[crossfire] Banking system

[Brendan Lally]

On 1/3/06, Miguel Ghobangieno <mikeeusaa at yahoo.com> wrote:
> gold and silver coins are not fiate currencies, their
> value can't be just inflated. You need paper money for
> that (or money who's value is more then the value of
> the material).
>
> I won't support inflating gold and silver etc. I will
> support creating paralell fiat currencies, and yes
> they did exist in the ancient world.

Ah, but now you have to consider what is actually fluctuating. Is it
that the value of gold is dropping, or the value of the currency is
increasing.

In recent history, it has tended to be the case that fluctuations in
the prices of gold/silver etc, have overwhelmingly /not/ taken other
prices with them. Just because the US dollar weakens against gold (or
if you prefer that gold strengthens against the dollar) doesn't mean
that the price of bread alters.

Certainly it is fair to say that gold has traditionally been quite
consistent with reference to other commodities but silver-backed
currencies (and especially silver-backed currencies with a debased
coinage, which is what I am describing here, rather than fiat
currencies) have fluctuated over time with respect to the price of
gold.

Whether you make the 'value' field relative to a fixed commodity, or a
currency, is really an irrelevant point, once you have the same
relationship between them being expressed, however, if we take the
consumer's-eye view of the economy, prices are significant relative to
wages, which are fixed in a currency, not to a commodity that few of
them will ever trade in (plus it involves modifying fewer object
values).