I was talking with some friends, and I got this brainstorm…If U.S. is going into a recession, why can’t we just print up more money…My friends shot me down, and said that we (The Fed. reserve) has to have gold or another worthy commodity to back up the amount of money they make and distribute…Now, that makes perfect sense, but, what in the hell would happen if they didn’t have a backing to put a value on it? Who would know? My friends had an answer for that too, they say that the money that was printed w/out a commodity to back it would be of no worth…I say it would look the same, noone would know it was worthless…Barring the paper & ink costs, what would happen if they just printed a little extra each time they went to press? THEN, I read Cecils answer that states NO ONE tells the Feds how much they can print…What about Fort Knox? Isn’t that where all the gold is that is backing the money I used today at McDonalds…And any other money I let slip through my hands…I am confused! And no, I am not a counterfitter waiting to happen!!! I am just curious as to why my friends spouted off yet another un backed truth…perhaps I should make them back up their knowledge with a commodity of sorts?
Someone please clarify!!! ?
Your friends are wrong. Every time Alan Greenspan lowers interest rates he is effectively printing more money (to cut a long story short). However, if he overdoes it, you get inflation (the money becomes worth less) which is Very Bad Indeed - because the only thing that backs the money you have in your wallet is the confidence everyone has that it’s worth what it says it’s worth.
So fort knox is not holding the gold to back all the cash?
Oooo I can’t wait to shove it in “mr always an answer, always right”'s face!!! Again!!!
Welcome to the Straight Dope blah-blah-blah.
Does this question relate to an actual Straight Dope column? If not, I will move the thread to a different forum.
moderator, «Comments on Cecil’s Columns»
I figure that when you pay with a credit card, you have just printed that much money. Well, actually, the bank printed it. Of course, you will pay it back in a few weeks, but lots of people do not. That extra money will circulate in the economy just the same as Greenspan’s money. In fact, it is Greenspan’s money, which he generated by having an interest rate low enough for you to buy things on credit.
That’s why, if the economy goes south, it’s your fault.
Eh, Arnold, I don’t see anything in the Column or Staff Report Archives that might pertain to this. Move it to General Questions?
I sent Cecil the question…then I went & searched archives for that question…I found one pertaining to currency…of which my question was broached upon…thus, I am here…My goodness…So strict!!! WHERE do I go comment on an answer given by Cecil…???
And…to the last respondee…“MY fault?” Sheesh, that’s putting a lot on my plate don’t ya think? I may have some credit card dept…but, I don’t think it’s to the point of causing this recession!!! At least I hope!!!
Please include a link to Cecil’s column if it’s on the straight dope web site.
To include a link, it can be as simple as including the web page location in your post (make sure there is a space before and after the text of the URL).
Cecil’s column can be found on-line at this link:
How much money is there? With the U.S. borrowing so much, why aren’t we broke?
The column (including Slug Signorino’s illustration) can also be found on pages 163-166 of Cecil Adams’ book «Return of the Straight Dope».
Special Note: I believe that this is the only drawing that shows both Cecil Adams and Slug Signorino.
moderator, «Comments on Cecil’s Columns»
patti Roosevelt took the US off of the gold standard in 1933-34. Even prior to that date, gold backed only a small part of our banknotes. After that date, it backed no currency.
Silver backed part of our banknotes until 1968. Then we quit redeeming those. Treasury securities(bonds, bills, etc.) backed some of our banknotes until the 1960’s.
Since 1968, all currency issued has been Federal Reserve Notes, which are backed only by the full faith and credit of the US Guvmint. And so far, it works.
The strongest currency in the WORLD today is the US dollar. We’re kicking serious butt around the world currency market. This may or may not be good. Depends on a lot of things.
Your friend was totally wrong.
Actually, before Federal Reserve Notes currency was at least theoretically redeemable in gold at any bank. (“Will Pay Bearer on Demand $10 in Gold” is pretty straightforward)
Paper money is actually an ancient idea, perhaps started in China centuries ago, but every time it has beeen tried, it has failed. Not too good a track record in the long run.
Paper money in the US has had a rocky history – the infamous “Continental” currency, printed after the revolution was ‘not worth a continental’ after all.
During the Civil War, specie (gold and silver) was withdrawn and “Greenbacks” printed by the U.S. to help finance the war.
The Federal Reserve Act around 1913 (so sue me) authorized a parallel issue of ‘fiat’ paper currency which was not redeemable for anything. Instead of what was essentially a warehouse certificate for a specified weight of gold, the thing representing “money” became money itself-- nice work if you can get it.
To prevent “hoarding”; the government recalled all gold coinage and certificates in 1933, presumably, when the government has <i>all</i> the gold, they aren’t hoarding, but I digress.
While there was no ‘gold standard’ for you and me, there was nominally a varying percentage of gold backing for each paper dollar in circulation as a result of the Bretton Woods Agreement of 1944; foreign Central Banks could redeem their dollar holdings for gold at Treasury, unlike private citizens, while Treasury who stood ready to buy and sell gold at $35 an ounce, thus stablizing the dollar, and indirectly, the rest of the world’s currency since they pegged the value of their currency to the dollar, and hence, gold.
This arrangement worked fairly well until the 1960’s, when the Vietnam War and staggering social program spending at home raised doubts among the rest of the world whether the dollar was as strong as we said it was. The French, in particular, were adamant about redeeming their dollar holdings for physical, delivered gold. Cracks began to appear in the arrangement, and a secondary market arose with gold pegged at around $40 an ounce.
Ft. Knox was more than likely emptied to meet the rising demand for gold. No audit has been performed their for many years. In any case, at that point President Nixon severed even that last remaining vestige of the gold standard, which at that time was something like 25 per cent backing for all notes and the dollar was allowed to “float” with respect to other currencies.
The government defaulted on the Silver certificates by 1968; up until that time it was popular to redeem them for the large supply of Silver Dollars which even then were worth a premium over silver bullion. For a time, silver dust granules were substituted, and completely repudiated shortly thereafter.
Still, the official stock of US gold stands at something like 262 million ounces, which at current prices might not even buy GM; a very large amount of the worlds gold (many countries keep theirs in the US for safekeeping) is held at the New York Federal Reserve under the streets of Manhattan.
Frankly, gold is kind of strange. At great expense, we dig it up out of the ground, melt it into bars, and then bury it again. Still, there are no tales of treasure hunters seeking some long forgotten monarchs checkbook…
I wen to my roommate w/what you folks first responded…She still contridicted & told me I’d better go study up on it before I spoke because she was sure!! That’s what I’m doing! Thanks for the truth with all those facts to back them even!!! i just printed it all up, & will show her!!! thais is an awesome place to come, when stuck in a quabble w/someone about something!!!
This WHOLE subject came up, becuase I “like a dummy” bought some coins I saw on TV…Withe the holographic lady liberty on the back…I got them, they were beautiful, except I got duped…the commercial specifically said “New from the American Mint” which naturally would make it an American coin…It wasn’t even a U.s. coin!!! It was from 'Republic of Liberia. Thus, we taled about Liberians using U.s. dollars as their appointed form of currancy…Now, both being the u.s. dollar…Could I technically take it to Liberia & use it…Would it be the same worth as a 10.00 bill is to us…(it is a 10 dollar coin).
Hmmm… reading the responses here has triggered off a side question, which I will pose if pati12812 doesn’t mind.
What does “strongest currency in the world” actually mean? We hear a lot about currencies strenthening and weakening against each other, which is clear enough. But how does one go about actually saying that one currency is stronger than another in absolute terms?
Actually, on second thoughts, my question would probably be better of in GQ, as it in no way relates to Cecil’s column.
So, I shall take it there. You may all now point at my departing back and snigger
Yes, who put’s these ‘rankings’ on the currencies? Is it because we have a strong economy? Or because the dollar is worth so much more than some other countries monies? Like I know mexico, they love to get american money, it cashes into alot of pesos for them!
is that the correct statistic? Our dollar is worth much more than Mexico money, but it is worth less than the english money? Or is it the other way around?
To avoid hijacking pati12812’s thread, I’ve started a new one with my question here, in GQ.
But before I run off again, I’ll just add that the general opinion so far from the masses (3 whole replies!) is that ranking depends on purchasing power. One such system listed puts the dollar in fifth place.
Oh, and pati - you are right: one pound sterling is worth more than a US dollar, which in turn is worth more than a peso. It seemed only fair I answer that since I have so shamelessy burst in here. Now I really will leave before you chase me out.
NEVER buy coins or anything coinlike from anywhere but a recognized coin dealer in your area. Specifically, avoid anything in sunday magazine supplements, popular non-coin magazines or any painted over coins or anything that says ‘liberia’ on it, etc. etc.
“5 Real Old Coins for only $$$” ads you see in newspapers, TV and magazines are simply scams. The markup is absurd. Old coins have a mature market and are traded much like commodities and that’s where the hucksters buy them, and charge outrageous prices for them.
http://www.coinworld.com should provide several links to recognized coin dealers online.
http://www.tulving.com
http://www.jandm.com
are bullion dealers which have reasonable prices for just about any type of coins or bullion you might be interested in.
Tedster As usual, you really do a nice job on the specifics. Well written.
I think you might rethink giving links to specific coin dealer’s sites. Just my opinion.
I know I shouldn’t have bought the coins…Now, but at the time, the commercial made it sound like they WERE American coins…& truthfully I didn’t buy for the investment value, I just thought they were pretty, and the unfounded patriotism that I have discovered in myself since 9/11 probably weighed in a bit too…Which makes me more bothered about it because, I was into the whole USA thing, not just the “holographic” coin. So I almost want to send them back, on principle, becuase the ad definitely gave the impression that “American Mint” was not only an American Company, But an heirloom like distibutor of authentic American coins…Not a shammy, sham of a company selling coins from some obscure African country that have American tributal themes (of questionable currency status at that)…
Is tributal a word? I hust reread my post & thought it looked like I meant the word tribunal…No, I meant like ‘having the qualities of a TRIBUTE’…not a Tribe.
That’s one of those word I kind of add the ‘al’ suffix & call it a word…But in this case it looked confusing when it was being used…I suppose if my damn dictionary wasn’t in the car, I’d go look it up!