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Definition of the US Dollar.
Old 03-02-2011, 05:25 PM   #1
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Definition of the US Dollar.

I watched an exchange between Ron Paul and Bernanke.
The question by Paul was: what is the definition of the Dollar.

Bernanke's waffling response was, whatever it buys, i.e. Food, Fuel, or other goods.

I am now more confused.
As far as I know the CPI excludes food, fuel heating or motive, rent etc. another words, the things that must be paid for by the public as essentials.

So the question to the financial vizardas: what is the definition of the Dollar. How is it established? Or is it simply vaporware.
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Old 03-02-2011, 05:29 PM   #2
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I'm not sure what "definition of the dollar" even means. I presume that Paul is trolling as usual, perhaps to make a point about how it should be backed by silver or gold or something, but in any currency system, a dollar (etc) is worth whatever people agree (without discussing it) to think that it's worth.

Of course, he could just have looked here.
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Old 03-02-2011, 05:34 PM   #3
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Whatever Congress says it is. See U.S. Constitution, Article 1, Section 8 "Powers of Congress", which includes the power

To coin Money, regulate the Value thereof, and of foreign Coin, and fix the Standard of Weights and Measures
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Old 03-02-2011, 06:16 PM   #4
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.....regulate the Value thereof, and of foreign Coin, and fix the Standard of Weights and Measures
In this description the word regulate means? To make regular, i.e. to facilitate, as in the original meaning of the commerce clause, or the more modern to control the value?

Darn English is difficult.
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Old 03-02-2011, 07:12 PM   #5
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Originally Posted by ls99 View Post
As far as I know the CPI excludes food, fuel heating or motive, rent etc. another words, the things that must be paid for by the public as essentials.
You are getting confused with core inflation. The CPI, as used for COLAs. etc., does include food, fuel, etc.

See the latest BLS bulletin:

http://www.bls.gov/news.release/pdf/cpi.pdf
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Old 03-02-2011, 07:25 PM   #6
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Its vapor, backed by nothing more than "good faith and credit" rather than hard assets in a vault.
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Old 03-02-2011, 07:32 PM   #7
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Its vapor, backed by nothing more than "good faith and credit" rather than hard assets in a vault.
hence, "In God we Trust"
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Old 03-02-2011, 08:31 PM   #8
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In this description the word regulate means? To make regular, i.e. to facilitate, as in the original meaning of the commerce clause, or the more modern to control the value?

Darn English is difficult.
I have always read that clause to mean "determine" -- as in "a dollar shall be .92 oz. silver" or something like that. To my knowledge, there is no current U.S. statute that determines or fixes the value of a dollar in terms of any commodity. So Bernanke is right, a dollar is valued by the parties to any transaction, one of whom will accept x dollars for y goods.
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Old 03-02-2011, 09:16 PM   #9
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To Bernanke is right, a dollar is valued by the parties to any transaction, one of whom will accept x dollars for y goods.
Sort of like gold, ...or vintage corvettes, ...or black market levi's.
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Old 03-03-2011, 07:01 AM   #10
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Quote:
Originally Posted by ls99 View Post
I watched an exchange between Ron Paul and Bernanke.
The question by Paul was: what is the definition of the Dollar.

I guess that's the quality of inquiry we can expect from our new Chairman of the House Financial Services Subcommittee on Domestic Monetary Policy.

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So the question to the financial vizardas: what is the definition of the Dollar. How is it established? Or is it simply vaporware.
The definition of a dollar is: "the universally accepted medium of exchange in the United States", which should be obvious to our esteemed Chairman. If instead he's asking, "how is it valued?" or "why does it have value?" he should ask those questions directly, instead of being obtuse. But when he's finished, he might want to ask those same questions for gold, and see how the answers compare (the Cliff Notes version is . . . they're the same).
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Old 03-03-2011, 07:29 AM   #11
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Originally Posted by Gone4Good View Post

The definition of a dollar is: "the universally accepted medium of exchange in the United States", which should be obvious to our esteemed Chairman. If instead he's asking, "how is it valued?" or "why does it have value?" he should ask those questions directly, instead of being obtuse. But when he's finished, he might want to ask those same questions for gold, and see how the answers compare (the Cliff Notes version is . . . they're the same).
+1 Saved me from looking it up in the dictionary. I hate pseudo profound questions intended to leave people with a blank look so the asker can jump in with their deep answer.
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Old 03-03-2011, 08:56 AM   #12
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Originally Posted by Gone4Good View Post
The definition of a dollar is: "the universally accepted medium of exchange in the United States", which should be obvious to our esteemed Chairman. If instead he's asking, "how is it valued?" or "why does it have value?" he should ask those questions directly, instead of being obtuse. But when he's finished, he might want to ask those same questions for gold, and see how the answers compare (the Cliff Notes version is . . . they're the same).
+1
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Old 03-03-2011, 09:18 AM   #13
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Just like for gold, houses, and beanie babies, the value of the dollar is determined by the market.
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Old 03-03-2011, 10:56 AM   #14
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Lots of good answers here... I will add...

The dollar is money... money is a store of value... end of answer...


But, to add some to the discussion... the value is determined by the interactions of various parties when exchanging this store of value for something else... it is used to facilitate commerce...

Now, if you look at it a bit more.... everything is a store of value... your house, your car, you furniture, your food etc. etc.... they all have value, which is why you exchange some of your dollars for them... but, trying to exchange a couch for food is not practical... so 'money' was invented... to make it easier to make this exchange...
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Old 03-03-2011, 10:57 AM   #15
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You are getting confused with core inflation. The CPI, as used for COLAs. etc., does include food, fuel, etc.

See the latest BLS bulletin:

http://www.bls.gov/news.release/pdf/cpi.pdf
Thanks, I now understand the CPI.

So in a way the CPI reflects the changing value of the dollar, or at least the perception of the dollar's worth. The less valuable it is, more is demanded by the seller of stuff.
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Old 03-03-2011, 03:23 PM   #16
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Directly from the face of a one dollar Federal Reserve Note:

This note is legal tender for all debts, public and private.
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Old 03-03-2011, 07:53 PM   #17
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The dollar is a faith-based currency. It is worth what people think it is worth.

Bill Seidman, when head of the FDIC during the S&L crisis put it this way: "My friends, there is good news and bad news. The good news is that the full faith and credit of the FDIC and the U.S. government stands behind your money at the bank. But the bad news is that you, my fellow taxpayers, stand behind the U.S. government".

That honesty, so rare in government at that level, annoyed a lot of people in Washington.
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Old 03-05-2011, 12:57 AM   #18
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The question by Paul was: what is the definition of the Dollar.
Well love of it is the root of all evil.

I suppose money is just a mechanism for converting out labour into the things we need to live. And for most of us it's just a series of bits on some computer in an investment house.

It's something that we, on this board, love a little too much.
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Old 03-06-2011, 05:10 AM   #19
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Many investors have lost much faith in the dollar during the last few years. This trend is likely to continue IMO.

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The dollar is a faith-based currency. It is worth what people think it is worth.
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Old 03-06-2011, 08:51 AM   #20
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I am not sure what the exact definition would be.... but I am reasonably confident that today's definition is about 1/2 what it was about 20 years ago.
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