Moneyness by FOFOA

English language haystack
User avatar
Indiana Jones
Freegold Member
Posts: 4765
Joined: 05 Oct 2011, 16:00
Contact:

Re: Moneyness by FOFOA

Post by Indiana Jones » 06 Feb 2012, 19:10

Boefke wrote:[ ....]. But beware, As Mises describes Money has only one function......medium of exchange.

That's Mises definition. [ ....]
This is true.

THE most important thing is to understand ‘what actually IS money’


My view on money (written in my double dutch. :D )

**Several centuries ago Money Scrips are introduced to simplify the barter system. The scrip is in core a Medium of Exchange, there’s nothing more to it. On this I agree 100% with von Mises !
The local market superintendant provided the scrips to the merchants on local markets. Market superintendants at different local marketplaces used different scips e.g. different scrip Mediums of Exchange.
Before the market was open, they swapped these local scrips with the merchants against collateral (silver or gold). After the market closed, the merchants swapped their local scips again against gold and silver. So the merchants used the scrip medium, to exchange their goods (commodities) and only because a cow had a higher price than a chicken, you could buy a chicken for 1 scrip and sell a cow for 50 scrips. This was easier for the merchants than barter because merchant John Do could buy a cow without having 50 chickens to trade.
**Therefore all these local scrips were also called Unit of Account during daily market times. I can imagine that a farmer who sold several cows in those local markets couldn’t carry piles of scrips so maybe the market superintendant created scrips with numbers like a 1-Scrip a 10-Scip etc. All current currencies are based on these "2 scrip roots” and therefore are Medium of Exchange and Units of Account.
Now how about this Store of Value thing ? Because scrips were never meant to be a Store of Value in the old ages. Silver and Gold were the true Store/s of Value. However I can image that during trading time scrips were temporarily Store of Value, so maybe that’s why we still consider our current currencies also a Store of Value, it’s somehow still in our minds.
**Every country or territory used its own scrips and that is inconvenient when trade expands, so I can imagine that somewhere on the currency/scrip trail, Central Banks took over from local market superintendants. And this is true, Central Banks do provide enough currency for trade. Currency made out of the blue, for trade only. Central Banks can contract or expand the currency / scrip quantity dependant on the economic activity. Thus is the REAL market lubricating oil.

**Now how about this debt in currencies ? Because in the beginning scrips were never meant to be a Store of Debt nor were they meant to be a store of Value.
Here Commercial Banks come in, when they took over from private money-scrip changers who also were private money-scrip lenders.
-These commercial banks were allowed to lend money against securities, they are so called debt.1 providers who create money. This debt (money) is secured by real assets of value. Before the lender get/s his money the Commercial Bank has to FIAT the loan. Actually this FIAT-money is a private- bond derivative because it is derived from commercial bonds.
-Now governments come in. Governments also want to lend money but Governments don’t owe things of value but they do owe future tax revenues. Nobody really knows how much tax will be paid in the future, because when economic activity is poor, citizens don’t pay much taxes. So Governments hired fortune tellers (economists) to forecast the tax revenue future and according to those fortune tellers, the future is always gorgeous sunny. Governments lend money from Commercial Banks (treasury debt) and Commercial Banks can create money out of it by persuading private investors to invest in these government bonds. This debt is so called debt.2 money. The only security underlying this debt is provided by fortune tellers, hired by the Governments. Actually the only security for this debt.2 and derived money is a Government promise.
This debt.2 and derived money is NO fiatmoney, because there was nothing to fiat for .... but fortunetelling and blue eyed promises.

Resuming there are actually 3 kinds of money we can use as Store of Value which would become a problem when not well managed by Central Banks (who also supervise Commercial Banks): scrip money, created by Central Banks providing the economy ; debt.1 money created (by fiat) and covered by securities, through Commercial Banks to provide Private Lenders; debt.2 money created through Commercial banks (by Government Promise) and covered by the Government/s blue eyes.
Mix those 3 functions of Store of Value money in a big melting pot without proper management and ask yourself what is what ?




My personal conclusion:

The core of (scrip)money is Medium of Exchange and later on also Unit of Account. If not well managed by Market Superintendants (C.B./s) this money can evolve in a unintended Store of Value.
When money exceeded it/s scrip-role it became fiat- debt.1 Store of Value and when Governments discovered the power of money blue-eye debt.2 Store of Value was created.

BTW. Duisenberg said: Economists (fortune tellers) know about MoE; UoA; SoV, but he himself stipulates that the most important quality of money is “a trusted social contract
Therefore, hyperinflation is NOT triggered by an economic MoE; UoA or SoV event, but hyperinflation is triggered by a loss of confidence in the social contract.
Everything that needs to be said has already been said.
But since no one was listening, everything must be said again.


User avatar
Boefke
Silver Member
Posts: 236
Joined: 03 Oct 2011, 17:26
Contact:

Re: Moneyness by FOFOA

Post by Boefke » 06 Feb 2012, 19:18

Last paragraph Indy....big applause from here!!! :) :)

User avatar
Indiana Jones
Freegold Member
Posts: 4765
Joined: 05 Oct 2011, 16:00
Contact:

Re: Moneyness by FOFOA

Post by Indiana Jones » 06 Feb 2012, 21:29

Boefke wrote:Last paragraph Indy....big applause from here!!! :) :)
The last paragraph is my logical conclusion from all above mentioned


Q & A with myself ..... :lol:

-But hey Indy …. What about Gold and Silver in your money story ?
-Oh yeah ….. forgot about that. Well, Duisenberg said in Aachen that the Euro was free from a Nation State. Logical, because in the same way scrips emerged into national currencies and therefore the local currency was also free from national territories.

-But free from gold, Indy ….. mmmmmm
-Duisenberg said that the most important quality of money (the social contract of money) is TRUST.

-Did the local merchants / traders trust the scrips ?
-Yes, they did, because when the market closed, they could swap their scrips into gold and silver (the REAL stores of value).

-How can we make this complex papermoney thing trustworthy ?
-Well, we put some gold or silver into the coins and as paper money concerns, (emperors / CB’s) have a big vault with gold and silver bars.

-Mmmm, that makes money trustworthy, don’t it !
-Not all of the money is backed by gold or silver, but a lot of it is, so people know that when the money market closes most of the people can always swap it into permanent Stores of Value like Silver and Gold. To make it more trustworthy (knowing not everybody is going to swap his money-scrips into precious metals), we introduce a standard. Italy is not so trustworthy, so their gold standard is a little higher but the Netherlands are more trustworthy and so their gold standard is a little lower.

-Mmmmm, good idea. But why did we abandon the gold and silver standards ?
-Well, Silver was also an important production commodity, less in price thus not so easy to store & to accumulate and therefore we thought a Gold Standard in general a better idea to support the TRUST in money.

-O.K.! …. But why did we abandon the gold standard ?
-Well, you know …… the Chinese NEVER had a gold or silver standard. They trusted their paper money (merely government bond derivates) because the Emperor said it was trustworthy and the Chinese Emperor was a GOD …. And yeah …. We trust GOD. Now here’s the problem: the governments needed more money (treasury bond derivatives) and there was not enough gold to support their needs. So after WWII all the world currencies were linked into the US Dollar and the Dollar was backed by a Gold Standard. Now in the ‘70ties the U.S. of A. government needed so much money (USTB derivatives), that there wasn’t enough Gold to support that. President Nixon and the USgov. thought they were like Chinese emperors and didn’t need gold to support the world-wide USD-derived money system.

-Is that true ?
-YEAS ….. I’m sure, because Lloyd Blankfein (Goldman Sachs CEO) said HE is like GOD and president Obama says it is GOD/s will that the U.S. of A. will overcome all current misery ….. so the U.S. emperors are the true GOD/s like the Chinese emperors were. It is therefore that the U.S. of A. is so important to the world currencies …. The USgov. is world's money system TRUST !
The Dollar quotes "In God we Trust"and that's ...... A DOUBLE Bond !

-So, what did Duisenberg mean when he said that the Euro severed its bond with gold ? …
-Well, he meant that you simply have to trust the European Nation, just like you have to trust the American Nation … like they are GODS. Duisenberg said that the Euro had severed it/s bond to gold, and severed means that there is NO bond with gold! If there was any bond, he would have mentionned it, wouldn't he. It is therefore that the ECB is free to quote some gold in the ECB balance sheet at current prices .... maybe to give a littlebit of support to the Euro, but no legal trust .... non whatsoever.

-Now what if we don’t trust those nations anymore ?
-Mmmmm, we’ll have hyperinflation because you don’t trust their money anymore.

O.K. I understand:
In times of hyperinflation, the Euro and Dollar are still Media of Exchange …
-Yes;

Still Unit's of Account ?
-Yes with a lot of zero/s added;

And still Store's of Value ?
-NO, no more SoV !!! because there never was and never will be any long term SoV in scrips nor scrip-derived money. Only when everything is sunny, people will use it in that way … because people are very easy to cheat and governments (and vultures circling around governments) are very greedy.

-So how this scrip market functions when there is no more trust ?
-Well, there still is trust in gold & silver. So my guess is that (part of) the market will trade in precious untill trust is restored in money scrips.

-How is trust gonna be restored ?
-Nobody knows ....could be gold support, could be a different system ....

:lol: ..Indy.. ;)
Everything that needs to be said has already been said.
But since no one was listening, everything must be said again.

User avatar
Rasta
Gold Member
Posts: 1424
Joined: 07 Oct 2011, 15:16

Re: Moneyness by FOFOA

Post by Rasta » 06 Feb 2012, 22:46

I'd recommend it to everyone. On ebay buy a set of history. Beautiful because it's amount of zero's, because of the absurdity of the drama behind the currency.

Image

And, it is pretty cool to have 10 quadrillion dollars in your hands. After having the stack for 2 years, I have to admit - you are getting used to big numbers. Less of a shock if we really get there.
Eventually there will be an awakening, a balancing of the scales and a bill to be paid, and for that I hold gold - Jim Sinclair

User avatar
Malcolm
Posts: 32
Joined: 13 Nov 2011, 05:46

Re: Moneyness by FOFOA

Post by Malcolm » 07 Feb 2012, 07:31

Let me make up a little story that helps me think about script and the here-after.

When reading about fairs of the 1200s, I've come across stories of roving bands of 'merchants' from individual cities. To settle a merchant's failure to perform, the fair's host would simply imprison another merchant from the same city. A crude debt collection policy, at best.

Paper had not migrated to Europe from China, and parchment was expensive.The 13th century's big innovation was double entry accounting. Using ink blots as a medium of exchange most commonly involved priests (who could write) and the trade went like this: for a coin, you got a pretty piece of script that promised exiting Purgatory 'x' days faster.

The big innovation of the 14th century occurred in Florence where local politics caused rich families to form 'patron-client' relationships with smart individuals from minor families. The smart kids would be posted to far flung outposts like the Black Sea, Africa and Northern Europe. To communicate with their patron, they had to be skilled writers. Thus, the brightest kids went to school. Paper was getting cheaper and learning to write was a ticket to a new lifestyle.

From this emerges the letter of credit, which would circulate among the family head and his bright clients. It allowed the 'house' to balance their paper based double-entry accounts with mobile paper sent roaming around the commercial world. Thus, the first European monetary script was a family affair, and relied on the love client and patron shared. I use the term 'love' literally. That is what they spent half their letters professing to one another.

To sum this little narrative up, perhaps the first European 'monetary script' (money) was not a social contract, but a love letter and gift. These love letters produced a group of trusting businessmen who worked far more efficiently than the roving bands of merchants common 100 years earlier. We are all familiar with the passionate patron - client relationship between the Medici popes and Michelangelo. That relationship's prototype can be studied by reviewing the patron-client relationships established between people like Cosimo di Medici and the sons of minor officials posted to Constantinople to buy and sell merchandise. (Economic and Social Exchange in Renaissance Florence, John F. Padgett)

What difference does this make?

Maybe this delusion will help make more sense of FOFOA's essay on 'the hereafter'. Lovers cannot imagine 'not loving' their sweetheart. When love evaporates, as it sometimes does, they often cannot imagine what they used to see in the other. There are two states of mind, and for a mind to reconcile their involvement in the other. That switch in perspective is what I think FOFOA is alluding to regarding the coming monetary changes.

Could it be that FOFOA is saying paper money is an evolved sort of love letter?
Last edited by Malcolm on 07 Feb 2012, 13:49, edited 1 time in total.

User avatar
Paul
Platinum Member
Posts: 837
Joined: 10 Oct 2011, 16:27

Re: Moneyness by FOFOA

Post by Paul » 07 Feb 2012, 10:03

nce perspective
thanks for sharing !
"Taxes are a barbaric relic of the past"

User avatar
Indiana Jones
Freegold Member
Posts: 4765
Joined: 05 Oct 2011, 16:00
Contact:

Re: Moneyness by FOFOA

Post by Indiana Jones » 07 Feb 2012, 10:51

Malcolm wrote:[ ....] Maybe this delusion will help make more sense of FOFOA's essay on 'the hereafter'. Lovers cannot imagine 'not loving' their sweetheart. When love evaporates, as it sometimes does, they often cannot imagine what they used to see in the other. There are two states of mind, and for a mind to reconcile their involvement in the other. That switch in perspective is what I think FOFOA is alluding to regarding the coming monetary changes.

Could it be that FOFOA is saying paper money is an evolved sort of love letter?
What thrives love? Some say love cannot exist for a longer time without absolute trust in each other. When one of the lovers cheats, the fight begins and love will perish.

The best rated credit lines are credit lines without securities and commercial banks do have blank credit lines. If there is any doubt about the trustworthiness of the debtor (unconditional love), the banks will ask for guarantees (securities).

The Chinese had absolute trust in their emperor (he deserved the love of a God) and therefore Chinese iron or paper money didn’t need any backup. Unlike other emperors who had to enforce their local money system with a gold guarantee.

So what do not trustworthy lovers do to sustain the relationship, they trick and treat. That is what the American government simply has to do, to sustain the dollar love ..... play trick and treat with their economical numbers.
Everything that needs to be said has already been said.
But since no one was listening, everything must be said again.

User avatar
Indiana Jones
Freegold Member
Posts: 4765
Joined: 05 Oct 2011, 16:00
Contact:

Re: Moneyness by FOFOA

Post by Indiana Jones » 07 Feb 2012, 13:49

Jim Sinclair on reserve currencies:


Hera Research Newsletter (HRN) interview, April 20, 2011

Question:HRN:
But the U.S. dollar is the world reserve currency. Doesn’t that guarantee its value?
Answer:Jim Sinclair:
Only by default. It remains so because central banks own dollars. If central banks could exchange them for gold or other currencies without a major dislocation, they would.

Question:HRN:
Then, as a practical matter, central banks can’t get out of the dollar?
Asnwer:Jim Sinclair:
The only one that’s gotten out of it is China. They’ve made deals all around the world for metals, materials, energy and manufacturing. If you add it all up, China is no more stuck in the dollar than the man in the moon.




Ellis Martin Interview, February 6, 2012

Question Elli Martin:

Were does the Euro fit within all this?
Answer Jim Sinclair:
Most likely a reserve currency by default. (That is to say it remains so because central banks own euro/s. If central banks could exchange them for gold or other currencies without a major dislocation, they would.) Nobody should want to be a reserve currency.





p.s. some other quotes HRN interview 2011
http://www.financialsense.com/contribut ... ial-system

HRN: What about gold? Do you see gold as a currency that can’t be debased?
Jim Sinclair: What is real money? Gold is a currency that has no liability attached to it. It’s a measure of value and a store of wealth that’s universally acceptable.

HRN: So, gold is an alternative to dollars or Euros?
Jim Sinclair: Physical gold is the answer. An individual who holds gold will have more time and ability to function.

HRN: How much higher do you think the price of gold could go?
Jim Sinclair: What’s the exchange rate of a currency with no liability attached to it? Gold is going much higher. We could see shocking gold prices, maybe Alf Fields’ target of $10,000 per ounce or Martin Armstrong’s target of $12,000 per ounce. I think that my price target of $1,650 per ounce gold is going to be so low it will be considered silly.

HRN: Thank you for your time today.
Jim Sinclair: It was my pleasure.
Everything that needs to be said has already been said.
But since no one was listening, everything must be said again.

User avatar
Indiana Jones
Freegold Member
Posts: 4765
Joined: 05 Oct 2011, 16:00
Contact:

Re: Moneyness by FOFOA

Post by Indiana Jones » 07 Feb 2012, 14:00

Indiana Jones wrote:Jim Sinclair on reserve currencies:[ ... ]Jim Sinclair: What is real money? Gold is a currency that has no liability attached to it. It’s a measure of value and a store of wealth that’s universally acceptable.[ ... ]
Mmmmmm,

Medium of Exchange: physical Gold
Unit of Account (measure of value): physical Gold
Store of Value (store of wealth): physical Gold

;) Indy
Everything that needs to be said has already been said.
But since no one was listening, everything must be said again.

User avatar
Boefke
Silver Member
Posts: 236
Joined: 03 Oct 2011, 17:26
Contact:

Re: Moneyness by FOFOA

Post by Boefke » 07 Feb 2012, 18:48

HRN: So, gold is an alternative to dollars or Euros?
Jim Sinclair: Physical gold is the answer. An individual who holds gold will have more time and ability to function.

He must be kidding us here. Unbelievable that he makes such a (sorry for the word) stupid statement.

FOFOA's dilemma: When a single medium is used as both store of value and medium of exchange it leads to a conflict between debtors and savers. FOFOA's dilemma holds true for both gold and fiat, the solution being Freegold, which incidentally also resolves Triffin's dilemma.

I am not going to describe the disadvantages of using gold as that specific medium. Just al the discussions and posts dealing with freegold are recommended to read, you only change the word $ into Gold. And as almost everybody is saying they aren't reading FOFOA any more, why am I going to describe them here.....

I thought Jim was a bit further down the road, but it seems obvious he still is in the hard money camp. No problem, don't we all learn more on this subject everyday? :lol:

Post Reply