Originally Posted by sjh

I'm only responding to your initial remark but have quoted everything you said because some people complain if their comments are edited.

Ultimately money must have some basis for its value. Historically the piece of paper (money) was in essence a contract that stated, "it's too cumbersome for me to carry around a physical asset so this paper is a lien or a claim on that asset. This has been true for over twenty five hundred years when Croesus, the King of Lydia issued the first known currency. Initially Croesus minted coins that were 100% backed by a tangible asset. However, Croesus quickly learned that he could mint more coins then he had assets. This allowed Croesus to live beyond his means for the short term but ultimately weakened his nation.

This same pattern has recurred every time a nation abandons monetary discipline and attempts to solve short-term problems at the expense of long-term prosperity. And I cannot be the only one on this board that observes that our nation (US) has been living in that manner at least since 1970, if not earlier.

The point of my comment about pre-'64 quarters was not to suggest that we should or should not revert to a gold and/or silver standard because, frankly, I am an engineer and not an economist and I'm not knowledgeable enough about economics to know the best basis for currency valuation.

My comment was illustrating the profound debasement of our currency and that it is much less that gas has gone up then it is that our currency has gone down.

In my home when I run out of money I either stop spending or go into debt which I am obliged to repay. Governments have a third option, print paper money, knowing that it weakens the economy in the long run but allows the current leaders to avoid dealing with unpleasant choices.

Now central banks are suppose to be isolated from political considerations and only make decisions based upon the best interests of the economy. If there is a need to temporarily issue excess currency than the bank is suppose to, as quickly as possible, take the excess money out of circulation as soon as possible. But that, like many ideals, is not what actually happens.

Finally, while completing acknowledging my limited grasp of economics (though I suspect I am more learned in the area than many) have to ask why should one limit their thinking to the current paradigms offered by contemporary economists and governments.

Ultimately I want the dollar in my wallet to be based on more than the integrity of my government because frankly I do not trust the electorate or the elected leaders to make wise decisions. Humans are flawed creatures. Our fore-fathers seemed to understand this and design their institutions with this in mind much more so then we do today.

So when Hatterasguy states that currency cannot be based upon specific tangible assets because no modern economy does so he is expressing what is conventional wisdom. And it may be correct. But if that is the case then a nation's central bank must exercise great restraint and wisdom in maintaining the value of the currency. Clearly we have not done so.