Your grocery bill is high because of Washington, not Wall Street. Stop blaming the billionaires.

Originally posted by: Kevin Lewis

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I don't understand your last statement.

 

However, to answer your question, 25 cents would buy a bag of freshly made peanut brittle at the Candy Jar, which was strategically located next to the movie theater and a block from my school. They fired up the oven just as school was letting out. No fools they.

 

For any price comparison year over year to have meaning, purchasing power would have to be factored in as well. I can tell you that subjectively, our family had less purchasing power back then than a similar family has today.

 

We can debate the evil machinations of the Fed all day, but my measure of increasing or decreasing national wealth and prosperity has nothing to do with currency or coinage: How long does Joe Average have to work to be able to buy X? How long did he have to work back then?

 

Nothing else matters IMHO.

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Originally posted by: LiveFreeNW

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The statment "Today twenty five cents has very little purchasing power. However, that same quarter you had in your pocket in 1963 is worth over 16 Federal Reserve Notes today"  

 

It was meant to show how debasing the coinage (remonving silver) has diminished purchasing power of the currency. 

 

That 1963 quarter has a melt value of 16 Federal Reserve Notes. 

 

With that in mind one must ask, have prices of goods and services gone up, or has the spending power of the currency gone down? 

 

That aside, I would suggest that the purchasing power of the average single income family has gone down in many ways. Some things have gone up and others gave gone down. 

 

 

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Originally posted by: Kevin Lewis

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Coinage eventually has/had to be "debased" for two reasons:

 

1. The supply of precious metals is finite, and eventually, it becomes impossible to mint un-debased coins without incurring ruinous costs.

 

2. As the supply of precious metals decreases (as it must), a coin made of precious metals becomes worth more than its face value. Then, no one will ever buy anything with it; it makes more sense to keep it. The whole monetary system takes a dump.

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Originally posted by: LiveFreeNW

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And that "need" to debase the coinage is/was strong evidence to suggest that currency inflation has increased at a rate greater than wealth creation. 

 

 

 

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Originally posted by: Kevin Lewis

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So you really think that our coinage should have continued to consist of precious metals? Even though no country in the world does that any more?

 

Let me ask you: what happens when currency is "fiat money" but coinage is "real money"? I'll answer that for you: nobody will accept currency as legal tender. I can inform you of dozens of historical examples where exactly that happened.

 

There's also the simple practicality, which you haven't addressed, that we will eventually run out of precious metals and as they grow scarcer, we won't be able to mint the needed coinage. 

 

Whatever you "suggest," I still haven't seen any proof that the currency in circulation is growing faster than our wealth. I don't know if anybody even attempts to measure that.

 

Oh, and you do realize that much of the new currency printed is to replace worn currency collected by banks and sent to the Fed?

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Originally posted by: LiveFreeNW

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Whether we should or should not have continued using precious metals in coinage is a different debate. I didn't bring it up to argue that one way or the other. I brought it up because I think it is evidence that the amount of currency inflation has outpaced wealth creation. 

 

If the amount of new currency was on par with the amount of wealth created then the purchasing power of the currency would trend towards stability. It doesn't. 

 

The majority of new currency in the system is not "printed" it is created digitally. Not only by the Federal Reserve but by other banks as well.

 

Nearly all banks create currency on a daily basis. When someone gets a loan from a bank we like to imagine  the bank moving the money from their account to the customer's.

 

That is not what happens. The bank simply adds the amount digitally to the customer account. That is creating new currency in the system. If that money is paid back the new currency is extinguished. But only the principal. The interest is new currency. (Assuming the amount of loans totals more than they have "in the vault" which is common practice) 

 

Our current monetary system is pretty much based entirely on debt. Currency is introduced when the government or the people borrow money.

 

Our National Debt is now greater than our GDP. In large part due to our current monetary system. It is not sustainable. Something has to change. 

 

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Originally posted by: Kevin Lewis

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I realize that that's a common shibboleth, but debt is not inherently a bad thing. It's only bad if the cost of carrying it is greater than the benefit gained from the borrowed amount. And the US still borrows money at the lowest interest rates in the world. In fact, borrowing money at an interest rate equal to or lower than inflation is completely free and it would be stupid NOT to do it. 

 

Compare the historic interest rates on T-bills and the prevailing inflation rate for any given period and you'll see that we get that money for free.

 

As far as the national debt is concerned, we must measure the amount we have to spend to service it against the benefits the borrowing provided and has provided. You say it's "unsustainable," but we are in fact sustaining it. Once again, because the cost of carrying it is affordable. It's even more affordable when inflation is factored in. Borrow expensive dollars. Repay with cheaper dollars. Ka-ching!

 

You have it wrong when you say that loans create new currency. They create new MONEY, which is a different animal. More currency may be created to represent that money, but that's a different process.

 

The current federal "reserve requirement" is 20%, meaning that a bank can loan five times what's "in the vault." 

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Originally posted by: LiveFreeNW

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The current reserve ratio is zero. As of 2020

 

I agree with you that some deck can be good. However I maintain that too much is a disaster. 

 

When the country inflates itself out of debt the banksters, government and cronies prosper. The average person suffers. It is the average person that pays the cost of that inflation in the form of weaker currency. 

 

 

 

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