Just a question about the gold standard - when they dropped it back in the 70s gold was only $35 an ounce. That doesn't seem like any where near enough if it backed all the money in circulation at that time unless there was an enormous amount of gold in storage to back it.
Well gold outside of the vault would be the same value but it would all depend on wether the car dealer was happy to use it as a medium of exchange. There would have to be changes in the tax code to reflect this so the dealer etc can be charged his taxes. If it was in place, it would be easy enough to exchange the gold for cash at the bank. Bank hands it over the (New) Fed Reserve and they get to create more paper dollars to the equiv value = the much needed inflation we all need to grow. Forget about China being able to buy "more" stuff because they have lots of gold. THEY currently own something like 3 trillion in USD and US bonds or something ridiculous like that, or was it 1.3Trillion US and 3 trillion total? I'm pretty sure they don't have 3 Trillion worth of Gold at todays value. If they wanted to buy up what ever you are worried about they could do it now no problem at all. The US just doesn't have to make it interchangeable at all ever again. All they have to do is continue to Audit the gold reserves to ensure they directly represent plastic dollars in circulation and confidence would be restored in the USD while ever they held true to that.
That was what I was thinking, they will either have to have a crapload of gold or the value of gold would be many multiples of what it is now to back everything. Hopefully it's the latter - hello house for 10 ounces of gold
Yes, you are wrong. If it works like this just think about it for a second. You claim that when you deposit 100 in a bank the bank then uses it to lend 1000 to the next person. OK, that person then redeposits the 1000 and by your system the bank can lend out 10,000 the next time This gets redeposited and the bank can then lend out 100,000 the next time. It only takes 10 iterations of this and you are at 1,000,000,000,000 (a trillion dollars). For the vast number of loans that are given in Oz the M3 would be at some truly astronomical number something like 10 to the power of a billion. Banks don't create money!! The time factor of money makes it look like it does, but it's just an illusion. What you have to remember is that it is the money that the bank OWES you that is in your account, not money itself. Just as if I lent you $100 you would owe me $100 or to put it in banking terminology I would have $100 in my account with you. If you add that $100 in my "account" with you to the $100 cash that you now have, that adds up to $200, but no money has been created.
Just cause the banks don't create money doesn't mean by any stretch they are on my XMas list. I'm highly critical of them. But you have to be for the right reasons. Claiming they are fraudulently creating money redirects away from the real problems. Things like over-leveraging and reckless lending.
Don't want to overdo this but just wanted to add this which I wrote on another forum In the above example there is $100 cash and $171 worth of promises for a total "money supply" of $271. This of course can be lent out further to a theoretical limit of around $1000 (composed of $100 cash and $900 of promises). You can do FRB with your friends as shown above. Wow, I can create money just by lending it out the same way as the banks "create money"!
