thanks nasor. u must have been writing that while i was writing this. Thanks. thats a big help. But we still have inflation dont we! Why?? (sorry. i have many questions) Please Register or Log in to view the hidden image!
Bollocks. The faith and credit of the American people is absolutely meaningless beyond the USA's borders. When a bank starts up now, they need about 15% of their opening value in gold, as a back-up. Like the USA, however, that gold is never touched, never enters circulation as part of the economy. But it must remain in place as some solid measure, an emergency fund to pay sudden losses or immediately payable debts. Pete: As I explained earlier, the value of gold, silver, and copper is based on them being noble metals.
Yes, I'm quite sure. You can check it out yourself if you don't believe me. While I'm sure it would matter to someone if all the gold in fort knox was stolen, it wouldn't affect the value of the american dollar. You could buy up all the gold in fort knox with only a tiny fraction of the dollars in circulation. I don't understand why you don't think the system could work. It's no different than any other system of money. We decide that pieces of paper created by the united states government have value, so we use them as money. Why not use dollars? It's no different from using gold or silver. It's not like gold or silver has any real value; you can't eat it and it's not a very good building material. You can't forge weapons or build tools out of it. It's just something that we decided to use as money. Now we use dollars, yen, marks, or whatever in place of the gold.
The faith and credit of the american people is still quite meaningful beyond the USA's borders, which is why the dollar is the most commonly used foreign currency in other countries. If you don't want to believe me, perhaps you would believe the U.S. Mint web page. http://www.usmint.gov/about_the_mint/mint_history/index.cfm?flash=no&action=1900 Note the entry for 1971.
(on gold and silver) You can!! And it would be a very sturdy object (i think). This brings us to the point i was making with the thread. Gold and silver are only valuable because they look like they should be and are relatively rare. It comes down to people perceptions, like u said i think Nasor. i can beleive that about money not being linked to gold and silver now. it makes sense. but how can u buy up all the gold in fort knox with only a fraction of the money in the world? because more gold has been collected and the amount of money in circulation is at a set standard i.e. the money in circulation relates to the amount of gold there was then , but there is more now. I appreciate ur point about the noble metals adam but i think that before much was known about them they were valued and used as currency.Originally they probably used pigs and cows etc etc but when someone found gold they found they could buy a whole cow with it. (something along these lines) Why was it seen as valuable?? because it looks like it should be. its a pscyhological value.
That was an interesting article, but I don't see how it disputes the fact that United States money in not backed by gold. It explicitly stated several times that US money is not backed by gold. About inflation: inflation occurs when either 1) the money supply increases without production increasing or 2) production decreases without the money supply also decreasing. The Federal Reserve is constantly tinkering with the money supply in the united states to prevent inflation.
It does actually say nasor that banks do have about 15% of their value, in gold in vaults.I think it also says that all banks do have some gold in them.
Ultimately, gold is the only base currency. Everyone relies on it in the end. Paper and electrons change daily, and could collapse entirely; then you're left with only gold. That's why banks and nations keep it. And yes, the US retains a huge stack of gold. The US Federal Reserve has quite possibly the largest hoard of gold gathered in any one place.
Why are u so angry adam?? Please Register or Log in to view the hidden image! you dont have to talk like were stupid you know Please Register or Log in to view the hidden image! were having a conversation. thats all
Yes, the Federal Reserve has a huge pile of gold - but again, it's not backing our money. The fact that as you put it 'paper and electrons change daily' is the result of currency not being backed by gold. If our money was backed by gold then the value of the dollar would never fluctuate - it would always be exactly equal to 1 oz (or whatever amount) or gold. Because the value of the dollar isn't tied to the value of gold, its value is free to 'float' around. Hence the term 'floating dollar' that appeared in the article.
A few things about values, inflation, etc. When your currency is tied to gold, you will always exchange your printed money for some specific amount of gold. Your money is really just an ownership title that says you own some certain amount of gold, and when you use your money to buy something you are in effect really paying in gold. This means that the value of your currency is tied to the value of gold; if gold value goes down, your printed money is worth less. Also, if you print any new money without also increasing your gold supply then your money will be worth less because each dollar (or whatever) will represent a smaller fraction of your total gold supply. If your currency isn't tied to the gold standard than changes in the price of gold won't affect the value of your currency. This is why people are now free to mine or own gold in the united states. Gold has value, and dollars also have value. You can exchange one for the other, but because their values aren't linked the rate of exchange from one to the other will fluctuate. In theory the value of gold could fall to zero (look! I have a machine that makes free gold!) and the value of the dollar would not change. It also goes the other way – dollar values could fall while gold remained the same. When the dollar is losing value because of inflation people will often convert their dollars into gold, since the value of gold might not be changing much. They then convert their gold back into dollars when the inflation has stopped. Also, the united states isn't hording gold in an effort to dominate other countries. You're free to buy or sell as much gold as you want on US commodities markets.
are u sure!?? They could be. really!? i didnt know that. thanks for ur help. BTW - if eough money was exchanged for gold regularly the 2 would become linked wouldnt they? The value of both would stabilise. So how come america allow people to trade in gold?? because they have so much of it that ultimately they control the value and any other alterations in value would be minute?
The exchange rate between gold and dollars is relatively stable because the demand for gold doesn't change much. It could move up or down, though; if everyone suddenly started trying to buy gold then the price of gold would go up, while if everyone started selling gold then the price would go down. It would be basic supply and demand - you pay more for something if everyone wants it, and less if no one wants it. Since we (in the united states) define dollars as the units of value, then we would say that gold has become less valuable if gold prices drop. Someone who defines values based on gold (like the united states did before 1971) would say that the dollar have become more valuable if gold prices went down. Because the price of gold in the united states just doesn't affect the value of the dollar.