fail to see what you're not grasping here.

[theNater]

Everything we create requires work.

If I make a table, I worked. If I write a book, I worked.

Gave IT support, fixed a power-line, baked cookies, tended crops, flipped burgers, painted a ceiling, trained lions... whatever- I worked.

Pulling metal from the ground requires work as well.

This makes it intrinsic.

It is a physical embodiment of real labor. You are literally trading work for work.

Well, there's your problem. You seem to think that work has intrinsic value. But, as with any object or currency, work is only worth what someone else is willing to trade you for it. A carpenter who makes two identical tables, but has a broken arm while making the second one, doesn't get paid more for the second one, even though making a table with a broken arm is more work than normal. Similarly, two identical people working equally hard at pulling metal out of the ground are going to get different amounts of metal, just by quirks of geology.

I know the idea of money only being in the hands of the deserving is appealing. Unfortunately, reality is too messy, and there will always be some people who get a lot of money with little effort and other people who put in a lot of effort and don't get much. Making currency a physical item doesn't change that, it just changes how one lucks/cheats one's way into money.

[martianmister]

Gold has no intrinsic value, it's just a shiny metal. Totally worthless, just like the paper they used to make dollar bills.

[factotum]

Gold has no intrinsic value, it's just a shiny metal. Totally worthless, just like the paper they used to make dollar bills.

Not true. Gold actually has several properties that would make it a very useful material, if it wasn't so rare--for instance, its electrical resistance is very low and its heat conductance very high, so in an ideal world you'd use it for both electrical wiring and heat sinks in computers. It's obviously far too expensive for such a use, though, so we go second best and use copper instead. I believe they also used incredibly thin layers of gold as an anti-glare component in Concorde's cockpit windows, since it would survive the high temperatures generated by the aircraft's speed better than anything else they could choose.

Also, saying something is worthless because it's only useful for making pretty things kind of flies in the face of thousands of years of human history. Gold was considered valuable long before the uses I mentioned above were identified, precisely because it's a superb material for making jewellery--it's attractive and doesn't tarnish or rust.

[martianmister]

Not true. Gold actually has several properties that would make it a very useful material

True. Just like the paper and other materials they used to make money. It's still worth less compared to its extrinsic value.

Also, saying something is worthless because it's only useful for making pretty things kind of flies in the face of thousands of years of human history. Gold was considered valuable long before the uses I mentioned above were identified, precisely because it's a superb material for making jewellery--it's attractive and doesn't tarnish or rust.

It's still not intrinsic, not different from dollar bills.

[factotum]

Well, no value is intrinsic, is it? Values are set on things by human beings--whatever is agreed to be valuable, is.

[Svata]

The value of very few things in intrinsic. Potable water, non-spoiled food, shelter, clothing, that sort of thing has intrinsic value, because it is necessary to survival.

[georgie_leech]

Everything we create requires work.

If I make a table, I worked. If I write a book, I worked.

Gave IT support, fixed a power-line, baked cookies, tended crops, flipped burgers, painted a ceiling, trained lions... whatever- I worked.

Pulling metal from the ground requires work as well.

This makes it intrinsic.

It is a physical embodiment of real labor. You are literally trading work for work.

So who worked harder, the guy that panned for gold for hours, or the guy that drove the machine that did the digging? Do advances in mining technology make everyone's labour worth less because it takes less labour to produce a given amount of gold, or worth more because there is more gold per labour? Why is mining and digging the base unit of labour? Why isn't wood from trees that take some time to grow and cutdown the base?

Furthermore, what does it matter if $1 bills are made the same way as $10 bills, if the vast majority of people using them have to work for them in proportionately different amounts of time?

And finally, these days physical money is increasingly not used, rather a complicated system of ones and zeroes that keep track of who has what money. Under the gold-based system, is this not allowed?

[Grey_Wolf_c]

And finally, these days physical money is increasingly not used, rather a complicated system of ones and zeroes that keep track of who has what money. Under the gold-based system, is this not allowed?

Far more important question: will fractional reserve banking be allowed, and therefore the modern system of mortgages, loans, etc. that the modern economy relies on? If everyone is like Erys, and refuses to "work for IOUs", what happens when the builders refuse to take mortgage-backed money? How does any business get off the ground if no worker will take a job at a business who "only pays in IOUs" since all their money is a loan from investors? No single modern successful company I know of has run exclusively on their own cash reserves - heck, Apple was two guys in a garage and a rich guy allowing them to use his money in exchange for IOUs, but if Erys had been that rich guy, no modern personal electronics today.

(The above is rhetorical, by the way. Fractional reserve banking is the greatest advance in economics of the last 500 years, and would be killed dead by the gold standard - indeed, the gold-standard lovers want to get rid of fractional reserve banking: they think that it is a bad thing. Clearly, they are all sons of rich people who have never needed a loan, and have no understanding of why gold standards were abandoned in the first place due to their drag on economic growth)

Grey Wolf

[georgie_leech]

Far more important question: will fractional reserve banking be allowed, and therefore the modern system of mortgages, loans, etc. that the modern economy relies on? If everyone is like Erys, and refuses to "work for IOUs", what happens when the builders refuse to take mortgage-backed money? How does any business get off the ground if no worker will take a job at a business who "only pays in IOUs" since all their money is a loan from investors? No single modern successful company I know of has run exclusively on their own cash reserves - heck, Apple was two guys in a garage and a rich guy allowing them to use his money in exchange for IOUs, but if Erys had been that rich guy, no modern personal electronics today.

(The above is rhetorical, by the way. Fractional reserve banking is the greatest advance in economics of the last 500 years, and would be killed dead by the gold standard - indeed, the gold-standard lovers want to get rid of fractional reserve banking: they think that it is a bad thing. Clearly, they are all sons of rich people who have never needed a loan, and have no understanding of why gold standards were abandoned in the first place due to their drag on economic growth)

Grey Wolf

Worth noting that FRB was a thing when the gold standard was still a thing. It's literal gold currency that stops it dead, which is what Erys seems to be arguing for. The early days of Bank Notes where they were mostly for the merchants and other well-to-do folks saw plenty of FRB pretty much as soon as it was a possibility, not just when they achieved mass adoption.

[Grey_Wolf_c]

Worth noting that FRB was a thing when the gold standard was still a thing. It's literal gold currency that stops it dead, which is what Erys seems to be arguing for. The early days of Bank Notes where they were mostly for the merchants and other well-to-do folks saw plenty of FRB pretty much as soon as it was a possibility, not just when they achieved mass adoption.

Yes, and it did so because by the point the FRB started to be a thing (it took more than a few tries to get it right, by the way, and collapsed more than one economy in doing so, but every new system has bugs needing to be ironed out), by that time the strict adherence to the gold standard was literally chocking the economy - there just wasn't enough currency to be able to develop further.

It would take a few decades to officially abandon the gold standard, but the moment people started accepting the bank notes as currency as good as official currency, the gold standard wasn't long for this world. It is trivial to imagine a scenario in which the money "multiplies" as people take a bank note, and put it in their bank, and then that too gets lent out, and put in another bank, and lent out, ad nauseam, until a single unit of gold "backs" multiple units of currency moving about the economy instead of just one. It is, in fact, what caused the bank runs which most of us are familiar from the end of Mary Poppins, and what the gold-standard people want to force upon the rest of us.

But here's the thing: those collapses can happen much more easily under the gold standard, unless you forbid FRB, at which point we regress to pre-industrialization economies, which is such a terrible price to pay that it is quite literally unthinkable, especially when the alternative is the current system of slow inflation.

Grey Wolf

[georgie_leech]

Yes, and it did so because by the point the FRB started to be a thing (it took more than a few tries to get it right, by the way, and collapsed more than one economy in doing so, but every new system has bugs needing to be ironed out), by that time the strict adherence to the gold standard was literally chocking the economy - there just wasn't enough currency to be able to develop further.

It would take a few decades to officially abandon the gold standard, but the moment people started accepting the bank notes as currency as good as official currency, the gold standard wasn't long for this world. It is trivial to imagine a scenario in which the money "multiplies" as people take a bank not, and put it in their bank, and then that too gets lent out, and put in another bank, and lent out, ad nauseam, until a single unit of gold "backs" multiple units of currency moving about the economy instead of just one. It is, in fact, what caused the bank runs which most of us are familiar from the end of Mary Poppins, and what the gold-standard people want to force upon the rest of us.

But here's the thing: those collapses can happen much more easily under the gold standard, unless you forbid FRB, at which point we regress to pre-industrialization economies, which is such a terrible price to pay that it is quite literally unthinkable, especially when the alternative is the current system of slow inflation.

Grey Wolf

Oh yeah, you just couldn't afford, say, installing a proper sewage system into London without modern banking systems.

[Erys]

How does paper/plastic money not take real labor to produce?

Again, learn how fiat money is created and the amount of 'work' it takes to produce billions of dollars verse a billion ounces of gold.

There is a real, and important, difference between the two.

Money is an abstract concept anyway. It is the service by which goods are exchanged. It in and of itself is not a good. It has always been an IOU, just one that everyone accepts as payment, because they can also use it as one. Making it able to be expanded by not tying it to an un-renewable resource is a positive. Yes, if people all decide paper money is worthless, it becomes worthless. Outside of people using it in circuitry/transistors, the same is true of gold. I fail to see what you're not grasping here.

First off, All commodities are intrinsic.

As for the rest, yes and no.

Yes, if everyone agrees that cigarettes are an acceptable unit of exchange, it becomes money.

No, money that is intrinsic is not an IOU. Also, to just arbitrarily expand whatever money you have is not a benefit- save in the very immediate short term. Think long term and you might start to see where I am coming from.

It wasn't an accident that mankind figured out gold and silver make good units of exchange.

Well, there's your problem. You seem to think that work has intrinsic value. But, as with any object or currency, work is only worth what someone else is willing to trade you for it. A carpenter who makes two identical tables, but has a broken arm while making the second one, doesn't get paid more for the second one, even though making a table with a broken arm is more work than normal. Similarly, two identical people working equally hard at pulling metal out of the ground are going to get different amounts of metal, just by quirks of geology.

I know the idea of money only being in the hands of the deserving is appealing. Unfortunately, reality is too messy, and there will always be some people who get a lot of money with little effort and other people who put in a lot of effort and don't get much. Making currency a physical item doesn't change that, it just changes how one lucks/cheats one's way into money.

You are not understanding the work for work idea. A carpenter makes a two tables, but one with a broken arm... that alone doesn't make the second more valuable.

Just like if mining co A pulls more gold out than mining co B, the second company doesn't get paid less because they are smaller and had less workers... they get paid less simply because they got less gold.

(See below for more details).

So who worked harder, the guy that panned for gold for hours, or the guy that drove the machine that did the digging? Do advances in mining technology make everyone's labour worth less because it takes less labour to produce a given amount of gold, or worth more because there is more gold per labour? Why is mining and digging the base unit of labour? Why isn't wood from trees that take some time to grow and cutdown the base?

Furthermore, what does it matter if $1 bills are made the same way as $10 bills, if the vast majority of people using them have to work for them in proportionately different amounts of time?

And finally, these days physical money is increasingly not used, rather a complicated system of ones and zeroes that keep track of who has what money. Under the gold-based system, is this not allowed?

If a plumber comes to your house and does a 2 hour job, does he get paid the same as a 20 hour job?

Supply and demand dictates much of what prices should be. If the cost of mining is reduced the mining company makes more money- because again, the currency should be controlled by the governing body. That body pays for the gold and is in control of the mint.

Wood is too plentiful. One of the pillars of a good currency is whatever is used has to be somewhat scarce... though not too scare that it is unable to change hands.

It costs the same to make a sheet of $1s as it does a sheet of $100s. Sure, from the people who have to "work for them", this is not understood and doesn't really affect them (save the inevitable inflation that robs them of their purchasing power). However, to the people who control the money... well, its a different ball game. If I can just create the money I need at a whim, nothing- be it items or persons- are out of my reach to buy. That alone is a problem.

Electronic receipt money is an interesting thing. On the surface, you really should not use it, as the less tangible a currency the easier it is to fraud and debase said money. That said, I do know of a way you could keep the convenience of modern electronic money while having a gold currency- (really short answer is) so long as there is gold vaulted away that is the entire sum of its electronic counterpart- and anyone at any time can exchange their electronic money for physical gold/silver, there is no issue. Same for paper, go back to what we used to have when we first got hoodwinked: gold/silver certificates make great paper money but are paper representations of actual intrinsic coin.

Again, as long as you are not allowing fractional reserve banking and allow/encourage people to trade their paper for intrinsic coin at their request- there is no reason you cannot have an intrinsic system with modern conveniences.

Oh yeah, you just couldn't afford, say, installing a proper sewage system into London without modern banking systems.

Why not?

And don't give me the 'not enough gold' line...

Remember, the numbers across the board are about 1000 times smaller than what we see today. And as an additional bonus you won't get no bid contracts to buddies of Parliament- when you use gold as money and can't just create money on a whim -> the costs start to matter.

[Erys]

It would take a few decades to officially abandon the gold standard, but the moment people started accepting the bank notes as currency as good as official currency, the gold standard wasn't long for this world. It is trivial to imagine a scenario in which the money "multiplies" as people take a bank note, and put it in their bank, and then that too gets lent out, and put in another bank, and lent out, ad nauseam, until a single unit of gold "backs" multiple units of currency moving about the economy instead of just one. It is, in fact, what caused the bank runs which most of us are familiar from the end of Mary Poppins, and what the gold-standard people want to force upon the rest of us.

What you are describing is called Fractional Reserve banking. It always leads to fiat, which leads to fractional reserve fiat banking. True intrinsic wealth people oppose such shenanigans.

Interestingly enough, right now banks do the very thing you Falsely Accuse 'gold standard people' of doing/wanting: they create nine new dollars for every ten they are supposed to hold.

The FDIC was created to give the illusion of security so people would not do 'bank runs' thinking their money is somehow "insured" and would be available to them. Short-sighted because that money is also created the same way the original money was... from nothing. Meaning the economic factors that caused the bank run in the first place just got worse- and peoples buying power at that stage of the game will be approaching Weimar Republic levels.

[theNater]

You are not understanding the work for work idea.

At least one of us isn't.

A carpenter makes a two tables, but one with a broken arm... that alone doesn't make the second more valuable.

If a plumber comes to your house and does a 2 hour job, does he get paid the same as a 20 hour job?

What if it took the carpenter 2 hours to make the first table and 20 to make the second? Why are the rules different for the carpenter than they are for the plumber? I'm pretty sure it's because all specific measures of value are arbitrary and the systems that deal with them are a cobbled-together hodge-podge of whatever seemed to work at the time, but I suspect you have a different take on the matter.

Just like if mining co A pulls more gold out than mining co B, the second company doesn't get paid less because they are smaller and had less workers... they get paid less simply because they got less gold.

Why do you assume mining co A had more workers? Maybe they had fewer workers, but hit a lucky vein. It happens.

It costs the same to make a sheet of $1s as it does a sheet of $100s.

Depending on where one digs, it may end up costing the same to dig out a dozen one-ounce nuggets as a single 100 pound nugget. Why is this an acceptable state of affairs for gold, but not paper money?

[Erys]

What if it took the carpenter 2 hours to make the first table and 20 to make the second? Why are the rules different for the carpenter than they are for the plumber? I'm pretty sure it's because all specific measures of value are arbitrary and the systems that deal with them are a cobbled-together hodge-podge of whatever seemed to work at the time, but I suspect you have a different take on the matter.

You are looking at the wrong end. Its not how one does the work, but rather what the work has created.

A carpenter makes a good table and a wobbly one- the good one sells for more. The "work" is the final product, in this case: a table.

Your goal as a carpenter is to take the labor, the materials, and other costs and turn a profit by offering your tables at a price that someone will say, "That's a nice table, and I can afford it. I'll take it." This is true no matter what currency you use.

If I offer you gold for that table, that gold (just like that table) required work. Someone had to crawl into a hole and dig it out. Then others to refine it. And finally the fruit of that labor is formed: a coin.

Whereas if you give the man a fiat note, you give him a debt instrument that required very little effort to create. And which slowly depreciates as time goes on.

Depending on where one digs, it may end up costing the same to dig out a dozen one-ounce nuggets as a single 100 pound nugget. Why is this an acceptable state of affairs for gold, but not paper money?

Do you know why diamonds retain a high price?

Its because there exist a monopoly over them, and those that control it withhold diamonds from circulation to keep their appearance of rarity and their price high.

While you don't need banks per se; if you want a successful currency its best to have a society, therefore there should be a government which functions and has obligations.

A responsible government will regulate the money supply in steady fashion. Not just buy all the gold and put it into circulation at once. It will save a reserve of circulated money in times of mining booms, so it can account for shortfalls later.

If a mine hits a boom, good.

[georgie_leech]

Erys, what sort of labour or work do you think goes into gold mining?

[Erys]

Erys, what sort of labour or work do you think goes into gold mining?

I will give you that, modern mining has come a long ways since- even 50 years ago. But, so has table making...

Fifty can do the work of 1,000 easy in many labor areas.

But there are still men who work the machines that dig the holes and suck the rocks.

[georgie_leech]

Right, they work machines like this, or maybe this, Or maybe even this. So I ask again, why is it so important that every bit of work be exchanged for this? Especially since the same piece of "work" can get traded over and over; the hours of digging that paid for a pair of shoes then get used to pay for a doctor's appointment, then the doctor buys a car, then the car dealer buys food, then the cashier buys a computer...

[theNater]

You are looking at the wrong end. Its not how one does the work, but rather what the work has created.

A carpenter makes a good table and a wobbly one- the good one sells for more. The "work" is the final product, in this case: a table.

So why doesn't this hold for plumbers? The "work" being a functioning plumbing system, which should command the same price whether it took 2 hours to produce or 20.

A responsible government will regulate the money supply in steady fashion. Not just buy all the gold and put it into circulation at once.

Why can a government be relied on to do this with gold, but not with fiat currency?

[Erys]

Right, they work machines like this, or maybe this, Or maybe even this. So I ask again, why is it so important that every bit of work be exchanged for this? Especially since the same piece of "work" can get traded over and over; the hours of digging that paid for a pair of shoes then get used to pay for a doctor's appointment, then the doctor buys a car, then the car dealer buys food, then the cashier buys a computer...

People should be free to trade in any medium they choose. Intrinsic metal should just be the base currency of the land. It is stabler, slower to corrupt, and protects the buying power of the people.

...And yes, currency should have velocity.

So, about those London sewers?

So why doesn't this hold for plumbers? The "work" being a functioning plumbing system, which should command the same price whether it took 2 hours to produce or 20.

You seem to be confusing two plumbers doing the same job, one finishing in 2 hours and the other in 20. I am referring to two different jobs, with different needs and solutions where one takes 2 hours and the other, more complicated one, takes 20.

Why can a government be relied on to do this with gold, but not with fiat currency?

Gold has real, physical constraints. You have to choose your projects wisely and try to get the best bang for your buck, so to speak.

Paper, on the other hand, you create as needed/wanted. There is no real constraint in the system. Sure, there is a budget, but that really only serves as a guide line. You can have a trillion dollar budget and add 200 billion new dollars per quarter on top of it without batting an eye. (And it gets many times worse when you consider the fractional reserve aspects of our modern fiat system). All the while, each time new money gets dumped into the supply- we lose a little more buying power and live with a little less.

[factotum]

The value of very few things in intrinsic. Potable water, non-spoiled food, shelter, clothing, that sort of thing has intrinsic value, because it is necessary to survival.

But the value they have is still defined by human beings, because we're the only ones who care about that sort of thing. As an example, I pay water rates each year to have potable water delivered to my house and sewage taken away, and the amount I'm charged for that is based on the costs to the water company to do those jobs, not any sort of intrinsic value that the water has. Even in places where water is scarce, the value of it usually comes down to labour rather than money--e.g. somebody has to walk five miles with a pot on their head to fetch water from the nearest clean source.

Now, it's not *impossible* to think of a scenario where water is used as a trading commodity because it's that rare and valuable, but I'm not sure if any such scenario has ever existed on Earth. If someone knows of one, please let me know because I'd be fascinated to hear the details.