Drake

And it is my understanding that the Bretton Woods agreement was done in 1971 because Asian and other lenders were asking for debt to be repaid in gold in 71. We couldnt do it and keep the Vietnam War going.

We unhooked the dollar completely from gold and it allowed us to finance more war with no actual cost.

What is your understanding of why Bretton Woods happened in 71 yast?

guerilla

The end of Bretton Woods was basically a dollar default. Nixon closed the gold window, because they had printed more dollars (which functioned as gold reserve receipts) than there was gold in order to finance Johnson's Guns and Butter policies of the 60s (Vietnam War, War on Poverty).

The previous dollar default iirc was in 1933, when FDR confiscated all of the gold bullion held by private citizens. Gold was available in exchange at the bank for $20 an ounce. When FDR allowed gold back into the banks later, it was set at $35 an ounce. So the dollar was devalued by 43% just by the government resetting the rate.

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erect or anyone else interested, if you are still reading this, the Mises Institute has put out a Bailout Reader with links to lots of articles and information.

The Bailout Reader - Mises.org - Mises Institute

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From the Volokh blog,

Finally, the best line of the night last night (that I saw) went to Congressman Ron Kind who said that phone calls to his office were "running 50-50,

50% 'No' and 50% 'Hell No.'"

And

And Larry White adds : "Capitalism in which AIG never closes down is like American Idol in which Sanjaya never goes home."

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erect

2 questions

1> What's wrong with a silver or other "hard asset" dollar base system

2> What's the likelihood that the gold is still in Fort Knox after what FDR did?

Yea, I'm still here. Will be checking that link out over the weekend.

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-Bill-

Washington Mutual bit it
I wonder who is next?

These banks keep folding out... I wonder how long the FDIC is going to wait to update their online watchlist...
It has got to be growing by the day right now.

Washington mutual bailout

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guerilla

Nothing from the perspective of the citizen. From the perspective of politicians and special interests, it makes it very hard to transfer wealth from main street to wall street, or for government to conduct wars, build welfare states or deficit spend in general. In an MP3 I linked to (Peter Schiff) he explains that hard money is like a government chaperone. They have to tax to spend. They can't just inflate the money supply if it is tied to a commodity, because hanky panky risks a default. When FDR defaulted, the Depression carried on another 4 or 5 years. When Nixon defaulted, you had the stagflation of the 70s and early 80s. Eventually these dollar bubbles have to burst and when they do, you get bad economic times.

It also means the banks can't cheat either. They can't leverage on leverage on leverage. They have to be accountable to their depositors or they will go bust.

Not good. I believe most of it is classified as "deep reserve" but is assumed to be loaned out to foreign governments (off the books).

I know that any attempt to audit the physical gold is blocked. Ron Paul has been trying since the 80s to get one done.

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erect

Which basically gets rid of fractional lending which, from my understanding, is a big part of what got us into all this shit in the first place ... hmmmm

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guerilla

Fractional Reserve banking is institutionalized counterfeit.

If I go to the bank of erect, deposit $20. Then Drake comes along and borrows $20, and I show up the next day to get my $20, you give it back.

So when I deposited my $20, it allowed the bank to make $20 new dollars to loan to the Drake. The allowed ratio is much higher than 1:1.

So then the Drake deposits his loan from Bank of erect into Bank of Nacho. And the Bank of Nacho creates a new $20 to loan to xmcp123.

And pretty soon, that original $20, can create 10s of thousands of dollars.

That is fractional reserve banking, and that is a scam. If a private citizen lent out money he didn't have, that would be called fraud.

What's the alternative? Full Reserve banking with time deposits. If you put your capital into the bank, you can't get it back for 90 days or 18 months or whatever. This allows the bank to loan out your capital without duplication. You would earn interest on this. You're allowing the bank to manage your capital and make loan investments from it, in return for the bank getting a cut.

This of course would spawn the "warehouse bank" which is a bank which you actually pay to store and transfer your money (for electronic purchases). In return for the service of storing, securing and transferring, you might pay 0.25% per annum or something plus a per transaction fee. They would perform services like check cashing, issuing check books, debit cards, wire transfer etc etc.

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Unarmed Gunman

Having our money backed by a hard asset such as gold or silver does not by definition disallow fractional reserve banking. The only way that would be true is if we actually used the hard asset as our day-to-day currency. If we still used a paper money backed by gold, nothing would prevent the banks from loaning out more than they have on deposit.

Fractional reserve banking counts on two things:

1 - People with excess wealth will need somewhere to store it long term, and will not remove their deposits en masse.

2 - People that borrow money will pay it back in a timely fashion.

The formulas used as the backbone of fractional banking factor these things in to determine how much can be lent out without causing a run on the bank, and at what interest rates for the bank to remain profitable.

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guerilla

Which is why FDR confiscated bullion from private citizens.

Obviously a hard money system (commodity money) is only part of the solution. Which is why gold bugs and the Money Masters folks don't see the whole picture.

FRB is legal counterfeit. Until this is stopped, the problems will reappear.

Ideally, there is free market money. There is no fixed commodity backing currency. If someone tries to manipulate or confiscate a supply, people can just start using a different good. In other words, repeal legal tender laws.

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-Bill-

I seen this on my lens' adsense block earlier...

No Wall Street Bailout |

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Unarmed Gunman

Whoa - you're opening up a big can of worms with that.

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snavr

The issue here is math ... global crashes (should) happen about every 60 years, and have since the rise and fall of the Roman Empire.

And it boils down to usury (interest paid on borrowed assets). Over time usury builds up speculative capital which starts to far outweigh the value of real capital. But it can never be tied to any real goods or work performed. It's just a cost paid for borrowing an asset. Usury creates nothing ... but hey, nobody is going to lend shit out for nothing ... so usury is never going away.

That's why it's a millenia old problem. It's a mathematical certainty.

All the speculative capital (wealth on paper) that builds up over time isn't real. It has to crash eventually. The system has to reset. And then of course it'll start all over again.

And it doesn't matter if you have a gold standard, tight regulation, no regulation ... none of that shit matters. People will never lend money for free ... seriously, why the fuck would you? ... so you have interest. And interest creates wealth out of nothing.

It creates a bubble full of nothing. The bubble pops. End of equation. It's just math.

These idiots running around trying to save the financial system for the last 20 years are on the wrong side of fundamental math. They're just creating a fundamental need for artificial growth (bigger bubbles) each time.

Enigmabomb

Interesting stuff on FRB. I had no idea that's how it worked.

That's collosally fucked up if they don't follow the strictest of guidelines, which as it seems they dont.

enigmabomb

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Dan Grossman

Wachovia, which is unfortunately one of my banks... they're doing merger talks over the weekend to see if someone will save them by market open.

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guerilla

I don't think so.

It's a system that is setup to fail, reset, fail, reset. Each time, the most wealthy get to snatch up property at a discount, and confiscate wealth through government.

There is another option. Instead of a fixed rate of return, you make an investment and profit from it. You buy into a company, and you receive dividends on your capital investment. If the company does well, you do well. If the company does poorly, you don't get a return.

That is how it was done in the day.

The only reason we don't do it that way anymore and conform to the interest model instead, is that the banks issue all of the credit in the economy. They are allowed to "print" money out of thin air, and no private capital holder can compete with the superpower of legal counterfeit.

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Unarmed Gunman

Guerilla, you've spoken eloquently on several economic issues - but you haven't thought out the repeal of legal tender. Unless you think we should run off of a barter economy alone? You can't have millions of people deciding what they think is legal tender. You bring the economy to a halt. You're driving out west, what do you pay for gas with? Merchant doesn't accept that - now what? You need to stay at a hotel, what do you pay with?

Store owners don't like the way you look, so they won't accept your money, etc. Think it through. Everybody has to agree on what has value in order for an economic system to work. Show me a sufficiently large scale economic system in existence today that proves otherwise....

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guerilla

That's not the only alternative.

Quote:

Originally Posted by Unarmed Gunman You can't have millions of people deciding what they think is the correct word processor. You bring the economy to a halt.

Quote:

Originally Posted by Unarmed Gunman You can't have millions of people deciding what they think is the best job. You bring the economy to a halt.

Quote:

Originally Posted by Unarmed Gunman You can't have millions of people deciding what they think is tasty. You bring the economy to a halt.

Quote:

Originally Posted by Unarmed Gunman You can't have millions of people deciding who they think they love. You bring the society to a halt.

Quote:

Originally Posted by Unarmed Gunman You can't have millions of people deciding what they think God is. You bring the society to a halt.

Quote:

Originally Posted by Unarmed Gunman You can't have millions of people deciding which channel to watch. You would bring the entertainment industry to a halt.

Quote:

Originally Posted by Unarmed Gunman You can't have billions of people deciding which currency to trade in. You would bring the global economy to a halt.

Actually, competition is good. It's always good. You get the most transparency, the most freedom, the most options, the most security and the most efficiency.

There are competing currencies in the world. There are competing credit cards and other forms of payment.

I don't think you can have a handful of economic and political elites deciding what is legal tender. They will use it to cornhole the masses.

But that aside, if you believe in competition (which I do) why would you want a monopoly in money? Or in government? Or in religion? Or in politics? Or in anything?

Presumably a hotel owner services people from out of town, not the locals, I am quite sure he would be willing to recognize different forms of payment. Again, it doesn't have to not be money. It could be Citibank bucks. Unarmed Gunman Rubles. Wickedfire Dollars. Or maybe he could accept your credit/debit card, and the transaction would be automatically converted by Visa/Amex/MC into the currency of his choice.

I worked in stores. We took money from anyone with money. Hoes, crack heads, cops, blacks, whites, hispanics, male, female, old, young etc. We weren't the MFing Salvation Army. We were there to make a profit.

I and a great many others have.

You're overcomplicating it. Do it like foreign exchange. We have the technology.

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-Bill-

Wachovia Bailout

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Dan Grossman

Is this your page? You've been writing dates as 10/xx/2008... that's October, not September. Wachovia has something like $100 billion in mortgage assets and $400 billion in deposits... if the bailout bill is ready today, which it looks like it is, then they may not need help tomorrow after all.

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-Bill-

Ahahaha Noted and fixed

Thanks much Dan

We'll see about the bailout plan.
I seriously believe this is a "super shot term" fix to the long term problem. Lending will be right back where it is now, and we will be in the shit again within 3 years max.

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niche

A little uneasy at this bale out deal thing
it's just robbing peter to pay paul.
The amount of tax payers money that is being proposed did not just appear from nowhere. It's not money that has been lying idle somewhere, waiting for this one moment. it is money that should be going to other things egg roads, security, health etc

Yes you can bail out the banking institutions but at what cost.
that's what I,m worried about!

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Unarmed Gunman

Then you're missing the point. You took money from them. You didn't take Newports. You didn't take a goat. You took money, because (a) it's legal tender, so you were required by law to accept it (b) you knew that you could then take it to a different store and use it to buy things because it was legal tender, and they were required to accept it as well.

And as far as the world being the "sufficiently large system" that proves otherwise, you're forgetting that all of the currencies are also legal tender, so your point is lost.

Again, show a sufficiently large economic system being used in which a lack of legal tender exists.

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Dan Grossman

They're not going to take money away from anything else. They won't rebalance the budget. They'll, as they just did, request the limit on the total federal deficit be increased, and print the money. Literally they'll just hand out money that doesn't actually exist, increasing the supply of money in circulation, lowering the value of all the money already out there. Rather than pay for it in taxes, when the government prints money like this, we all pay for it in reduced spending power.

It's a short term solution for sure. Eventually there must be a deep recession to correct the bubble.

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guerilla

Two bailout videos you gotta watch NOW!

YouTube - Sounds Like Insider Trading To Me! Rep Kaptur

Ok, the second one is important. Listen at 1:19 very closely, the implications are huge.

YouTube - We Are Under Martial Law! As Declared By The Speaker Last Night! Rep Burgess




@Gunman, it's cool. When the shit hits the fan, remember to PM me and ask about this again.

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guerilla

EDIT, apparently it is martial law under Robert's Rules of Order. It is not a national emergency. It is martial law which means everyone has to attend and vote, or they can be arrested.

Of course, they have to vote, and many of them have not seen the bill.

Scary stuff.

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jenzkc

the only solution to this problem is to not pay taxes. if enough people don't pay for this shit, wtf are they gonna do?

keep bendin' over america.

snavr

That's a wonderful dream ... but you're still creating wealth out of nothing. Investing is not a physical product and it is not labor capital (like tilling a field). You will still have a buildup of speculative wealth which eventually surpasses real wealth and creates the need for a crash (or reset of the system).

There ARE things that make the problem worse, like FRB and debt currency, but you can take away all those things, and there's still the fundamental problem of usury.

Even a barter society won't get rid of usury. If I'm trading 2 chickens for a bushel of hay, but you don't have hay right now ... we might cut a deal that says I'll give you the 2 chickens NOW for a 1.5 bushels of hay 6 months from now. That's usury. That's creating wealth from nothing tangible. Plus, no trade is equal for both sides. And if you make more trades that favor you than the next guy, then again, you're creating wealth from nothing.

The reality is this. Economies must expand and contract. If the global economy tanks it will suck. But it woulda sucked less if they let it fail 20 years ago. And it's gonna suck more if they keep it alive for another 20 years.

You can talk all you want about making a fairer system, but you can never change the fundamental physics of the system to get rid of speculative wealth. You can only navigate the ups and downs skillfully.

And if you don't, someone else will.

guerilla

Uhm... NO.

Uhm... YEAH! (Have you ever heard of capital goods?)

Uhm.... NO! Why would you say this? Read on...

That's still a straight swap. The deal concludes when you get your 1.5 bushels of hay. The 0.5 bushel of hay does not begin to compound over time. It's basically the futures game.

Uhm... I use the 2 chickens now, to get to where I can provide 1.5 bushels of hay later. The tangible good is the 2 chickens, and the ability to provide 50% more hay later, is because I was given time to make payment (acquire or grow the goods). The hay will be created, by my hands, in my field. It's just deferred settlement. This is really basic stuff dude.

I believe in Mises' model for human economic action. A trade occurs when both sides feel they are better off with the exchange of goods. Now the price may not seem fair to you, but if both sides trade less than what they think they are getting, it is a fair trade. The market sets prices this way (where supply intersects with demand).

This is obscene.

This we can somewhat agree upon.

Well, you're presuming that speculative wealth is a bad thing. On the contrary, people who successfully guess supply and demand changes in advance (speculators) are the ones who keep big crashes and big booms from happening, as the market adjusts gradually before the turbulence.

You've got some ideas, but then some really wrong ones. Reading what you wrote, you sound much more like an interventionist than a free marketer.

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Mahzkrieg

Hilarious thread.

What's with these armchair warriors that haven't even taken Economics 101 trying to duke this one out?

guerilla

Dude, if someone brought in gold, silver or diamonds, we would have done business too. Even if it was illegal, even if it wasn't legal tender.

That's the difference between a fiat paper money (which is fiat due to legal tender laws) and real money (that which cannot be counterfeited, and are rare).

Arguments for legal tender are usually pretty nutty. For example, the government could say that paper dipped in bird shit is legal tender. We'd all be dealing with shit dolllars. Or they could say that paper printed with the blood of asian virgins was legal tender. Or they could say that marbles are legal tender. Or cars are legal tender. It's completely arbitrary. In the absence of the law (and how many of us follow the law 100%, answer = none) the good is only worth what someone is willing to trade for it. That's why there is never hyperinflationary or hyperdeflationary gold. But there is hyperinflationary and hyperdeflationary paper.

No, my example is valid. Euros are not legal tender in America. But Europeans can exchange them and visit America, and likewise. They do trade with America, and likewise. Same with any other currency.

Credit cards actually make this even easier, as you can convert and pay in the currency of choice on demand at the latest rates. Believe me, if Singapore made gold their legal tender, then you could be able to go to Singapore with zero gold, and still participate in their economy with US dollars.

Done. A lot of very smart people have been talking about this for quite some time. There is a lot of literature on it. It's not quackery. The world is already trending towards nation neutral, legal tender neutral money. Dropping legal tender laws would speed it up tremendously.

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LazyHippy

Our notes say, for example, "I promise to pay the bearer on demand the sum of Ten Pounds"...

I've always wondered how they would pay that if I demanded it, when these notes (a glorified IOU) are the only currency.

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Dan Grossman

US dollars used to say something like that too, but the text was removed when the gold backing to the dollar was removed. And that's the root of what is happening around the world today.

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brianpaxton

WHAT NOW?

Dan Grossman

Buy gold and make sure your passport is up to date.

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guerilla

Sad but true. Also, if you're even going to consider that path, make sure you know about the exit conditions. There is regulation to prevent you from fleeing the US with your wealth. It's fairly recent, so you'll want to be up on that.

What people aren't getting is that the stock market crash isn't the problem. It's the dollar devaluation. When the dollar takes body blows, prices are going to soar, choking off consumption and driving up interest rates. And that will be a chokehold on the economy. During the Depression, the market deflated but the dollar stayed constant because it was linked to gold.

The FED tried to pump liquidity (credit) into the system, but the banks wouldn't take it, and the people didn't want loans they knew they couldn't pay back in a bad economy.

You're seeing the same thing today. The FED just injected $400 billion (without a bailout bill) into the economy, and it did nothing. No stimulus shock. Meanwhile, each injecting is pushing up prices as the dollar weakens.

Cover your asses. If you're over-extended, stop making excuses. Get your house in order.

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amateursurgeon

By way things look at the moment, the best investment most Americans could make for the future is Mandarin lessons.

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guerilla

The truth comes out. All of the people who blindly believed the bailout was some great thing, are being exposed as a little too trusting of government.

YouTube - **FLASH** The REAL REASON For The Bailout (Hint: FOREIGNERS)

It's what people have been warning about. Foreign creditors are calling America's note. The bailout is not for domestic banks or domestic mortgages, it is to bail out the foreign banks and governments.

(D) Brad Sherman blew the whistle on Kudlow and Company, and tonight on Lou Dobbs, it was revealed that Wall Street is hiring people to call Congress and lobby for the bailout (pretend to be voters).

If you haven't contacted your rep yet, why not?

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LazyHippy

Makes sense, but feels a lot like the sort of conspiracy theory the sheeple have been conditioned to ignore or ridicule.

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ummdav1d

Guerrila, could you point me in the right direction to learn more about those regulations? Thanks.

erect

... you wouldn't be from England would you?

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guerilla

You can google us exit tax. H.R. 3056 is part of it, but I think there is more.

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