Comments on: Bob Prechter: Gold Is Still Money http://www.tradersnarrative.com/bob-prechter-gold-is-still-money-2619.html Freshly squeezed market commentary & analysis Sat, 21 Nov 2009 13:34:19 +0000 http://wordpress.org/?v=2.0.2 by: dacian http://www.tradersnarrative.com/bob-prechter-gold-is-still-money-2619.html#comment-40360 Sun, 31 May 2009 08:42:56 +0000 http://www.tradersnarrative.com/bob-prechter-gold-is-still-money-2619.html#comment-40360 I completely agree with you Russ from a "technical" and pragmatic point of view; though, there is a valid point which is made in that the government can't stop printing those bills in more amounts than necessary (political issues) which has moral implications. I completely agree with you Russ from a “technical” and pragmatic point of view; though, there is a valid point which is made in that the government can’t stop printing those bills in more amounts than necessary (political issues) which has moral implications.

]]> by: Russ Abbott http://www.tradersnarrative.com/bob-prechter-gold-is-still-money-2619.html#comment-40359 Sun, 31 May 2009 07:22:44 +0000 http://www.tradersnarrative.com/bob-prechter-gold-is-still-money-2619.html#comment-40359 Currency is not a government promise of anything. Currency is a unit of measure of value that the government requires that we use. It's important to have such a unit of measure so that economic value can be exchanged. Without such a standard unit, the economy couldn't function. So all the government does is to require that whenever we make economic agreements, we express the value of those agreements in these standardized forms, i.e., that we express our economic agreements in terms of "legal tender for all debts public and private" as it says on our money. In the US that form is the dollar. Money has no other explicit or implied value. Gold is not a good choice for these units of value because the supply grows more slowly than the need. As the economy grows we need more "money" so that we can exchange more goods and services. If we limit ourselves to paying each other in gold, then as the economy grows the cost in gold of everything would continually decrease -- because there would be less and less gold to use for each exchange. Another way of putting this is that gold would rise in value because a unit of gold would buy more and more. This is so because the amount of gold available will become smaller and smaller compared to the amount of economic goods and services it is being used to value. This is classic deflation, which kills economies. Deflation kills economies because if you own gold you will want to wait as long as possible to spend it since its value is continually increasing. So economic exchange stagnates as everyone puts off making purchase agreements. Why buy today when it will be cheaper (my gold will go farther) tomorrow? Currency is not a government promise of anything. Currency is a unit of measure of value that the government requires that we use. It’s important to have such a unit of measure so that economic value can be exchanged. Without such a standard unit, the economy couldn’t function. So all the government does is to require that whenever we make economic agreements, we express the value of those agreements in these standardized forms, i.e., that we express our economic agreements in terms of “legal tender for all debts public and private” as it says on our money. In the US that form is the dollar. Money has no other explicit or implied value.

Gold is not a good choice for these units of value because the supply grows more slowly than the need. As the economy grows we need more “money” so that we can exchange more goods and services. If we limit ourselves to paying each other in gold, then as the economy grows the cost in gold of everything would continually decrease — because there would be less and less gold to use for each exchange. Another way of putting this is that gold would rise in value because a unit of gold would buy more and more. This is so because the amount of gold available will become smaller and smaller compared to the amount of economic goods and services it is being used to value.

This is classic deflation, which kills economies. Deflation kills economies because if you own gold you will want to wait as long as possible to spend it since its value is continually increasing. So economic exchange stagnates as everyone puts off making purchase agreements. Why buy today when it will be cheaper (my gold will go farther) tomorrow?

]]> by: dacian http://www.tradersnarrative.com/bob-prechter-gold-is-still-money-2619.html#comment-40300 Sat, 30 May 2009 19:08:14 +0000 http://www.tradersnarrative.com/bob-prechter-gold-is-still-money-2619.html#comment-40300 Hi, "The free market always chooses the best possible form, or forms, of money." I don't know about that...the market is guessing or trying the best; how can one prove a market choice is best? what's best, optimal? markets are rather pragmatic. "The only sound monetary system is a voluntary one." I don't agree; a voluntary monetary system is the most "moral", but not sure it's a sound one (from a technical point of view). I don't know how to put it (ie fortunately or not), our societies don't advance on "moral" aspects all the time (moral is a temporary and relative to people customs. I'm not sure a gold standard is very pragmatic choice today; there just isn't enough gold in the world for 6 billion people, hence the money (gold) will be so scarce that everybody will hoard, hence a permanent deflation with very low consumption. There is a lot of talk bout this gold standard, but I wanted to offer a different point of view :) Hi,

“The free market always chooses the best possible form, or forms, of money.”

I don’t know about that…the market is guessing or trying the best; how can one prove a market choice is best? what’s best, optimal? markets are rather pragmatic.

“The only sound monetary system is a voluntary one.”

I don’t agree; a voluntary monetary system is the most “moral”, but not sure it’s a sound one (from a technical point of view). I don’t know how to put it (ie fortunately or not), our societies don’t advance on “moral” aspects all the time (moral is a temporary and relative to people customs.

I’m not sure a gold standard is very pragmatic choice today; there just isn’t enough gold in the world for 6 billion people, hence the money (gold) will be so scarce that everybody will hoard, hence a permanent deflation with very low consumption.

There is a lot of talk bout this gold standard, but I wanted to offer a different point of view :)

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