For all the Fed’s imposing grandeur, Ben Bernanke is running our third (albeit longest-running) try at a central bank. This country has lived without a central bank before and, if given the chance, could do so again. FULL ARTICLE by C.J. Maloney
Source link: http://archive.mises.org/15228/life-without-the-fed-the-suffolk-system/
Life without the Fed: The Suffolk System
Previous post: If you are near Frankfurt this Summer…
Next post: What Constitutes a Gold Standard
{ 110 comments }
“… it is the quality rather than the quantity of money that matters.”
Beautiful. This is true for so many things in life. Could be said for Government as well. I’d rather have a small high-quality government than a large low-quality government any day!
“… it is the quality rather than the quantity of money that matters.”
Nope. It is their product (quantity x unit value) that matters. Would I rather have 1 piece of paper worth 2 widgets or 4 pieces of paper worth 1 widget?
F Beard
No. He remains correct. You have not rebutted his position.
“It is their product (quantity x unit value) that matters.”
That has a bearing but ultimately it is a subjective evaluation that matters. Quality is paramount in this.
“Would I rather have 1 piece of paper worth 2 widgets or 4 pieces of paper worth 1 widget?”
Who knows what you’d do as you fail to state it. Others may or may not agree with your choices.
By evading the matter of quality you evade the main issue the author was addressing. Take the question you pose as example. The answer depends upon context which you’ve failed to address. For example, personal preferences matter, as does widget specification and, indeed, the quality of said widgets (which directly relates to the specification).
When widgets differ from each other (that is, there are good ones and bad ones in the sense that some widgets are of excellent quality while some are lesser), then the choice is not as you’d like to pretend. In the example you present one needs to evaluate whether the two widgets are superior to the single widget and by what margin this may be so.
Consider that the 1 piece of paper denotes 2 red widgets, while the 4 pieces of paper denote a blue widget. When blue widgets are known to be superior to red widgets (due to their particular attributes), the evaluation requires determining how far that superiority is sufficient to prefer one type to the other. Ultimately what is sought is under which conditions tokens representing one type are preferable to tokens representing another and by what margin that is so. This can rapidly become a non-trivial problem. Is a quarter of a blue widget worth more than a pair of red ones? Why? It depends upon quality.
In the case where red widgets are, say, mere “full faith” promises of an institution while the blue widgets are specie, what counts is the quality and not the quantity. That’s the author’s point and THAT is the point you miss entirely.
By the way, it is one of the issues (raised in a previous thread by several contributors) which dooms your funny money issuance ideas.
Sione
In my example, I assumed the widgets were identical. It was the quality of the money (paper), I was addressing.
Ah, for a true free market in private money creation. It would teach many lessons and I could save my breath.
It would destroy fractional reserves.
It would shame usury.
It would make the gold-bugs look silly.
It would vindicate true libertarians.
It would shrink the size of government as wealth was shared and not reaped with common stock as money.
It would vindicate the Bible wrt money and economics. It would thus glorify God.
Oops! Got to spend some worthless fiat for my daily bread. Back in a while.
“It would shame usury.”
How exactly do you define usury?
How exactly do you define usury?
Charging any interest for a loan to a fellow countrymen, see Deuteronomy 23:19-20.
Common stock as money renders usury, PMs and fractional reserves obsolete. So why are they still extant? Government privilege. You can see why I don’t want PMs privileged by government. It’s time to escape those who rent our money supplies to us be it fiat or gold.
David
“How exactly do you define usury?”
God knows!
Sione
@F. Beard: “Charging any interest for a loan to a fellow countrymen”
Why would anyone ever loan money then? Money in the future is worth less than money in the present. Interest is simply the difference between the present and future values of money and it is a legitimate market price, bible verses notwithstanding.
Assuming common stock could somehow replace everything else as money, interest would still be charged on loans. Having stock now is preferable to having stock in the future isn’t it? So if you wanted a loan you’d have to pay for it.
F Beard
“I assumed the widgets were identical.”
Your assumption was erroneous.
“It was the quality of the money (paper), I was addressing.”
Oh no, you weren’t. By failing to perceive the fundamental importance of the quality of the widgets backing the monetary tokens, you failed to address the quality of money at root. You engaged in a misidentification of the issue of quality in order to evade the author’s point.
The remainder of your post is yet another helping of baseless assertion, some empty puffery and a sprinking of your usual mumbo-jumbo.
Sione
The remainder of your post is yet another helping of baseless assertion, some empty puffery and a sprinking of your usual mumbo-jumbo. Sione
I do love your vocabulary. Good show!
Speaking of “mumbo-jumbo”, “The Family Man” with Nickolas Cage is an excellent Christmas movie. He used that phrase.
You lost me at God, the Bible, Deuterwhatever and blah, blah, blah. Backing anything up with the Bible displays a lack of logical thinking and any real base to stand on. And if you don’t think quality matters then I guess we’ll all just need to carry around a billion pieces of paper to buy one loaf of bread. Did you see the recent story about the 100 trillion Zimbabwean dollar bill going for 5 US dollars as a novelty item? How very clever those Zimbabweans were. Condensed 100 trillion pieces of paper into 1.
“The relatively poor quality of the country-bank-issued versus the city-bank-issued bank notes triggered Gresham’s law — bad money drove out the good.”
Why? Was there a legal tender law requiring Boston merchants to accept notes from country banks?
Good question.
Gresham’s law is commonly stated: “Bad money drives out good”, but is more accurately stated: “Bad money drives out good if their exchange rate is set by law.” from http://en.wikipedia.org/wiki/Gresham%27s_law
The problem with our money supply is not that it is fiat, (since government is force and fiat is thus IDEAL for it) but legal tender laws for private debts and other government privileges for FRNs.
PMs for government money are thus not necessary and in fact would be government privilege for a private money form, PMs and usury since PMs require lending at interest to generate a return.
Austrians assume that PMs are money yet it is government privilege (acceptance of them for taxes, for instance) that would give them much of their value beyond commodity value.
“yet it is government privilege (acceptance of them for taxes, for instance) that would give them much of their value beyond commodity value.”
Unless I’m misreading what you mean by “much of their value”, I think I have to disagree. In the absence of outright price fixing it is purely the demand for a coinage in relation to its supply that determines its value. This is just as true for PM coinage as it is for fiat coinage. The demand for a particular currency (PM or fiat) generated by taxes may affect the value of the currency somewhat, but we must expect the government will spend the currency right back into circulation so it seems unlikely that the value will be affected much. Government acceptance for taxes can help to jump start a fiat currency into circulation, but since no such encouragement should be necessary for PM coins government acceptance should not affect them.
Whether much or little, PMs are not entitled to being legal tender. There are ways to limit the effects of excessive government spending such as alternative private currencies and free market exchange rates between government and private monies. Gold is not needed nor welcome.
As to how gold would perform in a true free market in private money creation, I have my doubts about that. It is, after all a non-performing asset that requires usury. And as Hayek pointed out, who would desire to borrow an appreciating currency?
So no, PMs must be denied legal tender status. They, PMs, especially gold, could be one of the biggest scams in history. Let’s find out, eh? Let’s see how gold performs as a truly private money form.
“Whether much or little, PMs are not entitled to being legal tender.”
I do not believe anything is entitled to be legal tender.
“Gold is not needed nor welcome.”
Without legal tender the question of gold being needed or welcome (welcome by whom?) becomes moot. Sans legal tender I believe PM coinage is simply inevitable. In fact there are cases where PM coinage persisted even in the face of legal tender laws mandating government script. Look into the history of the US in Cuba and the history of Japan in China. In both cases the public long resisted the introduction of fiat currencies despite legal tender laws and despite the requirement that taxes be paid in script.
Government, as long as we shall have it, will continue to collect taxes. The question then is shall it collect taxes in your favorite money form, my favorite money form, someone else’s favorite money form, every money form, or its own money form, fiat?
Obviously, the only fair solutions are “every money form” and “its own money form, fiat”. I submit that “every money form” would be impractical. That leaves “its own money form, fiat” as the only fair and practical solution to the problem of taxation.
Or shall I be compelled to sell a non-usury money form, common stock, to buy someone else’s gold, which requires usury to pay my taxes? Then I object on religious grounds, Deuteronomy 23:19-20
Use PMs all you want for private debts but they must not be accepted for government debts (taxes and fees).
F. Beard,
Do you observe the rest of the laws in Deuteronomy 23? Keeping in mind Galatians 3:28 (There is neither Jew nor Gentile….), and considering the Parable of the talents, would you consider it safe to assume that the particular laws you refer to are obsolete?
@F. Beard: “Or shall I be compelled to sell a non-usury money form”
What is a non-usury money form? Are you using the word “usury” to mean interest in general, as opposed to excessive interest? If so, are you suggesting that there is or could be a form of money that is not worth more in the present than the same amount would be worth in the future?
This is, in my humble opinion, to a large extent irrelevant. Even if you are required to pay taxes in the currency X, you don’t need to actually use currency X for anything. You can pay taxes by performing a bank transfer to an account that uses currency X even if the source account’s currency is not X. The banks just charge you some fees, but typically this is not very much.
The real issue is that the state prescribes accounting rules, for example what exchange rates to use for income and expenditures in other currencies. That allows them to counteract the market forces. Let’s say there is a 10% income tax. If, for example, you make a profit of 100 units of Y and the market exchange rate is 100 Y = 1000 X, the central bank might have a higher exchange rate for accounting (e.g. 100 Y = 1100 X), creating a tax obligation of 110 X (instead of 100 X derived from market), costing you 11 Y instead of 10 Y if you buy currency X on the market in order to pay the tax. Alternatively, you can exchange Y for X directly with the central bank, in which case it will quote you again a different exchange rate (because, like any other bank, they have different rates for buying and selling), say 100 Y = 909.09 X, resulting in you ending up paying 11 Y anyway. So, legal tender laws create a crowding out effect similar to Gresham’s law even if there is only one legal tender currency (unless the central bank screws up horribly or the tax enforcement is lax).
“Yet, history tells us that it need not be a government-run affair — private individuals acting outside the bounds of political control have proven entirely capable of providing much the same functions as a central bank, and at a far lower cost, no less”.
And that’s precisely the point — removal of the _technique_ of concentrating humungous amounts of financial funds at the beck and call of crooks and criminals should be targeted. And the recommendation stated above would be the way to go. This approach would also herald the coming of true laissez faire capatilism. And let’s not forget the IRS, the henchman of these same crooks that forces us to part with our hard-earned money at the point of the proverbial gun. So in effect the IRS collects and these ruffians spend the loot on wars and on projects that deliver absolutely nothing.
Indiscrimate Power wielded by crooks and criminals who consider themselves untouchable will lead to the downfall of our way of life.
Well said Anon.
And yet the Suffolk Banking System could walk away from these important functions. Does not this show that a permanent central system to regulate the money is indispensable?
The author was a bit vague on that aspect of Suffolk’s history. It’s just a short article after all. In his History of Money and Banking Rothbard has Suffolk adopting some monopoly practices which got them into trouble when a competitor finally arose. Dropping the note clearing business was an attempt at avoiding competition. We’ll never know now, but the bank might have been forced by the market to reverse that policy had Lincoln not been elected. Or Suffolk’s role may simply have been supplanted by Mutual Redemption. Such occasional replacements are the norm in a market economy after all.
No. There was a competitor to pick up the same functions.
They walked away because someone else came into the market and did a better job of it. That goes to show that a central bank is NOT indespensible as a permanent central bank cannot be put out of business by a better bank.
Forgive me for posting here, which is not appropriate, but it’s the best place I could think of to try to reach the parties that can help.
I’m only here to agitate: If I know that some number of liberty-minded people agree that a particular issue should be addressed by TMI, and that number is high enough, there should be a way for me to determine what TMI’s response is. Either “Haven’t gotten to it yet” or “No comment” or “Great idea, come back with financial (technical, political, etc.) resources and we’ll go forward” or whatever.
First, there should be a number, even if TMI requires that the people be dues-paying members, so that when that many people sign on to an issue, it publicly becomes something on TMI’s plate. What I’m agitating for is that TMI be an example of an institution that provides transparency into its implied responsibility to be responsive to the public whose interests it claims to serve.
Second, there should be some kind of framework through which people can proceed in order to establish themselves as agreeing that a particular issue should be addressed. TMI could use any number of such frameworks, and Robert Murphy’s introduction of ThePoint.com could be one of them. There are only six different people on the thread at http://www.thepoint.com/campaigns/campaign-0-1240/discussion/topics/15464 which now has a great way to provide those abroad with a way to help with the Murphy-Krugman debate.
Lew Rockwell recently pointed out that our battle is in the realm of ideas (http://www.lewrockwell.com/rockwell/american-dream156.html), and on that battlefield, every mind is a potential source of powerful weapons. There should be some way for us to see how the ideas born in those minds proceed to the fore, not only so that we can help them proceed, but because they can help us too.
The Federal Reserve System (“FRS”)is actually a hybrid–part the typical central bank, “managing” (or perhaps mis-managing) the supply of money. This part of its business is a matter of the implementation of policies of the Board of Governors of the FRS in Washington, the only fully governmental piece of the puzzle. However, under the Board of Governors are the 12 Reserve Banks spread around the country according to the political priorities of a long past age. The Reserve Banks are owned by their member banks, not the government, and have additional functions more akin to those of a trade association than a central bank. For example, they operate an enormous wire transfer system, deal in foreign exchange, deal in government bonds, provide conventional banking services to the federal government, and act as a “lender of last resort”. Many of these services are strictly for the benefit of the members, and have no governmental function at all. My point is only that the FRS is much more than a central bank, and that as a technical matter, those services are not being provided by government. They are heavily regulated, of course–but, as I said, it’s a hybrid…
It’s essentially a government body. Taxes must be paid in it’s scrip. Money paid out is only in it’s scrip. The government mandates we all accept payment in it’s scrip to clear debt. All debts must be contracted in terms of it’s scrip.
As someone who puts zero credibility in the terms used, there is nothing “private” about the Federal Reserve as I have no choice but to do business with them. That makes them a de facto government agency.
The economy wasn’t that great during that period, let me help with the history lesson:
http://en.wikipedia.org/wiki/List_of_recessions_in_the_United_States
From the article:
and considering the Parable of the talents, would you consider it safe to assume that the particular laws you refer to are obsolete? Daniel Hewlett.
Christians are not under the OT Law but we are wise to know and heed it. As for the Parable of the Talents, it was permissible to charge Gentiles interest.
Look, I have no objection to you practicing usury. That’s between you and God. I just insist the government, mine as well as yours, doesn’t favor it.
F. Beard,
Just challenging you on your theory, brother. I was curious to hear your answer. I’m ancap so I don’t insist that government favor anything.
Now another challenge, why are you comfortable with government using a fiat currency? Yearning for a true free market in private money does not sound very sincere, when you also favor a currency for public debts that somebody else may have a moral objection to.
Yearning for a true free market in private money does not sound very sincere, when you also favor a currency for public debts that somebody else may have a moral objection to. Daniel Hewitt
Government money should be pure fiat but only legal tender for government debts (taxes and fees), not private ones. Conversely, private money forms such as PMs should only be acceptable for private debts, not government ones. Free market exchange rates would always prevail hence no stealth inflation tax. Capital gains tax and probably the Income Tax would need to be abolished too.
How will Suffolk or any other protect the many weak from the whims of the few strong, i.e. the ones with mountains of idle money they don’t have ideas to do with except cause asset bubbles willy nilly in their desire to make money simply trading assets, rather than investing in real production of something valuable in the market or to society? To borrow an important theme from Plato about democracy and truly dynamic markets?
How does it prevent money from being borrowed cheap or for free here and being siphoned off to build asset bubble markets in China, India, Brazil, etc. creating jobs there while providing a leveraged return to powerful qualified investors who leverage their equity with borrowed money from banks who don’t want to take real risks?
How does it prevent powerful money holders from buying Fiscal spending from the Federal Budget to enrich their businesses, especially war spending which piles debts on the many weak taxpayers?
It seems like we need Landesbanks to keep money for small players in the regions, and we need to get back to a regional banking system for which the Fed was originally designed. The national consolidations make Fed committees focus on the monetary conditions for national players i.e. Wall Street, not regional economies. It also sounds like we need some mechanism to control perverse incentives in our fiscal policy system. SCOTUS needs to be pressured to rule to reverse 1970s campaign finance reforms which created PACS to collectively represent business owners in fiscal policy setting, while also allowing dismantling during the last decades of unions to represent wage earners, the reason the PACs were justified in the first place. Effectively those two systems working hand in hand handed over Fiscal policy to the corporate players who directly benefit from a few dozen $7000 contributions to those Tools in Congress, and adversely affect our monetary situation irrespective of real demand in the non-Keynesian part of our market. Otherwise, the downward pressure on our USD caused by perverse incentives in Fiscal policy will drive us out regardless of the monetary policy and system we have.
“How will Suffolk or any other protect the many weak from the whims of the few strong, etc…”
Does the Federal Reserve provide protection from any of the many things you listed?
If so, are you suggesting that there is or could be a form of money that is not worth more in the present than the same amount would be worth in the future? David Bratton
Yes, common stock in a good corporation.
“Yes, common stock in a good corporation.”
Why do you think so? A pile of common-stock-in-a-good-corporation in your hands right now is worth more than the promise of the same at some time in the future. Isn’t it? You will still have to pay interest on any common-stock-in-a-good-corporation you borrow.
I would never borrow common stock. Why should I when I might issue my own? If I have the credit standing to borrow someone else’s common stock then I have credit standing to issue an equivalent amount of my own common stock and save myself the interest.
Why would anyone ever loan money then? David Bratton
To please God:
All day long he is gracious and lends, and his descendants are a blessing. Psalm 37:26
It is well with the man who is gracious and lends; he will maintain his cause in judgment. Psalm 112:5
However, I would never abolish usury.
Money in the future is worth less than money in the present. David Bratton
Common stock in a good corporation will normally appreciate.
Interest is simply the difference between the present and future values of money and it is a legitimate market price, David Bratton
True wrt to conventional money but since common stock normally appreciates in value, it would be ridiculous to borrow it.
bible verses notwithstanding.
They will withstand all.
Assuming common stock could somehow replace everything else as money, interest would still be charged on loans. Having stock now is preferable to having stock in the future isn’t it? David Bratton
True. But would it be worth borrowing something that will be more expense to repay (normal appreciation) PLUS interest? No, unless the borrower intended to sell it short, in which case I would not lend it to him.
So if you wanted a loan you’d have to pay for it.
The need for borrowing will be greatly reduced once we don’t have a government backed counterfeiting cartel to contend with.
“Common stock in a good corporation will normally appreciate.”
Hmmmm…..
How do you know in advance if a corporation is a good corporation?
(And why do I have this urge to throw my hands in the air and yell “THERE’S A HOLE IN THE BUCKET!!!”)
How do you know in advance if a corporation is a good corporation? David Bratton
Oh, I don’t know. Their financial statements? Their balance sheet?
And if the corporation was not forthcoming in publishing pertinent financial data then I would refuse to accept their stock.
“Oh, I don’t know. Their financial statements? Their balance sheet?”
Well if that’s all it takes to guarantee that a stock will appreciate in value why isn’t everyone on Wall Street making money always? We’ll just read their financial statements and let them tell us if they are a good corporation or not.
Corporate stock cannot replace money. Corporations issue stock in order to raise money. Do you not see a problem?
Corporate stock cannot replace money. Corporations issue stock in order to raise money. Do you not see a problem? David Bratton
Why not use the common stock to buy assets and labor directly? Who needs conventional money? The par value of the common stock would be the unencumbered liquidation value of the corporation. Of course, a corporation would need some initial capital (talent, patents, processes, etc).
But let’s take this step by step. Suppose you had a 100 tons of gold. You then incorporate and issue common stock. If you lend out that stock, is that not equivalent to lending out a form of super gold certificate? Now suppose instead of lending it that you buy an asset with that common stock, say an amusement park. The rides are purchased with your common stock money. If you receive that common stock money back at the same rate as you spend it (salaries, expenses) then your money merely retains its value. But say the amusement park is very popular and you receive more common stock money back than you spend. The value of your money has gone up! However the amount in circulation will eventually be exhausted since more is being received than spent. So what do you do? You buy more assets by issuing and spending more stock. This increases the amount of your money in circulation so people can continue to visit your amusement park while at the same time you tap the appreciation in value of your money to buy even more investments.
Notice I used gold to demonstrate the “soundness” of the process to those who think gold is “sound” but any initial capital could be used.
Note also that no fractional reserves or usury was involved.
How would a corporation publish “financial” data when its own common stock is money? I just don’t understand how you see economic calculation and pricing happening when millions of corporations all across the world issue their own common stock which circulates as money thus making for millions of moneys, none of which is actually comparable with any other simply because each common stock (and each unit of it thereof) stands for a certain volume, not value, of a variety of economic goods because it just stands for ownership of the means of production that belongs to the issuing firm as well as its own stock of raw materials, work-in-process and unsold finished goods as well as the finished goods and common stock of other firms with whom this firm engaged in exchange. Please explain how you see any corporation can issue financial statements that others can make sense of.
I have other questions on your (what I consider ill-conceived) opposition to usury, but I’ll leave that for later.
Please explain how you see any corporation can issue financial statements that others can make sense of. Bala
I said common stock as money was mind-boggling
I imagine a common stock money would have some initial par value in a pre-existing currency based on the liquidation value of the corporation. Afterwards, the value of the stock above liquidation value would depend on demand for it. And demand for that common stock money would depend on how desirable the corporation’s products were that could be bought with that money.
So the volume of shares redeemed for products would be a key metric. And remember, the common stock money would have an initial par value too so there would be little risk of accepting it at the right price.
As for the complexity of many corporations issuing their common stock as money, I would expect computers, modern communications, specialists and above all the free market to handle it smoothly.
Also, in a free market of private money creation, common stock as money would be an option but not the only option. People would be free to use whatever as private money, including gold, silver or the government’s fiat. However, I expect common stock monies would eventually dominate because of their inherent moral and economic advantages.
“I imagine a common stock money would have some initial par value in a pre-existing currency based on the liquidation value of the corporation.”
How would the initial par “value” be determined? How is the liquidation “value” to be determined? When I apply the regression theorem, I reach a stage where the initial value of each common stock is in itself a mish-mash of land, building, other capital goods, raw materials, work-in-process, unsold inventory and goods obtained in exchange. How is anyone at all to set a “value” on this mish-mash? Starting from this impossible starting point, how is the value of the same common stock to be set in the future and how is the value of every other common stock to be determined in relation to this undetermined and indeterminable common stock value?
I am just saying that your idea just does not make any sense. It fails on day-one because of its inherent and obvious flaws. It fails not because it is very complex but because it is impossible.
You fail to understand that commodities like Gold and Silver worked (and will always work) as money because what mattered in any exchange was just HOW MUCH of it was offered/accepted in exchange. This makes it possible and easy to work out “exchange ratios”, also known as “price”, which, with a common numerator across different goods of different classes, makes economic calculation possible.
Such calculation is humanly impossible with your fanciful “common stock as money” system.
“I imagine a common stock money would have some initial par value in a pre-existing currency based on the liquidation value of the corporation.”
If there is a pre-existing currency, what is the motivation for anyone at all to switch over to the use of common stock as money? What is to happen to the initial value of the original common stock (which you see as the starting point of the “valuation” of common stock as money) when the demand and supply of the pre-existing currency fluctuates with market realities. Do we have s standard whose value is fluctuating all the time? How can such a unit with a fluctuating standard ever be used for measurement and calculation purposes. Imagine the plight of science if what is 1m today stands for 1/2m tomorrow and 2m the day after!! Common stock as “money” i no different.
That’s where Gold and Silver (and any other commodity money) are different. 1 ounce of Gold is 1 ounce of Gold as long as the definition of the unit “ounce” is the same. Your only opposition to commodities as money is that they are open to usurious applications. Given that your objection to usury makes no sense at all, you objection to commodities as money makes no sense as well.
I have other questions on your (what I consider ill-conceived) opposition to usury, but I’ll leave that for later. Bala
What does that matter to you? I would never, ever ban usury just eliminate all government privilege for it and all government borrowing of money for that matter.
It matters because you tout it as one of the problems inherent in monetary systems other than the one you propose. I am just saying that what you call a problem is not a problem at all but an undeniable aspect of reality. Reality cannot be wished away because Deuteronomy orders or advises you to. That’s about as insane as insane gets.
(And why do I have this urge to throw my hands in the air and yell “THERE’S A HOLE IN THE BUCKET!!!”) David Bratton
Money is a mind boggling concept and common stock as money is even more so but other than that I have no idea.
Life was good for the US without a central bank. It wasn’t until Lincoln won the civil war that he went for nationalizing the country. The passage of legal tender laws, the IRS, the department of agriculture, nationalizing the banks, forcing southern states to accept mandatory public schooling. All damaging to the country.
Reality cannot be wished away because Deuteronomy orders or advises you to. That’s about as insane as insane gets. Bala
Well, let’s just have a true free market in private money creation and we shall see, eh? There would be nothing to prevent you from using gold, silver or whatever as private monies.
It fails not because it is very complex but because it is impossible. bala
See my amusement park example above and explain to me how that would not work. Yes, I start with a 100 tons of gold for the sake of clarity (to gold-bugs) but any other initial capital should work too.
You bring your biblical fantasies to the monetary world which causes you to contradict yourself repeatedly. First there would be no usury, then usury would be present. Is it in your system or not? Common stock can be money, then it must firstly be based on something else. In reality the money is the base.
You bring your biblical fantasies to the monetary world which causes you to contradict yourself repeatedly. First there would be no usury, then usury would be present. Is it in your system or not? RTB
Common stock as money requires no borrowing or lending. See my amusement park example
above. However, I would not ban the practice of usury. PERSONALLY, I would never practice it though because of Deuteronomy 23:19-20. Do as you please.
Common stock can be money, then it must firstly be based on something else. In reality the money is the base. RTB
I never said money could be backed by nothing. Government fiat is backed by force, its taxation power. Private monies, OTOH, must be voluntarily accepted, hence they must be backed by something of value. Common stock would be backed by the unencumbered assets of a corporation, which would typically be performing assets not non-performing ones such as gold.
Well, if Deuterwhatever says it then it must be right. Or are you also trying to say there is a rational base for your position? If so, dump the Deuter stuff, you don’t need it. Meanwhile, keep on flipping, chucking and jiving.
Well, if Deuterwhatever says it then it must be right.
I’ve learned to trust the Bible.
Or are you also trying to say there is a rational base for your position?
Of course.
If so, dump the Deuter stuff, you don’t need it.
Never. I got this far by reading the Bible and I will continue. And I will give credit where credit is due, to the Bible.
“Common stock as money requires no borrowing or lending.”
Common stock is a form of borrowing. Corporations issue stock to raise money. What you seem to be proposing isn’t stock at all. It’s just privately issued unbacked currency.
“Government fiat is backed by force,”
Force alone isn’t enough to impose a fiat currency. US currency is mainly backed by public debt, which in turn is backed by taxation. What will hold up the value of your stock-dollars? Good corporate-ness?
Common stock is a form of borrowing. Corporations issue stock to raise money. What you seem to be proposing isn’t stock at all. It’s just privately issued unbacked currency. David Bratton
I don’t see where you get that. The money would be common stock. Hence it would be title to a share in the unencumbered assets of the corporation.
Force alone isn’t enough to impose a fiat currency. US currency is mainly backed by public debt, which in turn is backed by taxation.
And that taxation is backed by what? What happens if you don’t pay your taxes?
What will hold up the value of your stock-dollars? Good corporate-ness?
Goods and services that people can buy with those stock-dollars would create demand for them.
“I don’t see where you get that. The money would be common stock. Hence it would be title to a share in the unencumbered assets of the corporation.”
What happens when a company wants to expand? They will have to issue more stock and try to spend the shares directly in the marketplace. They could try selling their stock, but all money is stock so “selling” stock will just result in a pile of some other company’s stock. By issuing stock as money a company is really just printing unbacked currency. Now you will object and say that it is backed by the assets of the company, but that isn’t backing. I cannot redeem the stock for anything except stock in another company. In the current economy I can redeem stock for money; but if stock were to become money then stock would be effectively nonredeemable.
“And that taxation is backed by what? What happens if you don’t pay your taxes?”
The point is you need the intermediate steps to the monetary confidence game in order to get it to work – currency supported by public debt supported by taxes supported by force. Just printing notes and decreeing them into circulation doesn’t always work and it isn’t the system we have in place today.
“Goods and services that people can buy with those stock-dollars would create demand for them.”
Really? Remember we are going to be spending GM stock and Ford stock and Newmont Mining stock and General Electric stock and every other kind of stock, no two of which will likely have the same value. So the first customer walks in and buys an item worth six and two thirds of a share of GM. The next guy comes in and buys the exact same thing but it costs him two and seven eights of a share of Ford. The merchant now pays his vendors using a combination of multiple types of stock, none of which match the price list he got from the vendor when he ordered his inventory. Is this your vision? Remember the fundamental purpose of money is to ease and facilitate exchange.
Your amusement park example fails because it skips addressing the important issue of valuation. How will the values of the common stock being exchanged, be it that of the amusement park or of the individual customers happen? You have not explained it. You just assume that because you have bought assets by paying 100 tonnes of gold, others would be ready to value those assets at 100 tonnes of gold as well. That’s pretty much an “intrinsic value theory” for all i can make of it. It therefore stands dismissed right there.
Please address the challenge posed on valuation of common stock as money without reference to any other pre-existing money. You haven’t done that yet.
How will the values of the common stock being exchanged, be it that of the amusement park or of the individual customers happen? You have not explained it. bala
The value of each share is 100 tons gold / number of shares. Obviously the number of shares should be such that the least expensive ride at the amusement park could be bought with one share. Let’s assume the cheapest ride was $1.00 under the old management. At $1000 per oz that equals 1/1000 oz gold = 1 share. So the par value of each share would be 1/1000 oz gold.
You just assume that because you have bought assets by paying 100 tonnes of gold, others would be ready to value those assets at 100 tonnes of gold as well. bala
One should buy wisely.
Please address the challenge posed on valuation of common stock as money without reference to any other pre-existing money. You haven’t done that yet. bala
Nor do I need to. I never claimed gold was not a (crude) money form. But frankly I wish I had used fiat in the example since I should not encourage the delusions of gold-bugs. My position is that common stock as money can work without fractional reserves, usury or PMs. I proved that to my own satisfaction. Take it or leave it. Some will understand and get rich with a completely honest, usury free, PM free money form. Others will worship a shiny metal and wonder why they didn’t get rich with it. Live and learn.
Share values of a company have nothing to do with the assets it holds. The market capitalization of any given company is on average 10 times higher than the total of the assets on the books.
The market capitalization of any given company is on average 10 times higher than the total of the assets on the books. J. Murray
My point was that the minimum value of a corporation was its unencumbered assets. I imagine the actual stock price represents forward earnings potential.
The minimum price is always $0 because if it got to the point of liquidation, the entity would be so heavily indebted that it would be unable to fully cover all higher order claims before dissolution to shareholders. No organization with sufficient resources to actually pay back shareholders ever liquidates. The actual price is only dictated by what someone else will come by and buy it off of you for. Nothing more, nothing less.
All the other fancy terms – earnings potential, mismatched value to share price (as Warren Buffet likes to say before begging Congress for bailouts and grants for his failing holdings to prop them up), and all the other stuff is just fluff that stock brokers throw around so they can pretend they’re doing more than just making wild guesses.
“Nor do I need to.”
Stubbornly refusing to address the impossibility of calculation in your fanciful scheme does not give any credence to your scheme.
“The value of each share is 100 tons gold / number of shares.”
False right there as J. Murray has said. Please tell me why anyone else should value it at 100 tons of Gold/No. of shares.
“Obviously the number of shares should be such that the least expensive ride at the amusement park could be bought with one share.”
What about the rides that would require 1.1, 1.2, 1.3, 1.4, 1.5…. I hope you get the idea…. any fractional shares for it to be remunerative? How will payment be made for those? Further, let’s not assume that customers will want to pay only in shares of the amusement park. They would more often than not want to pay in common stock that they already own. These common stock may not be valued in terms of the prices of the rides at the amusement park. How then will these shares be valued and used to purchase rides at the amusement park?
Basically, you have just too many calculation problems to solve before you can claim any chance for your system to survive a single day.
“My position is that common stock as money can work without fractional reserves, usury or PMs.”
And my position is that common stock cannot work as money because it has insurmountable calculation problems. Until you can show how economic calculation is possible under your system, you cannot convince me.
Until you can show how economic calculation is possible under your system, you cannot convince me. Bala
You assume I wish to convince you. I am a libertarian. I believe a true free market in private money creation should do the convincing.
Let’s have one and we shall learn, imo:
1) Gold is a mutually agreed upon shared delusion of a mythical “store of value”. Its true store of value is legal tender status for government debts should it acquire it. Ironically, I imagine the gold-bugs will eventually seek legal tender status (or its equivalent) for gold for PRIVATE debts too!
2) Redeemable currencies are silly.
3) Performing assets are the true backing of a successful currency not non-performing ones like gold.
The fractional reserve bankers learned these things long ago and have been using them to loot us ever since. They have grown rich unethically. I show you a similar but ethical way and you claim it won’t work!
I really don’t care if you gold-bugs are convinced or not. Use your shiny metal to your heart’s content. However, if you seek government privilege for it then I object since that would be fascism.
“You assume I wish to convince you.”
I can see that you just wish to make random assertions that make no sense to anyone else and keep repeating them till the cows come home. Who am I to stand in your way?
” I believe a true free market in private money creation should do the convincing. ”
So do I. Just that I don’t see how it can work. Even the proposer refuses to explain how it will. I guess only a serious attempt on a free market can prove either of us right.
” Gold is a mutually agreed upon shared delusion of a mythical “store of value” ”
Wrong. Gold is a metal sought by people for ornamental purposes. Out here in India, people buy Gold not for monetary purposes but as jewellery. No Hindu marriage happens without the bride being decked (in keeping with the economic status of her parents) in Gold ornaments. So don’t even try telling me that Gold is a delusion. I couldn’t care less why people buy Gold, but the fact that they do and not for monetary purposes is enough proof that you are the one having delusions.
” Its true store of value is legal tender status for government debts should it acquire it. ”
Interesting hypothesis, except that it would help to know how you came to the conclusion that the “true” source of Gold’s value is legal tender status.
“Redeemable currencies are silly.”
In any case, Gold is not a redeemable currency. It is itself money.
” Performing assets are the true backing of a successful currency not non-performing ones like gold. ”
Once again, Gold is not a “non-performing” asset. It performs the role of a medium of exchange which is what money is. While it is prevented from doing this, it plays the role of an ornamental metal that people voluntarily seek.
“The fractional reserve bankers learned these things long ago and have been using them to loot us ever since. They have grown rich unethically.”
The looting by fractional reserve bankers is not the fault of Gold. It is rather silly to suggest it.
“I show you a similar but ethical way and you claim it won’t work!”
Frankly, it falls on your shoulders to back your own assertions, but you have flatly refused to.
“However, if you seek government privilege for it then I object since that would be fascism.”
Please specify who out here sought government privilege for Gold.
This bank has lasted longer than its predecessors not due to any particular advance in either banker intelligence or scruples, but because it has benefited from a gigantic military apparatus which has allowed the US Fed to export inflation around the globe.
What a paper currency needs is not a banker with the wisdom of Solomon and the morals of Jesus Christ and the Buddha, but an army with the ability to make people accept the unbacked IOUs, or else. It is a sign that The End is Nigh, that the US is now has only a handful of small, fairly unimportant countries remaining which it can beat up and force to accept greenbacks.
In the passage you cited the author isn’t counting the back door attempts at a central bank by Lincoln, Grant, and those corpulent Presidents from Ohio. I’ve usually ranked the Fed as the fourth bank of the US. “4BUS” for short.
Whatever their number, my point is that all those previous central banks had a shorter shelf life because at the time they existed it was physically impossible to force any larger number of people to accept the paper, other than the few million US citizens. And even the US citizens had the options of a wide frontier where barter was accepted and a porous border over which they could trade in solid, fungible commodities (like gold, silver, whale oil, liquor, perfume, silk, cattle, horses …)
The last, and longest-running central bank came into being at almost precisely the moment when the US created a navy and army capable of dominating any other country on earth, and eventually it became capable of dominating *every* other country. I think that the US Fed has set an all-time record for the existence of an unbacked paper money. I believe that there is no reason for this “success” (a successful case of banditry) other than the incredible and unprecedented ability of the US as a hyper-power to bomb, immolate, pulverize, blockade, invade and occupy any place on earth which doesn’t accept its paper.
That is why it is pointless to argue about whether this central bank or another bank is better, or which central bank governor is smarter or more benevolent. It’s not about economic management as such, but about violent power. As long as a government has a populace which it can physically force to accept worthless IOUs, it will do so. The central bank is merely the printing shop which fills the orders for more bits of paper. Whenever the government loses its control over the population, *OR* when it still has control but the population is literally saturated with paper-money denominated debt, the currency reverts to its actual intrinsic value in fairly short order.
I don’t doubt the connection between central banking and militarism in the US; but keep in mind other countries have central banks without a recent history of militarism.
Speaking of which, I believe the real reason Europe is much more socialist than the US is because American hegemony in Europe during the latter half of the twentieth century lowered the utility of militarism as a means of justifying government expansion. European governments turned to welfare-ism instead. Bourne’s maxim that war is the health of the state is not quite right. It would be better to say that crisis is the health of the state. “Free health care” doesn’t have quite have the same ring to it as “they’re comin’ to git us”, but it seems to work just as well.
Welfare is war. It just changes the face of the enemy from “foreigners” to “the rich”.
Welfare is war. It just changes the face of the enemy from “foreigners” to “the rich”. J. Murray
Who got that way in many (most, almost all?) cases via the “government backed counterfeiting (fractional reserve) cartel in the government enforced monopoly money supply”?
The US is a combined banker-fascist/socialist state. The rich steal via counterfeiting to be rich and the poor steal via socialism to survive.
Yet the Bible says “Thou shalt not steal” either from the rich or the poor. However, since the rich started the looting, socialism might be seen as a crude form of restitution.
J. Murray is correct: the welfare state is the warfare state turned in on itself.
Now you will object and say that it is backed by the assets of the company, but that isn’t backing. I cannot redeem the stock for anything except stock in another company. David Bratton
You cannot redeem the common stock at all. It would be silly to. Let’s say 3 of us own an ox equally. We each have 33 shares of Ox Corp. We make a good living renting out the ox for plowing. Suddenly you wish to redeem your shares. Shall we give you 1/3 of the live ox and ruin our business? Or shall we keep a dead ox around (and pay refrigeration costs) and give you 2/3 of the dead ox instead?
In the current economy I can redeem stock for money; but if stock were to become money then stock would be effectively nonredeemable. David Bratton
Redeemable currencies are silly. If you don’t like a currency then sell it. I once designed a bank model in Excel to see how banking could be done ethically. I allowed the currency to be redeemed in gold. I discovered to my amazement that the more people who redeemed their money, the greater the profit for the bank! Why? Because they were exchanging a performing asset (bank money) for a non-performing one, gold. Redeemable currencies are silly.
“You cannot redeem the common stock at all.”
Which is the very definition of unbacked. Thank you for finally making that concession, assuming you even realize you’ve done so.
Which is the very definition of unbacked. Thank you for finally making that concession, assuming you even realize you’ve done so. David Bratton
Insist on a redeemable currency if you wish but know that you are using the money of a bank with non-performing (dead) assets. That means that the interest the bank must charge will be greater and/or the interest it can pay on deposits will be less.
And why rent your money supply from a bank when you might create your own via common stock or accept the common-stock money of a good corporation and share in its profits via stock appreciation?
To each his own, though.
The banks just charge you some fees, but typically this is not very much. Peter Surda
I have discovered in my own life to be very suspicious of the word “just” such as “I just want to do-so and-so”.
As for the rest of your comment, capital gains tax and the Income Tax should be abolished too if we are to have a true free market in private money creation.
Well, it just happens that I transferred a large sum in a cross-currency bank exchange in December and the fee was below 0.1%. I was merely pointing out.
The example I provided applies to to other types of taxes, such as sales tax, with minor modifications. I only used income tax for demonstration. In the previous example (assuming 10% sales tax), if selling something for 100 Y, you would need to charge extra 10 Y for sales tax, but the obligation against the tax office would be 110 X (which has a market price of 11 Y). Again, a crowding out effect.
OK. So the capital gains tax, the income tax, AND sales tax might all have to be abolished. But here is an example of a simple tax I think is workable: The Federal Gasoline Tax which is a per gallon fee payable in government fiat. (I suppose this is an Excise Tax but I am no tax expert.) To pay the tax, one must have government fiat. And if one must buy the fiat with a private money form then free market exchange rates would always apply. (BTW, the government would never sell or lend its fiat. Nor would it borrow it.) Do you see problems with this simple tax?
I assume you are not familiar with accounting. It is irrelevant where you get the currency from, the tax owed to the tax office is not influenced by that. The point is that If you sell the gas for, say, 0.05 ounce of gold net and have to actually charge 0.055 ounce of gold due to a 10% tax, that does not mean that the tax owed to the government is equal to the market price of 0.005 ounce gold denominated in government fiat.
versus
These two sentences contradict each other.
I have to concur with other people arguing with you (e.g. Bala), you make no sense.
“the government would never sell or lend its fiat. Nor would it borrow it. ”
These two sentences contradict each other. Peter Sula
Not at all. What private money form should the government sell its fiat in exchange for? Your money form, my money form, all money forms, no money form? The libertarian answer is “all or none”. And if “all” (at free market exchange rates) then what will the government do with all those private money forms? Whose will it spend and thus effect it’s value? What order shall they be spent in? Mine first? Your’s later? All at once?
Thus government money should never be sold. It should only be spent and taxed.
Should government lend its money? The libertarian answer is “to everyone equally or to no one at all”
Obviously government should not be in the lending business either since that requires individual judgment that CANNOT be legislated. So government should never lend its money.
Should government ever borrow money? Whatever for when it can simply spend it into existence and tax it out of existence? To give an undeserved, risk-free gift to those with spare money to lend to the government? Is that not welfare?
I have to concur with other people arguing with you (e.g. Bala), you make no sense. Peter Sula
My position is internally consistent and throughly libertarian. I’m sad you can’t see it.
What’s truly insane is that you guys conflate liberty and PMs. Listen to yourselves. Liberty for whom? Gold mine owners? Usurers?
I shall of course oppose you if I can’t convince you, so help me God.
But what’s to argue about if you will just drop your outrageous attempts to have government sanction ANY private money form?
So Austrians, decide whether you are fascists or true libertarians. Don’t be hypocrites and claim to be what you are not. In that regard, Mussolini was more honest.
On the contrary. If the government does not sell or lend its money, noone can obtain it. If noone can obtain it, noone can use it to pay tax with. If government requires tax be paid in it, noone would be able to pay tax. But you said in the beginning that people need to pay tax in it. So, you contradict yourself.
It is completely irrelevant whether it’s libertarian or not. It’s self contradictory and contains plenty of vague areas.
Well, I consider it insane that someone prefers beliefs to logic, but a lot of people do it anyway.
“Not at all”.
On the contrary. If the government does not sell or lend its money, noone can obtain it. If noone can obtain it, noone can use it to pay tax with. If government requires tax be paid in it, noone would be able to pay tax. But you said in the beginning that people need to pay tax in it. So, you contradict yourself. Peter Surda
That’s pitiful. Will you play word games with me? I suppose your definition of “selling money” includes buying goods and services with money? Most people would call that “spending money”. But you strain out a gnat while you swallow a golden camel.
“My position is internally consistent and throughly libertarian. ”
It is completely irrelevant whether it’s libertarian or not. It’s self contradictory and contains plenty of vague areas.
What contradictions? As far as I know there are none on my side but plenty on yours if you claim to be libertarian. As for “vague”, ask and you shall receive. What do you find vague?
“What’s truly insane is that you guys conflate liberty and PMs.”
Well, I consider it insane that someone prefers beliefs to logic, but a lot of people do it anyway.
Actually I stood my ground well enough wrt logic. Delete all religious references and I have still refuted the gold-bug position using libertarian principles and logic alone.
As for your slight of my beliefs, by all means continue. There are Christian and Jewish Austrians. Please make it abundantly clear to them that you gold-bugs hold their beliefs in contempt.
Of course. I don’t consider money a praxeological term. Paying with money = selling money. So, you should have said “government would only sell money under certain conditions. At least in theory, that would fix my objection.
But there is still a problem. Since the government would only provide limited supply of its money, while expecting people to pay taxes for it, that would inflate the price of the government money and distort prices. While the restricted supply might curb government spending, it happens at the cost of higher price distortion. Should the government instead choose a currency that has wider circulation, the effect would be smaller while still preventing the government from using money printing to finance itself. While I am hesitant to call myself a gold standard proponent, at least I can see the logic in that position. If the government used the dominant privately generated currency (which, possibly, would be gold), to collect taxes, the price distortion effect would be minimised.
There are two sorts of currencies.
Those which come into use because people CHOOSE to use them.
And those currencies that people are FORCED to use.
“Legal tender” laws stink of the latter – even though the Constitution states that only “gold or silver coin” may be declared legal tender by any State , Article One, Section Ten, and that Congress only has the power to mint coin (not issue notes like the old “Contenantals” the real reason the Articles of Confederation did not work).
The United States would have a really good Constitution – IF there was any way to enforce it (the Supreme Court of judges idea has proved to be weak reed).
It is the gold (or the silver – or whatever people choose to use) that is the money – using names like “the Dollar” confuses the issue, by conning people into accepting (with the threat of government violence behind the con) that anything with the special magic name “Dollar” attached to it is money (even if it is worthless paper – or even computer entries).
The essential dishonesty of the government was shown by the 1850s ban on privately minted COINS.
The Constitution says that Congress may mint coins – not that it has to ban all private coins.
And in the West various private mints opened up (which took gold and minted it into coins – minus a weight of gold as payment for the minting).
This was banned in the 1850s not because the privte mints were dishonest – but to establish a govenrment monopoly.
What matters is the weight and purity of the gold (or whatever other commodity people CHOOSE to use as money) not magic names like “Dollar”, “Pound” and so on.
This must be kept in mind – it is the commodity that is the money, the notes (or computer entires) are simply claims upon it. Anything else ends in the fraud of massive monetary expansion – with the artificial “booms” and the very real (and free market detroying) “busts”.
The essential dishonesty of the government was shown by the 1850s ban on privately minted COINS. Paul Marks
Should the government be allowed to counterfeit private monies? Or force an exchange rate for them via legal tender laws and other means. Ans: No.
Now should private individuals be allowed to counterfeit government money even if they use gold to do so?
Yet that is what some of you seek to do. That is not libertarianism; that is fascism and hypocrisy.
The minimum price is always $0 because if it got to the point of liquidation, the entity would be so heavily indebted that it would be unable to fully cover all higher order claims before dissolution to shareholders. J. Murray
Always with the debt. First, I would never accept common stock money from a corporation with debt. So either it would never dissolve or if it did (for whatever reason I do not know) then I would still get a share from the liquidation sale.
No organization with sufficient resources to actually pay back shareholders ever liquidates. The actual price is only dictated by what someone else will come by and buy it off of you for. Nothing more, nothing less. J. Murray
Sounds reasonable. However, it is odd to me that the current stock price does not always at least equal the unencumbered assets of the corporation.
All the other fancy terms – earnings potential, mismatched value to share price (as Warren Buffet likes to say before begging Congress for bailouts and grants for his failing holdings to prop them up), and all the other stuff is just fluff that stock brokers throw around so they can pretend they’re doing more than just making wild guesses. J. Murray
Agreed! Our insane money and banking system makes prediction near impossible except for the tried and true method of robbery via government. Congratulations Warren on your investment “success”!
” I believe a true free market in private money creation should do the convincing. ” FB
So do I. Just that I don’t see how it can work. Even the proposer refuses to explain how it will. Bala
I did my best. I would bet that common-stock money would succeed but I can’t prove it. However, I do make a plausible case, imo.
I guess only a serious attempt on a free market can prove either of us right. Bala
Exactly. That is what I insist on, a true free market in private money creation.
” Gold is a mutually agreed upon shared delusion of a mythical “store of value” ” FB
Wrong. Gold is a metal sought by people for ornamental purposes. Out here in India, people buy Gold not for monetary purposes but as jewellery. No Hindu marriage happens without the bride being decked (in keeping with the economic status of her parents) in Gold ornaments. So don’t even try telling me that Gold is a delusion. I couldn’t care less why people buy Gold, but the fact that they do and not for monetary purposes is enough proof that you are the one having delusions. Bala
Yet in the US a simple band of gold will do. And the wife’s dowry might be the common stock of good corporations. Perhaps common stock is the mutual delusion of the West as gold is the mutual delusion of India. And I don’t deny that women’s preferences are a huge factor economically. Yet gold is static and a corporation is dynamic. Can the static compete with the dynamic? Can the dead compete with the living?
” Its true store of value is legal tender status for government debts should it acquire it. ” FB
Interesting hypothesis, except that it would help to know how you came to the conclusion that the “true” source of Gold’s value is legal tender status. Bala
History for one thing. I suggest Stephen Zarlinga’s “The Lost Science of Money” for more info. It is pricey ($70?) but worth it,imo. BTW, I do not agree with his proposed solutions which are socialist.
“Redeemable currencies are silly.” FB
In any case, Gold is not a redeemable currency. It is itself money. Bala
And so is common stock. But common stock is a performing money and gold is not.
” Performing assets are the true backing of a successful currency not non-performing ones like gold. ” FB
Once again, Gold is not a “non-performing” asset. It performs the role of a medium of exchange which is what money is. While it is prevented from doing this, it plays the role of an ornamental metal that people voluntarily seek. Bala
I would prevent nothing. However, only the government’s own money, fiat, should be accepted for taxes, not gold. That would rather cut down on gold’s exchange value, don’t you think?
“The fractional reserve bankers learned these things long ago and have been using them to loot us ever since. They have grown rich unethically.” FB
The looting by fractional reserve bankers is not the fault of Gold. It is rather silly to suggest it. Bala
Not at all. FR banking started with the goldsmiths. Bankers will almost invariably cheat with FR reserves whatever the backing of their money.
“I show you a similar but ethical way and you claim it won’t work!” FB
Frankly, it falls on your shoulders to back your own assertions, but you have flatly refused to. Bala
No. I showed you a perfectly reasonable (imo) example (the amusement park). I did my best.
“However, if you seek government privilege for it then I object since that would be fascism.” FB
Please specify who out here sought government privilege for Gold. Bala
Paul Marks for one and Gary North for another.
“I did my best.”
Your best wasn’t good enough. I have raised so many questions that you still haven’t answered that your amusement park example is looking really ridiculous.
“I would bet that common-stock money would succeed but I can’t prove it.”
Yes. For good reason. You will never be able to show how it will get over the insurmountable (for common stock as money) problem of calculation. Incidentally, you sidestepped my point that the main strength of Gold vis-a-vis your fanciful notion of common-stock-as-money is that Gold solves the calculation problem in a jiffy. It does not take a network of computers making complex calculations. It just requires a weighing scale and a means of measuring purity or, better still, a reason to trust it to be what it is claimed to be.
“History for one thing.”
I told you I live in India and see the reality of Gold purchases without State intervention in favour of Gold.
“I would prevent nothing.”
The State does.
“However, only the government’s own money, fiat, should be accepted for taxes, not gold.”
The thug has to ask for that which will get him what he values. If Gold is at any point of time serving the function of money, government benefits by asking for taxes in Gold. Why “should” taxes not be in Gold? Deuteronomy?
“FR banking started with the goldsmiths.”
This is not the fault of Gold either.
” Bankers will almost invariably cheat with FR reserves whatever the backing of their money.”
FR Banking grew because those runnning government saw that it is more beneficial for them to fail to do discharge their primary responsibility – defend property rights – and act in concert with the dishonest FR bankers. If governments hadn’t suspended specie redemption, enforced charters on banks, placed restrictions on inter-state branch banking and made redemption of notes and deposits difficult, I doubt FRB could have grown to be the monster it is. To blame Gold for that is rather juvenile.
“I showed you a perfectly reasonable (imo) example (the amusement park). I did my best.”
Your best wasn’t good enough. Your amusement park example was amusing but explained nothing.
“Paul Marks for one and Gary North for another.”
Does LvMI say that? In any case, I didn’t. So don’t even try that line with me.
Why “should” taxes not be in Gold? Deuteronomy? Bala
Because that would be government privilege for a particular private money form. That is fascism whether you know it or not. Besides being totally inappropriate (to any right thinking libertarian), it is totally unnecessary too. Government is force; it needs no other backing for its currency. However, some gold-bugs wish to co-opt that force to give value to their shiny metal. Nope, not this time.
As for your rejection of the idea of common stock money: Fine. Be content with PMs and usury. And when even 100% reserves and gold proves to be a disaster what will you do then? Allow fractional reserves and fiat again? Haven’t we been there and done that?
In any case, I didn’t. So don’t even try that line with me. Bala
Good! Though we disagree wrt common-stock money I appreciate a true libertarian.
“Because that would be government privilege for a particular private money form. That is fascism whether you know it or not.”
Fascism requires systematic violation of individual rights as a matter of government policy. Insisting on a particular form of money for payment of taxes is not a violation of individual rights. Nor is it a “privilege”. It is just an arbitrary choice.
It is a different matter that government should not even exist. As long as government exists, it has to make a choice. It cannot (for its own sake) accept anything that people want to throw at it. When you speak of government privileges as your argument against Gold, you are missing the woods for the trees. Get rid of government and your problem is solved. People would then be free to decide what to use as money, be it Gold or common stock.
“Be content with PMs and usury.”
Yup!! As long as opponents of interest persist in giving ridiculous arguments based on, believe it or not, religious texts, I will have no option but to laugh off their silly suggestions. The day they can give real arguments, I’ll take them seriously.
That apart, I don’t see how humans are going to give up on time preference. As long as that is true, interest will remain an inseparable aspect of reality and any attempts to abolish it can only end in human misery. So, I see you only as a proponent of human suffering to uphold unjustified and unjustifiable religious diktats.
Fascism requires systematic violation of individual rights as a matter of government policy. Insisting on a particular form of money for payment of taxes is not a violation of individual rights. Bala
I strongly disagree. If you insist that government may privilege a private money form then you are fascist. What’s the matter? Are you afraid that PMs truly are an inferior money form?
Nor is it a “privilege”. It is just an arbitrary choice. Bala
In that case the socialists may insist that all money be pure fiat for both private and government debts. If you insist on all the loaf or none then be prepared to starve. If you truly had confidence in gold then you would INSIST that it (nor anything but government fiat) be acceptable for taxes. Do you have that confidence?
It is a different matter that government should not even exist. As long as government exists, it has to make a choice. It cannot (for its own sake) accept anything that people want to throw at it. Bala
Where have I ever said that the government must accept any money thrown at it? Instead I have stated that all taxes be paid only in government fiat but that that fiat should only be legal tender for government debts, not private ones.
When you speak of government privileges as your argument against Gold, you are missing the woods for the trees. Get rid of government and your problem is solved. Bala
I seek to shrink the need for government via genuine capitalism. And if you say there is NO current need for government then you ignore the injustices that have occurred under our present system which you admit is unjust.
People would then be free to decide what to use as money, be it Gold or common stock. Bala
Of course. But until then we can be perfectly free to use whatever we wish for private monies. All we need do is insure that the government has a truly separate money supply and cannot tax us stealthily via money manipulation.
“Be content with PMs and usury.”
Yup!! As long as opponents of interest persist in giving ridiculous arguments based on, believe it or not, religious texts, I will have no option but to laugh off their silly suggestions. The day they can give real arguments, I’ll take them seriously. Bala
Karl Denninger makes a strong case that any debt based money MUST lead to the boom-bust/liquidation cycle short of fascist restrictions. Yet common-stock money requires no debt. That means common-stock money may be immune to the boom-bust cycle. Do you think that is an insignificant argument?
That apart, I don’t see how humans are going to give up on time preference. As long as that is true, interest will remain an inseparable aspect of reality and any attempts to abolish it can only end in human misery. So, I see you only as a proponent of human suffering to uphold unjustified and unjustifiable religious diktats. Bala
Then you are blind since I have already told you that I would never, ever ban usury. In fact, boom-bust cycles (caused by usury) have killed tens of millions and caused great misery.
What I am advocating is true liberty in private money creation, nothing more or less. If you reject that then you are a enemy of mankind, not me, and no libertarian either.
“If you insist that government may privilege a private money form then you are fascist.”
This is really funny. To make the matter simpler, answer the following question. If a trader refused to accept your common stock as money and insisted on your paying in Gold, would you consider him fascistic? It is his prerogative to insist on a preferred form of payment. The same goes for government.
What you fail to realise is that real facsism would be declaring it legal tender requiring private contracts to be necessarily settled in Gold. Demanding tax payment in Gold is not fascism. Incidentally, I would say the same thing about a proposal to accept common-stock as money for payment of tax. I am just saying that it is an irrelevant issue.
” What’s the matter?”
The matter is that you seem confused about the meaning of the term “fascism”.
“In that case the socialists may insist that all money be pure fiat for both private and government debts.”
This would be real fascism because it infringes upon the right of individuals to make contracts based on their own preferences.
“If you truly had confidence in gold then you would INSIST that it (nor anything but government fiat) be acceptable for taxes.”
This is a truly bizarre way of demonstrating “confidence” in Gold. The real way of expressing confidence is to say “I don’t care what you accept in taxes. I couldn’t care less if you insist on payment of taxes in Gold (or Silver). Just don’t force individuals to enter into contracts requiring settlement only in your preferred form of money. Don’t use the monopoly over the use of force that you have arrogated to yourself to favour particular forms of money in private contracts.”.
I do have this confidence.
“Instead I have stated that all taxes be paid only in government fiat but that that fiat should only be legal tender for government debts, not private ones.”
Ah!!! Why am I reminded of the Continental and the Greenback?
“I seek to shrink the need for government via genuine capitalism.”
I seek to eliminate government via genuine capitalism.
“All we need do is insure that the government has a truly separate money supply and cannot tax us stealthily via money manipulation.”
I am saying this is an irrelevant issue and that the only solution is to get rid of government.
“Karl Denninger makes a strong case that any debt based money MUST lead to the boom-bust/liquidation cycle short of fascist restrictions.”
Gold is not debt-based money.
“Yet common-stock money requires no debt.”
There you go again over-selling your bizarre notion of common-stock-as-money without explaining how it will overcome the insurmountable (for common-stock-as-money) problem of economic calculation.
“Do you think that is an insignificant argument?”
No. I think it is a foolish argument because I just don’t see how common stock can ever be money. Please explain how common stock will overcome the problem and function as money. Failing that, please do the courtesy of not touting it as a panacea or even as an option.
“Then you are blind since I have already told you that I would never, ever ban usury.”
“Abolish” does not mean “ban”. It means taking the goal of eliminating as an objective. Your suggestion of common-stock-as-money is rooted in the aim of eliminating usury. Hence, you are an interest-abolitionist (though you do not seek it through government fiat), however much you may rail against that label.
“In fact, boom-bust cycles (caused by usury)”
False. Boom-Bust cycles are NOT caused by usury. They are caused by credit expansion by inflating the supply of fiduciary media. Read up on ABCT. There are enough resources available at http://mises.org/books.
“What I am advocating is true liberty in private money creation, nothing more or less.”
So am I, except that I am also saying that government accepting only particular currencies in payment of tax has nothing to do with the issue at hand. I am also saying that your suggestion of common-stock-as-money still needs legs to stand on even as a conceptual possibility, leave alone a realistic possibility.
Oh, btw, since you made such a big deal about it, all private currencies including common-stock monies would have a free market exchange rate with regard to government money.
So a properly constrained government money would be as good as gold as a standard measure of value. I’d bet that it is a superior one.
Thanks for the debate. “Iron sharpens iron, so one man sharpens another.”. Proverbs 27:17
My thanks to the other folks on this site who have engaged me too.
“Allow fractional reserves and fiat again? Haven’t we been there and done that?”
Who are we to allow or disallow FRB? To disallow it by law would be fascism. To even talk of allowing reveals a fascistic mindset. All a free market needs is human liberty to choose one form of money over another. It requires systems to protect property and contractual rights. These will necessarily evolve on a free market. The only problem with FRB is government connivance. If that can be ruled out, the free market can take care of this fraud.
Who are we to allow or disallow FRB? To disallow it by law would be fascism. Bala
Good for you. However, I assumed you would ban it. My mistake. Without a lender of last resort in the case of fiat or suspension of specie redemption for private monies and with merciless application of fraud and insolvency laws, I have no problem with it. I had toyed with banning it with government fiat but have changed my mind recently.
To even talk of allowing reveals a fascistic mindset. Bala
True. I’m very glad to see you don’t have one.
All a free market needs is human liberty to choose one form of money over another. It requires systems to protect property and contractual rights. These will necessarily evolve on a free market. The only problem with FRB is government connivance. If that can be ruled out, the free market can take care of this fraud. Bala
Well said!
J. Murray is correct: the welfare state is the warfare state turned in on itself. The Anti-Gnostic
The US is a battle ground for fascists and socialists with only an occasional true libertarian. Many of the fascists think they are libertarian! And of course the socialists speak of “freedom from want” at the expense of others.
I fail to see any meaningfull difference between fascists and socialists.
Point taken. However, many libertarians have conflated liberty with shiny scarce metals. The true fascists can go jump. As for the socialists, I believe a good many of them they can be eased to a true libertarian position. Their hearts are in the right places in many cases.
I have raised so many questions that you still haven’t answered that your amusement park example is looking really ridiculous. Bala
What will be ridiculous and sad will be if gold is remonetized. Already the rise in price in gold has killed 284 Africans via lead in their water supply from the local gold mine:
http://www.businessweek.com/investor/content/dec2010/pi20101220_698752.htm
Actually, an “artificial gold” makes more sense. No mining required just a computer with a hard-coded “mining rate”. Still tyranny mind you, but more sensible tyranny.
“Already the rise in price in gold has killed 284 Africans via lead in their water supply from the local gold mine:”
Once again, you are blaming gold for a fault of the particular humans involved.
“Actually, an “artificial gold” makes more sense.”
This only looks like more dreaming given that your funny notion of common-stock-as-money has been sufficiently taken down.
“Already the rise in price in gold has killed 284 Africans via lead in their water supply from the local gold mine:”
Once again, you are blaming gold for a fault of the particular humans involved. Bala
And their fault is being poor? It does not take much to mine for gold. Millions of poor miners grubbing around for a primitive money form can do a lot of damage. California still bears scars from its gold-rush.
“Actually, an “artificial gold” makes more sense.”
This only looks like more dreaming given that your funny notion of common-stock-as-money has been sufficiently taken down. Bala
No. Just doing a little work for you gold-bugs. Remember, I once did not reject gold as a money form so I am familiar with the arguments for it. How lame and pitiful now they seem in comparison to a more sophisticated money form! But to each his own.
“And their fault is being poor?”
I sense severe comprehension problems. The “fault” I spoke of is that of miners who release lead into the water supply. The fault is that of governments for failing to ensure individual rights, especially property rights. Not of the poor who died of lead poisoning.
“How lame and pitiful now they seem in comparison to a more sophisticated money form!”
Sophisticated!!! I believe that’s the word that was used to describe paper money in comparison to Gold, which those very people considered a barbarous relic. Interesting that you use that word.
“Remember, I once did not reject gold as a money form so I am familiar with the arguments for it.”
Nor did you offer the least bit of justification for your fanciful scheme of common-stock-as-money. Frankly, this discussion is turning out to be pointless as you are stubbornly refusing to address the gaping holes in your position. So, count me out till you provide the necessary justifications.
So, count me out till you provide the necessary justifications. Bala
You are a very worthy opponent. You defend well what is increasing clear to me is an indefensible position. Who knew?
I’ll let you have the last word. I am sad to lose such a spirited opponent.
adieu
FB
“If you insist that government may privilege a private money form then you are fascist.”
This is really funny. To make the matter simpler, answer the following question. If a trader refused to accept your common stock as money and insisted on your paying in Gold, would you consider him fascistic? Bala
Of course not.
It is his prerogative to insist on a preferred form of payment. The same goes for government. Bala
Ever hear of “Equal Protection under the Law”? Shall your money form be privileged but not all others or should NONE of them be privileged? The difference between private individuals and government is the difference between voluntary cooperation and force.
What you fail to realise is that real facsism would be declaring it legal tender requiring private contracts to be necessarily settled in Gold. Demanding tax payment in Gold is not fascism. Bala
It still is fascism, just a more subtle form. It is an old banker’s trick going back to at least 1694 (BOE) to add exchange value to their money by having the government accept it for taxes.
Incidentally, I would say the same thing about a proposal to accept common-stock as money for payment of tax. I am just saying that it is an irrelevant issue. Bala
So you say. Then it should not matter then if gold (and all other private money forms) were completely unacceptable for taxes. Let’s err on the side of liberty then or do you prefer otherwise?
” What’s the matter?”
The matter is that you seem confused about the meaning of the term “fascism”. Bala
It is you and some other gold-bug “libertarians” who are confused. It is absurd on its face to conflate liberty with PMs. They have nothing to do with each other. You might as well conflate God with a golden idol and it is not blasphemy for me to say so since my God commands justice and desires liberty for His creatures.
“In that case the socialists may insist that all money be pure fiat for both private and government debts.”
This would be real fascism because it infringes upon the right of individuals to make contracts based on their own preferences. Bala
Practically speaking, via the Income Tax and Capital gains tax, we have that now.
“If you truly had confidence in gold then you would INSIST that it (nor anything but government fiat) be acceptable for taxes.”
This is a truly bizarre way of demonstrating “confidence” in Gold. The real way of expressing confidence is to say “I don’t care what you accept in taxes. I couldn’t care less if you insist on payment of taxes in Gold (or Silver). Bala
As long as it is a PM, eh? Some choice! And a choice that would require all tax payers to buy PMs to pay their taxes! Here is the fascism, that by government privilege all tax payers would be forced to buy PMs.
Just don’t force individuals to enter into contracts requiring settlement only in your preferred form of money. Bala
Agreed! I would restrict government fiat to legal tender for government debts only. The tax laws would be changed to prevent the hated stealth inflation tax.
Don’t use the monopoly over the use of force that you have arrogated to yourself to favour particular forms of money in private contracts.”. Bala
However, you think it is “irrelevant” that taxes be required in gold, a clear double standard.
I do have this confidence. Bala
Yes, the confidence that if the government requires PMs for taxes, it is mostly irrelevant which PM it chooses. If gold, then the rewards of fascism will be mostly confined to the very rich. Silver, being more abundant, would spread the spoils more widely.
“Instead I have stated that all taxes be paid only in government fiat but that that fiat should only be legal tender for government debts, not private ones.”
Ah!!! Why am I reminded of the Continental and the Greenback? Bala
The Greenback was legal tender for private debts too, if I recall. I propose no such thing EXCEPT for a general bailout of the population from under the current system before fundamental reform. Unlike the Austrians who deny the possibility of just restitution and insist on a Depression, I don’t.
“I seek to shrink the need for government via genuine capitalism.”
I seek to eliminate government via genuine capitalism. Bala
With the help of government privileges for PMs? Hypocrisy!
“All we need do is insure that the government has a truly separate money supply and cannot tax us stealthily via money manipulation.”
I am saying this is an irrelevant issue and that the only solution is to get rid of government. Bala
And how do you propose to do that? I offer a genuine proposal to shrink (and possibly eliminate) government and you just say we shouldn’t have one. But if we do have government, according to you, then it may be a fascist one by requiring that taxes be collected in a particular private money form, PMs, thereby guaranteeing, imo, that we shall NEVER be free of government.
“Karl Denninger makes a strong case that any debt based money MUST lead to the boom-bust/liquidation cycle short of fascist restrictions.”
Gold is not debt-based money. Bala
Gold is a non-performing asset or a non-performing money if you prefer. How will investment be accomplished without lending it at interest? Shall everyone just save their capital and not lend it? Then how shall capital be consolidated for economies of scale? Which brings us neatly back to the common-stock company which allows saved capital (not necessarily money) to be consolidated without debt.
“Yet common-stock money requires no debt.”
There you go again over-selling your bizarre notion of common-stock-as-money without explaining how it will overcome the insurmountable (for common-stock-as-money) problem of economic calculation. Bala
Economic calculation is not insurmountable since the government’s money would be available as a common measure. Doubtlessly, other private measures would arise too or is the free market incapable?
“Do you think that is an insignificant argument?”
No. I think it is a foolish argument because I just don’t see how common stock can ever be money. Bala
It’s not necessary as a libertarian that you understand everything. It is necessary that you be in favor of liberty, that’s all. Your judgments of what is “irrelevant” or “foolish” are irrelevant themselves to any true libertarian.
Please explain how common stock will overcome the problem and function as money. Bala
I’m trying to explain but that is not the key issue here. The key issue is whether all private money forms including common stock and your precious precious metals be allowed to compete fairly as private money forms.
Failing that, please do the courtesy of not touting it as a panacea or even as an option. Bala
I have only attempted to explain common stock as money here not because I wish to “tout it” but because I wish to make a plausible case that all private money forms should be allowed not just PM based ones.
“Then you are blind since I have already told you that I would never, ever ban usury.”
“Abolish” does not mean “ban”. It means taking the goal of eliminating as an objective. Your suggestion of common-stock-as-money is rooted in the aim of eliminating usury. Bala
Not necessarily. My interpretation of Scripture is that all usury between fellow countrymen is forbidden. But Gary North and other Christian and Jewish Austrians claim that it is only usury collected from the poor that is forbidden. All I insist is that usury not be privileged by government. Let’s let a true free market in private money creation decide if usury is truly competitive.
Hence, you are an interest-abolitionist (though you do not seek it through government fiat), however much you may rail against that label. Bala
False. Deuteronomy 23:19-20 allows interest to be collected from foreigners. I might be very happy to collect it from you! Because you are a foreigner? No but because your libertarian ideas are less than ideal. You may in fact be an unconscious fascist and the less money fascists have, the better!
“In fact, boom-bust cycles (caused by usury)”
False. Boom-Bust cycles are NOT caused by usury. They are caused by credit expansion by inflating the supply of fiduciary media. Read up on ABCT. There are enough resources available at http://mises.org/books. Bala
So I once thought. And it is true, imo, that FR lending greatly amplifies the cycles. However, Karl Denninger says that debt itself is the cause. He calls it the “Law of Exponents” or some such. And remember, I am a post-Austrian. Since you guys can’t seem to move on beyond shiny, scarce metals then I have moved on from you, by the grace of God.
“What I am advocating is true liberty in private money creation, nothing more or less.”
So am I, except that I am also saying that government accepting only particular currencies in payment of tax has nothing to do with the issue at hand. Bala
Indeed it does! How shall we ever have a true free market in private money creation if the 850 lb gorilla called government shows favoritism to a particular class of monies?
I am also saying that your suggestion of common-stock-as-money still needs legs to stand on even as a conceptual possibility, leave alone a realistic possibility. Bala
It is a work in progress. It is a plausible possibility however and I insist that it not be smothered at birth via government preference for PMs.
I don’t come here to tout common stock as money. I come here to insist on true liberty in private money creation to folks who apparently can’t conceive of anything but PMs and usury for that purpose.
Since the government would only provide limited supply of its money, while expecting people to pay taxes for it, that would inflate the price of the government money and distort prices. Peter Surda
Good catch. You have noticed that a potential problem now is government underspending wrt to a certain level of taxation. Yet the generally advanced problem is government overspending . So, at the very least, the problem of government spending has been bracketed.
While the restricted supply might curb government spending, it happens at the cost of higher price distortion. Should the government instead choose a currency that has wider circulation, the effect would be smaller Peter Surda
Excellent argument. However, while the gold-bugs would rely on an artificial constraint, the difficulty of gold mining to limit government spending, a better solution is to be found via Matthew 22:16-22, liberty and the rule of law. How could it not be so?
while still preventing the government from using money printing to finance itself. Peter Surda
Nice try but of course the government should print money to finance itself. Government is force. It should print money so people can pay their taxes with it. Or should we also be FORCED to buy gold (or silver) to pay our taxes?
While I am hesitant to call myself a gold standard proponent, at least I can see the logic in that position. Peter Surda
And you state it well.
If the government used the dominant privately generated currency (which, possibly, would be gold), to collect taxes, the price distortion effect would be minimised. Peter Surda
And how shall the “dominant privately generated currency” be determined? Shall we wait 10 years to see? Or shall it be a an immediate political contest between gold and silver bugs?
Comments on this entry are closed.