What I like about papers like the one you posted is that it proves that the men running the con know exactly what they're doing. The men making the decisions are not dupes, they are completely culpable.
They are making conscious decisions that defraud the public at large. Yet, they do it anyway. If this isn't proof of their corruption I don't know what is.
I have this article in one of Ayn Rands collections of essays. I first read it when Greenspan was still in office. I've wanted to ask him why he changed his views after he got in power. If anyone has a link to him answering that question, I'd like to see it.
I never would have believed it:
"It may surprise more than a few gold devotees to learn they have an ideological friend in none other than Federal Reserve Board chairman Alan Greenspan. Starting in the 1950s, in fact, Greenspan was a stalwart member of Ayn Rand's intellectual inner circle. A self-designated "objectivist", Rand preached a strongly libertarian view, applying it to politics and economics, as well as to religion and popular culture. Under her influence, Greenspan wrote for the first issue of what was to become the widely-circulated Objectivist Newsletter. When Gerald Ford appointed him to the Council of Economic Advisors, Greenspan invited Rand to his swearing-in ceremony. He even attended her funeral in 1982."
That's too hard to read, Nate. Can you dumb it down a little?
(kidding...)
Thinking of a topic over at Vox's, I'm sorry so few people understand your misspellings. Occasionally I'd get them.
the men running the con know exactly what they're doing. The men making the decisions are not dupes, they are completely culpable.
They are making conscious decisions that defraud the public at large.
I suppose this would be a good time to bring up all the problems associated with gold-backed currency, problems severe enough that no country in the world backs their currency with gold.
There's tradeoffs for each approach. You're making the mistake of counting only the costs of the opposing side vs only the benefits of your side.
"I suppose this would be a good time to bring up all the problems associated with gold-backed currency, problems severe enough that no country in the world backs their currency with gold."
You mean "problems" like the fact that they can't print money out of thin air?
Do enlighten us Bill.
Again, I only needed to read this much:
I suppose this would be a good time to bring up all the problems...
to know it was Bill's comment.
Bring it on Bill, I want to hear it. When we abandoned the gold standard our currency has been inflating ever since.
I own two copies, one hardback and one paper, of Ayn Rand's, Capitalism: The Unknown Ideal, which is mostly articles by Greenspan. The beauty of that book is its case that capitalism rewards the hard working and honest men, and allows the "others" to fail... but learn and be reborn from their errors. Every man has a second chance in Capitalism, contrary to the bullshit they teach in public schools. It's certainly not utopia, but it's a chance to save, recover from adversity, and run your own life. Greenspan of old understood this. The Greenspan of today is all about booty, or carion if you prefer. The Sheeple (Dhimocrats all, regarless of their stated political leanings) and investment bankers are living off of capitalism's corpse. Eventually the wolves will arrive and eat the sheeple in all their doe eyed dishonesty and make the bankers work for them.
And Nate, thanks for taking the time to print that. We've strayed mighty far from his ideals and without knowledge of "the root" it's easy to talk about "investments" without a clue as to the values involved.
This is not a 'your side' versus 'our side' issue Bill. This is about objective reality. So don't bring any Hegelian dialectics into this. It won't work.
"I suppose this would be a good time to bring up all the problems associated with gold-backed currency, problems severe enough that no country in the world backs their currency with gold."
Really? And what were most of these countries basing their currency on less than a century ago? Gold. So let's see: since that standard was dropped, we've seen a century of the worst mass atrocities known to man, we've seen the rise of communism, fascism, socialism, social engineering, and a host of isms ALL bent on enslaving societies from within. We've seen the USA debauch itself from a nation of self-reliant hard workers to a bureaucratic nightmare where harmless success and ability are to be punished at every turn. And the one idea all the socialists and dictators had in common: use economics as a tool to engineer society. And that was not possible on any gold-based currency.
No, I would say no country in the world uses the gold standard precisely because the politicians and bureaucrats are aware of the power they will be giving up. And in fact, I would guess that all of your arguments boil down to some variation on "well somebody needs to have the power to fix us, for all we like sheep will go astray..."
Hmmm??
Again, I only needed to read this much...
to know it was Bill's comment.
I had only to read Nate's post to know that Bill would show up to support "money" from thin air.
Some one please get me a doctor, I'm taking Bill's side.
Bill is correct, (it pained me to type that) there are a number of problems associated with a gold based monetary system. The most historically common problem was the difference in scarcity and trade value in the bimetallic currencies. If you don't understand what a bimetallic currency system is, learn about it before taking on the rest of the idiosyncrasies of the banking industry. The United States has NEVER had a gold standard, its a bimetallic standard.
I'm not a fan of the FED. For those of you who don't know, one of the goals of the legislation that created the FED was to make an "elastic currency"; which is to say a currency subject to manipulation. The system we have now was thought to be better than the one we used to have. In some ways it is and in others its worse. There are a number of problems associated with tinkering with the currency. Making/going to a gold standard has a number of issues that would destroy most of the worlds economy.
If the paper note was redeemable for it's equal weight in gold, that would be ideal.
The fact that the populice could walk into the First National Bank and redeem their currency for what used to be the required gold standard would keep banks in check. Allowing gold as a competing currency (isn't it nice that our government tells us what we can't trade with people) would also help. I don't assume that people would be carrying around heavy bags of coins or bars, as anti-gold people would start imagining, just that if people/companies wanted to make large transactions and do it with something that might go up in value, they could simple hand over large case of Gold Eagles instead of oh.......transferring 1's and 0's from a bank or using fiat currency.....banks love that part.
Res... whatever. The real question is not bimetallism vs. monometallism or what-have-you. Is the money associated with something physical of value, or is the real value of your money something that should be decided--and changed at will by some guy with a spreadsheet? Fiat or non-fiat?
And it seems that in the quote above, Greenspan dealt with the "issues". Or does Alan Greenspan number among the economically miseducated ones in your view?
I love how the anti-metallists always say there are "a number of issues" that would destroy the world economy. Every time, the only answer I hear is "scarcity!!!" OK, sometimes it's "hoarding!!" (Horrible awful people keeping what's theirs...)
Now, I don't consider myself to be particularly well-educated in economics. My point is simply that I don't like my life being controlled by some bureaucrat in his plush office. But I'm here to learn, so how about we look at a couple well-argued online essays pro and con, and see if the more erudite among us can support or debunk:
- pro-fiat: http://www.huppi.com/kangaroo/L-gold.htm
Highlight: "There has not been a single depression or bank panic in any nation anywhere in the world using Keynesian monetary policies."
- anti-fiat: http://www.lewrockwell.com/
rockw...ldstandard.html
Highlight: "The case for radical monetary reform is as obvious as the need to sell the post office. Every year or 18 months, the world goes through some sort of monetary convulsion."
You didn't say anything or substance Res.
Here's your argument.
There are problems with a gold standard.
America used to have a bi-metallic system. There is a problem with scarcity versus trade value.
Thing is, you didn't explain why scarcity versus trade value is a problem ,you just asserted it.
I'll make a wild prediction here and say that the 'problems' you say a gold standard has were actually created by the banks or governments involved when they tried to manipulate the market in their favor.
As a beginning please read this article. I think it may deal with any further objections you may raise.
http://www.mises.org/story/2824
It appears to me that there would be extensive destruction of world economies under a gold standard; the valuelessness of fiat currency and thereby it's economic apparatus becomes evident in the face of real value exchange. Things would settle down though.
"Making/going to a gold standard has a number of issues that would destroy most of the worlds economy."
JAC said it first. The only reason it would destroy much of the world's "economy" is because so much of the world's "economy" is illusion.
Res... I once knew a girl that heard a strange knocking noise in her car. To solve the problem... she turned up the radio.
You're currently suggesting that we shouldn't turn down the radio... because we might find out the car is broken.
As I understand it, the problem with the gold standard was that the abundance of the commodity could not keep up with the growth of the economy.
So, gold/silver became scarce, and their relative value went up, leading to sometimes severe price deflation. Deflation is very dangerous to business, because the one contractually agreeing to pay for goods or services stand to lose big time as the contract plays out. As the market adjusts to compensate, borrowers find their income shrinks and cannot keep up with their loan payments, leading to defaults.
I'm not an economist, but the idea that money should depend on any commodity seems a little fishy to me. Having the money supply for all industry depend on the actions of one industry (mining) seems dangerous to me. Not only is such a system prone to manipulation, but it is also subject to the whims of fate. If there is a sudden discovery of a huge gold mine or if a foreign power decides to unload their reserves, then whamo ~ inflation. Now all industries are affected instead of just the gold industry.
Of course, now we have one industry, banking, in charge of the money supply. And certainly this system is also subject to manipulation. But at least in principle the creation of money is vastly distributed, with every loan being evaluated by some banker that actually knows and evaluates the fitness of the borrower. The troubles we've gotten into recently are because there is no connection between lenders and borrowers as the banking industry consolidates and centralizes.
"As I understand it, the problem with the gold standard was that the abundance of the commodity could not keep up with the growth of the economy.
So, gold/silver became scarce, and their relative value went up, leading to sometimes severe price deflation. Deflation is very dangerous to business, because the one contractually agreeing to pay for goods or services stand to lose big time as the contract plays out. As the market adjusts to compensate, borrowers find their income shrinks and cannot keep up with their loan payments, leading to defaults.
I'm not an economist, but the idea that money should depend on any commodity seems a little fishy to me. Having the money supply for all industry depend on the actions of one industry (mining) seems dangerous to me. Not only is such a system prone to manipulation, but it is also subject to the whims of fate. If there is a sudden discovery of a huge gold mine or if a foreign power decides to unload their reserves, then whamo ~ inflation. Now all industries are affected instead of just the gold industry.
Of course, now we have one industry, banking, in charge of the money supply. And certainly this system is also subject to manipulation. But at least in principle the creation of money is vastly distributed, with every loan being evaluated by some banker that actually knows and evaluates the fitness of the borrower. The troubles we've gotten into recently are because there is no connection between lenders and borrowers as the banking industry consolidates and centralizes.
thimscool | 04.08.08 - 10:05 am "
You sound like a central banking propagandist.
You're making assertions, unfounded assertions.
You say deflation is dangerous to business because of contracts. Why did they make a contract when they knew prices would deflate? We are talking about long term economic trends here right? It seems you are thinking like a business owner expecting to deal with inflation in the long term. If we had long term deflation the situation you described would not happen and you know it.
You say, that money should depend on any commodity seems a little fishy. Do you even know what real wealth is? How about honest trade? Have you even read what your Bible says about honest weights and measures? I don't think you know what money is either. You're living in a fantasy world. Study up.
You accuse a gold standard as prone to manipulation. Any system built and governed by men is prone to manipulation. The use of a gold standard is a tool for limiting the damage that any manipulation can do. It's rooted in objective reality rather than some government economic planner's we dreams.
The creation of money is vastly distributed you say? And that's a good thing? Having more people making more money is a good thing? You really must be smokin some good dope.
No connection between lenders and borrowers? I'd say the connection is direct and traceable. The loans w
I ran into the word limit it seems. To continue.
No connection between lenders and borrowers? I'd say the connection is direct and traceable. The loans were made to known bad risks. That the bad paper was made a part of some financial investment vehicle is what muddies the waters in honestly evaluating the risk thereafter.
Damn people, the information is out there. Go read it. Stop being ignorant. When I or Nate or Vox recommend the Mises Institute or Ludwig von Mises specifically as a source for learning about basic economics we aren't just pointing to some university trained academic, we're pointing you to a man, in von Mises, that has personally seen and been a part of almost every state intervention in the market possible within his lifetime. He has years of observation of objective reality to guide him in his conclusions. He's not just making it up as he goes along like many ivory tower academics.
AP, I have not solidified my thinking in these matters.
I am hardly a central banking propagandist because that implies intent. I'm just trying to have a conversation.
I am a business owner. I do plan for inflation. I plan to raise my prices, and the rate at which I pay employees. Customers don't like a rate raise, but unless they can find a cheaper alternative, they'll pay and watch to make sure I'm delivering good value. Employees love raises, and need them to live reasonable lives so that they can be reliable employees.
In the context of deflation, I need to cut prices and make less money. Customers may be happy about that, but they are only as loyal as I am good at cutting those prices. I'll also need to cut employee pay, or fire some and make the others do more work. Neither is a recipe for happy employees. Customers have a good measure of value because successful businesses have well defined products. The value of an employee is a much more nebulous thing, unless you are doing something rote like line work. It is hard to conduct business if you depend on employee morale when you have to keep cutting their pay.
Moreover, in the context of deflation, my incentive as a business owner is to keep my cash, not reinvest it. My money is becoming more valuable, which increases the down side of my entrepreneurial risk.
If those employees start grousing about pay cuts, and my customers disappear because I don't reduce my profits to zero, then why not fold up my tent an go to the beach with whatever cash I have left? The less I spend the more I make. That is a recipe for a sour economy.
This is why central banker propaganda says that moderate inflation is a good thing.
And rather than directing me to go and read what your hero's have written, why not tell me what's incorrect about what I'm saying?
Weren't you the one asking Res to give some explanation of why scarcity is bad, AP? Well, I gave you some explanation, you call it an "assertion", and then insist that I read somebody else's explanation of why I'm wrong. Smells like cowardice to me.
These aren't assertions. These are opinions, admittedly based on imperfect understanding. Why not enlighten me?
thimscool is pretty close to the root problem with gold. The problem with gold is that it's just a shiny rock, it's worth just as much as other rocks; IT HAS NO INHERENT VALUE.
There is nothing about gold that makes it valuable, it's just another "fiat" currency. I find it surprising that so many people engage in the fiction that gold, of all things, has some value beyond what someone at some point in time is willing to exchange for it. There is nothing, not anything, that has intrinsic value. What good is gold if you're cold and hungry? What value is salt if you live next to the ocean? What value is wool if you live where it's always warm?
The idea that something can have inherent value is a fiction invented by people with a fetish for shiny things. There has never been a notable economy based on bullion. If you don't like fiat money, your only option is barter.
Any economy bigger than two grass huts requires a common currency. A currency must be;
1) Divisible.
2) Common enough for the economy, but otherwise scarce.
3) Difficult to counterfeit.
4) Easy to transport.
5) Easy to store.
Once your economy gets bigger than Rhode Island, you have more requirements for your currency;
6) Fungible.
7) Controllable by a central monetary authority.
Difficult for outside actors to debase.
Paper "fiat" currency meets these needs better than gold "fiat" currency, and both are obviously, self-evidently, undeniably, unquestionably, better than bullion.
Well Bill, dollars have increasing problems with number 2, 3, and the unnumbered number 8.
Gold would have problems with 4,5,6, and 7.
A gold backed dollar would have problems with?
I understand your point about gold also being a fiat currency, but it has never been worth zero. Our 'central monetary authority' isn't helping the dollar in this regard.
There is nothing about gold that makes it valuable
Bill, you ingnorant slut...
http://www.google.com/search?q=uses+of+gold
Hmmmm... uses for gold;
http://www.google.com/search?q=u...?
q=uses+of+gold
Yes, that's exactly my point. I don't wear jewelry, I don't make my own electronics, and my teeth are fine. Therefore, gold is useless to me, as it's useless to the vast majority of people. I'd rather have dollars. It's easy to trade dollars for pizza and beer, which are two things for which I have a substantial need.
Nate, AP, etc.
I realize that reading is hard, so I'll type slow.
First, saying gold has problems isn't the same as embracing a private banking system run for the benefit of the politicians and the bank. I'm putting this in for those of you suffering from a public school education that didn't include reading comprehension.
Second, AP, some of us have read nearly everything Von Misses has collected and republished on the subject of economics. Additionally I've corresponded with Dr. North and other anti-fed types, on this subject, not one of them has a plan that could implement a change in the banking system that would return us to a sound currency based on gold. They have several models that would give us sound money, but it would still be fiat.
I'm not a fan of the Fed, never have been since my first undergrad class in Money Credit and Banking. Our current banking system was set up to facilitate debt servicing, transfer of payment and unrestricted cash flow for the Fed Gov. In exchange the bankers get an on going unstoppable return on investment and fractional lending. The latter being something they always did, but now if there is a bank run, the Fed is obligated to bail them out.
There are 2 ways to fix this: End the welfare warfare state, or the collapse of Western Civilization. The first requires a fiscally responsible government that seeks to do whats right not it own power. The second requires large scale death and suffering.
FWIW if you have ever had a 30 year mortgage you are a beneficiary of fiat money and the federal reserve. The same is true if you have a check book, credit cards or any other form of debt.
A gold backed dollar would have problems with?
Debasement is the main problem, which happened to England in the 1700's and Spain in the 1600's. There is a huge temptation for your enemies to either flood your country with gold, or for your enemies to hoard gold, all in an effort to destabilize the currency. This has the effect of taking the central bank out of the picture and forcing actual gold transactions, thus making trade agreements almost impossible and just generally screwing with a country.
It's important to keep in mind that this "gold standard" thing only lasted about a hundred years. This was the era in which England, France, Germany, Spain, and a handful of other countries all pegged their currency to an ounce of gold in an effort to promote trade and currency stability. The effort, of course, failed, due to the other major problem with gold backed currency - the theft of the gold. What does a country do when someone invades them and takes all their gold?
The biggest problem with fiat money is that it really, really, looks like free money to the government. It encourages irresponsible monetary policy. Fiat money is not, ipso facto, a bad thing.
On the other hand, gold is no guarantee against irresponsible monetary policy, and it adds other problems. On balance, totally fiat money is not all that bad.
The first requires a fiscally responsible government that seeks to do whats right not it own power. The second requires large scale death and suffering.
Large scale death and suffering it is! Not the option I want to see, but the first is as mythical as the tooth fairy.
What does a country do when someone invades them and takes all their gold?
I dunno Bill. Switch to silver?
On balance, totally fiat money is not all that bad.
Fiat money is kinda like socialism. Sounds like a good idea till you actually try it.
What does a country do when someone invades them and takes all their gold?
Maybe they could print up a bunch of green paper, and call it money, and when they need more, just print more. Kinda like we do today to fund Iraq.
Maybe the lesson is that invasions are tough on currency, on both sides.
The problem with paper money is that the printing press can make all you want. Although there's some merit in "Gold warfare", the real issue for both Spain and Britain was they were using their gold to fight foreign wars, which are not conductive to trade with paper money either, and became over extended with no reserves. I see Bill's point, loving foreign wars of aggression and all, fiat money is the best way to finance them. However, the bill always comes do, be it paper or gold. Gold is no guarantee of stupid government, it's just a limit against continuing stupidity against all reason.
The Venetians were the richest empire of all time, although tiny. They backed all their currency with/in gold and some silver. Their currency floated a bit, causing occasional dislocations, but the only empire that ever came close to them in trade was likely the Romans. In fact, because their currency was backed by something other than the bad intentions of the government, they had the freest and most dynamic global trading network ever seen. In 1240 they had an agent in Siam (Thailand). The venetian empire lasted about 900 years. We will be lucky to make it to 250. Fiat currency has a lot to do with it.
Don't forget Bill, our military exists in it's present shape and unfettered (economically speaking)form because of our wealth. When Jorge decided to debase our wealth with fiat currency he signaled the end of our military gravy train. There is nothing new coming into the system to speak of and the costs are breaking us. Every system we have was designed more then twenty years ago and the utility of most is questionable. Fiat currency looks like a great way to finance wars but the bill always come due. It's coming due now.
Bill's definitions for things like fiat money are much different than any other definitions I have ever read. There isn't anything I can say to Bill that I haven't already said. Since he refuses to use accepted definitions for many economic terms there is no possiblity for a fruitful discussion. Just so you know Bill, I'm gonna ignore anything you have to say on this subject, for the above stated reasons.
Basically Bill, fiat money is Biblically untenable if not outright forbidden and you advocate it. That makes you an advocate of evil. Honest weights and measures, honest weights and measures. A piece of paper that has value only because the state says it does is not honest.
"They have several models that would give us sound money, but it would still be fiat.
Res Ipsa | Homepage | 04.08.08 - 2:10 pm"
If it's sound money then how can it be fiat?
As for what else you had to say it sounds a lot like this: Since the system is already here and making life as we currently know it possible there is no way short of fatal cataclysm to change it for the better. Simply, since the world will end if we try to change it therefore we can't or shouldn't change it. Fatalism at it's finest.
Better be prayed up cause the future don't look so bright. I forsee it but I do not advocate pushing it to make it go faster.
I certainly do not advocate any kind of revolutionary action. The Lord forbid.
Coming up with an honest banking system is not a problem. Coming up with something better and still be working within the current system is the height of folly and you know it. Work with satan? Just how do you think God would like that? Did you really think North or any of those other guys could come up with a workable answer? You set them up to fail and you know it.
" And rather than directing me to go and read what your hero's have written, why not tell me what's incorrect about what I'm saying?
Weren't you the one asking Res to give some explanation of why scarcity is bad, AP? Well, I gave you some explanation, you call it an "assertion", and then insist that I read somebody else's explanation of why I'm wrong. Smells like cowardice to me.
These aren't assertions. These are opinions, admittedly based on imperfect understanding. Why not enlighten me?
thimscool | 04.08.08 - 12:23 pm"
Changing the amount of money in the economy does nothing for the real health of the economy. It doesn't matter what the money is, changing the amount only changes it's value in relation to the other goods in the market. The exception is pushing the supply up or down in extremely large magnitudes over relatively short periods of time, this can have terribly bad secondary effects. There is no ethical reason to change the amount of money in the system other than through what you could might call natural increase, as in mining.
Operating with a gold standard limits the amount of inflation that can be inflicted on the economy at any one time.
Also, that people think that today's prices should be tommorrow's prices and that it's a crime of some kind for them to change, up or down, is part of the propaganda we've all been fed since we were children. Price stability is not some kind of God given right. It isn't a crime for a price to change. Deflation is not some kind of boogie man.
Operating a business with a sound money where reliable financial calculations could be made would make the running of a business much easier. Instead of being beholden to the powers that obscure price information through inflation and other market interventions you could rely on the market environment to stay stable and your money to hold value if not increase in value. You could make good decisions and they would stay good.
I would think NOW would be the better time for a gold standard. Information travels around the world in, what... a second flat?
Wouldn't that alone deter efforts at debasement?
And why is ANY inflation a good thing? It deters true savings and devalues held currency. What good is that?
I would think a world with stable currencies and no cost of living increases would be a perfectly fine thing.
But then the big banks would have to find honest ways to make their trillions.
There is a huge temptation for your enemies to either flood your country with gold...
Bill, do you happen to know where we can find some enemies diabolical enough to be tempted to flood our country with gold?
Or maybe just my apartment?
Or maybe just my apartment?
Mine too, please.
OK. Now we're talking.
I think the major confusion I have is about the real meaning of inflation and deflation. Let's start with inflation... Dictionary.com says this:
[Inflation is] a persistent, substantial rise in the general level of prices related to an increase in the volume of money and resulting in the loss of value of currency (opposed to deflation).
To me, this seems to be a conflation (sorry) of two or more effects. I was thinking of inflation as a general increase in prices, regardless of the reason for this increase. It could be that oil is harder to come by, affecting the price of all other products. It could be that taxes are too high, necessitating an increase in prices to enable businesses to make a profit. Or it could be that there is too much money being printed in a fiat money system, which by supply and demand makes that money worth less. It could be all of these things, but I was thinking of inflation as just being a measure of rising prices.
I get the notion that you (Athor Pel, and probably Nate) think that inflation is simply a measure of the growth of the money supply. Am I right?
If so, I can see the virtue in this terminology because it is simpler to measure than some "consumer price index", which demonstrably does a crappy job of measuring price inflation. I am willing to use this term if you prefer.
So inflation means growth of the money supply, which you think should only happen when someone finds more money in a mine... and I guess deflation never really happens in your gold standard, because the metal is immutable and even gold used for industrial processes could be recovered.
Believe me when I say that I see what you mean when you said: Operating with a gold standard limits the amount of inflation that can be inflicted on the economy at any one time. That means that wars would be limited to matters of national security, entitlements (welfare or corporate) would be limited, and debt payments would be capped because of the escalating cost of borrowing more of a scarce commodity.
However, what I previously called "deflation" and I will now call "price deflation" is a serious problem, for the reasons I already mentioned.
"If it's sound money then how can it be fiat?"
Money can be sound without tying it to gold or silver. Money is just a medium of exchange. One of North's (I think it was North) suggestions was that ending the governments open line of credit at the Fed would stabilize the money supply simply because it would end the source of interest drawn on Fed funds. Another requirement on the road to sound money is a balanced budget, balanced in the normal sense of the word not in the Washington slide of hand definition. Paying off government debt would increase the stability of our money since it would decrease the need for devaluation.
In all of those examples we would improve the soundness of our money, but it still would remain fiat.
If you can: imagine Dave Ramesy putting his budgeting and cash flow ideas into practice managing the governments cash flow and budget. All of those types of changes would produce sound, yet entirely faith based if you will (fiat) money.
"Operating a business with a sound money where reliable financial calculations could be made would make the running of a business much easier"
And to be clear, sound business is what makes everything possible, including foreign wars. As it is now the purpose of currency manipulations through fiat money is an attempt to make the government run easier... in the short term. Only a short sighted moron, like Jorge, would do what's currently being done to our economy. We're eating our seed corn to make fools more comfortable and in the end even the wise (who feed the fools) will end up broke.
Also, that people think that today's prices should be tommorrow's prices and that it's a crime of some kind for them to change, up or down, is part of the propaganda we've all been fed since we were children. Price stability is not some kind of God given right. It isn't a crime for a price to change. Deflation is not some kind of boogie man.
I dunno... I think I gave pretty good reasons why price deflation is a real problem. What do you think about what I said?
I realize this is address at Bill, but:
Basically Bill, fiat money is Biblically untenable if not outright forbidden and you advocate it. That makes you an advocate of evil. Honest weights and measures, honest weights and measures. A piece of paper that has value only because the state says it does is not honest.
Don't put your finger on the scale because it is like stealing, which is forbidden. Be honest in your business dealins, as you are in personal matters. This is what is required. Pieces of paper that say "One US Dollar" are just another commodity.
Luke may have pointed out some of the market uses for gold, but the reality is that if gold were not seen as having innate value as a defacto currency, it would be worth much less to people than it currently is worth. Throw jewlery off the table because it is just a way for people to store and flaunt gold... non corrosive electical contacts and tooth fillings would hardly compell the price to be what it is. The current price is what it is for the reason that people use gold as a store of value. This has nothing to do with God. God does not care what the price of gold is, but only that you sell an actual ounce of gold at whatever price you agree to per ounce. It is just another admonishment to be honest and fair.
Thimscool,
"Price deflation" means an increase in the purchasing power of the monetary unit, does it not? How is that to be feared?
thimscool,
In a unregulated free market (we don't have one, think Ayn Rand's perfect world) both inflation and deflation occur as part of the business cycle. The chief complaint Nate et al are voicing is that our SYSTEM is designed to use inflation as a tool to benefit one group (government and bankers)at the expense of the general public. They are correct in what they are saying about the FRB. Thats why it was created. In fact if you take the time to read the act that created the system you will find the phrase "elastic money system" as part of the justification for the law, embodied in the text of the bill its self.
Inflation and deflation as part of the business cycle isn't a "good" or "bad" event, its just part of the way things work. Inflation as a tool for government cash flow management is a way of stealing money from responsible citizens for the benefit of bankers and politicians.
Mike says: And why is ANY inflation a good thing? It deters true savings and devalues held currency. What good is that?
Well, at the risk of provoking ire from all quarters, savings and hoarding capital denies that capital from being used to grow the economy through trade. So a system that has moderate inflation encourages people to invest their money and beat the beast, so that the value doesn't disappear on them.
Likewise, deflation encourages people to hold onto their money and avoid investments that may carry risk. Why risk when you can just profit by sitting all your coin in a big vault like Scrooge McDuck?
Money is by definition a collectivist concept. Gold has value because the market says it does. Same with the us dollar. The collective has an interest in the way that monetary policy works.
Now go ahead and call me a commie.
"Price deflation" means an increase in the purchasing power of the monetary unit, does it not? How is that to be feared?"
Borrow $100,000 on a house, 20% down 80% mortgage. Say the payment is $500/month for several years. You are paid in gold and the debt is in gold. Currently you make $1,500 per month. Price deflation occurs throughout the economy, it effects everything including wages. Your employer now pays you $800/month.
Are you better off?
Inflation is the same situation in reverse.
"Price deflation" means an increase in the purchasing power of the monetary unit, does it not? How is that to be feared?
If you sell your time to a corporation or the government, I guess it's great. But if you employ people to make a product that you can profit on, it sucks.
Now, if technological improvements or training make worker productivity increase faster than the price deflates, then ok... but if you can't make a profit, you go out of business, which isn't so good for those employees after all.
"that you can't profit on, it sucks."
I'm going to be late for class. I'll check in after 9:30 my time.
Gold has value because the market says it does. Same with the us dollar.
If by "us dollar" you mean Federal Reserve Note, then no. Though the market price of gold in FRNs certainly makes their debasement very plain...
It's true, Luke. If the bond holders lose enough confidence, you will find it out.
It is all a group consensual hallucination. Just like the idea that an ounce of gold is worth two semi-auto handguns...
It's your gold/dollar... but it is worth what we all agree to.
The great weakness of the US constitution is that it made no real provision for monetary policy, nor limitations on the governments ability to back corporate forms.
They tried to protect against politial tyranny, but they failed to protect against economic tyranny... and that has worn down what protections they did manage.
They are debased because the market says so.
I certainly do not advocate any kind of revolutionary action. The Lord forbid.
AP, do you believe the revolution led by George Washington was Biblically wrong?
"In a unregulated free market (we don't have one, think Ayn Rand's perfect world) both inflation and deflation occur as part of the business cycle."
No. No no no no no.
There is no such thing as the business cycle. It doesn't exist. It is a created name to describe the fluxuations purposely caused by the central banks in the money supply.
Traders need a moving market to make money. It can be going up... it can be going down.. but it needs to be moving. So they move it.
Inflation as it relates to a "business cycle" is a keynsian idea. In the past inflation was purely related to money supply... as it should be.
kiwi... investigate the term "sarcasm".
I understand that Res Ipsa and thimscool are somewhat moderate in their view of all this.
But I still find it interesting that another argument for fiat money is that it "spurs" the economy, as thimscool argues above regarding business owners. I think of it sort of the other way round: it engenders a feeling of panic that makes people work much harder than they should have to. I mean, why with the incredible amount of technological progress we have made, do people still have to work as hard as ever?
Note thimscool: "Employees love raises, and need them to live reasonable lives so that they can be reliable employees." Seems like we are approaching a circular argument if we're not careful.
There is this argument that "people just expect" wages to go up and they "will just put up with" prices also going up. And then that is put together with the argument that--essentially, if money retains value, then there will be no incentive for businesses to keep developing. While I find this last one to be somewhat of a specious argument, Let's assume it's valid. What of it? So a businessman is feeling plush enough to retire from the struggle; fine, that leaves an opening for a new business to come in and take some market share. And that person who retires still has wealth to spend, and will doubtless be spending it, thus spurring the economy.
But this whole idea that an economy must be just going *mad* all the time, with growth and development is something I find questionable. Look at the insane "growth" of our economy over the past few decades. It seems to have mostly benefited the extremely rich, who are now ever so much more so (I used to work in the yachting industry, and since I left it 13 years ago, the average length of a superyacht has doubled, to around 400ft.), while the average among us are slipping in real wealth, never mind those on the bottom rung.
And really we shouldn't just be talking about "the economy" like it's some rare beast we must preserve from extinction. It isn't a living thing, and it doesn't deserve our support or pity. We should be talking about *people* and whether they are being unknowingly enslaved. I argue that they are. And yes, of course that can be accomplished on a gold standard or some other standard based on hard assets, but it is harder to hide.
And the kind of business that is spurred by this sort of economic pressure seems to be increasingly of the cheap, cynical, short-sighted, regimented sort. Like the explosion of featureless (or just plain ugly) strip malls, or the thousands of new housing developments with names like "Auguste Bay" or "Southbridge Landing" even though they are nowhere near any body of water. You know, those neighborhoods with thousands of identical houses with the same idiotic cutesy designs. Everything about neighborhoods and communities is getting more fake by the year. It seems to me that this sort of economic spurring brings us material in
(erm... word limit interrupt...)
It seems to me that this sort of economic spurring brings us material increase in pure quantitative terms, but attended by the cheapening of our lives.
Nate, the statement in question didn't seem sarcastic, and I don't know AP well enough to know how he meant it.
And sometimes I'm dense. :o)
rycamor,
I'm not at all moderate about the problem of the Fed manipulating the money supply to discount the public debt. I just understand it a little better than most and I've spent a good amount of time researching the options on how to change the situation. I tend to favor solutions that don't involve shooting people.
The main problem is everyone in America benefits to some degree from the current FED control of the money supply. Would someone like Ron Paul if given the chance try to change it? Maybe, but I can't see any other politician having an honest go at the question.
But I still find it interesting that another argument for fiat money is that it "spurs" the economy, as thimscool argues above regarding business owners. I think of it sort of the other way round: it engenders a feeling of panic that makes people work much harder than they should have to. I mean, why with the incredible amount of technological progress we have made, do people still have to work as hard as ever?
That was the first example of many where you hit center target with your remarks.
I have a rather different business than yours. I provide IT consulting, service and support. We're the people that make it go even faster, cheaper, and sometimes even better. But I have to say that I hear the siren song of your words.
One thing I've learned, the hard way, is that you rest when you're running smoothly. You don't stop until you are finished. It is wearisome. But it is the way of the world.
The wistfulness in your written voice tells me that you understand that Res is correct about the impossibility of sticking the genie back in the bottle.
This will end the inevitable way. I can't cheer on the outcome, but I can say that money is not the root of the problem here. It's just another symptom; and it would still be such if it were gold coins, as it was in Caesar's day.
"I tend to favor solutions that don't involve shooting people."
Fine... so you're bored with shooting people... we'll mix it up a bit... I've got a hangin' rope!
I have a rather different business than yours. I provide IT consulting, service and support.
Actually, my business is similar to yours. These days I am a freelance application developer and Unix systems guy. But I have been involved in many odd areas of business in my 42 years. I've worked for rich people and poor people, small companies and huge multinationals... from manual labor to management and skilled technical jobs. I wouldn't say it's made me an expert on business, but it has given me some perspective.
Of course we know the genie won't just go back in the bottle. Currencies usually don't get reformed; they just collapse and are replaced by another (or several currencies). Usually this is accompanied by some sort of massive breakup of the country.
A glance at this webpage might lead one to suspect that our breakup is on the way: "The U.S. of A. has all the characteristics set in place that have led to the collapse of every other fiat currency money in history."
It seems to me that such things as fiat currencies are nothing new, and viewed at a historical scale, they have never proved to last long. Keynes' major influence on economies occurred about 70 years ago. That's merely a historical blip of an interval. Anything can be made to look good on the short term.
"AP, do you believe the revolution led by George Washington was Biblically wrong?
Kiwi the Geek | 04.08.08 - 9:38 pm"
I have grave misgivings. A government must present massive evidence of gross misconduct before I would consider throwing in with any opposition. I would still NEVER advocate for anyone else to do the same. It's their life, their decision.
The kind of opposition I foresee for myself is more along the lines of civil disobedience, not shooting. Open warfare is THE last resort. Only when pushed to the wall will I even contemplate that.
AP: how much MORE misconduct do you need? Lying our way into murdering the world around us? Debasing the currency to the point of collapse? Stealing half a productive man's gains every year? Stangling virtually every aspect of a free man's life via stupid laws of every kind?
We passed the point of sufficient provocation 75 years ago, if not 95.
"Well, at the risk of provoking ire from all quarters, savings and hoarding capital denies that capital from being used to grow the economy through trade. So a system that has moderate inflation encourages people to invest their money and beat the beast, so that the value doesn't disappear on them." --- thimscool | 04.08.08 - 8:40 pm
And also destroys the value any amount of responsible savings and/or sources of fixed income. And savings bonds, for that matter.
"Denying" others the use of your money implies they have some claim to it. This is just silly. Does anyone have claim to use any other of your property? Why not?
Without inflation, we could have REAL bonds worth buying. One that pay interest income that wouldn't be debased in the interim.
Michael,
The beast is destroying itself just fine on it's own. It doesn't need my help.
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