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Re: Free trade - a debate



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The common method is the "invisible hand". The RBI governor will give so
much rice as the rice-producer is willing to give him for 100 rupees; the
rice-producer will give so much rice as would provide him the same value
as the 100 rupees (for buying his other requirements) and so on with other
producers coming into the circle. The money system is a rotating circle,
where each agent **believes** in the validity of the fiat issued by the
government. i.e. every agent trusts the government's word. A 100 rupees is
a 100 rupees as the government defines it. Inflation is therefore
cheating, if it happens without one's concurrence. On the otherhand, if
everyone concurred, the very word "inflation" is meaningless. But again,
the RBI governorship itself is suspect. Why should it exist ? If we see
properly the government itself exists because Agent A doesn't *trust*
Agent B. When there is this mistrusts in a community, every agent in that
community reliquishes some power to an acommunal force called the
government which ensures the sanctity of contracts and non-violence as
well among the agents in the community. In the absence of mistrust and
violence among people there would be no governments and of course no fiat
money. The money could be issued by anybody in the community, for a fee,
as an occupation in itself. Indeed there are thousands of communities in
the world today who are doing just that. The problem of course comes if
that community is not self-sufficient. I am not sure you need gold/etc to
have a money system.

Thanks.

Padmanabha

On Mon, 12 Feb 2001, MV wrote:
 If there is no *common method* of calculating
 "Sum of hundred rupees worth of rice"  or
 "Sum of 2.15 US dollars worth of rice? or
 similarly for other currencies and products.
 Then how can free/fair trade take place? Can
 anyone who studied economics explain this?
 
 MV.
 
 >From: prakash chandrashekar
 > congratulations Mr MV,
 > you just stumbled onto the biggest fraud in history - fiat money, i.e
 -
 > money being so only because the government says so. All Money used to
 be
 > pegged on a certain sum of gold /silver. Infact the words pound and
 > dollar reffered to certain weights of precious metals. Ever since the
 US
 > dissociated the dollar from gold, no other currency is pegged on a
 real
 > value. All the float in the world of dollars, euros, pounds, is all
 > currency with no base in real wealth. they depend  on the ability of
 the
 > governments to tax their people and restrict their own printing
 presses
 > of money.
 >
 > regards
 > prakash
 >
 > Now let us define the value system of currency....
 >
 > For eg. the Rs.100 currency has value because,
 > the governor of RBI says "I promise to pay the
 > bearer the sum of hundred rupees" and this
 > promise is "Guaranteed by the Central
 > Government" of India.
 >
 > Most other currencies are also backed by
 > similar promise/guarantee. What is it the
 > RBI governor is promising, when he says *sum*
 > of hundred rupees? for eg. If someone goes to
 > RBI governor and gives Rs.100 note and ask for
 > "Sum of hundred rupees worth of rice" how will
 > he calculate how many kg of rice to give?
 >
 > For people using different currencies to decide
 > the value of their goods and services all currencies
 > should have a common value system, isn't it?
 > As per current economic theory what is this
 > common value system?
 >
 > MV.
 
 
 
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____________________________________
Kadirenahalli Venkata Padmanabha Rao
http://www.padmanabha.org

"To think I cannot feel..."



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This is the National Debate on System Reform.       debate@indiapolicy.org
Rules, Procedures, Archives:            http://www.indiapolicy.org/debate/
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