From: positron@engin.umich.edu (Jonathan Scott Haas)
Subject: Re: Views? :
Date: Wed, 16 Dec 92 12:52:02 EST
Organization: University of Michigan Engineering, Ann Arbor

In article <1992Dec16.142218.18962@samba.oit.unc.edu> bolden@beta.math.unc.edu (Jeffrey Bolden) writes:
>In article <HWT=BL+@engin.umich.edu> positron@engin.umich.edu (Jonathan Scott Haas) writes:
>>In article <1992Dec16.123301.14776@samba.oit.unc.edu> bolden@beta.math.unc.edu (Jeffrey Bolden) writes:
>>>In article <#FT=a2-@engin.umich.edu> positron@engin.umich.edu (Jonathan Scott Haas) writes:
>>>>In article <1992Dec15.193448.4741@samba.oit.unc.edu> bolden@beta.math.unc.edu (Jeffrey Bolden) writes:
>>>>>
>>>>>2 - For a currency to be backed in oil.  You must have the right to trade
>>>>>both ways.  As one of the gold standard people said:
>>>>>$35 - gets a barrel of oil.
>>>>>a barrel of oil - gets $35.
>>>>>
>>>>
>>>>...and anyone who wants to convert a goodly sum of money has to bring a 
>>>>tanker truck. The whole *point* of a standard (or one of the points,
>>>>actually) is so that people who lack confidence in the issuing body can
>>>>easily convert money back and forth.
>>>>
>>>
>>>	Why is it that you time and time again refuse to accept the
>>>existence of commodity certificates and insist on pretending like people
>>>actual have to cary oil around.  Recently a large chunk of IBM was sold at
>>>the NYSE do you think that they picked up Poughkipse NY carried over to
>>>the exchange building on Wall Street and sold it?!
>>>	Stop with silly tanker stuff.
>>
>>Because in that case, you're just shifting faith in one body to another.
>>If you convert your "oilbucks" to futures contracts on the exchange, then
>>you're withdrawing your faith in the government, but taking faith in
>>the commodity exchange. If said exchange folds up, you're up a creek...
>>which could very, very well happen, if all currency was backed by oil
>>and there was a panic. When you buy shares in IBM, all you've got is
>>a piece of paper saying that you own X% of IBM. If NYSE suddenly folds,
>>you've got a very serious problem.
>>
>>A good store of value, in order to both promote confidence and accomodate
>>those who have no confidence, must be portable.
>>
>
>
>	If the major exchanges collapse, I can't see gold being worth much
>either.  What your describing is a the collapse of western civ.  If that
>happens, to quote a Russian proverb, "you can't eat gold".  No currency
>standard will matter because there won't be a currency.  That would just
>be an aweful situation.  Finally if society collapses to that extent, why
>would the government (if there still was one which would be doubtful) make
>good on the old govt. promise to pay in gold for green paper.  
>	I don't see this as a valid objection
>

In case you didn't notice, civilizations have risen and fallen throughout
all of recorded history, yet gold has always been valuable, and respected
as a medium of exchange, Russian proverbs notwithstanding. No, no currency
standard will matter, but things will still have value (things will
*always* have value, as long as there is supply and demand) and I'm
betting gold will be one of them.

When the crash comes, you're absolutely right that the government probably
will not make good on its promise to convert currency to gold. That's why,
if we had a gold standard, I'd try to anticipate it by a few years, and
be in gold before then.

The POINT (from which I'm getting sidetracked) is that, to instill confidence,
a store of value *must* be easily portable. People have to *know* that
at any time they can demand, and get, and actually *have* their money's
worth, independent of the paper assurances of another party.

(by the way, your tone tells me that you doubt that the 'crash' will ever
occur. Let me tell you what I think will happen. Sometime, in our lifetimes,
the government will default on the national debt. It will have no choice...
at the rate we're going, interest on the debt will soon become the largest
single budget item. When the government defaults, T-bonds, T-bills, and
T-notes will become worthless overnight. There will be riots, as lots of
little old ladies and fine, upstanding folk have their life savings in
good, safe T-bills. When it happens, I don't want to be holding any U.S.
Dollars.)

-- 
__/\__  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.
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