How does paper money actually work and the World Bnak

[Samaalic Era]

How did it replace Gold and Silver as a nedium of exchange and how can a country like the US just print money out of thin air but not impact its economy

 

[Tukraq]

US has expert economists, it won't impact our economy because the federal reserve knows when to print and burn money for the right circulation, as for silver and gold its the same as paper money, just mediums of exchange, paper money is easier to care around

 

[Samaalic Era]

US has expert economists, it won't impact our economy because the federal reserve knows when to print and burn money for the right circulation, as for silver and gold its the same as paper money, just mediums of exchange, paper money is easier to care around

What gives the US Dollar its value?
If other countries print money the same way, everything will collaspe?

Also what about the World Bank and its limitless money printing and insane loans. This always never made sense to me

 

[Tukraq]

What gives the US Dollar its value?
If other countries print money the same way, everything will collaspe?

Also what about the World Bank and its limitless money printing and insane loans. This always never made sense to me

what gives anything value? people, otherwise its valueless, if other countries print out of control they'll end up like Zimbabwe, but like I said the US federal reserve is filled with expert economists, intact they burn money as much as they print to have the perfect circulation of dollars

 

[YourBroMoe]

What you're referring to is the transfer from the Gold standard to fiat currency.

The Gold standard is easy to understand, you have money in a very easy to hold form (paper), but it represents gold that you can get when you exchange the money in a bank.

Fiat currency is legal tender, which means the government allows a financial institution to print money in the form of currency representing the purchasing power of citizens in a nation.

The way fiat currency works is that a central bank, which is a financial institution that's mostly privately owned, has the legal power to print money.

It needs to print more money every year, because as businesses expand in an economy, more money needs to be in circulation to move the economy.

Problem is: with more printed money, the value of the currency drops, this is known as inflation.

If milk cost $2 in 2009, and then it costs $2.25 in 2010, then the milk didn't change, so the price difference is due to an increase in the money supply.

However, deflation is worse than inflation. Deflation is when there's less money in circulation. When there isn't enough money, then businesses cannot grow or be created, because the money needed to carry it out doesn't exist.

Most nations have a ministry of finance or a treasury. They work with the central bank to ensure inflation doesn't exceed 2% per year.

A lot of people think the gold standard is better, but it's actually worse for a couple of reasons.

1. Inflation can still exist if we end up with too much gold or silver. This happened in Spain when they invaded Chile for their silver reserves. They brought back too much silver, which inflated their currency.

2. If people hoard their gold/silver, then that money isn't being circulated. Since money acts as an asset in the form of gold or silver, hoarding with a significant amount of people can mean a halt in business endeavors for the economy. I.e. a lack of economic growth.

3. The only way to increase the money supply is to make every dollar worth less than the amount of gold/silver, or find more gold/silver. This of course will simply increase inflation again.

4. International trade is harder, as nations under the gold standard tend to gravitate to a economic ideology known as mercantilism. Mercantilism is basically the financial position to increase one's gold supply by minimizing imports and maximizing exports. The problem with this is that this model for world trade isn't sustainable. Eventually the nations that import one's goods would need to export good to increase the gold supply needed to import more anyway, which isn't sustainable. This mindset is based on point number 2, but instead of hoarding gold as individuals, this is done by whole nations. This can end up resulting in conflicts.


Our current system isn't that great, because commercial banks aren't that well regulated, so more of our financial crises tend to arise from the fact that they make a lot of bad decisions for the nation for their own financial benefit.

So it's not so much the lack of a gold standard, as it is the mother of all financial troubles, unregulated greed.

 

[Samaalic Era]

What you're referring to is the transfer from the Gold standard to fiat currency.

The Gold standard is easy to understand, you have money in a very easy to hold form (paper), but it represents gold that you can get when you exchange the money in a bank.

Fiat currency is legal tender, which means the government allows a financial institution to print money in the form of currency representing the purchasing power of citizens in a nation.

The way fiat currency works is that a central bank, which is a financial institution that's mostly privately owned, has the legal power to print money.

It needs to print more money every year, because as businesses expand in an economy, more money needs to be in circulation to move the economy.

Problem is: with more printed money, the value of the currency drops, this is known as inflation.

If milk cost $2 in 2009, and then it costs $2.25 in 2010, then the milk didn't change, so the price difference is due to an increase in the money supply.

However, deflation is worse than inflation. Deflation is when there's less money in circulation. When there isn't enough money, then businesses cannot grow or be created, because the money needed to carry it out doesn't exist.

Most nations have a ministry of finance or a treasury. They work with the central bank to ensure inflation doesn't exceed 2% per year.

A lot of people think the gold standard is better, but it's actually worse for a couple of reasons.

1. Inflation can still exist if we end up with too much gold or silver. This happened in Spain when they invaded Chile for their silver reserves. They brought back too much silver, which inflated their currency.

2. If people hoard their gold/silver, then that money isn't being circulated. Since money acts as an asset in the form of gold or silver, hoarding with a significant amount of people can mean a halt in business endeavors for the economy. I.e. a lack of economic growth.

3. The only way to increase the money supply is to make every dollar worth less than the amount of gold/silver, or find more gold/silver. This of course will simply increase inflation again.

4. International trade is harder, as nations under the gold standard tend to gravitate to a economic ideology known as mercantilism. Mercantilism is basically the financial position to increase one's gold supply by minimizing imports and maximizing exports. The problem with this is that this model for world trade isn't sustainable. Eventually the nations that import one's goods would need to export good to increase the gold supply needed to import more anyway, which isn't sustainable. This mindset is based on point number 2, but instead of hoarding gold as individuals, this is done by whole nations. This can end up resulting in conflicts.


Our current system isn't that great, because commercial banks aren't that well regulated, so more of our financial crises tend to arise from the fact that they make a lot of bad decisions for the nation for their own financial benefit.

So it's not so much the lack of a gold standard, as it is the mother of all financial troubles, unregulated greed.

Thanks for the detailed response sxb. Learned something new today.

If you were running Somalia's Central Bank, how would you regulate the Somali Shilling if you dont mind me asking

 

[Radical]

So let's pretend that your dad is a baker, and sends you to school every day with a slice of cake in your lunchbox. It's really good. You can trade that cake with the other kids, and because slices of cake are rare, everyone is willing to make good trades for that cake. They will do your homework for that slice of cake. They will give you a cool comic for that slice of cake. One slice of cake a day makes you the most important person on the playground.


So you decide that you're going to bring a WHOLE cake to school next time, so that you'll get even MORE things! But... now that cake isn't as rare, and everyone can tell that's the case, they are less willing to do the same work for just one slice. Now they know that they could ask for TWO slices of cake for doing your homework, or THREE slices for giving you that comic, and that they could realistically get it.


Having more cake available made each slice of cake less valuable. Now, instead of one slice of cake getting you homework, everyone is asking for two slices.

The same basic concept applies to money. Money is valuable because it is rare.


If there are only $1000 dollars out there, having $100 is a BIG deal! You've got 1/10th of all the money out there! That means you have a lot of power! But if the government decides to print more money, so now there's $1,000,000 dollars out there, only having $100 is no longer that special. The money you have isn't as valuable anymore.


That's inflation. When more money is printed, it loses its value. Many countries have tried this, thinking that the short term benefit would be worth it, but in the long run it has ruined many economies.

 

[YourBroMoe]

Thanks for the detailed response sxb. Learned something new today.

If you were running Somalia's Central Bank, how would you regulate the Somali Shilling if you dont mind me asking

I'd work hand in hand with the ministry of finance to ensure there's a healthy amount of money, and then work with the government to try to ensure there's healthy regulations with commercial banks, so they don't end up screwing over the public for their own financial means.

A good example is Iceland. After the financial crisis in 2008, they actually threw their bankers in jail

https://grapevine.is/news/2018/02/07/36-bankers-96-years-in-jail/

 

[Samaalic Era]

So let's pretend that your dad is a baker, and sends you to school every day with a slice of cake in your lunchbox. It's really good. You can trade that cake with the other kids, and because slices of cake are rare, everyone is willing to make good trades for that cake. They will do your homework for that slice of cake. They will give you a cool comic for that slice of cake. One slice of cake a day makes you the most important person on the playground.


So you decide that you're going to bring a WHOLE cake to school next time, so that you'll get even MORE things! But... now that cake isn't as rare, and everyone can tell that's the case, they are less willing to do the same work for just one slice. Now they know that they could ask for TWO slices of cake for doing your homework, or THREE slices for giving you that comic, and that they could realistically get it.


Having more cake available made each slice of cake less valuable. Now, instead of one slice of cake getting you homework, everyone is asking for two slices.

The same basic concept applies to money. Money is valuable because it is rare.


If there are only $1000 dollars out there, having $100 is a BIG deal! You've got 1/10th of all the money out there! That means you have a lot of power! But if the government decides to print more money, so now there's $1,000,000 dollars out there, only having $100 is no longer that special. The money you have isn't as valuable anymore.


That's inflation. When more money is printed, it loses its value. Many countries have tried this, thinking that the short term benefit would be worth it, but in the long run it has ruined many economies.

Your first paragraph is hilarious sxb, you should defintely get into storytelling

The dilemma is you need to print money but you cant at the same time which is a paradox

 

[Radical]

You should read Zimbabwe's economic disaster

https://en.m.wikipedia.org/wiki/Hyperinflation_in_Zimbabwe

 

[angelplan]

I'd work hand in hand with the ministry of finance to ensure there's a healthy amount of money, and then work with the government to try to ensure there's healthy regulations with commercial banks, so they don't end up screwing over the public for their own financial means.

A good example is Iceland. After the financial crisis in 2008, they actually threw their bankers in jail

https://grapevine.is/news/2018/02/07/36-bankers-96-years-in-jail/

A man does indeed make sense.
This is best read i have done in somalispot since @AussieHustler got fired from a job with a twist of terror.

 

[riyaale]

How did it replace Gold and Silver as a nedium of exchange and how can a country like the US just print money out of thin air but not impact its economy

 

[Waaqo of Punt]

We should have more of these type of threads

 

[Inquisitive_]

Petrodollar is why they can print as much as they like, they basically forced oil producing nations to only accept dollars for purchasing oil.

This creates a huge demand for the dollar across the world, so if your Somalia needing oil you will exchange real assets or produce for those dollars which they just print on a whim

To make matters worse they also forced bilateral trades between countries to be done using dollars, making the demand for dollar even higher allowing them to print more and more while in return they get real assets allowing them to get filthy rich

They can continue to print almost unlimited while these conditions exist because they control the seas, trade routes and air to enforce this dajjalic system

Inflation and deflation they control, inflation is a means of reducing there debt which overtime becomes less and less.

All this cannot be done with gold or silver because it has intrinsic value, hence why they got rid of it

But before this they managed to confiscate much of the world gold which they hoard in there central banks from all countries most of them voluntarily gave it to them, while others they went in and stole.

 

[Samaalic Era]

Petrodollar is why they can print as much as they like, they basically forced oil producing nations to only accept dollars for purchasing oil.

This creates a huge demand for the dollar across the world, so if your Somalia needing oil you will exchange real assets or produce for those dollars which they just print on a whim

To make matters worse they also forced bilateral trades between countries to be done using dollars, making the demand for dollar higher allowing them to print more and more while in return they get real assets while getting richer.

They can continue to print almost unlimited while these conditions exist because they control the seas, trade routes and air.

Inflation and deflation they control, inflation is a means of reducing there debt which overtime becomes less and less.

All this cannot be done with gold or silver because it has intrinsic value, hence why they got rid of it, but before this they managed to confiscate much of the gold which they hoard in there central banks from all countries most of them voluntarily have it to them, while others they went in and stole.

Damn. This explains how they can give out endless 'aid' to countries and engage in endless wars across the world. One thing about Somalia is that I believe that by using Gold and Silver as money would easily recover economically and fix our finances. The World Bank is the reason why poverty is worse than its ever been and the fact that the majority of people live in poverty

 

[VantaBlack]

It is the biggest scam in human history.

 

[Waaqo of Punt]

@YourBroMoe this video seems to shit on fiat money, basically saying that it has no value and always ends up in failure. From what they say in video I don't see why G&S aren't superior to paper.
Also, I don't get this: "3. The only way to increase the money supply is to make every dollar worth less than the amount of gold/silver, or find more gold/silver. This of course will simply increase inflation again." Pls explain.

 

[Zayn]

Damn. This explains how they can give out endless 'aid' to countries and engage in endless wars across the world. One thing about Somalia is that I believe that by using Gold and Silver as money would easily recover economically and fix our finances. The World Bank is the reason why poverty is worse than its ever been and the fact that the majority of people live in poverty

Actually our weak currency is kinda good cos our goods will be cheap and competitive and that is why China devalues the yuan

 

[kickz]

What gives the US Dollar its value?
If other countries print money the same way, everything will collaspe?

Also what about the World Bank and its limitless money printing and insane loans. This always never made sense to me

Petro Dollar, US currency is tied to Oil of Saudia, anyone who doesn't take it will be taken down. IE Saddam, Gaddaffi, etc.

 

[Ras]

Damn. This explains how they can give out endless 'aid' to countries and engage in endless wars across the world. One thing about Somalia is that I believe that by using Gold and Silver as money would easily recover economically and fix our finances. The World Bank is the reason why poverty is worse than its ever been and the fact that the majority of people live in poverty

Sxb do you want to get us nuked?

Use gold and silver? I want to go back home to a peaceful Somalia one day.

Seriously though. If you don't play along with their economic system then you don't get to benefit from it.

West Europe and East Asia voluntarily accepted the dollar as the global reserve after ww2 because the US was by far the biggest market and they wanted access to it.

Economics and monetary theory is a work in progress so don't stay up for a perfect system.