Bush warns Congress on Social Security

[D_Raay]

http://www.guardian.co.uk/worldlatest/story/0,1280,-4727665,00.html?gusrc=ticker-103704

President Bush tried to increase pressure on members of Congress who are leery of his ideas to change Social Security by telling them Tuesday they could be risking their jobs.

``I happen to believe people who have been elected to office who ignore problems will face a price at the ballot box,'' Bush said during a forum with voters who support his goal of creating private investment accounts to partly replace guaranteed benefits.
----
This is where tolerating vote fraud gets you; a dictator able to choose which legislators he wants.

[ASsman]

Yey! Let's invest our SS money in the stock market. Like crackers.

[Echewta]

There is a huge crisis in Social Security. Do you want social security to that could come in the form of a mushroom cloud?

[Running_Beastie]

This is a column that appeared in the New York Times.

Editorial: The Social Security Fear Factor

January 3, 2005






If you've lent even one ear to the administration's recent
comments on Social Security, you have no doubt heard
President Bush and his aides asserting that a $10 trillion
shortfall threatens the retirement system - and the economy
itself. That $10 trillion hole is the basis of the
president's claim last month that "the [Social Security]
crisis is now." It's also the basis of the administration's
claim that the cost of doing nothing to reform the system
would be far greater than the cost of acting now.

Well, the $10 trillion figure is the closest you can get to
pulling a number out of the air. Make that the ether.
Starting last year, as the groundwork was being set for the
emerging debate, the Social Security trustees took the
liberty of projecting the system's solvency over infinity,
rather than sticking to the traditional 75-year time
horizon. That world-without-end assumption generates the
scary $10 trillion estimate, and with it, Mr. Bush's
putative rationale for dismantling Social Security in favor
of a system centered on private savings accounts. The
American Academy of Actuaries, the profession's premier
trade association, objected to the change. In a letter to
the trustees, the actuaries wrote that infinite projections
provide "little if any useful information about the
program's long-range finances and indeed are likely to
mislead any [nonexpert] into believing that the program is
in far worse financial condition than is actually
indicated."

As it often does with dissenting professional opinion, the
administration is ignoring the actuaries. But that doesn't
alter the facts or common sense. If the $10 trillion figure
is essentially bogus, so is the claim that Social Security
is in crisis. The assertion that doing nothing would be
costlier than enacting a privatization plan also turns out
to be wrong, by the estimates of Congress's own budget
agency.

Over a 75-year time frame, Social Security's shortfall is
estimated by the Congressional Budget Office at $2 trillion
and by the Social Security trustees at $3.7 trillion, a
manageable sliver of the economy in each case. If the
shortfall is on the low side, Social Security will be in
the black until 2052, when it will be able to pay out 80
percent of the promised benefits. If it is on the high
side, the system will pay full benefits until 2042, when it
will cover 70 percent.

Contrary to Mr. Bush's frequent assertion that Social
Security is constantly imperiled by political meddling, it
has in fact been preserved and improved by political
intervention throughout its 70-year history, most
significantly in 1983. The system could - and should - be
strengthened again by a modest package of benefit cuts and
tax increases phased in over decades.

Instead, the administration wants workers to divert some of
the payroll taxes that currently pay for Social Security
into private investment accounts, in exchange for a
much-reduced government benefit. To replace the taxes it
would otherwise have collected - money it needs to pay
benefits to current and near retirees - the government
would borrow an estimated $2 trillion over the next 10
years or so and even more thereafter.

In effect, the administration's plan would get rid of the
financial burden of Social Security by getting rid of
Social Security. The plan shifts the financial risk of
growing old onto each individual and off of the government
- where it is dispersed among a very large population, as
with any sensible insurance policy. In a privatized system,
you may do fine, but your fellow retirees may not, or vice
versa.

In any event, doing well under privatization is relative.
Congress's budget agency analyzed the privatized plan that
is widely regarded as the template for future legislation
and found that total retirement benefits - including
payouts from the private account plus the government
subsidy - would be less than under the present system. The
amount available from the privatized system was less even
after midcentury, when the current system is projected to
come up short.

It should come as no shock that individual investors might
not do as well as hoped. The stock market's historical
returns - some 7 percent a year - are predicated on a
hypothetical investor who bought an array of stocks in the
past, reinvested all dividends, never cashed in and never
paid commissions or fees. That's not how investing works in
the real world. An especially grave danger is that
investors would withdraw their funds before retirement, a
pattern that is pronounced in 401(k) plans. It would be
politically very difficult to refuse people access to
accounts that were sold to them on the premise that they -
not the government - would own them.

The Congressional Budget Office analysis also likely
understates the costs to individuals of privatizing Social
Security. The borrowing that would be needed to establish
private accounts could lead to higher interest rates, a
weaker dollar and slower economic growth. It is also likely
that future tax hikes would be required to cover the
interest payments on the additional national debt.

The only hands-down winner would be Wall Street, as fees to
manage millions of accounts poured in. (Those fees, not
incidentally, would come out of your return.) Current
stockholders would also stand to benefit, as increased
demand pushed up stock prices, giving existing owners a
gain at the expense of newcomers who would be forced to buy
high. The affluent, who could afford professional investing
advice, would also be advantaged, even though everyone
would be taking the same risks.

The zeal over privatization is fueled by the belief of Mr.
Bush and his supporters that free-market fixes are
appropriate for virtually every problem. That faith is
misguided. For a society to be functional and humane, it's
not enough that some people have a chance to be rich in old
age. Rather, all old people must have the dignity of
financial security, and that requires universal coverage.

Social Security is the core tier of old-age support,
replacing about a third of preretirement income for a
typical retiree and providing inflation-proof income for
life - a feature not available in private accounts. Its
purpose is not to supplant other retirement investing, but
to provide a crucial safety net. Anyone who wants to
maintain his or her standard of living into old age must
also amass substantial personal savings and investments. To
introduce the same risk into the core tier of benefits that
already exists for the bulk of one's retirement savings
would be as unfair as it is unwise.

If Mr. Bush were not so serious about privatizing Social
Security, his urgency would be silly. Compared with other
challenges looming for the government, it's a non-problem.
The shortfall in the Medicare hospital insurance fund is
two to three times the size of the Social Security
shortfall, and that fund is projected to be insolvent some
two to three decades before Social Security. Taken
together, the costs of the Medicare prescription benefit
and of making the tax cuts permanent - Mr. Bush's two main
domestic initiatives - are 5 to 8.5 times larger. And his
hair is on fire over Social Security?

One of the most distressing aspects of the debate over
Social Security privatization is that it distracts from
more pressing issues and obscures better solutions to the
problem of secure retirement. A future editorial will
discuss new strategies to increase private savings outside
of Social Security that draw on market theory and
behavioral economics and are more promising than rehashing
the same tired formula of tax-sheltered savings accounts.
In the meantime, however, Mr. Bush and his supporters will
be pursuing their idée fixe of privatization. It's bad
policy. And it's bad politics, too, driven by reflex,
ideology and special interests, and sustained by conformism
that masquerades as party discipline. Lawmakers who still
value their right and obligation to think for themselves -
and to act in the best interest of their constituents -
must champion solutions that will build on Social Security,
not undermine it.

[Running_Beastie]

Here is another article by Paul Krugman, an award winning economist.

Copyright 2004 The New York Times Company
The New York Times

December 17, 2004 Friday
Late Edition - Final

SECTION: Section A; Column 1; Editorial Desk; Pg. 35

LENGTH: 780 words

HEADLINE: Buying Into Failure

BYLINE: By PAUL KRUGMAN.

E-mail: krugman@nytimes.com

BODY:


As the Bush administration tries to persuade America to convert Social Security into a giant 401(k), we can learn a lot from other countries that have already gone down that road.

Information about other countries' experience with privatization isn't hard to find. For example, the Century Foundation, at www.tcf.org, provides a wide range of links.

Yet, aside from giving the Cato Institute and other organizations promoting Social Security privatization the space to present upbeat tales from Chile, the U.S. news media have provided their readers and viewers with little information about international experience. In particular, the public hasn't been let in on two open secrets:

Privatization dissipates a large fraction of workers' contributions on fees to investment companies.

It leaves many retirees in poverty.

Decades of conservative marketing have convinced Americans that government programs always create bloated bureaucracies, while the private sector is always lean and efficient. But when it comes to retirement security, the opposite is true. More than 99 percent of Social Security's revenues go toward benefits, and less than 1 percent for overhead. In Chile's system, management fees are around 20 times as high. And that's a typical number for privatized systems.

These fees cut sharply into the returns individuals can expect on their accounts. In Britain, which has had a privatized system since the days of Margaret Thatcher, alarm over the large fees charged by some investment companies eventually led government regulators to impose a ''charge cap.'' Even so, fees continue to take a large bite out of British retirement savings.

A reasonable prediction for the real rate of return on personal accounts in the U.S. is 4 percent or less. If we introduce a system with British-level management fees, net returns to workers will be reduced by more than a quarter. Add in deep cuts in guaranteed benefits and a big increase in risk, and we're looking at a ''reform'' that hurts everyone except the investment industry.

Advocates insist that a privatized U.S. system can keep expenses much lower. It's true that costs will be low if investments are restricted to low-overhead index funds -- that is, if government officials, not individuals, make the investment decisions. But if that's how the system works, the suggestions that workers will have control over their own money -- two years ago, Cato renamed its Project on Social Security Privatization by replacing ''privatization'' with ''choice'' -- are false advertising.

And if there are rules restricting workers to low-expense investments, investment industry lobbyists will try to get those rules overturned.

For the record, I don't think giving financial corporations a huge windfall is the main motive for privatization; it's mostly an ideological thing. But that windfall is a major reason Wall Street wants privatization, and everyone else should be very suspicious.

Then there's the issue of poverty among the elderly.

Privatizers who laud the Chilean system never mention that it has yet to deliver on its promise to reduce government spending. More than 20 years after the system was created, the government is still pouring in money. Why? Because, as a Federal Reserve study puts it, the Chilean government must ''provide subsidies for workers failing to accumulate enough capital to provide a minimum pension.'' In other words, privatization would have condemned many retirees to dire poverty, and the government stepped back in to save them.

The same thing is happening in Britain. Its Pensions Commission warns that those who think Mrs. Thatcher's privatization solved the pension problem are living in a ''fool's paradise.'' A lot of additional government spending will be required to avoid the return of widespread poverty among the elderly -- a problem that Britain, like the U.S., thought it had solved.

Britain's experience is directly relevant to the Bush administration's plans. If current hints are an indication, the final plan will probably claim to save money in the future by reducing guaranteed Social Security benefits. These savings will be an illusion: 20 years from now, an American version of Britain's commission will warn that big additional government spending is needed to avert a looming surge in poverty among retirees.

So the Bush administration wants to scrap a retirement system that works, and can be made financially sound for generations to come with modest reforms. Instead, it wants to buy into failure, emulating systems that, when tried elsewhere, have neither saved money nor protected the elderly from poverty.

[valvano]

Social Security is nothing but a legalized pyramid scheme.....if you are counting on it to finance your retirement, you are an idiot

:eek:

[ASsman]

Bush also warned Congress, "My inauguration party IS GONNA BE OFF THE HOOK, G!" .

[yeahwho]

As the Bush administration tries to persuade America to convert Social Security into a giant 401(k), we can learn a lot from other countries that have already gone down that road.

Information about other countries' experience with privatization isn't hard to find. For example, the Century Foundation, at www.tcf.org, provides a wide range of links.

Yet, aside from giving the Cato Institute and other organizations promoting Social Security privatization the space to present upbeat tales from Chile, the U.S. news media have provided their readers and viewers with little information about international experience. In particular, the public hasn't been let in on two open secrets:

Privatization dissipates a large fraction of workers' contributions on fees to investment companies.

It leaves many retirees in poverty.


So the Bush administration wants to scrap a retirement system that works, and can be made financially sound for generations to come with modest reforms. Instead, it wants to buy into failure, emulating systems that, when tried elsewhere, have neither saved money nor protected the elderly from poverty.

You know if we could only get Krugman on the same page as Armstrong Williams, this SS reform will start to sound a lot better. Bush will be shopping around for a few good journalists to help with this program.

[D_Raay]

Bush also warned Congress, "My inauguration party IS GONNA BE OFF THE HOOK, G!" .
With the king of all rednecks, Kid Rock, (well maybe) rocking the Bushies into the night. I am waiting with great anticipation to see the neo-cons slamming their heads to "Bam diddy bam di bang to bang".

[Echewta]

Social Security is nothing but a legalized pyramid scheme.....if you are counting on it to finance your retirement, you are an idiot

:eek:

To finance your retirement completly, yes. But, when you invest and your funds/stock take a hit later in life, at least you know your SS check will be there.

[Señor Stino]

Social Security is nothing but a legalized pyramid scheme.....if you are counting on it to finance your retirement, you are an idiot

:eek:

speak for your own

[EN[i]GMA]

How can an award winning economist not realize a system where people are getting more than 4 times what they put in is failing?

Believe all the fairy tales you want about SS, but it's going to continue down the road of deficit until something is done.



So Krugman says the problem is that people aren't able to invest their money properly? Who's fault is this? Because I could swear it isn't mine.

And I have a sneaking suspiscion that Krugman's "minor improvements" are nothing but spending increases.

[EN[i]GMA]

Social Security is nothing but a legalized pyramid scheme.....if you are counting on it to finance your retirement, you are an idiot

:eek:

"The greatest threat to your Social Security retirement funds is Congress itself. Congress has never required that Social Security tax dollars be kept separate from general revenues. In fact, the Social Security “trust fund” is not a trust fund at all. The dollars taken out of your paycheck are not deposited into an account to be paid to you later. On the contrary, they are spent immediately to pay current benefits, and to fund completely unrelated federal programs. Your Social Security administration “account” is nothing more than an IOU, a hopeful promise that enough younger taxpayers will be around to pay your benefits later. Decades of spendthrift congresses have turned the Social Security system into a giant Ponzi scheme, always dependent on new generations. The size and longevity of the Baby Boom generation, however, will finally collapse the house of cards."

Rep. R-Ron Paul

[D_Raay]

You are correct enigma...

Did anyone catch Bush telling the black people (particularly the one seated to the direct left of him) that something needed to be done because black males die earlier than the rest of us? I was cringing in my recliner. I mean what the fuck is that supposed to mean? Maybe he should do something about them dying earlier. Really grasping at straws there..

[valvano]

ever heard of the concept of risk vs. reward?

[ASsman]

Hobos die younger too. You should also give them their money earlier.

[Whois]

GMA']"The greatest threat to your Social Security retirement funds is Congress itself. Congress has never required that Social Security tax dollars be kept separate from general revenues. In fact, the Social Security “trust fund” is not a trust fund at all. The dollars taken out of your paycheck are not deposited into an account to be paid to you later. On the contrary, they are spent immediately to pay current benefits, and to fund completely unrelated federal programs. Your Social Security administration “account” is nothing more than an IOU, a hopeful promise that enough younger taxpayers will be around to pay your benefits later. Decades of spendthrift congresses have turned the Social Security system into a giant Ponzi scheme, always dependent on new generations. The size and longevity of the Baby Boom generation, however, will finally collapse the house of cards."

Rep. R-Ron Paul

Go Paul!
(y)

[Echewta]

ever heard of the concept of risk vs. reward?

I don't want your poor risk taking to effect my pocket book even more when you sign up for medicare and goverment housing.

[valvano]

and i dont want my retirement to be controlled by some faceless bureaucrat in washington, dc

i thought you liberals hated the big bad govt and its wars, army, etc...but you sure do want it to manage your healthcare, retirement, etc


here's a novel idea, let people make decisions for themselves...opt out of social security and invest on their own, be it the stock market, money market, or a simple passbook savings acct...let people educate themselves and make the investment choice that best meets their goals...

even the govt employees own retirement system has current rate of return that is better than social security...... :D

[bb_bboy]

http://www.guardian.co.uk/worldlatest/story/0,1280,-4727665,00.html?gusrc=ticker-103704

President Bush tried to increase pressure on members of Congress who are leery of his ideas to change Social Security by telling them Tuesday they could be risking their jobs.

``I happen to believe people who have been elected to office who ignore problems will face a price at the ballot box,'' Bush said during a forum with voters who support his goal of creating private investment accounts to partly replace guaranteed benefits.
----
This is where tolerating vote fraud gets you; a dictator able to choose which legislators he wants.

I think the implication is that they won't be reelected due to receiving a minority share of votes, not that he will have the vote counts altered to force them out of office. Read, digest and comprehend.

Besides, social security is totally fucked. We might as well stop it completely so I can quit spending all of my cheddar on the shizzle while knowing that I won't get anything in return. Or, we can lower the quality of healthcare for the elderly and simultaneously increase levels of fertility and the availability of jobs for minors. Get rich or die trying. Peace.

[100% ILL]

I'm only going to live two years past retirement any way. I don't wanna invest and never get anything in return.

Personal Death Clock for 100% ILL

Your Personal Day of Death is...
Thursday, March 1, 2046

[D_Raay]

I think the implication is that they won't be reelected due to receiving a minority share of votes, not that he will have the vote counts altered to force them out of office. Read, digest and comprehend.

Besides, social security is totally fucked. We might as well stop it completely so I can quit spending all of my cheddar on the shizzle while knowing that I won't get anything in return. Or, we can lower the quality of healthcare for the elderly and simultaneously increase levels of fertility and the availability of jobs for minors. Get rich or die trying. Peace.
Errr, it appears you did not "read, digest, and comprehend" what I said.
I meant that if we let them get away with something like vote fraud, then sarcastically, we may as well let him pick his own legislators. Not that the two were tied together..

[D_Raay]

OK, contrary to all the official lies (from people like Jane Bryant and her ilk), Social Security is in SEVERE DISTRESS.

Lefties generally claim that the crisis is bogus; that the Republicans are just trying to "hurt the poor" by privatizing social security. Rightists pretend that they are trying to create a more accountable, freer system. THEY ARE BOTH LYING! There IS a crisis, but regulated accounts are NOT "private" and will NOT save the day. The purpose of private REGULATED accounts is to sweep more money into Wall Street, TO SAVE WALL STREET, not the pension owner!!

This is basically an admission that Social Security is doomed:

http://money.cnn.com/2005/01/04/news/economy/social_security/?cnn=yes

By creatively adjusting the numbers, they can claim that SOCIAL SECURITY IS "OVERFUNDED" and SHAKE IT DOWN for even more money than they already did under the Reagan administration when they raised the rates to "save social security", then raided the fund!!!!

Main points:

1. Pension funds are the last remaining big pool of private capital in the USA and a few other chronically capital-starved currency-empires.

2. They have been and continue to be plundered.

3. Government schemes to "save" the systems have in fact been schemes to raid them.

4. This has been a longstanding, ongoing, "bipartisan effort". You can not fix the problem by voting for the "right" political party.

[valvano]

all the money that would be rushed into wall street is not going to sit on wall street, it would be turned into investment capital and invested in businesses, etc, thus creating economic growth, job, and a positive return on investment bypassing the rate currently offered by social security.

you see, govt doesnt create wealth, wealth creates wealth...as it currently stands, social security is nothing by a pyramid scheme/redistribution of wealth.......another failed example of making a class dependent upon the govt via entitlements

they should just scrap the whole thing and make everybody responsible for their own retirement. if you dont save/invest, so be it. its called personal responsibility

[Ace42]

all the money that would be rushed into wall street is not going to sit on wall street, it would be turned into investment capital and invested in businesses, etc, thus creating economic growth, job, and a positive return on investment bypassing the rate currently offered by social security.

you see, govt doesnt create wealth, wealth creates wealth

Heh, that is a great story. Tell it to some kids.

Firstly, over-investment was a significant cause of the great depression. Secondly, your government has been increasing your massive national debt for decades. Your economic growth is based purely on speculation, and when speculation dries up. BOOM, Steinbeck anyone?

[yeahwho]

Damn...Ace beat me to it!

they should just scrap the whole thing and make everybody responsible for their own retirement. if you dont save/invest, so be it. its called personal responsibility

That is laughable, the US goverment owes billions and billions of dollars to the citizens of the US, "personal responsibility" would require us to get the money we've been giving to them in good faith for decades, HA!

That will never, ever happen. Why? Here is why, hahahahaha (http://www.federalbudget.com/)

punk'd by my own goverment! again.

[valvano]

thats my point, the billions and billions we've been giving for years and years, you and i and those others of us under 40 will never see. social security is a pyramid scheme. it depends on the input of newer workers to finance the retirement of older workers and requires an expanding base for payors into the system. well, people are living longer and longer and getting more and more from the "pyramid". its was doomed for failure from the time of conception, its just taken 70 or so years for it finally come.

i go back to my original point. let people be in charge of their own retirement. invest in the investments they chose. if they want high returns, they take the risk. less risk, lower returns. or a combination of both. or whatever they want. or stuff their money into a mattress. whatever. but as nearly every other govt program that has come along to solve a "problem", govt only adds to the problem and makes the problem a lot more expensive that it would have been. govt is not the solution, its the problem. and both political parties are a big factor of the problem, they dont have the balls to admit that social security is a scam

i would love to see somebody ask ted kennedy, or bush, or somebody at a press conference "what exactly is the difference between social security and a ponzi scheme?"

[infidel]

When historians look back at the bush presidency they're more likely to note that what sets Bush apart is not the crises he managed but the crises he fabricated. To attain goals that he had set for himself before he took office - the overthrow of Saddam Hussein, the privatization of Social Security - he concocted crises where there were none.

So Iraq became a clear and present danger to American, ful of WMDs, a nuclear attack just waiting to happen. And now this week the president is embarking on his second great scare campaign, this one to convince the American people that Social Security will collapse and that the only remedy is to cut benefits and redirect resources into private accounts.

The way bush is going about SS reform reminds me of the person who is dead broke borrowing money for a bedroom addition to his house for a child he won't have for forty years. SS needs to be fixed but not while the economy is iffy and the deficit is running so high. Better to wait for a Democratic administration if it's to be fixed right. The only reason junior is going after it now is because he wants the glory of being the one who fixed SS but he'll probably end up being the one to blame for screwing it up.

[valvano]

democrats dont have a great record of govt programs designed to solve problems:

1. social security (our subject), created by FDR, has now made an entire generation dependent upon a failed retirement system ready to collapse

2. welfare and the great society, created by LBJ, trillions spent on social programs, welfare, etc. the result? per the democrats we have more poor folks than ever before, more people dependent up that monthly govt check, more children born out of wedlock then ever before, all in the name of the govt check, the loss of personal responsibility

4. numerous govt subsidies to business sectors that, if left to compete in the true marketplace, would die a natural death. farm subsidies, business subsidies, etc.

need i go on???

and the republicans arent innocent in all of this. they just pretend to hate govt spending, but govt spending is the true powerbase of both dems and reps. its their heroin.

the number one thing that can be done to fix 90% of the problems in DC:

1. pass a balanced budge amendment
2. cap the increase in spending to inflation
3. pass a line item veto

[yeahwho]

and the republicans arent innocent in all of this. they just pretend to hate govt spending, but govt spending is the true powerbase of both dems and reps. its their heroin.

the number one thing that can be done to fix 90% of the problems in DC:

1. pass a balanced budge amendment
2. cap the increase in spending to inflation
3. pass a line item veto

Therein lies the reality gap between the elected and the electorate. Peter G. Peterson's excellent book, Running on Empty, encapsulates the scary reality of the current mess we are in.

Mr. Peterson entertains a darker possibility: that ''our national leaders are providing the American people with precisely what they want.'' Debt, he notes, is particularly alluring in periods of partisan intransigence. If the two sides cannot compromise on priorities, each can take what it wants while dumping the bill on future generations. Americans used to understand this temptation and flee it. Thomas Jefferson warned: ''To preserve our independence, we must not let our rulers load us with perpetual debt. We must make our election between economy and liberty, or profusion and servitude.''

So it may be that some terrible change has come over the national psychology that admits to only two diagnoses. Either the complexity of government has outrun the capacity of a democratic public to understand it, or that public, understanding well the options Jefferson put before it, has chosen servitude.

Your 3 point plan is a hard a pill to swallow. Unfortunately, American business is hitting the skids in the morality play and reading about CEO's (http://www.nytimes.com/2005/01/16/business/16koz.html?hp&ex=1105851600&en=e28c69fe943ee6e8&ei=5094&partner=homepage) and there solutions is becoming a regular daily diet.

Bush will not be the guy to solve this very complicated mess. Guaranteed.

[EN[i]GMA]

Heh, that is a great story. Tell it to some kids.

Firstly, over-investment was a significant cause of the great depression. Secondly, your government has been increasing your massive national debt for decades. Your economic growth is based purely on speculation, and when speculation dries up. BOOM, Steinbeck anyone?

He should tell that story to some kids, pehaps they would learn about fiscal responsibility and letting the market regulate itself.

It wasn't overinvestment due to the market, it was overinvestment due to government intervention via the Federal Reserve.

And speculation doesn't cause market crises, it softens them. When the prices start to fall, speculators purchase them, softening the drop, and when they rise, speculators sell prevent them from raising to a level that would warrant a quick drop off.

The Great Depression was caused due to the Fed reducing interest rates to point that people borrowed so much money that they were producing more than could be bought.

Free market capitalism would never do this as it's a self adjusting system.

Thanks Uncle Sam!

[valvano]

another big reason for the great depression was the use of stocks etc as collateral in other financing, much like using house credit at a casino. when things tanked, that created a domino effect.

today, the use of securities as collateral is highly regulated to prevent such another "depression"

[EN[i]GMA]

another big reason for the great depression was the use of stocks etc as collateral in other financing, much like using house credit at a casino. when things tanked, that created a domino effect.

today, the use of securities as collateral is highly regulated to prevent such another "depression"


Actually, the biggest problem was the buying of stock on margins.

[valvano]

thats what i meant
(y)

[D_Raay]

The Great Depression was caused due to the Fed reducing interest rates to point that people borrowed so much money that they were producing more than could be bought.
Bingo! Give the man a cigar!

I go back to my original point, what to do? what to do? We aren't getting any help from either party on this one. And the idea that a buffoon like W is speaking to me about a particularly complex issue such as this is appalling to my intellect...

[Ace42]

GMA']And speculation doesn't cause market crises, it softens them.

Speculation != prodcution. Speculation works on the principle that you forsee and buy into a chain of events where a sacrifice of assets now will guarantee a profit in the future. When something occurs like the great depression, confidence in all industries drops. Investors need their money back, which means there is no tolerance for deliquent debts. On top of the economic crisis, long-term profit from interest cannot occur (due to long-term investment in a declining economy being proportionatly less profitable than short-term investment).

So, a company whose fortfolio is hit will quite possibly go out of business as its shares become worthless and the companies it owns are declared bankrupt. An out of business investment firm cannot speculate or invest.

For speculation to be a positive market force, the speculation has to come to fruition. This cannot *truly* occur in an economy which is based solely around good intentions and faith in the system.

The US national debt is massive and has been increasing for decades. This is because borrowing is greater than production. If everyone has been making so much genuine profit - how come the US isn't able to repay its debts?

I find the idea of "speculating" with 60% debt to be quite farcical. It is like a Gambler whose Gambled away for than half his possessions saying "Yeah, but I still have 40% to win it all back!"

The Great Depression was caused due to the Fed reducing interest rates to point that people borrowed so much money that they were producing more than could be bought.

Free market capitalism would never do this as it's a self adjusting system.


No, alas, it would happen in a free market. Competing investment companies offer lower and lower interest rates to try and run the others out of business (which always happens in capitalism according to you) - they get massive short-term profits due to a borrowing culture developing (much like is in the US at the moment) and then you are in the same situation.

Over-production was a problem? ANd yet in your pro-capitalist Utopia, you cited increased production due to a happier and better payed work-force as a driving factor.

[EN[i]GMA]

Bingo! Give the man a cigar!

I go back to my original point, what to do? what to do? We aren't getting any help from either party on this one. And the idea that a buffoon like W is speaking to me about a particularly complex issue such as this is appalling to my intellect...

I trust Cato.org more than Bush.

Check this site out: www.socialsecurity.org

As long as the Govts plan stays close to that one, we'll be o.k.

[EN[i]GMA]

Speculation != prodcution. Speculation works on the principle that you forsee and buy into a chain of events where a sacrifice of assets now will guarantee a profit in the future. When something occurs like the great depression, confidence in all industries drops. Investors need their money back, which means there is no tolerance for deliquent debts. On top of the economic crisis, long-term profit from interest cannot occur (due to long-term investment in a declining economy being proportionatly less profitable than short-term investment).

So, a company whose fortfolio is hit will quite possibly go out of business as its shares become worthless and the companies it owns are declared bankrupt. An out of business investment firm cannot speculate or invest.

For speculation to be a positive market force, the speculation has to come to fruition. This cannot *truly* occur in an economy which is based solely around good intentions and faith in the system.

The US national debt is massive and has been increasing for decades. This is because borrowing is greater than production. If everyone has been making so much genuine profit - how come the US isn't able to repay its debts?

I find the idea of "speculating" with 60% debt to be quite farcical. It is like a Gambler whose Gambled away for than half his possessions saying "Yeah, but I still have 40% to win it all back!"



No, alas, it would happen in a free market. Competing investment companies offer lower and lower interest rates to try and run the others out of business (which always happens in capitalism according to you) - they get massive short-term profits due to a borrowing culture developing (much like is in the US at the moment) and then you are in the same situation.

Over-production was a problem? ANd yet in your pro-capitalist Utopia, you cited increased production due to a happier and better payed work-force as a driving factor.

Your lecturing ME on the national debt? There wouldn't be any national debt if things were run correctly. And comparing the U.S. government to a corporation isn't accurate. The Government's debt has nothing to do with prosperity or lack thereof, it has to do with the government spending less money.

How would it happen in a free-market? The lower interest rates were caused by the fiat currency system. If you have a gold/silver-based currency, the value of the currency stays the same. With a government fiat currency they can choose to print more and cause inflation, lower interest rates, take money out of the system, etc.

They can do just about anything to the money that is detrimental to the economy. Banks wouldn't be able to lower their interest rates below a certain point because at that point they simple wouldn't be making a profit.

And the current U.S. economy is more than capable of handling the lower interest rates.

Would like to go on record as Mises did and predict a Great Depression? It could land you in a history book.

[Ace42]

GMA']If you have a gold/silver-based currency, the value of the currency stays the same.

Nonsense. You might as well say a "diamond based economy" would do that. And yet, Debiers have been artificially maintaining the value of diamonds for decades. To suggest having a currency based on the values of arbitrary materials is somehow reliable is a nonsense. Especially for commodities which are of no practical value.

With a government fiat currency they can choose to print more and cause inflation, lower interest rates, take money out of the system, etc.

You can do that with any currency system, irrespective of it being tied to a fixed asset, which by its very nature does not have a fixed value, merely the arbitrary value assigned to it by the general population.

The quantity of currency produced CANNOT ever be tied to the gross quantity of the material it is supposed to represent. Money gets lost, burnt, crumpled, etc totally independant of the resource it is supposed to signify. The treasury cannot produce a directly corresponding amount of currency to the materials it is supposed to represent or is in circulation. Thus printing surplus money will always be a problem, irrespective of how the system is controlled.

Banks wouldn't be able to lower their interest rates below a certain point because at that point they simple wouldn't be making a profit.

Ahhh, but they would. If borrowing is cheap and easy, you can borrow massive amounts. Even if the profit is 1%, you merely borrow more at the competing rates so you can offer more.

Would like to go on record as Mises did and predict a Great Depression? It could land you in a history book.

Oh yes. It is not if, but when. It is coming.

[EN[i]GMA]

Nonsense. You might as well say a "diamond based economy" would do that. And yet, Debiers have been artificially maintaining the value of diamonds for decades. To suggest having a currency based on the values of arbitrary materials is somehow reliable is a nonsense. Especially for commodities which are of no practical value.

It's been gold for nearly 4,000 years, why change our arbitrary unit of value now?



You can do that with any currency system, irrespective of it being tied to a fixed asset, which by its very nature does not have a fixed value, merely the arbitrary value assigned to it by the general population.

No you can't. If you value of your "dollar" is "one dollar (Certain weight) in gold", you can't change the value. It's intrinsic.

[qoute]
The quantity of currency produced CANNOT ever be tied to the gross quantity of the material it is supposed to represent. Money gets lost, burnt, crumpled, etc totally independant of the resource it is supposed to signify. The treasury cannot produce a directly corresponding amount of currency to the materials it is supposed to represent or is in circulation. Thus printing surplus money will always be a problem, irrespective of how the system is controlled.[/quote]

On a non-fiat currency, money does not get burnt or lost etc. The "money" you hold is nothing but a piece of paper entitling you to that much in gold. The money isn't worth paper it's printed on, it's the gold that's worth something.


Ahhh, but they would. If borrowing is cheap and easy, you can borrow massive amounts. Even if the profit is 1%, you merely borrow more at the competing rates so you can offer more.

Is that bank guranteed to get it's money back? No. There is a certain percentage of loans that, for whatever reason, will not be payed back to the bank. If the bank runs on a razor thin 1% interest rate, it quickly fails one a big loan or 2 goes unpaid.


Oh yes. It is not if, but when. It is coming.

I meant a timeframe. That's like me saying "I predice the end of the world". Well duh, it's going to happen sometime, the trick is when.

[Ace42]

GMA']
No you can't. If you value of your "dollar" is "one dollar (Certain weight) in gold", you can't change the value. It's intrinsic.

The value of gold is not static. You have exactly the same situation you do now, but with the value of Gold related to everything else being manipulated instead of the value of pieces of paper. It is equally arbitrary.



On a non-fiat currency, money does not get burnt or lost etc. The "money" you hold is nothing but a piece of paper entitling you to that much in gold. The money isn't worth paper it's printed on, it's the gold that's worth something.

Lose the paper (in the washing machine, in house fire) you lose the Gold. QED.

Is that bank guranteed to get it's money back? No. There is a certain percentage of loans that, for whatever reason, will not be payed back to the bank. If the bank runs on a razor thin 1% interest rate, it quickly fails on a big loan or 2 goes unpaid.

When you are dealing with borrowed money that is part of an arbitrary system, that is immaterial. The US has been wracking up debt like nobody's business. This has not stopped it operating on a NEGATIVE (never mind razor thin) profit margin for 30 years. When you are dealing with borrowing, this is not necessarily a problem, as can be observed by watching every aspect of capitalism.

I meant a timeframe. That's like me saying "I predice the end of the world". Well duh, it's going to happen sometime, the trick is when.

Within my lifetime, unless there is revolution. It is not surprising the US throws so much money into its military when it is so far in debt. It is like a debtor getting even more into debt buying a gun to prevent the repo men from taking his shit back.

[EN[i]GMA]

The value of gold is not static. You have exactly the same situation you do now, but with the value of Gold related to everything else being manipulated instead of the value of pieces of paper. It is equally arbitrary.

O.K. But is the value of ANYTHING static? Is there anything, short of commodities, that can be used to back a currency?

Gold's value may be arbitrary, but I would rather have a solid metal backing up my money than the hollow words of politicians.


Lose the paper (in the washing machine, in house fire) you lose the Gold. QED.

How is that any different than what we have now? Take care of your money or store it a bank or in a fund.


When you are dealing with borrowed money that is part of an arbitrary system, that is immaterial. The US has been wracking up debt like nobody's business. This has not stopped it operating on a NEGATIVE (never mind razor thin) profit margin for 30 years. When you are dealing with borrowing, this is not necessarily a problem, as can be observed by watching every aspect of capitalism.

I'm even more in favor of getting rid of the national debt that you are. And besides, governments don't worry (Though they should) about things like profits and losses, they know they can just tax us.


Within my lifetime, unless there is revolution. It is not surprising the US throws so much money into its military when it is so far in debt. It is like a debtor getting even more into debt buying a gun to prevent the repo men from taking his shit back.

I doubt it. Who's going to revolt? I'm happy.

[Ace42]

GMA']O.K. But is the value of ANYTHING static? Is there anything, short of commodities, that can be used to back a currency?

Gold's value may be arbitrary, but I would rather have a solid metal backing up my money than the hollow words of politicians.

Would you rather have your (corrupt) politicians controlling the economy via the treasury, or faceless foreigners (and foreign governments) controlling your economy via their controlling influence on the world's Gold resources?

How is that any different than what we have now? Take care of your money or store it a bank or in a fund.

At present, money is independant of Gold, which means that whether there is a net increase or decrease in paper money is immaterial. If the money is directly tied to the value of Gold, then the amount must be proportional to the quantity of Gold. You cannot have more money without having more Gold. So, as investing does not increase the net quantity of Gold, investing cannot logically make money.

As the treasury cannot know precisely how much money is being lost, it cannot print replacement money accurately. As the Gold is not disappearing, unlike the paper money, eventually there will be no paper money, and piles of Gold which doesn't belong to anyone as they have *no money* to buy it.

Whether you are printing lots of money that is worth an arbitrary amount, or whether you are printing lots of money that is worth the arbitrary value of Gold, it amounts to the same thing.

I doubt it. Who's going to revolt? I'm happy.

What do you think will happen when the people who 0wn 60% of the US want their money back? How many people and businesses can it alienate before people stop giving them the benefit of the doubt?

[EN[i]GMA]

Would you rather have your (corrupt) politicians controlling the economy via the treasury, or faceless foreigners (and foreign governments) controlling your economy via their controlling influence on the world's Gold resources?

A private company printing a private currency backed with gold and silver.



At present, money is independant of Gold, which means that whether there is a net increase or decrease in paper money is immaterial. If the money is directly tied to the value of Gold, then the amount must be proportional to the quantity of Gold. You cannot have more money without having more Gold. So, as investing does not increase the net quantity of Gold, investing cannot logically make money.

That's true, but the alternitave is printing more money which causes inflation which is the bane of economic growth everywhere. Backed currencies are by far the best system.


As the treasury cannot know precisely how much money is being lost, it cannot print replacement money accurately. As the Gold is not disappearing, unlike the paper money, eventually there will be no paper money, and piles of Gold which doesn't belong to anyone as they have *no money* to buy it.

People aren't going to be silent when they lose money. Through the printing and banking system there would be ample oppurtunity to put in money that had been destroyed.


Whether you are printing lots of money that is worth an arbitrary amount, or whether you are printing lots of money that is worth the arbitrary value of Gold, it amounts to the same thing.

If it comes down to arbitrary paper or arbitrary metal, I'll take my metal. You can have the paper. The mere fact that Gold IS something makes it better than a fiat currency.


What do you think will happen when the people who 0wn 60% of the US want their money back? How many people and businesses can it alienate before people stop giving them the benefit of the doubt?

We'll find out. Or we'll elect a President who might do something.

[Ace42]

GMA']A private company printing a private currency backed with gold and silver.

Because private companies are always the model of reliability. And you don't get to choose who controls the world's gold reserves. The Gold and Silver values by their very nature are dependant on the policies of other countries. To be dependant on an international resource is to make it impossible to be independant of international policy.

That's true, but the alternitave is printing more money which causes inflation which is the bane of economic growth everywhere.

Printing more money is unavoidable. The whole principle of economic growth is that you are increasing prosperity. If there is a static amount of money (as there is a finite amount of Gold) then there can be no economic growth, merely the re-distribution of existing wealth. That is recession.

People aren't going to be silent when they lose money. Through the printing and banking system there would be ample oppurtunity to put in money that had been destroyed.

How? Someone says "Oh, I lost my $5 bill in my trouser pocket in the wash... Give me it back!" "Ok, here you go!"

Or will you have to carry a $1 bill receipt with every $1 bill you own to prove you owned it?

Or do they expect every citizen to record every lost unit of currency they have ever lost? "Well, I KNOW I lost precisely $3.45 the other day... So that makes my monthly loss of money up to $10. I'll just go dow nto the bank, fill it in, and then they wil lknow precisely how much money to print to equalise the net currency value with the net gold value!"

Hah, yeah that'd work.

The mere fact that Gold IS something makes it better than a fiat currency.

Paper *is* something. What if no-one wanted Gold anymore? What would you do with your piles and piles of Gold? Use it to make more jewlery than you could ever wear and that no-one really wants? In ancient Egypt, wood was a more valuable material than Gold because trees were harder to come by there. All physical materials only have the value people ascribe to them, Gold is no exception.

The value of Gold is strictly related to factors that apply equally to paper currency. Its rarity is not static. If someone flooded the market with Gold, its value would drop, and your currency would become practically worthless, causing the inflation you so dread with equal certainty. Likewise, its value only corresponds to what people will trade for it (Goods and services) - by tying it to Gold, you are tying it to something people might not want. Currency was traditionally tied to static units (gold, etc) and this system was rendered obsolete because the values of materials vary so much. The whole stock market is based upon this principle.

When not tied to anything, money represents a constant that can be used to measure external values. When tied to Gold, it serves the same purpose but is misleading because it is based on the *illusion* that its value is static. It is not.

We'll find out. Or we'll elect a President who might do something.

Never happen. It is not in a politician's best interest to do that.

[EN[i]GMA]

Because private companies are always the model of reliability. And you don't get to choose who controls the world's gold reserves. The Gold and Silver values by their very nature are dependant on the policies of other countries. To be dependant on an international resource is to make it impossible to be independant of international policy.

You do know the Federal Reserve is actually a private company, not a branch of the government, right? We already have a currency that avoids this. The problem with the Fed is that the Gov has to much of a say in it's running.

And a private currency already exists. It's called the Liberty Dollar and it's fully gold-backed.



Printing more money is unavoidable. The whole principle of economic growth is that you are increasing prosperity. If there is a static amount of money (as there is a finite amount of Gold) then there can be no economic growth, merely the re-distribution of existing wealth. That is recession.

Of course more money would be printed. You can create money without creatin (Much) inflation. A static currency is impossible, it will either inflate or deflate, the key to is to keep it inflating at a very low rate, providing growth while still allowing people to maintain wealth.


How? Someone says "Oh, I lost my $5 bill in my trouser pocket in the wash... Give me it back!" "Ok, here you go!"

Through the same system we have now. People lose their money all the time. You print off money to make up for what was lost, and if your up a few dollars, the inflation is negligable and possibly beneficial.


Or will you have to carry a $1 bill receipt with every $1 bill you own to prove you owned it?

That's all money really is, a reciept showing you own something else, generally gold.


Or do they expect every citizen to record every lost unit of currency they have ever lost? "Well, I KNOW I lost precisely $3.45 the other day... So that makes my monthly loss of money up to $10. I'll just go dow nto the bank, fill it in, and then they wil lknow precisely how much money to print to equalise the net currency value with the net gold value!"

Hah, yeah that'd work.

Why would you do that? You aren't entitled to any money you lost. You lost it.


Paper *is* something. What if no-one wanted Gold anymore? What would you do with your piles and piles of Gold? Use it to make more jewlery than you could ever wear and that no-one really wants? In ancient Egypt, wood was a more valuable material than Gold because trees were harder to come by there. All physical materials only have the value people ascribe to them, Gold is no exception.

Would you rather have a dollar bill or one dollar's worth of gold? Would you rather have a pound of paper or a pound of gold?

Gold may be arbitrary, but it's the best of any commodity that exists. Do you propose anything different?


Tonly corresponds to what people will trade for it he value of Gold is strictly related to factors that apply equally to paper currency. Its rarity is not static. If someone flooded the market with Gold, its value would drop, and your currency would become practically worthless, causing the inflation you so dread with equal certainty. Likewise, its value (Goods and services) - by tying it to Gold, you are tying it to something people might not want. Currency was traditionally tied to static units (gold, etc) and this system was rendered obsolete because the values of materials vary so much. The whole stock market is based upon this principle.

So non-existant money is better than real money because people think so? The dollar is still locked at being worth 57 cents of gold. We've moved off the gold standard only so the Government could inflate our currency and enrich itself.


When not tied to anything, money represents a constant that can be used to measure external values. When tied to Gold, it serves the same purpose but is misleading because it is based on the *illusion* that its value is static. It is not.

Money represents value, the value of gold. True, it isn't completely static but it's more static than anything else.



Never happen. It is not in a politician's best interest to do that.

It's not in their best interest not to get overthrown?


Tell me Ace, what do you propose? Communism? Just get rid of this whole "money" thing and regress back into the stone age?

[Ace42]

GMA']
Of course more money would be printed. You can create money without creatin (Much) inflation.

Not really. Especially if you have a static amount of gold each unit of currency represents. If the rate of production is higher than the rate of destruction, then you have a disparity. All it would take is for everyone to say "oh, I want my share of Gold now please!" turn in their bills, and WHAM, the system is flat.

While that happens at the moment, in a system which purports to equate Gold with the monetary unit that is unnacceptable. Even the smallest hint of this would undermine faith in the currency, and cause an instant economic failure. People do not deal in a currency which has no faith behind it.

A static currency is impossible, it will either inflate or deflate, the key to is to keep it inflating at a very low rate, providing growth while still allowing people to maintain wealth.

Except they cannot maintain wealth, because there *is* a static amount of Gold, and if the money is truly tied to it, it cannot deviate from this net amount. Even at a low rate, the disparity is cumulative.

Through the same system we have now. People lose their money all the time. You print off money to make up for what was lost, and if your up a few dollars, the inflation is negligable and possibly beneficial.

It is negligible because inflation works as a constant across the board. However, if your currency is tied to Gold this is not the case. While people can say "oh, there is more money around so I want more money for the same job" to deal with this, this means they will be able to get more gold for the same amount of work.

That's all money really is, a reciept showing you own something else, generally gold.

Maybe three hundred years ago. Currency is a lot more sophisticated than that now. How many people do you know that do their day to day business in Gold?

Why would you do that? You aren't entitled to any money you lost. You lost it.

Precisely, so no-one will keep track of how much they lose, so the bank will have to produce a surplus of currency to prevent paper money drying up, which means there must be more paper money than there is Gold. This results in massive problems when people try to convert their paper money into Gold and *no-one can do it because there is not enough to go around*

Would you rather have a dollar bill or one dollar's worth of gold? Would you rather have a pound of paper or a pound of gold?

It depends. I don't know a single shop which accepts Gold as tender. If I had one dollar's worth of Gold, I'd starve to death. Or, more likely, would be unable to secure the full dollar's worth of goods due to a large portion of its value being wasted paying for the process of evaluation to verify its worth.

Gold may be arbitrary, but it's the best of any commodity that exists. Do you propose anything different?

"Best commodity that exists" - why, because it is yellow and shines prettily? And no, why would I propose anything different? One arbitrary yardstick is as good (or bad) as any other.

It is still a pointless system.

So non-existant money is better than real money because people think so?

How can your gold-locked currency be *real* if there is more of it in circulation than there is Gold?

The dollar is still locked at being worth 57 cents of gold. We've moved off the gold standard only so the Government could inflate our currency and enrich itself.

It needs that money for tanks and conquest. Gotta spend money to make money.

And if this is such an injustice, why doesn't everyone all use Gold?

Money represents value, the value of gold.

Bullshit. Money represents only what people will do / give for it. That is why countries are moving away from the Gold standard, because the gold standard is no longer relevant. Where people used to want gold jewellery and ornaments, now they want technology and TVs. Gold is an anachronism. Why do you think it is rappers and darts players and not oil-barons that wear so much of it?

Money represents power. The power to field an army, to control technology, to deny resources to people. As such, tying it to Gold is pointless as Gold no longer represents an individual's power. Want proof? How much of Bill Gates' wealth had anything to do whatsoever with control of gold? Or any natural resource?

In an economy driven by ideas and technology, non-usable materials are of the most precarious value. Someone can choose to refuse payment in sparkly metal, but they are much less likely to refuse payment in technology (including anti-virals, agricultural developments, weapons systems, etc) that they sorely need.

True, it isn't completely static but it's more static than anything else.

I'd be very interested to see which comparative graph between the values of Gold vs Silver vs Diamonds vs Platignum vs other assets you used to come up with that conclusion.

It's not in their best interest not to get overthrown?

You overthrow the Government, not the people who retired 20 years ago and have a personal army of bodyguards in their remote innaccesible mansion.

Tell me Ace, what do you propose? Communism? Just get rid of this whole "money" thing and regress back into the stone age?

That is the most backwards comment you have made yet. Firstly, since when has the absence of money automatically equated to a prehistoric society?

There was no "money" in many places throughout the world in places that had iron-age technology. I mean, you ARE several *millenia* out there.

Communism *would* be a solution - in a society where all people have an equal amount of everything, then there is no need for a system to measure social disparity.

Alternatively, leaving money alone to its own devices would be an equally acceptable system. The whole point of money is that it intrinsically is worth the value society attributes to it. Ignoring the value society gives to it and saying "it is worth X units of Gold" is actually regressing society back to before the industrial revolution.

[EN[i]GMA]

Not really. Especially if you have a static amount of gold each unit of currency represents. If the rate of production is higher than the rate of destruction, then you have a disparity. All it would take is for everyone to say "oh, I want my share of Gold now please!" turn in their bills, and WHAM, the system is flat.

That's the point. There would be enough gold for everyone.

Read this before we go on please: http://www.libertydollar.org/html/moneyfaq.asp


While that happens at the moment, in a system which purports to equate Gold with the monetary unit that is unnacceptable. Even the smallest hint of this would undermine faith in the currency, and cause an instant economic failure. People do not deal in a currency which has no faith behind it.

So faith, not actual wealth, makes a currency? As far as I know, faith has absolutely no real world value. Many people would sell you bread for gold, few would sell bread for faith.


Except they cannot maintain wealth, because there *is* a static amount of Gold, and if the money is truly tied to it, it cannot deviate from this net amount. Even at a low rate, the disparity is cumulative.

That's the point. That there is a static amount of gold meaning it has a static value.


It is negligible because inflation works as a constant across the board. However, if your currency is tied to Gold this is not the case. While people can say "oh, there is more money around so I want more money for the same job" to deal with this, this means they will be able to get more gold for the same amount of work.

That's true, but the inflation rate would be so low, it would be a non-issue.


Maybe three hundred years ago. Currency is a lot more sophisticated than that now. How many people do you know that do their day to day business in Gold?

How is currency more sophisticated? It serves the same purpose, to represtent wealth. And you can't do your day to day business in gold, the FDR administration made it illegal to use pure gold as a currency.


Precisely, so no-one will keep track of how much they lose, so the bank will have to produce a surplus of currency to prevent paper money drying up, which means there must be more paper money than there is Gold. This results in massive problems when people try to convert their paper money into Gold and *no-one can do it because there is not enough to go around*

Only if every single person in the U.S. tried to do it at the exact same time. In the current system, only 10% of people have to withdraw all of their money before the system fails. Which is more likely to happen, 10% of the people take their wealth out of the banks or well over 90%?


It depends. I don't know a single shop which accepts Gold as tender. If I had one dollar's worth of Gold, I'd starve to death. Or, more likely, would be unable to secure the full dollar's worth of goods due to a large portion of its value being wasted paying for the process of evaluation to verify its worth.

I think most people would accept gold. Gold is almost universally accepted as being valuable. Paper isn't.


"Best commodity that exists" - why, because it is yellow and shines prettily? And no, why would I propose anything different? One arbitrary yardstick is as good (or bad) as any other.

So you have no actual solutions? Criticism is good but dogmatically attacking something without proposing an alternative leads nowhere.

And gold is generally accpeted as the best arbitrary yardstick because it always has been.


It is still a pointless system.

Currency isn't pointless unless you prefer to pay for your new car with 36 chickens, a barrel of corn and 12 loaves of bread.


How can your gold-locked currency be *real* if there is more of it in circulation than there is Gold?

There wouldn't be (At least more than a few percentage points to make up for lost bills). The level of discrepency would be so low, it would be negligable.


It needs that money for tanks and conquest. Gotta spend money to make money.

The company backing the Liberty Dollar has no tanks.


And if this is such an injustice, why doesn't everyone all use Gold?

Because it's easier to carry around paper than it is actual gold. Paper is easier to store, use and carry.

But paper is useless without something to back it up, lest I be a very rich man, what with all the trees surrounding me.


Bullshit. Money represents only what people will do / give for it. That is why countries are moving away from the Gold standard, because the gold standard is no longer relevant. Where people used to want gold jewellery and ornaments, now they want technology and TVs. Gold is an anachronism. Why do you think it is rappers and darts players and not oil-barons that wear so much of it?

The gold standard isn't relevant because governments want to move away from it. Fiat currencies allow them to juice the money supply and enrich themselves.


Money represents power. The power to field an army, to control technology, to deny resources to people. As such, tying it to Gold is pointless as Gold no longer represents an individual's power. Want proof? How much of Bill Gates' wealth had anything to do whatsoever with control of gold? Or any natural resource?

Bill Gate's dollars SHOULD be backed with gold as dollars were originally meant to represent a certain weight of gold.


In an economy driven by ideas and technology, non-usable materials are of the most precarious value. Someone can choose to refuse payment in sparkly metal, but they are much less likely to refuse payment in technology (including anti-virals, agricultural developments, weapons systems, etc) that they sorely need.

Buy what you need using the gold. This isn't a bartering system (Though you're more than welcome to).


I'd be very interested to see which comparative graph between the values of Gold vs Silver vs Diamonds vs Platignum vs other assets you used to come up with that conclusion.

Gold is far more valuable than silver, diamonds aren't viable as a currency and platinum is to rare and to useful to be locked away in banks.


You overthrow the Government, not the people who retired 20 years ago and have a personal army of bodyguards in their remote innaccesible mansion.


Bodyguards can revolt as well.


That is the most backwards comment you have made yet. Firstly, since when has the absence of money automatically equated to a prehistoric society?

There was no "money" in many places throughout the world in places that had iron-age technology. I mean, you ARE several *millenia* out there.

Communism *would* be a solution - in a society where all people have an equal amount of everything, then there is no need for a system to measure social disparity.

Alternatively, leaving money alone to its own devices would be an equally acceptable system. The whole point of money is that it intrinsically is worth the value society attributes to it. Ignoring the value society gives to it and saying "it is worth X units of Gold" is actually regressing society back to before the industrial revolution.


Oh, my mistake, iron age.

I think we'll try to avoid to communism as an option, it's track record isn't the best.

Leaving money to it's own devices? Great. Give me a hard currency in the hands of a private company like the Liberty Dollar, do away with Federal Reserve notes (Or at least gold back them) and I'm happy.

[Ace42]

GMA']That's the point. There would be enough gold for everyone.

Urm, but there wouldn't. The population of the country is not static, the net quantity of Gold is. Thus, there cannot be "enough gold for everyone" if the population doubles.

So faith, not actual wealth, makes a currency? As far as I know, faith has absolutely no real world value. Many people would sell you bread for gold, few would sell bread for faith.

Gold only has the real world value *WE* ascribe to it. Like I said, in Egypt, wood was more valuable than Gold. If everyone today said "well, we don't NEED Gold, it isn't particularly useful" it would become worthless instantly. If no-one wanted it, you could have all the Gold in the world, it would still be useless to you.

That's the point. That there is a static amount of gold meaning it has a static value.

Think about that for 30 seconds and say that again. 30 grams is a static amount of Gold. Its value goes up and down.

That's true, but the inflation rate would be so low, it would be a non-issue.

If it is cumulative, it would not stay low. That is the whole point of it being cumulative. Eventually it would be high.

How is currency more sophisticated? It serves the same purpose, to represtent wealth. And you can't do your day to day business in gold, the FDR administration made it illegal to use pure gold as a currency.

"How is currency more sophisticated" - try using your pile of gold nuggets to buy a CD in Japan over the internet.

Only if every single person in the U.S. tried to do it at the exact same time. In the current system, only 10% of people have to withdraw all of their money before the system fails. Which is more likely to happen, 10% of the people take their wealth out of the banks or well over 90%?

Why not use actual figures, instead of pulling them out of the air?

I think most people would accept gold. Gold is almost universally accepted as being valuable. Paper isn't.

Try going into a corner shop and trying to buy something with Gold. You'd not get very far here, I can tell you. I don't think Amazon accepts gold either, last time I checked. However, paper notes will get you prompt service. And unlike Gold, there is no haggling, nor do you lose particulates of money caused by shaving it to give change.

So you have no actual solutions? Criticism is good but dogmatically attacking something without proposing an alternative leads nowhere.

An alternative to what? Why do I need to propose an alternative to a system that is clearly inferior to the one in place?

And gold is generally accpeted as the best arbitrary yardstick because it always has been.

And before that it was chickens. Actually Gold was used as a yardstick because of its chemical properties vs its abundance. This is no longer relevant to our societies. Gold was a yardstick before copyright laws, before banks, before credit cards. Banks used Gold because they had to transitionally, not because it was a "good system." The Bank of England stopped trading in Gold because *NO-ONE EVER NEEDED TO USE IT*

The whole concept is redundant, which is precisely why no-one uses it anymore.

Currency isn't pointless unless you prefer to pay for your new car with 36 chickens, a barrel of corn and 12 loaves of bread.

And a nuggest of Gold makes so much more sense. A barter system is pointless, unless you are bartering shiny chunks of metal? Yah.

There wouldn't be (At least more than a few percentage points to make up for lost bills). The level of discrepency would be so low, it would be negligable.

Well, I am glad that you base that on something as concrete as *supposition you pulled out of your ass*

Why not have a hunt for the annual estimates for lost dollar bills, and check how it corresponds to the printed bills entering circulation.

The company backing the Liberty Dollar has no tanks.

The company backing the liberty dollar is full of cranks who no doubt have a controlling interest in the Gold market. I am still amused you used that site as a justification for your argument. That is as bad as the sites Ill uses to prove creationism.

Because it's easier to carry around paper than it is actual gold. Paper is easier to store, use and carry.

But paper is useless without something to back it up, lest I be a very rich man, what with all the trees surrounding me.

Hah, bullshit. You aren't even thinking now. Nothing backs up my currency. When I buy something with a paper note, I don't have to PROVE I have Gold that is being transferred. If they said "How do I know I'll be able to get Gold for this" - I (like EVERY OTHER PERSON IN THE COUNTRY) would have to say "well, to be honest, I can't guarantee it"

Well, we have trees here, I'm not rich. Oh, I guess that is because you are talking absolute bollocks. Money is not just "paper" as you know. Merely having trees does not make you a master counterfeiter.

The gold standard isn't relevant because governments want to move away from it. Fiat currencies allow them to juice the money supply and enrich themselves.

It also allows global trade to occur and fiscal independance from foreign powers. If your currency was linked to Gold, then a shrewd foreign power could manipulate the exchange of Gold stocks to impoverish the US. They could either saturate the country with their Gold, thus making your currency practically worthless, or they could buy up all your gold, leaving you without any for your country to use as a yardstick.

Bill Gate's dollars SHOULD be backed with gold as dollars were originally meant to represent a certain weight of gold.

If you introduced a gold standard today, he could simply cash in all his wealth, and sell off your whole country's Gold reserves to every other nation in the world. No more Gold, no more economy.

Buy what you need using the gold. This isn't a bartering system (Though you're more than welcome to).

It is a bartering system, as you cannot trade Gold as easily as money. The purity and quantity both have to be taken accurately into account. This is a specialist procedure which takes time and effort, and CAN'T BE DONE OVER THE INTERNET. It can only be done in person by people qualified. You cannot go into a shop and have it give a dozen different quantities and the corresponding weight in karats.

If you do not intend to exchange the paper currency to the Gold, then tying it to Gold is irrelevant. Unless there is free interchange between the two, the two *will* sever. The economic pressures on the two materials are different, and as such they will move in different directions.

Gold is far more valuable than silver, diamonds aren't viable as a currency and platinum is to rare and to useful to be locked away in banks.

Hah. Why aren't diamonds viable? Again you just state your opinion as fact. And your argument for Gold seems to be its rarity (its sole valuable characteristic) and its uselessness.

Well, let's see. Money is as rare as you make it, and has no other purpose other than currency, so it doesn't matter if it sits in a bank vault.

By your criteria, money is fine as it is.

Bodyguards can revolt as well.

Yeah, because they'd all simultaneously do themselves out of a well paid job to attack a politician that no longer has any power, leaving the current crop untouched.

I think we'll try to avoid to communism as an option, it's track record isn't the best.

So, which capitalist countries do you think enshrines a good track record? Now, tell me, do they have a fiat currency, or no?

Answers on a postcard.

Leaving money to it's own devices? Great.

I thought you were for the free-market? Funny how you have stopped trusting it now, and want to tie it down.

Give me a hard currency in the hands of a private company like the Liberty Dollar, do away with Federal Reserve notes (Or at least gold back them) and I'm happy.

Until there is no Gold left, then your "Hard currency" has liquified in your hands.

[ASsman]

This thread has officially inflated, and is now worthless.

[EN[i]GMA]

Well done Ace, argument conceded.

Fiat currencies are necesary to deal with increasingly large and complex economies.

[yeahwho]

I think that Bush's idea to privatize and let us invest in the market will greatly simplify social security.

President wants retirees to starting rolling the dice

The premise of President Bush's scheme to privatize a portion of Social Security (which may become known as the Stockbrokers Relief Act) is that people will earn a higher return than Social Security funds presently get if they invest some of those funds in the stock market. That is a gamble, and it may not be a very good one.

Investments by the large baby boomer generation have helped buoy the stock market in recent years, but according to market analysis "once the oldest boomers turn 65 in 2011, the much smaller generation following in their footsteps could lead to a reversal of the trend."

We may drown in debt on that rainy day. I sure hope we see no kneejerk solutions, like we have the past 4 years.

[Echewta]

So, when the government lets you invest your social security money, do you think the goverment isn't going to keep its hands in it? How much is it going to cost to have them manage the money now? Outsourse it to who? Get rid of SS all together?

We love to continue to cry about welfare to the poor and SS but meanwhile the corporate welfare runs crazy and they can't even do an audit on the defense department.

Please.

[EN[i]GMA]

So, when the government lets you invest your social security money, do you think the goverment isn't going to keep its hands in it? How much is it going to cost to have them manage the money now? Outsourse it to who? Get rid of SS all together?

We love to continue to cry about welfare to the poor and SS but meanwhile the corporate welfare runs crazy and they can't even do an audit on the defense department.

Please.

End corporate welfare as well. It's nothing but mercantalism.

[EN[i]GMA]

I think that Bush's idea to privatize and let us invest in the market will greatly simplify social security.

President wants retirees to starting rolling the dice

The premise of President Bush's scheme to privatize a portion of Social Security (which may become known as the Stockbrokers Relief Act) is that people will earn a higher return than Social Security funds presently get if they invest some of those funds in the stock market. That is a gamble, and it may not be a very good one.

Investments by the large baby boomer generation have helped buoy the stock market in recent years, but according to market analysis "once the oldest boomers turn 65 in 2011, the much smaller generation following in their footsteps could lead to a reversal of the trend."

We may drown in debt on that rainy day. I sure hope we see no kneejerk solutions, like we have the past 4 years.


You don't have to invest in stocks. You can invest in commodities, bonds, or a differnt type of fund.

And ON AVERAGE the stock market returns you over 7.5% comared to 1 or 2 percent with SS.

There is no reason to keep SS like it is, other than to finance more of the government's follies.


5. I don't know how to invest. How would I manage under an individual account system?

You don't have to understand financial markets or be an experienced investor to benefit from individual accounts. The history of 401(k) plans, IRAs, and mutual funds has proven that experienced account managers can help workers manage their accounts. The relationship between a worker and an account manager is like that between Patient Jane and her doctor. Patient Jane doesn't have to understand the intricacies of the flu to choose a good doctor-understanding the flu is the doctor's job. A good doctor, like a good account manager, will help Jane pursue the best course of action. Finally, as with IRAs or 401(k) accounts, personal accounts can be structured to keep out scam artists and restrict investment strategies that are too risky.

[yeahwho]

GMA']You don't have to invest in stocks. You can invest in commodities, bonds, or a differnt type of fund.

And ON AVERAGE the stock market returns you over 7.5% comared to 1 or 2 percent with SS.

There is no reason to keep SS like it is, other than to finance more of the government's follies.

I understand where your coming from and millions of Americans want/demand reform. First accountability for what is there and what has become of SS should take place. I'm not alone when I think of how frightening the current administration has been in handling complex issues.

All of Bush's appointees for this second go around are on the same page, he has yes people surrounding him, even more than the first time. I'm not expecting any sort of serious audit to happen.

Saying you want to invest and control your SS funds is all fine and dandy, but you still will have the fed as a middleman. That actually gives the feds 2 ways to handle what they so lovingly refer to as our "Social Security."

[ASsman]

My brain can't accept that GWB might be doing something "good".