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Very Hot Topic (More than 25 Replies) Currency is a Non-Excludable Good (Read 803 times)
Jacob
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Currency is a Non-Excludable Good
Aug 11th, 2019 at 1:12pm
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In other words, a public utility.

I'm taking a stand based on idea from Economics for Dummies, one of my introductory books of choice for economics.

I'm making my stand here in favor of fiat currency (not for inflation mind you) because I also want to hear your arguments in case you favor a gold or silver standard instead.

Quote from the text:
"... A lighthouse provides warning services to all ships in the vicinity regardless of whether they pay the lighthouse keeper. Because every ship knows that it can get the service without having to pay for it, the private lighthouse quickly goes bankrupt because only a few ships are fair-minded enough to pay for the service."

I think that currency itself is a public good. Everyone has to have access to it in order to facilitate trade. If the money supply is restricted by a limited resource like gold, only a few people benefit from having lots of it, with everyone else having to fend for their own stash of gold in a shoebox.

Again, I am not defending deliberate inflation, which only increases the price of goods in response to the artificially supply of money. While a gold standard does answer the problems of inflation, it doesn't answer to the fact that money itself has to be more accessible than everyone owning their own vault and security system to protect literal hunks of metal.
  
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Little Biq Man
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Re: Currency is a Non-Excludable Good
Reply #1 - Aug 11th, 2019 at 2:01pm
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Jacob wrote on Aug 11th, 2019 at 1:12pm:
In other words, a public utility.

I'm taking a stand based on idea from Economics for Dummies, one of my introductory books of choice for economics.

I'm making my stand here in favor of fiat currency (not for inflation mind you) because I also want to hear your arguments in case you favor a gold or silver standard instead.

Quote from the text:
"... A lighthouse provides warning services to all ships in the vicinity regardless of whether they pay the lighthouse keeper. Because every ship knows that it can get the service without having to pay for it, the private lighthouse quickly goes bankrupt because only a few ships are fair-minded enough to pay for the service."

I think that currency itself is a public good. Everyone has to have access to it in order to facilitate trade. If the money supply is restricted by a limited resource like gold, only a few people benefit from having lots of it, with everyone else having to fend for their own stash of gold in a shoebox.

Again, I am not defending deliberate inflation, which only increases the price of goods in response to the artificially supply of money. While a gold standard does answer the problems of inflation, it doesn't answer to the fact that money itself has to be more accessible than everyone owning their own vault and security system to protect literal hunks of metal.


Are you saying that government-created currency should be given freely to everyone equally, as is the light from a government-run lighthouse?

I read somewhere that "land pirates" used to build lighthouses set several hundred yards inland in order to trick ships into crashing on the rocks so they could be robbed.  The book said that Atlantic City is much the same today, except that the lights are brighter.

Wish I could remember where I read that . . .

  
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Jacob
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Re: Currency is a Non-Excludable Good
Reply #2 - Aug 11th, 2019 at 2:30pm
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Little Biq Man wrote on Aug 11th, 2019 at 2:01pm:
Are you saying that government-created currency should be given freely to everyone equally, as is the light from a government-run lighthouse?



Haha no, I'm talking about access not distribution.
  
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SkyChief
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Re: Currency is a Non-Excludable Good
Reply #3 - Aug 11th, 2019 at 2:41pm
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I'll make the argument for gold and silver.

Gold and Silver have served as money/currency for literally thousands of years.  The will serve as money for thousands of years to come.

Fiat currencies come and go.  They always die an agonizing death when they are over-inflated.   All fiat currencies will be over-inflated at some point.  They will continue to lose purchasing power until they are virtually worthless.

Thre are NO exceptions.  Governments cannot resist printing money.  That's how governments loan money to themselves they print a bunch of it and offer it up as "Treasury Notes" to foreign investors.

What a cool way to have other countries pay for our Wars!!   It's brilliant.  Grin  But at the same time, stupid.  Because at some point the buyers of Treasuries will realize that the issuer will default when the Note is called.

Here's what happened to our currency when RMN killed Bretton Woods and declared that the USD is no longer convertible to gold:



It will only get worse until the currency loses all purchasing power and then there will be  a "reset".

Only people with hard assets (Gold, Silver, Real estate, Rare Art) will be left standing when the dust settles.

The streets will be littered with the smashed bodies of Bankers and stock brokers who leapt to their deaths.
  
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Jacob
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Re: Currency is a Non-Excludable Good
Reply #4 - Aug 11th, 2019 at 2:45pm
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I can't accept an appeal to tradition as far as it being used for thousands of years. Aristocracy has been practised for thousands of years but it would be a weak argument for feudalism.

The Romans used a gold standard and still figured out a way to debase their currency as well.

As for the government printing more money, that all depends on who is in charge. I doubt a fiscal libertarian barred from instituting a good standard somehow would respond by printing more money.

Capital B bankers? Who are you referring to?
  
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SkyChief
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Re: Currency is a Non-Excludable Good
Reply #5 - Aug 11th, 2019 at 3:02pm
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Jacob wrote on Aug 11th, 2019 at 2:45pm:
As for the government printing more money, that all depends on who is in charge.

Sorry.  This is wrong.

If a currency can be printed without reserves of some commodity, Government (central bank) will print it.

No exceptions.   Name ONE government that didn't print fiat money.   Just ONE.
  
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Jacob
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Re: Currency is a Non-Excludable Good
Reply #6 - Aug 11th, 2019 at 3:03pm
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SkyChief wrote on Aug 11th, 2019 at 3:02pm:
Sorry.  This is wrong.

If a currency can be printed without reserves of some commodity, Government (central bank) will print it.

No exceptions.


I see your no exceptions...
I raise you by Constitutional Amendment!
  
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SkyChief
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Re: Currency is a Non-Excludable Good
Reply #7 - Aug 11th, 2019 at 3:10pm
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Jacob wrote on Aug 11th, 2019 at 3:03pm:
I see your no exceptions...
I raise you by Constitutional Amendment!

It's ok - you're still learning about economics.   Some startling things will be revealed to you about economics.

Unsettling things.

When the music stops, you better have some precious metals in your portfolio. . . I mean physical metals. . . .not ETF (paper) metals. . . .ETFs will be worthless after the reset.

Jacob wrote on Aug 11th, 2019 at 1:12pm:
. . . If the money supply is restricted by a limited resource like gold, only a few people benefit from having lots of it, with everyone else having to fend for their own stash of gold in a shoebox.

This is wrong, too.

It doesn't matter if a person has half an ounce of gold in a shoebox, or 60 pounds of gold bars in a safe bolted to the floor.

Both have stored their wealth out of the reach of government.    The gold (no matter what the amount) cannot be taxed, and it cannot be artificially inflated.  It retains its purchasing power NO MATTER WHAT.

Even if the house burns to the ground and the coins melt into a shapeless glob of yellow metal, IT STILL HOLDS ITS VALUE AS MONEY.
  
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Jacob
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Re: Currency is a Non-Excludable Good
Reply #8 - Aug 11th, 2019 at 3:59pm
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But the same goes for the gold standard.

If I had 50 dollar notes exchangeable for gold, how can I prove I owned them if the house burns down?

What if none of "my gold" is held in a vault separated from the rest of the gold?
  
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Jacob
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Re: Currency is a Non-Excludable Good
Reply #9 - Aug 11th, 2019 at 4:09pm
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Jacob wrote on Aug 11th, 2019 at 3:59pm:
But the same goes for the gold standard.

If I had 50 dollar notes exchangeable for gold, how can I prove I owned them if the house burns down?

What if none of "my gold" is held in a vault separated from the rest of the gold?


Nevermind, all I've said is you can't trust government backed currency
  
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