Central bankers cannot be trusted with the printing press, especially when there is no formal check on their inflationary policies. It is no coincidence that gold is hitting such heights as investors the world over hunker down for what may very well be a collapse of the dollar system. FULL ARTICLE by Robert P. Murphy
Source link: http://archive.mises.org/14599/gold-the-markets-global-currency/
{ 133 comments }
If the world moves off the dollar it won’t be long before they lose faith in other currencies, and that would eventually lead them to seeking something more stable like gold.
All the gold bugs want to see a return to the gold standard for one reason only, their gold holdings will go up to over $5,000 and ounce. But it will never happen, so they push the fear of currencies to increase the speculation in gold and silver markets.
I disagree with the statement that gold and silver has viable uses. Small amounts are used in jewelry, dental and some space applications, but nothing that would justify the current price. And since we no longer use film in our cameras, silver has lost its biggest customer.
If you do go back on a gold standard and the price of gold hits $5,000 and ounce, you will see and increase of mining operations that take a ton of earth and extract less than an ounce of gold. The environmental impact will be huge.
But getting back to the present reality, you will not see a gold standard and the current price of gold is being pushed up on nothing more than speculation and the demand created by the GLD. The price will fall and people are going to loose a bunch just like they did in the 70′s.
If silver were plentiful, all of our electrical wires would be made of silver. Ditto gold. If gold were plentiful, all of our cutlery would be made of gold. All of our fillings would be made of gold. Most statues would be made of gold.
The reason we see so little gold is that there is so little of it. Its scarcity, desirability, imperviousness to rust, make it ideal as money.
If gold were money, we wouldn’t need a dollar or a yen.
Hey, guess what, you’re spot on about not needing fiat dollars or yen.
you could barter, true.
“push the fear of currencies ”
I think the effect I can have on this is somewhat more limited to that of, say, one Ben Bernanke. Some might even say his actions dwarf the “pushing” of all the “goldbugs” others to insignificance. Or hang on, maybe “goldbugs” exists because of Bernanke? Never mind….
“I disagree with the statement that gold and silver has viable uses”
Ha Ha, good one.
“If you do go back on a gold standard and the price of gold hits $5,000 and ounce, you will see and increase of mining operations that take a ton of earth and extract less than an ounce of gold. The environmental impact will be huge.”
Yes, no’one on this site has EVER grappled with this one, you’re the very first to think of it. I’m off to burn my copy of Human Action.
“The price will fall… ”
We’ll see.
“I disagree with the statement that gold and silver has viable uses”
I think I must expand on my previous answer and point out that this comment seems to indicate you have some special talent, in that it packs a truly astounding amount of proof that you are an economic and scientific ignoramus of the highest order into a mere 12 words. And you have the gall to write in that tone?
Please, give examples of what gold is used in large enough quantities to justify this demand. None of you have come out and given us these uses, the best you can do is make some stupid statement like gold used in wiring??? Please list the uses and approximate demand!
What gives gold it’s value today is the amount of gold needed in reserve with the GLD. The GLD is the seventh largest holder of gold and this ETF was just created out of thin air, like most ETF’s.
I think you just did.
Greg, there’s always a demand for money. Money is ‘used’ in trade. You don’t burn money as you burn oil. You don’t eat money as you eat wheat. You don’t wear money as you wear silk and cotton. You don’t build houses with money as you build with wood, steel and concrete.
I want you to do a little test, take $1500 in cash and buy a gold coin. Then take a taxi from Central Park to Wall Street and see what you end up with.
In our economy, gold is not money and by the time you sell your gold to get money, pay transaction fees and pay the taxi driver, you will have about $1,200. That makes it a very expensive taxi drive.
Since none of you have come up with uses for gold, let me help by refering you to the following website: http://geology.com/minerals/gold/uses-of-gold.shtml
They state that the coins are for collecting, not a medium of exchange. The largest industrial use is in electronics where $500,000,000 is used in cell phones a year. While that is a lot of money to you and me, it isn’t that much in the total supply of gold.
And why isn’t gold used in more applications. The answer is simple, it cost $800 an ounce to mine and refine it. At that cost, other materials are used that may not be as good as gold, but is more price effective.
What you have to do is take the emotion out of it and really look at the supply and demand.
“In our economy, gold is not money…” — that is true only by fiat. In a free market left to its own devices, silver and gold would once again be money.
“Since none of you have come up with uses for gold…” — its greatest use is as money.
Barrick, for example, is producing at a cost of about $350 an ounce. So your numbers don’t match reality. Demand for gold is demand for sound money to replace fiat money that is depreciating by the day.
More than half of mined gold is used in jewellery which is gold’s current primary use.
Gold bugs don’t need to see gold at $5,000 because dollar will not exist any more.
The current price of gold is suppressed by GLD. Because GLD is paper. There is less than 5% of physical gold for all the contracts that are transacted each day – “gold” paper sold, leased etc. GATA is full of this. Gold market is currently operating in a similar system to fractional reserve banking. The real value of physical gold is much higher than $5,000.
Who lost money on gold in the 70′s? As far as I can tell, the only way to have lost money in nominal terms in gold since the 1971 national default was to buy between 1980 and 1981 and to have sold at the bottom in 2000. Did anyone really do that besides Western central banks?
As for your idea that a bunch of noisy people are driving the dollar down somehow by driving up gold:
“It is error alone which needs the support of government. Truth can stand by itself.” –Thomas Jefferson
Gold lost about 4% in real terms/year between the 80s and the 2000s. Between the beginning of the 19th century and recently it hasn’t even kept up with inflation. However, in recent times (last 7-8 years) yes, it has vastly outperformed.
greg, GLD and other paper gold schemes push the gold price down, not up. See, one has to make his own call on what’s going on:
-EITHER-
the market is honest, the inventories are sound, there’s all the stuff in Fort Knox, COMEX and LBMA have enough metal to deliver if all of the contracts asked for it, etc. The price moving upward then may overshoot and need a correction later on.
-OR-
the market is being rigged downwards, the paper claims are backed by only a fraction of real stuff, there are problems with physical delivery, the london fixing is used to suppress the gains made during asian trading etc etc. What we see is then reality finally catching on them, bringing the pyramid down as greater fools run out.
The beauty is these two are mutually exclusive, it cannot be both a bubble, and being manipulated below the true market price at the same time.
The only practical way for the US to return to a gold standard – if the gold really exists – would be to revalue our money at at least 500 to one. Turn in 500 old dollars, get one new dollar. Kids, your piggy banks just became worthless.
Libertarians who are for a gold standard are hypocrites and are actually supporting elite power and statism. Screw the gold standard. Let people FREELY choose their currencies without having a standard imposed on them. If people want to choose gold, great, but keep the law and the government out of it beyond allowing people free choice.
I don’t think many libertarians would disagree with you that the end goal should be complete economic voluntarism when it comes to individuals choosing their preferred currency. It is true that a government enforced gold-backed currency is still a monopolized currency. But I think the libertarian position does — and should — favor a gold standard for federal paper money as a means to limit government borrowing, spending, and printing power. The emphasis should loudly proclaim that this is only a means to a purely free market in currency. Perhaps, we should also be more adamant about opening markets to other currencies for legal tender?
But I think the libertarian position does — and should — favor a gold standard for federal paper money as a means to limit government borrowing, spending, and printing power. CS Gordon
Wrong and unprincipled. The solution to government overprinting is to remove legal tender laws for private debt, not impose an artificial constraint which would also unfairly favor a private money form (precious metals).
Perhaps, we should also be more adamant about opening markets to other currencies for legal tender?
Only the US Government should issue legal tender and it should only be legal tender for government debts (taxes and fees), not private ones. Conversely, private monies should ONLY be good for private debts.
“The solution to government overprinting is to remove legal tender laws for private debt, not impose an artificial constraint which would also unfairly favor a private money form (precious metals).”
Amen!
I think you’re misinterpreting what I’m saying; you’re confusing the end with the means. I agree with the end you’re pursuing, my comment to King George was not a negation of that. That the government’s control of currency for private debt should be abolished in a single swift move is absolutely correct — that it will happen that way is unlikely. The gold-backed currencies for federal notes is not the end I’m advocating but a viable means to limit government power in the mean time (something arguable preferable to what we have now). Agreed, we should also loudly proclaim the end, but this should not deter advocacy for a more tolerable gold standard relative to fiat federal money.
“But I think the libertarian position does — and should — favor a gold standard for federal paper money as a means to limit government borrowing, spending, and printing power.”
What is libertarian about this? This is like saying that minarchism is a libertarian position. These are positions, but there is nothing libertarian about either one.
“What is libertarian about this? This is like saying that minarchism is a libertarian position.”
As I replied to F. Beard — you’re confusing the end with the means. That free market anarchism is the just political end is true — however, it is unlikely that this will be brought about instantly. That minarchism would be preferable to what we have now is also a true — so that, if we could achieve minarchism prior to anarchism, we should advocate that as a means (but keep explicit the end of free market anarchism). Similarly, with the gold standard: that it is a viable means to limit government power for now makes it a principled policy on the road to abolishing the federal government and complete voluntarism in private currency.
I agree that we can’t just jump to our desired end and we need to pass through steps along the way, I’m just skeptical that a gold standard would be better than we have now. In fact, it could be worse and more anti-liberty if the government effectively enforces a fixed exchange rate and still maintains legal tender, only in gold and silver or FRNs redeemable in the same. Again, we’ve seen that movie before, and we know how the story ends. I would really like to try something different this time.
very utilitarian…………….
forget gold, free value system for all.
Perhaps you don’t realise that but when libertarians or anarchists talk about gold standard, they don’t mean that is ought to be enforced by the state, they mean that market will freely choose the gold and other commodities as money. Ron Paul is one example, he talks about gold standard but emphasizes that he wishes to abolish the FED and legal tender laws.
Ron Paul is one example, he talks about gold standard but emphasizes that he wishes to abolish the FED and legal tender laws. Juraj
But what about Gary North who would require that taxes be paid in precious metals? That would be a de facto government enforced precious metals standard since all tax payers would need to have or to buy PMs to pay taxes.
Gee wiz folks. Are we libertarians or not?
Hey, simple solution: Stop paying taxes. Like voting, it only encourages ‘em.!
Yeah, Ron Paul does say that, but he would also prefer FRNs to be gone. That implies that the government would have direct control over a PM money supply. Government should not have control over private money PERIOD, whether it be gold, silver, or FRNs.
I keep seeing the same terrible arguments against gold.
1) There’s not enough gold to back the dollar at the market price, so returning to gold at that price would drain the Fed of its reserves which would demand deflation to avoid bankruptcy.
2) If you set the price so that the dollar could be backed 100% by gold, say $10,000/oz, gold-hoarders would rush to sell to the Fed, inflation would be rampant, and the price of gold would sky-rocket.
3) The Fed would have no flexibility to inflate through a recession.
Wrong, wrong, and wrong.
Set the price of the Fed’s gold at $10,000/oz, and don’t offer free coinage (at least not at the exchange rate). Effectively, you can buy the Fed’s gold for $10,000/oz, but they won’t buy yours for anything more than the market price (whatever that happens to be). At the present market price of $1,400, the Fed could buy an ounce and print an additional $8,600 to do as it pleased (loan to the Treasury, for instance), giving the Fed the flexibility to inflate the currency by 700%.
Since the exchange rate was set high, at 100% backing, no deflation would be necessary, nor would the market deflate the money supply by buying the Fed’s gold. Since the Fed is not purchasing gold at the exchange rate, there would be no rampant inflation, and gold-hoarders wouldn’t experience a windfall that many would consider “unfair”. Since there is currently a significant gap between the market price and the Fed price, there would be ample room to inflate. Additionally, the Fed could always change the exchange rate higher at some later date.
Murphy mentioned that the value of fiat currency is its anticipated purchasing power. He neglected to mention the value base (industrial use of linen, which is effectively $0, so it’s not worth mentioning). HOWEVER, the same can be said of gold money. It’s value lies in its industrial use PLUS its anticipated purchasing power. Like gold jewelry, it makes sense for gold money to be priced at a premium to gold as an industrial metal, and a smart mint would maintain that premium by limiting purchases (i.e. restricting the supply of gold money).
Valid objections: the Fed won’t keep the the dollar 100% backed by gold. Fractional reserve banking will undermine that 100% backing, even if the Fed could be trusted. The Fed has TOO MUCH flexibility to inflate (700%).
The solutions to those problems involve repealing legal tender laws, privatizing or dismantling the Fed, abolishing the FDIC, and installing free or full reserve banking (whatever suits your fancy).
Those objections / solutions, however, are not on the table of discussion. The discussion right now is a “gold anchor”, and the inaccurate objections being raised.
The better question would be, “What good would a gold anchor do?” Not much, at least not right away, but it’s a step in the right direction, it sets a value floor for the dollar, and an inflation ceiling (albeit a fairly high ceiling).
Here’s an argument against gold for government money that is based on principle:
Government money is backed by its taxing authority (force). Therefore, it need not and should not be backed by anything else since that would unfairly favor a private money form.
Government is force and the private sector is voluntary cooperation; it is morally impossible for them to share a money supply.
You Austrians had better decide if you are for liberty or gold. They are not synonymous.
F. Beard and everyone else, you might find this interesting: http://fofoa.blogspot.com/2010/11/dilemma-2-homeless-dollars.html and the site in general.
Why would things be different this time around under a “new” gold standard. A gold standard is the same as a gold cross to crucify humanity upon, and by government force and sanction. The right solution is “repealing legal tender laws”; in fact, do that and you don’t even need to worry so much about the Fed. Things will sort themselves out.
A gold standard is the same as a gold cross to crucify humanity upon, and by government force and sanction. King George
Indeed! And let’s see how well gold, usury and even fractional reserves survive in a truly free market in private money creation. IMO, they wouldn’t, not for very long.
nothing will “return” to gold.
when gold reaches ridiculous heights, that’s just the sign that the ship is sinking. gold will do no good in open waters.
Its too early to lock the dollar to some level of gold.
If that happened today at $1,400, it would benefit the masses. This is clearly not the plan.
Although the dollar has depreciated 98% since the federal reserve was created, enough purchasing power hasn’t been stolen yet. Got to get that last 2% first.
BTW, I just finished reading “The Big Short” by Michael Lewis. Its a great explanation of how trillions were stolen the past decade using fraudulent securities and derivatives.
“Its too early to lock the dollar to some level of gold.”
It’s also too late to to this. In fact, we should NEVER do this.
The solution is this: “repealing legal tender laws”
Although the dollar has depreciated 98% since the federal reserve was created, enough purchasing power hasn’t been stolen yet. Price
If the dollar has depreciated to 2% of its 1913 value yet you have 51 times as many, are you not 2% better off in real terms?
The arguments about the proper implementation of money are many. Let’s have liberty to satisfy everyone worth satisfying and to discover who understands money best.
If the dollar has depreciated to 2% of its 1913 value yet you have 51 times as many, are you not 2% better off in real terms?
=
No. Some will undoubtedly be better off than others after the expansion. Inflation is not a neutral process. The first receivers of new money are better off than the later ones. As far as whether anybody living today is 2% better off than those living in 1913 as a result of monetary expansion, I’d say it’s irrelevant. The problem for us is that the dollar will continue on its current path of debasement.
Inflation is not a neutral process. The first receivers of new money are better off than the later ones. Stephen Adkins
True. And I don’t argue the present system is just, far from it. But my point is simply that there is nothing NECESSARILY unjust in new money creation otherwise no mining of gold should be allowed either.
As far as whether anybody living today is 2% better off than those living in 1913 as a result of monetary expansion, I’d say it’s irrelevant.
What if the victims of the FR bankers, both borrowers and savers, were the first recipients of any new money? And what if leverage restrictions were placed on the banks to compensate for the new money so as to prevent price inflation? Would you be opposed to the US Treasury creating debt and interest free legal tender fiat for that purpose?
The problem for us is that the dollar will continue on its current path of debasement.
The problem is that the new dollars are being given to the villains, the banks, not their victims, the US population. Now the current winners via money creation wish to shut down the process of money creation to preserve their unjust gains?
Fiat money is not “backed up” by anything; it is intrinsically useless paper (or nowadays, mere electronic bookkeeping entries) that is valuable only because of its anticipated purchasing power. Robert Murphy
Fiat money has value because the government requires that taxes be paid in it. For example, if the Federal Government charges $.50/gal in tax for gasoline then that creates demand for US dollars.
In contrast, a market-based commodity money, such as gold or silver, is a useful good in its own right, serving industrial and consumer purposes. Robert Murphy
Precious metals, if used for money are not commodities and if used as commodities are not money.
I would like to see legal tender repealed myself. That is the real point, not whether the USD os fiat or whether it would hyperinflate or whatever. Give the people an alternative, and that doesn’t matter. It would certainly get rid of much of the seignorage and confiscatory powers of the fed.
I would like to see legal tender repealed myself. King George
Yep, that is the answer, not gold. The Austrians and maybe even Ron Paul had better get real clear on this soon. I won’t vote for him till I know for sure that he does not falsely equate liberty with gold.
Of course Ron Paul does not and neither Austrians are worshippers of gold per se. Ron Paul openly stated that he wishes to abolish legal tender laws and allow competition and people to choose freely what they use as money. And I believe that is Austrian position as well.
http://www.youtube.com/watch?v=aEvzlzFnubs
Watch the last minute.
Watch the last minute. Juraj
I did and am alarmed. On one hand RP says he want to repeal legal tender laws and then says that the Constitution only allows gold and silver to be legal tender!
Besides which, Greenbacks which are the IDEAL government form, were never ruled un-Constitutional.
Dr. Paul, I am going to peel my “Ron Paul for President” bumper sticker off my car and a new one will not replace it till you are clearer about legal tender laws.
that is Greenbacks would be an IDEAL government money form IF they were only legal tender for government debts not private ones.
But he’s basically correct..The constitution does say ‘to coin’ so it has to be some type of metal. He can’t come out and say the constitution is against my libertarian/austrian principles and expect to get re-elected.
The Constitution wasn’t written with your principals in mind. It is what it is. If it does disallow something that you think should not be disallowed then work for an amendment. Aside from that elected officials are required to abide by it. Unfortunately, because people think like you and say well these aren’t my principles they just change it to say whatever they want it to say.
It was my understanding that fiat money has value because the government has the power to tax its people indefinitely, not just that it requires that taxes be paid in the fiat money.
But my understanding of this is a little shaky… Although, your $.50/gal tax creating demand for US dollars does make your argument a bit more concrete.
It was my understanding that fiat money has value because the government has the power to tax its people indefinitely, not just that it requires that taxes be paid in the fiat money. Tyrone Dell
If government requires or even accepts taxes in anything other than its own fiat money then it would be favoring some other PRIVATE money form such as gold or private bank notes. True libertarians desire a true free market competition in PRIVATE money forms with NO government privilege for any.
That taxes must be paid in it is a minor issue compared to the much larger issue, that creditors are forced to accept depreciated money in payment of debts and other contractual obligations. This stiffing of creditors has been the traditional political lever for the establishment of fiat money in America. Read Rozeff’s “The U.S. Constitution and Money” series:
http://www.scribd.com/michael%20s%20rozeff
That taxes must be paid in it is a minor issue compared to the much larger issue, that creditors are forced to accept depreciated money in payment of debts and other contractual obligations. Ryan
As a libertarian, I am in favor of a totally level field with regard to private money creation. Perhaps some libertarians cannot imagine PM or usury free money, but some can.
As for government money, It should of course ONLY be legal tender for government debts. If the government over-issued, then the private sector would not necessarily be affected since it would have private alternative currencies.
It seems to me that a lot of people in their 20′s and 30′s have not bought into the supposed rock solid advice of socking away a bunch of US dollars. A high percentage of younger workers don’t participate in 401K programs, for example, or save anything. This may simply be a living for the moment mentality at work, but that also is a sign that the status quo has been rejected. I don’t know what that means for the future of the dollar, but surely softer demand for saving and investing by young people must have some effect.
people did not notice that the new world currency is the yuan.
china has leveled the playing field from the bottom.
any cost that is not measured in yuan is not real.
third world countries that only have commodities to sell and sell them to china,
are already using the yuan in their internal markets.
because the products come priced in yuan.
gold is a problem to transport, deal and keep. and easily taken away by thieves.
if the world do not agree on a global coin, the coin will be yuan.
Interesting – have you experienced this first hand?
Whoa, several misconceptions floating around. Let’s look a few:
Greg’s are easy to understand and straighten out, although it wont make any difference to him. I’m pretty sure Greg is a Keynesian or derivative thereof, which would explain his animosity towards gold and Austrians. There is, however, some truth in this assertion (accusation, really) of his. He said,
“All the gold bugs want to see a return to the gold standard for one reason only, their gold holdings will go up to over $5,000 and ounce.” [TRUE] “But it will never happen,” [FALSE, it is happening right now.] “so they push the fear of currencies to increase the speculation in gold and silver markets.” [True, perhaps, but so what? Bernanke with QE2 and his other smooth moves is doing such a bang-up job of spreading fear for the value of the dollarthat gold bugs don't have to do anything but sit back and watch, count their profits, and maybe help their cause by letting everyone know what Bernanke is up to. Of course those aren't profits and gold hasn't been appreciating in value, Greg. What you are witnessing, and perhaps what is upsetting you is that the dollar and most fiat currencies are rapidly depreciating.
Greg also did a little prophesying: "[Y]ou will not see a gold standard and the current price of gold is being pushed up on nothing more than speculation and the demand created by the GLD. The price will fall and people are going to loose a bunch just like they did in the 70′s.”
Sorry, Greg, but you are not Nostradamus. Back in the late 70s early 80s the Fed still had the power to manipulate interest rates, the price of gold and even the economy, as it demonstrated by pushing interest rates through the roof and bringing the economy, inflation and the hot market for gold to a screeching halt. But those salad days for the Fed are long over. Did you not notice what happened when Bernanke announced QE2? Better sell your crystal ball for a couple of grains of gold. When it hit $5000, you’ll be glad you did.
Greg also said this: “Please, give examples of what gold is used in large enough quantities to justify this demand.” That is almost too easy. The demand is from people who know that gold is a reliable store of value in an age of monetary inflation. Inflation makes gold bugs out of almost everyone, and right now monetary inflation, the kind that often gives rise to price inflation, is rampant. I know, I know: Krugman and Bernanke keep saying that we should fear deflation rather than inflation, but as anyone canl plainly see no one is listening to these two clowns anymore. Markets that used to quake when Greenspan sputtered unintelligible drivel hardly even hiccup when Bernanke whines.
Finally, and I will move on from Greg, but I can’t resist dispelling one more piece of nonsense: He said, “In our economy, gold is not money and by the time you sell your gold to get money, pay transaction fees and pay the taxi driver, you will have about $1,200. That makes it a very expensive taxi drive.” True, but only because of legal tender and other government impediments to the use of gold in daily transactions, which if lifted would cause gold to immediately or soon thereafter become the common coin and currency of the worldwide realm. Furthermore, what you are presently witnessing–although you obviously haven’t yet realized what is taking place, is that gold as money, like Gresham’s law, is asserting itself and no central bank is in a position to stop it. I’m sure you saw the publicity about the automated-gold-vending machines. That is just the start. Entrepreneurs the world over are going to respond to the demand of real instead of funny money by making gold available and usable in ways that will confound and baffle the central banksters and statist, perhaps putting the former out of business once and for all. Of course that may take a little more time.
jaderdavila the small shareholder said, “[T]he new world currency is the yuan.” Not a chance. The world isn’t dumb enough to replace one essentially worthless fiat currency with another, particularly not one whose supply is “managed” by a bunch of bureaucritters more secretive and even less trustworthy than the Board of Governors of the Federal Reserve. Stop day dreaming.
The world isn’t dumb enough to replace one essentially worthless fiat currency with another,… Ned Netterville
The problem isn’t fiat vs gold but government backed fractional reserve banking. Without that monstrosity, government fiat would be easy to manage. Bernanke and the other CBers are trying to rescue the FR bankers and the economy from their usual wrecking job.
Ho, ho ho. And who would manage it? Do you think Congress, for example and as some monetary cranks have proposed, even without fractional reserve banking, could manage the nation’s fiat currency any better than the Fed with fractional reserve banking? I don’t. I can see it now: Nancy Pelosi and Barney Frank in charge of monetary policy in line with their worldview, political persuasion and economic knowledge. No, the problem is that no individual (king) or group of individuals (ministers) have the knowledge and integrity to manage money and monetary policies for the benefit and welfare of all people. Only the market, with input from everyone in the world, all who buy and sell or who decline to buy or sell, can do that, as it does so well for so many other commodities. There is but one sensible monetary policy: hands off!
No, the problem is that no individual (king) or group of individuals (ministers) have the knowledge and integrity to manage money and monetary policies for the benefit and welfare of all people. Only the market, with input from everyone in the world, all who buy and sell or who decline to buy or sell, can do that, as it does so well for so many other commodities Ned Netterville
Managing a government money supply in which fractional reserves are prohibited (or strictly limited by market forces) should be easy. Issue too much or unwisely and price inflation results. Those voters who rely on government money will complain. Issue too little and those who need to buy government money to pay taxes such as a gasoline station would complain. I expect that politics would keep things reasonably balanced for the government money supply. Meanwhile, the private sector, to the extent it could avoid the need for government money, should prosper with high performance private monies.
Why are you afraid to remove the legal tender and other laws that currently keep gold (or, whatever alternatives the market chooses) from assuming its natural role? You’ve thought it through part way, now go all the way. There never was and never will be a need for a government monetary policy. Try giving me a rational explanation of why the government should be involved in the first place.
Why are you afraid to remove the legal tender and other laws that currently keep gold (or, whatever alternatives the market chooses) from assuming its natural role?
I strongly advocate that government money should be legal tender only for government debts and that private monies or money classes should only be good for private debts.
You’ve thought it through part way, now go all the way. There never was and never will be a need for a government monetary policy.
Please explain then how government will tax us without favoring a particular private money or money class?
Try giving me a rational explanation of why the government should be involved in the first place.
In order to not favor a particular private money or money class such as PMs, then the government MUST issue its own separate money backed ONLY by its taxing authority.
“In order to not favor a particular private money or money class such as PMs, then the government MUST issue its own separate money backed ONLY by its taxing authority.”
This misses the point that, while government can compel the acceptance of some medium in exchange through its taxing power, it cannot establish the purchasing power of that medium, as that is set on the market as a whole. The idea of separate market and government monies is a chimera.
For once I agree with “Beefcake the Mighty”. The market decides the price of all monies including any attempts governments make to get money into circulation. The Chartalist/MMT idea that whatever the government tax automatically becomes money is crazy. The Chartalists argue for this by the rhetorical trick of claiming that every change in the accepted money in a country was the state’s intention, or that any form of government debt is money.
If we have competitive money then some sort of state approved certificates would be needed for paying tax. However, these need not become a sort of money. I doubt they would become a sort of money but design of the tax system could prevent them from becoming so.
Well, Current, you know great minds think alike.
Jaderdavila,
China utilizes commodities bought from other countries by its arbitrage of cheap labour, nothing more. The last thing China would want to see is its currency being used as a reserve currency for the rest of the world!
Zoellics plan of linking a new reserve currency to gold would only work if the private ownership of gold was banned wordlwide. FDR banned ownership of gold for the same reason, fearing the creation of a currency that was beyond Central Bank control within the US.
Ned,
Selling gold for cash is painless right now. You can take a Krugerand or whatever you bought and go to a coin shop and sell it. No taxes to pay ect. Try that with realestate or a few other “investments” I can think of.
Try that with realestate or a few other “investments” I can think of. DavidM
If the FR bankers did not have the government given power to wreck the economy then gold holders would be silly indeed. And I expect that gold is a tool of the FR bankers for such a time as this after they have ruined the economy.
True, but Greg was still essentially right in his hypothetical, contrived scenario. If you only had a gold coin that you just bought for $1400, you’d have to have the taxi driver drive you to another coin shop with the meter running and then back to Central Park. And because the coin shop’s buying price would be less than what you just paid for it, the difference between the extra cab fare to the coin shop and back to Central Park, plus the two coin shops’ mark up and mark down, you could easily end up spending $200 for a cab fare that would have cost you only $20 if you had Bernankies. Of course if gold behaved as it has been lately, which is to say if the Bernankies kept depreciating as they have been since Bernanke took over, the driver just might agree to take the coin and let you keep the cab.
My own experience in dealing with coin shops long ago was that single, bullion coin transactions may have been painless but I thought they were relatively expensive. How now? What’s the spread between what the buy and what they sell at for a one ounce bullion coin?
F Beard, King George, et al.,
I think you’re missing the point about a gold standard. While removing legal tender laws is certainly a step in the right direction, it is not sufficient to create a true free market in money. Only the elimination of the State can actually achieve that end. A government gold standard is purely considered as the next best thing (I’m not bothering to deal with the ideas of non-anarchists).
Let’s take F Beard’s proposal for purely private and purely public monies. Suppose the government issues a currency which it demands for payment of taxes, fines, etc. while leaving private monies to compete amongst themselves. The government spends its money (since it has no other) on its various projects, so the government money finds its way into the hands of private individuals. At this point several things can happen: (1) only the receivers of government money can pay taxes, fines, etc.; (2) the receivers of government money may sell government money to others so that they can pay their taxes, fines, etc.; (3) government money may compete with private money in the private market.
In case (1), why is the government even using money? If the only people who provide government income are the people who supply the government with goods and services, why does the government not simply enslave those people and nationalize their property? In case (2), since taxpayers and people who are fined or otherwise incur debts to the government are likely to not have any government money, they must be able to purchase government money from those who do possess it. Government money thus becomes a commodity traded on the private market. At this point, if the money is ever undervalued on the private market (which is extremely likely), then arbitrageurs will purchase it on the market and start selling it at a higher price. If this process is allowed to go on, then eventually the government money will start to be used as money on the private markets and likely out-compete private monies as well. Ultimately, the only feasible scheme is (3), to allow government money to compete with private money in the private market, which rather ruins the thought of finding the optimal money on the market.
A government gold standard is meant to provide a stable currency during the transition period between a statist and an anarchic society. Once the State is well and thoroughly gone, any debates on the optimal currency would be completely academic.
You CANNOT have a stable monetary system with a fixed exchange rate that is also legal tender, which is essentially what the gold standard is. Why do you expect things to play out differently than they did last time around? Are you just turning a blind side to history?
I think F.A. Beard has a more realistic view here: Keep Fiat for the government transactions and float it against gold (and anything else) which should be left to market forces. If government imposes a system from the top down, it will have exactly the same problems it did the last time around. Why would you expect differently? In fact, it could even be used an as excuse to let it fail and confiscate even more wealth than fiat does, yet blame it on the “barbarous relic”.
F. A. Beard? That’s a good one. F.A. Hayek was in favor of competing currencies so I’m just carrying on that tradition, I guess.
when has money supply ever been stable? why even have a stable money supply?
why even have a stable money supply? james b. longacre
So I can sit on my gold hoard and watch it increase in value risk-free as OTHER people take risks and invest? Except why should they invest either?
A true store of value would be common stock if we had a true free market in private money creation.
Oh sorry, King George, my appologies. My reply was aimed at goldbugs, not you.
how do you know that it would increase in value?? if people weew reluctant to trade anything for it. how did you get your gold hoard anyway? by increasing the money supply?? that doesnt sound stable.
james b. longacre,
“why even have a stable money supply?”
Care to elaborate? I’m listening.
Cordially,
Don
it was a question. why bother having a money supply??
You asked the question. Are you saying that you have no suggestions for what the answer might be? That you are a clean slate? Haven’t seen one of those since … can’t remember when.
If it works for you, you go guy.
Thinker: “While removing legal tender laws is certainly a step in the right direction…”
King George: “You CANNOT have a stable monetary system with a fixed exchange rate that is also legal tender…”
Excellent reading comprehension. The meat of your complaint seems to be that a gold standard will fail and that this failure will allow the State to return to a fiat money regime. However, the historical gold standard failed because governments refused to actually abide by it, particularly during and for the decade following WWI. Of course, governments will always break their own rules and blame whatever scapegoat they can find–gold is no different in this respect from any other proposal to limit government.
Well that was the point I originally brought up, wasn’t it? I am not for a gold standard with or without legal tender laws, but I am most certainly against it with legal tender laws.
Exactly, what makes you think that government would act any differently this time around? We’ve seen this movie before and we know the ending. That’s why I’m not very enthralled about the proposition.
I can’t quite tell what specific things you’re talking about. Please specify.
Robert Murphy writes: Zoellick is a member of the Council on Foreign Relations, and a participant in the notorious Bilderberg meetings
This comes from the Central European country of Slovak Republic (map: from Wien Austria down the Danube river, then turn left). Slovak Minister of Finance, member of the ECOFIN board of EU finance masters, published on Mon Nov 8th short piece clearly laying out the Austrian perspective of current events, and credited Mises and Hayek (in this order). Who’d knew he knows? [original (slovak)] [google translation a bit funny but usable]
Smells like interesting times. I wonder what these guys are up to.
In case (2), since taxpayers and people who are fined or otherwise incur debts to the government are likely to not have any government money, they must be able to purchase government money from those who do possess it. Thinker
Yep, you got it
Government money thus becomes a commodity traded on the private market. Thinker
Yep, except government can increase or decrease the supply at will by spending and taxing respectively, subject to voter approval.
At this point, if the money is ever undervalued on the private market (which is extremely likely), then arbitrageurs will purchase it on the market and start selling it at a higher price. If this process is allowed to go on, then eventually the government money will start to be used as money on the private markets and likely out-compete private monies as well. Thinker
If the government money supply is truly preferred by the free market, then so be it. However, the private sector would always have the option of using private alternative monies. It’s still liberty whether it is exercised or not The government would have to carefully balance spending and taxing so as to prevent price inflation or price deflation in its money supply.
Ultimately, the only feasible scheme is (3), to allow government money to compete with private money in the private market, which rather ruins the thought of finding the optimal money on the market.
My proposal WOULD allow government money to compete with private sector money. And it is not mine or anyone else’s business what the “optimal money” is, only that we have a free market in private money collection to allow it.
A government gold standard is meant to provide a stable currency during the transition period between a statist and an anarchic society.
I see. In order to have more liberty tomorrow we must have less of it today? And if that would work then why don’t we have an anarchic society today since we once had a government enforced gold standard?
Once the State is well and thoroughly gone, any debates on the optimal currency would be completely academic. Thinker
We still need the State to reverse past injustices of the money system. If the FR bankers think they can loot via government privilege and then call for the abolition of that same government ,then they are sadly mistaken. They have sowed the wind and hope to avoid a whirl wind?
F Beard,
“Yep, except government can increase or decrease the supply at will by spending and taxing respectively, subject to voter approval.”
My sole objection to your point here is that you place more trust in the wisdom of government policy than I think is justified. Firstly, in government there is never any strong incentive to decrease the money supply, as that makes it harder to borrow and means that more revenue must be collected in taxes than public opinion may permit. Spending is also something that political pressures will tend to increase, so the money supply will not fall from government parsimony. Secondly, voters actually have very little power over government policy, even in the world’s “liberal” democracies. And even if they did, politicians can always claim that new money will be used to benefit their constituents, so the voters will actually be generally on the side of printing more money. Thus, the government money supply cannot be expected to ever fall, but rather it will only rise. The level of control actually present will likely be much lower than you imply.
“If the government money supply is truly preferred by the free market, then so be it.”
The government money will tend to be preferred solely because the demand for the payment of debts to the government is extremely inelastic and also extremely high. Essentially, you can’t have a free market in money without eliminating the State, so the idea of a free market preferring government money is logically impossible.
“The government would have to carefully balance spending and taxing so as to prevent price inflation or price deflation in its money supply.”
As I mentioned above, that is a very tall order. You have much more faith in the wisdom of government policy than I do.
“In order to have more liberty tomorrow we must have less of it today?”
No, we have to grab government by the nose before we can kick it in the ass. A gold standard limits government expenditures and reduces it’s ability to meddle in monetary matters. If we are trying to limit government, with an eye toward eventually eliminating it, a gold standard is a useful tool.
“And if that would work then why don’t we have an anarchic society today since we once had a government enforced gold standard?”
I have difficulty imagining how you could possibly be serious in asking this question, but I’ll answer it anyway. Firstly, a gold standard is not sufficient to eliminate government. That requires a large scale political movement to not only counter the proposals of the statist parties, but also to push back against existing government. This movement has been rather absent through most of human history. Certain institutions, such as private property and a gold standard, have helped slow the advance of statism, but, as Francis Bacon said, “If we do not maintain Justice, Justice will not maintain us.” Secondly, proposals today for a gold standard are made in the context of a fiat money and an enormous State apparatus. A gold standard is intended to prevent government from growing any more and to help in shrinking it from where it is now.
“Yep, except government can increase or decrease the supply at will by spending and taxing respectively, subject to voter approval.” FB
My sole objection to your point here is that you place more trust in the wisdom of government policy than I think is justified. Thinker
False. I merely attempt to limit government monetary mistakes to its own money supply.
Firstly, in government there is never any strong incentive to decrease the money supply, as that makes it harder to borrow and means that more revenue must be collected in taxes than public opinion may permit. Thinker
First, a sovereign government should never borrow money since it has a right to issue it debt and interest free. This is another free ride for the usurers that must stop. A Constitutional amendment to that effect is in order here.
Second, who says a money supply should ever shrink? Because you hate inflation, deflation is good?
Spending is also something that political pressures will tend to increase, so the money supply will not fall from government parsimony. Secondly, voters actually have very little power over government policy, even in the world’s “liberal” democracies. And even if they did, politicians can always claim that new money will be used to benefit their constituents, so the voters will actually be generally on the side of printing more money. Thus, the government money supply cannot be expected to ever fall, but rather it will only rise. The level of control actually present will likely be much lower than you imply. Thinker
You appear to miss the whole point of having a separate government money supply which is to limit the consequences of bad government monetary policy to government. If the government over issued, then the value of its money would fall. Government workers would howl, not to cut their own wages, but to cut the pay of other government workers. No longer would it be government workers united against the private sector but government workers divided against themselves. Or the government workers could unite and lobby for higher taxes to drive up demand for government money. In that case, they would face voter opposition from the private sector that would have to buy more government money to pay its taxes.
“If the government money supply is truly preferred by the free market, then so be it.” FB
The government money will tend to be preferred solely because the demand for the payment of debts to the government is extremely inelastic and also extremely high. Thinker
One of the chief and sneakiest government taxes is the inflation tax. With true private currencies, then the private sector could escape this tax UNLESS the government raised taxes to compensate which would of course be out in the open and bitterly opposed by taxpayers in the private sector.
Essentially, you can’t have a free market in money without eliminating the State, so the idea of a free market preferring government money is logically impossible. Thinker
Just flat wrong. We can have a totally free market in private money creation IF we prevent the government from favoring any private money or money class such as precious metals. That is by definition.
“The government would have to carefully balance spending and taxing so as to prevent price inflation or price deflation in its money supply.” FB
As I mentioned above, that is a very tall order. You have much more faith in the wisdom of government policy than I do. Thinker
Wrong again. I am trying to free the private sector from a single failure point in monetary policy. The consequences of bad government monetary policy would fall chiefly on the government.
“In order to have more liberty tomorrow we must have less of it today?” FB
No, we have to grab government by the nose before we can kick it in the ass. A gold standard limits government expenditures and reduces it’s ability to meddle in monetary matters. If we are trying to limit government, with an eye toward eventually eliminating it, a gold standard is a useful tool. Thinker
In the case of a government gold standard, you are being a hypocrite, pure and simple. You wish to force the rest of us to use gold to pay our taxes when there are other forms of private money that do not require precious metals? How then are you not a tyrant?
The solution is separate government and private money supplies. Government is force and the private sector is voluntary cooperation. They cannot logically or morally share a single common money supply whether it be fiat, gold or anything else.
“And if that would work then why don’t we have an anarchic society today since we once had a government enforced gold standard?” FB
I have difficulty imagining how you could possibly be serious in asking this question, but I’ll answer it anyway. Firstly, a gold standard is not sufficient to eliminate government. Thinker
True. In fact, it is government that would give value to gold beyond its commodity value.
That requires a large scale political movement to not only counter the proposals of the statist parties, but also to push back against existing government. Thinker
Much of the impetus for socialism has been the boom-bust cycle which is the result of government privilege for bankers and what should have been purely private money forms. When we eliminate fascism in the US then the need for socialism should “wither away”.
This movement has been rather absent through most of human history. Certain institutions, such as private property and a gold standard, Thinker
As if private property depended on a government enforced or favored gold standard?!
have helped slow the advance of statism, but, as Francis Bacon said, “If we do not maintain Justice, Justice will not maintain us.” Thinker
And just what is “just” about a government imposed gold standard?
Secondly, proposals today for a gold standard are made in the context of a fiat money and an enormous State apparatus. A gold standard is intended to prevent government from growing any more and to help in shrinking it from where it is now. Thinker
I know the intentions of the gold-bugs but they are a step backwards rather than forward. Must we repeat history?
Decide Austrians. Are you for a government imposed or favored gold standard or for liberty? And if you decide for the former then know that you are fascists not liberty lovers.
F Beard,
“First, a sovereign government should never borrow money since it has a right to issue it debt and interest free.”
Take the US government and the Fed. The Fed is a separate entity that prints money and lends it to the government. This maintains the illusion that the government follows the same fiscal rules as everyone else, helping to preserve its legitimacy in the eyes of its subjects. A government certainly might borrow in order to achieve ends related to public opinion, and borrowing could be useful for other, political, ends as well.
“who says a money supply should ever shrink?”
You miss the point. I was not saying that the money supply should ever shrink, merely that if it ever needed to shrink, it almost certainly wouldn’t. The only control over the money supply the government would actually exercise is to keep from increasing it so rapidly as to destroy its purchasing power entirely, as is done now (for the most part).
“If the government over issued, then the value of its money would fall. Government workers would howl, not to cut their own wages, but to cut the pay of other government workers. No longer would it be government workers united against the private sector but government workers divided against themselves. Or the government workers could unite and lobby for higher taxes to drive up demand for government money. In that case, they would face voter opposition from the private sector that would have to buy more government money to pay its taxes.”
As a counterexample, I submit the past sixty years. The government has consistently been over issuing money, causing it to lose value, yet the government workers do not howl for less money issuing, but for more. This is because it takes time for prices to adjust to changes in the money supply. Thus, government workers have a third option of lobbying for higher salaries paid for with more money issues, allowing them to reap the advantages of having new money before its purchasing power degrades. Supposing that there are competing private monies doesn’t change this either; it just means that the exchange rates will have to adjust, which also takes time.
“One of the chief and sneakiest government taxes is the inflation tax. With true private currencies, then the private sector could escape this tax UNLESS the government raised taxes to compensate which would of course be out in the open and bitterly opposed by taxpayers in the private sector.”
There are a couple problems here, but I’ll just deal with one. If the government inflates, then the exchange rates between government money and private monies will adjust to reflect the change in the purchasing power of the government money. All this means is that private individuals might switch from government money to private money for the purpose of saving. However, government money is almost certainly vastly more salable (owing to the extremely high demand for the payment of debts to the government) than private money, so this won’t cause a private money to out compete the government money. Rather, private monies will still tend to vanish over time, or at best be confined to narrow spheres.
“We can have a totally free market in private money creation IF we prevent the government from favoring any private money or money class such as precious metals. That is by definition.”
We must stipulate that the government not favor any commodity as money in order to have a free market in money. We’ve been using the term “money” for convenience, but technically we are either discussing potential monies or a single money. The idea of competing monies is contradictory. Switching to the appropriate term for clarity, what we both want is a free market in potential monies. Since government will always favor one commodity over others, it is impossible to have such a free market in the presence of a State. Your claim is analogous to saying that we can have a free market in adjudication services even if there is compulsory funding of government courts.
“The consequences of bad government monetary policy would fall chiefly on the government.”
I’ve dealt with this above, but I’ll repeat myself briefly. The checks on government money over issue you assume do not exist. With government money favored in the private market, the consequences of bad monetary policy would fall on anyone who used government money as currency, which the government could expand to include essentially everyone simply by taxing everyone, which it wants to do anyway. Your idea of separating the market for potential monies would not work.
“You wish to force the rest of us to use gold to pay our taxes when there are other forms of private money that do not require precious metals? How then are you not a tyrant?”
Actually, I want there to be no taxation at all. Government taxation consists of forcing people to give the government a portion of their wealth. I think this is wrong whether the government confiscates gold, its own paper money, or the resources it wants without bothering with money at all. I support a gold standard because, of the available choices, I think it is best suited to limiting government. You may disagree with my economic assessment, but ad hominems only obscure the issues we are discussing. We both want the same end (a more restricted government than we have now), so let’s stick to economic arguments.
“The solution is separate government and private money supplies. Government is force and the private sector is voluntary cooperation. They cannot logically or morally share a single common money supply whether it be fiat, gold or anything else.”
My argument has been that it is impossible to separate government and private monies because government necessarily meddles in the private market merely by creating its own money. The government and private sector will tend to use the same money because it is inefficient to have multiple moneys and be locked in a state of partial barter. And the entirety of human history stands as evidence against your claim that it is logically impossible for the government and market to share a money.
“Are you for a government imposed or favored gold standard or for liberty?”
We are for liberty and consider a gold standard to be a useful tool to that end. You disagree with our economic assessment. So far, your arguments against gold and in favor of your private/public money scheme have proven unsatisfactory. There are too many problems with your system for it to be viable. If you wish to convince us, you need a better system or better arguments, or both.
As a counterexample, I submit the past sixty years. The government has consistently been over issuing money, causing it to lose value, yet the government workers do not howl for less money issuing, but for more. This is because it takes time for prices to adjust to changes in the money supply. Thus, government workers have a third option of lobbying for higher salaries paid for with more money issues, allowing them to reap the advantages of having new money before its purchasing power degrades. Supposing that there are competing private monies doesn’t change this either; it just means that the exchange rates will have to adjust, which also takes time. Thinker
The government workers can lobby and obtain any raises they might but only they will bear the price inflation. Your “it just means that the exchange rates will have to adjust, which also takes time.” is very lame. You reject the very power of separate money supplies with a flimsy technically. In fact, those whose livelihoods depended on calculating the correct exchange rate would keep a sharp eye on governmental spending and taxing. You’re clutching at straws.
There are a couple problems here, but I’ll just deal with one. If the government inflates, then the exchange rates between government money and private monies will adjust to reflect the change in the purchasing power of the government money. All this means is that private individuals might switch from government money to private money for the purpose of saving. Thinker
Isn’t this your chief reason for desiring a gold standard, to preserve purchasing power? Private currencies would allow that and yet you dismiss them?
However, government money is almost certainly vastly more salable (owing to the extremely high demand for the payment of debts to the government) than private money, so this won’t cause a private money to out compete the government money.
So what? To each his own.
Rather, private monies will still tend to vanish over time, or at best be confined to narrow spheres. Thinker
Baseless assertion.
Actually, I want there to be no taxation at all. Government taxation consists of forcing people to give the government a portion of their wealth. I think this is wrong whether the government confiscates gold, its own paper money, or the resources it wants without bothering with money at all. I support a gold standard because, of the available choices, I think it is best suited to limiting government. You may disagree with my economic assessment, but ad hominems only obscure the issues we are discussing. We both want the same end (a more restricted government than we have now), so let’s stick to economic arguments. Thinker
No. You are in fact a hypocrite. You wish to limit government power except to support your private money form, gold. I wish to separate the private sector from the pernicious effects of bad government monetary policy while you wish to impose another burden on it, the requirement to have gold for taxes.
My argument has been that it is impossible to separate government and private monies because government necessarily meddles in the private market merely by creating its own money.
Nonsense. Government would be limited to creating and using only its own money. It wouldn’t recognize any private money form much less meddle in it.
The government and private sector will tend to use the same money because it is inefficient to have multiple moneys and be locked in a state of partial barter.
The free market will determine the correct balance between convenience, efficiency, purchasing power protection, etc.. It is not for you to presume what a free market will choose and then limit its choices to what YOU think it would choose.
And the entirety of human history stands as evidence against your claim that it is logically impossible for the government and market to share a money. Thinker
My statement stands as written. It is logically impossible for a FREE market and government to share a single common money supply by DEFINITION.
Government would be limited to creating and using only its own money. It wouldn’t recognize any private money form much less meddle in it.
that sounds like nonsense or a lie. govt by definition takes taxes. if you didnt pay in govt taxes they usually seize property…likely your so called private money.
was the fed a creation of govt?? it is a separate entity from what?? could the govt undo the fed??? do fed worker paychecks come from the govt??
We are for liberty and consider a gold standard to be a useful tool to that end.
“We are all for liberty and consider forcing every one to pay their taxes in gold to be a useful tool to that end.” LOL!
You disagree with our economic assessment. So far, your arguments against gold and in favor of your private/public money scheme have proven unsatisfactory.
Unsatisfactory to you, I’m sure.
There are too many problems with your system for it to be viable.
Mere assertion.
If you wish to convince us, you need a better system or better arguments, or both.
I needn’t convince you of anything. You have convinced me that many of you goldbugs are no libertarians and are actually closet fascists and thus not even worthy of my time. And I have already been informed by a well known libertarian with impeccable credentials in finance that the solution of separate government and private money supplies “sounds like the correct and fair one”
Next!
Hey King George, where do the true libertarians hang out?
F Beard,
I agree that this conversation has entered the area of negative returns, but have just a little more to say. I could go through each of your claims and deal with them individually, but instead, I’ll just comment generally.
The crux of the disagreement between us seems to be that you believe that a free market in money is possible in the context of a State, whereas I do not. We both agree that the optimal money can only be determined on a free market and so wish to eliminate government meddling in the market. However, we have different solutions to this problem because of the disagreement I just mentioned: establish separate monies (yours), and eliminate the State (mine). There is no disagreement on ends, only on means.
Unfortunately, you seem to be allowing your hatred of gold to influence your ideas about money (I should point out that I don’t have any special affinity for gold; I’m not even particularly fond of the color). I’ve also noticed that you seem to analyze at least this issue in terms of absolutes, so that when I say that I support a gold standard with the qualification that this opinion is dependent on the continued existence of the State (which I oppose), you ignore the qualification. You also conflate disagreements on economics with disagreements on morality. None of these propensities of yours is conducive to satisfactory argument.
This is a bit of a shame, since I imagine you and I could have quite an interesting and lively discussion about different money schemes. However, I imagine we’ll have a similar discussion some time in the future, so we can try this again later.
He can’t come out and say the constitution is against my libertarian/austrian principles and expect to get re-elected. kyoki
Well, if one wants to be picky then US Treasury could coin cheap metal “Greenbacks”.
However, I am afraid the entire Austrian movement with only a few exceptions has conflated liberty with gold.
I wasn’t advocating them coining anything. Just pointing out he was correct. I just see success as more likely in incremental steps. Gold first then a completely free market approach. I don’t think the State can be removed from monetary issues in one legal step.
I could be wrong but i think that’s the basic premise behind austrian advocacy of a gold standard. That and they believe gold’s properties make it the best anchor against inflation etc.
I don’t believe so but i sure hope austrians aren’t so blind to the contradiction in equating a gold standard with liberty!lol
Gold first then a completely free market approach. kyoki
And if that wrecks the economy, why wouldn’t we move to full blown socialism instead? If our goal is liberty then let’s move in that direction and leave gold for the private sector, assuming it can survive there.
What annoys me when I read comments on these articles is I see the same lame objections reiterated, ones that have been responded to and clarified to death. Please, do some background reading and don’t repeat the blatantly fucking obvious.
Question for Professor Murphy. Krugman and other commentators who have gone apoplectic since Zoellick’s bald audacity for just mentioning gold, have claimed that countries not on the gold standard fared better economically during the Great Depression than those that were on the gold standard. I am sure they are fudging statistics, but I don’t have the knowledge to discredit their contention. Certainly the US by any reasonable assessment was off any semblance of a real gold standard after Roosevelt confiscated private-citizen’s gold in 1933, and its economy failed to recover until the 1950s, which tends to disprove their thesis.
The new congress should try to force Bernancke to resign. The House can use the power of the purse to get a better chairman. They can liquidate Freddie and Fannie. They can pass
a bill forbidding the Fed from printing more currency. Americans should trade dollars for real things like real estate, gold and businesses. We should not own savings bonds, CDs, treasury notes etc. Once interest rates rise to 10-20% the dollar will have more value. The government will have to dissolve or divest itself of nonessential parts. Debts will be liquidated and we will start over.
Will the GOP recognize Ron Paul’s leadership on the issue of monetary policy and name him as Chair of the House Domestic Monetary Policy Subcommittee, as his seniority warrants, and as his role in the restoration of our right to own gold and in the movement to audit the Fed justifies? We need to tell Speaker-designate Boehner that Dr. Paul MUST be the head of the subcommittee that oversees this critical issue! Please send your message to the GOP House leadership!
Link to Boehner’s contact form:
http://www.campaignforliberty.com/blog.php?view=39290.
I think that people against gold standard are missing one point. It’s not about what is the best form of money – gold, silver, gold-backed currency, chocolate beans, cigarettes or whatever. The whole question here is rather about anti-fraud enforcements. With gold standard you have an instrument to prevent unlimited counterfeiting – i.e. fiat money. That’s it. Then we can discuss of fractional reserve – which still is a form of fraud, but at least limited, predictable, and controllable.
If you prefer to speculate about what kind of commodity would be the most suitable, or whether or not centralized authorities should impose a “standard” from above, you are a bit off-track. There will always be a centralized authority above us all, buddies – even if somebody will end the fed someday. The only hope we have is to LIMIT the decisional power of these centralized authorities. Gold standard can do it. Could be diamond-standard or hydrogen-standard for all I care.
You cannot just say – “well, let’s end all monetary central authorities – market will pick up the best type of money”. Apart from the fact that this is pure science fiction, market requires a certain environment to function decently (I am not speaking of efficiency yet). I mean, you need to protect property rights first, you need to know that they are safe – then you can trade, use money, risk, invent. No monetary authority and no enforcement against counterfeiting (that is, no limits on presses) will just destroy an unimaginable quantity of wealth, thanks to recurrent frauds and bankruptcies.
F. Beard: “I am afraid the entire Austrian movement with only a few exceptions has conflated liberty with gold.”
You have said this several times, but I have been observing the Austrian movement for sometime without ever getting this impression, although it is obviously the case that many Austrians feel that gold as money is an important facet of freedom , or crucial tool for limiting the State on behalf of individual liberty. The most likely reason they feel that way is that they have deduced it through logical ratiocination. AS I read your comments, I do not get the impression that you are more dedicated to liberty than Austrians in general. I wonder if your evident animosity to what you call gold bugs doesn’t stem from a feeling that you missed the gold boat when it left shore at $260 an ounce. If so, not to worry, it is still cheap viz-a-viz Bernankies.
You have said this several times, but I have been observing the Austrian movement for sometime without ever getting this impression, although it is obviously the case that many Austrians feel that gold as money is an important facet of freedom , or crucial tool for limiting the State on behalf of individual liberty. Ned Netterville
Yea, yea, yea except they then turn around and try to force the rest of the population to use gold. That is hypocrisy. Liberty is liberty and gold is gold. Go ahead and use gold, silver or whatever for a private money but don’t try to force it on rest of the population via government. This is Libertarianism 101 and Gary North, you fail, assuming you are even interested in being a libertarian, which I doubt.
The most likely reason they feel that way is that they have deduced it through logical ratiocination.
And none of you have been able to refute my logic or King George’s either.
AS I read your comments, I do not get the impression that you are more dedicated to liberty than Austrians in general.
Really, and what tyranny am I guilty of? May the Lord judge between you and me in this regard.
I wonder if your evident animosity to what you call gold bugs doesn’t stem from a feeling that you missed the gold boat when it left shore at $260 an ounce.
I bought lots of gold at $242/oz. Right now, I would not buy it at any price since it is a tool of oppression and looting.
If so, not to worry, it is still cheap viz-a-viz Bernankies.
The only hope you goldbugs have is some kind of government privilege for your private money form. You guys are not part of a libertarian solution to the problem of money. You are simply Plan B of the usury cartel. One day you will be ashamed of being tools.
is that all it is ?? a tool of oppression and looting??
Well, Mr. Beard, “my” solution is to the monetary dilemma is to repeal government, which I suspect would lead to gold money by choice not imposition. You, on the other hand, as far as I can tell, are advocating government money for taxes, or something along those lines. Maybe I’m missing something or overlooking something you have said, in which case I apologize. But I don’t see government and taxes having anything to do with liberty. Government and taxes spell violence and stealing in my dictionary. The “system” you seem to favor includes government and taxes, both of which I equate with the introduction of force and violence without provocation into otherwise peaceful human intercourse against completely innocent people. “My” system, which really isn’t “mine” but rather one I derive from the teaching of Jesus and Austrian economics, has no place for government or its taxes. Oh, I know there are some Austrians who think, like Mises once did many years ago, we need government to protect the free market, and others who advocate a gold standard, which to me means government. But I think today–years after Mises wrote HUMAN ACTION–most Austrians are more inclined to agree with Rothbard, who saw no need for the violent State, and most would allow the free market to determine what “standard” would previal. (Not really a “standard” as not government imposed.” I am willing and happy to let the Lord judge whose tyranny is greater, yours, mine, or, as I said, Austrians in general, because in the Stateless, voluntaryist, nonviolent society I envision and full expect will in due course emerge, that is Who will be doing the judging–not some government “supreme,” “sovereign” authority. And it is my expectation, that when that happens most people–then truly free to choose–will choose gold for their money. Will there be people who take advantage of others when governments and fiat money are a thing of the past? Yes indeed, that’s part of human nature. But virtuous, wise libertarians will be able to handle such sociopaths without going back to mandatory government for all.
Very nice sentiments but
1) The bankers have just pulled off the biggest heist in human history via government privilege and now you wish to piously abolish government when that is the only plausible institution that could reverse that theft or at least ameliorate its damage?
2) As opposed to just dreaming about the elimination of government, I propose a strategy that would allow it to gracefully shrink over time and replace it with genuine capitalism and a minimal government. And as for eliminating government altogether, I suspect the Lord will not allow that yet. The Hebrews wanted a central government contrary to the will of God and He gave them one. He also said it would oppress them and that He would ignore their cries for relief from it:
“Then you will cry out in that day because of your king whom you have chosen for yourselves, but the LORD will not answer you in that day.”
Nevertheless, the people refused to listen to the voice of Samuel, and they said, “No, but there shall be a king over us, that we also may be like all the nations, that our king may judge us and go out before us and fight our battles.” 1 Samuel 8:18-20
Robert Murphy, by using incorrect verbiage, perpetuates the confusion with which so-called “economists” flood the literature, airwaves, blogs, and lecture halls. I quote:
“In order to make sense of our current situation — and why Zoellick would timidly call for a return to a pseudo-gold standard — we need to first think through the logic of fiat money. Fiat money is not “backed up” by anything; it is intrinsically useless paper (or nowadays, mere electronic bookkeeping entries) that is valuable only because of its anticipated purchasing power. In contrast, a market-based commodity money, such as gold or silver, is a useful good in its own right, serving industrial and consumer purposes.”
The marketplaces of the world decided long, long ago that GOLD was the only real, true money. All other “media-of-exchange” are MONEY-SUBSTITUTES. Money is the COMMODITY that is most widely-used as a medium-of-exchange in commerce. NOTICE LUDWIG VON MISES’ USE OF THE TERM “COMMODITY.”
RP Murphy even acknowledges in his quote above that so-called “fiat-money” is worthless paper and not a commodity. Case Closed. Define your terms, RP Murphy!
So-called “fiat-money” is not money in any sense of the word. It is a money-substitutes and is properly called fiat-currency.
Who has all the gold? Fort Knox is empty you know. Are we forgetting that Americas war for independence was because Brits mandated a gold standard over the colonies? Ron Paul is right on just about everything but THIS! I hope people wake up a little more now that the elite are trying to pimp gold as an answer to private banking (federal reserve). Follow the constitution and return the power to create money to congress, we the people. Don’t be fooled by false solutions.
Amen!
i havent been to fort knox. i dont know where the govt keeps the gold bullion it owns.
OTOH Fort Knox may be full of plenty of gold. Would certainly play into American interests should a gold standard be reintroduced.
Want liberty? Support a free choice in currencies. Gold can only be set free by being allowed to float, free for exchange and independent of government money-fixing and manipulation.
Gold can only be set free by being allowed to float, free for exchange and independent of government money-fixing and manipulation. King George
Yes indeed, please! Let us find out once and for all if gold and usury can survive in a true free market in private money creation in a civilized society.
What if the prohibition of usury between fellow countrymen in Deuteronomy 23:19-20 is proven to be sound economics? Would not the US score a major competitive leap over other economies?
Unfortunately, you seem to be allowing your hatred of gold to influence Thinker
I don’t hate gold; it is a truly noble medal. What I hate are those who would use government privilege to obtain an unfair advantage in the market place.
I am a true libertarian and wish to see genuine capitalism before I die. Government will not go away soon and if we don’t have a workable strategy to enable it to shrink gracefully to a minimum then it never will. Separate money supplies are the answer and not because I say so but because He did:
Mathew 22:16-22
Bad link, once again:
Mathew 22:16-22
Mr. Beard: See, also, http://www.biblegateway.com/passage/?search=mark%2012:13-17&version=NIV, and http://www.biblegateway.com/passage/?search=luke%2020:20-26&version=NIV, and http://jesus-on-taxes.com/Page_7.html
Thanks! This passage has a subtle message too; that government must spend before it can tax:
Then Jesus said to them, “Give back to Caesar what is Caesar’s and to God what is God’s.” Mark 12:17
Next we’ll be discovering that the Lord was correct about forbidding usury between countrymen (Deuteronomy 23:19-20) and commanding periodic debt forgiveness (Deuteronomy 15).
Although I do not understand your belief that the bible is a tretease on economics, as long as you religious types don’t try to forbid usury or command debt forgiveness by others just because your bible says so I have no objections.
Believe what you want but please don’t think that you have any right to force others to adhere to the “logic” of your bible.
(I am not accusing you of advocating the use of force, but it is such a short step from “God told me to do this” to “God told me to tell you to do this” that absolute religious declarations make me nervous)
Although I do not understand your belief that the bible is a tretease on economics, Anthony
It really has an extraordinary amount of sound economic thinking such as the wisdom of diversification, honest weights and measures, prohibition of bribery, putting money to use, and even a strong hint about legal tender laws (Matthew 22:16-22), imo.
as long as you religious types don’t try to forbid usury Anthony
No way would I ever do such a thing because 1) I am a true libertarian and 2) I would miss the satisfaction of watching the free market crush it to death. I truly believe it would in the long run. And if it didn’t then I would learn something. (And BTW, Christians are not under the Old Testament Law and even if we were it would only apply to us, not you).
or command debt forgiveness by others just because your bible says so I have no objections. Anthony
Actually, I advocate a bailout of EVERY US adult citizen, debtors and savers alike (since both were cheated by the government backed counterfeiting cartel) with an equal distribution of new, debt and interest free, full legal tender, United States Notes just given to every US adult citizen (combined with a 100% reserve requirement on the banks to prevent an inflationary spiral). After the debt was cleared then fundamental reform would be implemented including separate government and private money supplies. The government money would only be legal tender for government debts and private monies would only be good for private debts.
As for the Bible, I would bet a truly free market, including private money creation, would vindicate it with regard to economics. That is how I would glorify God, by showing that His ways would prosper under liberty.
@ Anthony
Ignorance on top of bigotry…wow.
Mr. Beard: See, http://www.biblegateway.com/passage/?search=mark%2012:13-17&version=NIV, and see http://www.biblegateway.com/passage/?search=luke%2020:20-26&version=NIV, and also see http://jesus-on-taxes.com/Page_7.html, and further see http://c4ss.org/content/4326, and see http://kingwatch.co.nz/Law_Government/voluntary_taxation.htm. and finally see, http://www.lewrockwell.com/orig11/barr-j1.1.1.html
I think I see now where you are coming from. You are interpreting the incident recorded in Matthew 22, Mark 12, and Luke 20, wherein the spies of the Pharisees and Herodians tried to trick Jesus into expressing his well-known opposition to Rome’s tax on the Jews by asking him in the presence of potential adverse witnesses, “Is it lawful to pay Caesar’s tax, shall we pay it?” (Mark) After asking to see the coin commonly used to pay the tax, Jesus asked them whose face and inscription were on the coin. When they answered Caesar’s, He replied: “Give Caesar what is Caesar’s, but give God what is God’s.”
I suspect you may be misinterpreting Jesus’ words to mean, “Since the coin is Caesar’s (presumably because it bore his picture), give it to him.” Thus, you believe Jesus distinguished between government money (viz., the denarius with Caesar’s face on it), and all other money for private transactions, and, furthermore, because of what he said, you, mistakenly in my opinion, believe that Jesus was saying it is okay to pay taxes as long as you use the government’s money to do so. Am I close?
Let me point out where I think you are mistaken. Jesus’ answer to the question required his listeners (and now us) to know what belongs to Caesar and what belongs to God. Right? And Caesar’s face on the coin in question no more made it Caesar’s coin than does George Washington’s face on the quarter in your pocket make it George’s. Certainly Jesus, of all people, was not fooled by any sophistry that holds that government-minted money belongs to the government after it has gone into circulation. Money, today and when Jesus walked the earth, is a bearer instrument. It belongs to, is owned by, the person in whose possession it is found–unless that person stole it. Otherwise, as Mises has shown, it would not circulate.
On the other hand, the Torah, with which Jesus was intimately familiar and of which he said “the Scripture cannot be broken,” states “The earth is the Lord’s and all that is in it.” (Psalm 24:1, and several other OT passages). That leaves nothing for poor old Caesar and that is exactly what Jesus meant: “Don’t give that murdering, stealing, enslaving, warring, blaspheming, pretender to the throne of my Father one damn denarius.” Mr. Beard, all of the citations in my first paragraph are different exegetes’ interpretations of that incident in the three Gospels, which interpretations reach essentially the same conclusion I have expressed hear.
The alternate (mis)interpretation which you have apparently embraced is one that orthodox exegetes for many centures have been promoting in order to justify the existence of the State and its taxes. Those taxes clearly violate the command of Jesus’ Father, “Thou shall not steal.” I am confident that Jesus would not endorse violations of the Decalogue nor the usurpation of his Father’s role in men’s life as Lawgiver, which is exactly what Caesar was doing.
Mr. Beard, I believe the orthodox misinterpretation of the incident demeans the impeccable character of Jesus. I also think you would find life much easier and simpler without the necessity of carrying around two monies: one for government taxes and one for all other transactions. And here is another blessing of correctly understanding Jesus: You wont have to bother with taxes once you realize Jesus did not endorse paying them. Quite the contrary.
Is Murphy suggesting Bernanke and Zoellick are part of a conspiracy to replace the dollar with the Amero?
F. Beard said, “What I hate are those who would use government privilege to obtain an unfair advantage in the market place.”
Don’t hate ‘em. Love your enemies, it befuddles them, as the words and love of Jesus befuddled those spies sent to trap him.
Now let’s all go to the LvMi seminar on money at Furman U. tomorrow and get the real poop on moola.
This misses the point that, while government can compel the acceptance of some medium in exchange through its taxing power, it cannot establish the purchasing power of that medium, as that is set on the market as a whole. Beef Cake
Not so. We all like to drive,correct? So what if the government puts a $.50/gallon on gasoline (assuming it doesn’t already)? If only government money was accepted for that tax then I guarantee you that the market would assign a good value to government money. It would be quite inelastic too sans voter outrage if the tax was too high relative to the amount of government money in circulation.
I am VERY surprised to hear that Zoellick is open to an anchored currency; it almost leads me to believe that every member of the Bilderberg group is not evil (laughable). The Group is not stupid as the writer states. They are probably anticipating the populations move to precious metals and are currently seeking to control and monitor that in order to take away the advantages of holding such an asset. All I know to do is pray that a Libertarian/Truly Free Market/Grassroots movement grows out of this polluted and desolate existence the world has developed into. I wish more of the worlds population were like Milton Freedman and our leaders like John F Kennedy… we would have a chance then (I’d hope).
Even I am tired of hearing me on this thread, so,
Adios amigos, hasta luego.
Late to the thread. Everyone else probably moved on. However, my 2 cents.
The primary objective, I take it is to preserve the value of money. Why not just pass legislation to allow a steady, say 2%, annual increase in the supply of high powered money. This legislation could be formally reviewed by Congress every 5 or 10 years. (This assumes that the movement to fully competitive private money is not going to happen any time soon.) This takes all discretionary monetary policy out of the hands of the Fed. One may argue that this rule could be changed, but all economic regimes are open to change. Gold standards can be fiddled with, abandonned when thought “appropriate”, etc.
Actually, the primary objective is freedom, which can best be accomplished by repealing laws and constitutions that give authority over what is money by anyone other than the money users. Leaving monetary legislation in the hands of congress is quite as bad as leaving it in the hands of a central bank. Furthermore, I question why you think a little inflation is a good thing? If the money supply does not expand with a growing economy and demand for money, prices will fall sufficiently to abate the additional demand.
thanks Ralph!
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Trolling for bottom-feeding suckers.
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