Loaned, sold, gone - and doomed

[ensho]

http://www.atimes.com/atimes/Global_Economy/JL25Dj01.html


-snip-

Cleverly, I reply, "I don't know if you are aware of it or not, my dear fellow, but the total amount of gold held by the government/Fed is only about 261 million ounces! That's all! Less than one ounce per person in the USA!"

-snip-

Undaunted, I went on, "And at $800 an ounce, that 261 million ounces comes to a value of $209 billion! Hahaha! A lousy $209 billion! Hahahaha!"

At this, I stand up and address the other patrons of the bar, saying, "And already something like $8.5 trillion over the next years in new spending/guarantees have been proposed! Not to mention the original $700 billion in TARP scams and schemes already spent, and more hundreds of billions in bailouts of every kind every day!"

Really warming up to it, I bellow, "Hell, the projected federal budget deficit for next year alone is upwards of a trillion dollars, almost five times as much as the total value of all the gold we have as a nation! And this is just the budget deficit! Hahaha! We're freaking doomed!"
-long snip-
------------------------------


our dollars are empty

[rockymountaindem]

1. Our money has not been backed by gold since the Nixon administration

This doesn't really matter.

[gratuitous]

2. Down in front!

These are always amusing little tirades. Did he get to the part about the Germans bombing Pearl Harbor yet?

[ensho]

5. so you didn't read the long snip

nt

[ensho]

3. as I said our dollars are empty

nt

[hobbit709]

4. Our money used to be backed with gold

Then it was backed by silver.
Now all it says on the bill is "IN GOD WE TRUST"
We know what that's worth.

[Javaman]

6. Like they say...

shit in one hand and wish in the other. See which fills up first. LOL

[TechBear_Seattle]

7. Like every other currency on the planet, the US dollar is "fiat" money

That basically means that our currency is not backed by any material resource and has value only because someone says it has value. Fiat money is rather like a stock: there is no intrinsic value, only the value given it by an open bidding process and how it is more or less desirable than other similar paper. When the corporation (or country) is well run, has a low debt-to-income ratio and is generally doing well, the value is high. When the corporation (or country) is poorly run, has a high debt-to-income ratio and is generally not doing well, the value is low.

I learned that in junior high school, in a "free enterprise" class that had been mandatory since the Cold War.

Still, the article is pretty funny. I especially like the blurb about the author at the bottom, about how the author is "the editor of The Mogambo Guru economic newsletter - an avocational exercise to heap disrespect on those who desperately deserve it."

[eleny]

8. So our collective purchasing power determines the value of our dollar?

[TechBear_Seattle]

14. It is not that clear-cut

First, a distinction must be made between domestic value and international value. Domestic value is the value of a currency within its country of issue; international value is the value of a currency as it is traded on the open currency market.

Domestic value is determined by a currencies buying power. When prices go up, the value of the currency goes down because it buys less. When prices go down (hey, it could happen!), the value of the currency goes up because it buys more. This is a bit easier to think of if you use a metric such as your current wage. Let's say you earn $12 an hour, or 20 cents a minute. Last month, some item cost $2, or ten minutes of work. Today, the same item costs $2.20, or 11 minutes of work. The domestic value of the dollar in your case has dropped 10%. It is a bit more complicated when you try to come up with a domestic value on a national scale, but the basic principle is the same.

International value is actually easier to determine because you have international currency markets. These markets create an exchange rate in exactly the same way that stock markets create an exchange rate between stocks and currency. When demand for common shares of XYZ Corp. is high, the price of those shares increases. When demand for the stock decreases, the price decreases. Same thing with a nation's currency: When demand for the US dollar is high, the dollar has increasing value. When demand is low, the dollar has decreasing value.

What drives the market is PERCEIVED worth. A one dollar bill, like a one share certificate of stock, has very little (if any) intrinsic value. There is nothing backing it except the issuer's promise that it is worth something, and the acceptor's faith in that promise.

[eleny]

18. Thank you, TS

I had no idea that money could be valued differently on a national and then a worldwide basis.

[CTyankee]

16. It's not "Fabbrica Italia Automobile Torino"?

Darn, I was gonna buy stock in that!

[Doc_Technical]

20. Accually,it stands for;

Fix
It
Again
Tony

[CTyankee]

21. Love it! I was in Torino in May. I never saw such BIG cars in an Italian city!

They weren't American monsters cars, but they had some big Euro cars, not just Italian, but also British and German.

[dysfunctional press]

9. what's gold got to do with it?

nothing.

whenever you're ready, you can join the rest of us in the 21st century...look around- there's got to be a bridge to the future somewhere that you can drive your packard over.

[ensho]

11. you can be comfortable with empty money, I can't

nt

[alcibiades_mystery]

15. Gold is just as arbitrary as a universal equivalent as anything else

You're fetishizing.

[dysfunctional press]

19. i guess that's your problem then...

my money still seems to be good at all the stores, tho.

[Historic NY]

10. Our money has other uses.....

[Greyhound]

12. The entire global economy is such.

Historically, our fiat currency has lasted longer than any other, but the charade is over now.

Monetizing gold would be even more disastrous.

[JNelson6563]

13. I *knew* it was Mogambo.

Fun financial commentary.

Julie

[Ioo]

17. Back in my day we got 2 hogsheads to a bushel, and we liked it

We liked it just fine...