The Story of Modern Banking & Economic System - For noobs and uninformed alike

actually through history the ability to control gold by tyrants and kings is more prevalent then that of fiat. If you held only 30% or 40% of a societies gold the free market wouldn't decide prices you would.

the money stock shouldn't stay constant that would lead to deflation which slowly kills any economy.Money should increase and decrease along with available goods and services. that is the only way to stabilize currency

 

So, I guess we just need some leaders who will only increase the money stock along with available goods and services? I guess that's the crux of it all.

 

yes, i believe this is the only way to have a fair system of any kind.Some say its impossible, but with complete transparency and a diligent populist in can be achieved.

“All of the perplexities, confusion, and distress in America arises, not from the defects of the Constitution or Confederation, not from want of honor or virtue, so much as from downright ignorance of the nature of coin, credit, and circulation.”

John Adams, Founding Father of the American Constitution

 

sorry i meant that as a question to you

 

Read the Mystery of Banking. You will find answers to a lot of your questions:
http://mises.org/books/mysteryofbanking.pdf

Here is one chapter:

3. THE PROPER QUALITIES OF MONEY
Which commodities are picked as money on the market?
Which commodities will be subject to a spiral of use as a medium?
Clearly, it will be those commodities most useful as money in any
given society. Through the centuries, many commodities have
been selected as money on the market. Fish on the Atlantic seacoast
of colonial North America, beaver in the Old Northwest,
and tobacco in the Southern colonies were chosen as money. In
other cultures, salt, sugar, cattle, iron hoes, tea, cowrie shells, and
many other commodities have been chosen on the market. Many
banks display money museums which exhibit various forms of
money over the centuries.
Amid this variety of moneys, it is possible to analyze the qualities
which led the market to choose that particular commodity as
money. In the first place, individuals do not pick the medium of
exchange out of thin air. They will overcome the double coincidence
of wants of barter by picking a commodity which is
already in widespread use for its own sake. In short, they will
pick a commodity in heavy demand, which shoemakers and others
will be likely to accept in exchange from the very start of the
money-choosing process. Second, they will pick a commodity
which is highly divisible, so that small chunks of other goods can
be bought, and size of purchases can be flexible. For this they
6 The Mystery of Banking
need a commodity which technologically does not lose its quotal
value when divided into small pieces. For that reason a house or
a tractor, being highly indivisible, is not likely to be chosen as
money, whereas butter, for example, is highly divisible and at least
scores heavily as a money for this particular quality.
Demand and divisibility are not the only criteria. It is also
important for people to be able to carry the money commodity
around in order to facilitate purchases. To be easily portable,
then, a commodity must have high value per unit weight. To have
high value per unit weight, however, requires a good which is not
only in great demand but also relatively scarce, since an intense
demand combined with a relatively scarce supply will yield a high
price, or high value per unit weight.
Finally, the money commodity should be highly durable, so
that it can serve as a store of value for a long time. The holder of
money should not only be assured of being able to purchase other
products right now, but also indefinitely into the future. Therefore,
butter, fish, eggs, and so on fail on the question of durability.
A fascinating example of an unexpected development of a
money commodity in modern times occurred in German POW
camps during World War II. In these camps, supply of various
goods was fixed by external conditions: CARE packages, rations,
etc. But after receiving the rations, the prisoners began exchanging
what they didn’t want for what they particularly needed, until
soon there was an elaborate price system for every product, each
in terms of what had evolved as the money commodity: cigarettes.
Prices in terms of cigarettes fluctuated in accordance with
changing supply and demand.
Cigarettes were clearly the most “moneylike” products available
in the camps. They were in high demand for their own sake,
they were divisible, portable, and in high value per unit weight.
They were not very durable, since they crumpled easily, but they
could make do in the few years of the camps’ existence.1
Money: Its Importance and Origins 7
1See the justly famous article by R.A. Radford, “The Economic Organization
of a P.O.W. Camp,” Economica (November 1945): 189–201.
2At current writing, silver is approximately $13 an ounce, and the
pound is about $1.50, which means that the British “pound sterling,” once
In all countries and all civilizations, two commodities have
been dominant whenever they were available to compete as moneys
with other commodities: gold and silver.
At first, gold and silver were highly prized only for their luster
and ornamental value. They were always in great demand.
Second, they were always relatively scarce, and hence valuable
per unit of weight. And for that reason they were portable as well.
They were also divisible, and could be sliced into thin segments
without losing their pro rata value. Finally, silver or gold were
blended with small amounts of alloy to harden them, and since
they did not corrode, they would last almost forever.
Thus, because gold and silver are supremely “moneylike”
commodities, they are selected by markets as money if they are
available. Proponents of the gold standard do not suffer from a
mysterious “gold fetish.” They simply recognize that gold has
always been selected by the market as money throughout history.
Generally, gold and silver have both been moneys, side-byside.
Since gold has always been far scarcer and also in greater
demand than silver, it has always commanded a higher price, and
tends to be money in larger transactions, while silver has been
used in smaller exchanges. Because of its higher price, gold has
often been selected as the unit of account, although this has not
always been true. The difficulties of mining gold, which makes its
production limited, make its long-term value relatively more stable
than silver.

 

Thanks for that.