dedication,

Nowhere did I mention a gold standard. You have also misunderstood my point.

A currency, any currency, has to have a stable relationship to the actual wealth produced in that country. It matters not what the wealth is. It could be grain, wood products, mining products, computer products, vegetables, meat, leather, etc... or any combination of products being produced in that nation. The money supply needs to equal the amount of physical wealth produced. When the money supply begins to exceed the GDP(gross domestic product) we get inflation. Why? Because there is more currency than there is wealth. Thus my example of printing money with no increase in the basis for the underlying wealth--gold in my example.

The banking system used around the world is a fractional reserve system. What that means is that a bank can loan out more money than it has in deposits. In the US banks can lend money out at the rate of $10 for every $1 of deposits. Thus there is an immediate imbalance of actual wealth to currency floating around. That currency is all debt. This system guarantees inflation and is dangerous if the depositors ever lose faith in the banking system for there is no way the banking system can ever pay back the depositors as they have loaned out $100 for every $10 they have on deposit. This is what happened in the Savings and Loan scandal. Bad loans were made and the system collapsed of its own weight.

The very similar thing happens when politicians decide they are going to "jumpstart" the economy through a huge financial stimulus. All that "stimulus" is is money printed out of thin air. It causes inflation just like the fractional reserve system does as the sudden infusion of vast amounts of money causes the money supply to greatly exceed the actual wealth that it is perceived to be based upon so that the currency itself is devalued.

Supply and demand, which is simply the goods produced that people desire compared to how many of those goods are actually purchased, has nothing to do with inflation per se. It is the goods produced compared to the money supply that says whether the value of the currency goes up or down.

The fact that an economy is complex does mean that it somehow violates the laws that govern it. By that I mean the natural laws such as the relationship between the supply of money and the amount of wealth produced at any specific time.

Have you understood what I'm saying so far? Have I done a better job of making what I'm saying clear?

The first sentence should read: The fact that an economy is complex does not mean that it somehow violates the laws that govern it.

I think you missed the point of my post -- for it was showing that the dollar is based on something --
....oil....!

The USA has considerable control over the economy of the whole world thanks to it's agreement concerning oil.

What was the whole "oil war" about a couple years ago when the USA flooded the oil market with it's oil and drove prices of oil so low it pretty much completely shut down oil production in Canada and left tens of thousands of Canadians job-less in one province alone.


Of course it was aimed at controlling Saudi Arabia, putting them into a deficit and bringing them back under US control, thus ensuring the power of the US dollar.
But it sure struck an awful blow at Canada as well.

Crude oil is (or was) Canada's most exported product to its southern neighbor, as well as to Japan and other countries.


But since the oil war, the Canadian dollar has dropped so low it's alarming. It used to be almost at par with the US dollar, now it's worth only about 65 cents. Prices of all necessities have jumped up but wages haven't. It's particular hard on people with fixed income. Talk about inflation rising prices and lowered income!!!!

You misunderstand the principle. The fact that the world buys oil with the US dollar does not mean that those dollars are backed by production of goods in the US. It simply means that country A uses US dollars to buy oil from country B. It also means that trillions of dollars are floating around in the world that have no relationship whatsoever to the GDP of the US. That's why if the US dollar is superceded as the reserve currency there will be hyperinflation in the US that will make the inflation in the Weimar Republic after WW1 look like child's play. The US will default on its loans overnight as the dollar will go from what it is worth now, to maybe 1/100th or maybe even 1/1000th of that value. Why? The US will suddenly be flooded with dollars from all over the world that the countries of the world have been holding for decades to use to buy oil with that they will have no further use for.

You are actually making my point for me, not any point against what I have said.

dedication,

I just thought of what is probably a better way to explain this.

It will be like the gold example I used in which the number of dollars was doubled and thus reduced the value of each dollar by 50%. Except that in this case it will be more like printing up 10,000,000 more dollars without any more gold to back the currency.

The use of the US dollar as the reserve currency means nothing more than it is the medium whereby country A and country B exchange money for oil between each other. One country gets the goods produced by the other country and the country that sells the goods agrees that the bill will be paid in US dollars. That has nothing to do with the economic activity in the US. It just gives the US a strong political influence.

Actually, I fully agree that the debt based method of running an economy is ruinous to the nation. What you are saying is the way we wish things were.

Obviously banks should not be giving out huge mortgages with next to no down payments that will absolutely bankrupt them if a number of their clients can't pay their monthly payments.

And true, should America loose it's position as having the standard reserve currency, the value of the US dollar would drop like a lead balloon.

The economy is very complex and globally intertwined now and in many ways it violates the laws of a healthy state of economic living.

Yet the idea that economic activity is based only internally within a country is no longer true. The export/import activity does affect the economic activity within the country.
I mean-- here in Canada our economy took a real plunge because of external happenings, and those external happenings have affected a lot of people in Canada in very personal ways. Over 60,000 people in one province lost their jobs within six months because of the oil war taking place in other nations.

So yes, making a few changes to affect the betterment of the local commerce is always a good thing, but I'm not sure there is any possibility of going back on this practice of the USA printing money "out of thin air". They have to do it to maintain their position in the world economy.

Not only must they print money, they have to assert their authority on the oil market to keep their dollars position as the world standard or reserve currency.
That I believe, is why the USA did the "oil war" two years ago. It bolstered the US dollar again.
It put down other nations currency in relationship to the US dollar.


Somehow I don't think the USA will ever give up their position as having the world reserve currency.
Prophecy in Rev. 13 shows the USA in economic power over the whole world. They have enough economic power so no one can buy or sell unless they have the "mark of the beast".

The position of the US dollar as the world's reserve currency is what gives the US this kind of power over the world's economy.
And the "elite", secret societies, behind the scenes manipulators will see to it, that this remains the case. (not for the well being of American people, they aren't concerned about that, but for their agenda to control).

Sorry.

Blessings Gary K.

First off; I am not beating anyone over the head.

Secondly; I respond my own way. Like it or not.

1. You have mistaken the principles involved for the example used. Gold was just an arbitrary example. I could have used silver, grain, furniture, etc.... Any form of real, tangible wealth.

2. You completely ignored my example showing that it is the injection of currency into an economic system with no basis in real wealth that causes inflation. Address that.

3. If you want to discuss things then let's discuss them on an even basis. When I make points you either agree with them or disagree, and if you disagree show empirically why my example is wrong. I'm not just going to let you beat me over the head with questions and while you answer nothing.

4. Have you downloaded the book on Keynes? Or are you someone who refuses to look at the evidence against your position?

5. Do you understand Say's law? If you say it is incorrect, show why you think it is incorrect.


On your first point, it is easy to think gold since you mentioned gold and many proponents of the Austrian economic view promote the gold standard. I appreciate your clarification that any "real wealth" is satisfactory. Although, the term real wealth also needs clarification.

To get to the point I am headed, I don't believe that money or currencies are by nature inflationary. It is simply a man-made construct to keep money scarce from the people while those in control can have gargantuan amounts of money.

Not the velocity of cash or the supply and demand principle have any bearing on the existence of money. If you understood the inflation calculation well enough, you would see how man-made calculations are manipulated against the people all the time.

On your fourth point; No, I will not waste the time. You have mistaken what I clearly said about Keynes and his economic ideas.

The only thing I would add to the US Dollar as the reserve currency is that in 1944 at Brenton Woods, NJ, that idea was established there because the US had most of the worlds gold. But, that had changed by 1971 and the US moved to oil in a slight of hand sort of way.

I believe this demonstrates just how fickle an economy can be! We can change anything to suit our means! I saw the term "natural laws" used and I believe that is where much clarification is needed. Our economy now is not at all natural.

This is why I say that; By nature and economy at its fundamental beginning is just money or currency on one side and credit or debt on the other side. This is the first and most important clarification we must make in natural law! Cash and credit must be two totally separate and free standing entities! Then, and only then, can cash pay off debt and still remain in circulation.

Our present economy has money created out of debt! When we pay off debt the money disappears with it. So, when we have more debt than money, what function is available to pay off all the debt?!?

We must separate cash from credit altogether.

Or you could simply raise the value of gold so the new currency doesn't have any effect on inflation!