Michael Feroli, chief U.S. economist at JPMorgan Chase (michael.e.feroli@jpmorgan.com), stated that Ron Paul’s idea of returning to the gold standard would result in the exact opposite of what, in reality, it would result in. He implies that under a gold standard, financial markets would be volatile and would be based on manipulation of the money supply by gold producers.
In reality, asset prices on a gold standard could never rise over the long term—they could only fall. They would also be very calm, as there would not be new, fake money sloshing around. Indeed, prior to the Fed’s creation in 1913, most financial markets were very calm, even boring. Commodities in particular spiked stongly—periodically—in parallel to the bursts of money printing, and then fell again upon the subsequent monetary contraction. But all asset (and consumer) prices at the end of the 1800s were the same as the beginning of the 1800s, oil included. Indeed, if the banks had been restrained by a free market from creating monetary booms, commodity prices would also not have boomed. Equities and oil in particular were basically flat-lined.
In contrast, these days, with banks being able to print unlimited quantities of money, asset prices are very volatile and continue to rise. Feroli alludes to the OPEC cartel controlling oil prices (which they don’t). But the banks are in fact a cartel that controls—indirectly—ALL asset prices, including oil. Still, Feroli says that if the free market and gold producers supplied our money, prices would be high and volatile. In other words, what Feroli says would be the case under a gold standard would not be. It’s the case currently because Feroli’s industry is in charge of creating money instead of the free market. And, it’s absurd to think that scores of producers could control the supply of money—especially any more than the monopoly central bank does today!
Feroli knows better. He knows the real story. He lied in order to help is bank, his industry, and himself. Here is the email I wrote him:
Dear Mr. Feroli,
You stated:
“We would still have monetary policy – it would be set by gold miners in South Africa and Uzbekistan, rather than bureaucrats in Washington,” said Michael Feroli, chief U.S. economist with JPMorgan Chase.
“If you like what OPEC means for oil prices, you’d love what the gold standard would do to financial markets.”I’m sure your understanding of economics is not so little that you really believe such illogical, stupid statements. If it were, I would be happy to educate you. But indeed, it’s worse: you state such audacious lies merely to protect your employer and your industry. You want to keep benefitting at the expense of other citizens by redistributing their money to you, your firm, and to wealthy investors by way of inflation. You are actively promoting theft and the harm of millions of people. You will win, because people are ignorant enough to believe your propaganda. But no matter, it is immoral and unethical.
Sincerely,
Kel Kelly
Atlanta, GA
{ 136 comments }
Also, most of the gold ever mined is still in existence.
New annual supply from miners represents a small amount of the total gold ever mined. This suggests that gold is not very sensitive to annual mine production.
Michael Feroli should know that.
“…most financial markets were very calm, even boring.” If by most you mean, there weren’t banking panics in most years, I would agree. However, if you mean, that out of the tiny number of liquid financial markets prior to 1913 (a whopping 2 by my count) the majority was calm, then your statement is misleading. The fact that the gold standard worked when the level of financial intermediation was tiny is not an argument against the potential for volatility in today’s financial markets if you were to pull the rug out from under the system and hope they land on your golden floor right-side up.
“The fact that the gold standard worked when the level of financial intermediation was tiny is not an argument against the potential for volatility in today’s financial markets if you were to pull the rug out from under the system and hope they land on your golden floor right-side up.”
Oh, then what would work now? Make believe paper currency backed by nothing but empty promises? Please. How did the level of financial “intermediation” balloon to where it is now in the first place?
Who the hell are you, impostor?
“He implies that under a gold standard, financial markets would be volatile and would be based on manipulation of the money supply by gold producers. ”
HAHAHHHAHAHAHAH. Volatile markets? money supply manipulation? This is what he’s trying to save us from. HAHAHHAHAH HAHAHAHA
The old “theft” canard with regards to inflation. But people would find their debts more onerous under deflation? Not theft! By the same token, was Mel Gibson the victim of theft or is the $450 million not theft because the courts said so?
Canard, eh? Ok, step up and show us how it’s a canard. Of course it’s theft. You could not have deflation under a gold standard. Deflation is caused only by unbacked credit expansion (inflation), which could not exist under a full gold standard. You are likely confusing deflation with falling prices (under which debt is no harder to repay). Sorry, try again.
Under a currency that is monopolised and legal tender, it is theft. Now pipe down.
If someone (the State) forces you at gun point to accept their paper and pay taxes in it regardless of your contracts, while creating more of those papers and stealing your purchasing power, that is robbery of the highest caliber!
You three forget that inflation over the 20th was equivalent to an average annual “flat tax” rate of 2-3%. In other words if you consider inflation to be a “tax” then it has been lightest and fairest form of taxation.
“Flat tax”, and most other taxes, are paid on the difference of values, for example the amount you earn during that period. Inflation affects all available balances, i.e. is cumulative. It’s linear versus geometric progression.
Peter, I think you just exploded Gil’s brain. Well done. Small mess to clean up.
2-3% by itself isn’t so bad, but it’s on top of all the other taxes we pay. But couldn’t you also consider the business cycle caused by the printing of fiat money a tax?
And is this meant to be a counter argument to my explanation of State’s violation of property rights? Or are you just letting us know that we can be happy that most state currencies lost about 95% of their purchasing power since 1900s?
Tax is theft.
And people have lost 95% of the wealth of the year 1900 and living in desperately poverty.
@Gil
Perhaps in a relative sense, yes, poverty, not desperate though. And of course we still live with the business cycle, which real money would cure.
If prices increase by 3% because of money creation, when without money creation they would’ve fallen by 4%, then the inflationary effect of money creation is 7%.
Abe Foxman owns the word “canard”. Keep your mitts off.
Sure . . .
Math isn’t your strong suit then?
While Mr. Feroli could certainly have chosen much better words to critique Ron Paul’s Neanderthal views on monetary policies, he is at least a real economist (PhD from NYU). Not sure we can say that about Mr. Kelly.
No PhD, but he has an MBA as well as an MS in Economics. Says that on all his articles here (but not the blog posts).
So what? Shall we count the number of Keynesian PhDs who were busy cheering on and/or engineering the housing bubble? How about we compare that number to the number of Austrians (credentialed or otherwise) who predicted and warned of the bubble (and who were ridiculed for their “neanderthal” economic views)?
Why don’t you try counting them? I’d be very interested to see what you come up with. If you want to talk about neoclassical economists who were completely clueless I agree you’d have a rather long list, but there just aren’t that many prominent Keynesians because the fresh-water boys pushed them out of academia after the loathsome Milton Friedman captured the elites’ approval. Or do you think Robert Taylor is a Keynesian?
Are you a Keynesian? Have you ever read Keynes’ GENERAL THEORY OF EMPLOYMENT, INTEREST AND MONEY? Have you read Hazlitt’s THE FAILURE OF THE NEW ECONOMICS, or his (editor) THE CRITICS OF KEYNESIAN ECONOMICS?
Oh, those poor Keynesians. Nobody ever listens to them.
But I agree, things would be better if the die-hard Keynesians had their way. At least then the disaster would be so complete that they might finally shut the hell up (not likely, but you have to look on the bright side). Unfortunately, the politicians, central bankers and other Establishment figures aren’t that foolish, so instead we get the diluted, protracted, Friedmanized version of Keynesianism.
At least you’re a real idiot. We rarely see your kind here.
Oh yes. Because everyone with a PhD is an excellent economist per se, isn’t that right? It doesn’t matter whether one believes in Keynesian voodoo or is simply a state apologist trying to influence the policy for his own advantage (like JPMorgan thieves do).
LOL what is a “real” economist? “Economists” are so sensitive.
All that the PhD credential proves is that Feroli effectively swallowed hook, line, and sinker all the BS that was fed to him from NYU. It’s a simple economic equation really — Govt controls education as the vast majority of education is funded by govt. Ergo, educators are chosen who parrott economic ideas acceptable to govt. to gullible students who need the educators’ approval to get a good job. Kelly points out a similar perverse incentive regarding Feroli — that being that if you kill central banking and its magically expanding fiat currency, big bank monopoly profits will evaporate just like that. No more big salaries; no more big bonuses.
So, in a world filled with dangerous and perverse incentives created by a too powerful federal govt staring you in the face, you choose to hang your hat on academic credentials from a big govt captured institution? Now, that’s what I call Neandertahal thinking, BigEd.
Manipulations of precious metals can occur in different ways. Xtrata was and maybe still is a metals trader who realised that if it purchased a copper mining company in Australia named MIM Holdings and if it stopped production for a period, it could then reduce the supply of copper and therefore increase the price not only substantailly but enormously in the way of profits when a company such as Xtrata was not dealing in physical stocks of copper at that time but futures options and derivative instruments.
So too can the price of gold be manipulated by enticing strike action at various gold mining sites around the world by paying off the union bosses or militia who might be enticed with the prospect of higher incomes from time to time. Politics is a complex business, but the money making business is an even more complex business.
What Kel is saying is that these methods would be vastly inferior to the current money printing methods in terms of being used for theft.
They are also things you could hedge against by not placing everything into gold.
Personally, I think something like bitcoin is a better solution, if it can be made more palatable for the normal monetary “consumer.”
Gillysrooms, but even if that kind of occurrence could take place–and it certainly could not affect prices very much or for very long–that can not raise prices over the long term. And such actions could not take place very often, and could thus not cause very much volatility. This is why we don’t see such occurrences much, if at all, in other markets with other prices (volatility can come from nervous traders reacting to such news, but it cannot come from the news itself. And traders’ actions would be fleeting as information is absorbed). As Aaron said above, new supply added each year is small in relation to existing gold. That small of a supply change could alter gold price only a very, very little.
So you need to go to absurd lengths to try and have even a minimal effect on the price of metals where with paper you can just print it or increase digits in bank accounts. Yeah, I see the comparability of the volatility here. Striking.
“and if it stopped production for a period, it could then reduce the supply of copper and therefore increase the price not only substantailly but enormously”
Excuse me but which competitor is not going to pounce on the opportunity to fill this gap?
There is a way to investigate the benefit to thieves of metal price manipulation(that is to say, interference with the unhampered market with respect to market prices of metals) and fiat currency manipulation(violent monopoly control over currency, interest rates and such). The mind of a person is unknown to us, subjective to the outside world, so we cannot deal with intent very well. However, we can measure actions. Simply look at how eager the thieves are to continue the current system rather than rely on the distortions possible under the systems they denounce.
One might respond that they only have such a one sided interest because of their particular circumstances, and their actions which so overwhelmingly favor fiat currency do not prove anything. I won’t make a rigorous rebuttal here, but keep in mind that the market is a good measure of all the combined interests and circumstances. There must be very little sustenance to be had by stealing through manipulation of a commodity currency, else where are all the thieves of different circumstances in opposition to this liar for JP Morgan? No, thieves favor the lowest hanging fruit, just like everybody. In overwhelmingly favoring fiat currency, they betray its failures.
The options business, along with many of its associated derivatives (pun fully intended), largely exists due to the existence of fiat money and laws that mandate (for example) that people “invest” a certain proportion of their income in approved retirement plans. Some tens of billions every month “must” be so invested, and so the manic hunt for arbitrage opportunities has reached a level of frenetic mania that would embarrass a tom cat.
Associated with these mandates is the pretence that such business operations provide some kind of real and productive service (*more on that point, below), whereas the reality is that they are mostly scams and rorts of the first order. There was nothing productive about the ‘respectable’ business operations of Goldman-Sachs during the Fed-induced property boom of the early noughties. The whole business was a tissue of lies, a fraud on a global scale.
It is not that Austrians believe or teach that options should not be permitted, although they do teach that fraud ought to be illegal. But I hold that in the absence of the entire edifice of monetary manipulation, which includes the many mandates about what you must do with your money, and with whom, these businesses would never have grown to their present global-economy-threatening size.
Most people simply are not natural ‘investors’ in such schemes. Hence the coercive laws enacted on behalf of the scammers.
(* with respect to the usefulness of booms, busts, and their associated scandals: from a longer view, taking an historic perspective, one could argue that they do indeed serve a salutary purpose. They educate vast numbers of people as to the inherent dishonesty of the political and financial classes, as to the wisdom of hard money, as to the long-term consequences of greed as personal and public policy, and etc. But it takes a far more cynically detached – perhaps sociopathic – perspective to appreciate this view, than I am capable of maintaining. In the interim, a lot of people are badly hurt. I hold this to be a great evil, no matter what educational side-effects it might have.)
“He implies that under a gold standard, financial markets would be volatile and would be based on manipulation of the money supply by gold producers.”
As opposed to:
“He implies that under a [paper money] standard, financial markets would be volatile and would be based on manipulation of the money supply by [the government].”
I’m sorry (actually I don’t have to apologize), but I’ll side with the ‘evil’ gold producers any day.
Easy to refute. How much money really is in the gold-mining countries? Probably below 1 % of the complete gold production of all times. Anyway wanting Fiat-money is what all this manipulators like to have. A few zeros there a few less there and all will be fine ™….
“Indeed, prior to the Fed’s creation in 1913, most financial markets were very calm, even boring.” This is a delusional reading of economic. Perhaps Mr. Kelly picked this up from reading Congressman’s Paul’s newsletters written by Mr. Rockwell?
And regardless of what would gold standard bring or not, Ron Paul doesn’t want state money, mandated gold standard. He wants to repeal legal tender laws, remove capital gains on precious metals etc., halt printing of fiat money and ultimately allow currency competition so that people can move away from JPMorgan et al currency.
Inflation is not theft. It’s an externality. Changes of purchasing power are not violating anyone’s rights. However, that does not mean it’s good. As Mises and Rothbard say: a change in the quantity of money has no social benefit, it has a purely redistributive effect.
The real robbery is in the gun that collects taxes and enforces legal tender laws, including their latest incarnations, anti-money-laundering and anti-terrorism legislation.
Gold only fixes a part of the problem: the expansion of the monetary base. Bitcoin also fixes the second part of the problem, expansion of credit (see https://en.bitcoin.it/wiki/Fractional_Reserve_Banking_and_Bitcoin )
What about coiunterfeiting?
Is that theft?
(Yes, it is illegal, but it is not stealing, only a breach of government copyright.)
You are simply confused on this point.
Counterfeiting is, per se, not theft, similarly as copying is not theft. However, if you use a counterfeited bank note in a transaction, you might be, depending on the circumstances, committing fraud. If you take goods in exchange for a counterfeited note while misrepresenting the origin of the note, for example, you are committing theft, because the goods still belong to the original owner.
I base my arguments on the concept of property rights as originating from scarcity, and title transfer theory of contract as developed by Rothbard/Evers. I’m quite confident that the current proponents of the TTTC, such as Hoppe, Block or Kinsella, would agree with my explanation.
What does TTTC stand for?
http://en.wikipedia.org/wiki/Title-transfer_theory_of_contract
Interesting…
Since a counterfeiter could print P-notes at home, but this action alone would not confer any detriment to society at large so long as he kept this activity (and the products of his labor) to himself.
Fraud is theft. A person makes a trade under false pretenses which they would never have made if the truth was known. Using fake money to trade for something means you get a real good for something that is not real and cannot be used in turn.
(emphasis added) Manufacturing a piece of paper, regardless of its content, is not a trade. On the other hand, the use of a counterfeit document to obtain access to goods otherwise unavailable has nothing to do, per se, with the counterfeiting. Counterfeiting merely serves as a tool for a violation of property rights, similarly as a gun can be used as a tool for a robbery.
Why to you try to split hairs this way? It makes somthing meaningful, meaningless. Perhaps this is your intent? You think your duty is to “falsify” everything you touch?
Robbery is theft through use of force. Is it necessary to define the type or means of applying that force to understand robbery?
Armed robbery might be theft using a gun. If a hammer was used, it would still be robbery.
Counterfeiting is theft by way of copying currencies and putting them to commercial use.
Copyright vioaltion is theft by way of copying works and putting them to commercial use.
See?
My point is to expose the errors in my opponents claims by showing them they are self-contradictory. Thank you for confirming that you indeed contradict yourself.
Peter,
It’s been a nice respite from your nonsense.
Counterfeiting is, per se, theft, as is certain forms of copying, like counterfeiting and others.
Fraud is a form of theft; theft by deception and/or misrepresentation.
Perhaps you are splitting some kind of hair by claiming that MAKING a counterfeit bill is not a crime, but USING it is. Yet you have never extended this logic to other forms of dishonest copying; it is not a violation of anyone’s rights to make a copy of a book, only to distribute that copy to others, in principle.
Because people rarely do things for no purpose whatsoever, by convention making both copies of currency and copies of books is prohibited by law; it is presumed they will be used.
Both counterfeiting of currency and “counterfeiting” of books cause “inflation” by increasing supply.
…and who is Kinsella? Did he used to hang around here on Mises along wth that Tucker guy?
Yawn,
another boring, illogical, dogmatist post. Can’t say I missed them.
A joke perhaps:
A (G)uy is arrested and brought for questioning by the (P)olice.
P: You’ve been arrested in relation to a stabbing.
G: I did not stab anyone!
P: You were found carrying tools that can be used for stabbing.
G: Then you should arrest me for a rape as well?
P: Who did you rape?
G: Noone, but I have the tools.
Bye bye idjit.
Peter,
You are foolish.
If I generate inflation by printing more money out of “nothing”, the effect is beneficial to me, but detrimental to everyone else. If I own the printing press, I benefit at the exense of those who do not.
Therefore, a policy of monetary inflation is a policy of theft, which benefits the theif at the expense of the victims of price inflation.
Inflation is theft. It is not an externality, since each dollar I own competes wtih every other dollar for exchangable goods. I can never outbid a counterfeiter.
How can you get things so mixed up?
Somehow I think that repetition is necessary.
It is not detrimental to everyone else, only to those who receive the money late compared to the others, after prices have adjusted sufficiently. Furthermore, this effect is true of any increase of the supply of money, regardless of how it is produced.
I have presented a clearly defined and coherent framework to support my arguments. You apparently do not even know what “coherent” means, as demonstrated over the year you’ve been trolling here.
As usual, you want to disagree and debase the meaning of your own words to do it.
It is not necessary that a person EVER receive counterfeit money to be harmed, since the introduction of additional money CAUSES monetary inflation, which inturn CAUSES price inflation.
Counterfeiting, meaning a private, non-governmetnal agency being the producer of currency, breaks the exclusive ownership rights (i.e. property rights) enforced by the government agencies who are the only LEGAL producers of money. That is why we say that counterfeiting is ILLEGAL.
However, in both LEGAL and ILLEGAL money production, more money is introduced into the money supply, which causes harm to all users, but benefits the producers, as they have acces to the purchasing power that exists at the time of introduction, without having had to exchange anything of value (compared to the face value of the bill) to possess it.
Such a mechanism of “creating” value through simply printing yourself money, is a mechanism of theft.
Yet again you fail to address the errors in your claims.
Yes, I am such a failure. Thank you for setting me straight, O Great One!
Yes, it is a truism when Jesus was fasting in the desert prior to his ministry,he was tempted by the devil . On the third temptation, Jesus was taken up to a high mountain and shown all the riches around him. The devil offered all of these to Jesus if He will bow down and worship the evil one. But Jesus refused and said only the almighty God deserves to be worshiped.The point of this story? Jesus does not deny that the riches offered are the property of Satan, so it is Satan who controls the riches of this world. Now who are the richest people or organizations today? It figures.
It wasn’t riches but power that Satan offered Jesus as an inducement in the third temptation. Of course that devilish power is almost always used to illicitly take (tax) riches from others, but the crux of the problem is power, not riches. Here is how the incident (Luke 4:4-6) is translated in the New International Version of the Bible:
“The devil led him [viz., Jesus] up to a high place and showed him in an instant all the kingdoms of the world. And he said to him, “I will give you all their authority and splendor; it has been given to me, and I can give it to anyone I want to.”
Note that Jesus did not contest the truth of the devil’s claim. The completely illogical notion that some men somehow possess “authority” (presumed by most unthinking people to be a legitimate exercise of power) to rule other men without the others’ individual and explicit consent is, according to this passage, satanic. Because this concept of human authority to rule humans denies and destroys the principle of self ownership for the vast majority of the people of the world–the ruled–I conclude that the Bible got it right: it is satanic.
Peter Surda, I would argue that Inflation is indeed Theft as it is the actual redistributive effect which Mises refers to which is really causing inflation. What we are really experiencing is really all an illusion where for example infrastructure spending is made with printed credit $ of little real value [ maybe better explained as depreciated $'s ] but accepted by the unionized workforce as acceptable currency. If the infrastructure has a long life it would hopefully last longer than the eventual demise of the value of those printed credit dollars. The roads and tunnels continue to be a long time use asset of value for future commerce. It is another form of theft perpetrated by the State against its collective workers…by another name. Most politicians don’t wish to be seen to be stealing money through taxation, but rather much prefer to be ‘generous’ to their supporters by encouraging the creation of credit and the printing of new currency as many voters and politicians I might add, are unaware of the real slight of hand really happening before their eyes. Surely the inflationary effect of increasing dollars in an economy to avoid direct taxation must be viewed as another form of taxation by theft of the value against the previous supply of money. And might I add who knows which other arms of government might be printing American dollars which are so easily copied . Why have the USA Feds not at least looked at the system used by our Reserve Bank of Australia to make it impossible to copy?
One has to ask, if money printing and the associated creation of credit is so healthy, then why not let everyone “share in the wealth creation”? (as one former Prime Minister of Australia infamously put it)
Why does the Fed not simply mail bricks of dead Presidents to every mailbox in the country? Why does this banking cartel only distribute new money through its own members?
Those who argue that inflation is not theft, while ignoring the system in which the creation and distribution of new money takes place, and the laws that enforce the operations of this system, are deluded at best.
At worst, they are intellectual whores, 3rd millennium courtiers in the palaces of the elected nobilities.
(In between are an eye-watering lot of ‘useful idiots’)
Classify yourselves.
I do not dispute the redistributive effect, nor the decrease of value of money through increase of supply thereof, nor that it leaves vast parts of the populace at a disadvantage. But theft has a specific meaning and requires a violation of property rights. There are no property rights in value. On the other hand, taxation and legal tender laws are a violation of property rights. Inflation of fiat money piggybacks on them, same way as, say, tax consultants piggyback on them. They are both externalities, one negative and one positive.
Even gold increases its supply, slowly, through mining. This also has a redistributional effect. But it does not involve the use of force and is causing less disruptions than the manipulation by the central bank or fractional reserve lending.
Peter, what do you mean by gold having “redistributional effect”, due to an increase in its supply?
Any change of the money supply has a redistributional effect.
Gary North: Mises on Money:
So you’re jealous you don’t have a gold mine? Produce something of value to others. Seems gold mining would be a great business to get into.
I am making logical, value-free arguments, I am not assessing the emotional reactions or optimal investment strategies.
Peter,
Are you making some kind of technical argument concerning the meaning of the word “theft”?
All producers benefit from early access, since right to possession precedes trade. Gold miners possess the gold they produce (with some capital investments), and there benefit from the trade of it in the market.
If you are producing counterfeit bills, you benefit by early access to them, to the detriment of all of those down the line. Mises explained this mechanism very clearly.
The concept of theft is a taking of property without consent. In that context, counterfeiting is clearly a taking without consent. Even within your limited theories of scarcity, the purchasing power of money is based on its scarcity. Decreasing that scarcity also decreases its purchasing power.
If I pass you such a fine counterfeit bill that it enters the money supply and it can continue to be passed without detection, have I stolen anything? Yes I have; not only from the first person I passed the bill to, but to everyone else who uses that currency. I benefit from my early access to bill that I produce. You benefit more than the guy you pass it to.
Each transaction decreases the value of all other dollars relative to a given economic good. A policy of inflation is a policy of theft.
Another failure to provide a coherent explanation.
Mises argued that money is a separate praxeologicial category, and therefore is subject to different economic rules than production or consumption goods. This is what he said about the quantity of money:
and
To argue the reverse is just repeating the same error that you have been repeating with IP. It’s based on the fallacy of broken window.
Plenty of actions can have the same effect, i.e. decrease the purchasing power of dollar. For example shrinking of the economy (i.e. when people voluntarily switch to a different currency). You argument, as always, is illogical and leads to absurd conclusions.
Since, however, you have for one year avoided defining the components of this sentence, its repetition won’t make it more likely to be true.
Peter,
You always seem to assume it is my duty to start with you from the beginning, as if I am obligated to re-invent and/or define every word I use. Maybe I am mistaken in my assumption that you, too, come from planet Earth.
As usual, you jump to something that uses the words you think supports your argument (such as it is), but fail to understand the actual meaning.
Mises here is responding to the Keynesian assertion that the economy can be stimulated by monetary policy. That is the broken window fallacy. It is absurd for the reasons the broken window fallacy is absurd. If it were not, we could print ourselves into prosperity. This has little to do with the EFFECTS of monetary inflation on the value of the money that is being inflated, something that he also wrote on extensively.
The point is that no matter what the SOURCE of monetary inflation, it benefits those close to the source more than those more distant from the source. If you want to argue with me, argue against that assertion. Instead, you go off on a tangent. Figures.
Since I did not argue this, your criticism of me for doing so is nonsense. Do you have a point to make? Also, since I am not making this argument here, I do not see the connection to my position on IP, which you apparently never did come to understand. Figures.
I’m sure you are right; you can think of other actions to raise other than the one under discussion, which makes them irrelevant. For example, is it permissible to assume that this discussion about counterfeiting assumes the use of A SINGLE CURRENCY? Instead, you would rather interject some idea that seems to be loosely related to Gresham’s law, and assume at context that doesn’t actually exist? Ahem. I thought I was arguing with you about counterfeiting and theft.
“You argument, as always, is illogical and leads to absurd conclusions.” Precisely.
“The concept of theft is a taking of property without consent.”
Which words of the English language don’t you understand? And as is your habit, you neglect to indicate whether you think it false…or don’t you know what you think?
Wildberry,
as usual, you trail off into confusion and fail to address the errors in your claims.
Funny, but this is exactly what I said and what you objected to. You now agree with me that any monetary inflation is redistributive, while simultaneously claiming that the redistributive effect is the reason why counterfeiting is theft. You contradict yourself.
Peter,
You should read your own posts:
I never mentioned or address your redistribution theory of inflation. I don’t care. It is as obvious as saying that robbery is “redistributive”. Yes. So what?
I have claimed that counterfeiting IS theft. That is our disagreement. You are seemingly incapable of carrying on a rational discussion.
Wildberry,
maybe you should think before you write. I know that presents a big obstacle for you, but I’m not here to humour myself but to debate.
Here:
(emphasis added) You claim that the reason why counterfeiting is theft is that the “inflator” benefits at the expense of others.
Here:
and here:
You claim that it is possible to benefit at the expense of others without this being illegal.
So, you contradict yourself. An increase in the supply cannot simultaneously be, and not be, the reason why such act is illegal.
Peter,
It’s always interesting to go back over your posts. Don’t you find it just a little ironic that you would pull a something from Mises that supports exactly what I said, and what you claimed was contradictory? Yet when you say it, it sounds fine!
What I said was that those closest to production benefit most, and those close the source of monetary inflation benefit at the expense of those more distant, whether that source is counterfeiting or fiat currency expansion, or fractional reserve banking expansion.
All transactions, I suppose, no matter what they involve, have some redistributive effect, since they are after all AN EXCHANGE! Robbery, as I said, is also redistributive. So what?
Do you think it is some major insight to observe that an exchange is redistributive? Mere tautology…
You’re still having problems with elementary logic, and still are unwilling to confront your opponent.
The so-called authority to rule, make laws, print money, inflate, etc., is based on the forcible, violent, illicit human construct known as the State. Everything the State does is predicated on it being able to wield such overwhelming force that none within its claimed “jurisdiction” can successfully contest its illicit authority. The State itself in its existence is a violation of property rights, most insidiously the ultimate property right of self-ownership. Gold miners not committing fraud are bereft of the ability to violate property rights–unless by polluting others’ property.
The power to inflate the monetary base is a consequence of the power to tax and to enforce legal tender laws, banking regulations and so on. However, I disagree that acts causally related to a violation of property rights (consequences of violations of property rights) are a violation of rights as well by their own merit. This leads to absurd conclusions, such as tax advisors being a violation of property rights, or that us debating taxes is a violation of property rights. Atlas Shrugged is a consequence of Ayn Rand having lived in the Soviet Union. Does that mean Atlas Shrugged violates property rights? Of course not.
On the other hand, the power to inflate the money supply through credit expansion is not a consequence of the laws. I disagree here with Mises and Rothbard (and Block, Hoppe, etc). It’s the consequence of money substitutes having lower transaction costs than money proper. Without this condition, there is no expansion of credit. Conversely, in the presence of this condition, there will be an expansion of credit regardless of the legal system. If not through banks, than through other systems, such as LETS or Ripple. Unfortunately, even though they kind of dance around it, none of the Austrian economists I read explicitly formulate this and understand the full consequences thereof.
This is where Bitcoin comes in, because it can exist in practically any form, so an attempt to expand credit does not decrease transaction costs. It is a solution for a problem that the full reservists could not solve.
I am not defending the acts of state. I am merely interested in economics and attempt to make value-free statements.
Just to cover all sides, I also disagree with Selgin that credit expansion is a consequence of people wanting to lend money to the banks (make deposits). If money substitutes (or “inside money”, as he calls them) did not decrease transaction costs, making deposits would not lead to an expansion of credit. So his argument that the expansion of credit satisfies the depositor’s demand is wrong. Again, Bitcoin makes this implicit assumption explicit and shows that the demand for lower transction costs and demand to loan money to banks are two separate phenomena.
Sorry Peter, but I must demur. Your analogies are not persuasive. Inflation is exclusively a function of the State. It is not a consequence–unless you are referring to price increases as opposed to monetary inflation, which is not the Austrian way of looking at inflation. No other entity I know of but the State creates money out of thin air and forces people to use it. Those absurd conclusions of yours seem rather absurd to me. Nor do I think bit coins are the answer to State-imposed fiat currencies, although I must say they are an ingenious design to create money the State cannot manipulate. However, I fear an insufficient number of people throughout the world will trust them and use them, whereas gold has already found universal acceptance in exchange transactions. However, I don’t argue for a State-devised gold standard, rather I desire freedom for all to choose their money as readily as they choose the color of their socks–or going barefoot.
Dear Ned,
I humbly disagree. During its early years, Bitcoin has inflation that far outstrips traditional currencies. In the first year, inflation rate was infinite, in the second one 50% and an this, third one, 33%. Yet its usage spreads, because the size of its economy is growing too, as well as its value. It’s more of an empirical phenomenon than you admit. Nevertheless, within a couple of years, the inflation rate of Bitcoin will fall below that of fiat (2017) and gold (2021).
It is quite alright to be skeptical about Bitcoin.
Once the complexity of economy crosses the threshold of simple physical exchange, gold becomes impractical due to high transaction costs. This leads to the evolution of a banking system, money substitutes and FRB. Despite their efforts, the proponents of gold-based monetary system have not presented a solution to this. Bitcoin avoids all this, it has lower transaction costs than gold or the banking system. Whether this is enough to overcome the network effect of fiat is an interesting question.
Regrettably though, I simply don’t see how gold can compete against Bitcoin. Currently, regulation prohibits gold-based substitutes to compete with fiat (see http://www.thebitcointrader.com/2011/12/goldmoney-is-no-longer-money.html ), and even if it did not, I don’t see how it can decrease transaction costs of the dominant methods of payments (i.e. electronic ones). And once the fiat system collapses, how will you trade then? Will you have the right weights of gold available to do everyday shopping? The fiat-based banks will no longer operate. How long will you be willing to wait until a new banking system based on gold develops (if it develops)? Meanwhile, Bitcoin will continue to work and will still have the same low transaction costs that it has now, only the competition will be eliminated.
Sorry Ned, but I must agree.
Peter seems to be thinking that inflated currency is not used, or that if an economy is growing by some non-inflated measurement, that inflation cannot also exist.
He seems to be saying that an inflation rate of 100% is no problem as long as more and more people use the currency to make trades. This expains the “success” of bitcoin.
Peter is German, but perhaps he forgets that Germans used wheelbarrows to buy bread; certainly he would agree that the Weimer Republic printed money, lots of it.
Peter,
You should not speak so confidently of things you do not understand.
I don’t think your hero, Rothbard, would agree with your version of the history of banking. Perhaps you read his book?
Wildberry,
I see you’re up to your old tricks again.
If all else fails, make stuff up, and claim that your opponent claims something he does not. Ned claimed that “Inflation is exclusively a function of the State”. I showed him an example to the contrary. That’s all.
More made up stuff. I never said that “it’s no problem”.
I’m not German. More made up stuff.
While I could not find an explicit formulation that the reason why banking evolves is a decrease of transaction costs, many indirect arguments support this. There are many situations where Austrians say that bank notes are more comfortable to use than gold coins, for example. Regarding the origin of FRB, I disagree with Rothbard and side with White/Selgin: it evolves because it’s cheaper for consumers, not because the bankers want to rip them off. That this also leads to expansion of credit might be tragic, but it’s a simple consequence of economics rather than violations of property rights. Furthermore, bearer money substitutes are much more difficult to produce profitably without FRB and according to White never existed (I disagree, there are occasional examples of demurrage-based bearer bank notes, although they are not widely used).
Peter, Peter, Peter…
Inflation means, in AET terms, monetary inflation. Since the State has monopoly control of the money supply, they are the only ones (save the miniscule effect of other sources- i.e. counterfeiters) who can increase the supply of money. Therefore Ned’s assertion is true on the strength of basic logic. The state controls the supply of money. The State is the only entity who can increase the supply. Increase of supply is inflation. Therefore, the State is the only entity who can cause inflation; ergo it is “exclusively a function of the State”. That’s all.
No, I was paraphrasing. I was just going by what you said:
So, is inflation a “problem”, whether Bitcoin or State issued and controlled currency?
Peter is German, but perhaps he forgets that Germans used wheelbarrows to buy bread; certainly he would agree that the Weimer Republic printed money, lots of it.
Good. I’m glad we have that straight. Me neither. What about inflated currency? Can it still be used for trade?
This just goes to show that you will confidently make up theories and then explain them, when you have no idea what you’re talking about. This is the first I’ve heard that the FRB is there to help consumers and to make “bearer money substitutes” easier to produce. Perhaps you can correct Ron Paul’s understanding; I’m sure he would love to be “falsified” by you.
I have no interest in participating in Wildberry’s games. It’s no use to attempt to find a meaning in his arguments and attempt to confront them, since there is none. It’s just random sentenced gobbled up together.
Right. Well that was another waste of time…
Ron Paul doesn’t make use of ad hominem attacks and mistake them for a real argument like you did in your post. Neither does he call foremost for a gold standard, but rather allowing the market to decide what money is.
Not a single one of the points in your reply to Peter was a logical point. It’s no wonder it was a waste of time.
Mathiew, my good man.
First, where is the ad hominem? Peter can’t seem to respond to an assertion without going off on a tangent. I am very used to it by now.
Second, what does it take aroud here to have a reasonable discussion about anything? I spelled it out for Peter in simple declaritive statements. If you or he disagrees (or agrees) then just say so. However, to attribute assertions to me that I haven’t made is not a conversation.
So, do you have a problem with any of substance of my post, or do you just want to focus on my style?
Mathiew,
I almost neglected to respond to your reference to Ron Paul.
Let me help you. I was referring to Peter’s theories about how the FRB came to be and what its function is. I referred to Ron Paul because he knows something about the subject, and trust me, he is not saying anything like what Peter says.
I could have referred to Rothbard or De Soto. In any case, Peter puts these unique theories forward, with no support or framework, and when I call him on it, he gets all pissy.
My view is if you have something to say, say it, and don’t get pissy when challenged. Support your position like an adult. Too much to ask?
My reason for not addressing Wildberry’s “arguments” is that there is no such thing as his argument. What he presents is incoherent gobbledygook. It’s a fraud perpetrated on unsuspecting readers, simililar to Sokal’s famous paper. Except Wildberry repeats the trick even after being exposed.
Peter Surda,
Honestly speaking, I could care less what you do or what you think of me.
You are a whiner. You are now whining that, but for your constant vigilance, Wildberry would be free to pull the wool over the eyes of poor unsuspecting readers. What a CROCK!
You make these wild and far-reaching claims about things you seem to be poorly informed of, and then cry when I call you out. You can’t stick to a line of discussion to save your soul.
Unlike you, I have high regard for readers here, even those whom I disagree with. For the most part, they are fully capable of separating the dross from the gold, even without the supervision of Mr. Peter Surda.
If anyone reads back over this last exchange, it is obvious that I have no agenda other than to take issue with some of the nutty things you tend to say, as illustrated most recently by your “novel” theories of the history and purpose of the FRB. This trend of yours has been made abundantly clear in your ramblings concerning IP and other legal matters. You are the height of arrogance; you think you are smart enough to weigh in on subjects you know little about, and then attack those who try to lead you back to the facts. Rather than admit that you were just talking out of your ass, you pretend that I am just an imbecile. This is what the weak-minded do; you assume that I could only think you are wrong because I’m too dumb to know better.
In my view, the height of this kind of arrogance is made clear by your unwillingness to even acknowledge that anyone who disagrees with you can possibly know ANYTHING ABOUT ANYTHING. As a result, you place yourself out on a limb by making grand, uninformed proclamations, and then twist yourself into a logical pretzel as you saw that limb off from the wrong side.
I have not been making an argument today. I have just commented on some of your more outrageous pontifications. You are not my opponent. You are just a guy who likes to post here, but does not work very hard at conversation. You know way too much for that.
Thank you Wildberry for confirming my claim about the non-existence of arguments presented by you.
Peter Surda, Maybe you have hit on a very pivotally important aspect of all our thinking of what a government is really doing when it tampers with the money supply by increasing credit and printing more currency, because as you stated above…”There are no property rights in value. On the other hand, taxation and legal tender laws are a violation of property rights”. We may need to invite top silks and barristers to debate this interesting aspect of what violations are being committed if any as you assert and who is violating those inalienable property rights in value….Is there an implied value in the ‘natural’ supply of money without government interferrence…. or central bank interference? or private banking interference? I certainly will never be able to work it out and further complicated by international trade ..but others posters might.
Gillysrooms
According to Mises (and Rothbard and many other Austrians), any alteration of the money supply has winners and losers. Its particular incarnation, fractional reserve banking with its expansion of credit, leads, according to Mises, to the business cycle. The solution they propose is to have a monetary system that has a money supply as stable as possible. Historically, this has meant a system based on gold and full reserve banking.
Kel Kelly, do you have any credible information to show how much of the current stocks of gold are in the form of jewelry items and what percentage of each years gold ingot productions goes to jewelry or for industrial or electronic use and which percentage of gold is hoarded in private and government treasuries and where?
Might I also proffer the speculation that some countries whose currency is not market oriended and possibly worthless, may be using worthless currencies to buy gold bullion in preference to their own currencies for the day when gold becomes a world standard and obviously become substantially more valuable.
I would like to pose what I think is a pertinent question and ask which country is likely to benefit the most by us supporting the gold standard be introduced into the American economy?
Will it be the Arabs, the Chinese, the Indians or the Russians? Individually or collectively which of the beforementioned countries benefit most? How will the USA benefit the most in such circumstance?
Kel Kelly, do you have any credible information to show how much of the current stocks of gold are in the form of jewelry items and what percentage of each years gold ingot productions goes to jewelry or for industrial or electronic use and which percentage of gold is hoarded in private and government treasuries and where? Might I also proffer the speculation that some countries whose currency is not market oriended and possibly worthless, may be using worthless currencies to buy gold bullion in preference to their own currencies for the day when gold becomes a world standard and obviously become substantially more valuable.
I would like to pose what I think is a pertinent question and ask which country is likely to benefit the most by us supporting the gold standard be introduced into the American economy?
Will it be the Arabs, the Chinese, the Indians or the Russians? Individually or collectively which of the beforementioned countries benefit most? How will the USA benefit the most in such circumstance?
Check this out. It partially answers your questions. http://www.kitco.com/charts/CPM_charts.html
Thankyou e. It will help the debate.
Kel, do you have a source for the following comment you made in your blog; “But all asset (and consumer) prices at the end of the 1800s were the same as the beginning of the 1800s, oil included.”
Thanks!
jmorris84,
Here is information dating from 1665 to projected 2013. It is from Oregon State University.
http://oregonstate.edu/cla/polisci/faculty-research/sahr/sumprice.pdf
Plots of bond and stock volatilities for different countries going back 150 years
http://www.bis.org/publ/qtrpdf/r_qt0609i.pdf
If Mr.Feroli actually believes in his statements and whereas he is the Cheif Economic officer for JPM it would probably explain why the co. is “Loaded” up with too much debt. That may also lead to wonder how many other co’s coo’s believe that ideaology.
A state sanctioned gold standard is just as bad as a state sanction…anything. Period.
All of the comments I have read here seem to have STATIC arguments when in reality money and all its attributes are DYNAMIC. The following four (not in any priority order) are examples of the dynamic elements and the needed direction (low versus high):
Low Interest Rates
Low Inflation Rates
Low Unemployment Rates
and the number One most important is:
The speed in which money circulates through the hands of the buyers to the sellers, where each transaction creates a fair profit for the seller and a quality long lasting product for the buyer.
The taxation that occurs associated with these transactions whether through employment taxes, income taxes, corporate taxes, property taxes, or use taxes (all Federal, State, and Local) should be used to fund the government programs that business and individuals cannot or will not do whether it be building permanent long lasting infrastructure (Eisenhower’s Interstate Highways), reasonable and effective defense for the country (not global police force), and other necessary programs that promote our society (education comes to mind). Gold mining like all forms of our earth’s resources is only one of the basically constant elements that increases money supply very slowly. The printing of money to increase the supply and hence the speed in which money can circulate is far more important due to the multiple and dynamic transactions (and profits) that the money supply supports compared to the so-called loss in value of the money through government theft. Quotes and paradigms from 200 plus years ago may sound appealing, but most are only quaint sayings of their times when compared to the complexities of today; hence, none are truly applicable today.
If there are things that people will not pay for, then how do you know they are “needed”? How do you know what an economically-sound price for it is? How do you know when the State has spent more than the thing is worth, thus causing a net economic loss when it took money by force and spent it? What information do you use to calculate losses and benefits when you have destroyed the voluntary market for that good?
Also, what good is the mere increase in the velocity of money when it results in the dis-coordination between production and consumption? When it lures producers into inefficient allocation of time and capital into forms of production that are not supported by the true, unsubsidized, unstimulated demand?
1. If a product cannot be sold, it is not produced very long.
2. Sound price is cost plus fair profit, see 1.
3. For Infrastructure, competitive bids are taken and awarded to the best combination of price and quality. Same with products, competitive and approved product lists with prices. “Money by force” seems inflamatory, simply stated taxes are taxes.
4. I cannot think of a government procurement that has destroyed a voluntary market for a good. How about an example? But I was not really talking about government procurements of things that are normally provided by business or individuals. So I really do not understand what you are talking about here. If you are referring to the solar panel company in California, I think that is an aberration, not a typical issue. How fast money circulates is key to any economy.
5. The velocity of the cash moving through hand to hand by definition requires a seller and a buyer. Production should be geared to demand for the product and/or service, otherwise no sales are made and money does not flow. If someone borrows money or invests money or hires too many people in order to make a larger volume and associated profit, but there are no buyers, the person or company loses money. Again, there needs to be a balance of supply and demand. If the Government stopped buying nuclear bombs or nuclear power plants became illegal, then the nuclear industry would shrink rapidly. So generally, specialty government procurements may cause an up and down in a government focused industry due to changes in policy. Any defense industry could be subject to demand then no demand. There could be localized demand for concrete too, but these could expand and contract to meet the needs of both government and private industry.
6. Optimizing or enhancing the speed in which money circulates also means optimizing the supply to meet the demand and as I mentioned earlier is DYNAMIC (constantly changing).
You answered none of my questions.
Here’s what you need to focus on: “Production should be geared to demand for the product and/or service, otherwise no sales are made and money does not flow.”
How can this be done when the money “flows” by mandates backed up at the point of a gun? When the decisions on how to spend that money are made by people who do not depend on pleasing a paying customer?
The overall economic costs and benefits of, say, building a road are not accounted for by reference to competitive bids. The people paying for the roads did not choose to spend their money on road-building. The connection between the choice to pay and the good received was severed. It was severed deliberately, which is the whole point of paying for roads via taxation rather than paying customers in a voluntary market. The point of taxation is to isolate the expediture-deciders (and other decision-makers about non-monetary facotrs like location, type, materials, etc.) from the people who are paying for it all.
As a result, there is no feedback mechanism whereby the producer (the road-building company) knows what the payers want. When McDonalds changes the way they make fries, they have instant market information about whether they are meeting their consumers’ preferences. So too with every other economic decision that McDonad’s has to make — are they hiring enough employees, do they need to change their equipment, is the location, size and design of their physical space optimized, are they spending the right amount on advertising, etc.
McDonalds has loads of economic information with which to make all of these decisions, because no one buys their products unless they do so voluntarily. Every economic decision (thousands per day) is guided by this information, which tells the executives of the company if they are making good decisions or bad ones — decisions that constantly align with consumer preference.
Multiply that process by hundreds of millions of people engaging in market activity every day and you have the economy. Economic growth is the better alignment of production with consumption, and economic decline is the dis-coordination of production with consumption.
Road-building has none of this information, because the taxation system destroys it. How do you know if you have made road-building decisions that optimize the coordination of production with consumer preference? Consumers have no ability to exercise their preference, the way that fast food customers can go to Burger King or eat grocery food instead. Road-payers must pay whether they like the road or not.
How do you know if you’ve built too many roads or too few? If they are the right size? If they carry the right volume? Are designed with safety features that are cost-effective?
Have you factored the 35,000 people who die in crashes every year into your cost-benefit analysis of the economic soundness of road-buidling? I can tell you that if 100 people died in fast food restaurants every day, there would be a consumer shift away from that type of economic activity, rather immediately. But the road-planners don’t change things so resonsively, do they? What economic information are they basing their decisions on regarding rules of road use, enforcement and other safety features? How do the executives of roads (i.e., the State) know when they are spending too much or too little, or need to invest in different equipment, or hire more people or fewer, or train them differently? They all get paid the same, year in and year out, regardless of what choices they make.
Speaking of infrastructure, China built a whole city that no one wants. That’s a glaring example of statist decision-making that satisfies no one’s consumer preferences. That’s an economic waste, clearly. But the EXACT SAME WASTE is going on in every governmental enterprise, everywhere. The problem is that it’s impossible to measure the waste level until it reaches 100% (e.g., a wholly abandoned city).
We do not know if the Interstate Highway System is profitable or has yielded a net loss to the American economy. We have no pricing information from consumers to tell us, since road consumers must use those roads, and must pay for them, even if they would have preferred that roads had been located, designed, built, maintained and policed in completely different ways.
“The printing of money to increase the supply and hence the speed in which money can circulate is far more important due to the multiple and dynamic transactions (and profits) that the money supply supports compared to the so-called loss in value of the money through government theft. Quotes and paradigms from 200 plus years ago may sound appealing, but most are only quaint sayings of their times when compared to the complexities of today; hence, none are truly applicable today.quaint, your ideas certainly are.”
Talk about quaint; your ideas fit the word to a tee. Are you unaware of electronic money transfers, which constitute much of the monetary transactions that take place today, and which are as amenable to gold money as fiat money? Because governments have forcibly imposed fiat currencies upon their citizens, new, innovated developments to better facilitate exchange transactions have been substantially stifled. Use some common sense: a person like Steve Jobs would never waste his time and inventive genius in an environment controlled by the State, which stifles human creativity.
It is always assumed that the primary medium of exchange should also be a “store of value” when the three functions of money are listed. But stop and think – why? As it says here
http://fofoa.blogspot.com/2011_05_01_archive.html
As so often, you can find that Mises already said something that everyone is searching for. Why can’t something else be the “store of value”?
If we have gold trading freely (“FreeGold”) and NOT operating as “money” but floating against some other medium of exchange (notes issued by banks, walmart vouchers or some other “scrip” money or whatever, in any case something which is not judged on whether it is a store of value or not), then there is no longer any way the fractional reserve titles for this gold can enter the market (because you are storing your savings in gold, by definition something you’re not dipping into every day but holding for the future, and so the lowering of transaction costs by using paper titles is not a factor), therefore eliminating Peter’s complaint about using gold as money.
And if people issue too many of the short term medium of exchange, then it doesn’t hurt savers and aid debtors like money printing does now but does almost nothing, as the “price” of gold (and therefore people’s savings) simply rises, in time, to reflect this increase.
At present, I think this is what would happen if there was a free market for money, but I admit I don’t fully know what I think yet. Anyone have any thoughts on this?
Hello Kid Salami,
you present an interesting argument. I need more time to think about it. On one hand, I agree that those functions do not necessarily coincide. There are already examples of economists thinking along this path, for example Hayek’s competing currencies, or what is sometimes called “Black-Fama-Hall model”.
On the other hand, I think that on a free market, they tend to merge due to network effect, so I am skeptical about a model that is based separating them. It is also unclear to me how the “Freegold model” is supposed to fix the conflict between debtors and savers. Using a floating exchange rate between the two functions (medium of exchange vs. store of value) won’t change the core issue, which is that capital refers to scarce resources and will therefore be always a source of conflict.
I think that on a free market, money develops into the direction where a decrease of transaction costs occur, i.e. through a medium of exchange. If it is achieved through a money substitute, this has no effect on the store of value and unit of account function. If it is achieved as something new (such as government edict, or Bitcoin), this has a feedback effect on the store of value and a unit of account. A separation of these functions can occur due to exogenous causes, such as technological progress, legal framework, or depression/hyperinflation/fiat collapse, but it’s not a permanent state.
“won’t change the core issue, which is that capital refers to scarce resources and will therefore be always a source of conflict….I think that on a free market, money develops into the direction where a decrease of transaction costs occur, i.e. through a medium of exchange. If it is achieved through a money substitute, this has no effect on the store of value and unit of account function. ”
I don’t see this as the core issue – when anything goes wrt money then the very notion of “scarce” and “dollar” needs to be clarified and this is the core. As James Turk says here in a book review
I think that if all “money substitures”, either by law or by convention or a combination, always uniquely referred to either a specific weight of some suitable commodity or other quantifiable present good, or if there was a system like that of futures contracts so that even though more contracts than the commodity exist, the price/system is stable (in some sense), then there is no problem. I actually think a case can be made for this to be the law, that the entire notion of “redeemable on demand” makes no logical sense and contradicts other accepted legal principles/assumptions and is, rather like above, trying to change the meaning of the word year halfway through a construction contract so you don’t end up late.
However it seems to me that people just don’t want this, people just want to consume tomorrow’s productivity today and that increasing the money supply is the easiest way of doing this. i agree that issuing more gold certificates than there is gold just seems to be what happens – the fact that no’one would accept for a second more deeds to land than there is land or more log books for cars than there are cars doesn’t worry people, they’re trying to consume more than their fair share, not make logical sense. so the houses and cars are scarce capital but people deal with this just fine – most people don’t understand systems or the network effect though and so just don’t understand anything at all about money.
I think there is some evidence for FreeGold type scenarios in the past – ornaments and jewellry made of gold being valued greatly but changing hands rarely but everyday exchanges made using other less valuable commodities eg. copper/silver coins.
Kid Salami,
The (L)ender and (B)orrower are merely two parts of the same transaction. In time t1, the lender gives up X, and the borrower gains X. In time t2, the borrower gives up Y, and the lender gains Y. Using two different units with a floating exchange rate has no effect on this. The reason why there is a conflict is that B wants to maximise X and minimise Y, and L wants the opposite.
And I think that you are presenting a historical datum as an economic rule. The fact that a good with different physical attributes acts as a substitute for a different good, while a bit unusual, is not unique to money. Electronic books serve as substitutes for paper books. Not because the ebook gives you some legal claim to a physical book, but because the utility is, in some contexts, the same. Even better, often ebooks are more convenient, so in long term, you’d probably expect them to push paper books out of the market.
With money, the zero maturity and a common unit of denomination are merely secondary variables that affect the heterogenous substitututibility, but they are neither necessary nor sufficient. Zero maturity is imperfect, you have (or had, in the past) the suspension of specie payment clauses, and bank branches often require advance notice if you withdraw a large amount of cash. Common unit of denomination is not necessary around country borders, or online (and I’m not even mentioning Bitcoin). To concentrate on these two aspects is missing the point, which is transaction costs and network effect.
I don’t necessarily disagree, but again I think you’re concentrating on the less important aspect. If a money substitute has lower transaction costs than money proper, the latter will, ceteris paribus, push the former out of the market. And money substitutes require maintenance costs, and these need to be offset somehow: either you charge the parties involved in the transaction (e.g. demurrage, transfer fee) or you expand the supply (FRB). From the perspective of a single individual, the latter is cheaper, so again, ceteris paribus, will push out the former out of the market. This has nothing to do with particular time preference or an bankers wanting to scam people, it’s simple economics.
Because they deed does not act as a substitute for land. You can’t build a house on a deed or grow plants in it. Again, the phenomenon of wildly different goods acting as substitutes of each other exists in other products, such as books vs. ebooks, public vs. private IP addresses, and it also results in the same effects (expansion of supply at negligible cost). While we do have assorted people who claim copying is wrong, it is highly unusual for people to claim that using NAT is wrong on account of allowing more computers to be connected to the internet.
The fractional reservists, such as Selgin, realise that FRB is a logical consequence of gold being a basis for a monetary system. From this perspective, they understand FRB better than the full reservists. However, that does not negate Mises’ claim that any change in the supply of money has no social benefit. So, in a way, both sides are partially right and partially wrong.
Should be: If a money substitute has lower transaction costs than money proper, the former will, ceteris paribus, push the latter out of the market.
Can we can agree that it should be clear exactly what it is in fact that is being lent/borrowed? That owing someone 8 “dollars” is meaningless unless it is clear what a “dollar” actually is?
My gran used to use books to prop open doors. One item cannot, in a general sense, be a substitute for some other item, strictly it is meaningless to say this. Either it is indistinguishable from the original (and so not a substitute but in fact “it”) or if it is not indistinguishable then there is some mechanism to determine which is which, meaning some things can be done with one and not the other. Therefore, some subset of the possible uses of the original have to be specified and then one can declare that, wrt these particular uses, the item is a substitute. Whilst I’m being punch-in-the-face-worthy pedantic in 99.9% of scenarios, with money this is not so obvious – what is money? What is it being “used” for? There are simple answers to this from many viewpoints that people like to explain to me. I can recite these backwards – its not that I don’t know or understand them, it’s that I’ve thought about them for a long while and find them fundamentally lacking.
Yes – and what are touted as “money substitutes” are no such thing either, they are an entirely different good.
The reason there are two sides engaged in a flame war is that the debate is framed incorrectly. What I am advocating (though I stole this from someone else) as the sticking point is the store of value function – so the solution is the demonetization of gold – let something else be money so long as physical gold trades freely and floats against it.
Kid Salami,
My point is that a loan needs to be created at time t1 and extinguished at time t2. There are cases where more time points exist, but for simplicity we’ll ignore it. How this arrangement is represented between t1 and t2 is irrelevant, the point is that in each t1 and t2, a transaction occurs in the physical world (either a transfer of property rights or provisioning of some sort of service). Each of these transaction cannot have different physical manifestations for the parties involved. In t1, the borrower cannot receive something else than the lender lends, and in t2, the borrower cannot receive something else than the borrower returns. It is completely irrelevant how the monetary system works, or if there even is one.
I agree. In fact, I said the same thing several times in the past with respect to IP, the substitutibility is contextual. But you’re missing the point. For the purposes of our debate, the context is a use of a method of payment. The fact that this context is the purpose typically associated with the good/service (money), while strange, is not unique to money, nor praxeologically relevant. The purpose typically associated with books (reading) is also available in ebooks.
In fact, the whole issue of money is somewhat unpraxeological, since it is based on approximations. Money is defined as generally accepted medium of exchange. But there are situations where people reject money, either of particular units (e.g. foreign countries), or of particular form (e.g. cash vs. digital). Recently an exchange office refused to change my foreign coins because they would only take bank notes. Does that mean that the coins have unbecome money? No, just the context changed.
However, from the point of view of measuring supply, the physical distinction is irrelevant, similarly as it’s irrelevant whether gold is presented as coin, bullion, dust or nugget.
I tend to agree that decoupling the store of value and medium of exchange might fix the problem of elastic money supply. I merely do not understand how this either fixes the conflict between lenders and borrowers, nor how to maintain this separation. Let M be the medium of exchange and S a store of value. In order for M to be a preferred medium of exchange, it needs to have lower transaction costs as S. If it did not, people would use S as a medium of exchange. However, if it does, this would cause people to hold M for longer than necessary for the transaction (to avoid transaction costs from changing it back and forth to S), and this would elevate M to a store of value too. So I can’t see an equilibrium state. Even mandating this separation through a legal system might not have the desired effect, it might just create black markets, or switch to alternatives.
Kid Salami,
Always a breath of fresh air. How have you been?
I think what you say here is the crux of the issue:
I think the issue that Mises was aiming at is the Keynesian assertion that consumer spending drives the economy, and monetary policy is required to “regulate” economic growth, made possible by the mechanism of fractional reserve banking and fiat currency.
If dollars (say) were backed by gold, (or any other medium of exchange, as you point out), then this would destroy the Feds ability to issue currency (or substitutes) out of “thin air”, something which he argues is the cause of the business cycle. Keynesians argue the opposite position; requiring gold to back currency “inhibits” their ability to regulate economic conditions based on monetary policy. All those who have a stake in being in control of the money presses draw upon Keynesian theory to justify their positions. Mises has shown the falsity of that position.
It is not the attribute of gold as a medium of exchange, but as an immutable means of storing value relative to other things, that is relevant. You cannot counterfeit gold, for example. This is one attribute that contributes to its fundamental stability as a store of value.
Oddly, if the supply of fiat money was strictly limited in supply, say by constitutional authority, or something like that, it would begin to function much the same as gold. It is the fact that no one can increase the supply of gold (significantly) that makes it useful as a “standard” of relative value.
In a free market, participants would freely seek out stable stores of value to back transactions. I think that would eventually lead us back to the traditional stores of value: gold, silver, and perhaps precious stones. At any given time, the “value” of one could be calibrated by the value of another, and commodity prices could be easily converted into “gold equivalents”, silver equivalents, or say “diamond equivalents”, etc. They would not necessarily be stable relative to each other, though.
Estoy my bien – didn’t want to miss out on the fun of a “money” bun-fight. This isn’t my theory, I’m just debating it outloud to try to understand it better.
“In a free market, participants would freely seek out stable stores of value to back transactions. I think that would eventually lead us back to the traditional stores of value: gold, silver, and perhaps precious stones. At any given time, the “value” of one could be calibrated by the value of another, and commodity prices could be easily converted into “gold equivalents”, silver equivalents, or say “diamond equivalents”, etc. They would not necessarily be stable relative to each other, though.”
People clearly do this now – I store much of my savings in gold and silver, although this has resulted in much puking in the wastebasket of late. The difference is that gold does not trade freely now – “gold leasing”, to name one aspect, is the most ludicrous process i can imagine and is there only and solely to suppress the price of gold.
In a free or largely free market then if the government or whoever else issues the money being used issues too much of it, some competing currency may step in and take over. My point is though that is gold necessary to “back transactions” as you say? Need you have to “back” the currencies with gold? is it not just possible to price gold (or whatever people use to store value as opposed to use in transactions) in each one and allow people to choose? If a currency issuer performs a huge scam then they will effect only the currently active transactions and holders of that currency – not everyone, as would the issue of paper gold if gold is used as the MoE.
There is a theory that the Euro was designed to do exactly this. Frankly, I dont understand it yet – but it is a fact that the ECB reports gold on their balance sheet and marks it to market.
http://fofoa.blogspot.com/2011/07/euro-gold.html
Que Bueno!
Actually, I think you are right about the “storing value: comment; I recall justifying some money I spent on tools and other durable, useful items by thinking about them as “tangible assets” that would never have a value of zero, relative to some other economic good. Cash, on the other hand, can have a value of zero. Perhaps that is all that gold really is, relative to currency; a commodity whose value will never be zero. Or will it?
As to the concept of “backing” currency with gold, etc., I am not well informed here. I think I was alluding to your point when I said “in theory” a strictly limited supply of currency would show much of the same behavior as a gold-backed currency. What I mean is that one of the main arguments for gold-backed currency is to prevent the manipulation of the money supply, because the supply of currency is ultimately tied to the supply of gold. It is the manipulating of the money supply that drives the business cycle.
As I was trying in vain to point out to Peter, not everyone has an equal interest in this manipulation; those closest to the source, like counterfeiters, benefit at the expense of those more distant. This explains why governments benefit most from the existence of a central bank with money-creation powers, and why member banks benefit from the ability to loan money based on fractional reserve banking practices.
Like I said, I am not very informed about monetary theory, but I would speculate that the Euro was created in order for the central banking systems to gain control of the currency. Obviously Germany benefited greatly from this innovation, and is now exerting influence over Greece, for example, in ways they never could have after losing WWII. The problem, of course, is one of self-control.
Imagine yourself a counterfeiter, who produced perfect replicas of legal tender. The only restraint on your wealth was your self-restraint. Now imagine what would happen if you, with your unlimited production capacity, flooded the market with your bills in sufficient amounts to actually make legal tender significantly less valuable. You would have a repeat of the Weimer Republic hyperinflation. The only thing preventing this from happening is the self-restraint of government to assume debt in exchange for inflation; what we see everywhere today is the increasing lack of self-restraint.
You raise another interesting point that has some historical basis. The origin of fractional reserve banking practices actually began with stores of gold. The success was based on the fact that you could issue more “on demand” notes for gold than would ever be redeemed in the normal course of events. Only when there was a “run” and everyone tried to redeem their notes at the same time did it become obvious that the notes exceeded the stores, and the “bank” failed. In ancient Rome, such practices were punished by placing the head of the money changer on a pike in the square in front of the table he once used to engage in this deception.
Apparently, as a civilization, we have become a little more tolerant of monetary inflation.
I think you are right about the “local” effect of this practice in a free market; only those who hold the particular notes backed by redeemable gold (in the past the notes were specific to a specific “store” of gold). It would not affect holder of different notes. You are assuming a situation where transactions could be conducted with various currencies. Actually, this can is is done today, but it increases the transactions costs to have multiple currencies floating around. I think the market wants to have one (or at least a very small, familiar number) currency for most day-to-day transactions. There is nothing stopping anyone, even here in the US from using any tender they wish for private transactions. It is difficult to get someone to take Canadian coins, even, primarily because it increases the transaction costs to take and exchange a foreign currency, even if the exchange rate is relatively stable. The discount rate required to overcome this cost makes it impractical to deal in the foreign currency.
I am thinking of the issue not on a local scale, but on the scale of sovereign issued currency. Recall that one limitation of a “note” currency is the lack of uniform acceptance. This was a severe limitation on trade, as holders of notes could only redeem them against a specific bank (or merchant, etc) that issued them. One merchant is not likely to accept a note from another, except on deep discount. This is also part of the history of banking.
Bad money drives out good; why pay good money for something when you can use debased money and keep your gold (Gresham’s law)? On the other hand, why would you take debased money when you could demand gold? This explains why in ancient times, the acceptance of a currency would be established by making it legal tender for paying taxes. This built-in demand insured that its value would never drop to zero. This cannot work it seems to me, in a purely free market, where money is only in demand if it will be accepted widely in exchange for other economic goods. In such a context, traders would bargain not just on the “price” but the price as calibrated in a specific medium of exchange. I think this is probably the mechanism that establishes a currency as a widely accepted medium of exchange; transaction costs and velocity tends to cause a particular currency to emerge as the commonly accepted MoE.
Again, history supports this view. The word “dollar” as the denomination of US currency originates from the use of silver Spanish dollars here. Because it was considered a fair and honest weight of silver, it was widely accepted in trade, and was available in a small enough denomination to make it possible to use in reasonably small transactions, facilitating economic trade between individuals.
Unfortunately, once a currency used widely as a medium of exchange, it is subject to manipulation. Roman coins, when collected for taxes, were clipped, thus removing some of their gold, which was then used to inflate the money supply. Eventually, the coins were exchanged on a discount, but received full value for paying taxes. In effect, this is what is happening with the dollar and euro today. With time, the currency is continuing to be debased by monetary inflation, and the result ultimately must be what happens with the counterfeiting hypothetical I posed above.
While you may be puking in the waste can now, your holdings of gold and silver will never be worth zero. In the meantime, you are the victim of commodity volatility, like everyone else.
Here is a question for you: I have foregone the gold speculation, and hold dollars and securities. I have made about 12% on my securities investments. You, like many, have increased their stores of gold and silver as a hedge for inflation. Depending on if you have been long or short, you have either seen good appreciation in your holdings, or have been a victim of your buy/sell timing, whether you win or lose in the short game.
The presumption underlying a gold hoarding strategy is redeemability. Since it is always worth something, if you hold it you will always have the means to exchange it for needed commodities, like food.
On the other hand, if you hoard food, like some survivalists do, or you control major distribution channels, like Cargill, say, you will have no trouble trading your food for gold at a deep discount.
My question is, even if in the short run I starve and you don’t, what is the outcome in the long run? Do organizations like Cargill end up owning the food AND the gold?
Moronberry,
Actually, you provided convoluted nonsense, simultaneously claiming that the redistribution is, and is not, a reason why the act is illegal. Whereas I pointed out clearly several times that the redistributive process of value caused by a change of supply is a present in all goods, and has nothing to do with the legality of the act. Then you made up a lot of other stuff and attempted to divert the attention from the errors you committed.
@Peter Surda December 31, 2011 at 5:18 pm
Actually, you provided convoluted nonsense, simultaneously claiming that the redistribution is, and is not, a reason why the act is illegal.
Please show me where I made such a rediculous statement. If you cannot, then tell me why you are saying I did. And you are acusing me of making stuff up?
Ah, I see you’re back to your old tricks, where you suddenly suffer from a loss of memory.
Poor Peter Surda; can’t put up and can’t shut up.
I’ve read this a million times. Wihle it makes sense – but I think it is clear that gold “backed” money always results in frb. Like I say, I think that frb makes no logical sense whatsoever, but people seem to want it, bankers and public alike.
Yes, and I think the public are “wrong” to accept/want frb, they’d be better off without it, because it is without any question a transfer of wealth from those who don’t understand money to those who do understand it and are closer to the spigot. But who cares what I “think”? I’m saying that the 100% reserve solution to this problem, while logical and otherwise appealing on many levels and which I’ve advocated myself in the past, is not going to fly and so am positing/predicting another solution (one which in fact has existed at times in the past).
De Soto says exactly this happened to banker’s heads in Barcelona in the Middle Ages in his book, either you’ve mixed up the place or its happened twice, in which this seems to be a pattern – hopefully the entrances to branches of Goldman Sachs will have some visual treats in the future (although it’s the government to blame, not them really….).
Only temporarily, I’m saying that the competing mediums of exchange would eventually settle down into one or two dominant ones which would be hard to dislodge and so would have relatively long lifetimes (this time being a function/trade-off between of the transaction costs and the amount of debasement on the part of the issuer). But nowhere near as long as it will take to dislodge gold from its position as the store of value.
It is hard to get hard facts about this as they are almost always written as part of the flame wars between 100% reserve/frfb/government control of money and I don’t trust what I read. But this is certainly an issue yes.
In short, I’m saying gold should be demonetized so this doesn’t arise.
What taxes are paid in, if they have to be paid, creates a problem. I don’t know the solution to this. But the freegold solution doesn’t care who debases the primary MoE or how much, as its effect are local – this is the main strength of it.
I’m not sure I understand the question, no’one can end up owning all the food and all the gold if they have to give away their food to get the gold, because then someone else will own the food. If you mean will they still hold the capital goods required to grow and distribute food as well as the gold, then yes they may well end up, at some point, with this and lots more gold than they started with.
And I’m not expecting Mad Max and people feasting on people’s brains in a wasteland like some but yes you may do ok if you hoard food in a timely fashion to prepare for life after the coming financial catastrophe, but
“To oversimplify wildly, the reason to buy gold and silver is just that everyone else should buy gold and silver, too.”
http://www.safehaven.com/article/5205/why-the-global-financial-system-is-about-to-collapse
Buying gold is the Nash Equilibrium. (BTW John Law is obviously a pseudonym, the writer of this piece is better known Mencius Moldbug, which now I think I presume is also a pseudonym.)
Kid Salami,
I couldn’t agree more.
Kid,
I’m burried right now and wish I had time to respond to your thougtful post here.
In short, yes, I pulled that exampled from DeSoto from memory, and obviuosly got the place wrong. I should have looked it up. Anyway, let’s start with the heads of Berneke Geitner, and Dodd-Franks. Oh, let’s not forget Greenspan.
I think people support the FRB because of how and why it was originally sold in 1913; as a “cure” for bank failures. Somehow the trauma of your savings disappearing suddently behind locked bank doors seems worse than your savings disapearing over time from price inflation. I think it is the frog-in-hot-water scenario; sudden changes are more noticeable, if you only raise the temp a little at a time, the frog will boil himself. We are killing ourselves showly, from a historical perspective.
I’m not sure I grasp all that you are saying here, but I think that FRB is the main culpret. No matter how that is curtailed, it will diminsh the business cycle. There is probably more than one way to skin a cat.
I remember reading somewhere where a small island nation printed limited fiat money to build infrastructure to facilitate off-island trade; airports, roads, bridges and such. In this very limited example, it did the trick, sicne they could not raise capital in any other way. Obviously if new money is printed every time baby needs new shoes, it will crash the currency. Nearly 100 years of inflation by the FRB is a pretty slow rise in money supply until very recently. People are just being slow to catch on, but they seem to be.
More later. Nice to talk about something other thanIP. btw, what ever happened to Kinsella? He seemed to vanish along with Tucker??
BTW a very good article, thanks for the reference.
Kid Salami,
Most people do not store their savings in gold (I think you have some numbers in the article you originally referenced). I think that gold does trade freely, it is still quite liquid. It is just not used as a medium of exchange.
I’m obviously aware most people don’t save in gold so it doesn’t seem necessary for you to point this out to me, I was just noting that _some_ people do now.
Of course you can buy gold and sell it – since when is this sufficient to define a free market though? Houses are bought and sold freely also, but surely no’one can deny that the price of houses is wildly different to what it would be without the government sponsored credit expansion and interventions in the market place – the gold market is vastly more distorted than this and so cannot be said, in this sense, to trade freely.
I agree that the gold markets are regulated, but the same is true for fiat money. I don’t see how gold is particularly penalised. In fact, it has some legal advantages, for example, in some circumstances it is VAT free. What is penalised is the issue of debt instruments (securities). This is not particular to gold, it affects almost everything.
Does anyone know what the supply of gold was in 1800 and how much extra gold had been produced in those gold rushes and booms as experienced in California and Australia since the 1850′s to 1900 and how much gold has been produced during the next 100 years to year 2000?
Australia now has vast open cut Gold Mining production as has Africa and other countries and are producing gold at a faster rate than during the times when hundreds of thousands of prospectors travelled to places like Ballarat, Bendigo and St Arnaud to extra millions of onces of gold. Have I made a correct assumption that we are extracting more gold in modern times than say between 1800-1950 ? Places like St Arnaud in Victoria 3478 still has vast reserves of gold except that EPA restrictions have deterred Mining operators from starting extraction. I have two questions
1. If we had been operating on the gold standard would have inflation still have occurred to the extent that the extra gold had been producted?
2. Could a country like Australia use its proven “gold in the ground reserves” just as mining companies now do anyway to calculate their earning capacity ….claim that that undug gold as part of it gold standard backing. At the moment we have many futures traders pre-selling undug gold resources…so why could not a country claim those reserves under crown law. Im somewhat surprised that a government has not started a futures trading contract to sell its future taxation takings from the mining tax…am I giving anyone any ideas… Michael Feroli might write up a special report to his board to maybe suggest such a scheme?..lol
I really dont believe Michael Feroli chief U.S. economist at JPMorgan Chase is a lier but rather that he realises that one man alone in the Congress even Ron Paul as President will have little hope in convincing the other members of the Congress and the Senators even the Republican Senators such as supported by Donald Trump to change the system which allows property speculators to make huge amounts of money through financial inflation.
The banks themselves are not concerned that the ‘stocks’ of deposits /money they hold are losing value as they are not the ones losing the value as long as they can make a margin on relending or trading the financial instruments in the market place. The deposit holders are the losers first and last not countting the added risk of losing the $capital in the event their bank makes too many mistakes and defaults altogether…but that is another story.
In Australia we have a policy named the “Superannuation Guarantee Levy” the title was poorly chosen as there is no guarantee that there will be any pot of gold at the retirement of its beneficiaries. The scheme requires that every employer must pay a levy 9% now rising to 12% of any wages paid to its employees. Many employees belive it is a great idea when the hear the Actuarial figures of the $millions which will be available on the retirement of the workforce in various years into the future. All I see the levy is a guarantee to lose money and lose jobs as this type of impost ontop of other costs is making our workforce even more uncompetitive as compared to places like India and China. It has become self evident in recent times as we have banks using cheaper Indian telemarkerters to sell products at full Australia prices or using such cheap workers to do accounting and debt collection services to name a few.
Our government members both Left and Right of the divide believe or have been led to believe that it is a grand solution for people to be able to look after themselves in retirement with the accumulated funds and capital gains earnt by prudent investment by expert bankers……yet I have not seen any evidence since the scheme began that the beneficiaries/workers have advanced in any positive manner….most claim that their balances have been reducing. The only beneficiaries have been the bankers who manage these funds earning enormous fees irrespective of profits or loses on the stock markets and the brokers who earn from the trading transaction fees. Our government maybe the only government on earth which is forcing employers to place limited business funds into a government supported by but NOT GUARANTEED money losing scheme, all the while still believing the contrived statistics and indices which they and their acturies claim will eventually deliver great dividends because the indices always go up after they go down. What a laugh if it were not a serious matter.
These uneducated lazy Australian politicians are no different to the YES MINISTER politicians and candidates who occupy many of positions in the American Congress and which I believe RON PAUL will have to contend with if he was to gain the confidence of the American voter in the coming election. Ron Paul is a not only a real geniune person but he is much wiser than combined intellect of the entire administrations put together, but I have my doubts that he will have the power to change the direction of the American economic model on his own. His campaign is turning heads and he is winning debates with plain and simple logic ….but will it be enough and will the Republicans support him or will we end up with one of the same other disgraceful selection of undiciplined candidates. If the republicans really believe in financial and diplomatic responsibility then they can do no better than Dr RON PAUL. I’M SURE his logic alone will lure voters of both sides to come out in their droves to vote for him without any grand promises. Consider your verdict.
You’d think the way Austrian Economists carry on that the gold refining chart would be on a downward slope because all the easy-to-get, large nuggets were done in ancient times and people nowadays are scratching for dust however most gold has entered the system in the last 60 or so years.
Sorry for some spelling errors but I ran out of time as I learn how to correct mistakes. But I’m sure readers will still understand my meanings.
Just found this in one of our daily papers in Melbourne owned by Rupert Murdoch which if the story is true…….. Australians are the world’s wealthiest people on a median basis and second behind Switzerland on an average basis, according to a Credit Suisse Global Wealth report.
The report claims Australian adults are worth nearly $US221,704 ($215,525) each on a median basis, which is almost four times that of a US adult.
Individual wealth has been boosted by the strong Aussie dollar, high levels of property ownership and a robust job market.
Any comments?
That report sounds as dodgy as a $9 note.
Does Rupert Murdoch’s News Ltd own FOX NEWS?
Surda and Kid Salami;
About everything I was tryin to say is stated eloquently in this article by Rothbard.
http://mises.org/daily/5188/The-Austrian-Theory-of-Money
Surda, now what was your criticism again???
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