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Old 09-22-2011, 05:27 AM  
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Greenville, SC
Join Date: Jan 2011
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Quote:
Originally Posted by Eddie_T View Post
From investopedia.com:

(Wikipedia)
On August 15, 1971, the United States unilaterally terminated convertibility of the dollar to gold. As a result, "[t]he Bretton Woods system officially ended and the dollar became fully 'fiat currency,' backed by nothing but the promise of the federal government."
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Old 09-22-2011, 08:29 AM  
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Kent, Ohio
Join Date: Nov 2010
Posts: 1,237 | Kudos: +67
Quote:
Originally Posted by YelloJeep View Post
(Wikipedia)
fi?at mon?ey Noun: Inconvertible paper money made legal tender by a government decree.

If you consider a currency that loses half it's purchase power in a span of 25 years "more stable" then that's fine... And yes, I believe that kind of inflation is unstable... And too easily manipulated.
You are right, under the gold standard the gov't could change the "value" of it's paper money but it would be apparent. Under the current system, it is under the radar. It enables the gov't to carry out what I call a "stealth tax". When your cash loses spending power it is the SAME as taking money out of your pocket.
It is readily apparent that you believe currency should be a store of value. That a paper dollar, whether invested or stored in a mattress and forgotten about, should maintain the same value from the time it was acquired to the time it is spent. You treat currency as an asset.

I treat currency as a liability. A $20 bill in my wallet doesn't do a damn thing for me when I'm cold and starving. I have to carry it around, protect it from thieves, protect it from damage. I believe currency is the means of transferring value, not storing it. If my intention is to store value, I purchase an asset, whether that is a gold coin, a house, shares of stock, a savings bond, etc.

You say that when cash loses its spending power, it is the same as taking money out of your pocket. It can only do this if you attempt to use cash as a store of value. But, you are also forced to recognize that this same principal puts money into the pockets of anyone who makes a promise to pay in the future, by reducing the real value of their debt.

What you need to come to grips with is that every problem you have with fiat currency exists so long as any major player uses fiat currency. Any benefit you see with gold currency is eliminated so long as any major player uses fiat currency. You told us exactly how it can happen: With a gold standard, the government can't adjust the value of the dollar easily. Those nations using fiat currencies can. They can adjust the value of their currency to favor their businesses at the expense of our own businesses, and we're left holding the bag.

You've made it abundantly clear that you believe gold has maintained the same buying power throughout the years. Nobody is stopping you from using gold to store value. Go ahead and exchange your dollars for gold, and all of the issues you've complained about are resolved, WITHOUT demanding that the federal government create an economic system that will have the rest of the world robbing us blind.
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