The Political Thread

[The Legendary Shark]

Oook ook.

[The Legendary Shark]

On April 7th this year, the Arizona State Legislature passed a bill defining gold and silver as legal tender and encouraging its use as currency. This might not sound like a big deal, but it is.

Gold and silver are finite resources, unlike paper money which can be printed ad-infinitum. It is the constant creation of money (through printing, accountancy and debt creation) which drives inflation and rising prices. The more "money" there is, the more expensive things become. Home-owners are particularly blind to this, in my experience. "I bought my house for £20,000," they say, "and now it's worth "£50,000!" Well no - it's not your house that's worth more, it's your money that's worth less. Gold and silver doesn't have this problem as it largely keeps its value at a fairly stable level (except when compared to paper money, of course - where the same home-owners' paradox applies).

So - good on Arizona.

Except that, four days ago, Arizona Governor Doug Ducey vetoed the bill. Democracy, eh? Sounds like anything but to me...

[Jim_Campbell]

Gold and silver are finite resources, unlike paper money which can be printed ad-infinitum. It is the constant creation of money (through printing, accountancy and debt creation) which drives inflation and rising prices.

Because, of course, prices never rose in the era when currencies were backed by physical gold reserves. And why, despite vast quantities of money having created over the last few years, inflation is running at historic lows.

If you start using gold as currency, who agrees its value? Who arbitrates over whether it's been weighed accurately in the course of offering it in a transaction? Who guarantees its purity, so its value can be assessed with confidence for each transaction?

Perhaps it would be better if some organisation turned gold into some kind of units of agreed size and quality, and thus at least notional value. But, gosh, gold is neither particularly durable (in as much it's very malleable, a disadvantage if you want it exist as recognisable tokens) and very heavy. Perhaps some kind of lighter proxy might be needed... a paper note to represent the value of the gold tokens...

Cheers

Jim

[Hawkmumbler]

Also it's not like gold and silver can be easily gathered up by the rich and powerful, who probably already have several hundred thousand times the amount you or I have and ready access to much more, leading to an even greater gulf in class devide and eventual mass poverty...like, all the things modern currency has made strides to get away from.

[GordonR]

What I hear from you--

- general and constant antipathy to the idea of centralised authority
- a few weeks ago, you wanted to bring back legalised slavery as a criminal punishment
- now you want us all to carry purses of silver and gold ducats instead of paper money and credit cards

Would it be fair to say that what you actually seem to want is a return to some kind of Dark Ages society?

[The Legendary Shark]

Exactly, Jim.

Bank notes were originally backed by and based on gold and silver. These metals kept the value of the notes, and the amount of notes that could be issued, under control. When it became apparent in the 1970s that the number of bank notes in circulation far outweighed the amount of gold and silver supposedly backing and pinning them, the United States abandoned the Gold Standard. The dollar then became an essentially "floating currency" (i.e., untethered to anything) and, as part of the Bretton Woods agreement after WWII many other global currencies had been tied to the dollar in order to aid with reconstruction, this had the knock-on effect of untethering the rest of the world's currencies as well.

Of course, in order to counter this potentially catastrophic untethering, the U.S. hit upon the idea of the petrodollar instead (basically tethering the value of the dollar to oil).

You are absolutely right in what you say, that a bank note representing the value of gold and/or silver would be a good thing. A very good thing, in fact. Much better than the essentially valueless promissory notes we use today.

As to inflation, the fact is that it's money creation which causes it. Historically, prices were set by free market supply and demand and yes, they did fluctuate both up and down but not in a uniform manner. For example, in winter the price of wool might go up to reflect immediate demand for warm clothing whilst it would fall again in summer. Conversely, the price of silk might go up in summer and down in winter. This kind of thing was the original meaning of the term "business cycle" - a term which has been recently appropriated to the entirely artificial "boom and bust" cycle, which is caused by banking and governmental attempts to regulate and interfere with the natural economy.

[The Legendary Shark]

Would it be fair to say that what you actually seem to want is a return to some kind of Dark Ages society?

No.

What I want is for society, using the knowledge, wisdom and technology we've amassed over the last couple of thousand years, to move forward out of this neo-serfdom we currently find ourselves mired in.

[Jim_Campbell]

Exactly, Jim.

Bank notes were originally backed by and based on gold and silver. These metals kept the value of the notes, and the amount of notes that could be issued, under control.

Not really exactly, because that wasn't my point. My point was that inflation also existed when currencies were backed by gold reserves. The notion that if you wanted to have (arbitrary number for easy maths) £1bn in circulation in the economy you had to have £1bn worth of physical gold in a vault somewhere has no intrinsic benefits over the electronic system, certainly not the magical properties you ascribe.

The value of gold is also notional and abstract, and, crucially, subject to fluctuations. What happens if the value of gold on the world market tanks by 20% in a short time? Are you supposed to withdraw £200M from the economy? How do you propose to do that? Should the government buy more gold to bring the value of its reserves back up to £1bn? Note that either of these options has immediate and distinct economic consequences that are entirely outside the control of government and entirely unrelated to the health of the economy, or how it's being managed.

When does a pound stop being a pound? A wealthy citizen has £100M in UK banks. He moves the money offshore, but continues to be a UK citizen, paying UK tax. Do you remove £100M from the money supply to reflect the fact that this cash has been placed beyond economic use? Do you insist that wherever he moves it to also has sufficient gold reserves to underwrite that cash? Do you put the £100M back into the economy, deciding that now it's offshore they're not pounds any more? What happens if he moves that money back?

The problem, it seems to me, is that you have decided that the thing wrong with money is that it's an abstraction and if, somehow, we could make it 'real' many problems would be solved. But you can't. Money is an abstraction, it's fundamental to its nature, whether it's a five pound note, a gold ducat or a massive stone in your front garden. The point at which you stop being solely responsible for your own food, shelter, health and warmth, the point at which you abandon direct barter as the only means of exchange, you require arbitrary tokens of agreed value. That's money, and the 'agreed value' bit means that they will always be abstract.

Cheers

Jim

[Dandontdare]

"I bought my house for £20,000," they say, "and now it's worth "£50,000!" Well no - it's not your house that's worth more, it's your money that's worth less.

If it worked like that, then prices would rise uniformly for all goods - why is my money worth significantly less when buying a house, but may be worth more when buying consumer electrical goods?

[The Legendary Shark]

Yes, of course inflation has always existed - even when we used shiny beads. If I produce Product X and it's popular, I can inflate the price to the level consumers are willing to pay. If Product X is unpopular, I can deflate the price to one consumers find amenable. That's free market inflation/deflation based upon supply and demand which type of inflation/deflation still exists today but is a minor player in modern inflation.

Having £1bn of gold reserves to cover £1bn of notes in circulation has one great advantage over the modern electronic system - no bank runs. Electronic and fiat money can be rendered worthless or even non-existent in a heartbeat - gold and silver (and other metals or commodities) cannot. Like all matter, gold can neither be created nor destroyed. It can be dug up and misplaced, sure, but it cannot be breathed into and out of existence at the stroke of a pen or the push of a button. It is the current electronic system which is more akin to magic than the tangible gold (etc.) system.

Technically, the value of gold cannot fluctuate - it is the value of commodities which fluctuate in relation to gold - although you are correct to say that the value of gold is abstract. (All values are abstract and subjective (except fiat currency, the value of which is kept objective by central banking and government manipulation). Take the cost of one thing we both know and love, the weekly Prog. To you, the Prog is worth more than the £2.55 you pay for it but to your newsagent your £2.55 is worth more than the shelf space the Prog takes up. If the price rises, you have to decide whether it's still worth the cost - but that's your decision alone. If many people stop buying the Prog, the newsagent will cease stocking it. You make a subjective value judgement. If the government were to objectify the price of the Prog (as they do with fiat currency) they might make it £1.55, which is good for you but bad for the newsagent, or £3.55, which is bad for you and the newsagent.) Once governments and central banks objectify the value of gold (or currency of any kind), they take away your choice - robbing you of the power to ask yourself "how much of my gold/currency is Product X worth to me?"

In the unlikely event that the value of gold falls by 20%, driven by, say, the discovery of a fantastically rich new gold mine to add to the world's supply, it would not mean eliminating 20% of the notes in circulation. Each note would be worth 20% less. Even in this event, it would not mean that you'd automatically be able to buy less with it - prices and costs would fall in tandem otherwise businesses would fail. Inflation prevents this basic free market mechanism from working as it should because, even if inflation falls, all that means is prices are still rising, just more slowly. Economics, at its most basic, is simply the science of human interactions - if you do this or give this to me, I'll do that or give that to you. It's only when governments and central banks step into that simple equation that it becomes expensive, confusing and counter-productive. For a start, you've got to start paying the wages of the middle-men and bureaucrats and their machinery through coercive taxes.

Your example of wealthy citizens moving £100 million offshore poses no problems. Indeed, it makes no difference whether their money (in a gold-backed economy) is off or on shore - it's still temporarily out of wider circulation and all it means is that the value of the rest of the money in circulation rises slightly to cover the gap, with the concomitant slight rise in the cost of goods and services. The money itself is the proof of extant gold and has no need to be further underwritten.

Money is an abstraction but that's not the problem. Money will always be an abstraction and, while we continue to exist in this primitive state, we will continue to rely on it to run our primitive economic system. The problem is that it has become an abstraction of an abstraction and is no longer an abstraction of anything solid or real. We don't have to base our money on anything - Bitcoin proves that - but we do need to have faith in it. The value of any money all boils down to faith in the end. The question is, do you want to place that faith in something real or in something somebody else can just make up out of thin air?

DDD - A house and a washing machine (for example) both continue to rise in "price" but at different levels and with different drivers. Whilst constructing a washing machine may include certain technologies and materials, and outsourcing to poorer countries, which make the machine cheaper to produce, houses are built on existing land (which also continues to rise in price as it becomes more scarce). There is also the question of taxes, fees, licenses, protectionism and so forth - of which a house incurs more than a washing machine. Each item consists of many sub-items, some have more (like the house) and some have fewer (like the washing machine), it is the addition of all these sub-items which make some things seem like they are getting more expensive faster than others and results in uneven price increases across the board.

[TordelBack]

This nonsense with the BBC's recipe archive (of which I am a regular and happy user). Back when I was involved with unions on a daily basis we had a name for this too-common kind of shite: constructive dismissal.

Be a man, David, just give the BBC its notice and stop pissing around with this 'you're too elitist, no, now too populist, wait, wait, now too narrow, ah look, now you're too broad...'.  Waiting until David Attenborough dies* before turning out the lights might have a certain symmetry to it, but making their job untenable is a vile passive-aggressive tactic best suited to spineless managers, and a rotten way to treat the world's greatest broadcasting organisation. Give it a swift death, not this protracted decline.



*Darwin and/or all the gods of creation forbid.

[IndigoPrime]

And no prizes for guess who benefits from this turn of events.

[IAMTHESYSTEM]

The slow gutting of the Beeb begins.

[Professor Bear]

To be fair, the Beeb has worked hard to make this happen through its political coverage.

[COMMANDO FORCES]

The BBC in partnership with ITV is now thinking of going head to head with Netflix, Amazon, etc... WHY?