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darkmage099

America Explained

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I was browsing through random stuff and came across this article, which gives sufficient explanation about why America is in the Middle East and why the American economy is what it is. NO, it is not a conspiracy theory but rather an objective look at the U.S status in the world and why things may be happening. The article is quite long, so I will highlight the parts that I think are important.

 

 

 

 

 

Feel free to argue against it. :)

 

 

 

[hide] Effects of debt related fiat currency

 

 

 

The US gross domestic product (GDP) is approximately $12,000,000,000,000 ($12 trillion). The federal government should borrow money on the global market based on its creditors believing they will be repaid in full with interest. However, it also prints new currency (M3) that dilutes the value of the currency.

 

 

 

Britain recovered from the highest recorded national debt of 250% of its GDP after World War II. Britain repaid its debts to about 50% of G.D.P.

 

 

 

Debt burdens of 150% of GDP have proven unsustainable. Smaller countries are not credit worthy anywhere near this level. Argentina lost its ability to borrow after its debt hit 65% of GDP. A borrowing limit for the United States using 150% of its $12 trillion GDP would be about $18 trillion.

 

 

The official Treasury debt equals $4.6 trillion but the government has also spent money borrowed from the trust funds. The government owes $3.2 trillion, of which, $2 trillion is to Social Security and Medicare trust funds. Count this and the US has a debt of $6.6 trillion. However, the Social Security trust fund requires an additional $4 trillion to cover its obligations. Add this $4 trillion and the current debt is $10.6 trillion. Medicare trustees states the fund faces a shortfall of $9 trillion in obligations. Now, the prescription drug benefit reflects another $21 trillion deficit that to cover its supplementary obligations. This debt must be borrowed as there is no trust fund from which it can be taken.

 

 

This aggregate debt is $40.6 trillion, which is well beyond the unsustainable 150% of GDP limit of $18 trillion.

 

 

 

Total U.S. obligations of $40.6 trillion are nearly 338% of the GDP.

 

 

 

Now the USA must remain an empire. An empireÃÆââââ¬Å¡Ã¬Ã¢ââ¬Å¾Ã¢s economic foundations, from Greek and Roman, to Ottoman and British, are based on its ability to tax other nations. An imperial ability to tax demands a better, stronger economy and military. Subject taxes go to improve the living standards of the empire and to strengthen the military dominance that is necessary to enforce the collection of such taxes. Nation-states tax its citizens but an empire can tax other nation-states.

 

 

America can tax the entire world indirectly via inflation. It does not need to enforce direct payment of taxes as the predecessor empires as it distribute a fiat currency to other nations in exchange for goods with the intended consequence of inflating and devaluing those dollars via M3 growth and paying back each dollar with less economic goods. This difference is an imperial tax.

 

 

 

The U.S. economy would not dominate the world economy if the U.S. dollar was tied to gold. The M3 currency could not increase if it was limited to a gold reserve. The Great Depression, with its preceding inflation from 1921 to 1929 and its subsequent ballooning government deficits, substantially increased the currency in circulation, and rendered the backing of U.S. dollars by gold impossible. President Roosevelt removed the dollar from gold in 1932. The U.S. dominated the world economy from an economic point of view but was not an empire as the fixed value of the dollar did not allow the extraction of economic benefits from countries since these dollars remained convertible to gold.

 

 

 

With William Jennings BryanÃÆââââ¬Å¡Ã¬Ã¢ââ¬Å¾Ã¢s famous "Cross of Gold" speech, Keynesian monetary policies, and the historical record during the Gilded Age of depressions and bank panics represented by an onerous gold standard that most economists reject, no one is suggesting a return. Under the gold standard, the money supply was so limited with unprecedented economic, industrial, and population expansion that deflation resulted and ended the era with the Panic of 1873. However, deflation is not the problem with fiat currency.

 

 

 

The United States accumulated the worldÃÆââââ¬Å¡Ã¬Ã¢ââ¬Å¾Ã¢s gold by supplying allies with provisions during WWII and receiving payment in gold, which allowed the dollar to become the world currency. However, the dollar supply is no longer limited to the availability of gold since the Bretton Woods arrangement. An Empire began when foreign governments could not exchange dollars for gold. The supply of dollars was increased to finance Vietnam and LBJÃÆââââ¬Å¡Ã¬Ã¢ââ¬Å¾Ã¢s Great Society, where most of those dollars were given to foreigners in exchange for economic goods.

 

 

America was without prospect of buying these dollars back. The increase in dollar holdings of foreigners via persistent U.S. trade deficits was a classical inflation tax. A country normally imposes this tax on its own citizens but this time around an inflation tax was imposed on the entire world. In 1970-1971 foreign governments were demanding repayment for their dollars in gold, which caused the U.S. Government to default on August 15, 1971 by severing the link between the dollar and gold. This was an act of bankruptcy by the U.S. Government as it had extracted an enormous amount of economic goods from the rest of the world, with no intention or ability to return those goods, but the world was powerless to respond. The world had been taxed and it could not do anything about it. Therefore, the U.S. became an Empire.

 

 

Since, America sustains it Empire by continuing to tax the rest of the world. The United States must force the world to continue to accept ever-depreciating dollars in exchange for economic goods and to have the world hold more and more of those depreciating dollars. The economic reason to for the world to hold dollars since it could not buy back its dollars with gold was controlling the purchase of oil. Since 1972-73, the empire ensures the world only accepts U.S. dollars for oil. Because the world had to buy oil, it needs U.S. dollars. Since the world uses ever increasing quantities of oil at ever increasing oil prices, the worlds demand for dollars increases. Dollars are not exchangeable for gold but remain the only way to buy oil.

 

 

 

The economic essence is that the dollar is backed by oil. As long as that remains the case, the world has to accumulate increasing amounts of dollars because they needed dollars to buy oil. As long as the dollar is the only acceptable payment for oil, its dominance in the world is assured. The American Empire can continue to tax the rest of the world. If the dollar loses its oil backing our Empire may cease to exist. Imperial survival dictates oil is sold only for dollars. Oil reserves remain in sovereign states that are not strong enough, politically or militarily, to demand payment for oil in something else. Political or military means will be used to change any minds if a different payment is demanded.

 

 

 

A man who last demanded Euro for his oil was Saddam Hussein in 2000. At first, his demand was met with ridicule, later with neglect, but as it became clearer that he meant business, political pressure was exerted to change his mind. This caused the recession of March 2001. Countries, like Iran, wanted payment in other currencies, most notably Euro and Yen, the danger to the dollar was clear and present, and a punitive action was in order. We defended the dollar that supports the American Empire. We set an example, anyone who demanded payment in currencies other than U.S. Dollars will be punished. We went into Iraq to defend our Empire. Two months after the United States invaded Iraq, the Oil for Food Program was terminated, the Iraqi Euro accounts were switched back to dollars, and oil was sold only in U.S. dollars. No longer could the world buy oil from Iraq with Euro. Global dollar supremacy was restored and the president descended victoriously from a fighter jet to state mission accomplished.

 

 

The current home values relative to inflation adjusted currency are the highest in history. Other housing booms have been an offshoot of excess profits during the roaring 20's, specifically Florida's growth and development, at the end of the World War II when property loans expanded to home loans, and then expanded to giving loans on mass produced items such as washers and dryers. The later increasing prices in the 70ÃÆââââ¬Å¡Ã¬Ã¢ââ¬Å¾Ã¢s and 80ÃÆââââ¬Å¡Ã¬Ã¢ââ¬Å¾Ã¢s were related to economic booms. However, the latest housing market value has no such foundation.

 

 

 

Increasing dollar circulation causes currency inflation reflective of the outstanding debt, as that is how the privately owned Federal Reserve Bank operates. The government quit providing the M3 numbers on the date that IRAN had planned to start using another currency to sell its oil and has not released it since.

 

 

 

Global inflation has been controlled by the government by allowing US consumers to borrow it so its circulation is taxable. First bankruptcy was overhauled then the rates were cut to entice internal borrowing. Cars had 0% interest t rates. Home lending was whatever amount you wanted (i.e. ads for 125% of value). Tons of currency entered the US market. Cars quit selling, and then houses quit increasing in price, now hedge funds, which are unregulated, are acquiring companies using debt. Solid companies have to borrow massive amounts internally or become takeover targets.

 

 

USA has spent $50,000,000,000.00 on rebuilding Iraq, not including costs of the war or troop support. Who is left to borrow next? Wars have always been won by the country that can best liquate its assets.

 

 

 

The Iranian government, which has over $53B dollars, is trying to use the Iranian Oil Bourse. This leads to the destruction of the financial system underpinning of our Empire as the Bourse is based on a euro-oil-trading mechanism that implies payment for oil in Euro. This circumvents the U.S. dollar by allowing oil to be bought or sold for the Euro. Europeans will not buy and hold dollars needed for oil if they pay with their own currencies. Adoption of the Euro for oil transactions provides the European currency with a reserve status that benefits Europeans at the expense of Americans. Chinese and Japanese will deplete dollar reserves and diversify with Euros that protect against the threat of depreciation of the dollar and spend remaining dollars without replenishing its holdings. Russia's economic interest is to adopt the Euro since the bulk of their trade is with European countries, oil-exporting countries, China, and Japan. Russians are buying gold with depreciating dollars. Arab oil-exporting countries will diversify its rising mountains of depreciating dollars with European countries who prefer the Euro for its stability and to avoid currency depreciation.

 

 

 

Britain has a strategic partnership with the U.S. The two leading oil exchanges are New YorkÃÆââââ¬Å¡Ã¬Ã¢ââ¬Å¾Ã¢s NYMEX and LondonÃÆââââ¬Å¡Ã¬Ã¢ââ¬Å¾Ã¢s (IPE) International Petroleum Exchange both of which has London IPE interests and itÃÆââââ¬Å¡Ã¬Ã¢ââ¬Å¾Ã¢s British Pound. The British did not adopt the Euro namely because the London IPE would have had to switch to Euros which would destroy the currency of a strategic partner. The Iranian Oil Bourse has the interests of the Europeans, Chinese, Japanese, Russians, and Arab who will adopt the Euro and seal the fate of the dollar. Americans cannot allow this to happen. The Iranian Oil Bourse would collapse the dollar, accelerate inflation, and increase U.S. long-term interest rates driving deflation or hyperinflation. If the Fed raises interest rates it will start a major economic depression, a collapse in real estate, and an implosion in bond, stock, and derivative markets, with a total financial collapse. Or, inflation where long-bond yield sinks the financial system in liquidity and hyperinflation destroys the economy.

 

 

The sinews of war are infinite money. ÃÆââââ¬Å¡Ã¬Ã¢ââ¬Ãâ Cicero

 

 

 

First paper money issued in the Western world circulated in 1690 Massachusetts to pay for troops to fight against the French in King William's War (Nine Years' War, Europe). In 1729 Ben Franklin published, "A Modest Enquiry into the Nature and Necessity of Paper Currency". Ever hear the old quote, "Not worth a Colonial?"[/hide]

 

 

 

So far, I cant think of any reasons why this argument is illogical. Can anyone provide some, or is it right?

 

 

 

Enjoy.


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Extremely well written and logical article.

 

 

 

I was going to point out the US dollar isn't soon even backed up by oil, since major oil countries and the OPEC are beginning to deal exclusively in Euros (and the japanese Yen occassionally), but the article covered that as well.

 

 

 

The US can't remain an "empire", if it's currency keeps becoming less and less appreciated like it does now. The Euro is already worth ÃÆââââ¬Ã¡Ãâì1.4 per $1 dollar (1 dollar is about ÃÆââââ¬Ã¡Ãâì0.60 cents)

 

 

 

USA keeps printing money, but it has nothing to back up it's value, unlike European countries which not only have growing economies, have their common currency backed up by gold.

 

 

 

If all the main oil exporters start selling oil in Euros, the dollar will be worth about ÃÆââââ¬Ã¡Ãâì0.05 cents per $1 and destroy american purchasing power from other nations.

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Extremely well written and logical article.

 

 

 

I was going to point out the US dollar isn't soon even backed up by oil, since major oil countries and the OPEC are beginning to deal exclusively in Euros (and the japanese Yen occassionally), but the article covered that as well.

 

 

 

The US can't remain an "empire", if it's currency keeps becoming less and less appreciated like it does now. The Euro is already worth ÃÆââââ¬Ã¡Ãâì1.4 per $1 dollar (1 dollar is about ÃÆââââ¬Ã¡Ãâì0.60 cents)

 

 

 

USA keeps printing money, but it has nothing to back up it's value, unlike European countries which not only have growing economies, have their common currency backed up by gold.

 

 

 

If all the main oil exporters start selling oil in Euros, the dollar will be worth about ÃÆââââ¬Ã¡Ãâì0.05 cents per $1 and destroy american purchasing power from other nations.

 

 

 

Exactly. It also effectively explains everything America is doing in the Middle East.

 

 

 

Also, it points out why the gold system doesn't work that well :? . Kind of sucks right.

 

 

 

Now, I dont know how terrorism fits in there (scapegoat?), but that's a different story.


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USA keeps printing money, but it has nothing to back up it's value, unlike European countries which not only have growing economies, have their common currency backed up by gold.

 

 

 

 

No European country (i'm not sure if any country does in fact) is on the gold standard whereby its currency is completely backed by gold reserves. Of all countries the US maintains the largest reserves of gold bullion.


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USA keeps printing money, but it has nothing to back up it's value, unlike European countries which not only have growing economies, have their common currency backed up by gold.

 

 

 

 

No European country (i'm not sure if any country does in fact) is on the gold standard whereby its currency is completely backed by gold reserves. Of all countries the US maintains the largest reserves of gold bullion.

 

 

 

While it's true the Euro is only partially backed up by gold, Europe holds much more gold than the US. In fact, the EU owns about half of all the gold in the world. The EU has some 17,500 tons of gold ($184bn. worth), while USA itself has about 8,000 tons of gold ($100bn. worth), and nearly all of it's allies are sold out. All the significant european countries are already in the EU or in partnership with it (Norway and Switzerland remain nominally outside of the economic zone)

 

 

 

Europe gold reserves

 

[hide]Wener0516E.gif[/hide]

 

 

 

USA gold reserves (includes it's allies as well)

 

[hide]Wener0516F.gif[/hide]

 

 

 

The world already has more euros than dollars in circulation, if the dollar keeps decreasing in appreciation, it's only a matter of time before countries start using the Euro as the sole reserve currency rather than the US dollar.

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USA keeps printing money, but it has nothing to back up it's value, unlike European countries which not only have growing economies, have their common currency backed up by gold.

 

 

 

 

No European country (i'm not sure if any country does in fact) is on the gold standard whereby its currency is completely backed by gold reserves. Of all countries the US maintains the largest reserves of gold bullion.

 

 

 

There is no gold standard.


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I am curious tho on 1 thing.

 

 

 

Why is gold valuble? What can gold do for you? Its just a big piece of shiny rock.

 

 

 

Now oil, that is definatly gold. It can support your armies and power your economy.

 

 

 

But why is gold, which is probably useless in todays society, have any real value?

 

 

 

 

 

America is on a decline due to the fact that it has infinite purchasing power. Sad to say, but the money we work for over here in America is useless and as a good as monopoly money

 

 

 

 

 

Oh yeah, this was in Yahoo news today

 

 

 

"Bush says Iran threat to world security"

 

 

 

LOL!!


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I am curious tho on 1 thing.

 

 

 

Why is gold valuble? What can gold do for you? Its just a big piece of shiny rock.

 

 

 

Now oil, that is definatly gold. It can support your armies and power your economy.

 

 

 

But why is gold, which is probably useless in todays society, have any real value?

 

 

 

 

 

America is on a decline due to the fact that it has infinite purchasing power. Sad to say, but the money we work for over here in America is useless and as a good as monopoly money

 

 

 

 

 

Oh yeah, this was in Yahoo news today

 

 

 

"Bush says Iran threat to world security"

 

 

 

LOL!!

 

 

 

Because gold is pertty....no seriously. It's been a valuable metal because it...looks good. Other than that, I'm not really sure. I know there have been other metals used for economics such as copper in ancient China, silver in the Age of Exploration, and Iron back before it could be made.


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Arguing that a floating currency is backed up by oil? There have got to be some flaws

 

 

 

The U.S. economy would not dominate the world economy if the U.S. dollar was tied to gold. The M3 currency could not increase if it was limited to a gold reserve. The Great Depression, with its preceding inflation from 1921 to 1929 and its subsequent ballooning government deficits, substantially increased the currency in circulation, and rendered the backing of U.S. dollars by gold impossible. President Roosevelt removed the dollar from gold in 1932. The U.S. dominated the world economy from an economic point of view but was not an empire as the fixed value of the dollar did not allow the extraction of economic benefits from countries since these dollars remained convertible to gold.

 

 

 

Now this is just ridiculous. He's saying that the US economy was limited by the gold reserve when dollars were backed up by gold? It most certainly wasn't. The value of the dollar changed and when people came to the "gold windows" to redeem their dollars for gold they were bet with a nasty surprise. The gold standard was eliminated because it just didn't work and the dollar has been a floating currency ever since.

 

 

 

USA keeps printing money, but it has nothing to back up it's value, unlike European countries which not only have growing economies, have their common currency backed up by gold.

 

 

 

No, it doesn't "just keep printing money", the money supply of the US is monitored by the central bank. And no, the Euro is NOT backed up by gold

 

 

 

While it's true the Euro is only partially backed up by gold, Europe holds much more gold than the US. In fact, the EU owns about half of all the gold in the world. The EU has some 17,500 tons of gold ($184bn. worth), while USA itself has about 8,000 tons of gold ($100bn. worth), and nearly all of it's allies are sold out. All the significant european countries are already in the EU or in partnership with it (Norway and Switzerland remain nominally outside of the economic zone)

 

 

 

 

 

 

 

 

 

The world already has more euros than dollars in circulation, if the dollar keeps decreasing in appreciation, it's only a matter of time before countries start using the Euro as the sole reserve currency rather than the US dollar.

 

 

 

So what? The fact that they own gold is irrelevant. The Euro can buy gold, sure, but the Euro is not backed up by gold. It is a floating currency monitored by the European Central bank (In Munich I think, not sure). If the Euro was fixed, then everyone's cash would be redeemable for a certain amount of gold and the value of the euro would NEVER change (neither of these two things are true).

 

 

 

Why is gold valuble? What can gold do for you? Its just a big piece of shiny rock.

 

 

 

1. For some real uses, it's a metal that doesn't oxidize so it's perfect if something may rust over time (like fake teeth). The downside being that gold is soft and pretty rare so using it for big moving parts is out of the question.

 

 

 

2. Conspicuous consumption. You buy it to show off. YES, showing off is considered a "use" as it is a determinant of demand. Hence the demand for jewelry. Jewelry has no "functional" use, correct? It's used to show off, and that's conspicuous consumption.

 

 

 

3. Decoration. Self-explanatory, but also a form of conspicuous consumption.

 

 

 

So what's so good about a shiny rock? Well I have it and you don't. Also, keep in mind that value is a matter of opinion. I.E. I may having a huge value attached to a certain object (like a token that represents a gift and reminds me of a special person) but in your opinion the object is not really all that valuable.

 

 

 

But why is gold, which is probably useless in todays society, have any real value?

 

 

 

The value is determined by supply and demand. So even if there isn't much of a demand, we all know that the supply of gold is limited.


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It seems reasonible enough. Though personally i doubt the US will collapse because of it, more likely if the people in our government have any intelligence, they will probably lose some money, then figure out a different way to profit from it (I would look into it but its not my job :D), like perhaps just before econamic collapse Euro conversion (cut our losses better to loss 40% then 95%).


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Arguing that a floating currency is backed up by oil? There have got to be some flaws

 

 

 

The U.S. economy would not dominate the world economy if the U.S. dollar was tied to gold. The M3 currency could not increase if it was limited to a gold reserve. The Great Depression, with its preceding inflation from 1921 to 1929 and its subsequent ballooning government deficits, substantially increased the currency in circulation, and rendered the backing of U.S. dollars by gold impossible. President Roosevelt removed the dollar from gold in 1932. The U.S. dominated the world economy from an economic point of view but was not an empire as the fixed value of the dollar did not allow the extraction of economic benefits from countries since these dollars remained convertible to gold.

 

Now this is just ridiculous. He's saying that the US economy was limited by the gold reserve when dollars were backed up by gold? It most certainly wasn't. The value of the dollar changed and when people came to the "gold windows" to redeem their dollars for gold they were bet with a nasty surprise. The gold standard was eliminated because it just didn't work and the dollar has been a floating currency ever since.

 

 

 

It was limited by gold because the US needed more currency, which it did not have (the gold for). From my understanding, the gold did limit it.

 

 

 

The gold standard is flawed but so is the alternative. The article explains both.

 

 

 

 

 

The rest, that's BlueLancer's argument, which I look forward to hearing.


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No, it doesn't "just keep printing money", the money supply of the US is monitored by the central bank. And no, the Euro is NOT backed up by gold

 

 

 

While it's true the Euro is only partially backed up by gold, Europe holds much more gold than the US. In fact, the EU owns about half of all the gold in the world. The EU has some 17,500 tons of gold ($184bn. worth), while USA itself has about 8,000 tons of gold ($100bn. worth), and nearly all of it's allies are sold out. All the significant european countries are already in the EU or in partnership with it (Norway and Switzerland remain nominally outside of the economic zone)

 

 

 

 

 

 

 

 

 

The world already has more euros than dollars in circulation, if the dollar keeps decreasing in appreciation, it's only a matter of time before countries start using the Euro as the sole reserve currency rather than the US dollar.

 

 

 

So what? The fact that they own gold is irrelevant. The Euro can buy gold, sure, but the Euro is not backed up by gold. It is a floating currency monitored by the European Central bank (In Munich I think, not sure). If the Euro was fixed, then everyone's cash would be redeemable for a certain amount of gold and the value of the euro would NEVER change (neither of these two things are true).

 

 

 

 

I'm not sure what your sources are, but the Euro currency is backed up by all central banks in the EU represented by European Central Bank, and they have a joint gold agreement concerning the sales of gold and it's supply.

 

 

 

Europe has $180+ billion worth of gold to support the $788bn. worth of bills and coins in circulation.

 

 

 

You can't transfer euros into gold and forth literally at banks (which hasn't been possible in any country since 1971) but the currency itself is based on the gold worth of all EU countries together.

 

 

 

One common denominator can be found between both countries though:

 

 

 

No, it doesn't "just keep printing money", the money supply of the US is monitored by the central bank.

 

 

 

That's incorrect, both the ECB and Fed literally create money out of thin air and pump it into the economy in forms of loans and credit to banks who then further can loan these to businesses/individuals/etc.

 

 

 

When either of those central banks pumps, say, $200 billion or ÃÆââââ¬Ã¡Ãâì200 billion on the markets; That money doesn't exist. The people simply believe those numbers have a value which provides goods, services, loans, and so forth.

 

 

 

In reality, they are just digital numbers on bank accounts that are withdrawable against worthless pieces of paper (which, again, have their worth based on the faith that they will continue to be useful for exchange into materials, goods, services)

 

 

 

So what? The fact that they own gold is irrelevant.

 

 

 

That's the problem; It is relevant. If the general population stops believing the dollar or euro have any fiat value at all (since they are just pieces of paper), the government will still have something to circulate as a currency, such as printing notes which entitle you to withdraw gold at representative value

 

 

 

A key feature of representative money is that its value is very directly perceived by the users of this money, who recognize the utility or appeal of the tokens as they would recognize the goods themselves. That is, the effect of holding a token for a barrel of oil must be (to the holder) the same both emotionally and economically as actually having the barrel at hand.

 

 

 

If faith in the currency collapses, the issuer must have something to back up a new one without further breaking the trust of the citizens. Theoretically a country/union must have credible gold reserves to be a believeable issuer of currency.

 

 

 

Amount of gold reserves is almost always linked to how appreciated the currency is (on the exception of the UK, and Kuwait which has a very highly appreciated currency due to it's oil wealth and economy):

 

 

 

 

Gold reserves

 

http://www.gold.org/value/stats/statist ... index.html

 

 

 

Thailand 84.0 tons of gold (45 baht per 1 dollar)

 

Russia 386 tons of gold (25 rubles per 1 dollar)

 

U.S.A 8,133.5 tons of gold (point of comparison)

 

Europe 17,515.5 tons of gold (ÃÆââââ¬Ã¡Ãâì0.60 per 1 dollar)

 

 

 

Sure, no currency is absolutely or directly backed by gold, but the stronger an economy is -> The more gold it can afford -> The more people believe in it's economy -> The more valuable the currency becomes.

 

 

 

Gold reserves are directly linked to how powerful an economy is. The EU as a whole already does exceed the american economy (by nominal GDP as calculated by the IMF)

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USA keeps printing money, but it has nothing to back up it's value, unlike European countries which not only have growing economies, have their common currency backed up by gold.

 

 

 

 

No European country (i'm not sure if any country does in fact) is on the gold standard whereby its currency is completely backed by gold reserves. Of all countries the US maintains the largest reserves of gold bullion.

 

 

 

There is no gold standard.

 

 

 

"Gold standard" is a term used to describe a currency that is entirely backed by gold bullion (coins made of gold don't need to be backed obviously so long as they are of the corret wieght), whereby a single unit of currency can be exchanged through the issuing party (usually a bank/central bank depending on the time in question) for a specific quantity of gold.

 

 

 

I'm not sure what your sources are, but the Euro currency is backed up by all central banks in the EU represented by European Central Bank, and they have a joint gold agreement concerning the sales of gold and it's supply.

 

 

 

Europe has $180+ billion worth of gold to support the $788bn. worth of bills and coins in circulation.

 

 

 

You can't transfer euros into gold and forth literally at banks (which hasn't been possible in any country since 1971) but the currency itself is based on the gold worth of all EU countries together.

 

 

 

Thats not the same as being backed by the gold since you can not redeem the currency for gold. They hold gold as a reserve, not to back the Euro.

 

 

 

 

 

Now this is just ridiculous. He's saying that the US economy was limited by the gold reserve when dollars were backed up by gold? It most certainly wasn't. The value of the dollar changed and when people came to the "gold windows" to redeem their dollars for gold they were bet with a nasty surprise. The gold standard was eliminated because it just didn't work and the dollar has been a floating currency ever since.

 

 

 

http://news.bbc.co.uk/1/hi/business/7050529.stm , the gold standard is quite capable of crating significant cash shortages when an economy grows if it can't increase its stock of gold in pace with it, that then limits the economy.


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Hmm but if you think about it.. Gold in general is worthless to society, almost like showing off "your new ipod" to your friends, so to speak.

 

 

 

Yet we have been trained in the mind to always believe gold was "valuble". Therefor, when money was created and backed by Gold, we valued money because it was backed by something already pre-set in our minds that was valuble, the gold.

 

 

 

Therefor its a double standard. We believe money is valuble and it is not, the US Dollar is nothing more than a piece of paper. We believe Gold is valuble, but it is not, its just a shiny piece of rock.

 

 

 

However, there has to be some form of limit based on real physical material, otherwise, you grant someone infinite access to all supplies that are purchasable, which is basically what the US has done.

 

 

 

In the end, its all what " we think " is valuble that is valuble.


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to sum it up (the gold standard debate):

 

gold is an attempt to backup money with something of percieved value.


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to sum it up (the gold standard debate):

 

gold is an attempt to backup money with something of percieved value.

 

 

 

Yeah, but that is not what this thread is about :wink:

 

 

 

Gold had its uses.


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to sum it up (the gold standard debate):

 

gold is an attempt to backup money with something of percieved value.

 

 

 

Yeah, but that is not what this thread is about :wink:

 

 

 

Gold had its uses.

 

 

 

ya i know i was just trying to summerize that section of the discussion so we could get back to the main point.


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I obviously agree with most of the headlines of the article. America has been living above its standards for decades and that is a situation that is unsustainable. It will end, sooner or later. America's housing market is already taking a significant hit over the last months, something which is likely to continue for quite a while still. A recession is ahead, banks are already estimating the chance of a recession hitting America this year at 50%. Heck, some banks even somewhat claim that America is in a recession already.

 

 

 

The economic essence is that the dollar is backed by oil. As long as that remains the case, the world has to accumulate increasing amounts of dollars because they needed dollars to buy oil. As long as the dollar is the only acceptable payment for oil, its dominance in the world is assured.

 

 

 

If all the main oil exporters start selling oil in Euros, the dollar will be worth about ÃÆââââ¬Ã¡Ãâì0.05 cents per $1 and destroy american purchasing power from other nations.

 

 

 

BlueLancer, it somewhat surprises me to see you make such a ridiculous statement.

 

 

 

Anyway, the dollar is not "backed by oil". The choice of words in stating that is already extremely poor. The dollar is not "backed" by anything and has not been since the one-sided cancellation of the gold standard by America in 1971. What IS argued here, is that "the dollar derives a significant portion of its value from the fact that oil is being traded only in dollars".

 

 

 

Nevertheless, I still disagree. While I can "agree" that the fact that oil is being traded only in dollars implies a constant 'demand' for dollars, this arguement on its own is extremely fallacious. To start with the most obvious issue: it only looks at the demand side of dollars. What about those who supply the oil? They get dollars for their oil. Dollars they might not even want or need. Obviously, those who receive dollars for their oil while not being interested in keeping those dollars, still have all the abilities to sell these dollars back on the market. Hence, the 'artificial' dollar demand caused by dollar-only-oil is countered by the subsequent dollar supply of those who receive these unwanted 'artificial' dollars. The net result is barely any extra demand for dollars.

 

 

 

That does not mean the dollar-only-oil does not contribute to the dollar-hegemony at all, however. The dollar-only-oil ensures increased trading volume of dollars (following from the fact that non-americans wanting to buy or sell oil HAVE to deal with dollars), clearly making the dollar a more liquid currency. The dollar-only-oil is certainly a factor, but just not the most important one and arguably not even a major one. If the dollar-hegemony was based on dollar-only-oil then the system would have long collapsed, right after the gold standard was removed. Dollar-only-oil does not explain why 65.7% of the worlds foreign exchange reserves are dollars. They certainly don't need such a huge dollar-reserves just to be able to buy oil.

 

 

 

Also, it points out why the gold system doesn't work that well :?. Kind of sucks right.

 

 

 

There's nothing wrong about the gold system. The issues from a gold system are generally derived from overspending politicians. Politicians always want to spend more than their budget allows them to. Debt financing allows for this, by letting the inflation tax do its work. A gold system prevents debt financing and inflation tax and is thus unwanted by most politicians.

 

 

 

The gold standard disallowed America to continue its massive, yet unsustainable, money supply growth, which allowed America to live far above its standards. Thus it was removed. America backstabbed the whole world by breaking their promise that their "dollar is as good as gold". Their dollar is worthless paper or erasable electronic data. The whole world foolishly stepped into America's dollar-hegemony-system with both of their feet.

 

 

 

But why is gold, which is probably useless in todays society, have any real value?

 

 

 

Simply stated: gold = money. While regarding the dollar it's more like: dollar = faith. Essentially that goes for any non-backed currency by the way.

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Why has gold remained the metal chosen to back currency? Titanium is much more useful (almost anything would be as gold is completely useless), much rarer that gold, and much more expensive.

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The economic essence is that the dollar is backed by oil. As long as that remains the case, the world has to accumulate increasing amounts of dollars because they needed dollars to buy oil. As long as the dollar is the only acceptable payment for oil, its dominance in the world is assured.

 

 

 

If all the main oil exporters start selling oil in Euros, the dollar will be worth about ÃÆââââ¬Ã¡Ãâì0.05 cents per $1 and destroy american purchasing power from other nations.

 

 

 

BlueLancer, it somewhat surprises me to see you make such a ridiculous statement.

 

 

 

Anyway, the dollar is not "backed by oil". The choice of words in stating that is already extremely poor. The dollar is not "backed" by anything and has not been since the one-sided cancellation of the gold standard by America in 1971. What IS argued here, is that "the dollar derives a significant portion of its value from the fact that oil is being traded only in dollars".

 

 

 

Nevertheless, I still disagree. While I can "agree" that the fact that oil is being traded only in dollars implies a constant 'demand' for dollars, this arguement on its own is extremely fallacious. To start with the most obvious issue: it only looks at the demand side of dollars. What about those who supply the oil? They get dollars for their oil. Dollars they might not even want or need. Obviously, those who receive dollars for their oil while not being interested in keeping those dollars, still have all the abilities to sell these dollars back on the market. Hence, the 'artificial' dollar demand caused by dollar-only-oil is countered by the subsequent dollar supply of those who receive these unwanted 'artificial' dollars. The net result is barely any extra demand for dollars.

 

 

 

That does not mean the dollar-only-oil does not contribute to the dollar-hegemony at all, however. The dollar-only-oil ensures increased trading volume of dollars (following from the fact that non-americans wanting to buy or sell oil HAVE to deal with dollars), clearly making the dollar a more liquid currency. The dollar-only-oil is certainly a factor, but just not the most important one and arguably not even a major one. If the dollar-hegemony was based on dollar-only-oil then the system would have long collapsed, right after the gold standard was removed. Dollar-only-oil does not explain why 65.7% of the worlds foreign exchange reserves are dollars. They certainly don't need such a huge dollar-reserves just to be able to buy oil.

 

 

 

 

I think that was the point the article was making. The dollar WAS backed my oil because there WAS a high demand for the dollar (as the supply wasn't as high yet). However, there is now a decrease in demand because the suppliers, oil-producing countries, are selling their dollars into the economy. This devalues the dollar, and therefore decreases its value. To combat this, the oil producing countries are asking for money in Euros which is hurting it MORE.

 

 

 

 

 

 

 

Also, it points out why the gold system doesn't work that well :?. Kind of sucks right.

 

 

 

There's nothing wrong about the gold system. The issues from a gold system are generally derived from overspending politicians. Politicians always want to spend more than their budget allows them to. Debt financing allows for this, by letting the inflation tax do its work. A gold system prevents debt financing and inflation tax and is thus unwanted by most politicians.

 

 

 

The gold standard disallowed America to continue its massive, yet unsustainable, money supply growth, which allowed America to live far above its standards. Thus it was removed. America backstabbed the whole world by breaking their promise that their "dollar is as good as gold". Their dollar is worthless paper or erasable electronic data. The whole world foolishly stepped into America's dollar-hegemony-system with both of their feet.

 

 

 

That's exactly the problem! It keeps nations in check so the nations dont want it. America was being limited by the gold system so they said "screw it" and left it. Like the article said, the world got conned.

 

 

 

But why is gold, which is probably useless in todays society, have any real value?

 

 

 

Simply stated: gold = money. While regarding the dollar it's more like: dollar = faith. Essentially that goes for any non-backed currency by the way.

 

 

 

I think he is asking why gold...and not something else

 

 

 

 

 

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I think that was the point the article was making. The dollar WAS backed my oil because there WAS a high demand for the dollar (as the supply wasn't as high yet). However, there is now a decrease in demand because the suppliers, oil-producing countries, are selling their dollars into the economy. This devalues the dollar, and therefore decreases its value. To combat this, the oil producing countries are asking for money in Euros which is hurting it MORE.

 

 

 

And I argued that it is and was a rubish theory, please read again. The fact that countries world wide keep such a large dollar reserves, has nothing to do with dollar-only-oil.

 

 

 

In short the relevant history went more like this.

 

 

 

Before countries world wide started to collect dollars as bank reserves, they used to keep huge amounts of gold. Now America proposed the following system: instead of keeping gold reserves, you could have dollars. America promised that dollars would always be "as good as gold" meaing that dollars would always be exchangable for gold at the ratio of $35 / ounce gold.

 

 

 

The world liked the idea for a variety of reasons or were put under political pressure to like it. Either way, the world bought into America's dollar-hegemony scam and agreed to start accumulating dollars as bank reserves. After all, the dollar was as good as gold, what was there to worry about?

 

 

 

Indeed, there was little to worry about, except for the treachorous behavior of America on this point. In 1971 they broke their promise that the dollar, by no longer backing it with gold. Many countries protested, but in the end they did nothing / did not dare to do anything.

 

 

 

As a result, the gold price rose to a peak of $850 / ounce in 1980. If you compare that to the $35 / ounce America had promised, you should know there was something wrong and that the whole world was betrayed.

 

 

 

Why countries still choose to maintain large dollar reserves after this is beyond my comprehension. Political pressure may, once again, have played a significant role. Furthermore, before the world was seduced into the dollar-system, many countries used to have gold standards on their own currencies. However, as part of the dollar-system, America forbid everyone from maintaining such a gold standard.

 

 

 

That's exactly the problem! It keeps nations in check so the nations dont want it. America was being limited by the gold system so they said "screw it" and left it. Like the article said, the world got conned.

 

 

 

Again, you didn't read my argumentation at all. I said 'problem of gold' lies in overspending politicians, who spend more money than they can afford. Obviously, that is not a 'problem of gold' at all, that is a 'problem of overspending politicians'. Clearly, someone has to pay that overspending anyway and it happens with the 'invisible' inflation tax. Gold simply disallows politicians to make use of the inflation tax - hence why they hate it.

 

 

 

America was not "being limited" (what is that supposed to mean even... it sounds just as ridiculous as the statement "dollar is backed by oil") by anything.

 

 

 

I think he is asking why gold...and not something else

 

 

 

Gold fulfills the role of money quite well. Gold has ALWAYS remained a valid currency throughout all times. Gold has somehow always intrigued people too. I don't think that there's an answer to the why question regarding that.

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I think that was the point the article was making. The dollar WAS backed my oil because there WAS a high demand for the dollar (as the supply wasn't as high yet). However, there is now a decrease in demand because the suppliers, oil-producing countries, are selling their dollars into the economy. This devalues the dollar, and therefore decreases its value. To combat this, the oil producing countries are asking for money in Euros which is hurting it MORE.

 

 

 

And I argued that it is and was a rubish theory, please read again. The fact that countries world wide keep such a large dollar reserves, has nothing to do with dollar-only-oil.

 

 

 

In short the relevant history went more like this.

 

 

 

Before countries world wide started to collect dollars as bank reserves, they used to keep huge amounts of gold. Now America proposed the following system: instead of keeping gold reserves, you could have dollars. America promised that dollars would always be "as good as gold" meaing that dollars would always be exchangable for gold at the ratio of $35 / ounce gold.

 

 

 

The world liked the idea for a variety of reasons or were put under political pressure to like it. Either way, the world bought into America's dollar-hegemony scam and agreed to start accumulating dollars as bank reserves. After all, the dollar was as good as gold, what was there to worry about?

 

 

 

Indeed, there was little to worry about, except for the treachorous behavior of America on this point. In 1971 they broke their promise that the dollar, by no longer backing it with gold. Many countries protested, but in the end they did nothing / did not dare to do anything.

 

 

 

As a result, the gold price rose to a peak of $850 / ounce in 1980. If you compare that to the $35 / ounce America had promised, you should know there was something wrong and that the whole world was betrayed.

 

 

 

Why countries still choose to maintain large dollar reserves after this is beyond my comprehension. Political pressure may, once again, have played a significant role. Furthermore, before the world was seduced into the dollar-system, many countries used to have gold standards on their own currencies. However, as part of the dollar-system, America forbid everyone from maintaining such a gold standard.

 

 

Okay, so it's not that the countries need dollars for JUST oil, but the fact remains that countries do need American dollars. I still think oil has a lot to do with it despite what you said.

 

 

 

So if most reserves are in American dollars, then has the whole world taken a serious hit from the devaluation of the dollar?

 

 

 

 

 

That's exactly the problem! It keeps nations in check so the nations dont want it. America was being limited by the gold system so they said "screw it" and left it. Like the article said, the world got conned.

 

 

 

Again, you didn't read my argumentation at all. I said 'problem of gold' lies in overspending politicians, who spend more money than they can afford. Obviously, that is not a 'problem of gold' at all, that is a 'problem of overspending politicians'. Clearly, someone has to pay that overspending anyway and it happens with the 'invisible' inflation tax. Gold simply disallows politicians to make use of the inflation tax - hence why they hate it.

 

 

 

America was not "being limited" (what is that supposed to mean even... it sounds just as ridiculous as the statement "dollar is backed by oil") by anything.

 

 

Actually, it doesn't sound ridiculous at all.

 

 

 

LIMITED

 

limÃÆââ¬Å¡Ãâ÷itÃÆââ¬Å¡Ãâ÷ed /ÃÆââ¬Â¹Ãâ¹Ã¢â¬Â lÃÆââ¬Â°ÃâêmÃÆââ¬Â°ÃâêtÃÆââ¬Â°Ãâêd/ Pronunciation Key - Show Spelled Pronunciation[lim-i-tid] Pronunciation Key - Show IPA Pronunciation

 

ÃÆââââ¬Å¡Ã¬Ã¢ââ¬Ãâadjective

 

1. confined within limits; restricted or circumscribed: a limited space; limited resources.

 

 

 

Now that we've cleared up the definition of limited...The gold standard does (or rather did) limit America by limiting the overspending politicians. Hence, the reason for breaking off from the gold system.

 

 

 

I fail to see how that sounds ridiculous.

 

 

 

Furthermore, I did read what you said; saying I didn't is kind of ridiculous. I specifically said that it limits America. You said it limited the overspending politicians. Same [cabbage] different name.

 

 

 

 

 

 

 

I think he is asking why gold...and not something else

 

 

 

Gold fulfills the role of money quite well. Gold has ALWAYS remained a valid currency throughout all times. Gold has somehow always intrigued people too. I don't think that there's an answer to the why question regarding that.

 

 

 

The question is the bolded. And you said it cannot be answered. End.

 

 

 

Oh, and gold has not always been the valued currency :wink:


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Now that we've cleared up the definition of limited...The gold standard does (or rather did) limit America by limiting the overspending politicians. Hence, the reason for breaking off from the gold system.

 

 

 

I fail to see how that sounds ridiculous.

 

 

 

I guess anyone that thought a big controlling central government was the key to unlocking and freeing a country would agree with that comment.

 

 

 

I personally believe and I am making the assumption that Duke Freedom believes that a huge all powerful central government actually limits a country in the long run due to poor efficient use of money.

 

 

 

Money is going to be spent either way. If the government takes more of it in taxes to help with economic growth and the greater good vs people getting to keep it and spending it for their own economic growth and greater good which way do you think it will be used more efficiently?

 

 

 

So I guess my point is if you mean by it limits America in terms of how big the government can get I agree but if you say it limits America by limiting it's individual citizens then I would have to disagree.


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