Gold is Not Money

SilverPete said:
You're all wrong. Money is simply an idea, a very powerful idea. But don't confuse it with wealth.
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This is where my head is at.
Money is an imaginary concept, an arbitrary scale of intangible numbers created to make an economy function easier. It is the numbers in your bank account, used to represent human labour and the natural resources labour touches. When these numbers are attached to something real and tangible, they take on more meaning, but the numbers are still unreal. Money represents value, which represents real things such as human labour, and enables or facilitates the trade of value. Money can be created by making an entry into a bank ledger.

Currency represents money. It is the printed paper and coins.

Gold (and silver) is a tangible commodity, with a monetary value attached to it, as determined by the market supply and demand.
 
wrcmad said:
SilverPete said:
You're all wrong. Money is simply an idea, a very powerful idea. But don't confuse it with wealth.
Click to expand...
This is where my head is at.
Money is an imaginary concept, an arbitrary scale of intangible numbers created to make an economy function easier. It is the numbers in your bank account, used to represent human labour and the natural resources labour touches. When these numbers are attached to something real and tangible, they take on more meaning, but the numbers are still unreal. Money represents value, which represents real things such as human labour, and enables or facilitates the trade of value. Money can be created by making an entry into a bank ledger.

Currency represents money. It is the printed paper and coins.

Gold (and silver) is a tangible commodity, with a monetary value attached to it, as determined by the market supply and demand.
Click to expand...

Yep! Agree on almost all of this. But If money is the representation of human labour, money should be created or earned only through labour, and it shouldn't be possible to create money through money itself, that is, just by lending money and applying an interest rate because the money so earned is not the reflection of labour contribution.

Maybe I'll have to elaborate a bit more on this last point... When capital is created by excess of labour, it's ok in my opinion to lend it to someone else in exchange of a compensation from the borrower because in that case the borrower will be able to produce goods earlier. the lender takes a big risk (loan never repaid, capital lost) and as such he should be compensated.

When banks borrow money from central banks or other banks and lease them to someone applying an incremental interest rate to the initial borrowing rate, and that incremental rate is more than what is needed to cover their operational costs.... Why should banks earn that extra money? They have done absolutely nothing to deserve it, it's no more the representation of human labour. They also don't risk anything because the capital they lend is not something that they had earned via excess labour in first place.
 
Porcello said:
wrcmad said:
SilverPete said:
You're all wrong. Money is simply an idea, a very powerful idea. But don't confuse it with wealth.
Click to expand...
This is where my head is at.
Money is an imaginary concept, an arbitrary scale of intangible numbers created to make an economy function easier. It is the numbers in your bank account, used to represent human labour and the natural resources labour touches. When these numbers are attached to something real and tangible, they take on more meaning, but the numbers are still unreal. Money represents value, which represents real things such as human labour, and enables or facilitates the trade of value. Money can be created by making an entry into a bank ledger.

Currency represents money. It is the printed paper and coins.

Gold (and silver) is a tangible commodity, with a monetary value attached to it, as determined by the market supply and demand.
Click to expand...

Yep! Agree on almost all of this. But If money is the representation of human labour, money should be created or earned only through labour, and it shouldn't be possible to create money through money itself, that is, just by lending money and applying an interest rate because the money so earned is not the reflection of labour contribution.
Click to expand...
OK, my head is spinning a little trying to digest this, but I'll have a go. :)
To propose "money should be created or earned only through labour" is to lock in a value of money. This is contrary to the concept that money is only an arbitrary and intangible scale, that merely represents human labour. When money is created through lending, the arbitrary scale of unreal numbers that is money, is accordingly adjusted by the labour market to reflect the value of the labour it represents - it is called inflation.

Porcello said:
When banks borrow money from central banks or other banks and lease them to someone applying an incremental interest rate to the initial borrowing rate, and that incremental rate is more than what is needed to cover their operational costs.... Why should banks earn that extra money? They have done absolutely nothing to deserve it, it's no more the representation of human labour. They also don't risk anything because the capital they lend is not something that they had earned via excess labour in first place.
Click to expand...
The lease rate on money (interest rate) is determined by the market in accordance with supply and demand. While you can propose that the central banks fix the lease rate, this is again indirectly in accordance with economic or market supply and demand.

The banks are in effect providing a service that is being sought, and taken up, by the market. A service can be categorised as a tangible item, just the same as human labour, so has a monetary value attributed to it. To say that service providers (which is essentially interchangeable with human labour) don't deserve to be attributed a monetary value is erroneous IMO. A labourer digging someone a hole for monetary payment is essentially a service provider - does he not deserve it too?
I disagree that the banks don't risk anything by on-lending. As you previously stated, there is risk in lending.
So, given the banks provide a tangible service, coupled with taking on inherent risk (another service) that they deserve compensation for, I would argue that they have done enough to deserve the incremental interest rate they earn.
If the market decides they are over-charging for this service, then the price of lending will change accordingly.
 
Mmmhhh... Sort of makes sense at first glance.... But I'll have to re-read everything with a clear mind (sorry but I had one too many already!)

The other problem with today's fiat money in my opinion is that it's only a promise of future human labour (goods and services) and, being a promise it can be broken anytime. So, fiat money is essentially based on trust or constriction (just say it's not good and I'll move war to you).
When gold was money, human labour was already spent to dig it out so the commodity itself was the real representation of labour.

One too many?
 
Porcello said:
Mmmhhh... Sort of makes sense at first glance.... But I'll have to re-read everything with a clear mind (sorry but I had one too many already!)

The other problem with today's fiat money in my opinion is that it's only a promise of future human labour (goods and services) and, being a promise it can be broken anytime. So, fiat money is essentially based on trust or constriction (just say it's not good and I'll move war to you).
When gold was money, human labour was already spent to dig it out so the commodity itself was the real representation of labour.
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Fair call.
But, while gold is a commodity in which human labour is spent to dig it out, the future value gold holds relative to that labour is also essentially based on the trust/belief/faith that the market will continue to value it as such - after all, any commodity is valued by demand/supply forces, not by how much toil was spent obtaining it. A good example of this is oil.
 
wrcmad said:
The banks are in effect providing a service that is being sought, and taken up, by the market. A service can be categorised as a tangible item, just the same as human labour, so has a monetary value attributed to it. To say that service providers (which is essentially interchangeable with human labour) don't deserve to be attributed a monetary value is erroneous IMO. A labourer digging someone a hole for monetary payment is essentially a service provider - does he not deserve it too?
I disagree that the banks don't risk anything by on-lending. As you previously stated, there is risk in lending.
So, given the banks provide a tangible service, coupled with taking on inherent risk (another service) that they deserve compensation for, I would argue that they have done enough to deserve the incremental interest rate they earn.
If the market decides they are over-charging for this service, then the price of lending will change accordingly.
Click to expand...

Also the local mafia guy provides a service to you when he offers insurance against incident that may happen to your business. You pay a percentage of your revenue to him and he makes sure that your shop doesn't catch fire overnight. His service is greatly sought after because it's been proven to work effectively (the shop of whoever is not insured mysteriously catches fire overnight).
The mafia guy offers a tangible service and he's essentially a service provider. He also takes considerable risks because for some mysterious reasons the local policeman tries to catch him at night while he's monitoring the insured shops (passing by the non-insured shops, of course!).
If the market decides that the mafia guy overcharges for his service, then the price of insurance will change accordingly (maybe?)
The mafia guy is an extremely useful and respected member of the community and creates great value through his labour contribution.

PS: There is risk in lending capital that you have generated through your excess work or that you have saved by depriving yourself of present consumption. There is no risk by lending money that you create from thin air via fractional reserve tricks
 
wrcmad said:
Porcello said:
Mmmhhh... Sort of makes sense at first glance.... But I'll have to re-read everything with a clear mind (sorry but I had one too many already!)

The other problem with today's fiat money in my opinion is that it's only a promise of future human labour (goods and services) and, being a promise it can be broken anytime. So, fiat money is essentially based on trust or constriction (just say it's not good and I'll move war to you).
When gold was money, human labour was already spent to dig it out so the commodity itself was the real representation of labour.
Click to expand...
Fair call.
But, while gold is a commodity in which human labour is spent to dig it out, the future value gold holds relative to that labour is also essentially based on the trust/belief/faith that the market will continue to value it as such - after all, any commodity is valued by demand/supply forces, not by how much toil was spent obtaining it. A good example of this is oil.
Click to expand...

Yes, that's a given.
 
Porcello said:
wrcmad said:
The banks are in effect providing a service that is being sought, and taken up, by the market. A service can be categorised as a tangible item, just the same as human labour, so has a monetary value attributed to it. To say that service providers (which is essentially interchangeable with human labour) don't deserve to be attributed a monetary value is erroneous IMO. A labourer digging someone a hole for monetary payment is essentially a service provider - does he not deserve it too?
I disagree that the banks don't risk anything by on-lending. As you previously stated, there is risk in lending.
So, given the banks provide a tangible service, coupled with taking on inherent risk (another service) that they deserve compensation for, I would argue that they have done enough to deserve the incremental interest rate they earn.
If the market decides they are over-charging for this service, then the price of lending will change accordingly.
Click to expand...

Also the local mafia guy provides a service to you when he offers insurance against incident that may happen to your businessy. You pay a percentage of your revenue to him and he makes sure that your shop doesn't catch fire overnight. His service is greatly sought after because it's been proven to work effectively (the shop of whoever is not insured mysteriously catches fire overnight).
The mafia guy offers a tangible service and he's essentially a service provider. He also takes considerable risks because for some mysterious reasons the local policeman tries to catch him at night while he's monitoring the insured shops (passing by the non-insured shops, of course!).
If the market decides that the mafia guy overcharges for his service, then the price of insurance will change accordingly (maybe?)
The mafia guy is an extremely useful and respected member of the community and creates great value through his labour contribution.
Click to expand...
Yeah, but drawing a long bow as an analogy to banking.
The mafia guy is not providing a service to market - he is extorting you.
The banks don't stand over you for not lending - it is your free choice.

Porcello said:
PS: There is risk in lending capital that you have generated through your excess work or that you have saved by depriving yourself of present consumption. There is no risk by lending money that you create from thin air via fractional reserve tricks
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Disagree.
You stated yourself that there is risk in lending.
While the banks may enter lending into a ledger, as an independent entity they are still exposed to the debt until repaid.
Don't confuse the banks with the treasury.
 
Money is an idea, the old one...then its a tradition...then it is gold...it is money no more

commodity...money...idea...tradition...

but ultimately gold is still gold.
 
wrcmad said:
The mafia guy is not providing a service to market - he is extorting you.
The banks don't stand over you for not lending - it is your free choice.
Click to expand...

Yeah, I know, I was joking a bit partly because I'm enjoying the conversation (much better than talking about the latest lunar prices, no?) and partly because of my drinks.

The banks definitely don't force you to borrow from them. However, I could say that they do it indirectly in a much more subtle way by causing assets inflation... Look at house prices, they wouldn't be where they are without banks giving out stupid mortgages.

But the topic was not about banks, so I digress.
 
wrcmad said:
While the banks may enter lending into a ledger, as an independent entity they are still exposed to the debt until repaid.
Don't confuse the banks with the treasury.
Click to expand...

Agreed, and since they are private entities they should be left going out of business when they make crap investments, and not be bailed out with public money. It's too easy to privatize profits and socialize losses.
 
To a gold bug/stacker, gold is money even if it is not recognized as money by anyone else

To everyone else gold is a commodity
 
Pretty sea shells and squirrel feces may be money to some, but just like gold, to most people it isn't money because it doesn't function like money for the vast majority of people on the planet.



.
 
My currency is money....it's a widely accepted medium of exchange....I can readily exchanged my currency for a gold coin from the U.S. Mint but I can not exchange a piece of gold for my currency of choice at any of the banks I have ever been to.

This illustrates that my currency is money but gold isn't.




.
 
Gatito Bandito said:
I take it some in this thread aren't especially well-versed in modern Asian & Middle Eastern culture?
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I think that is an important point which highlights that because value is subjective, money should not take the form of legal tender. Rather, it should be whatever consumers choose to accept as money whether it is scrip, pumpkins, shells or gold. That is, money is a cultural relic, evolving from the economic activity of individuals making value judgements and should not forced onto people from a top-down structure and because money evolves from the economic activity of individuals it will always retain a greater store of value and confidence in the market than legal tender.
 
Taxation is the mean by which governments force a particular type of money onto their citizens. Without that, people are basically free to use any kind of money they like, until a de-facto standard emerges.
 
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