Pardon my English as a 3rd language – it means aside from creating $100 dollars out of thin air I also create conditions in which you ( generally speaking) have no choice but to borrow $99 of those $100 (I got to keep $1 as a “reserve” wink-wink). One of the factors driving people to borrow is having a minimum wage that does not follow the real value of money – or, if you prefer, real value of your work expressed in terms of productivity.
There’s your problem. People are always complaining there is never enough god to go around.
I’m still having problems following you. There is no “real value of money.” Money only has meaning from the amount of purchasing power it has. The flaw in the OP was stating that silver had a “real value” that could be applied.
The “real value of your work expressed in terms of productivity” is also a concept that is totally separate from the value of silver or precious metals, but closer to the amount of purchasing power that a dollar has. Warren’s argument is roughly that workers have seen their wages grow much less than capital because of non-labor based productivity improvements over the last half century. This is true, and she was not arguing that the minimum wage must be raised to match productivity gains, just that the government has not taken this into account as a factor when determining minimum wage.
Once again, this is not in any way similar to the Ron Paul school of calling for the end of fiat money, something that is truly insane and truly does take you out of any argument over the economy. Of course value is created out of thin air: only people who believe value must be tied to the amount of precious metal we have mined and refined and stored in a vault think otherwise.
I take issue with your inclusion of “non-labor” when describing productivity improvements – I’m not even sure what that means, and certainly Warren isn’t using that phrase – but agree that it has nothing to do with nutty ideas about the gold standard (or is it a silver standard?).
Look, the notion that fiat money is really debt or some such is just silly.
Money is a good that you use as a medium of exchange. Gold is a good. It can be used as a medium of exchange. Therefore, gold can be used as money. Cowrie shells are a good. They can be used as a medium of exchange. Cowrie shells can be used as money.
The important part that makes a good “money” is that you don’t actually care about the good itself. You accept gold ingots as payment for your baskets, not because you need gold ingots, but because you can take the gold ingots to anyone else in your village, and exchange those gold ingots for their goods.
So yeah, we could refuse to use paper money or credit cards or bank accounts, and go back to using gold ingots as money, or cacao beans, or cows, or whiskey, or cigarettes. But gold ingots make pretty good money–you can subdivide them, you can melt them down, they’re compact, they’re durable, they’re hard to fake, they’re portable, and so on.
But we aren’t talking about using gold ingots as money, are we? We’re talking about using pieces of paper with words written on them “I promise to give the bearer of this piece of paper X weight of gold on demand”. This is what’s called a “gold standard”, and it is not the same thing as using gold as money. Anyone can see that a piece of paper with a promise to pay a certain weight of gold is worth only as much as the promise is worth.
And it turns out, in real life, all countries that printed paper money “backed by gold” went off the gold standard in two seconds when a crisis hits. Oh, the money was still backed by gold. In theory. Except you couldn’t get the gold, because there was a war on. So what good does your piece of paper do you now?
It turns out that in today’s system of fiat money, you can get paid in gold. All you have to do is take your paycheck down to the coin shop, and you can freely exchange your worthless paper and/or electronic money for gold. And when it comes time to pay your taxes, all you have to do is figure out how many dollars you owe, take your gold and buy that amount of dollars with it (another way to put this is you sell the gold), and send those dollars to the government.
But back in the days when we had an ostensible gold standard it was actually illegal for citizens to own gold! And that’s because since the currency was backed by gold, and the government absolutely had to control the currency, it absolutely had to control the gold market. And so with fiat money we have a free market for gold, with gold standard money we cannot.
The gold standard is a nonsense idea, based on the idea that if the government regulates the value of gold–declaring that a certain weight of gold is always worth exactly a certain number of dollars–that we’d have economic stability. Except that’s just nonsense, because during the times we had gold currency we had depressions, recessions, panics, booms, busts, and everything in between. But what we mostly had was deflation, because the economy grew faster than the amount of gold produced, and so gold increased in value relative to the rest of the economy. And this change in the value of money is just as disastrous for the economy as inflation. You’ve tied the value of the dollar to one good, except the value of that good will increase or decrease over time by the laws of supply and demand. And so the government will have to control the supply and demand for that good if they want to control the money supply.
You are never going to get paid in gold coins, you are never going to buy your grocery with gold coins, you are never going to pay your taxes with gold coins. At most you could use pieces of paper that represent gold coins, or rather, electronic ledger entries that represent pieces of paper that represent gold coins.
I’d rather have honest fiat money that is backed by nothing more than the government saying that the fiat money is money, because that’s exactly what paper gold standard money is anyway. Except with honest fiat money we can have a free market for gold.
If we look back to the 1840’s, the British Empire solved the problem of a silver shortage witha very simple expedient - they went into dealing drugs.
China would sell tea to Europe, but it demanded silver in return. Pretty soon it was sucking all the silver out of Europe, causing a significant shortage. Britain found a commodity the Chinese would pay silver for - opium. They started shipping opium from their colonies to China; when China objected that this was not a good thing for its citizens, the Europeans went to war to enforce their right to free trade.
Maybe that’s what the USa needs to do - take a lesson from the British Empire, and back their currency with Acapulco Gold. All their problems will be solved. Or at least, it those problems will not seem as urgent…
Oh, but I wanted a peanut!
This is clearly not the case. People actually do have a pretty good idea of how economics works. The trick is getting masses of ignoramuses to not influence econonmic policy with what they think they know.
Isn’t this knowing how economics works?
It’s more your ignorance of the fractional reserve banking system and basic accounting we cannot forgive.
I (the bank) has to keep $1 (or whatever %) out of every $99 deposited. The remaining $99 I can loan out with interest. The money “created out of thin air” presumably comes from the value created by whatever asset you are using the loan to create - house, business, your education, etc. IOW, you are borrowing $100 and paying back $105 because you think your house will ultimately increase in value to more than $105.
Where problems occur is when the people who borrow all that money either can’t or won’t pay it back. Sort of like in the 2008 financial crisis. If everyone wants their deposits back from the bank all at once, the bank can’t pay all $100 back because it only has $1 on hand.
I’m not sure what minimum wage has to do with anything. According to the BLS:
73.9 million American workers age 16 and over were paid at hourly rates, representing 59.1 percent of all wage and salary workers.
Among those paid by the hour, 1.7 million earned exactly the prevailing Federal minimum wage of $7.25 per hour.
About 2.2 million had wages below the minimum.
The 3.8 million workers with wages at or below the Federal minimum made up %5.2 of all hourly-paid workers.
Among employed teenagers paid by the hour, about 23% earned the minimum wage or less, compared with about 3% of workers age 25 and over
IOW, the number of people who actually earn minimum wage is actually relatively small and they tend to be young people in typical young people McJobs.
Yup, tying money to a limited resource amid an exploding or at least expanding population is a recipe for disaster.
Either it inherently limits the amount of money, which is disasterous, or in the midst of a discovery of large amounts of that resource, it destroys everything tied to the stable value of that money.
“Money” is nothing more than a concept of a means of exchange. An illusion created to enable the stable and consistent means of exchanging any good, service or resource for any other good, service or resource. Gold isn’t money. Gold doesn’t have any value except what is agreed upon within that shared illusion.
That’s what the economy needs. An abolition of this monotheism nonsense and a return to good old-fashioned polytheism.
Yes! Let every man and woman have their own god – or, better still, let them all be gods. That solves the problem of shortage of gods.
Most of the productivity gains have come from the introduction of computers, robotics, and other mechanized devices. That means that companies can produce more with fewer workers. This produces gains for company stockholders and for the economy as a whole but is also part of the reason that as a group middle class and lower class workers have not had gains even equal to inflation for the past 40 years.
I’d like to point out, in 1964 minimum wage was not 5 silver quarters. It was a piece of paper, and 1 silver quarter.
If you worked four hours, you didn’t get any silver quarters at all. Just a piece of paper with a 5 on it.
Someone who worked a typical eight hour day would get a piece of paper with a 10 on it. Again, no silver quarters at all.
A lot of people were paid in cash then, so they would literally be given a piece of paper with a 10 on it. Not silver quarters.
So tell your friend that, and watch them sputter and blurt out random nonsense. It could be fun.
But you could take the piece of paper with the 10 on it to the nearest bank and exchange it for a whole roll of silver quarters.
Back then, there would be no fee and the bank would probably not even care if you had an account there.
I think it’s pretty clear that you owe several beers.
Holy Mother of God!
This is not even funny anymore.
Do you even know what “fiat” means?
You should not just read this - http://paulgrignon.netfirms.com/MoneyasDebt/Money_or_Credit.pdf - or this: http://paulgrignon.netfirms.com/MoneyasDebt/MMM.pdf - considering the deep lack of knowledge you should STUDY this, like, examples on a piece of paper and case works. And, as Soup Nazi says: “Come back, one year!” Then we’ll talk.
But, then, again, the conviction with which you delivered your post, I seriously doubt you can figure it out. You seem to be ideologically linked to this issue; somehow, I have a feeling that being a Democrat or at least thinking of yourself as not being a Republican you cannot possibly accept the factual state of money creation - whereas the whole setup is agnostic of politics. It makes you - and many others on this and similar threads - sort of dogmatic followers without original thought.
Once more - banks can create as much money as we can borrow. That’s it. That’s what fractional reserve banking is all about.
Can you expand on this? Who are the “I” and the “you” you’re referring to here? Who is it you’re saying is forced to borrow the $99, and who is it you’re saying they borrow it from? When does this happen?
Producing more with fewer workers is another way of saying that each worker is more productive, right? I’m not arguing that mechanization and electronicification aren’t responsible for a lot of productivity gains, just that calling it ‘non-labor’ is kind of non-sensical. And the reason it matters – and since you were referencing Elizabeth Warren, I’m very sure she’d agree – is that saying they’re ‘non-labor’ gains both implies that labor doesn’t deserve any of the gains, and that the capture of the gains by capital and upper-income segments is due to vast economic forces beyond anyone’s control.
And, if you think about it, why should mechanization make labor less powerful? Just about anyone can dig a ditch by hand, but it takes (at least some) skill and training to operate an excavator, and it takes even more skill and training to run a 300-ton boring machine. So ditch diggers should be easy to replace, excavator operators less so, and boring machine operators very hard to replace. Which – absent anything else- should lead to higher wages for the more skilled operators, right?
I disagree. I find your half-informed internet educated diatribe hilarious.
By the way. You might want to tone down your posts. Because you are coming across like a lunatic and a jerk.
I already studied fiat money and the banking system in a formally acredited business school.
I’ve also already seen Paul Grignon’s “Money as Debt” videos. Most critics would describe it as activist rhetoric that states what every econ 101 student already knows, but states in a way that is misleading and sisister sounding to people who are ignorant on the subject.
It only seems like conviction because it’s pretty basic stuff that really isn’t disputed outside of fringe elements.
No…that’s not really what fractional reserve banking is all about.
I don’t undestand this libertarian boner against debt and interest. Maybe you can articulate it for us instead of making disparaging comments and posting links to internet radicals?
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When I briefly worked day labor a few years ago, my colleagues told me that the guys operating the heavy machinery (bulldozers etc) get paid fifteen to twenty dollars an hour as opposed to our minimum wage. I thought at the time–and really maybe i should follow up on this–that I ought to get trained on some of that equipment (costs a few hundred) for just in case things go seriously downhill for me someday…