Re: Incomes and Exchange rates; part 2

["John B. O'Donnell" <jackodonnell@xxxxxxxx>]

Maria Laura Segura wrote:
>
> John wrote:
> > My own position is that gold [or any other commodity backing] is
> > superfluous to government taxation to establish value for money and
> > it is the quantity of value that is the sole relevant function of
> > monetary policy.
> >
>
> John,
> If I understood you well, you're saying only taxation incomes
> are sufficient to establish value for money.

No, but your misinterpretation may be because of my language
peculiarities.

Any taxation, not just that of "incomes" [A concept peculiarly defined
by U.S. courts that is part of the government practice of obfuscation
that confirms the tendency to mistrust government.] can establish value
of a fiat currency. Other methods can also  establish value for a
currency, but one is enough. And, even with a method of giving currency
value, there is still a need for a method to give it a particular value.

In logical perception, taxation is sufficient but not necessary to make
a currency valuable. It is not sufficient [It lacks the ability to
respond sufficiently quickly to changes in value.] to maintain a
reasonably constant value of the currency.

> That might be the case in the US, but in some countries
> where people don't trust there own's government ability
> to spend, some external insurance is necessary. In these
> cases the backing works as a control measure and restrains
> the government from excessive spending (which in most of
> the cases is financed through monetary emition and leads
> to high inflation rates)

There are fools everywhere who trust government but we can be grateful
the sentiment is not universal. The only reliable external insurance to
constrain the misbehavior of government is the power of the mob when the
mob is willing and able to exercise that power. [We can hope that the
threat is sufficient and governments do respect that possibility, but
they also push the frontier as far as they can without inciting
rebellion.]

There are many other procedures [Gold standard, etc.] that may appear to
be "insurance" against the misbehavior of governments, but since
governments can and have throughout history engaged in one form or
another of coin clipping, these other methods only appear to be
insurance. We may all wish it were simpler but the price of freedom and
security is still vigilance.

			-- jbod
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