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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: Robin Plunder who wrote (99487)	11/8/2008 4:34:15 PM
From: Hawkmoon	Read Replies (2) \| Respond to of 110194

it is absolutely astounding to me that so many could be so happy to hold nothing but an electronic blip as their wealth..ie We do it all the time. Do you actually take delivery of your stock certificates, or do you entrust your broker to hold them electronically so that you can buy/sell at your convenience? Where the FIAT system, and especially the electronic FIAT system excels is in creating "velocity" of economic transactions. Historically, people might use gold/silver for direct purchases of goods and services. But there is a time and security factor involved because that physical gold had to be transported and delivered for payment. So then they create the bills system for settlement and this increased the velocity of monetary exchange, and thus economic productivity. And then the increasing rarity of gold, combined with increasing populatons seeking access to that rare financial commodity, resulted in a FIAT system for economic transaction. We must not forget that gold, like anything other storehouse of value, is a medium of exchange. It replaces the actual bartering of goods/services and permits economic specialization. And it's just as subject to sudden inflation/devaluation when there are instances of large discoveries of it (like in the case with the Spanish and Aztec/Incan gold/silver). Gold is just as subject to the laws of monetary "supply/demand" as Fiat. If you want to create a deflationary spiral then you decrease the money supply and make that financial medium of exchange more difficult to obtain. This is the constant battle the Central Banks deal with on a daily basis in governing the pace of economic activity. And the very same thing can be done with Gold and Silver. Velocity of monetary exchange is the primary standard of determining economic GDP. Returning to a gold standard would be equivalent of a drastic reduction in money supply that could not keep pace with demand based upon population and consumer demand for goods and services. Hawk