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To: neolib who wrote (90966)	9/30/2007 7:27:46 PM
From: Elroy Jetson	Read Replies (1) \| Respond to of 306849

Your explanation is pretty good. In exchanging gold for "Permanent Reserves", the Fed has treated "Permanent Reserves" in much the same way. This is to say they have increased the level of "Permanent Reserves" only as fast as the growth of wealth in the economy. This has led to a situation where debt has greatly expanded at a rate of 15% or so per year, while "Permanent Reserves", the Fe's version of real money, has expanded at a rate of 4.5% or so annually. The end result are the problems resulting from an over-leveraged economy. A Safe Haven commentary suggested money, aka "Permanent Reserves", needs to be expanded as quickly as the debt. But this is a make-believe solution which would only create rampant inflation. The truth is we're ramping up against the constraints on debt fueled growth. .

To: neolib who wrote (90966)	9/30/2007 9:19:57 PM
From: 10K a day	Read Replies (1) \| Respond to of 306849

>>It would be of great service to the nation if a reality TV series were created with the sole purpose of showing how a society creates a money supply. Money is created w/ an accounting entry w/ no consideration. It's all so easy if you accept this postulate.

To: neolib who wrote (90966)	2/28/2008 8:38:59 AM
From: Hawkmoon	Read Replies (2) \| Respond to of 306849

Neo, In determining economic potential vs required money supply, one needs to take into account the velocity of money. The number of times a given amount of money changes hands (consumption vs savings). Sometimes you have a "stable" money supply, but for whatever reasons (consumer confidence or greater efficiency/productivity), its velocity of transactions increases, expanding economic growth. But the demand for that money can then create pricing pressures. Gold is something dug out of the ground. It's a scarce commodity. And some countries, like oil, have more of it than others, despite the fact that they lack a diversified economy or transparent (translucent?) financial system. Maybe if all gold were required to be immediately tranferred to an international committee of central banks, that distributed it various national banks according to GDP.. But who's going to permit that? And I'm not going to pretend that the current state of affairs is perfect (fractional banking). And I'll fully admit that understanding all the facets of international finance can be mind-numbingly confusing. But I just have an aversion to any system that omits the human potential to innovate and implement economic decisions and/or progress. The Permanent reserves concept does seem to reflect the current SDR (Special Drawing Rights) concept. But SDRs are based upon a basket of various currencies, each of which are not backed by any permanent reserve (commodities or otherwise). imf.org imf.org And if I understand this correctly, the USD, over the past 20 years, has increasingly made up the greater percentage of the value of an SDR: en.wikipedia.org Hawk