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Source link: http://archive.mises.org/14768/boom-bust-and-gold/

Boom, Bust, and Gold

November 26, 2010 by

A pure gold standard is not conducive to business cycles. Contrary to mainstream economists, it is the attempts of the central banks to bring about price stability and full employment that set in motion the menace of boom-bust cycles. FULL ARTICLE by Frank Shostak

{ 151 comments }

Mike Sproul November 26, 2010 at 10:43 am

The real problem with the gold standard is that some money-issuing banks will inevitably lose some of their assets and become insolvent. At this point they can either face a bank run and collapse, devalue their money relative to gold, or suspend convertibility of their money into gold and let the market place a value on its money. Nineteenth century note-issuing banks normally chose to suspend when this happened, as the least of evils. But a gold standard requires the maintenance of convertibility, and thus forces a bank run, the worst of the evils.

Richard November 26, 2010 at 11:33 am

“The real problem with the gold standard is that some money-issuing banks will inevitably lose some of their assets and become insolvent.”

As well they should if they have created more money substitutes than they have promised to redeem on demand.

Under a gold standard there is absolutely no reason for a bank to produce more substitutes than are backed by gold. An expanding economy does not need an expanding money supply.

Mike Sproul November 26, 2010 at 12:02 pm

A 100% reserve gold standard forces banks to charge fees for gold storage. Would you prohibit me from patronizing a bank that operates on fractional reserves and pays interest? Would you then call yourself a libertarian? Also, 100% reserve banks are more vulnerable to robbery than are fractional reserve banks. That’s one reason they have been nearly nonexistent for centuries.

Matthew Swaringen November 26, 2010 at 12:16 pm

This is like any other speculative investment. If the bank is making clear it’s going to take your money and loan it to other people, I have no problem with it.

However, if it’s loan portfolio collapses and this ties into other fractional reserve banks balance sheets and they also fail I expect no whining from the speculators who put their money into the system.

Richard November 26, 2010 at 1:00 pm

Never said I would prohibit banks that call themselves ‘fractional reserve banks.’ I said if a bank has lent more than depositors ultimately demand, then it should it fail. Banks should not be prevented from failing by force or fraud.

Are you also saying fractional reserve banks don’t charge fees for storage? I certainly hope that they would. My understanding is that such banks today do have safes, guards and security systems. I presume they have to pay for them. Just because people are earning interest on money that is somehow available to them on demand, but also lent out at the same time, does not mean they are not paying ‘fees’ for storage. If they aren’t, then you truly do believe that you can get something for nothing. (A customer of a 100% reserve bank may, on net, not pay fees either. If they give $10K to the bank for lending at 3%/year, but $2K for immediate redemption for which they pay a storage fee of 3%/year they would be making money – $240/year, or %2 on the total of $12K they have given the bank).

Finally, as for vulnerability to robbery – I rather think fractional reserve banking exists to the degree it does today thanks subsidization (in other words, robbery) by governments.

eric November 26, 2010 at 9:20 pm

Nothing wrong with fractional reserves and their customers. Fractional reserve banks pay interest rather than charge a warehouse fee. Just so long as they explain what they do up front AND don’t force others to except their substitutes at face value, I doubt any Austrian would have a problem with it.

Just don’t play the monopoly game using government guns to force all of us to use their substitutes and theirs alone. I.E. no legal tender laws favoring one bank over any other.

But we’ve all been over this over and over and over….

Brian Macker November 28, 2010 at 8:55 pm

The long history of people who use fractional reserve banking refusing to accept their losses and using the political machine to transfer their losses in this temporal pyramid scheme to others is reason enough to outlaw the practice, and require that fee based system be used. We already have a fee based system in place, ATMs, and also credit cards.

We can outlaw fractional reserve banking on the basis of several valid points. One of them being fraud. Bank notes claim to be 100% redeemable but they are not. If they said 1 in 10 chance of getting your gold then I could see it being legal. But then it would be labeled falsely as currency or money but instead what it is, a lottery ticket.

Jonathan M. F. Catalán November 26, 2010 at 12:13 pm

Not all bank runs are for base money. Banks could exchange liabilities for liabilities (i.e. inside money for deposit accounts). IIRC, the nature of most bank runs during the Great Depression were for currency, and they turned to a run on base money only after it was clear that banks could not provide sufficient currency (because they were disallowed to issue their own inside money or dollars).

james b. longacre November 26, 2010 at 3:14 pm

how does a gold standard force a bank run??? it would seem that poor economic forecasting might lead to a bank run. does your gold standard create notes that say redeemabale in gold beyond the actual amount of gold held?? ie not 100 percent?

nate-m November 26, 2010 at 3:38 pm

The real problem with the gold standard is that some money-issuing banks will inevitably lose some of their assets and become insolvent.

That’s not a problem. That’s a solution. How else are we suppose to get rid of banks that are ran poorly and inefficiently? Why else is there any reason to not trust a bank that is ran by morons if no matter what they do they won’t have to face any consequences?

At this point they can either face a bank run and collapse, devalue their money relative to gold, or suspend convertibility of their money into gold and let the market place a value on its money. Nineteenth century note-issuing banks normally chose to suspend when this happened, as the least of evils. But a gold standard requires the maintenance of convertibility, and thus forces a bank run, the worst of the evils.

No. The worst of all evil is having a entire country spiraling into bankruptcy because it was not able to make the necessary adjustments to it’s financial system to keep productive and efficient economy.

Compared to what is going on now a run on a bank or two that go insolvent is like a scraped knee compared to getting shot by a handgun. Yeah sure we probably may survive this government like we have been able to in the past, but there is a chance that we won’t this time.

Gil November 26, 2010 at 11:39 pm

In other words those who frequent FRB banks will experience mini-booms, busts and insolvencies such that they will eventually opt for 100% backing banks?

billwald November 26, 2010 at 11:59 am

Agree that a gold standard produces a stable economy. Stable with 80% of the population living in poverty as serfs or slaves. How about comparing the standard of the living of the owners and the serf class in those stable, gold standard years?

Richard November 26, 2010 at 12:34 pm

Please explain how the gold standard leads to 80% of the people living in poverty. You seem to think that under a ‘fiat’ system, contra a ‘gold’ standard system, it is the ‘people’ that get the money first, as opposed to the wealthy. This is certainly not the case. Under our current system, It is the big banks that get the fiat money first.

In your scenario, the ‘fiat’ money somehow ‘trickles’ down, but under the gold standard it doesn’t. Why not?

BTW, America was on a a gold standard in 1800. It was still on a gold standard in 1900.
In the U.S., on average, people were better off in terms of material wealth in 1900 than 1800 (GDP per capita increased from ~$2000 to ~$5500). People were also living longer (average life expectancy increased from ~40 yrs to ~50 yrs). Meanwhile the U.S. population had increased from ~5 million to ~75 million. (http://www.wisegeek.com/what-was-the-population-of-the-us-throughout-its-history.htm)

If the gold standard keeps people in poverty, how did the U.S. population manage to increase by ~15x while increasing, on average, everyone’s material wealth and well being?

Gil November 26, 2010 at 11:41 pm

However between 1900 and 2000 on average person were worse off, living shorter lives and wishing for the “good old days”?

Mrhuh November 27, 2010 at 3:12 am

Not true. Between 1900 and 2000 the average person was far better off due to constant deflation. The myth of The Industrial Revolution grinding the poor under its heels was largely a myth created by feudal aristocrats angry that the serfs were gaining autonomy and moving to the cities.

Richard November 27, 2010 at 8:10 am

Gil,

I was making the case that the gold standard does not keep people in poverty. If you believe it does please explain why.

Anthony November 26, 2010 at 2:54 pm

How about comparing productivity per worker over time? Might there be other factors influencing standard of living???

james b. longacre November 26, 2010 at 3:16 pm

can you even make such a comparison in the ancient world??? rome certainly stole a lot of gold perhap increasing poverty. the soldiers demanded it. maybe it was other factors leading to poverty.

Inquisitor November 26, 2010 at 8:22 pm

Well thanks for proving you are a troll.

Phinn November 26, 2010 at 11:50 pm

>>>How about comparing the standard of the living of the owners and the serf class in those stable, gold standard years?

What would that prove? That a complex set of economic factors that could never be replicated, even if we wanted to, produced some undesirable set of economic conditions?

You seem to think that the future can only consist of some version of what has actually happened before.

Here’s a thought — our economic future will be different than anything that has ever happened before!

(Actually, that’s true whether it will be better or worse. The only guarantee is that it will not be exactly the same as anything that has happened in the past.)

Patrick Barron November 26, 2010 at 12:02 pm

There is much confusion over what “money” is. What we have today–fiat money, backed by nothing–is not really money, but fiduciary media. Thus, the central bank says that it is providing the economy with “money”, but it really is providing the economy with more fiduciary media. This is the “nothing for something” of which Shostak speaks. In my class at the U. of IA, I show the students a dollar bill, a Euro note, a British Pound, and a pack of cigarettes. I ask them which really is money. The answer is that only the pack of cigarettes is money. (Nevertheless, I put the dollar, Euro, and Pound back in my wallet!) Cheers!

Mike Sproul November 26, 2010 at 12:10 pm

Your students ought to ask you why, if modern paper currencies are backed by nothing, do all the world’s central banks bother to hold assets against all the money they have issued?

Vanmind November 28, 2010 at 6:39 pm

It’s because they are peddlers in fraud.

Jonathan M. F. Catalán November 26, 2010 at 12:15 pm

Part of the fiat currency acts as base money, so it’s not all fiduciary media. With a paper fiat currency it’s difficult to tell what is money and what is money issued beyond base money.

james b. longacre November 26, 2010 at 3:24 pm

why is it difficult?? are there figure that currently state the amount of paper and coin currency???

what is it now?? right at a trillion dollars???? are there other dollars not in paper and coin form circulating as well???? monetary base says 2.2 trillion?? is a good part of that the currency in circulation???? true????

so far im finding out how much money there is. m2 says almost 9 trillion. are the extra 7 trillion or so dollars there non=paper and coin currency???

which money measure only track paper and coin currency and which do not????

does fiduciary media even apply to current dollar definitions???

B rian Macker November 30, 2010 at 7:47 am

Part of the reason for difficulty is that money serves multiple purposes. For example it acts as a medium of exchange and as a store of value. So with a commodity money like gold the stuff stored in vaults and in mattresses is acting as a store of value. The question then arises of how to treat the holding of a short term government bond. If the government plans to pay the bond by printing up more notes then the bond should be treated as money (since the government might as well have just printed up all the notes and stored them itself and transferred them over to the bond holder at maturity). China holds lots of short term notes like this. On the other hand if the government pays the bond off by taxing then it should not be treated as money.

You can’t absolutely tell the governments intentions here but I think it fairly obvious that it’s not going to be able to raise taxes enough to pay off all it’s bonds and debts. So it will need to print money. So in part those bonds held by the Chinese should be considered part of the base money supply. Productivity driven deflation would have been much greater if they had to hold cash reserves for their trade deficit instead of lending money to the bloated US government.

Also a bond might be used as a medium of exchange. if the bond were being passed around to buy other goods and services it should be treated as money. Settling trade deficits with bonds is using it as a medium of exchange, if the intention (or actual end result) is to print currency to satisfy the bonds. Our government is essentially using bonds to purchase goods. Unlike the consumer that does this (without fractional reserve) their is an inherent ability here to print up new notes.

I said without fractional reserves because with fractional reserves the banks print the new money up for the consumer immediately. Money that may later disappear as banks collapse during the bust phase of the business cycle.

So it isn’t so simple to determine what is base money or not with a fiat currency.

Same is true of commodity money. Do we treat gold held as jewelry as money or not?

Gil November 26, 2010 at 11:43 pm

I presume the “bazinga” of that story was that certain people chose cigarettes as money whereas the other three exmples were forced onto people by government and legal tender laws?

Esuric November 27, 2010 at 4:27 am

Patrick Barron,

You’re simply wrong. Cigarettes are not money. Telling your students that cigarettes is money is doing them a disservice, since money is defined as the commonly accepted medium of exchange. Fiat money is still money, and fiduciary media is still money (though federal reserve notes are not fiduciary media).

Craig November 27, 2010 at 6:55 pm

Esuric — No, I’d say that you’re simply wrong.It’s true that government has decreed the dollar as “money” and that we accept that, but a free market money would be a commodity that is valued in and of itself — no government approval or backing necessary. Gold is better than cigarettes, of course. I, for example, would end up smoking most of my money before it was spent.

John Voigt November 27, 2010 at 8:49 pm

“No, I’d say that you’re simply wrong.It’s true that government has decreed the dollar as “money” and that we accept that, but a free market money would be a commodity that is valued in and of itself — no government approval or backing necessary. Gold is better than cigarettes, of course. I, for example, would end up smoking most of my money before it was spent.”

But I’m not. Words have meanings, and money has a very precise definition. Cigarettes simply aren’t money, and federal reserve notes are. Now, I’m not saying that it’s good money, or that the market would choose this as the common medium of exchange, but it is money nevertheless. Mises’ explains the transition from commodity money (gold and silver) towards fiat money (pounds, dollars, euros, etc) in “The Theory of Money and Credit.”

Capt Mike November 28, 2010 at 1:38 pm

But cigarettes DID function as money, i.e. a medium of exchange, in POW camps.

John Voigt November 28, 2010 at 10:10 pm

Indeed, and in Germany as well (after the hyperinflation).

J.E.C. November 26, 2010 at 12:27 pm

We had- as the article notes- booms and busts between the advent of the Industrial Revolution and the institution of central banks. The article appears to explain these as the consequence of fractional reserve banking, but it is difficult to see how a purely free market wouldn’t have fractional reserve banking. The position of the Mises Institute (although not the position of Mises) is Rothbardian anarchism; how would this anarchism be consistent with a mandate for full reserve banks?

Furthermore, fractional reserve banking far antedates the Industrial Revolution. Why was it not so problematic before the advent of the industrial economy?

Richard November 26, 2010 at 2:28 pm

Where does the MI publish its position as ‘Rothbardian anarchism’? Even if it is, I agree that having anarchist legal and a total ban on FRB would be problematic. Still, that does not mean FRB would not lead to problems, nor that a free market legal order might keep FRB at a minimum because such banks would more likely fail.

Who says fractional reserve banking wasn’t problematic before the IR? It probably did lead to problems. They were probably not as deeply felt because of the heavier capitalization the IR required.

If fractional reserve banking leads to the mis-allocation of resources to higher order stages of production, we would expect that a recession would more deeply impact a heavily capitalized economy like the one we had under the IR (and have today). It is much harder to re-allocate resources from failed higher order production stages than comparatively lower order production stages.

james b. longacre November 26, 2010 at 3:36 pm

http://video.google.com/videoplay?docid=-466210540567002553#well the video here says it dedicated to the memory of m.r. i dont suppose they would go on for an hour while not propounding his (its) ideas.

economist and academic vice-president of the mises insitute. lies????

james b. longacre November 26, 2010 at 3:25 pm

maybe it was. maybe the record isnt as clear or verifiable.

ABR November 26, 2010 at 1:24 pm

If someone is interested in lending his money, let him lend — or become a shareholder in a bank that lends the shareholders’ money.

The average person wants to preserve his wealth. In the absence of fiat money, the best way to do that is that to store the majority of one’s liquid capital (a.k.a. gold or silver) in a bank’s warehouse account for a fee. In a decade, the remaining gold (after paying the fees) might buy more than a decade earlier. Or not. But if not, the decline is likely to be trivial.

FR banks deceive their customers. Eliminate the deception.

james b. longacre November 26, 2010 at 3:32 pm

The average person wants to preserve his wealth. In the absence of fiat money, the best way to do that is that to store the majority of one’s liquid capital (a.k.a. gold or silver) in a bank’s warehouse account

why is that the best way?? maybe in shares of farm automation company to process food commodites faster and cheaper rather than piling up money which might lose some value.

i dont know to what extent that fr banks as you claim they decieve customers. are you saying that fr banks exist now , as in nearly every bank in the us??
i had no knowledege of the us money system till a few years ago…i thought the info at the mises sites would help but its mostly lies. some historical info was helpful, but not much.
a deposit agreement with wells fargo never even uses the word money. it deposits and funds.

but i dont know that the banks deceive…more likely its the govt and the what they call the dollar that is deceitful. what exactly is fractionally reserved at the banks now anyway??? a ratio of what to what???

The Kid Salami November 27, 2010 at 4:50 am

“i thought the info at the mises sites would help but its mostly lies.”

Then – please – take your babbling, pre-teen level, bordering-on-retarded “commentary” elsewhere and stop spamming this blog.

greg November 26, 2010 at 2:02 pm

Since we have not had a “pure” gold standard in the US from the days of Alexander Hamilton until Nixon put an official end to it in 1971, it is hard to argue with you on the performance of the gold standard with regards to the business cycle. But I have to agree with Roubini, which I seldom do, that the gold standard will not work today.

Gold is nothing more than a commodity which its price is set by a small group of people that buy and sell it. And those that hold gold, want to see the price increase, so they see any move to expand the demand as good. So they are constantly pumping information that would push people to buy more gold.

The great thing about our current economic system is that there is nothing in your way to make a bet against the future. If you are convinced that economic security is tied to your gold holdings, go for it and convert all of your cash into gold. If the economy falls apart, you made a smart move.

But if the economy recovers and expands under the current banking system and the price of gold falls, you did not make a smart move.

I just find it interesting, not surprising, that gold pumpers tend to come out into the media when the price of gold starts to fall.

james b. longacre November 26, 2010 at 3:32 pm

Since we have not had a “pure” gold standard…………what is a pure gold standard and did it really exist???

King George November 26, 2010 at 5:53 pm

Arguing semantics is a game the communists like to play, too. Define your terms instead of running around them like children.

Craig November 27, 2010 at 7:13 pm

its price is set by a small group of people that buy and sell it. And those that hold gold, want to see the price increase

Greg — If gold were the currency, then what would its price rise against except producer goods? In that case, they’d get cheaper. Don’t project the current situation where people hedge against inflation by investing in gold — that situation wouldn’t exist anymore.

F. Beard November 26, 2010 at 2:34 pm

As a libertarian I don’t give a hoot what people use for money as long as that money is not privileged by government. So to hell with any government imposed or favored gold or any other standard. This leads to the following conclusions:

1) Government money should be pure fiat but only legal tender for government debts (taxes and fees).

2) Private monies should only be good for private debts; they should be totally unacceptable for government debts (taxes and fees). Government would be totally blind to any money form but its own.

3) The free market would determine exchange rates between government money and private monies and between private monies.

Gold enthusiasts should have no problem with this if gold is truly a valid form of money that can stand on its own. Let it succeed or fail in a truly free market of private money creation.

Government is force and the free market is voluntary exchange; how is it morally possible for them to share a single money supply be it fiat, gold or anything else? It isn’t, I would bet.

ref: “Render to Caesar …” — Mathew 22:16-22

Mike Sproul November 26, 2010 at 5:10 pm

Money that is acceptable for taxes is backed by the government’s assets–specifically by “taxes receivable”, so it isn’t fiat money at all, if by fiat money you mean money that has no backing.

F. Beard November 26, 2010 at 6:06 pm

Money that is acceptable for taxes is backed by the government’s assets–specifically by “taxes receivable”, so it isn’t fiat money at all, … Mike Sproul

Yes, that is the ultimate backing for the government’s money. However, by “fiat” the government may declare anything to be money including pieces of wood as the English did for about 800 years.

Mike Sproul November 27, 2010 at 11:59 am

Those pieces of wood (I presume you mean tallies) were issued by individuals and governments alike. When issued by an individual they were backed by the individual’s assets, and when issued by governments they were backed by the government’s assets. If I’m a landlord, and I declare that pieces of wood with my signature on them are acceptable for rent on my property, then you could say that I made them money “by fiat”, but the real reason they have value is that they are backed by my assets. These days, when most people say “fiat money” they mean unbacked money, but there’s no such thing.

Vanmind November 28, 2010 at 6:46 pm

I’ve never understood what the big deal is about the “Render unto Caesar” passage from that particular work of fiction. Obviously, nothing out of anyone’s income was ever “…what is Caesar’s,” so the appropriate amount to render was (and is when referring to any modern-day Caesar wanna-be) precisely zero.

james b. longacre November 26, 2010 at 3:10 pm

“We can thus conclude that the gold standard, if not abused, is not conducive to boom-bust cycles.”

couldnt empty certificates, if not abused, not be conducive to so-called business cycles??

are business cycles even a problem???

do they always end in bust or can they lead to sustained and enhanced standards of living???

high capactiy optic cable bubbles….highly mechanized farm machinery bubbles…..etc

nate-m November 26, 2010 at 4:06 pm

couldnt empty certificates, if not abused, not be conducive to so-called business cycles??

The entire point of abandoning a gold standard was that so governments and banks could be given the power to manipulate the economy by varying the money supply outside of market demand. Think of the tail wagging the dog. That’s the point to paper-only currency.

To understand what the differences you have to understand some basics:

Gold is a commodity. That is going to be the major difference between paper-only money versus a gold standard. You can use any commodity as a potential base for currency, but Gold is a particularly good one due to it’s natural properties.

Such as:
* it’s easily divisible. You can chop up a gold coin and not lose any of it’s value.
* It’s valuable in smaller quantities. You don’t have to own a lot of gold or carry a lot around to have significant purchasing power.
* It’s a element. It can’t be replicated, duplicated, or copied.
* It’s desirable for purposes other then money. It’s used in electronics, jewelry, and for many other purposes and is desirable almost universally so anybody in the world is willing to trade with anybody else for gold.
* It does not rust, it does not evaporate, and can be reused many times. Most of the gold today is the same exact gold that has been in use since ancient times.

Sure people mine it, but it’s rare and difficult enough to obtain that the amount of gold is remains fairly constant and demand is going to remain high.

Paper-only currency, or credit-backed currency (which is more accurate term for the dollar nowadays, I suppose) can lose it’s value utterly. There is no universal appeal to printed bits of paper… they can only have a contrived value that exists ‘just because’.

There are plenty of examples of credit-backed currencies imploding because of economic meltdowns. They come and go like the wind and have done so throughout history.

The illusion of the dollar being solid is based simply on the fact that up and until the 1970′s it was Gold backed. Regular people couldn’t exchange dollars for gold on demand since the 1930′s, but governments could. This was a result of treaties from the 1950′s that attempted to establish the USA dollar as the common exchange currency for the entire planet.

Since then the only reason it has survived was probably because governments handling it with kid gloves. Everybody was so increasingly paranoid about a bust that they have been doing anything and everything they can to maintain the dollar as a common exchange medium.

But now we have a government that is ran by people who never worked a honest day in their life. They have not only have little understanding of how the economy works they have utter contempt for business and capitalism in general. They have come to believe the government’s own bullshit. They think the economy is not managed by individuals working in concert with one another; they think they can simply control everything through government fiat.

They have effectively taken every single debt and debt overrun that our country has spent in 200 years of history…. and doubled it in less then 3 years. They are going to end up tripling it and quadrupeling it in even a shorter time span if they are given a chance.

This is the danger we are facing here.

Hyperinflation cannot happen with a Gold Standard because gold has a natural value utterly independent of any bank or government. We could have the entire banking system and treasury of the USA wiped out in nuclear war and it will still retain significant value. Sure deflation and inflation can still happen with a gold base, but that’s really just the market working changing the perceived values of commodities in relation to one another.

But with credit-backed-only money it can all evaporate with one bad presidential decision.

james b. longacre November 26, 2010 at 8:24 pm

if govt used gold/silver to buy up mines that contained gold /silver would they that still give them some type of control??? has that occurred???

i dont know that hyper infltion has ever occurred except for what some here say happened in germany…i dont know if thats true or not.

hyperinflaton isnt a common occurence is it??? and govt would do that why??

james b. longacre November 26, 2010 at 8:25 pm

But with credit-backed-only money it can all evaporate with one bad presidential decision.

what is credit backed money??

htran November 26, 2010 at 10:58 pm

Zimbabwe and Vietnam, personal family experience in Vietnam’s case, come to my mind.

nate-m November 27, 2010 at 12:25 am

i dont know that hyper infltion has ever occurred except for what some here say happened in germany…i dont know if thats true or not.

It’s true. It’s well documented history. Looking around the internet for a few minutes will find you creditable references.

It’s one of the major reasons behind the rise of the Nazi political party.


hyperinflaton isnt a common occurence is it???

Germany 1920′s saw massive hyperinflation.
Example:
http://en.wikipedia.org/wiki/File:German_Hyperinflation.jpg

1 Mark in 1923 = 1000000000000 Marks in 1928.

Wikipedia has a good article on it:
http://en.wikipedia.org/wiki/Hyperinflation
I counted well over 30 examples of hyper inflation. Most of which happened in the last century, but China has examples going back thousands of years.

You can see it happening realtime with Venezuela. With their government policies it’s just a matter of time and is starting to happen right now. I think they are experiencing around 30-40% inflation last time I checked.


and govt would do that why??

Not on purpose. They will try to control the economy for their own benefit by managing the money supply through combination of printing money, taxation, social projects, and the such. Hyperinflation happens when they screw it up and it spirals out of control.


if govt used gold/silver to buy up mines that contained gold /silver would they that still give them some type of control??? has that occurred???

Probably has happened. Although they wouldn’t pay for them, they’d just take it. The problem is that mines don’t really produce a whole lot. Most gold in circulation has been in circulation for hundreds and hundreds of years.

But it’s certainly something they’d try.

I think that with today’s technology it’s possible to use all sorts of different commodities as currency besides just gold. It does not have to physically change hands every time, either. I would be happy to carry around paper that I could exchange for gold or still use a bank debit card and such. Most reasonable people here are not expecting us to go back to carrying around money purses or anything like that.


what is credit backed money??

That’s my own term.

I think it accurately describes the current situation with the dollar and other fiat-based currencies.

People are willing to sell services and commodities in exchange for dollars because the dollars are perceived as having value. In reality they are just paper, and more often then that, are just balance numbers in a accounting program. But people believe they have value, so they have value.

It’s that belief in the dollar that gives it value.

What is that belief based on? It’s not the paper itself (or numbers on a computer), but what the paper/numbers represents.

I believe that this value is based on the fact that people are willing to trust the USA government and Federal banking system to ‘do the right thing’ and be good stewards of the mint.

In other words.. the credit of the USA government and federal banking system is good so therefore the dollar is good.

If people loose faith in the ability of the USA government to manage the currency then they will refuse to do business with the dollar. Thus the value of the dollar will drop massively.

And that is how hyperinflation can occur.

Ned Netterville November 26, 2010 at 5:18 pm

Shostak writes:

“When John the miner exchanges gold for goods, he is engaged in an exchange of something for something. He is exchanging wealth for wealth.
“Contrast all this with the printing of gold receipts, i.e., receipts that are not backed 100 percent by gold. This is an act of fraud — that is what inflation is all about — which is another way of saying that it sets a platform for consumption without making any contribution to the pool of real wealth.
“Empty certificates set in motion an exchange of nothing for something, which in turn leads to boom-bust cycles.
“The printing of certificates unbacked by gold diverts real savings from wealth-generating activities to the holders of the unbacked certificates. This leads to a so-called economic boom.
“The diversion of real savings is done by means of unbacked certificates, i.e., unbacked money. Once the printing of unbacked money slows down or stops altogether, this stops the flow of real savings to various activities that emerged on the back of unbacked money.
“As a result these activities fall apart — an economic bust emerges. (Note that these activities do not produce real wealth; they only consume.)”

This, at least to me, is a new argument for both ABCT and gold. It is a darn good one, and I am happy to add it to my defense of gold and Austrian-school arsenals. Thanks Frank.

james b. longacre November 26, 2010 at 8:26 pm

receipts that are not backed 100 percent by gold. This is an act of fraud — that is what inflation is all about —

there haveent been gold recepts since when????

Ned Netterville November 26, 2010 at 5:29 pm

I do wish Shostak’s referred to “gold” rather than a “gold standard”, which to me suggests legislated criteria. Unless the “standard” is something created cooperatively and voluntarily by the free market, sort of like the Law Merchant apparently developed, the state is in a position to alter it, as happened often in the past.

nate-m November 26, 2010 at 5:50 pm

Most ‘standards’ that tend to get used in the economy are ones created by private entities.

HTTP, for example, is a standard. It’s hyper text transport protocol. Hyper text meaning text that uses hyper links for connecting different documents instead of static references, and transport protocol meaning the method at which this text is encapsulated and transfered from one computer to another on a distributed network.

It’s not a dirty word. :)

King George November 26, 2010 at 5:51 pm

Yes, actually it is a dirty word. Gold standard was a government-enforced standard that failed in the past. If you don’t mean the same thing, then don’t call it the same thing.

King George November 26, 2010 at 5:50 pm

Agree 100%. We already know how the gold standard movie ends. Einstein once defined insanity as “doing the same thing over and over again and expecting different results”

The future is in decentralization and no privileged money, not a gold standard.

james b. longacre November 26, 2010 at 8:27 pm

Einstein once defined insanity as “doing the same thing over and over again and expecting different results”

one hammer hit on a cinderblock a chip
keep hammering on a cinderblock and it will break into

King George November 26, 2010 at 5:49 pm

“We can thus conclude that the gold standard, if not abused,”

Because it worked just perfectly last time around, right? When are libertarians going to stop being apologists for a state-controlled monetary system enforced by violence, whether it be gold or fiat? Both are wrong.

F. Beard November 26, 2010 at 5:58 pm

When are libertarians going to stop being apologists for a state-controlled monetary system enforced by violence, whether it be gold or fiat? Both are wrong. King George

Here, here! It really discredits libertarianism for so called libertarians to push a government backed, favored or enforced gold standard.

Gold is gold and liberty is liberty. They are not synonymous.

james b. longacre November 26, 2010 at 8:59 pm

with a govt (taxation power) in place however what is a better money system to have gold/silver or current dollar-currency-central bank??? and why?

F. Beard November 27, 2010 at 1:46 am

That is a false choice. I pick neither.

james b. longacre November 27, 2010 at 2:46 pm

it is not a false choice. it is a question.

i dont know if you pick or not…but i expect you pay…in current currency-dollars.
with a govt (taxation power) in place however what is a better money system to have gold/silver or current dollar-currency-central bank??? and why?

you exist within a govt now..so if you are not lair and fraud i guess you dislike the current govt that rules over you. is that false pal??? didnt think so. now, with the same govt
would you rather use gold/silver as money or the current currency-dollar??? and why???

F. Beard November 27, 2010 at 3:25 pm

now, with the same govt
would you rather use gold/silver as money or the current currency-dollar??? and why???
james b. longacre

I would pick the current system; it is bad enough to be constrained by government; it would be worse to be constrained by both government and the limitations of gold.

There is a libertarian solution to this mess and it isn’t a government backed gold standard. That should be obvious to libertarians.

Ned Netterville November 26, 2010 at 6:34 pm

F. Beard wrote:

“As a libertarian I don’t give a hoot what people use for money as long as that money is not privileged by government. So to hell with any government imposed or favored gold or any other standard. This leads to the following conclusions: 1) Government money should be pure fiat but only legal tender for government debts (taxes and fees). 2) Private monies should only be good for private debts; they should be totally unacceptable for government debts (taxes and fees). Government would be totally blind to any money form but its own.”

You suggested this idea of having government and free market money in the comments on another Mises article or blog post. I responded to you comment there, but you may not have seen it. You can find my comment towards the end of the 131 comments elicited. They are all here:
http://blog.mises.org/14599/gold-the-markets-global-currency/

As I said there, based on your prior reference to the biblical incident involving Jesus reported in the Gospels of Matthew, Mark and Luke, which I refer to as the “render-unto-Caesar incident.” that this is where your idea of two monies is derived. I wont repeat everything I said there, but just point out that it seems to me that your idea of government and free-market money derives from your interpretation of Jesus’ response to the question, “Should we pay Caesar’s tax?” Since the coin in question during that incident was a Roman denarius with Caesar’s image on it, you apparently interpreted Jesus’ answer: “Give Caesar what is Caesar,” to mean that government money should be used to pay taxes, and other (free-market) money used for other transaction. This, I think, is a misinterpretation of that incident. Jesus did not say pay Caesar’s tax with Caesar’s money. He said, “Give Caesar what is Caesar, but give God what is God’s.” This answer obviously requires that one knows what belongs to Caesar and what belongs to God. And since Jesus had on many occasions demonstrated a profound knowledge of and respect for Scripture, I am confident that he agreed with the words found in Psalm 24:1, “The earth is the Lord’s and everything in it,” which of course leaves nothing at all for poor old Caesar. And I and a growing number of others thoughtful people interpret this incident to mean: “Give nothing to Caesar. Don’t give that murdering, thieving, enslaving, warring, blaspheming pretender to my Father’s rightful title of law giver one dinarius. Nothing! Taxation is stealing in violation of God’s command: “Thou shall not steal,” and it doesn’t matter whether the tax requires government money or other money, it is stealing. Money is not owned by the issuer, once it leaves the issuer’s hands and goes into circulation. If it remained the issuer’s, it would not circulate. No one would give their goods or services to another in return for something that remained the property of a third party. It would not be money. I would also point out that libertarians in general believe that taxation is stealing. For a book-length essay on this topic, see my website and download the essay: JESUS OF NAZARETH, ILLEGAL-TAX PROTESTER. You will find it here: http://jesus-on-taxes.com/Page_7.html

F. Beard November 27, 2010 at 2:10 am

And I and a growing number of others thoughtful people interpret this incident to mean: “Give nothing to Caesar. Don’t give that murdering, thieving, enslaving, warring, blaspheming pretender to my Father’s rightful title of law giver one dinarius. Nothing! Taxation is stealing in violation of God’s command: “Thou shall not steal,” and it doesn’t matter whether the tax requires government money or other money, it is stealing. Ned Netterville

Certainly the Lord’s preference was a libertarian society along the lines of the Judges of Israel (cf 1 Samuel 8). The question is how we may return to it if we may. I suggest that separate money supplies is a strategy to grow the economy and thus shrink the need for government. Taxation would remain but at least the nationwide boom-bust cycle and the inflation tax would be eliminated.

Money is not owned by the issuer, once it leaves the issuer’s hands and goes into circulation. If it remained the issuer’s, it would not circulate. No one would give their goods or services to another in return for something that remained the property of a third party. It would not be money. Ned Netterville

The taxation authority of the government means that ultimately none of the government’s money is privately owned. Gold and silver coins confuse the issue because of their metal value. But it is illegal to melt down coins so how are the coins privately owned?

Ned Netterville November 27, 2010 at 11:33 am

“Taxation would remain but at least the nationwide boom-bust cycle and the inflation tax would be eliminated.”

Taxation is theft. It corrupts both thief and victim in more ways than many would imagine. I agree with your assessment of the Lord’s preference, but a nation or people along the lines of Israel’s descendants in the time of Judges would be impossible under a government with the power to tax. Rather it would be a place like America where theft has become endemic and the population dependent upon government instead of God. When the people of Israel demanded of Samuel to have a king over them, God told Samuel they were rebuking Him as their lawgiver, and told Samuel to warn them what the consequences would be if their desire for a king as their replacement lawmaker was realized. Most prominent among the many negative consequences He mentioned was taxation. IMHO, the libertarian society envisioned in the principles Jesus espoused will never come to fruition in the presence of taxation.

Your statement about the ultimate ownership of money neglects the definition of money as a store of value and a medium of exchange. Money ultimately subject to confiscation will not be accepted in the market place; it will not circulate, it will not meet even one of the two criteria. Even if only “legal” money is “allowed” and all others proscribed, other things will be used in the market as money, because those other things will not have the impediment of remaining the property of a third party. The only way to stop the use of creative “money substitutes” would be to shut all markets down, an act that even Satan couldn’t accomplish.

Keep in mind: No matter what the law says, the government’s power to tax, while substantial and oppressive, is not unlimited. Even if its powers are such that nothing escapes its purview, at some point taxpayers will determine that it better not to work at all than to work mostly or only to have the fruits of their labor exacted from them by force. The limits of taxation are determined by the courage of taxpayers to resist.

I think it is important to bare in mind that taxation is merely a less-brutal form of slavery, and almost certainly was originally conceived as an economical alternative to slavery. It saves the slaveholder the necessity of chains and bonds and direct overseers, although agencies like the IRS and other collectors retain some of the characteristics of Simon Legree’s overseers, who, btw, turned to Christianity in their remorse for beating Uncle Tom to death–kinda like Matthew or Zaccheaus were reformed by meeting Jesus. Since the general, although not complete, demise of slavery, taxation has risen to the status of the biggest impediment to the realization of a free society and the gravest blemish oh the human race. It is the basic fuel for wars, conquests, imperialism and genocide, to mention but a few of the crimes of states enabled by taxation.

F. Beard November 27, 2010 at 5:15 pm

Very eloquent! However, please note that socialism did not get a good start in the US till after the government backed FR bankers wrecked the economy in the 1920′s and 30′s. It might be expected then that the need for government would shrink once we learn to do capitalism correctly.

Until we do learn to do capitalism correctly then socialism is the price we must pay for our failure. Or should the helpless pay the price for our failure?

Ned Netterville November 26, 2010 at 6:59 pm

greg said: “I just find it interesting, not surprising, that gold pumpers tend to come out into the media when the price of gold starts to fall.”

You have made this silly accusation on several occasions in the past. It is an illogical, ad hominem attack on the motive of those whose arguments you are otherwise unable to refute or even logically counter. I could as easily and logically say that the only reason you show up here whenever there is an article on gold is because you have sold gold short and are losing your shirt, or you are jealous because you weren’t smart enough to buy some gold when it became apparent to many a few years back that the Fed was inflating (viz., depreciating) the dollar. As I recall, gold was around $300 back then and now is around $1365, so I don’t understand why you would imply it is dropping in value, but I do understand, if my analysis is accurate, why you are upset with yourself.

The most common motive of Austrian-school economists who argue on behalf of gold as money is the general welfare of people throughout the world. Your own motive is suspect as being considerable less honorable unless you can make a good case against gold as money, which you clearly have been unable to do up until now.

F. Beard November 27, 2010 at 2:53 am

The most common motive of Austrian-school economists who argue on behalf of gold as money is the general welfare of people throughout the world. Ned Netterville

You had best be very careful; the road to hell is paved with good intentions. Do you think the “Cross of Gold” speech was based on nothing? The wisest course is liberty; at least that way someone can find a solution whether it is yours or not.

I know the arguments for gold as money are very compelling but the arguments against it are compelling too. I suggest you goldbugs broaden your reading. I have read Rothbard and he is very good but Stephen Zarlinga makes excellent points too in his “The Lost Science of Money”. Ellen Brown’s “The Web of Debt” is thought provoking too. And speaking of Gary North since he can’t seem to leave MS Brown alone (jealousy?), his book “Honest Money” got me interested in the topic.

Ned Netterville November 27, 2010 at 12:17 pm

“Do you think the “Cross of Gold” speech was based on nothing?” F. Beard

I think it was based on demagoguery, eloquent no doubt almost beyond compare, but pure demagoguery nonetheless, For a comparable though not equal demagogic disquisition, eloquent of rhetoric but thoroughly dishonest of content, I would have to nominate John Maynard Keynes’, THE END OF LAISSSEZ FAIRE.

In his famous speech, Bryan was unquestionably playing to the avarice of those he wanted to represent, just as he was so doing when he backed the income tax of 1894. Of that latter effort it was said, “Then, as since, an earnest believer in an income tax, he put all his great power into the work.” http://www.restoreliberty.com/incometax.htm

james b. longacre November 26, 2010 at 9:06 pm

buy some gold when it became apparent to many a few years back that the Fed was inflating (viz., depreciating) the dollar.

so if the dollar depreciated but you have more dollars why buy gold??? it doesnt operate as money to any great degree.

Ned Netterville November 26, 2010 at 9:54 pm

Q. Do you walk to school or carry your lunch? A. Yes.

Hey, JBL, how do you get “more dollars?” The Fed added to the money supply, but who sez you get any of the extra dollars? Next question.

Gold is the only money in the United States that has fulfilled the dual role of money: to serve as a store of value and a medium of exchange. It has worked as a medium of exchange, but as a store of value it sucks. In 1914, when the Fed went into business, gold could be bought or sold for 20 dollars per ounce. Today gold can be bought or sold for somewhere around 1365 dollars per ounce. Now you could say gold has appreciated in value by more than 68 times what it was worth in 1914, but it would be more accurate to say that the value of a dollar has declined from $! to $0.0165 in terms of gold; that whereas a dollar used to buy 1/20th of an ounce of gold, today it will only buy 1/1350th of an ounce of gold. So chances are that even if you did get a few of those extra dollars the Fed has been printing, all of those extra dollars you were lucky enough to get probably wouldn’t be worth more than a fraction of what you would have lost by their decline in value. The trouble is that folks like you aren’t aware of how inflation is stealing your wealth because it has been very gradual and you weren’t aware its cumulative effect while it was subtly reducing your income and net worth. Why, hell’s fire man, even that dope John Maynard Keynes believed that employees could be duped in to accepting lower “real” wages just by inflating the fiat currency.

james b. longacre November 27, 2010 at 2:42 pm

but who sez you get any of the extra dollars? Next question.

maybe you carry a lunchbox to school?? maybe the new money goes into a new smelting technique that reduces energy consumpotion in processing metal. you dont spend as much on your lunchbox.

Ned Netterville November 26, 2010 at 10:42 pm

When are libertarians going to stop being apologists for a state-controlled monetary system enforced by violence, whether it be gold or fiat? Both are wrong.–King George

Here, here! It really discredits libertarianism for so called libertarians to push a government backed, favored or enforced gold standard.–F. Beard

I’m not sure what libertarians youae guys are talking about, but among the libertarians who hang around the Mises.org blog, I think many were probably way ahead of youse guys in the quest for free-market money. Because someone argues that the gold standard would serve the users of money much better than the fiat money system we now have, I do not take that to mean they prefer that government impose a gold standard versus allowing the free market to decide. They are arguing apples versus oranges, and you want them to choose a kumquat that isn’t on the table.

Btw, it those libertarians you pillory are like me, they know as well as any future possibility can be known, that, given full freedom, the market will undoubtedly pick gold as the money of choice. Indeed, I think that is what is happening to cause the price of gold to escalate lately. Finally fed up to the gills with remorseless depreciation of fiat currencies, and perhaps finally hearing some of the emissaries from the Austrian school speak the truth, the market worldwide is choosing gold over the fiats, and guys like Bernanke can’t do a damn thing to deter the market’s determination, although they might try and may have a temporary impact.

There was a time when most of the monetary gold in the world was in the hands of central banks, but those days are long gone. And while the central banks remain big gorillas, they aren’t big enough to scare off the other big guys, like the ETFs, in combination with the millions of little guys. The banks’ hoards have shrunk to the point where any attempt by the central banks to drive the price of gold down by selling from their stocks will be seen by others in the market as a buying opportunity against the day when gold pushes the fiats into oblivion and only gold remains standing as usable money.

F. Beard November 27, 2010 at 1:44 am

Btw, it those libertarians you pillory are like me, they know as well as any future possibility can be known, that, given full freedom, the market will undoubtedly pick gold as the money of choice. Ned Netterville

So you say. But any true libertarian will insist that the free market make and continue to make that choice. Personally, I think that without recourse to the government backed counterfeiting cartels that corporations would be forced to use their common stock as money.

Common stock as money has many advantages over gold as money such as:

1) Common stock requires no borrowing or lending hence there is no need for usury. This abides by Deuteronomy 23:19-20.

2) The amount of new common stock issued is not artificially constrained as is the case with precious metals.

3) All price inflation is born by the corporation’s owners who can vote to control it.

4) Since there is no need for borrowing or lending, deflation is not a potential problem.

5) The assets of a corporation can be performing assets unlike gold which is a non-performing one. However, a corporation could easily have gold as an asset too if desired.

John Voigt November 27, 2010 at 4:47 am

Your proposal makes absolutely no sense. Why have government money at all? Can you answer this question without referring to the bible? The government fiat currency would be valued solely because individuals are forced to use that money in order to pay compulsory taxes. Its supply would be completely controlled by the government, and its value would rise solely when the government increases taxes (since the sole function of this “government money” is to pay taxes). In fact, it would only be valued the day before tax day. And how would people exchange real money (the money chosen by the market) with the government’s pseudo-money?

Your whole proposal is entirely superfluous and entirely unnecessary. Let’s let the market control the supply of money.

F. Beard November 27, 2010 at 5:36 am

Your proposal makes absolutely no sense. Why have government money at all? John Voigt

So as to not favor any private money or money form such as PMs. That would be fascism.

Can you answer this question without referring to the bible? John Voigt

See above.

The government fiat currency would be valued solely because individuals are forced to use that money in order to pay compulsory taxes. Its supply would be completely controlled by the government, and its value would rise solely when the government increases taxes (since the sole function of this “government money” is to pay taxes). John Voigt

Yep. But at least there would be no stealth inflation tax. The government would have to carefully balance spending and taxing to avoid price inflation in its money.

In fact, it would only be valued the day before tax day. John Voigt

Nope. People are more farsighted than that.

And how would people exchange real money (the money chosen by the market) with the government’s pseudo-money? John Voight

Government workers, the military, Social Security recipients, etc. and those who supply the government would be paid in government money. Those who required government money to pay taxes would purchase it on the open market from those who had it. And actually, the government’s “pseudo-money” being backed (regrettably) by force (taxation) would be quite sound.

Your whole proposal is entirely superfluous and entirely unnecessary. John Voigt

Not really. I am for a true free market in private money creation. Logically, as long as we have government, that requires a separate government money supply so as to not favor any private money form such as PMs over common stock, for instance.

Let’s let the market control the supply of money. John Voight

Agreed! However, suppose the government chose my private money form as acceptable for taxes but excluded yours. Would you not have to buy my money form to pay your taxes? The solution is for the government to accept NO private money form but to issue its own legal tender fiat. However, that government money should only be legal tender for government debts not private ones.

John Voigt November 27, 2010 at 9:06 am

F. Beard,

“So as to not favor any private money or money form such as PMs. That would be fascism.”

Huh? The market freely choosing a common medium of exchange is not favoritism; in fact, it’s the exact opposite of favoritism. You’re not a libertarian if you support fiat money of any kind (since it necessarily means the employment of coercion).

“Yep. But at least there would be no stealth inflation tax. The government would have to carefully balance spending and taxing to avoid price inflation in its money.”

There couldn’t really be inflation with the government’s money, since its sole function is to pay taxes. If the government increased the supply of its money, then its value would fall relative to real money, and this would be the same thing as a reduction in taxes (and vice versa). Again, the only thing that this money would be used for is to pay taxes (the market money would be more stable and could be used for international transactions–Gresham’s law would take hold).

“Nope. People are more farsighted than that.”

What do you mean? Why would they exchange real money for the government’s money, therefore reducing their cash balances, unless it was tax day? I would never hold a single cent of this pseudo-currency until and unless it was tax day, or the day before tax day.

“Government workers, the military, Social Security recipients, etc. and those who supply the government would be paid in government money. Those who required government money to pay taxes would purchase it on the open market from those who had it.”

I guess there could be private firms that exchanged the government’s money for real money, but they would charge a fee, and this would amount to a tax increase for the general population. Additionally, those that work for the government, and the firms that work with the government (that are paid with this pseudo-money) would have to go to these dealers in order to get real money. But again, they would have to pay a fee. This would make working for/with the government less lucrative relative to operating within the free market.

“Logically, as long as we have government, that requires a separate government money supply so as to not favor any private money form such as PMs over common stock, for instance.”

No. Absolutely not. Just because there’s a private and public sector doesn’t logically imply that we need two different forms of money. Money is, by definition, the commonly accepted medium of exchange. Anyone even remotely familiar with monetary theory understands that the market always prefers market money to government fiat money (this is a tautology).Again, your entire proposal is superfluous and unnecessarily problematic. No one would support this, not the government (it doesn’t give the government any sort of advantage), nor the private sector (since if this government fiat money is really the best money, then it would be chosen by the market, and would cease to be fiat money, by definition). I don’t understand this fetish of yours (this dual monetary system); it’s really bizarre.

“However, suppose the government chose my private money form as acceptable for taxes but excluded yours. Would you not have to buy my money form to pay your taxes?”

You don’t know what money is and you don’t understand how/why it emerges. The free market naturally moves towards a single international form of money. As a good becomes more marketable (gains liquidity), it necessarily begins to eliminate other goods as potential forms of money (those that are relatively less liquid). This process is self-reinforcing, until there is only a single good that eventually becomes the commonly accepted medium of exchange.

Prakash November 27, 2010 at 2:07 pm

F.Beard’s proposal is definitely worth taking a look at.

The Path dependency argument
Governments already exist. The cashflows associated with governments already exist. The backing by force already exists. Now, no government can rely on a waiting period where the market comes to a new equilibrium and establishes a new currency. What will the government employees eat during those years? They have to be paid.

Lets overlook that issue for a minute and consider that a market standard emerges for money and it is a commodity. The government gives it a further boost by making it imperative to pay taxes in this commodity. Now unless and until technological advances have completely ceased in this society, many people will be extremely motivated to “print money”, i.e. discover every possible technique to get this commodity. If you think that building excess capacity of houses in the blind pursuit of money was bad, wait till you see how a technologically advancing society reacts to a commodity standard. I can easily imagine that extremely convoluted mining techniques and maybe even asteroid mining will become economically feasible, just to get at the gold. And when that asteroid gets dragged into the orbit of earth, that is the end of that commodity standard with another huge reset button being pressed on the economy in search of a new base. In essence, I personally do not think a single commodity standard will survive an onslaught by a technologically advancing society.

F.Beard’s solution may seem a little cumbersome, but it answers some important questions of free market monetary theory.

What to do with the governments and government money already in place

What might be a good money supply in a technologically advanced society (his answer -common stock of a well established firm)

King George November 27, 2010 at 7:29 pm

Prakash, EXCELLENT point, F.A. Beard too. The whole point should be in eliminating impositions of force. Libertarians must NOT be apologists for the state, as enforcement of a gold standard simply results in destruction of the middle class as it currently exists.

The future is decentralization of power and freedom. Imposing a gold standard works against that and in the long run, leads to the absurdities you mention. Only a free choice of money which would allow experimentation and competition would avoid those sort of absurd results.

King George November 27, 2010 at 7:25 pm

Yes, let’s tear down the Berlin walls separating people from freedom over their monetary and financial future. I’m not kidding. The only appropriate standard is one that fends off against all external impositions of standards and allows full voluntary choice.

james b. longacre November 27, 2010 at 8:50 pm

enforcement of a gold standard simply results in destruction of the middle class as it currently exists.”

does it make more poor enter the middle class?? making things better?? what does that eman and how do you even know???

a govt could force you to have sex with good looking women or force you to drink drano….on you may like better than the other.

F. Beard November 27, 2010 at 9:17 pm

a govt could force you to have sex with good looking women or force you to drink drano….on you may like better than the other. james b. longacre

Or a government could ban gold as money as being environmentally destructive. However, this true libertarian prefers that the free market teach you the inferiority of gold. However, if you insist on having the government dictate a gold standard then others may equally insist that gold be banned as a money supply.

Have you so little faith in gold as money that you would force it on others?

Ned Netterville November 27, 2010 at 12:30 pm

John, Thanks for picking up the thread. I can carry on no longer. The number of alternative monetary schemes the human mind can create is limitless.

james b. longacre November 27, 2010 at 2:40 pm

“I can easily imagine that extremely convoluted mining techniques and maybe even asteroid mining will become economically feasible, just to get at the gold. ”

maybe your imagination is faulty. if it cost 1oz. of gold to get .5oz of gold from an asteroid why bother until it cost 1oz. of gold to get 2 ounces of gold.?????

woulndt there still be other ways to invest ones gold-money??? energy?? food?? innovation???

Prakash November 28, 2010 at 8:27 am

James,

You make a valid point. Obviously, the expedition will wait until the payoff is worth it. But I’m talking about the marginal incentives in the future. Once a commodity is established as a money, it is very difficult to dislodge it from that perch, especially if it is sanctified by the government’s heavy hand. The commodity’s hegemony is maintained until the technology changes enough to do that. And what technology does a free society pursue – that which makes them most money.

Look at the incentives of the banks in today’s era. Why did they lend to housing so much? Because the path to making money via housing and finances was so easy compared to others. That is what agents in a free society will do, because money is something we cannot get enough of.

On the margin in 2007, a student who was bright and could succeed in biology or finance chose finance because the incentives were structured that way. I agree that the gold standard would definitely have changed his choice.

But on the margin in the hypothetical gold standard future, a bright student will have the choice between mining and biology and he would choose mining because the incentives were structured that way.

Is that significantly better than what we have now?

When the technology eventually develops where it costs 1 oz to get 2 from the asteroids, then the expedition goes forward and the economy encounters a radical reset, a major crash for everyone who holds gold and a major boost for everyone else. Same story, different media.

When we can visualise these problems even without extrapolating wildly, shouldn’t we really think of a better solution than a commodity standard? I don’t think beard’s solution is a be-all and end-all, but atleast he’s put some original thought into it. That should be praised.

F. Beard November 27, 2010 at 4:17 pm

The number of alternative monetary schemes the human mind can create is limitless. Ned Netterville

Perhaps but common stock is hardly a scheme but one of the greatest inventions in human history. The first common stock company was in 1602 with the creation of the Dutch East Indies Company. Common stock companies allow the capital of many small owners to be combined to achieve economies of scale, an extremely important economic consideration.

Ned Netterville November 28, 2010 at 2:25 pm

Corporations are not one of the greatest inventions in human history, they are one of the worst. They are statist legal fictions that limited the liability and therefore the responsibility of the owners for the corporation’s management and employee misdeeds. Corporations would not exist in a truly free society because they require government force (government is force) to provide that limit to their responsibility by fiat (law). The are a terrible blemish on the concepts of capitalism and the free market because so many big and small businesses are organized as corporations that many people mistakenly equate business, free markets and capitalism with corporations, corporate irresponsibility and corporatism, which is the collusion of corporations with the state for anti-competitive and outright fraudulent purposes. Business would not suffer in the least by the elimination of the state and its corporate licenses; business would flourish. Government licenses and franchises are nothing more nor less than permission from the state to do what would otherwise be illegal, and often the state makes perfectly harmless and beneficial acts illegal so that it can collect fees for the privilege of doing what it has made illegal.

F. Beard November 28, 2010 at 3:46 pm

I don’t doubt that corporate law may need to be modified but the basic idea of pooling the capital of many for economies of scale and sharing the profit remains sound. In that sense, corporations are a very great invention.

Also, I can’t see how the elimination of the state would eliminate corporations. They would remain a valid investment platform, imo. And how would a libertarian ban them? Now limited liability is another issue. Certainly criminal liability should not be limited. As for limited civil liability, I see no problem with that. Should a simple stockholder’s private assets be at risk because of the misdeeds of the corporation’s management?

And how would capital be raised without common stock issuance? By borrowing from the bankers? May we never be free of the usury class?

I of course share your disgust at government privilege. But I see nothing necessarily un-libertarian about corporations.

Ned Netterville November 29, 2010 at 7:05 pm

“And how would capital be raised without common stock issuance? By borrowing from the bankers?”

This questions tells me you haven’t given much thought to the concept of a truly free society, which, at least to me and quite a few of the folks at Mises.org., cannot co-exist with government as we know it. Government as we know it depends utterly upon the initiation of force against peaceful, innocent people, if for no other reason–and once force is admitted a plethora of other reasons will be found–than to collect the taxes that are vital to governments’ existence. Of course voluntary taxes (the term is an oxymoron) wouldn’t be taxes, and voluntary government (another oxymoron) wouldn’t be government.) So, in the absence of government, which would also mean the absence of legal fictions such as corporations, how would large pools of capital be assembled to undertake projects too big for individuals or small groups? The answer is in as many different ways as inventive entrepreneurs could devise to attract others to invest their saving in the entrepreneurs’ projects, ways that perforce do not rely on legislated limitations upon the owners’ full responsibility for the criminal AND civil misfeasance and malfeasance committed by the resulting organization the entrepreneur devised to attract others’ capital. Those who did not like that arrangement could probably buy insurance to protect them against any such mishappenstance, of course reducing their potential profit, or the resulting organization could provide the insurance. Of course, those who were fearful need not invest. Having spent a little time in what is often referred to as the investment business, I have observed some fairly large pools of capital raised outside corporations (viz., partnerships, pools, trusts, etc.), and I’m sure there would be many more in a society freed from the shackles of government, which would undoubtedly stimulate human creativity in every aspect of life, including non-aggressive vehicle of investment.

“May we never be free of the usury class?”

Are you familiar with the term, “originary interest?” If not, an explanation of it can be found in the on-line edition of Ludwig von Mises’ HUMAN ACTION beginning on page 526, here: http://mises.org/books/humanaction.pdf It is not an easy read, at least it wasn’t for my slow brain. For me it cast the biblical concept of usury in a different light. I probably refer to my copy of HUMAN ACTION for the wisdom contained therein more than any other book I own, excepting only the Bible.

F. Beard November 30, 2010 at 5:20 am

For me it cast the biblical concept of usury in a different light. I probably refer to my copy of HUMAN ACTION for the wisdom contained therein more than any other book I own, excepting only the Bible. Ned Netterville

Must I point out to a Christian that a non-believer is by definition at least partially blind?

But in any case, common stock as money renders the concept of interest mostly mute since common stock requires no borrowing or lending for investment purposes. As for the government, it should neither borrow or lend money. However, its money should only be legal tender for government debts.

B rian Macker November 30, 2010 at 8:02 am

“Must I point out to a Christian that a non-believer is by definition at least partially blind?”

Yeah, and Christian unbelievers include Muslims and Jews. and to a Muslim a Christian is at least partially blind, and to a Jew a Christian is at least partially blind. Not to mention a hundred other religions on the planet both past and present.

If you are using a 2000 year old text as your guide to economics then you are certainly going to be blind to any scientific progress made for over two millennium. The case can easily be made that it the dogmatist that is truly blind.

You claim to be a libertarian. Libertarian philosophy is anti-slavery and gives good reasons to be against it (at least some libertarians do). Those reasons and reasoning are nowhere to be found in the bible, and in fact the bible is fairly pro-slavery. So you can’t be using the bible as a guide on that issue. Nor many, many other issues both ethical and scientific.

In fact, the US Constitution was born out of the Age of Reason and a explicit rejection of using religious dogma as a guide to what is the correct form of government, and instead elevating reason above it.

You should read “The Age of Reason” and other writings by Thomas Paine some day. It would do you some good.

Gene Bray November 27, 2010 at 1:37 pm

This is an insightfull article. Thank you. I might also add that it is probable that the true reason for the financial classes disdain for the gold standard is that it subordinates them to the working class. In a true gold standard economy the only means of acquiring gold is some form of production (work). The financial class then is forced to compete with one another for a share in order to lend it as capital. The financial class hates that. It’s far more fun to pay the government to dislodge the savings from workers immorally in the form of taxes and inflation and then to speak grandiously of economic growth and money velocity and how brilliantly they manage our lives.

F. Beard November 27, 2010 at 3:42 pm

If you think that building excess capacity of houses in the blind pursuit of money was bad, wait till you see how a technologically advancing society reacts to a commodity standard. Prakash

Indeed. Recently over a hundred Africans were killed via lead in their water supply from a nearby gold mine. The Amazon is also being damaged by mercury used to extract gold.

Also, PMs require usury as a minimum and have historically led to cheating via fractional reserves. In fact, some argue that fractional reserves are a NECESSITY with conventional money forms. In that case, PMs or cash are merely a source of liquidity while the true backing of the money is the assets of the bank. With common stock as money, no borrowing or lending is required much less with fractional reserves.

Thanks for the support, Prakash. You seem to understand what I’m saying. That’s encouraging.

Brian Macker November 29, 2010 at 8:26 am

The mining problems happened on fiat so I don’t see your point. The issue obviously isn’t solved by going off gold standard.

We have “usury” now and there is nothing wrong with it. It doesn’t cause instability.

“and have historically led to cheating via fractional reserves.”
… and the fact that humans have sex organs has lead to sex slavery. Of course, when people have things other people will try to steal them via fraud. Your point?

“In fact, some argue that fractional reserves are a NECESSITY with conventional money forms.”
Some people are wrong.

“In that case, PMs or cash are merely a source of liquidity while the true backing of the money is the assets of the bank.”
We’ve been over this “backing” argument and it is nonsense. You can’t have an illiquid asset [that is non-divisible, and hard to assess, hard to transport, easy to construct, etc.] as a backing medium for currency. This is especially true when the medium is the thing the currency is being lent out to construct, like housing, and therefore effects it’s price.

You aren’t thinking about this correctly.

F. Beard November 29, 2010 at 11:48 am

We have “usury” now and there is nothing wrong with it. It doesn’t cause instability. Brian Macker

That is a matter of opinion. I would let the free market decide the matter particularly since Deuteronomy 23:19-20 clearly forbids it between fellow countrymen. Let’s see, shall we, whose interpretation of this Scripture is correct?

We’ve been over this “backing” argument and it is nonsense. You can’t have an illiquid asset [that is non-divisible, and hard to assess, hard to transport, easy to construct, etc.] as a backing medium for currency. This is especially true when the medium is the thing the currency is being lent out to construct, like housing, and therefore effects it’s price.

You aren’t thinking about this correctly. Brian Macker

IMO, fractional reserve lending IS a zero sum game, a game of musical chairs with guaranteed losers. I personally loath it. However, as a libertarian, I can imagine how it might be implemented ethically (full disclosure of the risk and no government backing).

Brian Macker November 29, 2010 at 6:31 pm

“That is a matter of opinion.”
Some opinion is wrong, as would be that contrary to my own on this matter. Also some opinion is worse than wrong in being inconisistent.

“I would let the free market decide the matter particularly since Deuteronomy 23:19-20 clearly forbids it between fellow countrymen.”
An inconsistent opinion if I ever read one. Letting the free market decide would mean that some people would charge interest and some would pay, which scripture “clearly forbids”. Unless perhaps you were suggesting we practice economics on the “opposite day” method as applied to scripture. Which would also imply the economic policy of “steal from others”.

” Let’s see, shall we, whose interpretation of this Scripture is correct?”
Why bother, you want to allow what it “clearly forbids” and I don’t care what scripture says on any matter, let alone economics.

F. Beard November 30, 2010 at 4:35 am

Why bother, you want to allow what it “clearly forbids” Brian Macker

Christians are not under the Law of Moses though we are wise to consider it. Yes, I would allow usury and even fractional reserves (properly disclosed) in the free market. Why? Because I have faith in liberty and the free market which is why I strenuously object to the gold-bugs seeking government privilege for their money form.

and I don’t care what scripture says on any matter, let alone economics. Brian Macker

Ah, but many Austrians are Christian, I suppose. While it is to be expected that non-believers might follow golden idols, it is to be hoped that Christians will heed Scripture instead.

B rian Macker November 30, 2010 at 7:18 am

Ah, but most Christians are smart enough not to take the bible seriously on matters of science.

Heck Christians don’t even use it as a source of morality, and instead impose their own opinion upon scripture as you have done above. That is what interpretation is all about. You must have some other source for your understanding of ethics in order to understand if scripture is good or bad.

In any case your reasoning skills are very poor if you give as a reason why we should do something the fact that it was banned by the bible.

B rian Macker November 30, 2010 at 8:20 am

So now you are accusing me of fashioning oxen out of gold and worshiping it?
One of the reasons I rejected Christianity is because of these kind of gross over-generalizations about people who don’t believe. Just because someone is not Christian doesn’t mean they go around sacrificing to golden idols.

The main thing that bothered me about it was the total worship of irrationality and glorification of ignorance. Critical thinking (asking hard questions) is actually a sin if you believe the Doubting Thomas story, and “Knowledge” is a bad thing if you are to believe the story of “Adam and Eve”.

Similarly, you can’t deduce from “Doesn’t believe in Santa, Leprechauns, or imaginary Dieties” to “Is greedy and worships money”.

Ned Netterville November 29, 2010 at 7:22 pm

“I would let the free market decide the matter particularly since Deuteronomy 23:19-20 clearly forbids it [usury ]between fellow countrymen.”

Does the Bible define usury? As you may know, economists have been arguing about the concept of “interest” for a long time, and I believe there have been several definitions of just what it is, including, of course, Mises’ originary interest, which cannot be avoided.

F. Beard November 30, 2010 at 4:49 am

I think that common stock as a private money form renders obsolete the need for borrowing money for investment purposes. As for government money, the government should certainly NEVER borrow money since it has the right to create it debt and interest free. Nor should the government lend money since that is bound to lead to favoritism.

So, we don’t have much need for the concept of interest, now do we?

B rian Macker November 30, 2010 at 7:30 am

Nonsense. You want me to issue common stock to borrow money against my house, to buy a car, etc. Transaction costs are too high. How do the accountants calculate profit and loss statements on our co-ownership of the car? Do I bill myself every time I drive it?

You are not thinking very deeply and therefore wasting everyone elses time here with ridiculous claims and statements. It wouldn’t be bad if you were asking questions but you act like you have answers. You don’t.

First thing you need to work on is your reasoning skills they are appalling. In fact, you may be so bad at it that you fail to recognize your own incompetence, like those tone-deaf singers who show up on the American Idol singing competition.

If you are a kid then your ignorance about reasoning may be something you grow out of. Hopefully you do. So far your comments have been a series of non sequiturs.

Why this obsession with a cartoonish view of libertarian ideology? Are you a troll. You certainly aren’t an Austrian.

John Voigt November 27, 2010 at 9:26 pm

King George,

“The whole point should be in eliminating impositions of force. Libertarians must NOT be apologists for the state, as enforcement of a gold standard simply results in destruction of the middle class as it currently exists.”

First of all, the gold standard doesn’t currently exist. Next, you simply don’t understand monetary theory and the history of money. The state did not force individuals to use gold and silver as money. In fact, the opposite is true. The people forced the government to use and accept gold/silver as the common medium of exchange and as the means of payment (gold was money before major states emerged). The people refused to use any other good as money. Whenever the king and politicians attempted to debase the currency, individuals and entrepreneurs would merely elevate prices (the coins would be lighter). Whenever the king and politicians attempted to interfere in the monetary system by setting arbitrary exchange rates, Gresham’s law would take hold.

The government is completely bound by the market under a true gold standard. When they want to finance their wars, they must come to the people, and ask for additional revenue (higher taxes). The response to higher taxes was often revolution. Occasionally, the government would issue their own fiat paper money in order to pay for their expenditures, but such schemes were short-lived–the currency would collapse, and individuals would (freely) return to a gold/silver standard. For all of these reasons, the kings and politicians despised the gold/silver standard and plotted against it for centuries (literally).

There is only one true libertarian position, and it’s quite clear: all legal tender laws should be eliminated; any and all government privileges should be removed from the monetary system. Now, this doesn’t necessarily mean that gold and silver would emerge as the common media of exchange once again, but it definitely means that F. Beard’s machinations will not come to fruition.

F. Beard November 28, 2010 at 10:14 am

Next, you simply don’t understand monetary theory and the history of money. The state did not force individuals to use gold and silver as money. In fact, the opposite is true. The people forced the government to use and accept gold/silver as the common medium of exchange and as the means of payment (gold was money before major states emerged). The people refused to use any other good as money. John Voight

You should broaden your reading. Apparently the Romans used cheap copper and bronze coins with great success till the time of Julius Caesar. Your really should read Stephen Zarlenga’s “The Lost Science of Money” so you can be more factually accurate and to know your enemy too. Zarlenga’s solution is socialist, imo, but his history seems accurate.

The first to plead his case seems right, until another comes and examines him. Proverbs 18:17

There is only one true libertarian position, and it’s quite clear: all legal tender laws should be eliminated; any and all government privileges should be removed from the monetary system. John Voight

Sounds good. Certainly government money should not be legal tender for private debts. As for government debts (taxes and fees) certainly the government should have the right to accept only its own money for taxes and fees? And to refuse all others? Or should I be able to use Winn-Dixie coupons at Krogers? And shall we fight over whose private money form the government will privilege via accepting it for taxes?

Now, this doesn’t necessarily mean that gold and silver would emerge as the common media of exchange once again, but it definitely means that F. Beard’s machinations will not come to fruition. John Voight

And what are my machinations? That I insist on a true free market in private money creation? Does that offend you?

Doesn’t the idea of a usury free money form (common stock) excite you? Might it not be the missing ingredient from our so far flawed implementation of capitalism?

Now. If you can figure out a way to tax without favoring any particular money or money form WITHOUT the need for a separate government money supply then let’s hear it. Otherwise, don’t question my libertarian credentials.

John Voigt November 28, 2010 at 9:08 pm

“Certainly government money should not be legal tender for private debts. As for government debts (taxes and fees) certainly the government should have the right to accept only its own money for taxes and fees? And to refuse all others?”

The government doesn’t have any rights. The government is the negation of rights and freedom; it is a monopoly on force. The government is important in monetary theory insofar as it arbitrarily alters the supply of money, necessarily distorting real economic phenomena. The government should accept the money freely chosen by the people, and that’s all. And again, I’ve already demonstrated that your proposal is (a) entirely superfluous, and (b) it doesn’t benefit anyone (not even the government).

“And what are my machinations? That I insist on a true free market in private money creation? Does that offend you?”

But you don’t. You support some bizarre dual monetary system that is only partially free and partially competitive. And your argument essentially rests on a poor interpretation of a single biblical passage.

“Doesn’t the idea of a usury free money form (common stock) excite you? Might it not be the missing ingredient from our so far flawed implementation of capitalism?”

What the hell are you talking about?

“Now. If you can figure out a way to tax without favoring any particular money or money form WITHOUT the need for a separate government money supply then let’s hear it.”

I already did. Taxation does not favor any particular form of money. The optimal monetary unit emerges naturally, in the market, through competition (this is the exact opposite of favoritism). And this is what you (partially) oppose. You favor competition in the market, and, at the same time, you favor an arbitrary monopoly. Thus, your proposal is both nonsensical and emphatically not libertarian.

F. Beard November 29, 2010 at 2:52 am

The government should accept the money freely chosen by the people, and that’s all. John Voight

And what if the people choose dozens or even hundreds of different monies? How do you suppose to tax equitably under those circumstances? And if you say the market will choose just one then 1) how do you account for the market picking both gold and silver in the past and 2) what shall we do while the market decides and 3) how will the market ever be able to choose again if a particular money form is favored by government?

And again, I’ve already demonstrated that your proposal is (a) entirely superfluous, John Voight

Not so. Until about 1826, the BOE’s money was accepted for taxes but was not legal tender for private debts. Thus the idea of separate money supplies for government and the private sector has at least that historical precedent. English tally sticks were also a separate government money form for hundreds of years.

and (b) it doesn’t benefit anyone (not even the government). John Voight

A successful parasite does not kill or impair the health of its host. A healthy economy benefits all including government. One can easily see that the government is incompetent in managing a single monopoly money supply (Who could be?) so the next logical step is to allow private money supplies. And since we must not presume what a truly free market would choose (and continue to choose) then there must be no government privilege for any private money or private money form. Hence the need for government to use no money but its own. And since government is force, fiat money is ideal for it but for NO private money form else it is not truly private.

But you don’t. You support some bizarre dual monetary system that is only partially free and partially competitive. John Voight

Actually, within the the private sector, competition between different private money forms could in principle be perfect. As for competing against the government’s money, there is no competition since government has a legal monopoly on force. However, there is no need for government money to be legal tender for private debts. That is the root of our (including the government’s) economic problems.

And your argument essentially rests on a poor interpretation of a single biblical passage. John Voight

My interpretation is the plain meaning of Scripture. Caesar is to be paid in Caesar’s money. Even Gary North admits that the government has the right to decide what to accept for taxes though he would limit it to gold based monies.

“Doesn’t the idea of a usury free money form (common stock) excite you? Might it not be the missing ingredient from our so far flawed implementation of capitalism?” FB

What the hell are you talking about? John Voight

Usury based money forms, particularly commodity based ones, are mathematically impossible in the long run according to many. Perhaps that is not true but I would not bet on it by excluding non-usury money forms such as common stock. Also, the plain meaning of Scripture is that usury between fellow countrymen is forbidden: Deuteronomy 23:19-20

“Now. If you can figure out a way to tax without favoring any particular money or money form WITHOUT the need for a separate government money supply then let’s hear it.” FB

I already did. Taxation does not favor any particular form of money. John Voight

Indeed it does. If I have to sell a common stock money to buy gold to pay my taxes then gold is favored by the government.

You favor competition in the market, and, at the same time, you favor an arbitrary monopoly.

Yes. I recognize the distinction between government (force) and the private sector (voluntary cooperation) and seek to preserve that distinction via separate money supplies. You would mix them (fascism).

Thus, your proposal is both nonsensical and emphatically not libertarian. John Voight

My proposal is libertarian in that it seeks to limit government to its own sphere so that the need for it may shrink over time. You, OTOH, are not a libertarian if you seek government privilege for a particular money form.

There are socialists out there with plausible money solutions using full legal tender fiat. If libertarians can think of nothing better than shiny metals and usury, then how do you expect to compete?

John Voigt November 28, 2010 at 9:19 pm

“Apparently the Romans used cheap copper and bronze coins with great success till the time of Julius Caesar.”

http://mises.org/daily/3663

I guess it depends on how you define “success.”

F. Beard November 29, 2010 at 3:01 am

I guess it depends on how you define “success.” John Voight

By most accounts, the Roman Republic (which used cheap fiat) was a model of virtue at least compared to the Roman Empire (which used gold and silver). In any event, there is no logical reason for government money to be anything other than pure fiat since the government is force.

Ned Netterville November 29, 2010 at 7:36 pm

“And what are my machinations? That I insist on a true free market in private money creation? Does that offend you?”

Your particular machination is deception, which is apparent in you second sentence, the question, in what I have quoted, although I do not think that you are trying to intentionally deceive someone else, rather I think you are deceiving yourself. Look at your question. (I use caps for emphasis because I don’t know how to add italics.) “…a TRUE free market in PRIVATE money…” If you will change that to read: a true free market in ALL money, only then you will be talking about a true free market. As it is, you are talking about private money and GOVERNMENT money, which means you are NOT talking about a TRUE free market, because a true free market cannot coexist with government.

F. Beard November 30, 2010 at 4:53 am

As it is, you are talking about private money and GOVERNMENT money, which means you are NOT talking about a TRUE free market, because a true free market cannot coexist with government. Ned Netterville

Yep that is a challenge, having a true free market alongside government. It won’t be easy to achieve and perhaps never perfectly but a separate government money supply is a big step in that direction, imo.

Ned Netterville November 30, 2010 at 9:41 am

“Be ye therefore perfect, even as your Father which is in heaven is perfect.”–MT 5:48

james b. longacre November 27, 2010 at 9:36 pm

“The Amazon is also being damaged by mercury used to extract gold.”

i dont know if you mean the river or forest…it seems they have damaged amazon since tv began broadcasting. i expect there are various industries operating in the amazon and have been for years. i suppose if it got too bad operations would be tidy-ed up.

Also, PMs require usury as a minimum and have historically led to cheating via fractional reserves.”
i dont know that fractional reserves as you claim was cheating. if it even took place. if one knew the note wasnt backed and could convince someone else to take a risky note…that doesnt sound like cheating.

In fact, some argue that fractional reserves are a NECESSITY with conventional money forms.”"

what is an unconventional money form???

Gil November 27, 2010 at 11:00 pm

Such is the power of gold – it’s hard to counterfeit. Some people would rather risk mercuy poisoning trying to counterfeit gold than work hard to earn actual gold money in a voluntary trade.

james b. longacre November 28, 2010 at 5:10 am

any more hard than current bills and base-coins or the various dollar forms in accounts???

what does counterfietting have to do with current currency??? the govt doesnt counterfiet its own currency.

all i can gather is that there may have been fraud earlier when there were more ‘redeemable in gold’ notes than there was actually gold…many years ago.

no…i really doubt some woudl rick mercury poisoning (to teh extent that occurs anymore) to try to counterfeit gold. sad.

Ned Netterville November 28, 2010 at 8:53 pm

“the govt doesnt counterfiet its own currency.”

The government doesn’t counterfeit?

Imagine a counterfeiter so skillful that his counterfeit Federal Reserve Notes were indistinguishable from the ones printed by the government. The counterfeiter could spend freely on whatsoever he desired.Such counterfeit bills would pass from hand to hand along with the government’s money without ever being withdrawn from circulation as fake. The economic impact would be precisely the same as when the government itself creates money by printing it and spending it into circulation. If the counterfeiter was big enough to, say, double the amount of cash in circulation [assuming for the sake of this argument that the nation's currency was the only money], the economic impact would be a doubling in the general price level, or a 50% depreciation of the dollar. If the counterfeiter used his freshly minted money to purchase cars (cash for clunkers), military hardware, shovel-ready roads and bridges projects, and green-energy subsidies, the counterfeiter would be “stimulating” economic activity exactly as the government does. With two sources of economic stimulus, wouldn’t the nation be better of economically than when only the government stimulates by creating new money?

Of course with counterfeit bills that good, people would be lining up to get some of them, just as with government money.

F. Beard November 28, 2010 at 10:23 am

what is an unconventional money form??? james b. longacre

Common stock is one that requires neither PMs or usury. Mike Rozeff’s “Wal-Mart Money” is one that does not require PMs.

Brian Macker November 28, 2010 at 8:56 pm

You can still have instability under a “pure” gold standard. All you need is fractional reserve banking.

F. Beard November 29, 2010 at 3:28 am

All you need is fractional reserve banking. Brian Macker

Indeed fractional reserve banking is the source of instability. Government fiat with a 100% reserve requirement might work well enough to suit most people.

Brian Macker November 29, 2010 at 8:14 am

That is if the government could control itself and not print up more currency. Problem is that with fractional reserve banking there is a disincentive to print because the base money has smaller purchasing power compared to the total increase it would cause in the money supply as leveraged by fractional reserve. So with fractional reserve at a 4% reserve rate the government only gets 1/25th of the purchasing power it would get with the same expansion of money supply under 100% reserves.

F. Beard November 29, 2010 at 10:04 am

That is if the government could control itself and not print up more currency. Brian Macker

I note that social spending in the US did not grow greatly in the US till after the bankers wrecked the economy in the 1920′s and 1930′s with their government backed fractional reserve banking cartel. So one can easily argue that the need for socialism in the US should shrink if only the boom-bust cycle is eliminated which 100% reserves should do. However, I would not ban FRL (fractional reserve lending) with private money supplies since with full disclosure of the risk and with no government backing, it would be morally acceptable, imo. Also, without a government backed cartel, the leverage banks could get away with would be limited (~2-1?).

B rian Macker November 30, 2010 at 8:12 am

It wasn’t purely “the bankers” who would have little power to cause monetary instability in the first place if it were not for the Fed and the legalization of the fraud inherent in fractional reserve banking. The problem is government.

F. Beard November 30, 2010 at 1:24 pm

The problem is government. B rian Macker

Indeed. So why do some believe that gold and silver are the solution? Since the problem is government then let’s fix government not use it to privilege our favorite money form.

B rian Macker November 30, 2010 at 11:43 pm

No one is asking to privilege certain money forms. Instead they are asking that the government allow individuals to use whatever money they want. Currently because of legal tender and other laws one cannot use gold, silver, or any other commodity as money.

Ned Netterville November 30, 2010 at 10:17 am

Mr. Beard, throughout history people like have been devising in there feverish minds monetary systems or schemes to replace the existing system, because they were dissatisfied with the status quo. Sometimes those feverish minds intent on making money work the way they think it should, when they were the “monetary authority”, have been able to impose their schemes upon the folks who are ruled. The present system of central banks, fiat currencies and fractional reserves came about in just that fashion. Of course the imposition of any system, which does not work the way those upon whom it is imposed would have it work, is bound to excite in the minds of those who are ruled creative” alternative monetary schemes, such as the one you propose, and hope or try to foist their schemes on their neighbors by persuading the rulers to adopt their systems. Such folks, including those who gathered at Jeckyl Island, Georgia to devise the present scheme for the United States, are often referred to by economists of the Austrian school as “money cranks.”

The only alternative to successive schemes of money cranks being imposed, which systems always favor the individual or class responsible for its imposition, is to allow the market to create the system that best suits the market participants. Whenever the money market has been sufficiently free to do that the participants have made gold their money of choice. May I suggest to you that your scheme for government fiat money and “common stock” money is just another one in a long line of schemes numbering perhaps in the many thousands that would never be adopted by the free choice of money users.

F. Beard November 30, 2010 at 1:10 pm

Nonsense. You want me to issue common stock to borrow money against my house, to buy a car, etc. Transaction costs are too high. How do the accountants calculate profit and loss statements on our co-ownership of the car? Do I bill myself every time I drive it? B rian Macker

As a libertarian, I don’t give a hoot what you use for money. I just insist that your favorite money form not be privileged by government over other money forms. It is a favorite trick of bankers to gain government privilege for their money. If gold based usury is so wonderful then I’m sure it should have no problem surviving on a level playing field with other private money forms.

You are not thinking very deeply and therefore wasting everyone elses time here with ridiculous claims and statements. It wouldn’t be bad if you were asking questions but you act like you have answers. You don’t.

First thing you need to work on is your reasoning skills they are appalling. In fact, you may be so bad at it that you fail to recognize your own incompetence, like those tone-deaf singers who show up on the American Idol singing competition. B rian Macker

I should take advice on reasoning from someone who says “and I don’t care what scripture says on any matter, let alone economics.” ?

If you are a kid then your ignorance about reasoning may be something you grow out of. Hopefully you do. So far your comments have been a series of non sequiturs.

Well, life is a learning process or at least should be.

Why this obsession with a cartoonish view of libertarian ideology? Are you a troll. You certainly aren’t an Austrian. B rian Macker

You guys, Austrians I presume, are supposed to be libertarians. Instead I find many of you to be worshipers of shiny metals and justifiers of usury. Such a lack of imagination.
All I insist on is a true free market in private money creation but no; many of you wish to replace paper fiat with gold and silver fiat.

F. Beard November 30, 2010 at 1:33 pm

The only alternative to successive schemes of money cranks being imposed, which systems always favor the individual or class responsible for its imposition, is to allow the market to create the system that best suits the market participants. Ned Netterville

Bingo!

Whenever the money market has been sufficiently free to do that the participants have made gold their money of choice. Ned Netterville

I have no objection to gold as a private money form.

May I suggest to you that your scheme for government fiat money and “common stock” money is just another one in a long line of schemes numbering perhaps in the many thousands that would never be adopted by the free choice of money users. Ned Netterville

Perhaps so. I just insist that we ALWAYS have a truly free market in private money creation. The gold cranks are so convinced that their shiny metal is the solution that they would have the government ratify that choice. They would trample liberty in their enthusiasm for a shiny metal?

B rian Macker November 30, 2010 at 11:55 pm

“I should take advice on reasoning from someone who says “and I don’t care what scripture says on any matter, let alone economics.’ ?”
Yes, because scripture is not about reasoning. In fact, religion exalts irrationality.

“many of you wish to replace paper fiat with gold and silver fiat.”
Clearly you don’t even know what the word fiat means.

I don’t see how a free money system is in any way an imposition on anyone. You can use communion wafers as money for all I care. I just want to be able to use gold, silver, or whatever I choose to trade for, and I don’t want bankers to be able to print off fraudulent notes claiming to be redeemable at will for commodities they don’t actually have on hand. That’s fraudulent, and the fraud can’t be solved by contract, any more than the fraud inherent in a pyramid scheme can be solved that way. The pyramid scheme fraud is much easier to see, and therefore more people are competent to detect it. Fractional reserve fraud it temporal in nature and therefore even harder to detect. So much so that many who think they understand it believe it not to even be fraudulent. Only because they too are incompetent to detect the fraud involved.

B rian Macker November 30, 2010 at 8:10 am

“Indeed fractional reserve banking is the source of instability. “
The source? Above you claimed above that in your opinion it was “usury” that was the source. You also claim that the bible should be followed, and that it bans usury. Yet you want to allow fractional reserve banking which not only depends upon usury to make a profit but leverages it by printing new money to charge interest upon. You have provided nothing but a hopeless tangle of contradictory opinion.

F. Beard November 30, 2010 at 1:16 pm

Both usury and fractional reserves are a source of instability, IN MY OPINION. Yes, I would allow a free market in private money creation, should we ever have one, to destroy both of them. What else should a libertarian wish?

I have many opinions on money but as for policy recommendations I have only a few including separate government and private money supplies.

F. Beard November 30, 2010 at 2:56 pm

The main thing that bothered me about it was the total worship of irrationality and glorification of ignorance. Critical thinking (asking hard questions) is actually a sin if you believe the Doubting Thomas story, and “Knowledge” is a bad thing if you are to believe the story of “Adam and Eve”. B rian Macker

It’s true that many Christians are woefully ignorant of the Bible, particularly the Old Testament. I suggest that you at least read Proverbs 8 to see what the Bible says about wisdom and knowledge.

B rian Macker December 1, 2010 at 12:06 am

That’s just a poem boasting about how the dogma the poet has to preach is to be listened to. Labeling myths as “knowledge” and labeling belief in such as “wisdom” doesn’t make it so. In the church it is considered wise not to ask questions and knowledge is whatever was handed down unexamined from others who keep their head buried in a bible like an ostrich in the sand.

F. Beard December 1, 2010 at 8:41 am

Clearly you don’t even know what the word fiat means. B rian Macker

Without checking the dictionary (that would be cheating) I’d say it means “by command”. The reason I insist on a separate government money supply is so that the 850 lb gorilla called “government” does not favor any private money supply be it gold or my toenail clippings via tax policy.

I don’t see how a free money system is in any way an imposition on anyone. B rian Macker

It wouldn’t be.

You can use communion wafers as money for all I care. I just want to be able to use gold, silver, or whatever I choose to trade for, B rian Macker

Good. However, those are all commodities. Common stock is an entirely different money form and should be allowed to compete on a level plating field too.

and I don’t want bankers to be able to print off fraudulent notes claiming to be redeemable at will for commodities they don’t actually have on hand. B rian Macker

You don’t hate fractional reserve lending any more than me. Fine. Make it illegal. I would prefer to let the free market crush it to death to drive home the lesson forever but it is not something worth fighting over to me.

That’s fraudulent, and the fraud can’t be solved by contract, any more than the fraud inherent in a pyramid scheme can be solved that way. The pyramid scheme fraud is much easier to see, and therefore more people are competent to detect it. Fractional reserve fraud it temporal in nature and therefore even harder to detect. So much so that many who think they understand it believe it not to even be fraudulent. Only because they too are incompetent to detect the fraud involved. B rian Macker

Well said. We surely agree about fractional reserves; we just disagree on the manner of its execution (destruction).

B rian Macker December 1, 2010 at 8:44 pm

Gold (and silver) were already accepted by the market as money. The only reason why the government took them as forms of payment was because they were the most marketable commodities. They weren’t moneys by fiat.

Common stock is just another commodity in that it is fungible with any other stock of the same company. Of course, stocks from different companies would be incommensurable. So you really are just calling for the possibility of yet another commodity. That however was not ruled out by my statement because I said “whatever I choose to trade for”.

What I object to is the government forcing me to take lottery tickets in payment as if they should be valued identically with the real stuff. If fractional reserve bank A is keeping only 5% reserves and bank B 10% reserves then their 1oz gold notes are not even commensurate with each other, let alone an actual 1oz gold coin. You can’t treat them as legally equivalent. If someone owed you a million dollars and they handed you a lotto ticket against a million dollar prize (which goes for a buck down at 7/11) and the government enforced that as fair payment then I think you can see the problem. There is a risk inherent in the note (especially one of a fractional reserve bank) that isn’t their with the coin.

F. Beard December 2, 2010 at 7:43 am

Gold (and silver) were already accepted by the market as money. The only reason why the government took them as forms of payment was because they were the most marketable commodities. They weren’t moneys by fiat. B rian

The moment the government accepted them for payment, they became a “fiat” money. If we are to have a true free market in private money creation, then the government must show no favoritism to ANY private money form. This leads to the conclusion that the government must issue its own money and that it only be backed by what government is, FORCE (taxation authority). However that money should only be legal tender for government debts to avoid distorting the private sector.

Common stock is just another commodity in that it is fungible with any other stock of the same company. B rian

No it isn’t. Common stock is title to the unencumbered assets of a corporation and confers voting rights in it. The assets of a corporation are often not even tangible such as patents, trademarks, etc.

Of course, stocks from different companies would be incommensurable. B rian

Yet the market would establish exchange rates between them.

What I object to is the government forcing me to take lottery tickets in payment as if they should be valued identically with the real stuff. If fractional reserve bank A is keeping only 5% reserves and bank B 10% reserves then their 1oz gold notes are not even commensurate with each other, let alone an actual 1oz gold coin. You can’t treat them as legally equivalent. If someone owed you a million dollars and they handed you a lotto ticket against a million dollar prize (which goes for a buck down at 7/11) and the government enforced that as fair payment then I think you can see the problem. B rian

Yep. Common stock has no such problems. It is what it is, ownership in a corporation for better or for worse.

There is a risk inherent in the note (especially one of a fractional reserve bank) that isn’t their with the coin. B rian

There is however the risk that the commodity value of the coin might drop or that the commodity value might rise to the point that most of the coins are melted down and sold for scrap. Where then is your money supply?

BTW, Hugo Salinas Price wants to have a silver “coin” standard in Mexico where the exchange rate with pesos can only go up. The coins would not have a denomination on them but (presumably) a weight. If the price of silver went up then the exchange value of the silver coins would go up. However, if the price of silver went down, the central bank would still have to buy them at the previous (higher) price. That would clearly be price fixing by government fiat. So here we have a silver advocate who wishes government privilege for silver. And yet silver is supposed to be “honest” money?

B rian Macker December 2, 2010 at 8:50 am

“The moment the government accepted them for payment, they became a “fiat” money.”

Wrong. As I said you don’t understand what the word means as applied to money.

You also don’t understand what the word commodity means.

“A commodity is a good for which there is demand, but which is supplied without qualitative differentiation across a market. Commodities are often substances that come out of the earth and maintain roughly a universal price.[1] A commodity is fungible, that is, equivalent no matter who produces it.”

Common stock is a good, just so long as it is scarce and people value it. So it meets the first criteria for a commodity. It has no qualitative differentiation across the market.

The second sentence is unimportant to determining if something is a commodity because they don’t have to come out of the earth, and can in fact be manufactured.

And stocks are fungible (but in this case Wiki gives a misleading definition of fungible). Fungible >means “interchangeable” and “Returnable or negotiable in kind or by substitution, as a quantity of grain for an equal amount of the same kind of grain.” Common stocks are fungible.

One thing that makes common stock ill suited as money is that they are cheap to produce (for the company) in vast quantities. They are more like tree leaves than gold in this regard. In fact more like fiat money in this regard too. What’s to stop the board of directors of a company from issuing lots of stock after you and your friends start trying to use it as money? Nothing. Therefore common stock if used as a money does not have an important property, which is a store of value.

It’s obvious you have read nothing on the subject of economics, and yet you keep trying to tell others what to think about the subject. I’ve already told you that you need to be more humble about this and learn about money before you try to teach. It’s quite ridiculous really.

The system you propose wouldn’t work. So government issues money, lets call that money “The fiat”. Tell me exactly why I would ever want to own any fiat? I don’t need it for trade because I have gold, silver, etc. to use as money. If the government starts taxing based on the fiat then I can show them my books and the fact that I never earned and fiats so there is no means to assess my profits in fiats. I have earnings that could be measured in whatever unit of money I’m using but not in fiats.

The only way for the government to decide how much I owe is to set some conversion factor between some commodity (or basket of them) and fiat, but once it does that it has merely created a kind of gold standard (or wheat standard, or whatever).

What you are actually suggesting is that the government set up a fiat credit based money (where the credit is based on taxes) however every credit based money has always been in terms of prior established prices via some commodity money and a conversion factor. The only way to eliminate the commodity out of the equation is to end conversion, and make it illegal to use the commodity as money via legal tender, tax, and other law.

F. Beard December 2, 2010 at 1:59 pm

“A commodity is fungible, that is, equivalent no matter who produces it.” via B rian

Your own definition refutes you since Ford stock is not fungible with Chevy stock. Let’s not quibble shall we? Notice also that I used the word “fiat” in quotes.

One thing that makes common stock ill suited as money is that they are cheap to produce (for the company) in vast quantities. They are more like tree leaves than gold in this regard. In fact more like fiat money in this regard too. What’s to stop the board of directors of a company from issuing lots of stock after you and your friends start trying to use it as money? Nothing. B rian

The Board of Directors is elected by the stock holders. That is the beauty of common stock as money; those who use it can vote (at least indirectly) on how much is issued; too much and the stock holders suffer price inflation. However, if the corporation issues too little then it might miss good investment opportunities. Notice the feedback mechanism.

Also, I note that corporations do not typically over-issue in the present day. Why should they in the future if common stock is used as money?

Therefore common stock if used as a money does not have an important property, which is a store of value. B rian

That would depend on the corporation. In any case, the Bible says it’s wise to diversify (Ecclesiastes 11:1-2) Also, PMs are not necessarily good stores of value either. Note the price inflation in Spain following the South American Conquest.

I’ve already told you that you need to be more humble about this and learn about money before you try to teach. It’s quite ridiculous really. B rian

I’ve read Rothbard; he’s excellent. If only he were alive today, I doubt he would fail to see the logic of common stock as a private money form. I started as a gold-bug but in designing my own bank using gold, I discovered the limitations of commodity based monies. It occurred to me that if banks issued their common stock as money then all the ethical questions such as price inflation and redeemability disappeared.

The system you propose wouldn’t work. So government issues money, lets call that money “The fiat”. Tell me exactly why I would ever want to own any fiat? I don’t need it for trade because I have gold, silver, etc. to use as money. If the government starts taxing based on the fiat then I can show them my books and the fact that I never earned and fiats so there is no means to assess my profits in fiats. I have earnings that could be measured in whatever unit of money I’m using but not in fiats. B rian

Good thinking. I notice you recognize the impracticality of the income tax for private money supplies. However, I suppose the government could still collect it (the income tax) on its own money supply.

The only way for the government to decide how much I owe is to set some conversion factor between some commodity (or basket of them) and fiat, but once it does that it has merely created a kind of gold standard (or wheat standard, or whatever). B rian

The government’s money would only be legal tender for government debts (taxes and fees) so the law of supply and demand would determine its value with respect to private currencies. If the government money was over-issued (supply) then its value on the free market would decline unless the government raised taxes (demand) to compensate. The voters might object to that so the government would have to be careful how it spent. Isn’t this what the gold-bugs want?

B rian Macker December 2, 2010 at 8:47 pm

“Your own definition refutes you since Ford stock is not fungible with Chevy stock. Let’s not quibble shall we? Notice also that I used the word “fiat” in quotes.”

Ford stock is fungible with Ford stock silly. I already said on Dec 1: “Common stock is just another commodity in that it is fungible with any other stock of the same company. ” So you are now going in circles.

I see that you are not understanding the other stuff I am writing. How could you say, “It occurred to me that if banks issued their common stock as money then all the ethical questions such as price inflation and redeemability disappeared.” after what I’ve already written. That’s ridiculous in the first place and more so after someone just spelled out the problems like: “It occurred to me that if banks issued their common stock as money then all the ethical questions such as price inflation and redeemability disappeared.”

You act like you’ve read Rothbard but obviously you did not comprehend him. He explained exactly why gold is suitable for money.

I will not be trying to explain anything to you anymore.

F. Beard December 3, 2010 at 5:21 am

You act like you’ve read Rothbard but obviously you did not comprehend him. He explained exactly why gold is suitable for money. B rian Macker

Gold and silver ARE primitive money forms. Use them all you wish as PRIVATE monies. Just don’t try to enslave the rest of the population to them (and usury) via government privilege is all I insist.

Common stock is clearly a superior money form to gold and silver. It can even incorporate gold and silver as assets. In fact, with 100% gold assets then the common stock would be a form of gold certificate BUT with the added advantage that performing assets could be acquired too. In fact, that is how fractional reserve banks started but instead of sharing the wealth via common stock as money, the bankers reaped it for themselves.

I will not be trying to explain anything to you anymore. B rian Macker

Thanks for the debate.

B rian Macker December 4, 2010 at 4:07 am

It wasn’t a debate. You were a gold crank before and are a stock crank now.

F. Beard December 4, 2010 at 9:37 am

I’d say I am a liberty advocate. I would not force anyone to use common stock as money whereas Gray North would force all tax payers to use gold or perhaps silver.

B rian Macker December 2, 2010 at 8:59 am

I don’t care what Hugo Salinas Price wants to do. It’s not relevant to the definition of fiat and non-fiat money. It’s perfectly possible to have a fiat money based on a commodity. You just have to, by law, set a conversion rate that is much higher that the actual market price. If Price were to force everyone to use a 1 oz silver coin upon which he stamped as worth ten thousand dollars each then it would be a fiat coin (aka. token coin). Even wooden nickles have some value (as fuel) but the reason they are tokens is that their face value is much higher than their market value. Without the law forcing people to accept a token currency at a certain rate of conversion no body would use it.

B rian Macker December 2, 2010 at 9:00 am

Note that one of those laws I’m talking about is one that prevents people from privately producing their own money. Even if you had cheap source of wood, or zinc, you are not allowed to make wooden nickles or pennies.

F. Beard December 2, 2010 at 2:11 pm

Even if you had cheap source of wood, or zinc, you are not allowed to make wooden nickles or pennies. B rian Macker

But Gary North would allow people to coin money that was acceptable for taxes. That is what I am objecting to. The fact that the coins would be gold is irrelevant. Counterfeiting is counterfeiting regardless of the material used. Government is force and the private sector is voluntary acceptance. To mix the two via a single common money supply or a single common money form (such as PMs) is fascism, imo.

Ned Netterville December 3, 2010 at 11:38 am

Mr. Beard, I want to take this opportunity to recommend to you a timely Mises Daily article published today (12/03), entitled THE MAJOR CONTRIBUTIONS OF THE SCHOLASTICS TO ECONOMICS, by Gerard N. Casey, which is found here: http://mises.org/daily/4845 My hope is that it may change your thinking regarding the role of interest (usury) in economics as well as its place in the Bible, particularly in the Gospels. Here is a pertinent excerpt:

“Money, of course, in an obvious sense, is absolutely sterile. If left in a drawer or, as in the case of the parable in St. Matthew’s gospel, buried in the ground, it produces no offspring. However, those acquainted with the parable of the talents should have noted that the recipients of the talents were expected to return not just the talents they were given but also an increase, and not just an increase from trade (as with the first two servants) but, as the parable explicitly states, even from interest:

“”Then you ought to have invested my money with the bankers, and on my return I would have received what was my own with interest.’ [MT 25:27]

“What is being missed in regarding money as sterile is the understanding of money as capital, or, perhaps better, as productive of capital that is then employed to generate an increase in real wealth.”

I also wanted to take exception to something you said in an earlier post in which you implied that I was a Christian. In fact I embrace no religion. I am, however, a disciple of Jesus of Nazareth.

F. Beard December 3, 2010 at 1:03 pm

The Jews were allowed to lend at interest to foreigners so the servant in Matthew 25:27 could have done so and still have obeyed Deuteronomy 23:19-20

I would not outlaw usury. I just insist that other forms of money such as common stock which do not require borrowing or lending (much less at interest) be allowed. I would love to see honest competition in private money creation.

I am, however, a disciple of Jesus of Nazareth. Ned Netterville

Jesus claimed to be God. As C.S. Lewis stated, that makes Him either a liar or a lunatic or Who He says He Is.

B rian Macker December 4, 2010 at 4:09 am

… or someone who never existed in the first place based on a conglomeration of myths and ethics from prior religions.

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