federal reserve conspiracy!!! [Archive]

TruthSeeker1234

15th July 2007, 11:03 AM

Sorry, I should have also linked to the companion article.

http://www.strike-the-root.com/4/baker/baker1.html

Here is a quote from it, that describes who is stealing from whom.

Suppose you had a printing press in your bedroom and you could create counterfeit $100 bills that were so realistic that not even a bank manager could tell they were bogus. And let’s say that you cranked out a cool $1,000,000. You haven’t built a house, or grown food, or made any clothes, or anything else that people actually need. So while you have created new and additional money, you have not created any new and additional wealth. The total amount of real wealth in the world is exactly the same as before you printed the money.

Now let’s say you take the million bucks and buy yourself a nice little condo at the beach. At this point you have certainly increased your own personal wealth dramatically. Yet since there is no more wealth in total, then logically somebody, somewhere must be poorer as a result. But who? The guy you bought the condo from is O.K., he’s happy with the $1,000,000 which he can turn around and spend on something new for himself.

At first glance it might appear that no one was hurt by your counterfeiting scheme. But this is not true. Because there is now more money being spent on the same amount of goods and services, the prices of those goods and services must go up. Which is another way of saying that every dollar is worth less now than it was before. Prices don’t go up all at the same time, of course. Instead, price increases ripple through the economy in waves, affecting some people sooner than others. This is key to understanding who benefits and who is hurt by the creation of new money. The early receivers of the new money benefit, because they have a chance to spend it before prices go up. The late receivers of the new money get screwed. By the time they get their hands on the new money, it’s too late, prices have already increased.

Jonnyclueless

15th July 2007, 12:00 PM

I wish I had a web site to make all my arguments for me....

Thank god we have these cult web sites who are well practiced in economics to figure this stuff out for us. If only they would share their vast economics understandings with the economic scholars of the world. Until then the economics experts sit inept and unknowing of how economics really work because the people running the cult web sites don't teach them what's really going on.

It's a travesty...

AlanGreenspan

15th July 2007, 01:54 PM

TruthSeeker1234 in your analogy you assume that the entity holding the monopoly power over money creation takes active part in the economy, that is: buys goods and services with the money being issued. In the real world economists advocate for an independent central bank (the Federal Reserve and Chile's Central Bank are good examples) with the very purpose of avoiding the analogy you are trying to make.

By the way, can you please point to Von Mises' argument against fiat money?

kookbreaker

15th July 2007, 02:10 PM

GregoryUrich

15th July 2007, 03:37 PM

OK, so as I understand it, the FR hating nutters want the FR removed becuase it makes money that is not backed by gold. Even though there is nowhere near enough gold to back up the money in circulation today?

Now, their complaint is that money is only of value because we have a faith in it as currency. Wheras gold has value because....its shiny and somewhat rare?

Maybe the FR hating nutters want the FR removed because it is privately owned and helps a small number of very wealthy people to maintain their economic hegemony.

Any time the money supply is increased the money is either lent out by the FR or the FR purchases securities or other assets. The FR charges interest on all loans (including new currency) and has an unfair advantage in other open market operations.

For example:

When the government needs to borrow money, tax payers end up paying with interest. The interest ends up in the hands of private corporations which own stock in the FR.

If the FR purchases securities or other assets, these are bought on the open market except the FR has an unfair advantage because the FR can create money thus devaluing other private competitors assets.

Oliver

15th July 2007, 04:13 PM

I can't wait for the day when Money is removed from the marked and replaced with digital Data on your RFID-Chip.

I already hear "them" scream: "Let's get back to the Paper-Money so we have ANYTHING backing up the digital money". ;)

3bodyproblem

15th July 2007, 04:17 PM

I love how people think that somehow backing the currency with gold is more stable.

Gold is shiny so it has value? I say we back the currency with chocolate. Chocolate is more tasty and makes me feel better than gold.

(oops, sorry kookbreaker, i just read your post. great minds)

JamesB

15th July 2007, 06:55 PM

Maybe the FR hating nutters want the FR removed because it is privately owned and helps a small number of very wealthy people to maintain their economic hegemony.

Any time the money supply is increased the money is either lent out by the FR or the FR purchases securities or other assets. The FR charges interest on all loans (including new currency) and has an unfair advantage in other open market operations.

For example:

When the government needs to borrow money, tax payers end up paying with interest. The interest ends up in the hands of private corporations which own stock in the FR.

If the FR purchases securities or other assets, these are bought on the open market except the FR has an unfair advantage because the FR can create money thus devaluing other private competitors assets.

Uhh, no they don't. The Fed is not a for profit organization. It is regulated by Congress. Any money they make in excess of their expenses is paid by to the Treasury, last year it was something like $29 billion. The Fed also does not "create" money. All they do is buy up and sell treasuries (which they are not responsible for creating in the first place) to keep the money supply in check. The Fed also does not print currency, the treasury does.

But other than being factually incorrect on every count, I have no problem with your post.

Jonnyclueless

15th July 2007, 06:59 PM

But James, you have to admit, that doesn't sound nearly as exciting as what Gregory is saying. Where's the action? Where's the adventure?

GregoryUrich

15th July 2007, 07:14 PM

Uhh, no they don't. The Fed is not a for profit organization. It is regulated by Congress. Any money they make in excess of their expenses is paid by to the Treasury, last year it was something like $29 billion. The Fed also does not "create" money. All they do is buy up and sell treasuries (which they are not responsible for creating in the first place) to keep the money supply in check. The Fed also does not print currency, the treasury does.

But other than being factually incorrect on every count, I have no problem with your post.

Part of the Feds expenses is 6% interest on all member deposits payed the the member banks. Not for profit, my batooti.

In order to increase the money supply, the Fed creates money to buy treasury bonds the money is allocated to the member accounts and then used to make the purchase. Alternatively, the newly allocated funds can be used in open market operations.

I never said the Fed prints money.

Go read something reliable about the Federal Reserve System and get back to me.

Dr Adequate

15th July 2007, 08:12 PM

When the government needs to borrow money, tax payers end up paying with interest. The interest ends up in the hands of private corporations which own stock in the FR. Tell me, how does one buy stock in the Federal Reserve?

Dr Adequate

15th July 2007, 08:13 PM

Part of the Feds expenses is 6% interest on all member deposits payed the the member banks. This is barely English, let alone high finance.

What are you talking about?

Abbyas

15th July 2007, 08:54 PM

Part of the Feds expenses is 6% interest on all member deposits payed the the member banks. Not for profit, my batooti.

In order to increase the money supply, the Fed creates money to buy treasury bonds the money is allocated to the member accounts and then used to make the purchase. Alternatively, the newly allocated funds can be used in open market operations.

I never said the Fed prints money.

Go read something reliable about the Federal Reserve System and get back to me.

Yes... if people put money in the bank, they are entitled to some recompense. That's called a savings account.

Otherwise regarding profit: all of the profit from the Fed goes directly into the US treasury.

Also, again, though these people have stock (not talking about deposits here), they don't have the same control over the Fed that a commercial stockholder does.

And, what, since you've studied the Fed, are the other ways in which the Fed increases the money supply?

Why is it that people act like inflation never happened pre Fed Reserve?

Max Photon

15th July 2007, 10:13 PM

---

OahuOahu,

For years I have been a student of synthetic currency, and the cloaking of the 1971 US default on its international gold obligations (a declaration of insolvency).

IMHO, you can do no better on the subject than the works of Antal E. Fekete

I recommend starting with the awesome short series:

The 10 Pillars of Sound Money

Here is the link to the webpage that has the links to the series.

http://www.shoemakerconsulting.com/GoldisFreedom/default.htm

(If you click on individual articles, and then look at the very bottom left, there is a button that shows the article with white background / black text - much easier to read.)

Here is a link to the first in the series:

http://www.shoemakerconsulting.com/GoldisFreedom/PVFfiles/firstpillarpvf.htm

Give his work a chance, and you are in for some serious clarity.

(He's also fun to read.)

Regards,

Max

---

Pardalis

15th July 2007, 10:22 PM

Hey looky here,

Max Photon is here!

hellaeon

15th July 2007, 10:33 PM

PhantomWolf

15th July 2007, 10:33 PM

I think that most CT's see money and wealth as a static item and that there is only so much money in the world. Thus they reason that if someone else has a heap of money and they don't, then this is unfair and they the other person has their share. They don't seem to understand that money is expansionary and that by going and getting a job and working hard, one can make money quite successfully. Of course they could also try swiddling their fellow CT's, I hear that works pretty well.....

kookbreaker

15th July 2007, 10:47 PM

Why is it that people act like inflation never happened pre Fed Reserve?

Yeah, but inflation is just not the same without bank panics, rare metal shortages, and coin recalls.

Abbyas

15th July 2007, 10:52 PM

Yeah, but inflation is just not the same without bank panics, rare metal shortages, and coin recalls.

Ah, the good old days. Remember It's a Wonderful Life? Bank runs can lead to angel wings.

And by the way, that whole kookbreaker's day thread with the xmas bit? Still laugh at the thought of that months later.

Pardalis

15th July 2007, 10:54 PM

Hey, looky-here,

Abby Scott Is here!

Good to see you :)

Abbyas

15th July 2007, 11:08 PM

Hey! Everybody is here!

Good to see you, too, Paro.

uk_dave

15th July 2007, 11:25 PM

Do you wear a superhero suit when you surf the net?

:D too funny

kookbreaker

15th July 2007, 11:32 PM

Ah, the good old days. Remember It's a Wonderful Life? Bank runs can lead to angel wings.

And by the way, that whole kookbreaker's day thread with the xmas bit? Still laugh at the thought of that months later.

My humor is subtle, subversive and lasting. Like a five wheeled biodesiel Honda. :P

Glad you liked it. :)

TruthSeeker1234

16th July 2007, 01:32 AM

Hi Abby.

Abby and I had an email conversation about economics. Abby is indoctrinated in the mainstream Neo Keynesian money multiplier nonsense that has so utterly failed to explain or predict anything.

I'll remind everyone that in the 1920's, when the price levels were stable, and the US economy was booming, it was Mises and Hayek who explained why this was a time of great inflation (Rapid money creation with the brand new Central Bank). Using Mises' "Theory of Money and Credit", they deduced the "Austrian Business Cycle Theory". They said that the artificially low interest rate was causing investors to over-invest in capital goods industries, and under-invest in consumer goods industries. Consumers were demanding more consumer goods, but the distorted price signals were causing investors to "mal-invest". The economy was being pulled in two directions at once. Mises and Hayed predicted the great depression. Repeatedly. For a couple of years straight.

Austrian Business Cycle Theory is correct. I invite you all to learn it, it's actually quite straightforward, and has tremendous explanatory power.

Fiat money is theft. I notice that nobody has even attempted to disagree with my explanation, which is taken directly from Mises, Rothbard, Riesmann, Hoppe, et al. Wealth is transferred from late receivers of new money, to early receivers of new money, and most of all to the monopolistic creators of new money.

The Fed and the Treasury are a partnership, they act in concert. Central banking is a government operation in every sense of the word. It is allowed to appear "private" on paper, so that there is a justification for its total secrecy.

We often refer to the "printing" of new money, without literally meaning printing currency. New money is created out of thin air by the issuance of new debt. The government creates an IOU called a treasury bond, which is purchased by the Fed with a check drawn on the Federal Reserve. The government can then write its own checks to buy what it desires, thus diverting resources away from the consumers who otherwise would have enjoyed them. These government checks end up in commercial banks, who then count that as additional reserves. For every checkbook dollar in additional reserves, the commercial bank can make six dollars in new loans. The money supply is now larger.

The real world methodology is complex, but the economic analysis really is the same if we imagine that the executive branch of the government has a printing press and simply prints bills of any denomination and spends them at will. It is theft. Theft is immoral. Thieves are bad guys. They should be stopped from thieving, and punished.

TruthSeeker1234

16th July 2007, 01:49 AM

TruthSeeker1234

16th July 2007, 01:59 AM

OK, so as I understand it, the FR hating nutters want the FR removed becuase it makes money that is not backed by gold. Even though there is nowhere near enough gold to back up the money in circulation today?

Now, their complaint is that money is only of value because we have a faith in it as currency. Wheras gold has value because....its shiny and somewhat rare?

Wrong all the way around. There is plenty of gold, because any money supply is optimal. Prices adjust. The free market will expand the supply of gold as demanded, the same way it expands the supply of anything else. If gold were to somehow become so scarce as to inhibit the function of money, the market would seek substitutes, as it does with any other commodity.

Gold spontaneously became the world standard money because of the market, not because of anyone's personal taste. It turns out that gold has the qualities that make for a well-functioning money. Had you read my article , you would know this now. The qualities are:

high demand
high value to weight ratio
durability
divisibility
interchangeability

Sword_Of_Truth

16th July 2007, 02:47 AM

As I said once before, I once ran for office under the banner of the Alberta Social Credit Party. It's been a long time since I was involved with this stuff, but I'm seeing alot of familiar terms being tossed about.

I'm curious, Ace. Could you explain to me what exactly is the difference. if there is any, between Von Mises theories and those of Clifford Hugh Douglas?

AlanGreenspan

16th July 2007, 04:39 AM

@GregoryUrich

Maybe the FR hating nutters want the FR removed because it is privately owned and helps a small number of very wealthy people to maintain their economic hegemony.

Well since you are so sure The Fed is "privately owned" i guess you'll have no difficulties listing the banks for which each of the members of the board of governors work for. The same goes for the chairman.

The Federal Reserve is not privately owned, its member banks are.

The FR charges interest on all loans (including new currency) and has an unfair advantage in other open market operations.

Why does it have an unfair advantage on open markets operations?

When the government needs to borrow money, tax payers end up paying with interest.

You do know that's what it happens with any financial institution, right? Just checking.

The interest ends up in the hands of private corporations which own stock in the FR.

Which private corporations are these?

If the FR purchases securities or other assets, these are bought on the open market except the FR has an unfair advantage because the FR can create money thus devaluing other private competitors assets.

The Fed creates money by purchasing securities or other assets, not by creating money to buy these financial instruments.

Part of the Feds expenses is 6% interest on all member deposits payed the the member banks. Not for profit, my batooti.

That makes no sense.

In order to increase the money supply, the Fed creates money to buy treasury bonds the money is allocated to the member accounts and then used to make the purchase.

Wrong, as i said earlier The Fed increases the money supply by purchasing financial instruments not by "creating money" to buy these instruments.

Go read something reliable about the Federal Reserve System and get back to me.

After quoting your previous assertion i have the feeling that it is you you has to do a lot of reading on the subject because you are completely clueless and very confused about it.

AlanGreenspan

16th July 2007, 04:43 AM

Absurd. The whole purpose of creating money is to spend it.

Sure it is "truthseeker" ... but not by the central bank as you incorrectly assumed in your previous "analysis". And please, can you quote Von Mises' argument rather than pointing to a file and saying "here it is"?

Dr Adequate

16th July 2007, 05:00 AM

Gold spontaneously became the world standard money because of the market, not because of anyone's personal taste. It turns out that gold has the qualities that make for a well-functioning money. Had you read my article , you would know this now. The qualities are:

high demand
high value to weight ratio
durability
divisibility
interchangeability Oh, wait, you forgot to mention that it's pretty and shiny.

Now, here's a question for you. If gold is so great, and actual dollars are just rubbish, then why don't, y'know, businessmen ... capitalists ... entrepreneurs ... people like that ... insist on dealing in gold rather than these bits of green paper?

Bit of a puzzler, no?

Dr Adequate

16th July 2007, 05:07 AM

GregoryUrich

16th July 2007, 05:34 AM

Tell me, how does one buy stock in the Federal Reserve?

One doesn't, member banks do by meeting the requirements for membership including depositing reserves in a Federal Reserve bank and holding some portion of reserves themselves.

The interest I was speaking of is more correctly called a dividend on the stock. The dividends are in lieu of interest on reserves.

GregoryUrich

16th July 2007, 05:40 AM

This is barely English, let alone high finance.

What are you talking about?

Sorry, my english is deteriorating after living in Europe for 15 years. Member banks get stock dividends equivalent to guaranteed 6% interest on their reserves.

8den

16th July 2007, 05:54 AM

Sorry, my english is deteriorating after living in Europe for 15 years. Member banks get stock dividends equivalent to guaranteed 6% interest on their reserves.

My english is just fine and I've lived in Europe for just 30 years. :D

Ace I'll add history and economics to the ever expanding list of "Stuff Ace knows diddle squat about". The 20s crash was caused by several reasons, but essentially the stock market was phenomenally over valued. Similar to the web stock boom in the 90s. People were buying stock on the assumption that it would automatically rise. It was a bubble and it burst.

This is the most achingly thunder headed maddeningly stupid argument I've ever seen proposed, since, well, the last time Ace spoke. There's no point even arguing with someone who is so spectacularly wrong. We just need to pick our jaws up off the floor, shake our heads, walk away and wonder, "Millions of sperm, and he was the fastest?"

Oh and BTW. ABBY RULEZ!

GregoryUrich

16th July 2007, 06:02 AM

@GregoryUrich

Is it really you Mr. Greenspan...we're not worthy!

Well since you are so sure The Fed is "privately owned" i guess you'll have no difficulties listing the banks for which each of the members of the board of governors work for. The same goes for the chairman.

The member banks own all of the stock in the Fed. Member banks are privately owned and sometimes publicly traded.

The Federal Reserve is not privately owned, its member banks are.

See above.

Why does it have an unfair advantage on open markets operations?

See below.

You do know that's what it happens with any financial institution, right? Just checking.

Which private corporations are these?

Member banks. Actually they get stock dividends in lieu of interest on reserves.

The Fed creates money by purchasing securities or other assets, not by creating money to buy these financial instruments.

from Wikipedia: Open Market Operations
Since most money is now in the form of electronic records, rather than paper records such as banknotes, open market operations are conducted simply by electronically increasing or decreasing the amount of money that a bank has, e.g., in its reserve account at the central bank, in exchange for the bank selling or buying a financial instrument. Newly created money is used by the central bank to buy in the open market a financial asset, such as government bonds, foreign currency, or gold. If the central bank sells these assets in the open market, the amount of money that the bank holds decreases, effectively destroying money.

Maybe Wikipedia is wrong. If so, do you have a better source?

That makes no sense.

The member banks get a guaranteed 6% stock dividend. That would be profit.

Wrong, as i said earlier The Fed increases the money supply by purchasing financial instruments not by "creating money" to buy these instruments.

Wrong. See above.

After quoting your previous assertion i have the feeling that it is you you has to do a lot of reading on the subject because you are completely clueless and very confused about it.

We are worthy. You can not be the real Alan Greenspan.

parmanides

16th July 2007, 06:49 AM

SIR JOSIAH STAMP (President of the Bank of England in the 1920's, then the second richest man in Britain)

"Banking was conceived in iniquity, and was born in sin. The Bankers own the Earth. Take it away from them, but leave them the power to create deposits, and with the flick of the pen, they will create enough deposits, to buy it back again. However, take it away from them, and all the great fortunes like mine will disappear, and they ought to disappear, for this would be a happier and better world to live in. But if you wish to remain the slaves of Bankers, and pay the cost of your own slavery, let them continue to create deposits."

nobody told me there'd be days like these

JonnyFive

16th July 2007, 07:24 AM

GregoryUrich, the stock that the member banks hold in the Fed cannot be publically traded, it cannot be sold, and it cannot be used as collateral(thus, our own "Alan Greenspan" is quite correct). The idea that the stock is equivalent to normal stock is completely false.

The dividends are fixed, and the rate of return is fairly low by market standards (6% annually is approximately what one would get in a high-yield savings account, and is quite below the average rate of return on stocks, as well as various other investment products).

In case you want a source: http://www.frbsf.org/publications/federalreserve/fedinbrief/organize.html
(right down at the bottom)

If you'd like to know about procedural issues, you can just go to the Fed's web site. All the various codes and laws are a matter of public record, as are its policies and organizational structure. Unless you think the Fed is lying about its own organization on its web site (and all the assorted codes/laws are ignored or lies too), in which case you're perfectly welcome to present the evidence that this is the case.

TS1234, and other assorted proponents of the gold standard as a monetary cure-all, I would like you to consider something from the history of the US and tell me what you think:

Post-reconstruction, at the end of the 1800's (1870's specifically, under President Grant), there was a fairly serious economic situation in the US. In the hopes of massive profits, business owners and promoters began to aggressively expand their enterprises. However, the level of profit was insufficient to sustain this economic growth, and the borrowers were unable to repay their debts.

Given this situation, the debtors pushed the Federal Government to re-issue non-backed currency into the economy. At the same time, the bankers who had issued those loans in the first place pressured the government to remain on the gold standard.

To anyone who is currently pushing the borderline conspiratorial anti-Fed platform: do you have any idea why the bankers would want the US government to remain on the gold standard in those conditions?

I should have given you enough information to at least make an informed guess.

As I said in the Monopoly Men thread - I am not saying the gold standard is unworkable. If you want to argue for gold, that's not a problem.

What is a problem is when one makes simplistic assumptions about gold being a kind of economic magical elixir that will fix our problems and make everyone wealthy (I use hyperbole, but some of the claims aren't far off this mark). There are issues with gold too, and those issues can be seen with a fairly cursory study of economics and history.

kookbreaker

16th July 2007, 08:36 AM

Wrong all the way around. There is plenty of gold, because any money supply is optimal. Prices adjust. The free market will expand the supply of gold as demanded, the same way it expands the supply of anything else. If gold were to somehow become so scarce as to inhibit the function of money, the market would seek substitutes, as it does with any other commodity.

Either way you are removing precious metals from the market that could be used for other purposes.

Gold spontaneously became the world standard money because of the market, not because of anyone's personal taste. It turns out that gold has the qualities that make for a well-functioning money. Had you read my article , you would know this now. The qualities are:

high demand

Only because people like its shiny nature. There's only limited uses non-monetary/jewelry uses for it.

high value to weight ratio

Again, as determined by human subjective need.

durability

So are lots of things.

divisibility
interchangeability

Sounds like the list is being padded.

I admit to not knowing a lot about economics, but I do know when something won't work. There are trillions of dollars in our economy right now, and no matter how much you inflate the price of gold there still won't be enough. Worse, you will cause massive damage to the industries that use those metals as you make them scarce by stuffing them into Fort Knox for no good reason.

Loss Leader

16th July 2007, 08:48 AM

our dollars will always be at least as valuable as a piece of paper, and they will never be less valuable than that cause how could a piece of paper be less valuable than a piece of paper.

Actually, US dollars aren't made out of paper. They're made out of cotton and linen. So you didn't even get that right.

Abbyas

16th July 2007, 08:50 AM

No, Truthseeker. You just had a hard time understanding the difference between the Keynesian multiplier and the money multiplier.

JonnyFive

16th July 2007, 09:29 AM

kookbreaker

16th July 2007, 09:30 AM

Actually, US dollars aren't made out of paper. They're made out of cotton and linen. So you didn't even get that right.

Not to nitpick your nitpick, but linen/cotton based paper is still paper.

Now if he had said that dollars were made of wood pulp....

TruthSeeker1234

16th July 2007, 09:35 AM

No, Truthseeker. You just had a hard time understanding the difference between the Keynesian multiplier and the money multiplier.

No Abby, you got confused. I called you on it, and you never answered any of my questions. I could probably dig up the email archive and post it with your permission. But it's irrelevant, the exchange contains no argument at all from you, only complete avoidance. Perhaps you could put your econ training to work and explain what you think is wrong with my opinion that fiat money creation is theft.

Here is Rothbard's treatise on money (http://www.mises.org/money.asp), freely available on line.

If there is something wrong with it, perhaps you could point out some errors, or link to anyone, anywhere who has critiqued it. AFAIK, it stands.

I'd be happy to link you to a rigorous dismantling of Keynes.

TruthSeeker1234

16th July 2007, 09:44 AM

Is it me, or did TS1234 argue that one of the reasons gold is valuable is because of it's high value/weight ratio?

Good to know that gold is valuable because it's valuable. That kind of information is very helpful when understanding economics.

I said the market chose gold as money because gold has the most "money-ish" qualities. It is the market which says gold is money, not me. It seems you are wrestling with what Adam Smith couldn't figure out - the value paradox. Why is a diamond worth more than a loaf of bread, when bread is the staff of life?

Carl Menger figured out the value paradox, ushered in the marginalist revolution, and founded the Austrian school.

In a sense, the tautology you present is instructive. Ultimately, it doesn't matter why people value what they value, as long as they do so freely. When freedom is allowed, gold is money.

JonnyFive

16th July 2007, 09:55 AM

I said the market chose gold as money because gold has the most "money-ish" qualities. It is the market which says gold is money, not me. It seems you are wrestling with what Adam Smith couldn't figure out - the value paradox. Why is a diamond worth more than a loaf of bread, when bread is the staff of life?

I was pointing out the fact that one of your "why gold is valuable" arguments was circular, that's all.

I'm quite familiar with the concept of value and the determination of value on the market.

ETA: For clarification, you said that one of the reasons gold was used as a market currency was its high "value to weight" ratio. However, your reason that it was chosen as a currency medium relates to it having some a priori value, which it does not. You apparently grasp the idea that the market ultimately assigns value to everything, but fail to understand the paradox of then saying that gold was chosen as a currency medium because of high "value to weight."

That "quality" you mention is assigned by the humans that make up the market, it is not innate to gold. You should've stuck with things like "doesn't corrode," "looks nice," "can be divided up easily," "can be shaped easily," "looks nice," "is rare enough to not be everywhere but common enough to actually find," etc.

There are other substances, incidentally, that have higher value/weight ratios in the current market. Ironically, several world currencies (including the US dollar) are among those substances.

Carl Menger figured out the value paradox, ushered in the marginalist revolution, and founded the Austrian school.

In a sense, the tautology you present is instructive. Ultimately, it doesn't matter why people value what they value, as long as they do so freely. When freedom is allowed, gold is money.

What stops you from using gold as money right now, TruthSeeker? Who prevents you from trading in gold and how?

TruthSeeker1234

16th July 2007, 10:00 AM

Either way you are removing precious metals from the market that could be used for other purposes.

There are always alternative uses for all commodities. How much milk should be made into cottage cheese, how much into ice cream, how much into butter, how much into yogurt? Only the market can decide this. Similarly, only the market can decide how much gold should be used to back money, and how much should be used for industrial and/or jewelry, etc.

Only because people like its shiny nature. There's only limited uses non-monetary/jewelry uses for it.

There are plenty of uses for gold, the most important of which is money.

Again, as determined by human subjective need.

Correct! You have stumbled onto two of the key insights of economics, in one sentence!

1. All economic activity is directed at fulfilling the wants and needs of people.

2. All valuation is subjective.

Sounds like the list [of money-ish qualities] is being padded.

A good money must be divisible into very small pieces, with the pieces still being valuable. Also it must be interchangeable, with one unit being the same value as another.

I admit to not knowing a lot about economics, but I do know when something won't work. There are trillions of dollars in our economy right now, and no matter how much you inflate the price of gold there still won't be enough. Worse, you will cause massive damage to the industries that use those metals as you make them scarce by stuffing them into Fort Knox for no good reason.Sigh. The only way we can determine what sort of money works best is to allow the market to function. Fearing that the market would not supply enough gold is like fearing that it won't supply enough socks. When people demand more, the supply will be made to increase by those people in the business of producing it. Enforcing a monopoly in the production of money is evil, for the same reasons that any other monopoly is evil.

TruthSeeker1234

16th July 2007, 10:07 AM

I was pointing out the fact that one of your "why gold is valuable" arguments was circular, that's all.

I was explaining why gold is a good money, not why gold is valuable. You have attributed to me a statement which I did not make, then used that to accuse me of a logical fallacy. That is itself a logical fallacy on your part. I thought you were smarter/more intellectually honest than this.

Abbyas

16th July 2007, 10:11 AM

[QUOTE=TruthSeeker1234;2772628]No Abby, you got confused. I called you on it, and you never answered any of my questions. I could probably dig up the email archive and post it with your permission. But it's irrelevant, the exchange contains no argument at all from you, only complete avoidance. Perhaps you could put your econ training to work and explain what you think is wrong with my opinion that fiat money creation is theft.

QUOTE]

Please do post it. But just to make sure. Tell me what is the difference between the money multiplier and the keynesian multiplier.

Abbyas

16th July 2007, 10:19 AM

And just at first glance at the "problems with fiat money" on that rothbard page: he doesn't mention the benefits of a depreciated dollar.

Yes, it hurts importers... but it helps exporters. And in the US we have a horrible trade deficit. A deflated dollar alleviates this problem.

Abbyas

16th July 2007, 10:20 AM

Another one: he mentions inflation but doesn't discuss unexpected inflation. That's a big problem.

JonnyFive

16th July 2007, 10:24 AM

I was explaining why gold is a good money, not why gold is valuable. You have attributed to me a statement which I did not make, then used that to accuse me of a logical fallacy. That is itself a logical fallacy on your part. I thought you were smarter/more intellectually honest than this.

All right, as I explained in my edit, I was pointing out that one of your "why gold is a good currency" arguments was circular. You clearly indicate that gold is a good currency because people consider it valuable. You have mentioned that it's primary value is as currency. You are, therefore, claiming gold is valuable because of its use as a currency, and by extension its good qualities as a currency contribute to its value because it is accepted as a currency on the market.

If you're going to claim gold's value is in its use as currency, you cannot separate its value from its function as a good money. The two are one and the same.

The value/weight relationship cannot have meaning without a priori or market value. Your arguments concerned the (as you claim) sudden emergence of gold as a currency standard.

To say that it is valuable as a currency, and was a good choice for currency because of its value/weight ratio is circular.

But that's just distracting from the real issues at hand. Claiming I am intellectually dishonest doesn't make you any more right.

What stops you from using gold as a currency right now? You keep talking about how people should be free, but they are - nothing stops you from buying and selling gold. You could hold all your money in gold, then sell only enough to pay expenses to those who won't accept gold but want, say, US dollars instead.

Also, you claim that any money supply is optimal. In a very base way, this tends to be theoretically true in an ideal, model market. However, this tends not to be the case in the real world. Even when the gold standard existed, there were issues related to the money supply. I already gave one historical example of money supply issues with a gold standard you haven't bothered to reply to yet.

Belz...

16th July 2007, 10:59 AM

our dollars are printed out of thin air. this is such an evil, vast, and dark conspiracy because our currency is not held under any type of gold standard to secure its value and stop inflation.

i know this is a worldwide conspiracy too, because almost every currency in the world is printed out of thin air and doesnät really adhere to some kind of gold stanard or metal standard.

Actually, it's printed from paper and ink.

Dollars are worth what people are willing to pay for them. It's just a very, very sophisticated form of barter.

It's always worked. What's wrong with it ?

kookbreaker

16th July 2007, 11:21 AM

There are always alternative uses for all commodities. How much milk should be made into cottage cheese, how much into ice cream, how much into butter, how much into yogurt? Only the market can decide this. Similarly, only the market can decide how much gold should be used to back money, and how much should be used for industrial and/or jewelry, etc.

You examples are invalid as they are renewable items. Gold does not strike as having the same development schedule as milk. If you are going to back our money, you have to back it all the way. There's just not enough precious metal in the world.

There are plenty of uses for gold, the most important of which is money.

These days there are plenty of uses. In older days the limit was money and decoration. Now why should modern industries suffer incredible raw materials price increases because we want to revert to an obselete system?

Correct! You have stumbled onto two of the key insights of economics, in one sentence!

1. All economic activity is directed at fulfilling the wants and needs of people.

2. All valuation is subjective.

So why is having our monetary system not based on gold such a bad thing?

A good money must be divisible into very small pieces, with the pieces still being valuable. Also it must be interchangeable, with one unit being the same value as another.

When you say divisible, you mean physically? As in 'Pieces of Eight'?

Sigh. The only way we can determine what sort of money works best is to allow the market to function. Fearing that the market would not supply enough gold is like fearing that it won't supply enough socks. When people demand more, the supply will be made to increase by those people in the business of producing it. Enforcing a monopoly in the production of money is evil, for the same reasons that any other monopoly is evil.

So far I have not seen anything really 'evil' about this alleged marketing, and I have read enough about the old days of metal money economies to know they have limitations that can cripple economies. In addition to other problems (price increases for raw materials i.e.). In short, I have yet to see why this system should be changed in favor of one that has had a very shakey past.

TruthSeeker1234

16th July 2007, 11:22 AM

Please do post it. But just to make sure. Tell me what is the difference between the money multiplier and the keynesian multiplier.

Sure, Abby.

The Keynesian multiplier effect is the a fictional idea wherein it is claimed that government spending increases real wealth. Government creates fiat money, spends it, and this increases demand in that sector, which attracts investment and creates new jobs. In turn, the new dollars are respent, which again increases demand and employment. The repeated ("multiplied") spending of the new money thus is alleged to increase the production of goods and services.

What Keynes forgot was what Bastiat taught. He forgot to consider that the government spending diverts resources away from where they would have been put to use, had the government spending not occurred. Because of the distorted price signals, the new economic activity must be less efficient than the economic activity that would have taken place otherwise. Thus it must be a net loss in real wealth.

The so-called money multiplier is another fictional construct. The money supply does not only consist of currency, but also of checkbook money, and all sorts of financial instruments, etc. The money multiplier is an attempt to determine the overall supply of money, by multiplying the quantity of currency by some number.

Now your turn. What's wrong with the Austrian explanation of how fiat money is theft?

Abbyas

16th July 2007, 11:38 AM

Now your turn. What's wrong with the Austrian explanation of how fiat money is theft?

See my comments above.

The so-called money multiplier is another fictional construct. The money supply does not only consist of currency, but also of checkbook money, and all sorts of financial instruments, etc. The money multiplier is an attempt to determine the overall supply of money, by multiplying the quantity of currency by some number.

No, that is not the money multiplier. Try again. The money multiplier is the amount that the total currency increases due to a specific injection in currency.

The Keynesian multiplier effect is the a fictional idea wherein it is claimed that government spending increases real wealth. Government creates fiat money, spends it, and this increases demand in that sector, which attracts investment and creates new jobs. In turn, the new dollars are respent, which again increases demand and employment. The repeated ("multiplied") spending of the new money thus is alleged to increase the production of goods and services.

Incorrect. In the case of the Keynesian multiplier, any component of the GDP is increased. Not just Government spending. And you are absolutely incorrect about where the funding for spending comes from. It does not come from the Fed. You've got fiscal action and monetary action. The two might work in tandem, but you do not need one for the other. Gov't spending does not necessarily include the increase of the monetary supply. That would defeat the purpose. Look up what is called the IS/LM graph.

Also, I've noticed you discuss a demand/supply for money. That does exist without the gold standard: see money demand, money supply curve. It measures the supply of money vs. the interest rate.

Edit to add: Yes, there have been many criticisms of Keynesian policies. Many from the Monetarism school of thought, which is also taught in standard econ classes. The Monetarists do not throw the baby out with the bathwater as you are doing.

Abbyas

16th July 2007, 11:42 AM

Also, there is a poor notion here that inflation in itself is inherantly evil. Look up the Phillip's curve for a refutation of this.

You want no inflation at all? Or unnaturally low inflation? Then welcome high unemployment.

AlanGreenspan

16th July 2007, 11:56 AM

@GregoryUrich

No, i'm not the real Greenspan ... the real one is too busy drafting policies for the NWO.

The member banks own all of the stock in the Fed. Member banks are privately owned and sometimes publicly traded.

Owning stock options on The Fed is not the same as owning stock option on a private corporation.

By the way, i asked you a simple question that you chose to ignore: what corporation employs the current board of directors and the chairman of The Fed.

By just saying "see above" you failed to point why exactly you claim The Fed has an unfair advantage on open markets operations.

Newly created money is used by the central bank to buy in the open market a financial asset, such as government bonds, foreign currency, or gold.

There's a problem with this statement, The Fed can only "create" money by buying financial instruments or expanding/contracting the legal reserves ... so saying that it buys certificates so it can buy more certificates is just absurd. Picture this, The Fed wants to expand the money supply by purchasing 1 million in certificates ... you go to a member bank and sell your certificates and receive 1 million US$, money supply has effectively been increased by 1 million but the money is not in the hand of The Fed but rather in the hands of the agents who sold the certificates. Whoever wrote that part of the wikipedia entry should revise his/her monetary policy notes.

Wrong. See above.

Then i guess you can tell me another way for The Fed to expand the money supply other than expanding/contracting the legal reserves or incurring in open market operations.

GregoryUrich

16th July 2007, 12:10 PM

Abbyas

16th July 2007, 12:13 PM

Who said it's normal stock? The stock is still privately owned. It's a guaranteed, no-risk return on investment and includes the right to create money (collectively with the other members). Normal stock has risks, but you probably know that.

You imply that it's normal stock by suggesting that the owners have the ultimate control over how much money is created. That is not the case.

JonnyFive

16th July 2007, 12:17 PM

TruthSeeker clearly likes gold very much, but I'd still really like to know what he thinks is stopping him from using it as a currency right now.

Gold is bought and sold on the open market, so he can freely buy gold or exchange it for any currency he wants, which can then be exchanged for other goods or exchanged for more gold.

Assuming TruthSeeker draws a salary from somewhere, he is free to buy gold with all the money he makes, then sell small quantities of gold to pay expenses to people who won't accept gold as direct payment.

He might even be able to convince some merchants to accept gold payments directly. They might not all want to, due to the hassle of converting it and storing it, but some might welcome it... perhaps they also feel as strongly about its value as a currency.

So, TS1234, what's stopping you from doing all this? You keep talking about freedom of currency, but what is forcing you to hold or use dollars? At the very worst, you would only need to hold dollars for a couple days in order to pay bills, or before you convert your salary into gold.

GregoryUrich

16th July 2007, 12:29 PM

@GregoryUrich
There's a problem with this statement, The Fed can only "create" money by buying financial instruments or expanding/contracting the legal reserves ... so saying that it buys certificates so it can buy more certificates is just absurd. Picture this, The Fed wants to expand the money supply by purchasing 1 million in certificates ... you go to a member bank and sell your certificates and receive 1 million US$, money supply has effectively been increased by 1 million but the money is not in the hand of The Fed but rather in the hands of the agents who sold the certificates. Whoever wrote that part of the wikipedia entry should revise his/her monetary policy notes.

To increase the money supply, the Fed buy's financial instruments by crediting the sellers reserve account. No account is debited.

From the Fed site:

Purchasing securities or arranging a repurchase agreement increases the quantity of balances because the Federal Reserve creates balances when it credits the account of the seller’s depository institution at the Federal Reserve for the amount of the transaction; there is no corresponding offset in another institution’s account.

JonnyFive

16th July 2007, 12:38 PM

Who said it's normal stock? The stock is still privately owned. It's a guaranteed, no-risk return on investment and includes the right to create money (collectively with the other members). Normal stock has risks, but you probably know that.

I actually misread what you said here:

The member banks own all of the stock in the Fed. Member banks are privately owned and sometimes publicly traded.

As implying the stock could be de facto publically traded. My apologies if that doesn't reflect how you actually feel about this.

Technically, it isn't no risk, as there is always the risk of catastrophic collapse of the economy, but I know what you mean. Yes, it is an extremely low-risk investment, with returns equivalent to other similarly low-risk investments. It also prevents the members from doing much of what can be done with standard stock, such as selling it at a profit or using it to obtain a loan.

Also, if the bank becomes insolvent, it loses its stock in the Fed, which could very well be considered a risk, albeit a small one:

http://www.federalreserve.gov/generalinfo/fract/sect06.htm

You can, assuming you have enough to open the account, get a high-yield savings account with a bank that will net you around a 6% APR, or you can get a low-risk mutual fund with a similar ROI.

And they may get the right to "create money" in a loose kind of way, but it's hardly unregulated. You wanted a better source for the idea of pledging collateral for currency, IIRC:

http://www.newyorkfed.org/aboutthefed/fedpoint/fed01.html

GregoryUrich

16th July 2007, 12:42 PM

You imply that it's normal stock by suggesting that the owners have the ultimate control over how much money is created. That is not the case.

The twisted spaghetti logic of your perceived implication must go something like this:

The owners of Fed stock can influence the creation of (effectively create) money. Since owners of normal stock can create money, the Fed stock must be normal stock.

I implied nothing. Duh!

Abbyas

16th July 2007, 12:47 PM

The twisted spaghetti logic of your perceived implication must go something like this:

The owners of Fed stock can influence the creation of (effectively create) money. Since owners of normal stock can create money, the Fed stock must be normal stock.

I implied nothing. Duh!

No. This was your implication: The owners of stock can influence the money supply, as normal stock owners control the company in which they own stock.

This is not the case with the Fed. The owners of stock in the Fed DO NOT have ultimate control over the money supply, decrease or increase.

Edited to add: Duh. Always a good argument.

Belz...

16th July 2007, 01:02 PM

Hey! Everybody is here!

Good to see you, too, Paro.

Hey, Abby.

I hope you checked out this thread (http://forums.randi.org/showthread.php?t=82492).

Bye.

Belz...

16th July 2007, 01:04 PM

Now your turn. What's wrong with the Austrian explanation of how fiat money is theft?

Well, I'll say one thing for your argument.

If they're true, just forward all your paychecks to me. I'll know what to do with 'em.

JonnyFive

16th July 2007, 01:06 PM

To increase the money supply, the Fed buy's financial instruments by crediting the sellers reserve account. No account is debited.

You quoted a passage from The Fed's publication The Federal Reserve System: Purposes and Functions (http://www.federalreserve.gov/pf/pdf/pf_complete.pdf), the rest of which reads:

Conversely, selling securities or conducting a reverse repurchase agreement decreases the quantity of Federal Reserve balances because the Federal Reserve extinguishes balances when it debits the account of the purchaser’s depository institution at the Federal Reserve; there is no corresponding increase in another institution’s account. In contrast, when financial institutions, business firms, or individuals buy or sell securities among themselves, the credit to the account of the seller’s depository institution is offset by the debit to the account of the purchas-er’s depository institution; so existing balances held at the Federal Reserve are redistributed from one depository institution to another without changing the total available.

I had to track back your discussion a bit, but you seemed to be saying that the Fed had some unfair advantage by being able to create money. That doesn't appear to be exactly correct.

One of the ways used to increase the total money supply is to buy securities, as this increases the available reserves for the bank to loan out, thus increasing the amount of money available to the total economy. Conversely, they sell securities to remove money from the reserves, and thus the economy at large.

Also, in order to actually create wholly new money, the Fed is required to pledge collateral. So how does this give them an "unfair advantage" in buying back government securities?

Presumably, your objection to all of this is the inflationary tendency created by, say, creating additional currency. However, do you have any particular reason to suspect that inflation is currently out of control, or inherently undesireable?

GregoryUrich

16th July 2007, 01:21 PM

You quoted a passage from The Fed's publication The Federal Reserve System: Purposes and Functions (http://www.federalreserve.gov/pf/pdf/pf_complete.pdf), the rest of which reads:

I had to track back your discussion a bit, but you seemed to be saying that the Fed had some unfair advantage by being able to create money. That doesn't appear to be exactly correct.

One of the ways used to increase the total money supply is to buy securities, as this increases the available reserves for the bank to loan out, thus increasing the amount of money available to the total economy. Conversely, they sell securities to remove money from the reserves, and thus the economy at large.

Also, in order to actually create wholly new money, the Fed is required to pledge collateral. So how does this give them an "unfair advantage" in buying back government securities?

Presumably, your objection to all of this is the inflationary tendency created by, say, creating additional currency. However, do you have any particular reason to suspect that inflation is currently out of control, or inherently undesireable?

Your quote from the Fed deals with two separate issues:

The Fed:
Conversely, selling securities or conducting a reverse repurchase agreement decreases the quantity of Federal Reserve balances because the Federal Reserve extinguishes balances when it debits the account of the purchaser’s depository institution at the Federal Reserve; there is no corresponding increase in another institution’s account.

Everyone else:
In contrast, when financial institutions, business firms, or individuals buy or sell securities among themselves, the credit to the account of the seller’s depository institution is offset by the debit to the account of the purchas-er’s depository institution; so existing balances held at the Federal Reserve are redistributed from one depository institution to another without changing the total available.

To whom does the Fed pledge collateral when creating entirely new money?

Inflation doesn't worry me. A system that maintains the wealth and power of a small number of people at the expense of the rest of the people is not a fair system.

JonnyFive

16th July 2007, 01:37 PM

Your quote from the Fed deals with two separate issues:

Yes, and it clearly describes how the purchase or sale of securities affects the available money supply, as opposed to the private purchase which does not. Was that not sufficiently clear?

To whom does the Fed pledge collateral when creating entirely new money?

Technically, to the government of the United States. In the event that Congress dissolves the Fed, the US government assumes liability for the notes.

In essence, the notes are backed by the US economy. If it tanks, so does the currency of the US.

Inflation doesn't worry me. A system that maintains the wealth and power of a small number of people at the expense of the rest of the people is not a fair system.

And how do you figure that the current system does this, exactly?

ETA: Your first post on that topic mentions the private ownership of the Fed, but neglects to mention that the Fed is ultimately an agent of the US government chartered to act in the public interest. The fact that it is not directly controlled by, say, Congress, protects it from political pressure to make unsound monetary decisions in the interest of politics.

You said it protected the "economic hegemony" of a few individuals. How?

How does the Fed has an unfair advantage on the open market in terms of buying securities? Can they force people to sell them those securities?

TruthSeeker1234

16th July 2007, 02:40 PM

All right, as I explained in my edit, I was pointing out that one of your "why gold is a good currency" arguments was circular. You clearly indicate that gold is a good currency because people consider it valuable. You have mentioned that it's primary value is as currency. You are, therefore, claiming gold is valuable because of its use as a currency, and by extension its good qualities as a currency contribute to its value because it is accepted as a currency on the market.

Stop it Johnny. My reasoning is in no way circular. Prior to the existence of gold money, there was a demand for gold as a commodity. That is, people valued it. Commodity monies emerged in response to the problems of barter. Additional demand for gold thus arose, the original demand for gold, plus the new demand for gold as a medium of exchange. The additional demand will make gold more highly valued.

Something which was not valuable could not function as money, because people would not accept it in exchange. Therefore, to function as money, a commodity must have a high pre-existing market exchange value. None of this is circular reasoning.

If you're going to claim gold's value is in its use as currency, you cannot separate its value from its function as a good money. The two are one and the same.

I don't claim gold's value, centuries of human history do. As explained, gold's value derives from the demand for it. This demand is partly due to it's pre-existing value as a commodity, and then additionally due to it's value as a medium of exchange.

The value/weight relationship cannot have meaning without a priori or market value. Your arguments concerned the (as you claim) sudden emergence of gold as a currency standard.

Where on earth have I ever said the gold standard emerged suddenly? I said it emerged spontaneously. The spontaneous emergence of the gold standard took place over thousands of years.

To say that it is valuable as a currency, and was a good choice for currency because of its value/weight ratio is circular.

No. Explained. Many things were used as money, all of them commodities with pre-existing market demand. Gold emerged as the best of the lot.

But that's just distracting from the real issues at hand. Claiming I am intellectually dishonest doesn't make you any more right.

Stop using the strawman fallacy and I'll stop calling you on it.

What stops you from using gold as a currency right now? You keep talking about how people should be free, but they are - nothing stops you from buying and selling gold. You could hold all your money in gold, then sell only enough to pay expenses to those who won't accept gold but want, say, US dollars instead.

In 1913, refusal to accept paper money was made a felony. In 1933, all the monetary gold was confiscated by the government, and its possession was made a felony. Making gold a felony tends to discourage its use, wouldn't you say?

Also, you claim that any money supply is optimal. In a very base way, this tends to be theoretically true in an ideal, model market. However, this tends not to be the case in the real world. Even when the gold standard existed, there were issues related to the money supply. I already gave one historical example of money supply issues with a gold standard you haven't bothered to reply to yet.

Any money supply is optimal. If this were false, then you could not explain why there is even one poor country. All any country would need to do is create more money, and be rich. Money is a medium of exchange, prices will adjust to any supply of money.

Sorry, must have missed your history lesson. Link it.

TruthSeeker1234

16th July 2007, 02:46 PM

My english is just fine and I've lived in Europe for just 30 years. :D

Ace I'll add history and economics to the ever expanding list of "Stuff Ace knows diddle squat about". The 20s crash was caused by several reasons, but essentially the stock market was phenomenally over valued. Similar to the web stock boom in the 90s. People were buying stock on the assumption that it would automatically rise. It was a bubble and it burst.

This is the most achingly thunder headed maddeningly stupid argument I've ever seen proposed, since, well, the last time Ace spoke. There's no point even arguing with someone who is so spectacularly wrong. We just need to pick our jaws up off the floor, shake our heads, walk away and wonder, "Millions of sperm, and he was the fastest?"

Oh and BTW. ABBY RULEZ!

Hi 8den-

Anyone who claims to explain the business cycle must explain two empirical points.

1. Why the cluster of entrepreneurial errors? Any investor can make mistakes, but why the big cluster?
2. Why is the mal-investment most heavily concentrated in the capital goods sector?

The ABCT explains this in a very straightforward and compelling fashion. What is your explanation, professor 8den?

Loss Leader

16th July 2007, 03:04 PM

Stop it Johnny. My reasoning is in no way circular. Prior to the existence of gold money, there was a demand for gold as a commodity. That is, people valued it.

Yes, but why did people value it? Gold can't be planted. It can't be eaten. It can't be converted to energy. Until very recently, gold had no function whatsoever. (It is now of small value in medicine, slightly more value in electronics and I think at its most valuable in the creation of certain industrial chemicals .) Until very recently, the only thing people liked about gold was that it was rare and shiny.

That value - shiny - is utterly arbitrary. There is nothing necessarily true about gold's ability to please the senses. My wife's engagement ring has no gold in it.

Since the demand for gold is arbitrary, your argument is circular. The gold market could collapse tomorrow when a nicer, more aesthetically pleasing substance is isolated. What would gold be worth if platinum did not exist? Or silver? Or even brass?

Something which was not valuable could not function as money, because people would not accept it in exchange. Therefore, to function as money, a commodity must have a high pre-existing market exchange value. None of this is circular reasoning.

Examine:

1. I do not find gold aesthetically pleasing.
2. I do not wish to own gold for its aesthetic properties.
3. Other people put a value on gold.
4. I need to get stuff from other people.
5. If I give them gold, they'll give me stuff in exchange.
6. Even though I do not find gold aesthetically pleasing, I wish to own gold for the value others place on it.
7. Thus, gold has value to me.

Now watch this. Nothing up my sleeves:

1. I do not find paper money aesthetically pleasing.
2. I do not wish to own paper money for its aesthetic properties.
3. Other people put a value on paper money.
4. I need to get stuff from other people.
5. If I give them paper money, they'll give me stuff in exchange.
6. Even though I do not find paper money aesthetically pleasing, I wish to own paper money for the value others place on it.
7. Thus, paper money has value to me.

But the real reason we know that your statement "Something which was not valuable could not function as money" is utter nonsense is because paper is functioning as money. And it's doing so quite well all over the world. And it has no intrinsic value.

Honestly, if you wouldn't work backwards from your conclusions, you'd be able to understand this stuff so much better.

TruthSeeker1234

16th July 2007, 05:40 PM

Yes, but why did people value it? Gold can't be planted. It can't be eaten. It can't be converted to energy. Until very recently, gold had no function whatsoever. (It is now of small value in medicine, slightly more value in electronics and I think at its most valuable in the creation of certain industrial chemicals .) Until very recently, the only thing people liked about gold was that it was rare and shiny.

That value - shiny - is utterly arbitrary. There is nothing necessarily true about gold's ability to please the senses. My wife's engagement ring has no gold in it.

Since the demand for gold is arbitrary, your argument is circular. The gold market could collapse tomorrow when a nicer, more aesthetically pleasing substance is isolated. What would gold be worth if platinum did not exist? Or silver? Or even brass?

Examine:

1. I do not find gold aesthetically pleasing.
2. I do not wish to own gold for its aesthetic properties.
3. Other people put a value on gold.
4. I need to get stuff from other people.
5. If I give them gold, they'll give me stuff in exchange.
6. Even though I do not find gold aesthetically pleasing, I wish to own gold for the value others place on it.
7. Thus, gold has value to me.

Now watch this. Nothing up my sleeves:

1. I do not find paper money aesthetically pleasing.
2. I do not wish to own paper money for its aesthetic properties.
3. Other people put a value on paper money.
4. I need to get stuff from other people.
5. If I give them paper money, they'll give me stuff in exchange.
6. Even though I do not find paper money aesthetically pleasing, I wish to own paper money for the value others place on it.
7. Thus, paper money has value to me.

But the real reason we know that your statement "Something which was not valuable could not function as money" is utter nonsense is because paper is functioning as money. And it's doing so quite well all over the world. And it has no intrinsic value.

Honestly, if you wouldn't work backwards from your conclusions, you'd be able to understand this stuff so much better.

If what you say is true, government would not have had to use force to impose fiat money.

Here is the crucial difference that you fail to appreciate:

Gold money evolved through free choice. When given the freedom to choose, people chose to accept commodities as money, especially precious metals, and gold above all others. Nobody forced this outcome, it was spontaneous. Please look up "spontaneous" if you are like Jonny5 and don't know what that means.

Fiat money did not evolve through free choice. When given the freedom to choose, people did not choose to accept unbacked paper money, ever. There are exactly zero historical examples of this. Ludwig von Mises proved in a rigorous way that money must originate as a commodity. It must.

Here is your comparison, corrected:

Examine:

1. I do not find gold aesthetically pleasing.
2. I do not wish to own gold for its aesthetic properties.
3. Other people (the market) put a value on gold.
4. I need to get stuff from other people.
5. If I give them gold, they'll give me stuff in exchange.
6. Even though I do not find gold aesthetically pleasing, I wish to own gold for the value others place on it.
7. Thus, gold has value to me.
8. And thus, gold is now demanded for its exchange value, in addition to its pre-existing values.

Now watch this. Nothing up my sleeves:

1. I do not find [unbacked] paper money aesthetically pleasing.
2. I do not wish to own [unbakced] paper money for its aesthetic properties.
3. Other people [the market] do not put a value on [unbacked] paper money.
4. I need to get stuff from other people.
5. If I offer them [unbacked] paper money, they'll tell me to go fly a kite.
6. Because I do not find [unbacked] paper money aesthetically pleasing, and because the market finds it essentially worthless, I do not wish to own [unbacked] paper money.
7. Thus, paper money has no value to me.
8. And thus, [unbacked] paper money is intrinsically worthless, and also worthless to free people as a medium of exchange.

Alternatively:

1. I do not find [redeemable] paper money aesthetically pleasing.
2. I do not wish to own [redeemable] paper money for its aesthetic properties.
3. Other people put a value on [redeemable] paper money, because they can readily exchange it for gold or silver.
4. I need to get stuff from other people.
5. If I give them [redeemable] paper money, they'll give me stuff in exchange.
6. Even though I do not find [redeemable] paper money aesthetically pleasing, I wish to own [redeemable] paper money for its value to others.
7. Thus, [redeemable] paper money has value to me.
8. And thus, [redeemable] paper money, though intrinsically worthless, becomes valued as a medium of exchange.

And finally:

1. I do not find [unbacked] paper money aesthetically pleasing.
2. I do not wish to own [unbacked] paper money for its aesthetic properties.
3. The government makes it a felony to refuse acceptance of [unbacked] paper money, and confiscates all the gold.
4. I need to get stuff from other people.
5. If I give them [unbacked] paper money, they'll go to jail if they refuse to accept it, so they are forced to give me stuff in exchange.
6. Even though I do not find [unbacked] paper money aesthetically pleasing, I wish to own [unbacked] paper money, because the government has left me with no choice, other than to revert to barter.
7. Thus, [unbacked] paper money has value to me.
8. And thus, [unbacked] paper money, though intrinsically worthless, and irredeemable, becomes valued as a medium of exchange.

Abbyas

16th July 2007, 06:09 PM

Truthseeker, please respond to my comments. You asked for some critique of that article, and after glancing at two sections I found cause for criticism.

AlanGreenspan

16th July 2007, 06:20 PM

@GregoryUrich

To increase the money supply, the Fed buy's financial instruments by crediting the sellers reserve account. No account is debited.

The Fed can also the amount of legal reserves and expand the money supply with no account being debited. What exactly is your point?

Tell me something, how do they balance their books if no debit is being made? Isn't duality one of the generally accepted principles of accountancy?

My god.

It makes one wonder why did you leave this part out of your post even when it was in the same paragraph:

so existing balances held at the Federal Reserve are redistributed from one depository institution to another without changing the total available.

... I believe you are confused with a very simple fact: how exactly do you think The Fed increases the money supply?

Loss Leader

16th July 2007, 06:28 PM

Gold money evolved through free choice. When given the freedom to choose, people chose to accept commodities as money, especially precious metals, and gold above all others. Nobody forced this outcome, it was spontaneous.

Really? Nobody forced the gold standard?

Jeez.

Well, whatever you do, don't tell this guy (http://www.tntech.edu/history/crosgold.html).

AlanGreenspan

16th July 2007, 06:33 PM

TruthSeeker1234: people are free to use stuff like liberty dollars or gold. Why don't they use it? You are free to choose not to seek financing for a small project by using your home as a security to get a 6% interest rate.

On another note, can you point me to an example of a government forcing people to use fiat currency?

I do hope your example is not some law forbidding you to print print 20's on your backyard.

TruthSeeker1234

16th July 2007, 06:41 PM

Truthseeker, please respond to my comments. You asked for some critique of that article, and after glancing at two sections I found cause for criticism.

First, I'm asking for criticism of this concept:

The creation of fiat money is theft. It necessarily transfers real wealth away from the late receivers of new money, and into the hands of the early receivers, and especially into the hands of the money creators.

Second, I did not link you to an "article", I linked you to a "treatise".

Your "criticism" amounted to your declaration that devaluation of a money will boost exports, so a strong currency is "bad" for exports and thus bad for the "balance of trade".

Your error is demolished in chapter 1, "The value of exchange".
(http://www.mises.org/money/2s1.asp)
All trade balances. For every buyer, there is a seller. Both parties expect to benefit, or else they would not agree to trade. If anything, boosting exports is a bad idea, because in involves sending goods away where they are consumed by others. Real wealth consists of real goods and real services.

GregoryUrich

16th July 2007, 06:48 PM

@GregoryUrich

The Fed can also the amount of legal reserves and expand the money supply with no account being debited. What exactly is your point?

Tell me something, how do they balance their books if no debit is being made? Isn't duality one of the generally accepted principles of accountancy?

My god.

It makes one wonder why did you leave this part out of your post even when it was in the same paragraph:

so existing balances held at the Federal Reserve are redistributed from one depository institution to another without changing the total available.

... I believe you are confused with a very simple fact: how exactly do you think The Fed increases the money supply?

Read it again Al and get back to me.

Abbyas

16th July 2007, 07:15 PM

First, I'm asking for criticism of this concept:

The creation of fiat money is theft. It necessarily transfers real wealth away from the late receivers of new money, and into the hands of the early receivers, and especially into the hands of the money creators.

Second, I did not link you to an "article", I linked you to a "treatise".

Your "criticism" amounted to your declaration that devaluation of a money will boost exports, so a strong currency is "bad" for exports and thus bad for the "balance of trade".

Your error is demolished in chapter 1, "The value of exchange".
(http://www.mises.org/money/2s1.asp)
All trade balances. For every buyer, there is a seller. Both parties expect to benefit, or else they would not agree to trade. If anything, boosting exports is a bad idea, because in involves sending goods away where they are consumed by others. Real wealth consists of real goods and real services.

Noooo. The trade balance by definition is amount exported subtracted by amount imported. GDP is increased with a larger trade balance. A negative one must be made up through the capital account. Do you know what that is?

Re: boosting exports bad. What??? Tell that to the companies that work in the country of question. Tell that to the employees of these companies. Foreign trade is bad? You do know that in return for these goods, money is acquired right? Have you ever heard of comparative advantage?

Good grief, what industry do you work in where foreign trade is bad for business and as a result the economy?

Yes, real wealth is real goods and real services. And guess what. A strong dollar means less goods (all goods are "real") can be purchased by other countries. Look up the real exchange rate.

You continously misdefine basic, basic concepts here.

And again, why does this "treatise" treat all inflation as unexpected? He doesn't address unanticipated inflation in his discussion of inflation=bad.

Edited to add: just looked at your link in the above quote. Says zilch about the international exchange rate.

TruthSeeker1234

16th July 2007, 07:16 PM

On another note, can you point me to an example of a government forcing people to use fiat currency?

Yes. The Federal Reserve Act of 1913. Besides creating the Fed, it made it a felony to refuse to accept "Federal Reserve Notes" in payment of debt. At the time, many contracts were written to be paid in gold. The government effectively tore up all those contracts.

In 1933, the US govt. confiscated all of the monetary gold, making it a felony to even possess. People were indeed put in jail for the "crime" of wanting to hold on to their own gold coins.

These are two very important events in US history. I wonder why they are not taught in school?

Abbyas

16th July 2007, 07:20 PM

Truth seeker, do you know how the Keynesian multiplier and the money multiplier are derived?

TruthSeeker1234

16th July 2007, 07:32 PM

Abby, I said "if anything" boosting exports is bad. If one country ended up with all the dollars, and another ended up with all the goods, the one with the goods wins. As I said, trade balances. When two parties agree to trade, both benefit. Every free trade increases Pareto optimality.

The benefits of trade accrue whether the trading partner is across the street, or across the ocean. Economics does not recognize borders. The analysis is exactly the same. Therefore, there is no such thing as a "trade surplus" or a "trade deficit". These are artificial constructs which serve to indoctrinate people with nationalism and fear of foreigners.

I run a trade deficit with my grocery store. I spend hundreds of dollars a week there, and they never buy anything from me. Ever. Is this a dire problem that needs to be fixed by monetary policy? No.

Yes, definitions are important. For example, inflation. The Austrians subscribe to the quantity theory of money, and inflation is defined as an increase in the quantity of money beyond the increase in goods and services. Rising prices are a symptom of inflation.

On the free market, the supply of money is expected to keep pace with the supply of goods and services, because on the market, all businesses (including the production of money) tend toward the same rate of return on investment. Thus, analyzed correctly, all inflation is "unexpected".

Abby, I know that, according to mainstream econ, Austrian econ is "wrong". The reverse is also true. The difference is, there exist scholarly refutations of Keynesian and Chicago-monetarist economics. I am not aware of any scholarly, rigorous refutations of Austrian theory.

So, I am asking to you to begin by giving us an explanation of where my (Austrian) analysis of fiat money is in error. Again, I say fiat money is theft. I have given a very clear explanation of why that is so. If you disagree, give me an explanation.

Abbyas

16th July 2007, 07:41 PM

Truthseeker, do you know what the capital account is?

Because you have a distorted view of how international trade works, and I am a little tired of explaining things to you.

I've made my comments on your treatise repeatedly. You just don't have the abilities to refute Keynes and/or Friedman on your own.

You've linked to a sight that misses things completely (example unexpected inflation, which I have brought up time and time again).

Here's another one. The "treatise" author mentions that a devalued currency is an embarrassment for the countries gov't. This completely misses all the times that gov'ts DEVALUE ON PURPOSE. Look up Nixon and Japan.

But I am done. You have a very poor understanding of things you purport to be wrong.

TruthSeeker1234

16th July 2007, 08:00 PM

AlanGreenspan

16th July 2007, 08:07 PM

TS1234

Besides creating the Fed, it made it a felony to refuse to accept "Federal Reserve Notes" in payment of debt.

So you would rather banks demanding whatever they want as payment for people's debt? I believe it is completely rational to establish by law a currency that financial institution must accept as payment for obligations.

Let's do something, let's challenge these illuminati bastards. Lend me 15,000 US$ and i'll pay them back to you in green bottles filled with sand ... 15 of them. Come on, let's stick it to the man.

In 1933, the US govt. confiscated all of the monetary gold, making it a felony to even possess. People were indeed put in jail for the "crime" of wanting to hold on to their own gold coins.

Are you talking about Executive Order 6102? If so, it was a forced sale not a confiscation of private property. The argument from your side resides on the intrinsic value of gold, you could convert your gold coins to bullions and still have the same wealth ... right?

Getting a little off topic, if the Fed is privately owned: which corporations employ the current board of directors and chairman?

Abbyas

16th July 2007, 08:12 PM

Yes, Abby, I know what is meant by "the capital account".

Gone, eh. So the answer evidently is "No, Abby Scott cannot refute Ace Baker's (Austrian based) claim that fiat money is theft.

Anyone else?

Okay, tell me what it is.

Good grief! I gave you criticisms. You still haven't addressed the unexpected inflation I mentioned. You have yet to address the incorrect idea that devaluation is always "embarrasing" to economists. In refutation of that you posted something that has absolutely nothing to do with international trade.

You. Don't. Know. What. You. Are. Talking. About.

This is exactly why I quit our email back and forth. You would make a statement, I would correct it, and you'd make the same statement.

Here, here is your refutation to the fiat = theft arguement: No. No it's not.

There! With less generic backing than the "treatise" you put fourth. That treatise is right up there with intelligent design. It makes distorted, sweepingly simple statements so that individuals with no economic background say, "Gee, that sounds right." Face it, you don't understand the background material enough to say whether or not mr. Ace is correct.

Or else, tell me: why does he avoid unanticipated inflation, why does he avoid devaluation as a valid governmental tool, how are the multipliers derived, what is the IS/LM curve, how do monetarists and Keynesians differ, what is the capital account, what is meant by the real exchange rate.

You need to know this stuff to make the judgements you are making.

Edited to add: See? This is why internet posters are such asses. I post something politely correcting something. It gets thrown back at me. I correct again. What do I then see? The same poop! Over and over and over again! AAAAAAGGGGHHHH. Stupid internets.

TruthSeeker1234

16th July 2007, 08:27 PM

Abby, I did so address "unexpected inflation", and so does Rothbard. On the free market, all inflation is unexpected, for the reasons given. If you want to explain why you think some inflation is expected and some not, and how that relates to fiat money being theft, or not, go ahead.

You're right, this conversation is like evolution vs. ID, and you're the one who is like the ID'er. The religious zealots have all sorts of "mumbo jumbo" that believers are supposed to regurgitate, just as do mainstream economists. Asking a free-market Austrian economist to endlessly regurgitate the details of fictional econometric constructs is like asking a rational scientist to regurgitate bible prophecy.

When push comes to shove, your only argument is "because I said so". Telling.

TruthSeeker1234

16th July 2007, 08:29 PM

Is there anyone who can offer a critique of the notion that fiat money is theft?

Abbyas

16th July 2007, 08:33 PM

Abby, I did so address "unexpected inflation", and so does Rothbard. On the free market, all inflation is unexpected, for the reasons given. If you want to explain why you think some inflation is expected and some not, and how that relates to fiat money being theft, or not, go ahead.

No it isn't. Not at all. Good grief, your Mr. Baker addresses inflation in EXPECTED TERMS. He even argues that when inflation is expected, people spend now.

Re: expected vs. unexpected inflation:
http://www.sparknotes.com/economics/macro/measuring2/section1.html

Scroll to the bottom.

This is another, basic, basic concept.

TruthSeeker1234

16th July 2007, 09:52 PM

I'll tell you what, Abby. For the sake of the thread, and trying to get an actual discussion of the wealth redistribution inherent in central banking, I will offer the following concession:

You, Abby Scott, know far more than I do about mainstream economics. I bow down to your vastly superior knowledge of mainstream economics.

You will admit, I hope, that I know far more about the so-called Austrian school of economics. You will say that it is all wrong, a fringe theory, whatever. Fine with me. Accepted for the sake of argument.

Using your vastly superior knowledge of mainstream economics, which is the correct thesis in your view, what is the error in my Austrian theory that fiat money creation redistributes wealth, away from late-receivers of new money, to early receivers of new money, and especially to the creators of new money?

Please Abby, don't hold back. Go for it. Lay your Galbraith on me. Your Samuelson. Or some Chicago Friedmanite monetarism. Whatever. Give it up. Please explain how it could possibly be that fiat money is created, yet real wealth not redistributed.

PhantomWolf

16th July 2007, 09:59 PM

Well Ace, if you think that paper money is worthless, you can send it to me, I'll happily take all that worthless paper off of your hands.

Corsair 115

16th July 2007, 10:03 PM

You. Don't. Know. What. You. Are. Talking. About.Now ask him about special visual effects for films and television programs.

TruthSeeker1234

16th July 2007, 10:07 PM

Well Ace, if you think that paper money is worthless, you can send it to me, I'll happily take all that worthless paper off of your hands.

Have I got a deal for you. I'll give you $40 in paper dollars, for every $20 gold piece you give me. You will double your money. Deal?

TruthSeeker1234

16th July 2007, 10:09 PM

Corsair and Abby. Both long on trolling, short on substance.

Abby, critique fiat = theft.

Corsair, critique this (http://www.acebaker.com/9-11/ABPlaneStudy/Chopper5Velocity2.html).

Corsair 115

16th July 2007, 10:19 PM

Corsair and Abby. Both long on trolling, short on substance.I'm still waiting for you to explain how the media of other nations are part of the 9/11 cover up. I would be interested to know, as a Canadian, that the CBC, CTV, and Global television networks were part of some conspiracy to hide the truth.

I'm still waiting to hear if you've tried contacting the aforementioned three networks to see what 9/11 news reports they might have archived.

I'm still waiting to hear if you've finally done some reading on the origin and background of special visual effects and if you've gained some knowledge as to how various techniques are done and how they've changed over the years.

Normally, I wouldn't have taken a shot at you like I did, as I do prize civility, but frankly, you've worn out my patience. So I fired a round across your bow to get your attention.

PhantomWolf

16th July 2007, 10:22 PM

Have I got a deal for you. I'll give you $40 in paper dollars, for every $20 gold piece you give me. You will double your money. Deal?

I'd be happy to give you all the gold I have for all the money you have...

stilicho

16th July 2007, 10:25 PM

Why is it that people act like inflation never happened pre Fed Reserve?
Or that price inflation contributed largely to the demise of Spain (c 17th Century) coupled with an aggressive adherence to a precious metal standard?

kookbreaker

16th July 2007, 10:38 PM

Corsair and Abby. Both long on trolling, short on substance.
[/URL].

Pretty arrogant for a guy who's been caught flat-footed and unable to even know the terms of what he's talking about.

Even I don't know squat about economics and I could see this is a losing proposition.

TruthSeeker1234

16th July 2007, 11:01 PM

I'm still waiting for you to explain how the media of other nations are part of the 9/11 cover up. I would be interested to know, as a Canadian, that the CBC, CTV, and Global television networks were part of some conspiracy to hide the truth.

I don't know if or to what extent the Canadian media are in on it. Good research subject. On 9/11, they were simply fed the same videos and information that everyone else was. Since then, I don't know.

I'm still waiting to hear if you've tried contacting the aforementioned three networks to see what 9/11 news reports they might have archived.

The Canadian networks? No. I'd be happy to though. Perhaps you could give me some contact info.

I'm still waiting to hear if you've finally done some reading on the origin and background of special visual effects and if you've gained some knowledge as to how various techniques are done and how they've changed over the years.

I discuss this in my paper. Had you actually read it, you'd know this. You should try comprehending that which you criticize. It will actually make your argument stronger.

Normally, I wouldn't have taken a shot at you like I did, as I do prize civility, but frankly, you've worn out my patience. So I fired a round across your bow to get your attention.

I've gotten a lot of people's attention. I have produced a robust proof of video fakery on 9/11. If you'd like to cease your distractions and contribute some substance, perhaps you could bump the appropriate thread.

TruthSeeker1234

16th July 2007, 11:09 PM

Pretty arrogant for a guy who's been caught flat-footed and unable to even know the terms of what he's talking about.

Even I don't know squat about economics and I could see this is a losing proposition.

Go back and re-read the thread. I know perfectly well what Abby's beloved multipliers are - both the Keynesian multiplier, and the money multiplier. I just happen to think they are both fiction. Historically, I don't see where mainstream economics has predicted or explained anything. It is a failed pursuit. I'm not real interested in belaboring a discussion of fictional constructs.

Austrian economics explains much. Would you like to know the cause of the boom/bust business cycle? Would you like to know the cause of price inflation?

I am interested in discussing the Federal Reserve System, and the creation of fiat money.

I am still waiting for anyone to even attempt to refute what I have said.

Fiat money = Theft.

TruthSeeker1234

16th July 2007, 11:15 PM

No it isn't. Not at all. Good grief, your Mr. Baker addresses inflation in EXPECTED TERMS. He even argues that when inflation is expected, people spend now.

Re: expected vs. unexpected inflation:
http://www.sparknotes.com/economics/macro/measuring2/section1.html

Scroll to the bottom.

This is another, basic, basic concept.

The page you link is revealing of your mindset. The page defines inflation as a rise in prices, and attempts to categorize inflation as "expected" and "unexpected". It's not very interesting. What is interesting is to wonder:

What causes inflation?

That is not discussed on your sparknotes page, Abby.

The Austrians have an elegant and scholarly explanation for the cause of price inflation. According to Austrian theory, the only possible explanation for a sustained, general rise in prices is an increase in the quantity of money, relative to the amount of goods and services.

That is why the Austrians define inflation as the increase in money supply, and say that rising prices are a symptom of inflation.

Naming ill-defined categories of things is boring to me. Understanding causation is stimulating. Perhaps that's just the difference between me and you.

Corsair 115

17th July 2007, 12:05 AM

I don't know if or to what extent the Canadian media are in on it. Good research subject. On 9/11, they were simply fed the same videos and information that everyone else was.They also had their own reporters there, covering various stories. A number of Canadians worked in the WTC towers; 24 were killed in the attacks that day.

The Canadian networks? No. I'd be happy to though. Perhaps you could give me some contact info. Google should easily supply such info.

I discuss this in my paper. Had you actually read it, you'd know this. No, I haven't read it. Why? I'll be blunt: anyone who's starting position is that ALL the video footage shot on 9/11 of the aircraft impacts (all 40+ angles worth) are fakes is someone who is divorced from reality and living in a fantasy world. As a result, I'm not much interested in reading their paper.

Considering my own eyes watched much of the same footage when it was originally aired and in broadcast quality and which was repeated several times, and given just how good these eyes of mine are at spotting special effects and which saw absolutely NOTHING wrong in any of the footage, I am content that what I saw was real. Add to this all the other supporting evidence (many eyewitness testimonies, aircraft debris, still photos, etc.), and I am sure your assertions are utterly incorrect and utterly false.

By the way, I'm still waiting for you to address all the still photographs of the 9/11 impact events. You're going to have to prove all those pictures which were shown on newspapers around the world are faked too.

I have produced a robust proof of video fakery on 9/11. You may have for folks who don't know much about the subject of visual effects, or who don't have a good eye for spotting them, but for everyone else, no, your proof is not robust (leaving aside all the other corroborating evidence that jetliners impacted the WTC towers which makes your case even weaker than it was initially).

One more time I mention this:

To determine if a video is faked, you do NOT need to do some frame-by-frame Photoshop analysis. Faked images can be detected merely by watching the footage at normal speed several times. If your eyes are any good, normal speed viewing should reveal the problems, and from there you can go into details. But if you can't spot the problems at normal speed, then your eyes are no good for spotting effects.

If you'd like to cease your distractions and contribute some substance, perhaps you could bump the appropriate thread.You're the one who has abandoned your own thread on the subject.

I'm still waiting for you to tell me what, if anything, you think looks odd about the way the full-size powerloader moved in the movie Aliens. That is a litmus test for determining whether you are any good or not at spotting subtle issues with the way things move. If your eyes find nothing out of the ordinary, then I know beyond any doubt that my eyes are superior to yours when it comes to determining special effects.

stilicho

17th July 2007, 12:26 AM

That is why the Austrians define inflation as the increase in money supply, and say that rising prices are a symptom of inflation.
The "Austrians" play an interesting little shell game, TS1234. They acknowledge the need for the concentration of capital useful for technological application (canals, railways, highways, motorcars, steamships, port facilities, industrial buildings, banks, airplanes, airports, and so on). But this requires a liquidity and portability of money that gold and silver simply cannot keep up with, nor can private banking concerns.

Not only that, but capitalism coupled with a precious metal exchange currency is a recipe for price inflation. You have to increase the local money supply (concentration of capital). That used to mean ridiculous demands on local banking facilities, runaway price inflation, and moreover stripped other places of their ability to employ the same technologies.

These days of central banking, that doesn't happen any longer unless the local authority loots the cash register and opens up a bank account in Zurich. Maybe you're afraid that's going to happen in your country. I can't see why, though. They certainly had their opportunity about eighty years ago and decided instead to play fair.

Maybe you live in a gold-producing area or something and you think you'll reap "benefits" of some sort of neo-mercantilist scheme. Or perhaps you're deeply indebted to others and feel you were coerced into your situation. But most people accept that "fiat" currency doesn't mean "fake money" and don't need to know much about economic history to realise that they're far better off than their ancestors were.

The nineteenth century saw a plethora of "Austrian" solutions and they resulted in bank panics, widespread poverty in the West, and dissolution of markets and trade. Shall we raise the banner of Tariff yet again Mr Truth Seeker?

portlandatheist

17th July 2007, 02:03 AM

Have I got a deal for you. I'll give you $40 in paper dollars, for every $20 gold piece you give me. You will double your money. Deal?
Can I take you up on that deal? I'll trade you my Krugerrands 1 oz legal tender gold coins @ $1,330 each for your fiat money

AlanGreenspan

17th July 2007, 04:32 AM

@TruthSeeker1234

First, I'm asking for criticism of this concept:

The creation of fiat money is theft. It necessarily transfers real wealth away from the late receivers of new money, and into the hands of the early receivers, and especially into the hands of the money creators.

That could be the case in a scenario where the Central Bank is an active agent of the economy, where it has the ability to spend the money it creates. In the case of the Federal Reserve the “money creators” receive no transfer of wealth.

The bit about the “late receivers” and “early receivers” makes no sense in the context of a Central Bank that manages the growth of the money supply according to the changes in the demand. A stable and predictable rate of inflation does away with your argument about the transfer of wealth from the “late receivers” to the “early receivers”.

Belz...

17th July 2007, 05:42 AM

Prior to the existence of gold money, there was a demand for gold as a commodity.

Yea, but when's the last time people used currency MADE OUT OF gold ?

Something which was not valuable could not function as money

Of course, and that's why paper money works.

In 1913, refusal to accept paper money was made a felony.

It's a good thing that the local supermarked can't ask for 6 goats in exhange for that new television set I want...

Belz...

17th July 2007, 05:50 AM

If what you say is true, government would not have had to use force to impose fiat money.

Actually, they would.

Paper money is THE SAME THING as any other kind of money, expect it's more practical, because there's never any less of it after a few million marriages.

Gold money evolved through free choice. When given the freedom to choose, people chose to accept commodities as money, especially precious metals, and gold above all others.

Yes. Same thing with paper money. What's your point ?

Fiat money did not evolve through free choice. When given the freedom to choose, people did not choose to accept unbacked paper money, ever.

And yet the world economy works fine with it. Your theory fails in practice.

4. I need to get stuff from other people.
5. If I offer them [unbacked] paper money, they'll tell me to go fly a kite.

Of course NOT. You are completely ignorant of these things, apparently.

If OTHER people use paper money as a currency, then it has economic value even if it has no real value.

So who cares ? "Diablo II" players used damn "Stones of Jordan" items as a currency... instead of ACTUAL gold in the game that they could use to buy stuff with. So why did they use that ? <shrugs> Because they agreed to use it as currency, that's all. They were cheating, but that's besides the point.

The creation of fiat money is theft.

That's your conclusion. So far you've failed miserably at demonstrating it.

It necessarily transfers real wealth away from the late receivers of new money

And THAT is why you fail. [/Yoda]

"Real wealth" is an illusion. You only have "real" wealth so long as the wealth you have is CONSIDERED wealth.

Mainstreammedia

17th July 2007, 05:56 AM

Of all the stupid conspiracytheories, this gold-crap really taks the pie...
Are these people unable to understand concepts like inflation? Or that there isn't gold enough in the world, to cover the value of money in the United States, let alone in the world?

Having Krugerrands and other "real" gold currencies is just stupid, let alone a bad investment. Gold prices are up right now, but not nearly as high as they were. And if the price of gold falls, which it very might well, and which it has done before, guess what, your precious Krugerrands will lose value as well. Unlike the money I have invested in bonds and the stock market...

Belz...

17th July 2007, 05:56 AM

Yes, Abby, I know what is meant by "the capital account".

Gone, eh. So the answer evidently is "No, Abby Scott cannot refute Ace Baker's (Austrian based) claim that fiat money is theft.

Anyone else?

No need to refute the nonsensical.

When push comes to shove, your only argument is "because I said so". Telling.

So far your argument pretty much hinges on the same reasoning, so I think we can call you the kettle, here.

I don't know if or to what extent the Canadian media are in on it.

Let me give you a hint: about as much as the American media.

Abbyas

17th July 2007, 06:00 AM

Corsair and Abby. Both long on trolling, short on substance.

Abby, critique fiat = theft.

Corsair, critique this (http://www.acebaker.com/9-11/ABPlaneStudy/Chopper5Velocity2.html).

No, no, no. You gave me a "treatise" proving that fiat=theft. I've taken it apart. It's up to you to show me more proof.

You don't "know more about the Austrian school of Economics" than i do, because you don't know about the basic tools.

Abbyas

17th July 2007, 06:03 AM

The page you link is revealing of your mindset. The page defines inflation as a rise in prices, and attempts to categorize inflation as "expected" and "unexpected". It's not very interesting. What is interesting is to wonder:

What causes inflation?

That is not discussed on your sparknotes page, Abby.

The Austrians have an elegant and scholarly explanation for the cause of price inflation. According to Austrian theory, the only possible explanation for a sustained, general rise in prices is an increase in the quantity of money, relative to the amount of goods and services.

That is why the Austrians define inflation as the increase in money supply, and say that rising prices are a symptom of inflation.

Naming ill-defined categories of things is boring to me. Understanding causation is stimulating. Perhaps that's just the difference between me and you.

You're moving the goal posts, big guy. Big time. You said there was no difference between unexpected and expected inflation.

Wanna know the problem with the quantity theory of money? The assumption that the Velocity of Money is fixed.

AlanGreenspan

17th July 2007, 07:03 AM

I came up with a simple scenario for the people who would like us to go back to the time when gold was used as currency. Let's start by reminding a very a very simple fact of real life: gold is a finite resource. With that in mind let's simplify life a bit and assume that a given country (let's name it Kookland) has 1000 gold coins running around in its economy. Kookland has a very fertile soil so they specialize in agriculture.

So, one day one of the farmers at Kookland sees he can duplicate his production for the next year if he can buy the necessary technology (a technology that does not exhibit constant returns to scale) ... problem is he can't pay for it in cash right now. The farmer goes to the financial market to see if anyone can lend him the money just to find out that the nation's money supply is already strained and there's a line of people who have the same trouble as he does. Since demand is higher than the finite supply there's only one thing to do: raise the interest rate, which means that credit is now more expensive and so the farmers will have to raise their prices in order to be able to pay their obligations. What is this? Inflation while using commodity money? But isn't this kind of money the panacea against inflation? Well, no it's not. Good monetary policy does not necessarily depend on what is being used as money, delete some of that information you got from "America from freedom to fascism" or "zeitgeist" and replace it with this tiny bit.

Loss Leader

17th July 2007, 08:01 AM

8. And thus, gold is now demanded for its exchange value, in addition to its pre-existing values.

It had no preexisting value. It's a soft and (until recently) fairly useless metal.

3. Other people [the market] do not put a value on [unbacked] paper money.

Um ... yes they do. They put quite a heavy value on it. Just today I was able to use some to convince a guy to bake me a bagel. I used more of it to convince the Campbell's Soup Company to grow eight vegetables, juice them, mix them together, bottle them and send them to the bagel guy for me to drink. So, your statement is false owing, I suspect, to your lack of comprehension of economics.

5. If I offer them [unbacked] paper money, they'll tell me to go fly a kite.

Wrong!

When I offered the bagel guy the unbacked paper money, he took it happily. He even told me to have a nice day. Did I mention the bagel had vegetable cream cheese on it? All in all, a lovely breakfast was had by me using unbacked paper money.

Do you have any examples of merchants in the US refusing to take unbacked paper money?

I didn't think you did. It's because you don't understand the issues.

6. Because I do not find [unbacked] paper money aesthetically pleasing, and because the market finds it essentially worthless, I do not wish to own [unbacked] paper money.

Send it all to me.

You won't, though, because you are lying. You do not find unbacked paper money essentially worthless. You covet it for its essential worth. You want more of it. So you're not even being honest about your own beliefs.

8. And thus, [unbacked] paper money is intrinsically worthless, and also worthless to free people as a medium of exchange.

Which would be true if it were at all the case. Unfortunately for you, I have just checked and my mortgage company will be happy to accept unbacked paper money for land. There's nothing more real than land and you can get some with unbacked paper money. Meanwhile, they will not sell me back my land for either bagels or V8.

3. Other people put a value on [redeemable] paper money, because they can readily exchange it for gold or silver.

You should pick up the very easy book Greenback by Jason Goodwin. He has some nice anecdotes from the 1800s about what happened when people tried to redeem their bank notes for gold. It was a pretty rare event. One bank manager told a customer that no one had ever made that request before and he would be happy if the man did not reveal to anyone else the location of the main bank branch that held the gold deposits.

There's a reason nobody cared when we left the gold standard: nobody could readily exchange their money for gold and almost nobody wanted to.

5. If I give them [redeemable] paper money, they'll give me stuff in exchange.

Really? Try buying a bagel and V8 with a note that says "IOU 0.006 oz. og gold." The truth is you could convert your money to gold today and you could issue gold certificates. Or you could skip that step and buy gold bonds directly. Then try to use them in trade. You can't. Guess why? People don't want them!

4. I need to get stuff from other people.
5. If I give them [unbacked] paper money, they'll go to jail if they refuse to accept it, so they are forced to give me stuff in exchange.
6. Even though I do not find [unbacked] paper money aesthetically pleasing, I wish to own [unbacked] paper money, because the government has left me with no choice, other than to revert to barter.
7. Thus, [unbacked] paper money has value to me.
8. And thus, [unbacked] paper money, though intrinsically worthless, and irredeemable, becomes valued as a medium of exchange.

I'm having difficulty seeing why this accurate representation of the world is in any way problematic.

JonnyFive

17th July 2007, 08:05 AM

Stop it Johnny. My reasoning is in no way circular. Prior to the existence of gold money, there was a demand for gold as a commodity. That is, people valued it. Commodity monies emerged in response to the problems of barter. Additional demand for gold thus arose, the original demand for gold, plus the new demand for gold as a medium of exchange. The additional demand will make gold more highly valued.

Something which was not valuable could not function as money, because people would not accept it in exchange. Therefore, to function as money, a commodity must have a high pre-existing market exchange value. None of this is circular reasoning.

Not sure what high value has gold other than as a medium of trade - which is equivalent to currency, but I'll drop the complaint as its trivial to the point of stupidity anyway. I apologize for misunderstanding what you were getting at.

Where on earth have I ever said the gold standard emerged suddenly? I said it emerged spontaneously. The spontaneous emergence of the gold standard took place over thousands of years.

Well, that was a simple misreading.

But technically, it wasn't spontaneous either. You even gave various reasons that gold was selected - making it a logical choice over time, and hardly spontaneous. Spontaneous implies arising without cause, but there are reasons to choose to select gold as a medium of currency. Also, numerous other mediums were tried, before gold was selected as one of the primary standards, along with silver to a lesser extent, in many civilizations.

In 1913, refusal to accept paper money was made a felony.

Incorrect, according to the Treasury:

http://www.treas.gov/education/faq/currency/legal-tender.shtml#q1

Private businesses are perfectly free to not accept cash. Do you have evidence that such a law existed and is still in effect?

As far as I can tell, there are no laws that force any private business from conducting business as it sees fit. They are perfectly free not to take paper money, as they are free not to take credit cards, or to refuse to accept payment in, say, gold.

In 1933, all the monetary gold was confiscated by the government, and its possession was made a felony. Making gold a felony tends to discourage its use, wouldn't you say?

This is highly misleading. What the US actually did was remove from circulation all the gold certificates that were used as currency. This, in absolutely no way prevents you from trading in gold. Gold is bought and sold on the open market, and if you can convince someone to take it in trade for something, there is no law that prevents you from doing so.

Possession of the original gold certificates is, in fact, illegal. They also have no value. However, this does not mean "gold" (as in, actual possession of gold, not a gold certificate in the old sense)

Your first sentence, which refers to monetary gold, I assume refers to the gold certificates issued by the US government. But then you switch to just saying "gold," which leads the reader to believe that using gold itself as a medium of exchange is illegal. This is false. You are quite free to try to persuade a business to accept gold as payment. They probably won't, but no law stops you. I think you have been misled about the US laws governing private exchange.

Any money supply is optimal. If this were false, then you could not explain why there is even one poor country. All any country would need to do is create more money, and be rich. Money is a medium of exchange, prices will adjust to any supply of money.

Like I said, this is true only in theory. However, you neglect to factor in the fact that both prices and wages are "sticky" relative to other economic factors - they tend to change more slowly. If the money supply is changing very quickly, then prices/wages may not change quickly enough to adjust for the money supply.

Obviously, the theory is that the money supply will always self-adapt. If there is only $100 instead of 100 billion in the whole economy (obviously absurd), then your wages might drop to 1 billionth of what they were, but so will prices. That is the theory, anyway. But, like I said, the prices and wages take time to adjust, and the economy takes time to reorganize.

There is also the issue of fixed debt. While the wages and prices may adjust to the money supply eventually, the debt amounts may not, and that may cause issues with repayment if the money supply is shrinking.

If you honestly believe the money supply always adjust perfectly, then why do you have such a problem with the Fed? After all, any changes they make must be optimal by definition, correct?

Sorry, must have missed your history lesson. Link it.

http://www.answers.com/topic/panic-of-1873

The central issue was that Grant refused to expand the money supply by moving off the gold standard. As additional background, there was pressure from the bankers to stay on the gold standard, and pressure from the debtors to move off it. Any idea why?

If you want additional sources, might I suggest the excellent "American Pageant, volume II" by Thomas A. Bailey et. al.

Again, my apologies for misunderstanding you, I was reading more into what you said than I should have.

Belz...

17th July 2007, 08:06 AM

Which would be true if it were at all the case. Unfortunately for you, I have just checked and my mortgage company will be happy to accept unbacked paper money for land. There's nothing more real than land and you can get some with unbacked paper money.

Hey, Ace!! Listen to the lawyer man. Forget the gold. We should use LAND as money.

It's true. :)

drkitten

17th July 2007, 08:11 AM

Go back and re-read the thread. I know perfectly well what Abby's beloved multipliers are - both the Keynesian multiplier, and the money multiplier.

Well, that's not coming across.

I just happen to think they are both fiction.

That's one of the reasons. If I wrote "I know perfectly well who John F. Kennedy and Bobby Kennedy were, but I just happen to think they are both fiction," then I don't know.

I am still waiting for anyone to even attempt to refute what I have said.

Fiat money = Theft.

No. That's not what "theft" means. Refutation complete.

JonnyFive

17th July 2007, 08:14 AM

Have I got a deal for you. I'll give you $40 in paper dollars, for every $20 gold piece you give me. You will double your money. Deal?

"$20 gold piece" as in "$20 worth of gold at present market value" or "$20 gold piece from some time in the history of the US?"

sackett

17th July 2007, 08:37 AM

parmanides

17th July 2007, 09:22 AM

You guys may well feel at home arguing angels on a pinhead - I notice that no one commented when I posted one from the horse's mouth - read it a weep gatekeepers:)

SIR JOSIAH STAMP (President of the Bank of England in the 1920's, then the second richest man in Britain)

"Banking was conceived in iniquity, and was born in sin. The Bankers own the Earth. Take it away from them, but leave them the power to create deposits, and with the flick of the pen, they will create enough deposits, to buy it back again. However, take it away from them, and all the great fortunes like mine will disappear, and they ought to disappear, for this would be a happier and better world to live in. But if you wish to remain the slaves of Bankers, and pay the cost of your own slavery, let them continue to create deposits."

AlanGreenspan

17th July 2007, 09:53 AM

Parmanides: there's nothing to comment on someone's personal opinion that you manage to catch while watching "Money Masters" or a similar video.

JonnyFive

17th July 2007, 09:53 AM

Don't listen to them, TS. You and me and Billy Bryan know the truth. We will answer their demand for a gold standard by saying to them: You shall not press down upon the brow of labor this crown of thorns. You shall not crucify mankind upon a cross of gold.

Wait -- I guess it's just Billy Bryan and me. Never mind, TS. Go seek some truth or something.

Ooh, nice reference!

You guys may well feel at home arguing angels on a pinhead - I notice that no one commented when I posted one from the horse's mouth - read it a weep gatekeepers:)

The "horse's mouth?" You mean the quote from the banker that's been dead for 66 years that you quoted without context or verification and expect comment on?

SIR JOSIAH STAMP (President of the Bank of England in the 1920's, then the second richest man in Britain)

"Banking was conceived in iniquity, and was born in sin. The Bankers own the Earth. Take it away from them, but leave them the power to create deposits, and with the flick of the pen, they will create enough deposits, to buy it back again. However, take it away from them, and all the great fortunes like mine will disappear, and they ought to disappear, for this would be a happier and better world to live in. But if you wish to remain the slaves of Bankers, and pay the cost of your own slavery, let them continue to create deposits."

Okay... so what? Posting this quote doesn't invalidate anything or make anything true. If you believe the Federal Reserve is somehow "enslaving" people, then you're welcome to make that argument using evidence.

Never mind that the "bankers" don't have the power to create money whenever they want, or simply use it to buy whatever they want. Who's the richest person in the world, parmanides?

Belz...

17th July 2007, 10:03 AM

Bankers are enslaving people ?

Abbyas

17th July 2007, 10:11 AM

Belz...

17th July 2007, 10:32 AM

He's keeping socks full of cash under his pillow.

JonnyFive

17th July 2007, 10:33 AM

He's keeping socks full of cash under his pillow.

Gold, perhaps?

Belz...

17th July 2007, 10:44 AM

Gold certificates, maybe.

Belz...

17th July 2007, 10:45 AM

You guys may well feel at home arguing angels on a pinhead

Zero angels can dance on a pinhead. They're all dead.

sackett

17th July 2007, 10:46 AM

JohnyFive:

Long years ago, I heard an old recording of Bryan reading that speech; he'd deliver it if you asked him enough times -- once, say.

By god but I wish we had such orators today! He was wrong about almost everything, but the power of his wrongness would carry you along with him, like a boulder tumbling in a stream.

"There used to be a giant in that body, but he got lost looking for Billy Bryan." That's from Inherit the Wind, and it would make a good title for a biography: The Lost Giant.

parmanides

17th July 2007, 10:59 AM

May I assume that you have no savings account, credit cards or loans of any kind?

I pay taxes that indirectly help hawks kill brown people - doesn't mean I dig the system sista

p.s. I certainly do not have any loans or credit cards thankyou! I make about 2 pence a month interest on my bank account.

parmanides

17th July 2007, 11:04 AM

Bankers are enslaving people ?

He was using emotive language - if you want to shoot down his style rather than grasp the content, then feel free to hang onto your world view.

parmanides

17th July 2007, 11:08 AM

Parmanides: there's nothing to comment on someone's personal opinion that you manage to catch while watching "Money Masters" or a similar video.

So if its not relayed 24 hour on CNN, then it cant be true - gotta love your logic

TruthSeeker1234

17th July 2007, 11:31 AM

No, I haven't read it. Why? I'll be blunt: anyone who's starting position is that ALL the video footage shot on 9/11 of the aircraft impacts (all 40+ angles worth) are fakes is someone who is divorced from reality and living in a fantasy world. As a result, I'm not much interested in reading their paper.

How can you purport to criticize something you won't even read? Do you even understand the premise and logic underpinning my study? It doesn't seem so.

Considering my own eyes watched much of the same footage when it was originally aired and in broadcast quality and which was repeated several times, and given just how good these eyes of mine are at spotting special effects and which saw absolutely NOTHING wrong in any of the footage, I am content that what I saw was real. Add to this all the other supporting evidence (many eyewitness testimonies, aircraft debris, still photos, etc.), and I am sure your assertions are utterly incorrect and utterly false.

You should have a fresh look at "Chopper 7" then. This is the only other "live" plane shot on 9/11. There are many versions. Your eyes will detect very unstable motion on the plane. It is even more obvious that that of CHopper 5, and I'm writing up my study, and will be presenting both at the Madison conference. If you are anywhere near Wisconsin on August 4-5, you are cordially invited to come and ask me your toughest questions.

By the way, I'm still waiting for you to address all the still photographs of the 9/11 impact events. You're going to have to prove all those pictures which were shown on newspapers around the world are faked too.

Still photos are easier to fake than video. If they can fabricate one, they can fabricate 100.

You may have for folks who don't know much about the subject of visual effects, or who don't have a good eye for spotting them, but for everyone else, no, your proof is not robust (leaving aside all the other corroborating evidence that jetliners impacted the WTC towers which makes your case even weaker than it was initially).

You haven't even read it.

One more time I mention this:

To determine if a video is faked, you do NOT need to do some frame-by-frame Photoshop analysis. Faked images can be detected merely by watching the footage at normal speed several times. If your eyes are any good, normal speed viewing should reveal the problems, and from there you can go into details. But if you can't spot the problems at normal speed, then your eyes are no good for spotting effects.

If you're really that allergic to frame-by-frame analysis, then watch chopper 7, AKA "the hippity hop plane". If your eyes can't see problems with that, you're blind.

You're the one who has abandoned your own thread on the subject.

I'm still waiting for you to tell me what, if anything, you think looks odd about the way the full-size powerloader moved in the movie Aliens. That is a litmus test for determining whether you are any good or not at spotting subtle issues with the way things move. If your eyes find nothing out of the ordinary, then I know beyond any doubt that my eyes are superior to yours when it comes to determining special effects.

It isn't any kind of litmus test. In order to fulfill your request, I would need to know the full range of possible movements for a powerloader, which I currently don't know. Then we could compare that to what is observed, to see if there is anything impossible being depicted.

Analyzing the planes is much easier, because we know their motion through air must be stable. The observed and measured instability in the motion is proof of video fakery.

TruthSeeker1234

17th July 2007, 11:37 AM

"$20 gold piece" as in "$20 worth of gold at present market value" or "$20 gold piece from some time in the history of the US?"

As in these, for instance. They say "twenty dollars" right on there.

http://americanhistory.si.edu/collections/numismatics/doubleea/1933or2.jpg

TruthSeeker1234

17th July 2007, 11:38 AM

Fiat money = Theft.

Any argument?

WildCat

17th July 2007, 11:39 AM

Do you even understand the premise and logic underpinning my study?
I think I speask for most here when I say that it's obvious there is no logic nor even a premise to your "study". It is the rambling blather of a lunatic. And you are only slightly more adept at economics than you are at video analysis. That is to say, completely clueless.

WildCat

17th July 2007, 11:46 AM

As in these, for instance. They say "twenty dollars" right on there.

http://americanhistory.si.edu/collections/numismatics/doubleea/1933or2.jpg
Back then the price of gold was set by the government. A fixed price for a commodity. Do you think that is rational policy?

I'll play your game - in 1933 gold prices were set at $35/oz by the US government, up from the $19.75/oz it was when the $20 Saint-Gaudens coins you pictured were minted. So of course the existing coins were no longer valid. Send all your gold to me, I will give you double it's legislated value! $70/oz, just for you TS1234! This is the offer of a lifetime, don't delay! PM me and we'll set up a deal.

TruthSeeker1234

17th July 2007, 12:04 PM

aggle-rithm

17th July 2007, 12:10 PM

Well Ace, if you think that paper money is worthless, you can send it to me, I'll happily take all that worthless paper off of your hands.

I think if he had any he wouldn't be bitching about the system so much.

JonnyFive

17th July 2007, 12:12 PM

Fiat money = Theft.

Any argument?

Who's taking the wealth "stolen" by fiat money?

What is stopping you from using gold (or anything else, for that matter) as your main form of holding wealth?

You claimed the governtment forces retailers to accept paper currency, which was incorrect.

You also claimed it was illegal to use gold, which was incorrect. I'll give you the liberty of assuming you meant "gold certificates," which is true - but a US gov't issue gold certificate would be worthless as tender now, as it no longer represents any gold.

But what stops you from taking your whole paycheck and buying gold, then selling small amounts of the gold to pay your bills (especially taxes, although you can get that taken right out of your paycheck with most US employers), or arranging purchasing agreements with merchants willing to accept gold?

Please, TruthSeeker, point out one current US law that prevents you from doing all this. Are there any laws preventing you from buying gold with your money? Are there any laws preventing you from selling gold with your money?

Even if your comment about not accepting paper money being a felony was true, that still doesn't change the fact you wouldn't have to hold paper money for more than a couple days while you exchange it to gold, or vice-versa.

According to your theory, this would protect your wealth quite well against the evils of fiat money (you wouldn't keep any longer than needed). Who's stopping you? You can buy and sell all the gold you want.

aggle-rithm

17th July 2007, 12:18 PM

Bankers are enslaving people ?

It's true. They enslaved me just this morning.

On the other hand, they had awesome donuts, so it was a wash.

AlanGreenspan

17th July 2007, 12:38 PM

TruthSeeker1234 are you replying to my last two posts any time soon? Here i'll give you the links:

http://forums.randi.org/showpost.php?p=2775094&postcount=117

http://forums.randi.org/showpost.php?p=2775358&postcount=124

JonnyFive

17th July 2007, 12:44 PM

Ooh, he thinks that creating more money takes the wealth from the "new receivers" and somehow gives it to the "old receivers."

Not sure how this would work, exactly. If the "old receivers" continue to hold their money in the form of the currency subject to inflation, they will feel the same effects. If they hold their wealth in the form of a more inflation-resistant medium (such as TruthSeeker's favored gold), then it doesn't matter one bit if they create inflation or not.

Of course, the fact that the Fed is not a money-spending entity for reasons other than controlling the money supply (i.e. it "spends money" to buy up market securities to increase the total money supply). All the members of the Fed committees and what-not receive set salaries.

Inflation doesn't magically benefit the "old money" or anything of the sort. It doesn't magically benefit, or harm, anyone. It all has to do with degrees, and causes.

Seriously, why did the bankers during the Panic of 1873 want the gold standard so much? Wouldn't they rather steal wealth using fiat money? Can you explain this to me, TruthSeeker?

Rika

17th July 2007, 01:03 PM

So if its not relayed 24 hour on CNN, then it cant be true - gotta love your logic

.. no, he means he can only comment on claims, like Ace is trying to make and .. umm.. failing to make a point with.

Corsair 115

17th July 2007, 01:09 PM

How can you purport to criticize something you won't even read? Do you even understand the premise and logic underpinning my study? It doesn't seem so. I'll reiterate:

Anyone who's starting position is that ALL the video footage shot on 9/11 of the aircraft impacts (all 40+ angles worth) are fakes is someone who is divorced from reality and living in a fantasy world. As a result, I'm not much interested in reading their paper.

You should have a fresh look at "Chopper 7" then. This is the only other "live" plane shot on 9/11. There are many versions. Your fixation upon live vs. recorded video is useless and pointless, since the recorded videos, all 40+ angles worth of it, agree with the live footage.

Still photos are easier to fake than video. If they can fabricate one, they can fabricate 100. 1) Then produce some. Create some examples. 2) The still photos match what the videos recorded.

You haven't even read it. I'll reiterate:

No, I haven't read it. Why? I'll be blunt: anyone who's starting position is that ALL the video footage shot on 9/11 of the aircraft impacts (all 40+ angles worth) are fakes is someone who is divorced from reality and living in a fantasy world. As a result, I'm not much interested in reading their paper.

It isn't any kind of litmus test. In order to fulfill your request, I would need to know the full range of possible movements for a powerloader, which I currently don't know. You're doing the "forest for the trees", overcomplication thing again.

Let me put this as simply as possible: you watch the part of the film I mention, then tell me if anything looks strange about the way the powerloader moves. That's it. The movie depicts a machine moving, you tell me if the way that machine moves meets with how you would expect such a thing to move. No preconceptions necessary.

Analyzing the planes is much easier, because we know their motion through air must be stable. The observed and measured instability in the motion is proof of video fakery.Ever been to an air show? The way some of those planes maneuver during aerial stunts may surprise you. Then there's the whole question of viewing angle, perspective, lighting, focal length of the lens, etc., which you seem to completely fail to take into account.

Question: what does a long focal length lens do to the background of an image as compared to a short focal length lens?

Question: if you hung a bank of lights on an aircraft, do you think it would make easier to spot or more difficult to spot from a good distance away?

Incidentally, I'm still waiting for you to explain away all the eyewitnesses and physical evidence.

parmanides

17th July 2007, 01:27 PM

.. no, he means he can only comment on claims, like Ace is trying to make and .. umm.. failing to make a point with.

Surely the claim is self evident

Major banking figure, with far greater knowledge of central banking than anyone here, catagorically confirms the misuse and dominance of banking power through the debt based credit system.

discuss

Abbyas

17th July 2007, 02:43 PM

Price fixing is always a bad idea. Prices should always be free to fluctuate according to supply and demand.

Wildcat, can you address the subject of the thread, the Fed conspiracy? I say the creation of fiat money is theft, for the reasons given.

Are you able to critique this idea with any substance?

I smashed the backing of your theory over and over. Good grief. Did you not see??? Why haven't you responded to my critique of the Quantity theory of Money? This is all essential to your argument that fiat=theft, and yet you don't acknowledge this.

Re: Price fixing. No, the free market is not always the proper solution. It doesn't do well with public goods (look it up), and goods/services with externalities (goods/services where the social benefit is not included in the price paid for the item), for example, police, fire, public schools, etc, etc.

No price fixing, means no rent control in large cities, which means gramma is out on the street. Huge externality in keeping her safe and warm.

WildCat

17th July 2007, 02:52 PM

No price fixing, means no rent control in large cities, which means gramma is out on the street. Huge externality in keeping her safe and warm.
You had me until this part. Rent control makes no sense whatsoever, unless your goal is a shortage of rental units and high rents.

Mainstreammedia

17th July 2007, 02:55 PM

Major banking figure, with far greater knowledge of central banking than anyone here, catagorically confirms the misuse and dominance of banking power through the debt based credit system.

discuss

Discuss what?!? Conspiracy theorists tendency to make up quotes, or your skills at quotemining? Please elaborate?

And with the above in mind, surely you have a non-conspiracytheorist link to your precious quote?

Or I have a quote for you to discuss:

"Surely, anyone to believe this crap about fiat-money is an idiot. I'm surprised nobody ever brought up the fact that I readily accept credit-cards on my site, while at the same time railing against bankers and the fed. Suckers..."
Alex Jones, radiohost.

WildCat

17th July 2007, 02:55 PM

Price fixing is always a bad idea. Prices should always be free to fluctuate according to supply and demand.
You really want the value of a dollar pegged to the value of gold on the open market? :eek:

Wildcat, can you address the subject of the thread, the Fed conspiracy? I say the creation of fiat money is theft, for the reasons given.
Sorry, your reasons are utterly ridiculous. As ridiculous as your "no planes hit the towers" theory.

Abbyas

17th July 2007, 03:06 PM

You had me until this part. Rent control makes no sense whatsoever, unless your goal is a shortage of rental units and high rents.

I here you, my fellow urbanite. However, without any type of rent control in NYC, we would have a Manhattan full of only the wealthy. However, we also have a combination of rent control and subsidies to try to alleviate the pressure on bldg owners.

Loss Leader

17th July 2007, 03:07 PM

You really want the value of a dollar pegged to the value of gold on the open market?

Actually, what Ace wants is to feel secure. He is really a remarkably fragile person and is absolutely terrified that his world is going to collapse at any moment.

He likes gold because, as Eddie Murphy taught us in Trading Places, gold is heavy. The idea of a monetary system pegged to faith is unbearable for him. Gold, though, is real. It weighs a lot. Money based on gold is more real, in his mind.

It's the same thing with 9/11. Nineteen guys who got lucky is just too randomly horrible for him to deal with. But if the whole thing was masterminded by a huge, overbearing, all-powerful government, there would be some stability. It's a perverse stability, to be sure, but it is still what his mind craves.

With Ace and people like him, the most instructive question to ask is why they believe what they do. In this case, the answer is that they care more about protecting their own sense of self than they do in perceiving the world as it really is.

AlanGreenspan

17th July 2007, 03:08 PM

Surely the claim is self evident

Major banking figure, with far greater knowledge of central banking than anyone here, catagorically confirms the misuse and dominance of banking power through the debt based credit system.

discuss

What should we discuss here? The fact that you are quoting an opinion without any analysis to back it up?

Come on, i think you can do better than a blatant appeal to authority.

kookbreaker

17th July 2007, 03:29 PM

I here you, my fellow urbanite. However, without any type of rent control in NYC, we would have a Manhattan full of only the wealthy. However, we also have a combination of rent control and subsidies to try to alleviate the pressure on bldg owners.

Has it really worked though? Rent in NYC is a horror show compared to any city on the East Coast and I don't know what other cities have tried rent control. Yet rents are much more reasonable in those cities. By comparison, NYC rents were always awful even when living in the Big Apple was not as popular as it is today.

parmanides

17th July 2007, 03:29 PM

What should we discuss here? The fact that you are quoting an opinion without any analysis to back it up?

Come on, i think you can do better than a blatant appeal to authority.

So there is no link between an extremely influential banking figure identifying the corrupt nature of the debt based credit system

and...

the reality that there exists a corrupt debt based credit system?

Surely you can do better than completely disregard a vital piece of evidence that massively corroborates the argument for reform. Even without supporting evidence, a person confessing to a crime makes them a prime suspect. Please be adult and intelligent enough to admit just this :rolleyes:

AlanGreenspan

17th July 2007, 03:42 PM

You seem so sure of your point (whatever it might be) yet you can't come up with nothing else than an appeal to authority? That's just funny. When the best you can come up with is a logical fallacy i'd say that's enough to determine your views are incorrect.

Even without supporting evidence, a person confessing to a crime makes them a prime suspect.

So if a doctor says he murdered a thousand people, shall we consider all doctors to be mass murderers?

Come on man, you are not even trying.

parmanides

17th July 2007, 03:55 PM

Discuss what?!? Conspiracy theorists tendency to make up quotes, or your skills at quotemining? Please elaborate?

And with the above in mind, surely you have a non-conspiracytheorist link to your precious quote?

http://www.brainyquote.com/quotes/authors/j/josiah_stamp.html

parmanides

17th July 2007, 04:05 PM

You seem so sure of your point (whatever it might be) yet you can't come up with nothing else than an appeal to authority? That's just funny. When the best you can come up with is a logical fallacy i'd say that's enough to determine your views are incorrect.

Why are you assuming that this is the sole piece of evidence for my case - grow up

If I thought that a detailed discussion of economics would change some of the padlocked minds here don't you think I would have started on that foot. As people here put so much stock in 'conventional' mainstream wisdom and the opinions of 'well repected' experts, I introduced that quote to inspire your own investigation

AlanGreenspan

17th July 2007, 04:23 PM

Why are you assuming that this is the sole piece of evidence for my case - grow up

Well because after 5 pages that's the only thing you've brought up as an argument for your case (whatever it might be).

Corsair 115

17th July 2007, 04:47 PM

Has it really worked though? Rent in NYC is a horror show compared to any city on the East Coast and I don't know what other cities have tried rent control.Toronto certainly has rent control, and has had it for many, many years. For a long time it was pegged as part of the reason for incredibly low vacancy rates (0.1%) but with low interest rates and a condo building boom, vacancy rates have gone up to 3%.

TruthSeeker1234

17th July 2007, 04:57 PM

You really want the value of a dollar pegged to the value of gold on the open market? :eek:

Sorry, your reasons are utterly ridiculous. As ridiculous as your "no planes hit the towers" theory.

On the free market, a "dollar" is simply a name for a particular weight of gold, say 1/20 ounce. It does not fluctuate, any more than a "yard" is a name for "three feet". Transactions are negotiated in weight of gold. Actual gold does not need to be carried around, as paper or digital substitutes are perfectly fine, so long as they are redeemable in gold.

Now, if my "reasons are utterly ridiculous" for why fiat money = theft, then why don't you explain how it is so?

I have given a very clear explanation for why fiat money redistributes wealth, and to whom and from whom it does so. All you have offered is vacuous assertions.

TruthSeeker1234

17th July 2007, 05:01 PM

He likes gold because, as Eddie Murphy taught us in Trading Places, gold is heavy. The idea of a monetary system pegged to faith is unbearable for him. Gold, though, is real. It weighs a lot. Money based on gold is more real, in his mind.

False. I like gold because the market chose it. If the market had chosen seashells, I would like them. If it had chosen slips of paper, I would like that. The selection of gold as the world money standard was not arbitrary. It was the result of thousands of years of natural selection. It spontaneously emerged as the best functioning money.

If I wanted to LL, I could make up all sorts of things about you, and what you like, and why. But I'm too intellectually honest to do that. You, on the other hand, are a lawyer.

TruthSeeker1234

17th July 2007, 05:03 PM

Can anyone even attempt to counter the strong claim that fiat money creation = theft?

Still waiting. You all have lots of empty rhetoric, but so far no one has brought anything of substance.

AlanGreenspan

17th July 2007, 05:16 PM

@Truthseeker1234

On the free market, a "dollar" is simply a name for a particular weight of gold, say 1/20 ounce. It does not fluctuate, any more than a "yard" is a name for "three feet".

And what happens to prices and exchange rates in this golden world of yours? To be more specific, which elements will determine the exchange rate and will there be a fixed rate of inflation? What will determine the change in prices?

Why gold? Why not hemp seeds?

I have given a very clear explanation for why fiat money redistributes wealth, and to whom and from whom it does so.

Actually, you haven't. If you did, can you please repeat said explanations? I'd love to read it.

Can anyone even attempt to counter the strong claim that fiat money creation = theft?

Strongly absurd perhaps. When the Federal Reserve responds to a rise in the demand for money and decides to expand the money supply by lowering the amount of legal reserves, who's it stealing from? When The Fed does the same thing by buying CD's, who's it stealing from?

Abbyas

17th July 2007, 05:25 PM

Can anyone even attempt to counter the strong claim that fiat money creation = theft?

Still waiting. You all have lots of empty rhetoric, but so far no one has brought anything of substance.

Why do you keep ignoring me?

Dr Adequate

17th July 2007, 05:25 PM

Why are you assuming that this is the sole piece of evidence for my case - grow up Well, apparently it's the only "piece of evidence" you're willing to put forward. And it is not, in fact evidence. It's an opinion unsupported by fact.

If I thought that a detailed discussion of economics would change some of the padlocked minds here don't you think I would have started on that foot. So basically it's our fault that you won't supply any evidence for your views?

Let me assure you, round here facts are the only things that change people's minds --- not the mere opinions of some dead Nazi plutocrat.

As people here put so much stock in 'conventional' mainstream wisdom and the opinions of 'well repected' experts... But this is not "conventional mainstream wisdom" so much as classic Fascist paranoia; nor does he give any evidence for his views, which is what we actually put stock in round here.

As for him being "well-respected", he wrote propaganda for Herman Goering's magazine Die Vierjahresplan and attended the Nuremburg Rallies as a guest of Hitler. So he was well-respected by Hitler and Goering, yeah. But I, for one, think rather less of his judgement than they did.

Loss Leader

17th July 2007, 05:32 PM

If I wanted to LL, I could make up all sorts of things about you, and what you like, and why. But I'm too intellectually honest to do that. You, on the other hand, are a lawyer.

I'm gonna give you that one. That was funny.

It's not funny that you actually believe that my education and experience makes me less honest than lay people, but if you didn't really believe it then the comment would be suitably pithy.

If anybody's keeping score, that's one for Truthseeker1234. So totaling that up:

Truthseeker1234: 1
The rest of planet earth: 100,000,000,000,000,008

Civilized Worm

17th July 2007, 06:05 PM

I yuv goooold! The shmell of it! The tashte of it! The texture!

http://forums.randi.org/imagehosting/thum_16445469d594473854.jpg (http://forums.randi.org/vbimghost.php?do=displayimg&imgid=7071)

Civilized Worm

17th July 2007, 06:06 PM

The nineteenth century saw a plethora of "Austrian" solutions and they resulted in bank panics, widespread poverty in the West, and dissolution of markets and trade. Shall we raise the banner of Tariff yet again Mr Truth Seeker?

You know what other austrian had a "solution"? That's right...

Abbyas

17th July 2007, 06:14 PM

You know what other austrian had a "solution"? That's right...

My algebra teacher Mr. Weisseldorf?

Foolmewunz

17th July 2007, 07:05 PM

My algebra teacher Mr. Weisseldorf?

And there was that brawny actor fella... "I'll be back." Whatever happened to him?

Foolmewunz

17th July 2007, 07:15 PM

Ya know..... !!!!

I tried to draw Ace into a discussion of his Austrian School beliefs way back and no one would join in. Now, I discover this thread hundreds of posts in, and everyone's pretty well taken away all the good arguments.

Thanks for nothing, gang!

Well, at least no one's started referring to "my precious"....

http://imagecache2.allposters.com/images/pic/ADVG/436~Gollum-Posters.jpg

portlandatheist

17th July 2007, 07:48 PM

TruthSeeker1234

17th July 2007, 09:35 PM

And what happens to prices and exchange rates in this golden world of yours? To be more specific, which elements will determine the exchange rate and will there be a fixed rate of inflation? What will determine the change in prices?

As far as gold backed money is concerned, there is no exchange rate. One ounce of gold exchanges for one ounce of gold. If a dollar is defined as 1/20 of an ounce of gold, and some other currency is defined as 1/10 of an ounce of gold, then one of those would exchange for 2 dollars. Speaking of the "exchange rate" between gold-backed currency makes no more sense than speaking of the "exchange rate" between $5 bills and $10 bills.

As to prices, they are are determined by the interaction of supply and demand. Producers can ask any price they wish for their goods, and consumers are free to purchase or not, as they see fit.

Inflation is defined as an increase in the supply of money relative to the supply of goods and services generally. On a free market, the rate of profit tends toward being the same for all businesses, including gold mining. Whenever any business becomes more profitable than average, investors pull out of less profitable ventures, and invest in the more profitable. This increases competition, and increases the supply, thus driving down prices and profitability. When any business becomes less profitable than average, the reverse happens.

On the market, inflation occurs when the production of gold money exceeds the production of other goods. This will drive prices up generally, which is the same as saying that the value of gold has gone down, relative to everything else. This lowered value of gold means that gold mining has become less profitable, so investors will pull some assests out of gold, and seek a higher rate of return elsewhere. And, as with all other businesses, if gold production drops, the reverse happens.

Why gold? Why not hemp seeds?

Because the market selected gold. Historically, many things were used as money - seeds, seashells, cattle, salt, etc. Gold won.

Can you please repeat said explanations? I'd love to read it.

It is here. (http://forums.randi.org/showthread.php?postid=2769936#post2769936)

Strongly absurd perhaps. When the Federal Reserve responds to a rise in the demand for money and decides to expand the money supply by lowering the amount of legal reserves, who's it stealing from? When The Fed does the same thing by buying CD's, who's it stealing from?It is stealing real wealth from the late-receivers of the new money. In practice, individuals in the government, the banks, and government contractors win, basically everyone else loses.

TruthSeeker1234

17th July 2007, 09:42 PM

Why do you keep ignoring me?

Sorry Abby, did I miss your explanation for how fiat money creation can avoid wealth redistribution? Link me to it please.

Abbyas

17th July 2007, 09:46 PM

Sorry Abby, did I miss your explanation for how fiat money creation can avoid wealth redistribution? Link me to it please.

Oh, no, bucky. You gave "proof" for your statement. I took it apart.

Here, I'll get specific, why do you believe that the velocity of money is fixed?

Also, please note, it's very difficult to argue with someone who (admittedly) doesn't understand the arguments.

Dog Town

17th July 2007, 09:51 PM

Sorry Abby, did I miss your explanation for how fiat money creation can avoid wealth redistribution? Link me to it please.

This ain't really my field, but here's how I see's it.
It's not redist, it's an adding of the value of other commodities into the system. That, or there could billions of slivers of gold worth a trillion dollars each.
I mean, not exactly, of course. Or I am wrong...

TruthSeeker1234

17th July 2007, 10:29 PM

Oh, no, bucky. You gave "proof" for your statement. I took it apart.

Here, I'll get specific, why do you believe that the velocity of money is fixed?

Also, please note, it's very difficult to argue with someone who (admittedly) doesn't understand the arguments.

Abby, the velocity of money is not fixed. For the lurkers, the velocity of money is the rate at which it is spent and then respent. I never said anything on this thread about velocity. Maybe you got confused with my airplane velocity study, a different subject. Abby, can you even go one post without falsely attributing statements to me?

Consumer time preference is central to Austrian theory. Time preference is the degree to which an individual prefers to spend and consume now, vs. saving now and consuming later. On the free market, the interest rate is determined by consumer time preference. Time preference also influences velocity.

I understand quite well Abby. You have not made any arguments. Not one. You attempted to criticize Murray Rothbard's money treatise by indicating that he doesn't make a distinction between expected and unexpected inflation. This is like criticizing Richard Dawkins for not discussing bible prophecy. The little sparknote page you referenced doesn't attempt to explain the cause of inflation, so I find it boring.

Now, again, the subject of this thread is the Fed. You claim to have addressed my argument that fiat money = theft, yet you actually haven't at all.

Please, the others here are counting on you Abby. Explain how fiat money creation could possibly not redistribute real wealth.

TruthSeeker1234

17th July 2007, 10:35 PM

Ya know..... !!!!

I tried to draw Ace into a discussion of his Austrian School beliefs way back and no one would join in. Now, I discover this thread hundreds of posts in, and everyone's pretty well taken away all the good arguments.

What arguments?

I have argued here (http://forums.randi.org/showthread.php?postid=2769936#post2769936) that fiat money is theft. No one has yet attempted to refute my argument.

Abbyas

17th July 2007, 10:49 PM

Abby, the velocity of money is not fixed. For the lurkers, the velocity of money is the rate at which it is spent and then respent. I never said anything on this thread about velocity. Maybe you got confused with my airplane velocity study, a different subject. Abby, can you even go one post without falsely attributing statements to me?

I thought you said you agreed with the Quantity Theory of Money?

I understand quite well Abby. You have not made any arguments. Not one. You attempted to criticize Murray Rothbard's money treatise by indicating that he doesn't make a distinction between expected and unexpected inflation. This is like criticizing Richard Dawkins for not discussing bible prophecy. The little sparknote page you referenced doesn't attempt to explain the cause of inflation, so I find it boring.

Noooo, I said he doesn't address unexpected inflation at all. In fact he defines inflation only in expected terms. That's sorely neglectful in a discussion of inflation. (And in a discussion as to the reasons for inflation.)

I also discussed his idea that devaluation of the dollar is "embarrassing for governments". Then why do governments devalue the dollar on purpose for trade reasons?

Abbyas

17th July 2007, 10:52 PM

What arguments?

I have argued here (http://forums.randi.org/showthread.php?postid=2769936#post2769936) that fiat money is theft. No one has yet attempted to refute my argument.

You are suffering from the false idea that the only way inflation is created is through the money supply. Look up cost-push and demand-pull inflation.

Jonnyclueless

17th July 2007, 11:04 PM

I have yet to see anyone refute my claim that the moon is made of cheese.

TruthSeeker1234

17th July 2007, 11:07 PM

I thought you said you agreed with the Quantity Theory of Money?

Noooo, I said he doesn't address unexpected inflation at all. In fact he defines inflation only in expected terms. That's sorely neglectful in a discussion of inflation. (And in a discussion as to the reasons for inflation.)

I also discussed his idea that devaluation of the dollar is "embarrassing for governments". Then why do governments devalue the dollar on purpose for trade reasons?

The quantity theory of money states that the amount of money spent is related to the amount of money that exists. It does not rule out changes in the velocity of money. Rather, it sees velocity as a symptom, not a cause. As money is devalued, people have a greater incentive to spend money more quickly. The same is true of demand-pull and cost-push. In the Austrian view, these are symptoms, not causes. You may disagree with the Austrian view, but if so, explain why.

Abby, I have three times stated Rothbard's definition of inflation:

Inflation is an increase in the supply of money exceeding the increase in the supply of goods and services.

Mainstream econ defines inflation as generally rising prices. In order to not talk past one another, let's call it "money supply inflation" and "price inflation". How's that?

Governments devalue the dollar, i.e. inflate the money supply, on purpose, because it enriches themselves and their friends. This is the subject of the thread, and the very subject of my argument (http://forums.randi.org/showthread.php?postid=2769936#post2769936). You have still been unable to offer any sort of critique of it.

Please, can you explain why the creation of fiat money would not redistribute wealth away from late-receivers?

I am still waiting, and so are your fans.

Abbyas

17th July 2007, 11:15 PM

The quantity theory of money states that the amount of money spent is related to the amount of money that exists. It does not rule out changes in the velocity of money. Rather, it sees velocity as a symptom, not a cause. As money is devalued, people have a greater incentive to spend money more quickly.

False. The Quantity Theory of Money is based on this equation: V=(nominal GDP/money supply). It is dependent on Velocity being fixed.

Don't believe me? http://www.investopedia.com/articles/05/010705.asp

or here: http://www.economyprofessor.com/economictheories/quantity-theory-of-money.php

Or just google the thing and take a look at the equation and necessary assumptions.

Abby, I have three times stated Rothbards definition of inflation:

And, I've shown over and over that his thesis is weak.

Governments devalue the dollar, i.e. inflate the money supply, on purpose, because it enriches themselves and their friends. This is the subject of the thread, and the very subject of my argument (http://forums.randi.org/showthread.php?postid=2769936#post2769936). You have still been unable to offer any sort of critique of it.

And you continue to refuse to address the way that the devaluation helps the trade balance. (Of which the US is in a negative one. Look up the BP curve.)

Please, can you explain why the creation of fiat money would not redistribute wealth away from late-receivers?

I am still waiting, and so are your fans.

In your calculations of "late-receivers", you are ignoring the time it takes for the money supply to grow from an injection. This is one hundred percent dependent on the money multiplier. Something you've acknowledged you don't know of or understand.

TruthSeeker1234

17th July 2007, 11:17 PM

TS,
Don't you realize that your fundamental thesis of why fiat money is "unfair" would also apply to gold? Say we did take up the gold standard, The big mining companies, the ma and pop mining operations, and the gold supplying countries like America and South Africa would be the "new receivers" of the gold while the rest of the world would be the "old receivers" and being ripped off. If we lived in your gold standard world, you'd still be crying foul.

Nope. Unlike fiat money, gold is real wealth. Increasing the supply of gold increases the amount of real wealth. Even more importantly, on the market, there is no monopoly of money creation. It is the monopoly which is inherently evil. Monopolies bad. Competition good.

Abbyas

17th July 2007, 11:24 PM

Dog Town

17th July 2007, 11:30 PM

Nope. Unlike fiat money, gold is real wealth.

Why...because it is shiny?

TruthSeeker1234

17th July 2007, 11:37 PM

So you'd have competing monetary bases?

Are all monopolies bad? Firepersons? Policemen? Armies? Local mass transits?

I sincerely suggest you pick up a basic macro book.

Yes, from the standpoint of consumers, all monopolies are bad. Under a monopoly, prices will be higher, and/or quality will be lower than what would prevail under competition. Austro-libertarians apply this to all goods and services, including money, protection, dispute resolution, transportation, energy, etc. We can argue public goods theory later. Walter Block has done a great job of debunking it.

But this thread is about the Federal Reserve and fiat money.

Is there anyone who can provide an argument against the notion that fiat money = theft ?

Still waiting.

Abbyas

17th July 2007, 11:43 PM

Respond to post 195 please.

And re: monopolies, you are forgetting about natural monopolies. May I assume you have no idea what I'm talking about?

quixotecoyote

17th July 2007, 11:56 PM

Well John, I contend the moon is made of gold. It's obvious it's not made of cheese or it would be blatantly unfair. Us of us born now would have to put up with a terrific stench. As late comers to the Earth that is completely unacceptable.

Furthermore you cannot just declare the moon to be cheese by your personal fiat, you need the solid backing of evidence! To support this I point you to a respected professionals opinion. The Economist in a 1991 article clearly states the moon is made of of gold (google it!).

Now as I've seen no one counter these arguments, I assume we can all agree that cheese is evil.

TruthSeeker1234

17th July 2007, 11:57 PM

And you continue to refuse to address the way that the devaluation helps the trade balance. (Of which the US is in a negative one. Look up the BP curve.)

I addressed this. I'll do it again. Pay attention.

When any two parties agree to trade, both expect to benefit. This is true whether the trading partners are across the street or across the ocean. It makes no difference. All voluntary trade is beneficial. Every single trade.

All other things being equal, an increase in exports is good, because more trades have taken place. All other things being equal, an increase in imports is good, because more trades have taken place.

Attempting to use government force to "balance" imports and exports is a terrible idea, because it necessarily restricts trade. Trade is good. Preventing trade is bad. Economics does not see borders. They are economically irrelevant. If China were to become the 51st state, our trade imbalance with them would magically disappear. But nothing would be any different. Imagine China is the 51st state. Feel better?

I run a trade deficit with my grocery store. They never buy anything from me. Is this a problem to be dealt with by monetary policy? No.

Can anyone address the argument that fiat money = theft?

Thank You.

Abbyas

18th July 2007, 12:02 AM

Why did you conveniently leave out my other two comments?

TruthSeeker1234

18th July 2007, 12:14 AM

False. The Quantity Theory of Money is based on this equation: V=(nominal GDP/money supply). It is dependent on Velocity being fixed.

Don't believe me? http://www.investopedia.com/articles/05/010705.asp

or here: http://www.economyprofessor.com/economictheories/quantity-theory-of-money.php

Or just google the thing and take a look at the equation and necessary assumptions.

Your links are a to a mainstream economics take on QTM, and correctly points out that the assumption of a constant velocity is "criticized". This is where Friedman and the monetarists go wrong.

The Austrians most certainly do not say velocity is constant. As I said before, time preference is central to Austrian theory. Velocity, wage-push, demand-pull are not ignored in Austrian theory. Rather, since rising prices must be a result of increasing quantity of money, these are treated as symptoms, not causes.

Thus, rather than getting stuck in pedantic naming exercises, we actually have causative explanations for macro-phenomena, something curiously lacking in mainstream econ, if you hadn't noticed.

TruthSeeker1234

18th July 2007, 12:25 AM

In your calculations of "late-receivers", you are ignoring the time it takes for the money supply to grow from an injection. This is one hundred percent dependent on the money multiplier. Something you've acknowledged you don't know of or understand.

Abby, I understand the money multiplier, and more importantly, I understand central banking. In the real world, the time it takes for the money supply to grow from the injection of new debt is not "dependent" on the money multiplier. It is dependent on how long it takes banks to make loans based on their newly increased reserves. The money multiplier is an abstract mathematical attempt to quantify the total money supply based on the existing supply of currency. The money multiplier does not exist in the real world. It is an abstract mathematical construct.

Nor did I forget the time element in my theoretical argument. In fact, it is crucial to the argument. Because it takes time for the money supply to grow, some people receive new money before prices have gone up, others are not so lucky. Remember, that's the whole point. Time is money. And fiat money is theft.

Foolmewunz

18th July 2007, 12:42 AM

So you'd have competing monetary bases?

Are all monopolies bad? Firepersons? Policemen? Armies? Local mass transits?

<SNIP>.

Don't forget courthouses. In one thread, Ace actually proposed that an open and competitive judicial system would work. "Hey, I ain't going to that court any more! I got two to five there last time. I'm going over to Judge Feelgood's Court of Vast Appeal... He's advertising probation, no waiting, air conditioned holding cells...."

I can see Dog, The Bounty Hunter deciding to branch out from bailbondsman to magistrate. Hey, it's a free world!

I know libertarians who'd cringe at the fact that certain persons call themselves same.

parmanides

18th July 2007, 03:02 AM

Well, apparently it's the only "piece of evidence" you're willing to put forward. And it is not, in fact evidence. It's an opinion unsupported by fact.

So basically it's our fault that you won't supply any evidence for your views?

Let me assure you, round here facts are the only things that change people's minds --- not the mere opinions of some dead Nazi plutocrat.

But this is not "conventional mainstream wisdom" so much as classic Fascist paranoia; nor does he give any evidence for his views, which is what we actually put stock in round here.

As for him being "well-respected", he wrote propaganda for Herman Goering's magazine Die Vierjahresplan and attended the Nuremburg Rallies as a guest of Hitler. So he was well-respected by Hitler and Goering, yeah. But I, for one, think rather less of his judgement than they did.

I'll take this to 10 pages if it can shed light on one point - sorry Im not going to give you lots of arguments to arrogantly swot away like flies one by on - The prefered method of discourse round here.

If links to the nazi regime make someone 'kooky' or not 'conventional', then apparently there are a couple of American presidents who are not 'mainstream' enough for you.

Its like saying people in the darwinst movement were linked to irrational fascism,therefore natural selection is irrational - can we please get a bit more sophisticated?

I feel I need to tell you that 'facts' will always be interpreted subjectively. Two highly intelligent people with moral fibre acceptable to you will see the same facts differently - deal with it. Sometimes the insight of important people sheds light on the argument. You may know that that many other significant people in history have been very candid about the credit based system too.

Foolmewunz

18th July 2007, 03:24 AM

I'll take this to 10 pages if it can shed light on one point - sorry Im not going to give you lots of arguments to arrogantly swot away like flies one by on - The prefered method of discourse round here.

If links to the nazi regime make someone 'kooky' or not 'conventional', then apparently there are a couple of American presidents who are not 'mainstream' enough for you.

Its like saying people in the darwinst movement were linked to irrational fascism,therefore natural selection is irrational - can we please get a bit more sophisticated?

I feel I need to tell you that 'facts' will always be interpreted subjectively. Two highly intelligent people with moral fibre acceptable to you will see the same facts differently - deal with it. Sometimes the insight of important people sheds light on the argument. You may know that that many other significant people in history have been very candid about the credit based system too.

If you can shed light on one point, you might take this to forty pages. Keep trying. I'll keep count. So far, you've tallied a score of... well, let's see now.... that'd be ..... Zero!

As to your latest derail. We can start with that one. You can shed light on it without even going to a new page. One post will do it.

Please list all the American presidents who attended the Nuremberg rallies and who made speeches in defence of Hitler.

Here, I'll save you the trouble:

Oh Noes! Is it the dreaded Bush's Grandaddy's Ties To Hitler theme? Kennedy's daddy's London connections? Lindbergh in '48????

(Other than those, I haven't seen a lot of pics of Roosevelt, Truman, or even Hoover, meeting up with and chatting with that paper-hanging fellow.)

AlanGreenspan

18th July 2007, 05:08 AM

@Truthseeker1234

Man you seriously should read and introductory economics book and leave all that conspiracy economics b.s. behind. I suggest you take a look at Mankiw's pre-grad book (can't remember the name right, i'll look it up).

As far as gold backed money is concerned, there is no exchange rate.

That is absurd. Plain and simple, saying that there is no exchange rate mean there's a global parity between all currencies and that's just nonsense.

If a dollar is defined as 1/20 of an ounce of gold, and some other currency is defined as 1/10 of an ounce of gold, then one of those would exchange for 2 dollars.

So now there is an exchange rate, make up your mind. So basically in your golden world what determines the exchange rate is what the value (measured in gold) the monetary authorities for each country "define" for their currency ... so if Cuba "defines" that their peso is worth 0.5 ounces of gold while the U.S.'s authorities "define" that the dollar is worth 0.25, then the Cuban peso has by default a higher value. Wow.

Since the exchange rate (when existing) is determined by some "definition" then the interest rates follow the same pattern ... problem is, since gold is a finite resource there's going to be a point where demand is higher than supply and the interest rates will be pressured to go up, which in turn will lead to a not so healthy situation: rising interest rates and a fixed exchange rate ... seems like you learned nothing from the Asian monetary crisis.

And since we are talking about a global fixed exchange rate regime, i suggest you do some reading on the Brazil 1998 and see the problems that arise when you have a fixed exchange rate in just one country. If you don't like Brazil you can try Chile 1979 or Mexico from 1996.

Sorry sport, "defining the value" is not a good monetary policy.

Speaking of the "exchange rate" between gold-backed currency makes no more sense than speaking of the "exchange rate" between $5 bills and $10 bills.

It is not a case of whether it makes sense or not, the problem is with the exchange rate regime that you would have to use. You are proposing a fixed exchange rate regime which is only good in time crisis and has to be dropped as soon as you move away from the crisis.

Inflation is defined as an increase in the supply of money relative to the supply of goods and services generally.

No, inflation is defined as the change (measured in %) in the price level. This is the generally accepted view shared by most (if not all) economists. If you like i can quote a few textbooks for you.

On the market, inflation occurs when the production of gold money exceeds the production of other goods. This will drive prices up generally, which is the same as saying that the value of gold has gone down, relative to everything else. This lowered value of gold means that gold mining has become less profitable, so investors will pull some assests out of gold, and seek a higher rate of return elsewhere. And, as with all other businesses, if gold production drops, the reverse happens.

Inflation will also occur when there's scarcity or a quality improvement. So in your golden model if there's inflation because demand was higher than supply then your investors will "pull some assets out of gold" ... but this will have a negative effect, demand will still be higher than supply and now producers will have to pay more for the credit because of a rising interest rate due to less gold being mined and available to be lent. To pay their obligations producers will have to raise their prices and matters will get worse.

Good thing you are seeking for the truth and not drafting monetary policy for any country.

Because the market selected gold. Historically, many things were used as money - seeds, seashells, cattle, salt, etc. Gold won.

Since you respect the decisions of the market so much, why don't you respect its decision to use fiat money instead of commodity money?

It is stealing real wealth from the late-receivers of the new money. In practice, individuals in the government, the banks, and government contractors win, basically everyone else loses.

That makes no sense, do you even know what contracting the legal base is? How is wealth stolen from anyone when the banks are required to keep less money in their reserves?

In the case of buying CD's your point gets ridiculous. When you go and sell a deposit certificate they don't steal it from you nor anyone, you get your money and go home to spend it on whatever you want and The Fed keeps the security in its possession so they can sell it later on when the need to expand the money supply arises.

Belz...

18th July 2007, 05:57 AM

He was using emotive language - if you want to shoot down his style rather than grasp the content, then feel free to hang onto your world view.

Bankers are enslaving people ?

Belz...

18th July 2007, 05:59 AM

How can you purport to criticize something you won't even read? Do you even understand the premise and logic underpinning my study? It doesn't seem so.

The premise is that everything is fake except your theory.

Your eyes will detect very unstable motion on the plane.

Yes. Hand-held cameras tend to do that.

Still photos are easier to fake than video. If they can fabricate one, they can fabricate 100.

Yes, Ace. Everything is fake. Everything.

It isn't any kind of litmus test. In order to fulfill your request, I would need to know the full range of possible movements for a powerloader, which I currently don't know. Then we could compare that to what is observed, to see if there is anything impossible being depicted.

Another good hint is the shadow of the crane that holds the thing from the back...

twinstead

18th July 2007, 06:17 AM

Once you start claiming evidence that contradicts your theory is fake, unless you can prove it your argument is lost.

Simply claiming contrary evidence could be faked with no further comment is lazy.

JonnyFive

18th July 2007, 07:45 AM

Nope. Unlike fiat money, gold is real wealth. Increasing the supply of gold increases the amount of real wealth. Even more importantly, on the market, there is no monopoly of money creation. It is the monopoly which is inherently evil. Monopolies bad. Competition good.

That is incredibly simplistic, Ace. Gold production needn't be monopolized (although gold mining certainly could be - another matter) because gold has an inherently limited supply. A free-floating currency must be restricted somehow or people will simply print their own money, and it will be valueless. That is the reason why paper assets need to be pledged to the government to create additional money, and why states and banks can no longer print their own currency.

Gold is "real wealth" only in that people are willing to pay for it. You seemed to clearly understand this when talking to me, now apparently gold is elevated above every other commodity.

Increasing the supply of gold doesn't "increase" the real wealth anymore than increasing the supply of paper money. If, suddenly, ten trillion tons of gold were rained down from space (in addition to everyone dying), gold would probably be worthless. Scarcity of an accepted medium of exchange tends to increase value, abundance tends to decrease value. That's the core principle behind inflation and deflation.

You claim that "fiat money = theft" is meaningless, because theft requires that someone take something from someone else. Although excessive production of currency can reduce overall wealth through excessive inflation, that is not necessarily the case. More to the point, that inflation wouldn't help anyone, it would hurt everyone who has a stake in the economy based on that currency, including the wealthy.

You still haven't answered my question:

-Why did those bankers in the late 1800's want the gold standard so damn badly? Why the pressure by the debtors to have the President take our money off the gold standard?

Additionally: Why would Woodrow Wilson, fierce opponent of the trusts and the bankers, work to take the US off the gold standard and set up the Reserve? What was the effect of the subsequent return to the gold standard? Any idea why the US went back off it again?

I suspect you haven't examined much of the history of the late 1800's and early 1900's around when the gold standard was revoked, reinstated, and revoked again. You paint this as a simple issue of greedy bankers stealing money from the poor, oppressed masses. It just isn't that simple, and the conspiracy sites only present a hollow picture of the issue.

Speaking of history, all laws regarding the private prohibition of gold ownership were repealed in 1975, Ace. The only thing still illegal is monetary gold (i.e. money backed by a fixed amount of gold - or a contract to that effect), but you're perfectly free to trade it in any way you see fit.

Belz...

18th July 2007, 08:00 AM

Fiat money = Theft.

Any argument?

Yes.

Ace's argument = False.

Any rebuttal ?

Belz...

18th July 2007, 08:09 AM

Why do you keep ignoring me?

I think it's because you represent reality, which he ALSO ignores.

Belz...

18th July 2007, 08:11 AM

Price fixing is always a bad idea. Prices should always be free to fluctuate according to supply and demand.

And people should be allowed to use the money they want to use, not just gold.

On the free market, a "dollar" is simply a name for a particular weight of gold, say 1/20 ounce.

Actually, on the free masket, EVERYTHING is simply a name for a particular quantity of something else.

It was the result of thousands of years of natural selection. It spontaneously emerged as the best functioning money.

And yet it has no actual value.

Can anyone even attempt to counter the strong claim that fiat money creation = theft?

Yes. It's false. Next.

Because it takes time for the money supply to grow, some people receive new money before prices have gone up, others are not so lucky. Remember, that's the whole point. Time is money. And fiat money is theft.

So you're basing your conclusion on an expression ?

Wow.

Abbyas

18th July 2007, 08:45 AM

The Austrians most certainly do not say velocity is constant. As I said before, time preference is central to Austrian theory. Velocity, wage-push, demand-pull are not ignored in Austrian theory. Rather, since rising prices must be a result of increasing quantity of money, these are treated as symptoms, not causes.

The Quantity Theory of Money, is the QToM. Regardless of who's behind it, the assumptions are the same.

Rather, since rising prices must be a result of increasing quantity of money, these are treated as symptoms, not causes.

Only if the Velocity of money is fixed. Do you even understand the equation?

This whole discussion is Sisyphean at best.

Cuddles

18th July 2007, 09:08 AM

Does anyone else find it amusing that while some conspiracists are busy ranting about how all money is worthless, the rest of them are ranting about how everyone should horde as much of it as possible because it will be worth so much when the revolution comes?

Dr Adequate

18th July 2007, 09:10 AM

I'll take this to 10 pages if it can shed light on one point - sorry Im not going to give you lots of arguments to arrogantly swot away like flies one by on - The prefered method of discourse round here. You so very very nearly have insight into your situation.

If links to the nazi regime make someone 'kooky' or not 'conventional', then apparently there are a couple of American presidents who are not 'mainstream' enough for you. Which American presidents supported Nazism, wrote propaganda for Goering, and attended the Nuremburg Rally as a guest of Hitler?

Its like saying people in the darwinst movement were linked to irrational fascism,therefore natural selection is irrational ... No, it's not in the least like that. But I do appreciate that you can't argue with what I actually said. Feel free to hack away at your stupid straw man with you silly little toy sword.

I feel I need to tell you that 'facts' will always be interpreted subjectively. Two highly intelligent people with moral fibre acceptable to you will see the same facts differently - deal with it. Sometimes the insight of important people sheds light on the argument. What's most funny is that after this prissy little homily, you immediately go on to say:

You may know that that many other significant people in history have been very candid about the credit based system too. --- as though the mark of candor is agreeing with you.

TruthSeeker1234

18th July 2007, 11:01 AM

@Truthseeker1234

Man you seriously should read and introductory economics book and leave all that conspiracy economics b.s. behind. I suggest you take a look at Mankiw's pre-grad book (can't remember the name right, i'll look it up).

I'm quite knowledgeable in undergrad econ, thank you. For those seeking a good introduction, I still recommend Hazlitt's classic "Economics in one Lesson". Sowell's "Basic Economics" is more recent, and also very good.

That is absurd. Plain and simple, saying that there is no exchange rate mean there's a global parity between all currencies and that's just nonsense.

Learn history and learn theory. Originally, currencies were based on precious metals, notably gold and silver. The British "pound" was exactly that, 1 pound of silver. A certificate for one pound of silver will exchange for another certificate for one pound of silver, regardless of what names are printed on the certificates.

On the market, there will indeed be fluctuating exchange rates between gold and silver, the same as there are for any two commodities. But to think that there would be an exchange rate from one gold back currency to another gold backed currency misses the whole point. Gold is gold.

Rothbard discusses this in "For a New Liberty". Chapter 5 is "The decline from weight to name". Here is that chapter on audio:

http://www.mises.org/multimedia/mp3/audiobooks/rothbard/money/6.mp3

So basically in your golden world what determines the exchange rate is what the value (measured in gold) the monetary authorities for each country "define" for their currency ... so if Cuba "defines" that their peso is worth 0.5 ounces of gold while the U.S.'s authorities "define" that the dollar is worth 0.25, then the Cuban peso has by default a higher value. Wow.

http://www.mises.org/multimedia/mp3/audiobooks/rothbard/money/6.mp3

Rothbard clears up your confusion. Purchases are made in weights of gold. Paper money, or magnetic card digits, are simply a method to keep track of the weights being exchanged. 0.23 ounces for lobster dinner and a glass of wine.

On the market, money is not issued by governments. It is issued by anyone who wants to issue it. People are free to accept or reject money in payment as they see fit, the same as they are free to accept or reject any sort of offer.

Since the exchange rate (when existing) is determined by some "definition" then the interest rates follow the same pattern ... problem is, since gold is a finite resource there's going to be a point where demand is higher than supply and the interest rates will be pressured to go up, which in turn will lead to a not so healthy situation: rising interest rates and a fixed exchange rate ... seems like you learned nothing from the Asian monetary crisis.

The monetary crises are a problem of fiat money and fractional reserve systems, not gold. Under gold, there is no exchange rate. An ounce of gold is an ounce of gold.

And since we are talking about a global fixed exchange rate regime, i suggest you do some reading on the Brazil 1998 and see the problems that arise when you have a fixed exchange rate in just one country. If you don't like Brazil you can try Chile 1979 or Mexico from 1996.

Same as above.

Sorry sport, "defining the value" is not a good monetary policy.

Under a gold standard, a paper note is simply a receipt redeemable for a certain amount of gold. The paper does not define the value of gold, anymore than a pink slip defines the value of a car. It is a receipt, a title.

It is not a case of whether it makes sense or not, the problem is with the exchange rate regime that you would have to use. You are proposing a fixed exchange rate regime which is only good in time crisis and has to be dropped as soon as you move away from the crisis.

Please get this straight. The gold standard is not a "fixed exchange rate", it is no exchange rate. An ounce of gold is an ounce of gold. Gold is money, the pieces of paper are simply receipts. They don't set values for anything.

No, inflation is defined as the change (measured in %) in the price level. This is the generally accepted view shared by most (if not all) economists. If you like i can quote a few textbooks for you.

This is a semantic issue only, I've addressed it. Yes, mainstream econ defines inflation as a sustained rise in prices. Austrians define it as an increase in the money supply beyond good and services.

To avoid confusion, we will simply refer to "price inflation" and "money supply inflation".

Inflation will also occur when there's scarcity or a quality improvement.

Changes in supply and demand move prices of individual goods up and down, of course. This is not a sustained, general change in price level. The current value of the dollar is less than 1/100 what it was in 1913. To explain that change in overall price level in terms of reduced supply would require a greater reduction in economic output than occurred after the fall of the Roman Empire. Instead, we see tremendously greater economic output than what was present in 1913, yet prices are more than 100 times greater. Not 100%, 100 times. The only explanation for this is that the money supply has expanded 100 times more than the production of goods and services. Actually, much more than that, because it ignores the great increases in efficiency, which serve to lower prices. Under sound money, the tendency is for prices to fall gradually, as production methods become more and more efficient. This serves to make money increase in value as it is held. In our inflationary economy, money loses value as it is held.

So in your golden model if there's inflation because demand was higher than supply then your investors will "pull some assets out of gold" ... but this will have a negative effect, demand will still be higher than supply and now producers will have to pay more for the credit because of a rising interest rate due to less gold being mined and available to be lent. To pay their obligations producers will have to raise their prices and matters will get worse.

On the market, the rate of profit tends to be equal for all businesses, including the production of money, and the lending of money. Anytime any activity becomes more profitable than average, it will attract more producers, thus increasing the supply, lowering prices and pushing profitability down towards the average. Anytime any activity becomes less profitable than average, it will repel some producers, thus decreasing the supply, increasing prices and pushing profitability up towards the average.

Since you respect the decisions of the market so much, why don't you respect its decision to use fiat money instead of commodity money?

How many times must I repeat this?

The market did not select fiat money. Fiat money was imposed by force, by government. The U.S. government made it a felony to refuse paper money, and eventually confiscated all the monetary gold.

How is wealth stolen from anyone when the banks are required to keep less money in their reserves?

Explained here (http://forums.randi.org/showthread.php?postid=2769936#post2769936).

JonnyFive

18th July 2007, 11:18 AM

The market did not select fiat money. Fiat money was imposed by force, by government. The U.S. government made it a felony to refuse paper money, and eventually confiscated all the monetary gold.

And yet it is neither currently illegal to refuse the US dollar, nor is it illegal to own gold. Although, technically, the possession of "monetary gold" (in the technical sense of something redeemable for either x amount of money or y amount of gold) is illegal, gold is freely traded in the open market.

What are the current laws stopping you from holding 100% of your wealth in the form of gold, Ace? The Executive Order banning private gold ownership (except for small quantities as jewelry, etc.) has been dead for over 30 years.

You implore Alan to "learn history," but you seem to be missing a big chunk of history that deals with the gold standard in the US and the creation of the Reserve.

TruthSeeker1234

18th July 2007, 11:19 AM

The Quantity Theory of Money, is the QToM. Regardless of who's behind it, the assumptions are the same.

Only if the Velocity of money is fixed. Do you even understand the equation?

This whole discussion is Sisyphean at best.

Yes Abby, I understand. It is George Reisman who gives a rigorous treatment of the Austrian QTM. He explains how it subsumes cost-push and demand-pull. Changes in velocity are symptoms of changes in money supply, or changes in consumer time preference. I could link you, but I don't think you care.

I am still waiting for you to give a coherent explanation of why fiat money does not equal theft, which is the subject of the thread.

Can you? Will You?

JimBenArm

18th July 2007, 12:02 PM

Fiat money = theft. I have to agree. You see, back in the mid-'70's, I owned a cute little sports car, a Fiat X 1/9. Dark green, with gold racing stripes, pop-up headlights, two-seater. When it ran, it was fun, but keeping it running was a headache! Since it was a mid-engine sports car, just changing the plugs meant having to practically pull the engine!
So, having spent tons of money to get almost no real enjoyment from it, I would call that theft.
Therefore, Fiat money = theft.
Also FIAT actually stands for Futile Italian Attempt at Transportation. Just thought I'd add that.
As far as the money stuff goes, my bet is that Ace is just as correct as he is about anything else. Not very.

TruthSeeker1234

18th July 2007, 12:37 PM

Or "Fix It Again, Tony".

Still waiting for anyone to offer an argument for why fiat money is not theft.

JonnyFive

18th July 2007, 12:44 PM

Or "Fix It Again, Tony".

Still waiting for anyone to offer an argument for why fiat money is not theft.

Several people have already, Ace. Your ignoring them doesn't do much to help you make your case.

My latest (http://forums.randi.org/showthread.php?postid=2778707#post2778707) - a few paragraphs down.

Your only sound case for fiat money = theft might be arguing that it steals wealth from everyone (via inflation) and gives it to no one, unless you're privvy to some secret of economics regarding monetary policy. Yet you've actually argued that it somehow "gives" wealth to the money creators. Never mind that the actual money creator is an abstract pseudo-government entity with salaried employees.

Not only that, but fiat money can be removed from circulation as well, generally decreasing inflation and increasing the value of each dollar on the market. That also counts as theft, Ace?

Belz...

18th July 2007, 01:19 PM

The monetary crises are a problem of fiat money and fractional reserve systems, not gold. Under gold, there is no exchange rate. An ounce of gold is an ounce of gold.

And yet it can STILL fluctuate.

Also, not enough gold for everybody.

Plenty of paper, though.

The market did not select fiat money. Fiat money was imposed by force, by government. The U.S. government made it a felony to refuse paper money, and eventually confiscated all the monetary gold.

Then why can I use a credit card ?

Belz...

18th July 2007, 01:21 PM

What are the current laws stopping you from holding 100% of your wealth in the form of gold, Ace? The Executive Order banning private gold ownership (except for small quantities as jewelry, etc.) has been dead for over 30 years.

Don't expect Ace to answer this one.

JonnyFive

18th July 2007, 01:31 PM

Don't expect Ace to answer this one.

Yeah... I'm kind of not.

I'm also not really expecting him to address my little history-based questions, because they don't happen to support his assumptions about the Reserve, fiat currency, or the gold standard.

What really galls me is what appears to be an implication on his part that non-backed currency is responsible for some unprecedented loss of real wealth on the part of the general populace.

Again, I maintain that Ace needs to read up on history a bit more if he honestly believes the general populace is worse off than ever before, economically speaking. The same holds true if he thinks simply bringing back the gold standard will fix all of our problems.

TruthSeeker1234

18th July 2007, 01:43 PM

OK, here's the assertion you call an argument:

You claim that "fiat money = theft" is meaningless, because theft requires that someone take something from someone else. Although excessive production of currency can reduce overall wealth through excessive inflation, that is not necessarily the case. More to the point, that inflation wouldn't help anyone, it would hurt everyone who has a stake in the economy based on that currency, including the wealthy.

Wrong. The creation and spending of fiat money does help someone. It benefits the early receivers of the new money, especially it benefits the creators of the new money, as explained.

Here's another way for me to argue my same point. If it is OK for one entity to create new money out of thin air, why is everyone not allowed to do it? On the free market, there is no problem with people mining gold. The mining of gold will be limited by supply and demand, the same way supply and demand limit the production of everything.

So, Johnny, you have avoided the point. The creation of fiat money (which used to be known as counterfeiting, BTW), hurts some while benefiting others. Had you actually read my argument, you would have known this.

Can anyone actually explain any errors in the theoretical argument that fiat money = theft? I am still waiting.

TruthSeeker1234

18th July 2007, 01:47 PM

Not only that, but fiat money can be removed from circulation as well, generally decreasing inflation and increasing the value of each dollar on the market. That also counts as theft, Ace?

This is why a 100% gold backed currency is not only the best protection against inflation, but also of deflation and depression as well. Under a gold standard, once money comes into existence, it stays in existence.

TruthSeeker1234

18th July 2007, 01:57 PM

And yet it is neither currently illegal to refuse the US dollar, nor is it illegal to own gold. Although, technically, the possession of "monetary gold" (in the technical sense of something redeemable for either x amount of money or y amount of gold) is illegal, gold is freely traded in the open market.

What are the current laws stopping you from holding 100% of your wealth in the form of gold, Ace? The Executive Order banning private gold ownership (except for small quantities as jewelry, etc.) has been dead for over 30 years.

You implore Alan to "learn history," but you seem to be missing a big chunk of history that deals with the gold standard in the US and the creation of the Reserve.

The complete takeover and monopolization of the the dollar began in 1913, and was completed in 1971. In 1913 refusal to accept paper was made a felony. In 1933, ownership of gold was made a felony. Until 1971, foreign banks and governments could still redeem in gold. The last remnant of the gold standard was shredded when Nixon closed the "gold window". All monetary gold was out of circulation in safely in Fort Knox. The takeover was finished.

As far as I know, it is still illegal to refuse Federal Reserve Notes in payment of debt. "Legal tender for all debts, public and private".

It would take a long time for the gold standard to re-emerge on the market, but if allowed, it will. As the dollar becomes less and less valuable, gold-backed private currency will become more and more attractive. Unfortunately, I'm sure government will act to thwart private money, should it ever begin gaining any sort of foothold.

Billdave2

18th July 2007, 02:18 PM

I say we scrap the fiat money and the gold money and use a currency that has real weight to it!
http://en.wikipedia.org/wiki/Rai_stones
:D

JonnyFive

18th July 2007, 02:28 PM

I'm glad I can goad you into eventually answering me, Ace. At least you don't have me on ignore. You've much better than 28th Kingdom was.

Wrong. The creation and spending of fiat money does help someone. It benefits the early receivers of the new money, especially it benefits the creators of the new money, as explained.

You have categorically not explained how the "early receivers" benefit in any way, Ace. When new money is created and circulated, it is distributed into the economy at large through the banking system, or held in reserve. Who is benefitting? You still haven't explained this in a concrete way.

Here's another way for me to argue my same point. If it is OK for one entity to create new money out of thin air, why is everyone not allowed to do it?

Because it would create rampant inflation and the currency would be worthless. That is why the protection of currency and prevention of counterfeit is a major priority for the Treasury department.

Fiat currency's value is preserved by controlling the supply of it, as gold's value is controlled because it is naturally scarce. The monopoly of production on fiat money you rail against is what helps to protect that currency from inflation.

This is one of the reasons the Fed was created as somewhat apart from the rest of the government, to preserve its neutrality. Additionally, the people behind the Fed's policy are all salaried employees chartered with working towards a stable, workable monetary policy. The Federal Reserve is not some free-wheeling entity, as you may believe. Similarly, it is not a mere puppet of the executive or legislative branch. The Fed is designed to objectively pursue a monetary policy that is most beneficial to the general economic health of this country.

On the free market, there is no problem with people mining gold. The mining of gold will be limited by supply and demand, the same way supply and demand limit the production of everything.

Gold is inherently limited by supply, being a scarce, non-renewable resource.

So, Johnny, you have avoided the point. The creation of fiat money (which used to be known as counterfeiting, BTW), hurts some while benefiting others. Had you actually read my argument, you would have known this.

You don't distinguish between counterfeiting and legal production of currency, which is silly.

Yes, the creation of additional currency does hurt some... but probably not in the way you think. Your argument about "new receivers" versus "old receivers" is actually obscuring the issue.

In reality, the creation of additional money tends to hurt lenders and help debtors, due to the devaluation of the currency the loans were originally made in. This has a lot to do with my historical question, if you plan on asnwering it.

Can anyone actually explain any errors in the theoretical argument that fiat money = theft? I am still waiting.

Your definition of "theft" is flawed and you still haven't established how these "first receivers" are benefitting from a fiat currency. Please provide concrete examples of your claims, it makes it much easier to evaluate them. How would this "theft" proceed, precisely?

This is why a 100% gold backed currency is not only the best protection against inflation, but also of deflation and depression as well. Under a gold standard, once money comes into existence, it stays in existence.

Unless, of course, someone removes it from the market. Or the economy expands too fast.

It's funny you mention deflation and depression. Would you like to discuss the return to the gold standard after WWI and the subsequent economic consequences?

The complete takeover and monopolization of the the dollar began in 1913, and was completed in 1971. In 1913 refusal to accept paper was made a felony. In 1933, ownership of gold was made a felony. Until 1971, foreign banks and governments could still redeem in gold. The last remnant of the gold standard was shredded when Nixon closed the "gold window". All monetary gold was out of circulation in safely in Fort Knox. The takeover was finished.

Actually, the issues with the gold standard began several years earlier, with President Wilson's commitment to attack the three things he saw as destructive the American people - one of which was the bankers.

In the middle of the first decade of the 1900's, Wilson began the actions that would lead to the creation of the Federal Reserve in 1913. The existence of the Fed, and the corresponding elasticity of the currency, allowed for the rapid economic expansion during the first World War. With the strict gold standard, reserves tended to concentrate in major private banks, preventing the currency market from quickly adjusting to a growing economy.

After WWI, there was a push to return to the old gold standard. Returning to the standard at pre-war price levels caused a massive deflation of the currency. This proved destructive to those already in debt (e.g. farmers, business owners), as they lacked sufficient currency to pay off their debts, especially those incurred during inflationary years. Deflation brought down both incomes and prices (and hence business profits), but the debt remained.

This immense debt burden was one of the central causes of the Great Depression.

The recovery from the GD is a story of both removing the gold standard and deficit spending, both of which helped provide the means to stimulate the economy.

As far as I know, it is still illegal to refuse Federal Reserve Notes in payment of debt. "Legal tender for all debts, public and private".

You don't read what I write, do you? Or read the links I post?

According to the US Treasury, it is not illegal to refuse Reserve notes. If you believe otherwise, please cite the current law to this effect. The US Treasury, that prints those notes and distributes them to the Fed, disagrees with you.

It would take a long time for the gold standard to re-emerge on the market, but if allowed, it will. As the dollar becomes less and less valuable, gold-backed private currency will become more and more attractive. Unfortunately, I'm sure government will act to thwart private money, should it ever begin gaining any sort of foothold.

What is stopping you from simply transferring all your wealth into gold now? The executive order was repealed three decades ago - you are free to buy and sell gold all you want. Why don't you just do this?

You're right, if the dollar became less valuable on the market it would be less attractive to investors.

Which is why it's so good that, in the US, private individuals are not prevented from buying commodities on the free market, or other currencies. We are free to invest in pretty much whatever we want, even gold, without the wrath of our government descending on us.

You also switch off between talking about a gold standard (i.e. a currency backed in gold with an exchange rate set and enforced by the government) and free market gold. We already have free market gold, and it seems odd that you would want the government not to control fiat money but are perfectly comfortable with them controlling and enforcing the gold standard.

gorgg

18th July 2007, 04:58 PM

OK, here's the assertion you call an argument:
Wrong. The creation and spending of fiat money does help someone. It benefits the early receivers of the new money, especially it benefits the creators of the new money, as explained.

If I understand correctly, you argue that early receivers have an advantage because the market is at first not fully adjusted to the new situation with an expanded money supply. The early receivers can buy things before the inflationary effect has been fully adjusted for.

It is true that people can gain an advantage when the market is not yet adjusted to a new situation. The extent a single person can use this depends of course on the actions he takes in such a situation. If prices are lower than would be the case on a perfect market, people who buy things are generally better of than the people who sell. In your example of counterfeit money, the guy who sold the condo is in theory on the losing side. If he had waited before the inflationary effect had kicked in, he could have sold the house for more.

So early receivers do not necessarily benefit. Only if they use this money to buy certain things, they will gain a (negligible) benefit. If the Fed buys all my government bonds and pays me with newly created money, I will be on the losing side if I just put this money on the bank. The market will adjust to the new situation and I will not benefit at all. My money will be worth less because of the inflationary effect.

In general (and again theoretically speaking because the effect is usually insignificant) people who buy win, people who sell or do nothing lose. This is not always the case. The people who buy government bonds (TIPS excluded) for example lose. Government bonds are less attractive when there is high inflation.

The FED expands the money supply mainly through Open Market Operations. It buys government bonds on the secondary market. The nominal value of these securities will remain the same so the FED is on the losing side.

Expanding the money supply could create a situation where the market is not yet fully adjusted. Arguing that the early receivers of the newly created money (who could be anyone who happens to be selling securities when the Fed has decided to buy) will benefit and all others will lose is nonsense. It doesn't matter if I buy a condo of the money I got from selling securities to the Fed or if I buy a condo of the money I got from selling the securities to a Mr. Smith.

The only possibility to foul play is when there is no transparency. People who know about the Fed's intentions might take better decisions than people who don't know. But the Fed is transparent about it's intentions and makes it's objectives for monetary policy public after each meeting.

Btw: the entire argument is imo irrelevant. Inflation is stable and highly predictable. The argument would be relevant in a situation where inflation would fluctuate heavily.

AlanGreenspan

18th July 2007, 05:12 PM

@Truthseeker1234

Learn history and learn theory. Originally, currencies were based on precious metals, notably gold and silver. The British "pound" was exactly that, 1 pound of silver. A certificate for one pound of silver will exchange for another certificate for one pound of silver, regardless of what names are printed on the certificates.

Newsflash: the world is a very different place today, different economies have different currencies, some are let to float free others are pegged. What you are trying to sell here is a global parity which is just nonsense, how do you expect that two different economies like the U.S.’s and Bangladesh’s will have a 1:1 exchange rate?

Perhaps you should worry about learning economics yourself before trying to worry about other people’s education.

But to think that there would be an exchange rate from one gold back currency to another gold backed currency misses the whole point.

And there you go again with the parity. Get this into your head: two different economies can’t have a 1:1 exchange rate, why? Because the weakest economy will have an overvalued currency … you do know hat happens in this situation, right? Or shall I explain it for you?

Rothbard clears up your confusion. Purchases are made in weights of gold. Paper money, or magnetic card digits, are simply a method to keep track of the weights being exchanged. 0.23 ounces for lobster dinner and a glass of wine.

So in your golden world an economy like Cuba’s will have a currency with the same value as the U.S.’s even when they are widely different economies. In time of crisis monetary authorities in Cuba won’t be able to make any effective monetary policy because of this fixed exchange rate regime.

Again, it’s a good thing that you are searching for the truth and not drafting monetary policy for any country.

On the market, money is not issued by governments. It is issued by anyone who wants to issue it.

And in your book this is somehow a good thing? Didn’t you say at the beginning of your post that you were “quite knowledgeable in undergrad econ”? What happened to your knowledge when you were writing that statement? it sure went out the window.

The monetary crises are a problem of fiat money and fractional reserve systems, not gold.

Apparently you know very little about the asian monetary crisis of 90’s. One of the main reasons of the capital flight was exactly what you are proposing: a virtual parity that caused these currencies to get overvalued.

But what you propose goes even further, you propose a fixed exchange rate and the use of commodity money which can lead (due to the finite nature of the commodity) to rising interest rates and overvaluing of the currency (exactly what led to the asian crisis) that in turn will cause a hike in the price levels. Wow, I wonder why no one will ever heed your advice.

Please get this straight. The gold standard is not a "fixed exchange rate", it is no exchange rate. An ounce of gold is an ounce of gold. Gold is money, the pieces of paper are simply receipts. They don't set values for anything.

Apparently you don’t know what you’ve been implying so far. If every country takes your advice (God help us) they will have a fixed exchange rate with the rest of the countries. Again, didn’t you say at the beginning of your post that you were “quite knowledgeable in undergrad econ”?

Changes in supply and demand move prices of individual goods up and down, of course. This is not a sustained, general change in price level.

I am talking about aggregated demand and supply, sport. I shouldn’t make this observation to someone who’s “very knowledgeable in undergrad econ”.

The current value of the dollar is less than 1/100 what it was in 1913.

Relative to what? And can you back that up with actual data?

To explain that change in overall price level in terms of reduced supply would require a greater reduction in economic output than occurred after the fall of the Roman Empire.

You do know that for demand can be higher that supply even when supply is growing? Just checking since your example seems to be forgetting this tiny, but obvious, bit.

The only explanation for this is that the money supply has expanded 100 times more than the production of goods and services.

Again, can you back that up with actual data?

Under sound money, the tendency is for prices to fall gradually, as production methods become more and more efficient. This serves to make money increase in value as it is held.

And do you think this is good? Do you really think it is profitable to start a business knowing that prices are going to be lower in the next periods? I’ll give you a small microeconomic example of what you propose. Let’s assume there’s a company named Kooks’r’us that has benefit function of the form: PQ-(CF+CV) they only use one input: labor. Fixed costs are 5000 and variable costs are 2000, current price for the good they produce is 500 and they produce 15 units of it. In this first period they have $500 in benefits. In the next period, according to your reasoning, the price of Kooks’r’us good goes down and keeps on going down for the next periods until it reaches $300 … solving the benefit function yields a negative amount of -2500.

Are you sure you are that knowledgeable on this subject?
On the market, the rate of profit tends to be equal for all businesses, including the production of money, and the lending of money. Anytime any activity becomes more profitable than average, it will attract more producers, thus increasing the supply, lowering prices and pushing profitability down towards the average. Anytime any activity becomes less profitable than average, it will repel some producers, thus decreasing the supply, increasing prices and pushing profitability up towards the average.

You didn’t reply to the fact I pointed out. I’ll repeat for you so you read it and actually address what I said:

So in your golden model if there's inflation because demand was higher than supply then your investors will "pull some assets out of gold" ... but this will have a negative effect, demand will still be higher than supply and now producers will have to pay more for the credit because of a rising interest rate due to less gold being mined and available to be lent. To pay their obligations producers will have to raise their prices and matters will get worse.

Still I would like to address something I saw in that ray of knowledge you just shared. How on earth are profits going to be equal for all businesses? Are you out of your mind? Not only are you claiming each firm has the same benefits function they also are producing at the same level and using the exact same number of inputs. I think you’ve never been close to an economics books, 10 yards top.

In your world Intel would have the same profits as the mom’n’pops next door.

The market did not select fiat money. Fiat money was imposed by force, by government. The U.S. government made it a felony to refuse paper money, and eventually confiscated all the monetary gold.

I already addressed that particular claim, you are free to hold as much gold as you want. Since your argument resides on the intrinsic value of gold you can melt all your coins into bullions and still have the same value.

Explained here.

No, you didn’t explain anything related to the contraction of legal reserves. I did however answer to that particular nonsense with this:

That could be the case in a scenario where the Central Bank is an active agent of the economy, where it has the ability to spend the money it creates. In the case of the Federal Reserve the “money creators” receive no transfer of wealth.

The bit about the “late receivers” and “early receivers” makes no sense in the context of a Central Bank that manages the growth of the money supply according to the changes in the demand. A stable and predictable rate of inflation does away with your argument about the transfer of wealth from the “late receivers” to the “early receivers”.

TruthSeeker1234

18th July 2007, 07:24 PM

@Truthseeker1234

Newsflash: the world is a very different place today, different economies have different currencies, some are let to float free others are pegged. What you are trying to sell here is a global parity which is just nonsense, how do you expect that two different economies like the U.S.’s and Bangladesh’s will have a 1:1 exchange rate?

I realize that having lived your whole life under fiat money, it is difficult to re-conceptualize money. Under a gold standard, there is not a 1:1 exchange rate. There is not a 2:1 exchange rate. There is no exchange rate. Money is measured in weight. Ounces and pounds, grams and kilograms, not dollars and not marks. "Dollars" are simply receipts or titles to money.

If a region (like Bangladesh) is poor, it is because they do not produce very many goods and services per person. Playing around with "exchange rates" does not solve this problem. If it could solve the problem, you would be hard pressed to explain why there are any poor regions in world at all. The real problem with poor regions is tyrannical governments which disallow people from owning things.

And there you go again with the parity. Get this into your head: two different economies can’t have a 1:1 exchange rate, why? Because the weakest economy will have an overvalued currency … you do know hat happens in this situation, right? Or shall I explain it for you?

Stop with the strawman argument. The problems with over- and under-valued currencies are problems with fiat money, not gold. Talk about the pot calling the kettle black. Gold is gold. An ounce is an ounce. There are no exchange rates in gold.

So in your golden world an economy like Cuba’s will have a currency with the same value as the U.S.’s even when they are widely different economies. In time of crisis monetary authorities in Cuba won’t be able to make any effective monetary policy because of this fixed exchange rate regime.

You are correct. Governments the world over would not have the power to enact "monetary policy". That is the whole point. "Monetary Policy" is theft. The idea is to put a stop to it. Correct.

Again, it’s a good thing that you are searching for the truth and not drafting monetary policy for any country.

That's like thanking me for not committing murder. You're welcome, I don't want to commit monetary policy, it is theft.

And in your book [privately issued money] is somehow a good thing? Didn’t you say at the beginning of your post that you were “quite knowledgeable in undergrad econ”? What happened to your knowledge when you were writing that statement? it sure went out the window.

Money originated on the market, privately. It was then forcibly taken over by governments. Yes, money should be privatized for the same reason that everything else should be privatized. Competing private firms have incentives to be efficient and to please customers, governments do not have those incentives.

Apparently you know very little about the asian monetary crisis of 90’s. One of the main reasons of the capital flight was exactly what you are proposing: a virtual parity that caused these currencies to get overvalued.

This is Orwellian. We live in a world of unbacked, fluctuating fiat currencies. How could you possibly blame the gold standard for that? Preposterous.

But what you propose goes even further, you propose a fixed exchange rate and the use of commodity money which can lead (due to the finite nature of the commodity) to rising interest rates and overvaluing of the currency (exactly what led to the asian crisis) that in turn will cause a hike in the price levels. Wow, I wonder why no one will ever heed your advice.

Historically, we know that during the worldwide gold standard, prices were gradually falling for a hundred years, during a time of unprecedented economic growth. Repeat, not a fixed exchange rate.

Apparently you don’t know what you’ve been implying so far. If every country takes your advice (God help us) they will have a fixed exchange rate with the rest of the countries. Again, didn’t you say at the beginning of your post that you were “quite knowledgeable in undergrad econ”?

Yes, and I'm also very knowledgeable about the Austrian school, which is far more important. I'm not denying that what you say is what is taught in mainstream econ. I'm arguing that it is wrong. Just as I could easily regurgitate the official story of 9/11, I could easily regurgitate Samuelson tripe. I have studied economists from Smith to Keynes, Marx to Malthus, Galbraith to Friedman, and many points in between. It is Mises and Rothbard who make sense, and who have debunked the others.

And do you think this is good? Do you really think it is profitable to start a business knowing that prices are going to be lower in the next periods? I’ll give you a small microeconomic example of what you propose. Let’s assume there’s a company named Kooks’r’us that has benefit function of the form: PQ-(CF+CV) they only use one input: labor. Fixed costs are 5000 and variable costs are 2000, current price for the good they produce is 500 and they produce 15 units of it. In this first period they have $500 in benefits. In the next period, according to your reasoning, the price of Kooks’r’us good goes down and keeps on going down for the next periods until it reaches $300 … solving the benefit function yields a negative amount of -2500.

Are you sure you are that knowledgeable on this subject?

The reason prices comes down in a free market is because innovation leads to a reduction in costs. Thus a firm can offer lower prices, and maintain profitability. Changing costs is not in your example.

You have done nothing to refute the theoretical proof that on the market, the rate of profit tends towards the same for all activities. If you think about it, it could not be any other way. Prices will direct resources to their most highly valued use.

You didn’t reply to the fact I pointed out. I’ll repeat for you so you read it and actually address what I said:

So in your golden model if there's inflation because demand was higher than supply then your investors will "pull some assets out of gold" ... but this will have a negative effect, demand will still be higher than supply and now producers will have to pay more for the credit because of a rising interest rate due to less gold being mined and available to be lent. To pay their obligations producers will have to raise their prices and matters will get worse.

You forgot to finish your analysis. In your example, investors will pull out of gold, and into the area of high demand. This increases production in the area of high demand, thus lowering prices, and pushing profitability back toward the average.

Without realizing it, you are about to stumble into the Austrian theory of the business cycle.

Increased consumer demand for present goods will cause them to save less. Lowered savings means less loanable funds, so the interest rate goes up. The higher interest rate causes investors to shift out of capital goods industries, and into consumer goods, because capital goods are more sensitive to the interest rate. And this is exactly the outcome we want. Consumers demand more in the present, and the price signals cause investors to respond correctly.

Decreased consumer demand for present goods will cause them to save more. Higher savings means more loanable funds, so the interest rate goes down. The lower interest rate causes investors to shift out of consumer goods, and into capital goods industries. Again, exactly the outcome we desire.

[/quote]

Still I would like to address something I saw in that ray of knowledge you just shared. How on earth are profits going to be equal for all businesses? Are you out of your mind? Not only are you claiming each firm has the same benefits function they also are producing at the same level and using the exact same number of inputs. I think you’ve never been close to an economics books, 10 yards top.

In your world Intel would have the same profits as the mom’n’pops next door.

[/quote]
The same rate of profit, yes.

On the market, the constant tendency is for the rate of profit to converge toward an average. It never gets there of course, but that is the driving tendency. With government intervention, there are all sorts of things which prevent the market from functioning correctly.

I already addressed that particular claim, you are free to hold as much gold as you want. Since your argument resides on the intrinsic value of gold you can melt all your coins into bullions and still have the same value.

No, you didn’t explain anything related to the contraction of legal reserves. I did however answer to that particular nonsense with this:

That could be the case in a scenario where the Central Bank is an active agent of the economy, where it has the ability to spend the money it creates. In the case of the Federal Reserve the “money creators” receive no transfer of wealth.

The bit about the “late receivers” and “early receivers” makes no sense in the context of a Central Bank that manages the growth of the money supply according to the changes in the demand. A stable and predictable rate of inflation does away with your argument about the transfer of wealth from the “late receivers” to the “early receivers”.[/quote]

JimBenArm

18th July 2007, 08:10 PM

What about wide recievers? Does the NFL devalue their contribution by paying them in Italian Automobile Money? What about AM/FM recievers? Would they cost less if I bought them with gold instead of IAM? And what about platinum? Or even uranium, especially U-235? They're both more scarce and valuable than gold. Even more useful. Especially moreso than IAM!
Maybe this is what God was saying to Moses. "IAM that IAM!" Jehovah is Italian Automobile Money! I figured it out! Now I have to make up a really ugly website, and trick you all to visiting it! Then you, too, can see the true value of IAM!

AlanGreenspan

18th July 2007, 08:45 PM

"Monetary Policy" is theft

LOL, i just had to stop there. I'll get back to you tomorrow.

Belz...

19th July 2007, 05:33 AM

Again, I maintain that Ace needs to read up on history a bit more if he honestly believes the general populace is worse off than ever before, economically speaking. The same holds true if he thinks simply bringing back the gold standard will fix all of our problems.

I was under the impression that we were better off than ever before, even if soft drinks don't cost a dime, anymore.

Belz...

19th July 2007, 05:47 AM

Wrong. The creation and spending of fiat money does help someone. It benefits the early receivers of the new money, especially it benefits the creators of the new money, as explained.

Technically, only for their first purchase.

And who are those "first receivers" ?

Here's another way for me to argue my same point. If it is OK for one entity to create new money out of thin air, why is everyone not allowed to do it?

You really don't understand why we have governments, do you ?

Can anyone actually explain any errors in the theoretical argument that fiat money = theft? I am still waiting.

IT IS INCORRECT.

This is why a 100% gold backed currency is not only the best protection against inflation, but also of deflation and depression as well. Under a gold standard, once money comes into existence, it stays in existence.

"Comes into existence" ? How ? By finding more gold ?

Oh, Ace:

What is stopping you from simply transferring all your wealth into gold now?

I realize that having lived your whole life under fiat money, it is difficult to re-conceptualize money. Under a gold standard, there is not a 1:1 exchange rate. There is not a 2:1 exchange rate. There is no exchange rate. Money is measured in weight. Ounces and pounds, grams and kilograms, not dollars and not marks. "Dollars" are simply receipts or titles to money.

What happens to countries with no gold reserves ?

I don't want to commit monetary policy, it is theft.

So you keep claiming.

It was then forcibly taken over by governments.

I was under the impression that money throughout history was always controlled by the government. I distinctly remember Caesar's face on a coin, somewhere.

The reason prices comes down in a free market is because innovation leads to a reduction in costs. Thus a firm can offer lower prices, and maintain profitability.

They'll also have to LOWER wages, Ace.

Loss Leader

19th July 2007, 07:38 AM

I was under the impression that money throughout history was always controlled by the government. I distinctly remember Caesar's face on a coin, somewhere.

That's only true for coined money. The rise of paper money was an uncontrolled mess. Basically, any bank that wanted to could start issuing certificates based on its gold reserves.

In the early days of paper money, before the civil war, a region could have ten or twenty different currencies floating around - each one with a different value. Then, traveling to a different area of the country often meant that noone in your new state recognized the bank that was holding your money. So they wouldn't honor the bills. If you wanted to travel from New York to, say, Georgia, you needed to slowly work your way down the coast exchanging your paper bank notes at the far south of their influence for bank notes at the far north of their influence. You might have to exchange your currency five different times on a thousand mile trip.

As you can imagine, the lack of standardization caused terrible inefficiency. Did the bank really have the gold? Was this bill a forgery? What was the gold to dollar ratio for this bank compared to another one? And, as you can imagine, since a bank's certificates had to be backed up fully by gold deposits, it was very difficult for banks to lend out their gold capital to collect interest on the theory that everyone wouldn't cash their money in on the same day. Without the ability to borrow on credit, individuals could not invest in new enterprises and the economy could not grow nearly as rapidly as today.

The Civil War was the beginning of the end for private money. By taking control of the paper money supply, the US government standardized money so that it was accepted anywhere. This freed laborers and entrepreneurs to to travel to wherever their services were usefull. It also allowed banks to lend more than they actually had. This spurred a humoungous growth in infrastructure including railroads, canals, factories and more.

The private money experiment was over and for good reason - it didn't work.

Source: Greenback: The Almighty Dollar and the Invention of America (http://www.amazon.com/Greenback-Almighty-Dollar-Invention-America/dp/0805064079)

CurtC

19th July 2007, 08:30 AM

A few years ago, I read the book The History of Money (http://www.amazon.com/History-Money-Jack-Weatherford/dp/0609801724/ref=sr_1_1/103-2656161-3262216?ie=UTF8&s=books&qid=1184855185&sr=1-1), which is a pretty good explanation for the layman of how money as a social concept developed. He's an anthropologist, so the parts discussing the social aspects of money are especially good, but some of his more modern details are a little off.

Cuddles

19th July 2007, 08:42 AM

Maybe this is what God was saying to Moses. "IAM that IAM!"

Wasn't that Popeye?

JimBenArm

19th July 2007, 09:03 AM

Wasn't that Popeye?
No, Popeye was a tuber.

"I yam what I yam!"

Belz...

19th July 2007, 10:04 AM

The private money experiment was over and for good reason - it didn't work.

Thanks for the history lesson! Don't you just love learning ?

But can I understand that most money in Earth's history was government-backed ?

CurtC

19th July 2007, 10:39 AM

But can I understand that most money in Earth's history was government-backed ?
Define "money." Do you instead mean "currency"?

Loss Leader

19th July 2007, 11:52 AM

But can I understand that most money in Earth's history was government-backed ?

Yeah ... welll ... um ... sort of.

Take the rise of paper money as a good example. Paper money began in Europe with the immensely rich and far-flung Medici family. Say it's 1630 and you want to move from Florence to Paris. You need money for your trip but you don't want to take all your gold and silver pieces with you because a) they're heavy and b) you will get robbed at some point on the road. So you could go to the Medici family in Florence and give them all of your money in exchange for a certificate of deposit. Then, when you got to Paris, you could present the Medici family there with your Florentine certificate and they would give you metal coins in exchange (less a small commission).

The question is whether this was private money or government money. The answer is: um ... both ... sort of. The Medicis were a private family but they were so damn rich they more or less were the Government. In 1630, a Medici was the Queen of France. Being rich and being the government were basically the same thing.

In general, coined money was a government enterprise. Paper money was a mix of private and government.

You can still to this day get private paper money. They're called bonds. They're often freely transferable and untraceable, just like cash. If you don't believe me, ask this guy (http://www.songfight.org/artists/hans_gruber_ultimate_villain.jpg).

Yipee-kay-yay m[rule8]er[rule8]er!

AlanGreenspan

19th July 2007, 01:02 PM

Truthseeker1234, since your post includes so much nonsense let's try to debate what you are saying one thing a time. Let's start with this particularly funny bit:

In your world Intel would have the same profits as the mom’n’pops next door.

The same rate of profit, yes.

I guess that by rate of profit you meant a profits/investment ratio, so what incentive would Intel have to go into the complicated business of computer hardware when they can just just put up a bead & breakfast inn and have the same rate of return on their investment?

In this golden model of yours there no incentive to invest in innovation or any high risk business since you would have the same return on your investment if you just invest in a grocery store. Wow, and this comes from someone who claims to be "very knowledgeable in undergrad econ".

TruthSeeker1234

19th July 2007, 05:14 PM

Please take the time to understand the reasoning behind this, the tendency for the rate of profit to equilibrate is a well-established economic principle. It is not original with me.

First, this has to do with a free market. In our non-free market real world, rates of profit are all over the place.

The rate of profit is never exactly equal for all economic actors, but market forces relentlessly pull the rate of profit toward the average. Investors do not seek average profits, of course. They seek maximum profits.

If Intel dropped out of the chip-making business, and went into the food business, here's what would happen.

1. Supply of computer chips goes down, price of computer chips goes up.
2. Supply of food goes up, price of food goes down.
3. High prices on computer chips send signals to investors of new high-profit opportunity.
4. Low prices on food causes losses, some producers go bankrupt.
5. Investment shifts from bankrupt food companies to high-profit computer chip opportunity.
6. Supply of food goes back down, prices go back up.
7. Supply of computer chips goes back up, prices go back down.

Rates of profits are pushed toward the average. Relentlessly.

In fact, this theory is so sound, it can be used as a very reliable "government interference detector". Show me any situation where rates of profit are persistently higher or lower than average, and I will show you heavy government involvement in the situation.

AlanGreenspan

19th July 2007, 06:04 PM

Please take the time to understand the reasoning behind this, the tendency for the rate of profit to equilibrate is a well-established economic principle. It is not original with me.

I do understand what you are trying to state here. But we don't live in a perfect competitive world where all profits tend to 0. We live in a world that in the best case scenario resembles a Cournot equilibrium.

The rate of profit is never exactly equal for all economic actors, but market forces relentlessly pull the rate of profit toward the average. Investors do not seek average profits, of course. They seek maximum profits.

No no, i asked you if Intel would share the same rate of profits with the mom'n'pops next door and you said yes. Don't backtrack on me sport.

If Intel dropped out of the chip-making business, and went into the food business, here's what would happen.

1. Supply of computer chips goes down, price of computer chips goes up.
2. Supply of food goes up, price of food goes down.
3. High prices on computer chips send signals to investors of new high-profit opportunity.
4. Low prices on food causes losses, some producers go bankrupt.
5. Investment shifts from bankrupt food companies to high-profit computer chip opportunity.
6. Supply of food goes back down, prices go back up.
7. Supply of computer chips goes back up, prices go back down.

Wait a minute there little Hayek. Remember that earlier you said that a goldllar would be worth the same in the whole world and if this miracle currency is cure of all evil, then every country would be using it so there won't be any incentive to put money into chips production when you can live by the beach with the same return on your investment. Chips will effectively disappear. But there will be plenty of goldllars available.

On the other hand, i believe you are starting to contradict yourself. First you claimed that the rate of profits would be the same for everyone, but now you claim it has a relative fluctuation.

And guess what? what you describe is exactly what happens when you use fiat money.

In fact, this theory is so sound, it can be used as a very reliable "government interference detector". Show me any situation where rates of profit are persistently higher or lower than average, and I will show you heavy government involvement in the situation.

And do you somehow think that government intervention can only happen when using fiat money? What holds a government from imposing price controls in your golden market?