Page 1 of 4 1 2 3 4 > 11-13-2008, 12:11 PM gwynedd1 18,572 posts, read 16,656,162 times Reputation: 7231 Advertisements It does not seem that many agree on the fundamentals of the problem we have so just like in any sport or task going back to fundamentals. Some think we have too many or not enough etc. So my question is briefly explain how a dollar is born for any that wish to offer their view. Thanks

11-13-2008, 01:36 PM sheenie2000 Location: Charlotte, NC 2,193 posts, read 4,660,923 times Reputation: 1075 I think back in the day it probably started when gold became too heavy and inconvenient to carry, so paper was created instead. But it was probably back then a 1:1 ratio. One gold coin equaled one dollar.



As for today, I think it would be hard to document the flow of how a dollar is created.

What I wrote above is how it started, then we need to figure out what happened after that till we get to today. 11-13-2008, 01:38 PM gwynedd1 18,572 posts, read 16,656,162 times Reputation: 7231 Quote: sheenie2000 Originally Posted by I think back in the day it probably started when gold became too heavy and inconvenient to carry, so paper was created instead. But it was probably back then a 1:1 ratio. One gold coin equaled one dollar.



As for today, I think it would be hard to document the flow of how a dollar is created.

What I wrote above is how it started, then we need to figure out what happened after that till we get to today.



Actually I do no mean historically. I mean a newly created dollar today. Hi sheenie2000,Actually I do no mean historically. I mean a newly created dollar today. 11-13-2008, 02:01 PM evilnewbie 19,530 posts, read 21,146,216 times Reputation: 8733 I think Al Gore invented the dollar as well... don't ask who created the planet... 11-13-2008, 03:51 PM mwruckman Location: Maryland about 20 miles NW of DC 6,106 posts, read 5,352,419 times Reputation: 2446 Quote: gwynedd1 Originally Posted by It does not seem that many agree on the fundamentals of the problem we have so just like in any sport or task going back to fundamentals. Some think we have too many or not enough etc. So my question is briefly explain how a dollar is born for any that wish to offer their view. Thanks



Most dollars are now created when credit is securitized and used as an asset in another transaction or when something like real estate or securities such as bonds or stocks are bid up in the market place. These become assets and are as good as money. Most dollars are now created when credit is securitized and used as an asset in another transaction or when something like real estate or securities such as bonds or stocks are bid up in the market place. These become assets and are as good as money. 11-13-2008, 09:26 PM gwynedd1 18,572 posts, read 16,656,162 times Reputation: 7231 No one can actually present the mechanics of how a dollar is created? That explains many of the posts I see. 11-13-2008, 09:32 PM Humanoid Location: Los Angeles Area 3,306 posts, read 3,620,588 times Reputation: 592



For anybody that wants to watch it there is a relatively good "movie" on youtube about money creation:





YouTube - Money As Debt (1 of 5) Money is created from debt.For anybody that wants to watch it there is a relatively good "movie" on youtube about money creation: 11-13-2008, 09:51 PM AnesthesiaMD Location: NJ/NY 14,131 posts, read 11,575,299 times Reputation: 10086 First of all, I am not an economist but it is a hobby of mine, so I'll take a stab at it. I'm not really sure what you mean by "mechanics" though. The physical mechanics? Or theoretical mechanics? I think I have a pretty good grasp of the theoretical, but if any REAL economists find any flaws, feel free to correct me.



Since the dollar was taken off the gold standard by the Nixon administration, we have been on a system of "fiat money". Which basically means we can print money out of thin air. That is how it is created. The creation of more or less is based on sound principles, but these principles get manipulated by the federal reserve. There is something called The Taylor Rule, which provides an equation telling how much money to print based on inflation and employment. When inflation and employment are high, you tighten the money supply. In other words, you raise interest rates and print less money. The equation tells you just how much to print based on the economic indicators you plug in. If unemployment is high and you have deflationary pressures (like now), you loosen the money supply by printing out more money to break the cycle and lower interest rates to whatever number the equation gives you.



Is this the type of answer you were looking for?



A problem we have now, as I see it, is that the federal reserve stopped using global US dollar supply to calculate the inflation rate. In recent years, they have only been using domestic dollar supply so they could give a falsely low inflation number. That way they could keep interest rates lower than they should have been and keep our money in the stock and real estate markets and out of savings accounts. Now, we need to print out a ton of money to break this cycle, but we cant because the fed rate is already at 1%. There isn't much further to go. Once we hit zero percent, and STILL need to print more money because of deflation and unemployment, we will fall off the taylor formula, and that would be bad. 11-13-2008, 10:04 PM Humanoid Location: Los Angeles Area 3,306 posts, read 3,620,588 times Reputation: 592 Money is not created out of "thin air". Also, actual paper currency only represents a small fraction of money. 11-13-2008, 10:06 PM AnesthesiaMD Location: NJ/NY 14,131 posts, read 11,575,299 times Reputation: 10086 Quote: Humanoid Originally Posted by Money is not created out of "thin air". Also, actual paper currency only represents a small fraction of money. Thats it? Care to expand? I'm trying to learn here too. Please register to post and access all features of our very popular forum. It is free and quick. Over $68,000 in prizes has already been given out to active posters on our forum. Additional giveaways are planned.



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