Full Money Market

Archive for the ‘fiat currencies’ Category

Since we’ve been using them for decades as a manufacturing base for trinkets and junk, paying them in a fiat currency hot off the presses?

doesnt matter…..ditch them…

they r ruining entire world with their exponential increase in population and using the resources.

Just imagine World minus China! I like it

Say there are two countries each using it’s own fiat currency. How is the black market exchange rate between these currencies determined? What determines the value of fiat currency?

There are a number of facotrs – supply and demand being one. If one country exports more than it imports, it’s currency will be in demand as people need it to pay for their imports and therefore it rises. In theory it would rise to the point that imports and exports balance in the long run.

Purchasing Power Parity. If you buy a beer in Canada for $5 but it costs $1 in the US then Canadians go to America to buy beer and there is a demand for US $ and a glut of CAD$ until the cost is effectively the same – on a basket of goods.

Interest rates – these effect exchange as people like to bank in countries with high interest rates. Ultimately the exchange rate can vary to equalize the situation.

Black markets exist only where there is no free exchange. Lets say Cuba, it has an artificial rate of say $1 Cuban peso to $1. People in Cuba want $ but cant get them easily and so will pay more. The rate is governed by supply and perception. If people think their country is unstable or their money is crap, they are more desperate and happy to get less dollars for their peso.

The real way exchange rates are struck is based on market perception. The traders look at data and make a guess which is why there is so much volatility.

The value of any currency is perception. If you look at a $100 bill, what is it really? A piece of paper and nothing more. The general public have a perception that it is worth 10 dvds or a tyre and are happy to swap it. As long as that perception exists you can trade it, earn it and spend it.

What if China demands trade debt payment in currency backed by precious metal (The Gold Standard) & claims
all the industrial revenue from Chinese produced goods
until USA withdraws all military forces to North America
or valid currency is recieved for debt. What will your cash
buy not made in China? Will all military return to USA?

wow! I’m surprised I understood what you said, lol!

Well, I suppose that all depends on who would be president at the time, and who was in the senate and house of Representatives. Also rests upon the reaction of individuals. If there were people in china who slipped us goods "beneath the table," and out of their leader’s eyes in an underground trade route, what would the world leader’s reactions be? Would American leaders actually try to STOP the underground trade route, even though it would profit the country, even in an un-honest way? Would this even be the cause of war, imposed by American leaders to stop the dishonest, though safe underground trade?

OR could it be that America could choose the tactics used in the South during the Civil War? Since the North had all of the industry, the South had to use old tactics used in the olden days, such as pulling out old spindles and making their own clothes. Could it be that should such a situation be presented to us, the country could turn around and become completely self-sufficient?

Or, (the most unlikely) we could ACTUALLY cooperate and return all military to our own country.

support your answer

Yes, it will continue to exist in one way or another. Even gold is a fiat currency as it has no value except that placed on it by man. The only difference is that it if harder to increase the supply.

There is no reason we should be limiting our economic activity based on how much of a substance we have taken out of holes in the ground and put into other holes in the ground.

Fist money, in spite of its ups and sowns has proven to be an effetive way to bring more spending power to more people than any other method.

[For anti-Paulites: Fed Chief Ben Bernanke admitted that our fiat currency has caused much of the current economic climate]

http://biz.yahoo.com/ap/080715/world_markets.html

Have the Federal Reserve Board’s actions brought this about? Directly/Indirectly? Please explain.

Thanks.

…

I wouldn’t blame the fiat dollar as much as I would blame the subprime crises and financial institution failures. Do you have a link that states Bernanke’s admittance that fiat currency caused the current economic climate? I don’t think he said that.

There is nothing wrong with fiat currency as long as it is stable, reliable, redeemable, and not easily counterfeited. Due to the current condition the dollar has been very volatile. There was also a lot of volatility when we were on the Gold Standard.

As a Ron Paul supporter, I don’t believe in a strict gold standard. I think a gold standard combined with privatization of money would be the best case. Even Hayek made a strong agrument for fiat money and privitazation of it.

It is debatable whether Greenspans easy money policy between 2002-2004 due to 9/11 and an impending recession contributed to the housing bubble.

There are no non-fiat currencies, technically. But the U.S. dollar enjoys quasi-fiat status because it is the worldwide reserve currency due to petroleum transactions being denominated in dollars. We are also the hired thugs for the oil monarchies in exchange for dollar denominated international oil sales. We can buy billions of China’s exports in dollars (not having to sell them something in Yuan before or after) because they can then turn around and buy oil (or U.S. treasury bonds) with our dollars. Therefore, oil backs the dollar. That’s why oil prices rise when the dollar falls and it’s why we invaded Iraq when Saddam started selling his oil in Euros (one of Paul Bremer’s first decrees as Governor of Iraq in the Coalition Provisional Authority was to declare all Iraqi oil transactions henceforth to be denominated in dollars).

Rather than Saddam’s Euro oil sales wrecking our financial system as they feared, Wall Street Ponzi-financial engineering and the President’s irresponsible foreign and domestic policies did it all on their own. It’s astonishing.

http://www.dailyreckoning.com/fiat-currency/

Yes, not because there is anything inherently wrong with it. The problem is human nature. As the philosophers say " Out of the crooked timber of humanity, nothing straight was ever built".

Once the politicians realize they can print money to buy votes its all over. Just look at the current US economic troubles.

No reputable economist is going to opt for the gold standard.

http://www.pkarchive.org/cranks/goldbug.html

Even Alan Greenspan, ex-chairman of the Fed, who once wrote a rant in favor of the gold standard

http://www.constitution.org/mon/greenspan_gold.htm

agrees that it wouldn’t work for today’s world.

http://www.gold-eagle.com/greenspan011098.html

http://www.lewrockwell.com/paul/paul236.html

All you would have to do is convince everyone you do business with to accept gold or silver in place of US Dollars. Euros, or whatever the local currency is. It wouldn’t work because most people do not have a specific idea how much gold or silver to accept in place of a dollar.
I, personally, would accept gold or silver in place of US dollars because I do have a specific idea of what the equivalent should be. It would be like dealing in a foreign currency – You would need to establish and agree upon an exchange rate.

All you would have to do is convince everyone you do business with to accept gold or silver in place of US Dollars. Euros, or whatever the local currency is. It wouldn’t work because most people do not have a specific idea how much gold or silver to accept in place of a dollar.
I, personally, would accept gold or silver in place of US dollars because I do have a specific idea of what the equivalent should be. It would be like dealing in a foreign currency – You would need to establish and agree upon an exchange rate.