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Replacement system for the Federal Reserve


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#1 Alexander Caldwell

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Posted 13 January 2012 - 02:35 PM

What do you think are possible replacements for the gold system and paper money system?

My opinion is that we should trade raw good in place of those systems. For example 10 2X4's of cherry wood along with 50 pounds of stuffing could be traded for 1 finished chair. When trading with other countries we would trade for the commodities we need rather than having to touch money at all. If we traded with Iran for oil or etc. we i in turn would give them resources they need.

Of course my system would definitely need improving and ways to make it not easily exploitable.

What do you think? What system would you design? What are some flaws you see in my system.

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#2 elmongo2

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Posted 15 January 2012 - 11:06 AM

If you think about it anything or any kind of service that somebody considers to be "of value" can become "currency". That's where trading comes in. I think you're on the track toward the way I see it.
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#3 JosiahK

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Posted 15 January 2012 - 04:48 PM

I don't actually think there's a real advantage to this system. Ultimately substituting gold for dollars just leaves you back where you were before. What's wrong with using money?

Money serves a number of functions that make it more effective than simple bartering. It is called a "medium of exchange" because it allows goods to be traded more easily. Imagine how things work on a commodety trade system: if you want oil and have corn you need to find an oil producer who wants corn. It doesn't matter if half the world wants corn, if the person with the oil doesn't want it you're stuck. However if you use money, half the world gives you money for corn, you give money for oil, and the money goes round the system, making sure that everyone gets a fair return on what they've produced.

A second advantage of money is that it is a store of value. Suppose that you produce excellent quality grapes. They're in high demand, and you're fine during the harvest. What do you do for the rest of the year? Grapes don't keep. But if you sell them, you can keep the money. Money acts as a store of value, basically saying that the economy owes you a certain quantity of goods and services for the grapes you provided, even if you don't need them imediately.

The third task of money is to provide for a single unit of account. Imagine if you had to calculate your wealth, and you said "X gold, Y grapes, Z acres of land..." It's very hard to convert grapes into land. (You can do it to some extent with gold, but again only if you're using gold as money anyway). However when everything is valued in a single central quantity such as dollars those calculations are so much easier.
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#4 elmongo2

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Posted 15 January 2012 - 07:56 PM

Just thought I'd bring this up: A woman's been living for 16 years without money.....

http://shine.yahoo.com/work-money/german-grandmother-lives-money-free-never-happier-173900934.html
People do dumb things. And I'm not talking about paying too much for car insurance either.

#5 the_patriot11

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Posted 15 January 2012 - 08:54 PM

A second advantage of money is that it is a store of value. Suppose that you produce excellent quality grapes. They're in high demand, and you're fine during the harvest. What do you do for the rest of the year? Grapes don't keep. But if you sell them, you can keep the money. Money acts as a store of value, basically saying that the economy owes you a certain quantity of goods and services for the grapes you provided, even if you don't need them imediately.

I see your point, and actually I agree with you, however if we went to a commodities market grapes is actually one of the commodities that would keep. I mean serious, just juice them and turn them into wine. That lasts for years, and is always in high demand :lmao:

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#6 Alexander Caldwell

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Posted 16 January 2012 - 05:27 PM

@JosiahK
I had not thought of that. I am not sure if i can think of a solution to that. The thing about storing money is that it also makes it very simple to accumulate wealth and hoard it as well. Also the person who makes the money has an unlimited amount of that resource (unless they use the gold standard). Hoarding resources is also possible and someone could potentially control the market for one resource as well. Do you have any thoughts on how to prevent these errors?

With a currency it would need to be easy to make and valued at the cost of making it efficiently. The issue with this is it would need to either be something anyone could make worldwide or in different areas the currency must still be able to be made easily and be valued at how easy it is to make the currency. This would prevent what is currently happening in america with the Federal bank controlling the currency.

I think maybe a mixture of both systems would be good. Such as the chair maker can sell his goods for the currency of the area or he could trade the chair for a much cheaper price if the material goods are provided to him. So that he can still sustain his business and he would not need to make the chairs until there is a demand for them.

This system would be similar to how it was in the old days with artisans in different areas. The artisans could potentially go into as many areas of business as they wanted to.

#7 Budapest

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Posted 16 January 2012 - 05:49 PM

My opinion is that we should trade raw good in place of those systems.

I don't really see why you think this is a good idea. Why do you think it is better than money?
The power of accurate observation is commonly called cynicism by those who haven't got it.

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#8 Alexander Caldwell

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Posted 16 January 2012 - 05:58 PM

Ok, I will reply but first tell me why you think money is a GOOD system. Not convenient.

Edit:

Also read my above post.

Edit 2:

I think the current system is corrupted where one organization holds complete control of the money supply. They Federal bank is exploiting that to their benefit. Their system is far from selfless, and needs replacement with a better designed selfless system, or fixing to where it does not breed debt.

As of now the Federal bank is loaning money to the United States government. These loans are given with interest which is impossible to repay due to them getting the money from them in the first place. Also the Federal bank controls the money supply.

This makes it so that the United States government is being exploited. So unless they print their own money, or change systems, or the Federal bank becomes selfless, then they will forever be in debt.

Do you have any suggestions on how to better my system?

Edited by Alexander Caldwell, 16 January 2012 - 07:19 PM.


#9 Budapest

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Posted 18 January 2012 - 05:44 PM

Why I think money is a good system has already been stated by JosiahK above: "It is called a "medium of exchange" because it allows goods to be traded more easily."

This is much more than just being convenient. Try to imagine what it would be like to live without money. How would you get a loan to purchase a house or a car? How would you run a business such as a supermarket? How would you receive your salary? With no money the economy would grind to a holt.

My understanding of monetary policy is fairly rudimentary. However I believe that the Federal Reserve purchases Treasury Bonds on the open market, which is not the same thing as a loan.
The power of accurate observation is commonly called cynicism by those who haven't got it.

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#10 Alexander Caldwell

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Posted 20 January 2012 - 05:08 AM

I see, looks like i will have to research that. I do believe that a currency system is a good system for system for what you have just stated, but i also believe that the Federal Reserve leaves room for improvement. Why does the government not just create a money system that allows anyone to create money, and value the money based on the ease of creation along with the amount currently in use.

What do you think? Are you satisfied with the flaws of the Federal Reserve?

#11 JosiahK

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Posted 20 January 2012 - 11:51 AM

There is a tale about a man who after a very long and intense period of prayer, recieves permission to bring one item with him into heaven. Desperate to make the best of it, he converts all his assets into a solod block of 24 caret gold. A few days later he dies and is proudly showing off his store of treasure. The angels are astonished. "But why?" they ask, "You brought pavement?"

Now there are a great many moral lessons in that tale, but I want to point out the economics. If something is commonplace it loses its value. Would you accept gold coin as payment for your hard work if you could pick up as much gold from the street? Put another way, would you accept pebbles as payment? Clearly not. You'd be much better off not working at all. If you could make money more easily than you can earn money, you're never going to waste your time and energy on an actually useful job!

In a bit of theory, the amount of money should relate to the value of what goods and services are available to buy. If you allow there to be much more money, but there aren't any more goods and services to buy with it, people will simply raise the price. That's what happened in Zimbabwe; Mugabe figured he could pay his debts buy printing money, but the sheer amount of money meant it was shortly worthless. In fact, at peak Zimbabwean prices were doubling every day, and you could have millions of Zim dollars but be unable to buy a loaf of bread. If you let anyone who wants some money make their own, it devalues that very money to the point of being unacceptable for purchases.
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#12 Alexander Caldwell

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Posted 22 January 2012 - 06:10 AM

Money is just paper with fancy drawings and ink on it.

I think you are missing my point a bit. What I am trying to say is what do you think would be a good replacement for the federal reserve? If you believe in money then say that the government should regulate and print their own money. If you believe in the Federal reserve then explain your reasoning.

What i am saying is you pick a pebble off the street and you have to carve an intricate design into it. Now the pebble requires much more work. What if the person who made the pebble had to have a license or some proof of special permission. Thus you can not simply pick a pebble off the street and use it as currency. If the intracacy of the design was increased then the pebble would be worth more.

Say Leonardo Da Vinci carves a beautiful pebble, whereas a bum picks a pebble up off the ground. Leonardo's pebble would be valued higher than the bum's pebble.

Thus when you work the amount of pebbles you earn and the intricacy of their design is dependent on your job and for what period of time you worked.

#13 JosiahK

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Posted 22 January 2012 - 09:45 AM

By manipulating the currency, the central bank has great power over the economy of a country. In the UK Gordon Brown explicitely gave the Central Bank independence for exactly that reason. It is simply too tempting for politicians to manipulate the economy for short term easy living in order to attract votes, ruining long term prospects. I don't know what particular problems you see in the Federal reserve.

Da Vinci himself apparantly hated scupture, but I'll mentally swap the name in your post for Michaelangelo. Even so, that is exactly what happens. If any artist of any form (sculptor, jeweler, painter, etc) produces something, it is valued. If someone wants to take it from them, they must buy it.

One advantage of money over using the art itself is that money is divisible. Suppose that you sell a carved stone for $500. You can spend $200 on one thing, bought from one shop, and the other $300 somewhere else. Imagine instead that you had to use the stone itself. You'd need to buy something that was exactly 500. Clearly you cannot chop it in two without seriously diminishing the value of the work! Moreover, we're talking about beauty which is probably the most subjective thing out there. {#include eye of the beholder quote} What if an art collector loves your stone and values it at $500, but you want to buy a laptop and the laptop salesman thinks it's only worth $50?
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#14 Budapest

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Posted 22 January 2012 - 05:19 PM

Are you satisfied with the flaws of the Federal Reserve?

What are the flaws of the Federal Reserve? You have not actually spelled this out as far as I can see.
The power of accurate observation is commonly called cynicism by those who haven't got it.

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#15 the_patriot11

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Posted 22 January 2012 - 05:44 PM

From what I have seen, there are no real flaws of the federal reserve, the flaw is in the american economy. For years now America as a whole-from the common citizen up to the president of the united states (and im not picking on any individual president, no one president is 100% guilty nor 100% innocent) have been under the whole philosophy of buy now, pay later. Problem is is its been getting out of hand-people want more and more so they go more and more in debt to get what they want now-and then can't pay for it. That is the flaw-with america as a whole. The problem is not the currency-the problem is greed, the I want it, and I want it now no matter what. The whole I only make 40 grand a year, but I want that $200,000 house and I want it yesterday. Problem is, in two years said person can no longer afford the payments, and they foreclose on it, leaving the person bankrupt with no money, but that also causes the bank to take a hit, and it goes on up the line, its a chain reaction.

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