From: positron@engin.umich.edu (Jonathan Scott Haas)
Subject: Re: Gold v. Oil: Backed Currency
Date: Fri, 18 Dec 92 01:24:42 EST
Organization: University of Michigan Engineering, Ann Arbor

In article <blather> tleylan@pegasus.com (Tom Leylan) writes:
>positron@engin.umich.edu (Jonathan Scott Haas) writes:
>>The five dollar bill you hold in your hand buys what one dollar could buy
>>in the Sixties. Does that not constitute a financial catastrophy in your
>>book?

>You earn $5 today in the time it took to earn $1 in the Sixties.

Yup, you sure do. But the money you had under your mattress in the Sixties
is worth 1/5 now what it was worth then. If you had it in the bank, you
earned interest on it, but not enough to quintuple its value.

>>Let's go through this one more time. As it is now, if the government wants
>>more money to spend (and who doesn't?) they can just print more. To use a
>>simple example, if the government decided to double the money supply,
>>they'd have a huge chunk of money to spend... but anyone who was holding
>>cash will discover that it now buys half of what it used to. Unfair? Yes,
>>but perfectly legal... with nothing backing our currency.
>
>If the government prints more money they didn't "effectively" double the
>money supply. 

I'd say that if someone actually does something, it's pretty effective,
isn't it? Not that it has the slightest bit of relevance to the discussion...

>If there are twice the number of notes then the notes are
>worth 1/2 their former value.  Anyone accepting them would demand twice
>as many of the new ones.

...and that couple, who has saved $100,000 for their $120,000 dream home,
now finds that the price has doubled, and they're in for some more saving.

>There would be no net effect on the cost of goods or what you earn after
>everybody adjusted for it.

...but anyone who was holding cash would be out of luck. Which is why
I intend to buy gold and keep buying gold, and keep it in a safe place.

>Money is a commodity traded on its own, just like wheat or steel, it is
>however shares in a country not of a hard good or product.  It is
>hoarded or spent depending upon whether people speculate the price of
>money will go up or down.  If you think Yen is moving up you'll want to
>trade in your dollars and hold onto Yen, trading back for more dollars
>than the Yen cost you when you think Yen peaked.

Unfortunately, the government insists that I pay my taxes in dollars, and
the storekeeper on the corner won't accept a fistful of yen.

>U.S. dollars are a form of U.S. stock certificates, they are worth what
>the buyer and seller agree upon and not a penny more or less.

Aside from being worth "what the buyer and seller agree upon and not a
penny more or less" (which is true of ANYTHING), the analogy between
dollars and stock certificates is completely false. If a private corporation
needs capital, it can go public, print up one billion shares, declare
each share to be worth one billionth of the company, and sell them. But
if it later decides it needs *more* capital, it *can't* print up another
billion, and declare that each share is now worth only one two billionth
of the company. Once it sets a value (in percentage of the company) of
its shares, that's it. The government, on the other hand, has absolutely
no qualms whatsoever about printing up more money.

-- 
__/\__  Jonathan S. Haas         | Jake liked his women the way he liked
\    /  University of Michigan   | his kiwi fruit: sweet yet tart, firm-
/_  _\  positron@engin.umich.edu | fleshed yet yielding to the touch, and
  \/                             | covered with short brown fuzzy hair.
Newsgroups: alt.politics.libertarian