Hard Light Productions Forums
Off-Topic Discussion => General Discussion => Topic started by: shabbir on December 22, 2009, 06:49:39 pm
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When analyzing the problems faced by the modern banking industry, it is better to get into some of the developments in the bygone centuries. To a certain degree the Venetian merchants fell into the habit of placing their money within the Chamber, for safe keeping. From this one approach the business of deposit was introduced and it is the second branch of modern banking. It was later found that a credit for money deposited in the chamber was equivalent to the cash in hand. Such a custom or approach was introduced for effecting payments through the transfer of these credits from the account of the payer to the account of the receiver.
Thus, every merchant was obliged to open an account with the bank. All the payments of bills of exchange in wholesale transitions were required to be made there, and in the manner described above. This method of payment was plainly a rude approach towards the invention of bank notes. The circulation of these bank notes constituted the third and the last branch of the banking business. This is much evident in a modern bank. That part of circulation involving bank cheques is only a very slight modification of this Venetian practice. The Bank of Venice long remained without a rival, but by the beginning of the 15th century, similar institutions, were established at Genoa and Barcelona. They were cities that were the pride of Europe in those times. They were only second to Venice when considering the extent of trade and commerce.
The ‘table of exchange’ at Barcelona and the Chamber of St. George at Genoa is an almost exact copy of the Bank of Venice, and soon it obtained an almost equal status in credit and celebrity. The bank of Barcelona was established in 1401 and the Bank of Genoa in the year 1407. As the center of commerce got shifted to the north, the Bank of Amsterdam was established in 1609. Banks working on the same principle as that of the Bank of Amsterdam was established afterwards at Hamburg and some other parts of the commercial towns and free cities in Germany.
LINK REMOVED - Thread is now a discussion of the banking system. - Karajorma
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/me is highly suspicous of this new poster.
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LINK REMOVED - Thread is now a discussion of the banking system. - Karajorma
Banks have money in them!
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But that money's value is determined by the government!
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But banks still have money in them!
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When the government controls the value of money, that can change in about two months.
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*shrinkwrapped*
When analyzing the problems faced by the modern banking industry, it is better to get into some of the developments in the bygone centuries. To a certain degree the Venetian merchants fell into the habit of placing their money within the Chamber, for safe keeping. From this one approach the business of deposit was introduced and it is the second branch of modern banking. It was later found that a credit for money deposited in the chamber was equivalent to the cash in hand. Such a custom or approach was introduced for effecting payments through the transfer of these credits from the account of the payer to the account of the receiver.
Thus, every merchant was obliged to open an account with the bank. All the payments of bills of exchange in wholesale transitions were required to be made there, and in the manner described above. This method of payment was plainly a rude approach towards the invention of bank notes. The circulation of these bank notes constituted the third and the last branch of the banking business. This is much evident in a modern bank. That part of circulation involving bank cheques is only a very slight modification of this Venetian practice. The Bank of Venice long remained without a rival, but by the beginning of the 15th century, similar institutions, were established at Genoa and Barcelona. They were cities that were the pride of Europe in those times. They were only second to Venice when considering the extent of trade and commerce.
The ‘table of exchange’ at Barcelona and the Chamber of St. George at Genoa is an almost exact copy of the Bank of Venice, and soon it obtained an almost equal status in credit and celebrity. The bank of Barcelona was established in 1401 and the Bank of Genoa in the year 1407. As the center of commerce got shifted to the north, the Bank of Amsterdam was established in 1609. Banks working on the same principle as that of the Bank of Amsterdam was established afterwards at Hamburg and some other parts of the commercial towns and free cities in Germany.
LINK REMOVED - Thread is now a discussion of the banking system. - Karajorma
Am I the only one that fails to see a point to any of that?
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When the government controls the value of money, that can change in about two months.
What screwy efficient government do you have? Because I can tell you right now, I've never seen any form (local, state, etc.) of government get anything done in a mere two months.
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I think he means that the government can destroy the economy in two months, not change it with any actual goal in mind. And it certainly can if it uses the Weimar Republic approach to crisis management.
Also, was the original OP and link supposed to be some sort of lending deposits/interest is EEEEEEVIL sort of thing?
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I kinda wish our money was still backed by silver.
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I wish our money was backed by anything. Silver is my first choice for that, though. Gold is too useful for other things. Leaving aside dispute on what should be used, the point is to use something at all. A currency not backed by anything is just so much paper.
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Silver is an excellent heat distribution material. I'd hate to see the price on it skyrocket.
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how about unobtainium?
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how about unobtainium?
or... leaves?
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Silver is an excellent heat distribution material. I'd hate to see the price on it skyrocket.
If a currency were backed by silver, the price of silver would be fixed. Back after WWII (IIRC, might have been a different war), the U.S. dollar was backed by gold, and was determined as 1/35th an ounce of gold. We have since stopped using any standard, but that precedent has been made.
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how about unobtainium?
or... leaves?
But the people would just burn the trees :p
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Of course... to combat inflation.
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I wish our money was backed by anything. Silver is my first choice for that, though. Gold is too useful for other things. Leaving aside dispute on what should be used, the point is to use something at all. A currency not backed by anything is just so much paper.
I'm pretty sure this would be truly horrible for our economy.
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Really? Explain please.
EDIT: I think I can see what you mean, but I'll wait for confirmation on your part before I say anything.
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Silver is an excellent heat distribution material. I'd hate to see the price on it skyrocket.
If a currency were backed by silver, the price of silver would be fixed. Back after WWII (IIRC, might have been a different war), the U.S. dollar was backed by gold, and was determined as 1/35th an ounce of gold. We have since stopped using any standard, but that precedent has been made.
Correct me if I'm wrong, but wouldn't creating a silver standard require the removal of a vast amount of silver from the open market? And wouldn't less availability cause the value of silver as a commodity to go up?
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Really? Explain please.
EDIT: I think I can see what you mean, but I'll wait for confirmation on your part before I say anything.
I don't remember my econ well enough, but basically, a large part of economic policy concerns managing the money supply. It's important that new money can be created or restricted as needed. Pegging the dollar to the value of silver would probably keep its worth way down and...uh, other bad stuff. But I'm not enough of an expert to specify.
Rian might know, I'll ask her.
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What, can I ask, can gold be used for? I seem to recall it's precious just because... it can be. You can't actually DO anything with it besides make it look pretty.
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Gold has a relatively low melting point, allowing it to be heavily used in most (if not all) electronic devices. Like your MoBo.
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also, low resistance to electricity flowing through it, etc etc (there's a reason the gold plated connectors are used in high-end stuff)
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What, can I ask, can gold be used for? I seem to recall it's precious just because... it can be. You can't actually DO anything with it besides make it look pretty.
It's precious because a) it's rare and b) because of its chemical properties, it doesn't tarnish (like silver does). This means that it is easy to take a given piece of gold, melt it down, and create something new with it. Because of this it was regarded as a "timeless" material, and timelessness and reusability made it worth very much. Plus, it's pretty.
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also, low resistance to electricity flowing through it, etc etc (there's a reason the gold plated connectors are used in high-end stuff)
That's probably not the main reason its plated on connection points, though.
Keep in mind that copper is the second-best conductor of electricity, and silver is in fact the best by a small margin. Since copper is cheaper, that's why you use copper wire, not silver.
Gold is highly resistant to corrosion and can remain coherent as a sheet to the point you can see through it. Thus, by plating something with gold, you in fact use hardly any of the stuff (which is good, as it's very expensive) while coating a surface with a material that's still highly conductive and won't form much of a disruptive oxide layer - AT ALL.
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also, low resistance to electricity flowing through it, etc etc (there's a reason the gold plated connectors are used in high-end stuff)
That's probably not the main reason its plated on connection points, though.
Keep in mind that copper is the second-best conductor of electricity, and silver is in fact the best by a small margin. Since copper is cheaper, that's why you use copper wire, not silver.
Gold is highly resistant to corrosion and can remain coherent as a sheet to the point you can see through it. Thus, by plating something with gold, you in fact use hardly any of the stuff (which is good, as it's very expensive) while coating a surface with a material that's still highly conductive and won't form much of a disruptive oxide layer - AT ALL.
thank you, i'm a definite idiot when it comes to chemistry and some things....
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I kinda wish our money was still backed by silver.
YOU SHALL NOT CRUCIFY MANKIND UPON A CROSS OF GOLD BLAHBLAH WILLAM JENNINGS BRYAN.
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... Our money was (until the 1950s) always backed by gold. Never silver.
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also, low resistance to electricity flowing through it, etc etc (there's a reason the gold plated connectors are used in high-end stuff)
That's probably not the main reason its plated on connection points, though.
Keep in mind that copper is the second-best conductor of electricity, and silver is in fact the best by a small margin. Since copper is cheaper, that's why you use copper wire, not silver.
Gold is highly resistant to corrosion and can remain coherent as a sheet to the point you can see through it. Thus, by plating something with gold, you in fact use hardly any of the stuff (which is good, as it's very expensive) while coating a surface with a material that's still highly conductive and won't form much of a disruptive oxide layer - AT ALL.
platinum is actually the best conducting metal at room temperature if i remember my electronics classes from high school correctly, its followed by gold, silver is also a good conductor but im not sure how it matches with copper. of course actual research says im full of **** (http://en.wikipedia.org/wiki/Electrical_conductivity_of_metals). diamonds are also very conductive both electronically and thermally. as beter lab manufacturing processes come into being, diamonds will be devalued enough to be used in most consumer electronics, at least as high efficiency heat exchangers.
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Your info's a bit off, Nuke...
Diamonds are actually the best conductors of heat available, I believe. However, they do not conduct electricity. Gotta love those non-metals (carbon, but everyone knows that).
Silver is the best conductor of electricity as far as my knowledge goes... I've not had the ambient temperature scenario as an argument before, but silver is indeed the best conductor of electricty as far as I'm aware. Now, this isn't to say temperature isn't a factor, as most superconductors (zero - nil resistance means awesome conductance...) become that way when the given element is brought down to near zero-Kelvin numbers (absolute zero). However, that's friggin' cold and you're not going to have that as a factor in your everyday job... Unless you work at a university/lab with a superconducting magnet.
Copper is second-best by a small margin. It's fairly common and much more common than silver. If you've got all-silver electronics, you've got way too much cash on hand.
I'm not sure how gold and platinum stack up, but the main attractions are that the metals are basically inert - they don't corrode. It appears that platimum has a rather low expansion coefficient, so it's valuable in high-temperature situations.
Lastly, I didn't mean to offend you, pecenipicek. I apologise if I did.
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Backing a modern currency with precious metals would be a horrible idea. There's not enough gold in the world to account for anything more than a small fraction of the American money supply--the amount of wealth that exists in the form of dollars is several times the value of all the gold ever refined on Earth. Furthermore, unlike in years past, precious materials have uses other than as money or treasure--gold is far too useful for a variety of electrical applications for all of it to be locked up in vaults to back currency. Even diamonds, perhaps the greatest symbol of vanity and materialistic pettiness in all of Western civilization, can be used for all sorts of industrial purposes--drill bits, reinforcing glass, abrasives, etc.
Fiat money is the only feasible solution for large economies. The risk of a fiat currency collapsing is something we just have to deal with and reduce through sound economic management.
platinum is actually the best conducting metal at room temperature if i remember my electronics classes from high school correctly, its followed by gold, silver is also a good conductor but im not sure how it matches with copper. of course actual research says im full of **** (http://en.wikipedia.org/wiki/Electrical_conductivity_of_metals). diamonds are also very conductive both electronically and thermally. as beter lab manufacturing processes come into being, diamonds will be devalued enough to be used in most consumer electronics, at least as high efficiency heat exchangers.
Don't count on that happening anytime soon. The value of natural diamonds is pretty much fixed by the DeBeers cartel, one of the most evil businesses that has ever existed.
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indeed it will be some time before diamonds will be dirt cheap. and most of the manufacture processes are kept so top secret they nearly rival the skunk works. with undisclosed laboratories and such. well maybe not that secret, they do like the outside world knowing what their doing, to gain funding, but they most likely want to keep the where and the how hidden until their patents come through. no telling what those cartels will do. essentially they found with he proper seed diamonds, they can grow onto them using some high temperature plasma of undisclosed chemical structure and come out with really large and very pure diamonds.
also diamonds and carbon in general are indeed conductive. graphite is used as brushes in large ac motors, resistors are made of carbon as well. typical testing of diamonds is done with an electrical charge, if a charge goes through it, its good.
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also diamonds and carbon in general are indeed conductive. graphite is used as brushes in large ac motors,
Oh no they aren't. Diamonds lack the free electrons to be good conductors of electricity. Graphite has a completely different structure to diamond which which results in a large number of dissociated electrons that allow it to conduct a charge. Diamond with its 4 covalent bonds definitely does not have this kind of structure.
It is possible for the impurities present in a diamond to allow it to act as a semiconductor but pure diamonds are actually very good insulators.
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Lastly, I didn't mean to offend you, pecenipicek. I apologise if I did.
naw, you didnt, i was just commenting on my lack of knowledge for the materials... last time i studied chemistry in relation to the physical properties of elements was 4 years ago :p
my formal education is textile - chemical technician (aka, lab dyeing monkey) and my chemistry courses were much much more focused on analitical chemistry (study of reactions of various chemicals on textile and similar materials. similar often meaning running around like a maniac with some HCl on your fingers xD)
Lab practices, oh how i loathed thee an thy insufficient safety measures... the only method of protection was a lab coat. most of the time, the more volatile chemicals were kept under lock thoroughly. didnt stop me from making nitroglicerine accidentally tho :p
also to echo karajorma on the whole diamonds matter, no, they do not conduct electricity. thank their tetraedric structure.
graphite has a hexagonal structure with two free links on every atom if i remember correctly...(talking about a single molecule here) and then there's the whole carbon "buckyball" deal :p
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its funny how we used to electrocute the **** out of each other with the diamond tester in the pawn shop. maybe it works on some kind of oscillation principal. or perhaps it was some bull**** tech they were dumb enough to buy.
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Backing a modern currency with precious metals would be a horrible idea. There's not enough gold in the world to account for anything more than a small fraction of the American money supply--the amount of wealth that exists in the form of dollars is several times the value of all the gold ever refined on Earth. Furthermore, unlike in years past, precious materials have uses other than as money or treasure--gold is far too useful for a variety of electrical applications for all of it to be locked up in vaults to back currency. Even diamonds, perhaps the greatest symbol of vanity and materialistic pettiness in all of Western civilization, can be used for all sorts of industrial purposes--drill bits, reinforcing glass, abrasives, etc.
Fiat money is the only feasible solution for large economies. The risk of a fiat currency collapsing is something we just have to deal with and reduce through sound economic management.
The value of fiat money is entirely adjustable. There is absolutely nothing that prevents there from being enough precious metals to account for it all. The metals would just be rather expensive. As a minor correction, I am as firmly opposed to using gold as said metal as you are. I would vastly prefer it to be silver, which has much less practical uses, but still has that "ooooh, pretty" effect that is practically demanded by anything of value. Another bonus is that silver is orders of magnitude more plentiful.
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its funny how we used to electrocute the **** out of each other with the diamond tester in the pawn shop. maybe it works on some kind of oscillation principal. or perhaps it was some bull**** tech they were dumb enough to buy.
That explains a lot. :eek:
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Regarding diamonds and electrical conductivity.
http://en.wikipedia.org/wiki/Diamond#Electrical_conductivity
Other specialized applications also exist or are being developed, including use as semiconductors: some blue diamonds are natural semiconductors, in contrast to most diamonds, which are excellent electrical insulators. The conductivity and blue color originate from the boron impurity. Boron substitutes for carbon atoms in the diamond lattice, donating a hole into the valence band.
Hence, pure diamonds do not conduct electricity. Which makes the diamond tester referred to by Nuke have the opposite evaluation. If the diamond conducts, it's not pure.
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... Our money was (until the 1950s) always backed by gold. Never silver.
Huh. I could've sworn someone's money was backed by silver. Oh well...
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As I noted, William Jennings Bryan took up the cause when he wasn't opposing evolution.
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... Our money was (until the 1950s) always backed by gold. Never silver.
Huh. I could've sworn someone's money was backed by silver. Oh well...
http://en.wikipedia.org/wiki/Silver_standard
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Backing a modern currency with precious metals would be a horrible idea. There's not enough gold in the world to account for anything more than a small fraction of the American money supply--the amount of wealth that exists in the form of dollars is several times the value of all the gold ever refined on Earth.
The American money supply has been majorly inflated. Right now the dollar is only worth about 1% of what it was 100 years ago.
I don't remember my econ well enough, but basically, a large part of economic policy concerns managing the money supply. It's important that new money can be created or restricted as needed.
It can still be done, before the federal reserve that duty was done by congress, and they did expand and contract the money supply as needed in order to keep inflation away, even while the dollar was pegged to gold.
EDIT: I'll also throw in there is a very real chance the dollar may end up self dustructing in the next few years because of the debt monotization that's happening, unless major changes happen to get our fiscal house basck in order.
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Backing a modern currency with precious metals would be a horrible idea. There's not enough gold in the world to account for anything more than a small fraction of the American money supply--the amount of wealth that exists in the form of dollars is several times the value of all the gold ever refined on Earth. Furthermore, unlike in years past, precious materials have uses other than as money or treasure--gold is far too useful for a variety of electrical applications for all of it to be locked up in vaults to back currency. Even diamonds, perhaps the greatest symbol of vanity and materialistic pettiness in all of Western civilization, can be used for all sorts of industrial purposes--drill bits, reinforcing glass, abrasives, etc.
Fiat money is the only feasible solution for large economies. The risk of a fiat currency collapsing is something we just have to deal with and reduce through sound economic management.
The value of fiat money is entirely adjustable. There is absolutely nothing that prevents there from being enough precious metals to account for it all. The metals would just be rather expensive. As a minor correction, I am as firmly opposed to using gold as said metal as you are. I would vastly prefer it to be silver, which has much less practical uses, but still has that "ooooh, pretty" effect that is practically demanded by anything of value. Another bonus is that silver is orders of magnitude more plentiful.
The problem is that this would devalue the currency so much it is worthless, destroying most of the wealth in the First World and thus destroying the world economy. You can adjust the value of money, but you cannot adjust the value of precious materials by fiat (heh), so there's just not going to be enough of it. Gold really isn't a great way to store huge amounts of value; it is good for private individuals to store value in a semipermanent manner, but not on a massive scale.
Backing a modern currency with precious metals would be a horrible idea. There's not enough gold in the world to account for anything more than a small fraction of the American money supply--the amount of wealth that exists in the form of dollars is several times the value of all the gold ever refined on Earth.
The American money supply has been majorly inflated. Right now the dollar is only worth about 1% of what it was 100 years ago.
So what? There are certainly way more than 100 times more dollars in the economy than in 1900. The real value of the American money supply right now exceeds the amount of refined gold in existence several times over. This basically leaves three choices: you mine several times more gold than has ever been mined in human history (but that will lead to diminishing returns as the value of gold crashes), you shrink the US economy by around 90%, or you stay with fiat money and live with the risks. Those are the only real options.
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The problem is that this would devalue the currency so much it is worthless,
Inflation devalues money, which is not what he is saying at all.
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No, I mean to match the currency with the value of gold reserves to create a gold-backed currency, you would have to destroy most of the currency's value (or to be really precise, the money supply's value) because the gold isn't worth enough to back the currency right now.
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I'll put it out again, since you seem to be missing it in every post. Gold would be a bad idea. I'm not saying anything about using gold. Using silver would be a much better idea, since gold has way too many commercial applications.
At any rate, backing a currency with a precious metal does not equate to artificially inflating the currency to match the current market value of said metal. It amounts to linking the worth of the currency to the metal in a set ratio. For example, after WWII, the American dollar was set to be worth 1/35th an ounce of gold. Granted, that has since changed, but the precedent has been set.
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I don't understand why this is necessary or a good idea.
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To get rid of inflation.
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/me starts giggling madly
Right. So, back when currencies were backed by precious metals, we didn't have inflation? I'm not an expert in economics, but that statement sounds very, very wrong indeed.
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You can't get rid of inflation. You either have inflation or unemployment; the two are intrinsically tied. Reducing one increases the other.
Inflation on its own isn't even a bad thing. Purchasing power is what you have to worry about.
I only vaguely remember my macroeconomics, but I took a course from Alan Sanderson, who is one of those Chicago School bigshots. Inflation is quite a bit more nuanced than it seems.
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Indeed. Inflation only gets bad when it goes out of control, if it is kept in check at a low rate (like 1 or 2 percent per year), it actually has a net positive influence.
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Quite so. Deflation is considerably more dangerous (for reasons I again can't fully recall). I remember a story about the Japanese economy being hobbled by incredible deflation; exasperated economists suggested using helicopters to drop bundles of money all over Tokyo to jumpstart some spending and inflation.
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/me starts giggling madly
Right. So, back when currencies were backed by precious metals, we didn't have inflation? I'm not an expert in economics, but that statement sounds very, very wrong indeed.
From 1784-1913, do you know how much net inflation the United States had? Zero. Everytime there was inflation, it was always accompanied by deflation to balance it out. And now? Now the US dollar is worth only 1% of what it was 100 years ago. Our economy certainly has grown of course, but not nearly as much as it appears.
You can't get rid of inflation. You either have inflation or unemployment; the two are intrinsically tied. Reducing one increases the other.
That's the keynesian view. How do you explain the period from 2003-2007? We certainly had plenty of inflation but not so much in the way of job growth. Right now inflation is starting to come back but unemployment is still high. Stagflation anyone? According to Keynes that situation is impossible, yet it is happening. Others disagree (http://en.wikipedia.org/wiki/Austrian_School#Inflation)
exasperated economists suggested using helicopters to drop bundles of money all over Tokyo to jumpstart some spending and inflation.
Nope, that was Bernanke in 2002. What he actually said was if he had to in order to avoid a recession in the US he would drop money from a helicopter. This led to his nickname "Helicopter Ben".
EDIT: I'll also add that I'm not an expert in economics either.
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It's not the Keynesian view - I was taught by Chicago neoclassicists.
exasperated economists suggested using helicopters to drop bundles of money all over Tokyo to jumpstart some spending and inflation.
Nope, that was Bernanke in 2002. What he actually said was if he had to in order to avoid a recession in the US he would drop money from a helicopter. This led to his nickname "Helicopter Ben".
Please do your research before saying things like this. The Helicopter Drop anecdote originated with Milton Friedman a long time ago and could easily have been applied to the Japanese economy.
The inflation of US currency is not anything to be concerned about unless some reason can be presented to be concerned about it. What matters is the purchasing power of the dollar.
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Please do your research before saying things like this. The Helicopter Drop anecdote originated with Milton Friedman a long time ago and could easily have been applied to the Japanese economy.
Good point, however Bernanke did invoke it.
The inflation of US currency is not anything to be concerned about unless some reason can be presented to be concerned about it. What matters is the purchasing power of the dollar.
Inflation fundementally causes the dollar (or any currency) to lose value. Right now because of the obscene levels of debt and deficits, the way they are looking to continue financing it is monitization, which will cause the inflation rate to go up even more. Gold is at over $1,000 now for a reason.
It's not the Keynesian view - I was taught by Chicago neoclassicists.
Which was partly influenced by Keynes.
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Inflation does not fundamentally cause money to 'lose value'. I don't remember the technical definitions but the fact that the dollar has inflated does not mean a drop in purchasing power. Inflation is a necessary and even beneficial side effect of economic growth, so inflation on its own is not worth panicking over. Rampant inflation is where it gets dangerous.
Neoclassicism may have been influenced by Keynesian views, but largely in the sense that the Jedi influence the Sith: it is a reaction to and counterattack upon Keynesianism.
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Inflation does not fundamentally cause money to 'lose value'. I don't remember the technical definitions but the fact that the dollar has inflated does not mean a drop in purchasing power.
Here's part of the wiki entry on inflation (http://en.wikipedia.org/wiki/Inflation)
When the price level rises, each unit of currency buys fewer goods and services; consequently, inflation is also an erosion in the purchasing power of money – a loss of real value in the internal medium of exchange and unit of account in the economy.[2][3]
An erosion in the purchasing power of money.....sounds like the loss of value to me.
so inflation on its own is not worth panicking over.
The problem is that it compounds upon itself. If the inflation rate is steady at 5%, it means your paycheck and savings become worth that much less every year.
As a thought experiment, what was our GDP in 2000?
Neoclassicism may have been influenced by Keynesian views, but largely in the sense that the Jedi influence the Sith: it is a reaction to and counterattack upon Keynesianism.
It's an attack on large parts of the central planning aspects of Keynesianism. However, other aspects such as having a central bank.