DescentBB

Here's a informative article on our economic system, how it works and why it doesn't.

http://fly.hiwaay.net/~becraft/VieiraMono4.htm

And, a more in-depth explaination.

http://home.hiwaay.net/%7Ebecraft/PoppCookieJar.pdf

I found both of these to be great read. The second link is pretty long, but really good.

B-

I think this problem is going to continue to be one of the great unknown worries of our age. Particularly since I totally glazed over after two or three paragraphs of the first article. Fractional reserve banking is unconstitutional is it? Oh my!

You glazed over after two or three paragraphs. Why not take a few moments to read the whole thing? You're bound to learn something.

Okay I managed to read 90% of the article but did skip forward to the conclusion when it seemed that I was hearing the same thing over again.
The "The National Alliance for Constitutional Money, Inc.," (Inc.?) Is upset that the U.S. dollar is no longer backed domesticly by silver (as required by the U.S. constitution apparently) and internationally by gold. This is pretty old news, the dollar was cut loose from silver in 1968 and gold in 1970. I don't personaly think that a vault of gold makes a currency any more secure than a managed money supply whose issue is based on economic output. As I have said in other threads "the economy" is a house of cards, all that keeps it up is an unwillingness of the players to knock it all down. A gold standard currency requires some kind of meaningful price for gold. What is gold worth? It has almost no practical value. It's price is just a number attached to a quantity just as artifical as basing the money supply on GDP.
Sorry I find this argument kind of like listening to the Flat Earth Society. And as usual the main thrust is that the government collects too much in taxes. Yawn.

All money is actually useless. Its just that we allow an arbitrary value to be attatched to it as to allow for easier exchanging of goods.

I don't think tying our currency to a rock does much good either. However from the first article, some good points:

- For the bank simultaneously to fulfill all its promises to redeem its outstanding notes "on demand" is impossible.

- The bank's managers know that complete redemption "on demand" is impossible, and therefore that the bank's promises to pay are false. And,

- The bank's customers, by and large, are ignorant of how the fractional-reserve scheme works, and the dangers it poses to them.

--------

The argument then can be made that owning some silver, gold, or other commodity/possesion could be a good idea in a worst case scenario in a deep depression (like in 29 when banks ran out of money because everyone clamored to withdraw at the same time) or if our government defaults on its debt. If either of those two things happen, having something like silver or gold would be a great idea. Of course, homes would be too, but silver/gold is much more liquid.

I don't personaly think that a vault of gold makes a currency any more secure than a managed money supply whose issue is based on economic output.

If you can't see the benifit(stability) of a commodity based system(I'd settle for fiduciary) vs. a total fiat system then I'm spinning my wheels.

As I have said in other threads "the economy" is a house of cards, all that keeps it up is an unwillingness of the players to knock it all down.

Ummmm, our "house of cards.. economy" is the result of a fiat system.

Tell me, Ford, do you keep your money in a bank?

Ummmm, our "house of cards.. economy" is the result of a fiat system.

Eh, not really. We were on the gold standard during the great depression. In 1971 we went off the gold standard, and not much changed. We've had huge stock market drops since then, and the banking system has been extremely resiliant.

The economy is a house of cards with or without a "backing."

I think the bigger worry is the possibility of the US defaulting on its debt. That would ruin our currency and our country's wealth.

Alright, I'll agree with that, B. I should have said that the instability of our banking system is due to a fiat currency.

Like most people I have very little money in a bank. I have mutual funds though and the whole stock market system is just a huge casino where bets are made on what a stock will sell for in a couple of days as opposed to what a company is worth. Most of the value of "the economy" is held in company's net worth and billions of that is pure speculation evidenced by the tech bubble bursting. A gold standard would have made no difference to that loss of value. Banks in truth hold very little money, instead they hold assets such as your home which they own through your mortgage and other collatoral they own through loans. I suppose I need to do some research but I venture to say that the proportion of assets owned by a bank that are made up of cash deposits from savers is very small indeed. I don't notice a lot of instability in the Canadian banking system but then there are only 5 major banks in the whole country.