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To: Zeev Hed who wrote (75158)	3/4/2001 1:02:08 AM
From: brightness00	Respond to of 436258

Zeev, IMHO, the key to understanding the modern gold theory is that reserve doesn't have to grow with GWP at all. Reserve is only required to meet expected re-demption until the next interest rate adjustment. We have to look at the picture from return-on-capital perspective. Individuals have three classes of assets to hold (1) gold, which doesn't bear interest (2) stocks, which provide you an expected stream of cash (3) cash, which bears interest You can always find an interest rate high enough to induce private holders of gold to turn in their gold for cash to replenish your reserve. For hundreds of years while the world was operating under British Pound Sterling, the actual gold reserve amounted to only a very tiny fraction of total currency in circulation. Jim

To: Zeev Hed who wrote (75158)	3/4/2001 3:25:53 AM
From: Don Lloyd	Read Replies (2) \| Respond to of 436258

Zeev - ...If gold production does not grow at twice GWP, economies will slow (for lack of monetary instruments), or the price of gold will creep up to allow for the increase in the money base (thus perpetual inflation). ... You assert this, and it may once have been true, but it seems unlikely that it is still true. Assume that my employer pays me 4 real ounces of gold per week and that I then pay all my bills using that gold. In this case my economic participation requires the real existence of that 4 ounces of gold. Alternately, now assume that my employer makes an electronic transfer of the rights to 4 ounces of gold from his payroll account to my checking account. Also assume that I pay all my bills by means of a credit card that promises payment in gold and that I make all the credit payments within the 25 day grace period from my gold rights checking account by electronic payment. In this case, there is now a requirement for 4 less ounces of gold than before without any loss of economic activity. Effectively, the gold has been replaced by an increase in the money supply by an extension of credit by a risk taking private concern. The government is only involved here to enforce contracts. The point is that any possible historical tie between the quantity of gold and the level of economic activity has been forever broken without major problems and there is no fiat currency requirement. Regards, Don

To: Zeev Hed who wrote (75158)	3/4/2001 1:30:50 PM
From: LLCF	Respond to of 436258

Zeev, IMO it comes down to trust... supply of gold matters little, economies can grow without growing quantities of gold, prices simply adjust. DAK

To: Zeev Hed who wrote (75158)	3/4/2001 4:45:35 PM
From: yard_man	Read Replies (1) \| Respond to of 436258

How silly can you get? You talk about gold being a currency then go on to define inflation in terms of the amount of paper currency that can purchase gold ... plain silly. If gold became currency and GWP grew faster than gold could be mined it would simply meant that as time progressed -- the same amount of gold would purchase more goods. That's not inflation ... >>Don, whatever the then current psychology about gold (hidden or "known"), if gold serves as the corner stone of the money in circulation, the production of new gold must be at about twice the general growth of the GWP, half to supply the current uses (which one would assume should grow at the same rate as the economies) the other half, to support the growth of money in circulation for a growing world economy. If gold production does not grow at twice GWP, economies will slow (for lack of monetary instruments), or the price of gold will creep up to allow for the increase in the money base (thus perpetual inflation). Since gold production at constant production costs is not growing at twice the economic growth rate, the only way to increase production is to exploit less efficient deposit, at higher cost (and thus higher POG), thus inflation.<<