Nuh uh, xeno... I'm not letting you get away with this sham.

For you to legitimately be able to complain about the problems of a currency system, you have to be able to present an alternative.  I have presented arguments as to why eliminating inflation is impossible and why any effort to eliminate inflation will inevitably trigger an economic collapse... A real collapse... one that's actually supported by macroeconomic models.  Otherwise, inflation is inevitable regardless of economic systems.

This most recent post is honestly doing nothing more than begging the question... to which I've already replied, multiple times.  This post is pretty much 100% reiteration on my part, which is a waste of both our times.  Please, either advance the discussion or wait until you have ample time to make a substantive post (heck, try saving a post in a word document so you can work on it for multiple sittings...).

As for your little story of the man saving all his life wealth...
1: First thing's first: At the point where there's no answer to the question of whether or not there's an alternative economic system that can prevent inflation while avoiding the central bank flaws I mentioned previously... this doesn't matter because inflation is inevitable.

2: Let me reiterate this: What that old man is doing... is a bad thing!  It's the very reason why we're having trouble getting out of this economic downturn.  That's #3 from last post (which you didn't answer as well).  You can dismiss economic models all you like, but it doesn't make your statements any more true.  X(

3: Oh, right... you're also assuming that old man lives in a box with no outside contact, which is utterly divorced from reality.  In real life, that old man would be reminded constantly that inflation is a real thing ("In my day, we could buy a bottle of pop for a nickel").  Seriously, those "back in my day" speeches every grandchild hears is a recognition of the fact that inflation is a real, perpetual thing.  He knows that inflation exists.  We all do.  Putting everything into cash would be a recognition an acceptance of the fact that the value of the savings would degrade over time.  Sorry, but I'm not going to feel sorry for him.

At what point is the old man supposed to take responsibility for picking a decent asset to hold savings... such as gold or certain bonds?  Am I supposed to feel sorry for him if he held all his savings in pokemon cards?  How about if he threw all his savings in a bottomless pit, knowing full well that it was a bottomless pit from which he would never recover his assets?  This is the flaw which you're perpetuating, and which you have still blatantly ignored despite my insistence... people aren't complete dumbasses.  They see that inflation is happening, and have ways to distribute their assets to avoid inflation.  If you went to a decent mutual fund and told them you wanted your assets to overcome inflation, they'd be more than happy to invest your assets... easiest... job... ever!

As for fiat currency...

I like fiat currency, actually.  First of all, there's the argument I placed earlier in this post... you know, the one that indicted backed currencies, and got a non-substantive reply?  Yeah, that!

The other problem is that without fiat currency, you're engaging in product bundling: people who want to buy one asset are forced to buy the other.  So if I just want a medium of exchange... I have to invest in gold.  And if I just want to buy gold... I also have to invest in the stability of the US government.  That means changes in one good affect the price of the other good in ways contrary to its intent.

Let's take an example: Assume the US government collapsed.
Fiat currency: Currency collapses.  Gold investors profit big time.
Gold-backed currency: Currency collapses.  Gold investors... would be screwed, because the US government was the one holding their gold assets... oops!

See what happened?  The very thing for which gold was supposed to be a hedge against... became its undoing!

Xeno, I'm going to ask this just once.  I'm a really busy person, and I'm sure you are too.  Please, just stop reiterating posts you've already posted.  I read it.  I answered it.  I presented real economic models to indict it.  Neither of us have time to replay the exact same posts we did previously.

People will flock to self dependent nations for currency holding, and I saw gold coming... just wondered when.

I knew gold was over-inflated. Now I will seem a prophet to certain people I predicted it to.

Only propped up by those waning physical gold on hand for the coming storm, and by those seeking hedges against unknown financial situations.

Now they want not liquidity, but security against everything bottoming out. Going to be rocky, especially since Obama has been so anti-business with these dramaticly huge regulations.

"inflation is inevitable."

Why?  Please explain your reasoning for why it is inevitable.

I, personally, don't think inflation is inevitable.  Prices need not always keep going up.  Population - the growth of which is what ultimately drives inflation  - can decline - take Japan as an example:

http://www.google.ca/publicdata/explore?ds=d5bncppjof8f9_&met_y=sp_pop_grow&idim=country:JPN&dl=en&hl=en&q=population+growth+japan

"2: Let me reiterate this: What that old man is doing... is a bad thing!  It's the very reason why we're having trouble getting out of this economic downturn. "

How could you say saving money is bad?  How could that be?  Better would be to say that inflation is bad. 

"that old man would be reminded constantly that inflation is a real thing"

The fact is not everyone does, and even for those who do, there is nothing they can do about it because they are poor and or middle class and have no way to invest to hedge inflation losses.

"Am I supposed to feel sorry for him if he held all his savings in pokemon cards? "

Zarf, show some sensitivity and awareness, will you?  Most people don't even have savings to invest in pokemon cards.

re: fiat currency

Back currencies result in the situation where "changes in one good affect the price of the other good in ways contrary to its intent."

You can say the same about fiat currencies, where changes in one currency affect the price of the other contrary to its intent.

"without fiat currency, you're engaging in product bundling: people who want to buy one asset are forced to buy the other."

At least backed currencies can always be redeemed for the commodity it is backed by and at least that commodity has some sort of inherent USEFULNESS. 

"If you went to a decent mutual fund and told them you wanted your assets to overcome inflation"

lol

We're talking about how investors have resorted to liquidizing to cash holdings, and you're saying we should invest in mutual funds? 

"Many researchers have suggested that the most effective way for investors to raise the returns they earn from mutual funds is to reduce the fees that they pay. They suggest that investors look for no-load funds with low expense ratios."

http://www.techtradersystem.com/frame.asp?url=http://en.wikipedia.org/wiki/Mutual_fund&title=Mutual%fund%-%Wikipedia,%the%free%encyclopedia&desc=A%mutual%fund%is%a%professionally%managed%type%of%collective%investment%scheme%that%pools%money%from%many%investors%to%buy%stocks,%bonds,%short-term%money%market%...

And how are the indexes doing?

http://www.google.ca/finance?q=INDEXNASDAQ%3ANDX&hl=en

Zarf: If you are paying a 2% fee on the principal when you invest it, on top of a 1% MER each year, and the average 10 year annual return is 4% / year, inflation is 3%, and gains you are making are taxed at 100% your marginal tax rate of, oh, let's say 40%, AND after 10 years, the currency you trade in has diminished in value by 20% relative to other world currencies, over that 10 year period, would you have even made anything at all? 

Edit: Oh, and let's add to the bill the 10 years of interest on the mortgage debt that he could have otherwise have paid off with the money he initially invested in the mutual fund.