And when did we know it? In a diatribe on the complete predictability of things deemed unpredictable, Barry Ritholtz enumerates a list of things that we have known, sometimes for thousands of years:
We’ve known for literally thousands of years that debts need to be periodically written down, or the entire economy will collapse. And see this.
We’ve known for 1,900 years that that rampant inequality destroys societies.
We’ve known for thousands of years that debasing currencies leads to economic collapse.
We’ve known for hundreds of years that the failure to punish financial fraud destroys economies.
We’ve known for hundreds of years that monopolies and the political influence which accompanies too much power in too few hands is dangerous for free markets.
We’ve known for hundreds of years that trust is vital for a healthy economy.
We’ve also known that avarice is damaging (“sinful”) and that it’s intrinsic to human nature. Rather than producing a system in which its effects are limited we elect to assume that some people are immune.
I was listening to a podcast on Roman history — because I’m a remarkably boring person with no intellectual life other than what I can listen to while walking zombie-like through the aisles of Costco in my eternal quest to keep my family supplied with paper towel — and I noticed the same thing. They were writing down debt in republic days, let alone empire, and learning that debasing the currency had a bad effect on purchasing power. Long, long time ago that.
From the link to the 1,900 years of problems with inequity:
“Given that the level of inequality in America today is one of the greatest in history.”
I continually find similar claims being made without evidence. According to the Gini index, America has the least income equality going back to the post-war period. Are we to gather that “history” is short for “living memory of Baby Boomers”? Before the Great Depression, before the welfare state, before the end of slavery, things don’t seem that great for the majority of people.
We’ve known for thousands of years that debasing currencies leads to economic collapse.
We’ve known that debasing currencies based on something has led to economic collapse. Do we know how true that is with fiat currencies?
True,
But isn’t government in large part all about lying to the public that things everybody knows to be true aren’t true anymore?
It seems to be what people want.
I largely agree with Ritholtz. Of all of these, the one that libertarian/conservatives deny/ignore that still surprises me is…
“We’ve known for hundreds of years that monopolies and the political influence which accompanies too much power in too few hands is dangerous for free markets.”
Theere seems to be a blindness on this issue. As long as the people holding all of the money and the power are the “right kind” of people, it seems to be ok. I dont think it is good to concentrate money, and therefore power, into the hands of any group. I am open to suggestions how to prevent this or lessen its effects, but I fail to see how you can deny it is a problem.
“We’ve known for hundreds of years that the failure to punish financial fraud destroys economies.”
We also know who can afford the best lawyers and who pays the most for political cover.
“The issue which has swept down the centuries and which will have to be fought sooner or later is the people versus the banks.” Lord Acton
Steve
“We’ve known that debasing currencies based on something has led to economic collapse. Do we know how true that is with fiat currencies?”
The word “debase” isn’t even applicable, because to debase a currency it must initially be based on something from which it derives its value. It’s like the term “monetize”: people continually throw it around without pausing to consider you can’t monetize something already composed of money.
It’s an example of the gold-standard mentality we’re still locked into even though we scrapped that system forty years ago.
@Ben Wolf
Money has a value, and there is a de facto gold standard. There will always be a “gold-standard mentality”, but it does not need to be gold. It could be a “cheeseburger-standard mentality”. Today’s dollar can purchase a specific number of cheeseburgers, and the value of that dollar is that number of cheeseburgers. I obtained that dollar by working a certain amount of time, and the value of that dollar is that amount of time.
Increasing the numbers of dollars (money supply) may affect my dollar. It is possible to increase the money supply to keep pace with growth, but if it is not done properly, money is devalued. My dollar can no longer purchase the same number of cheeseburgers, and I must work longer for the same cheeseburger.
The effect would be the same if the size of the cheeseburger were changed. If the meat and bun were reduced, my dollar would no longer purchase the same amount of cheeseburger. While the smaller cheeseburger and the larger cheeseburger would both be called cheeseburgers, one will not be as filling as the other.
“Cheesing the debt” would be to cut each cheeseburger in half and call still it a cheeseburger. Since a cheeseburger is a bun, meat patty, and cheese, half a cheeseburger is still technically a cheeseburger, but its value has now changed. Borrowing cheeseburgers, cutting them in half, and using them to pay off the debt is “cheesing the debt.”
Money has value. “A rose by any other name …”
“For the Snark was a Boojum, you see.”
A sense of justice seems to be innate in humans. Apes have it. Toddlers have it. Obviously the definition of justice/injustice changes over time. For example, slavery was seen as perfectly normal and not even worth debating, then as dubious, then as a necessary evil, and then as an absolute evil.
The problem with income inequality is not inequality per se, but rather the perception that it is the product of an unjust system.
Libertarians and Republicans cling to Calvinist ideas on that subject — the notion that the elect are the elect, and that God’s showering of benefits on this or that person is simply evidence that they must be among the elect. Case closed, shut up and let us eat our foie gras.
But when wealth is clearly the result of a rigged system, or of mere luck in the DNA lottery, or accident of birth, or outright theft, it offends modern notions of justice.
Not a problem for the elites so long as they hold all power. Which is why our current elites — like every elite in human history — tries to write the rules of the game to suit themselves and consolidate control. In the past the only way to counteract this was either to wait until the elite self-destructed, or rise up against them with pitchforks and guillotines.
Now, however, we have this thing called democracy. Or at least a version of it. So we need fewer guillotines and more votes. The people, should they get sufficiently motivated, can vote the elites down a few pegs.
The elites, in order to maintain power, double down on rigging the system. (Corporate personhood, money as speech, regulatory capture, lobbying, PACs, media as organ of the elite, union-busting, voter suppression.) Which is stupid because it’s a short-term strategy and long-term it’s destabilizing in that it radicalizes voters. But ‘elite’ and ‘smart’ are not the same thing.
So far the elites have used propaganda and irrelevant side issues (abortion, race, religion) to divide the 99%. And that’s why Frank Lunz is so scared of the Occupy movement: it is effective counter-propaganda that threatens to undermine the elite’s own propaganda and free voters to recognize the injustice in the system. Once that happens, change can occur with startling speed.
@Steve
… I dont think it is good to concentrate money, and therefore power, into the hands of any group. …
I would reverse money and power. While mostly synonymous, there are differences. Money can purchase power, but power can take money. Power does not need money, but money needs power.
Attempts to correct the system by limiting the influence of money on power will ALWAYS fail. When money cannot influence power, money becomes power. A system in which power is limited will be one in which money has limited influence. This is why more regulations never fix the system, and they usually make it worse.
This ties in with Dave’s earlier post: Making Distinctions
Warren Buffet, Jay-Z, Russel Simmons, Michael Moore, etc. are like Br’er Rabbit. “Oh please Br’er 99%ers, whatever you do, please throw me into the tax patch.”
The US Founding Fathers may have been a little more than just “old white men.” Limiting power is the answer. All else is folly doomed to failure.
“For the Snark was a Boojum, you see.”
@Michael Reynolds
… For example, slavery was seen as perfectly normal and not even worth debating, then as dubious, then as a necessary evil, and then as an absolute evil.
Prior to the Industrial Revolution, slavery was understood to be a natural part of social society. For the next 300 – 400 years, it became understood that slavery is absolutely evil. Serfs were de facto slaves, and in Czarist Russia, everyone (nobility and peasants) was the property of the Czar.
Slaves were generally considered draft animals. As our dependence on draft animals has lessened, our attitudes towards them has changed. We now treat them more humanely, but they are still considered animals. One may argue the same is true for the former slaves.
“For the Snark was a Boojum, you see.”
You fascinate me, steve.
“Of all of these, the one that libertarian/conservatives deny/ignore that still surprises me is…
“We’ve known for hundreds of years that monopolies and the political influence which accompanies too much power in too few hands is dangerous for free markets.â€
This is the heart and soul of where I am, along the spectrum of Republican to Libertarian. And all those who would similarly describe themselves.
It is the left who cries for concentration of power in government. Government fix this. Government fix that. How? Take money from the people, create yet another government agency that either a) creates a reliable voting block on the dole or employed by the government or b) a reliable rent seeking campaign contributor. And of course, since the problems never really get solved, we go to round two: yet another government program funded by the people…………….
FUBAR
Drew, you miss the funny part – we have an MD complaining about monopolies? Funny stuff!
@Michael Reynolds
The problem is that the legitimate and necessary activities are being used to camouflage illegitimate and unnecessary activities. Money laundering is an example of this.
Most of the debates between the various factions has one side arguing for or against one of these. The legitimate and necessary activities need some regulation, but the illegitimate and unnecessary activities should not occur. Increasing regulations on the first to eliminate the second will not work.
Unfortunately, one side argues that more regulations are needed to decrease the illegitimate and unnecessary activities, and the other side argues that less regulations are needed to increase the legitimate and necessary activities. The result is that both sides fight to obtain more power for the government, and the power obtained by one is also used by the other. The elites know this, and they use it.
This is the reason you see the 1% siding with the 99%ers. When the supposed opposition is fighting with you against the opposition, the question is who is the “opposition”. If you look around the poker table and cannot figure out who is the mark is, it’s you. Somebody is getting ready to be screwed, and it ain’t the 99% or the 1%. Mr and Mrs Middle Class need to stock up on vaseline. Apply liberally, and hope for a kiss.
By limiting power, money will have less influence. Not all elections attract the same amount of money. The election of the town dog catcher does not draw much money because there is not much power at stake. Give the dog catcher more power, and the election will draw more money.
“For the Snark was a Boojum, you see.”
@ Tastybits
“Money has a value, and there is a de facto gold standard.”
Money in our system has no intrinsic value, and I challenge you to present evidence of a de facto gold standard.
“Today’s dollar can purchase a specific number of cheeseburgers, and the value of that dollar is that number of cheeseburgers.”
You are confusing money with wealth. The money itself is nothing but a metric for measuring value and a medium of exchange.
“I obtained that dollar by working a certain amount of time, and the value of that dollar is that amount of time.”
Sir, dollars are not valued by minutes. Their actual value as a meium of exchange is determind by taxation, productivity and total national income.
“Increasing the numbers of dollars (money supply) may affect my dollar. It is possible to increase the money supply to keep pace with growth, but if it is not done properly, money is devalued.”
Simply printing dollars is not enough to “devalue” currency. If it were then explain why a tripling of the monetary base has generated no net inflation. Furthermore explain why inflation throughout the 90’s and 2000’s was below the post-war average while the government printed everything it spent.
“Borrowing cheeseburgers, cutting them in half, and using them to pay off the debt is “cheesing the debt.”
I’ll file that right next to “money multiplier”. I’m sure it will be just as useful. We don’t borrow, we aren’t cutting anything in half, and I can’t see any point to paying off our debt. Beyond that the metaphor is brilliant. Just out of curiosity, who is it you think we need to pay back?
@TastyBits-
In an authoritarian government, I think you are correct. In a democracy, where government needs to maintain the semblance of a democracy, I am not so sure. I think in such a system money equals power except in very unusual circumstances, like a Great Depression. As long as we have a democracy, it is pretty difficult to seize money. Could it happen? Sure, but in reality look at what is happening now. We are facing massive debt and the solution of the party most likely to be running things in 2012? Cut taxes on the wealthy. Coincidence?
“A system in which power is limited will be one in which money has limited influence. ”
I would counter with the U.S., the 1800s. Or, look at any third world country.
“This is why more regulations never fix the system, and they usually make it worse.”
I would counter with the US banking system from the 1930s until 1980. However, I would agree that better regulations are superior to more regulations.
Steve
“It is the left who cries for concentration of power in government. Government fix this. Government fix that. How?”
I don’t know about the “left”, but there is not that much I want government to fix. I think health care is not really amenable to market reforms, except for a small percentage of care. I think that a hybrid system with more governmental involvement than we have would work better. There are many examples of this around the world.
I think the financial sector cannot be trusted. Left alone, it will ruin the economy. I want government to regulate the hell out of it and eliminate TBTF institutions. I think that history supports this. It shows us that sooner or later the bankers will find a way around the regs, but we can make it hard for them.
As a subset of this, I would look at rebalancing creditors vs debtors. As Ritholtz notes, throughout history there has always been a balance between the two. We have legislated almost exclusively in favor of creditors for quite a while now.
Otherwise, there is not much else I want fixed now that I think government can fix. I dont know the answer to reducing current very high levels of inequality. I think it is bad because I dont think society or markets work very well when decision making rests in the hands of very few people, be it government or wealthy private individuals, especially today when those wealthy also control the media. I think that government may have to play a role in this, but I dont know. I guess you are ok with having money and wealth dominated by a small segment of our society.
On the other side, I would like for government to have a smaller role in our private lives. I want them less involved with telling us what to do with our bodies. I dont want government sending us to wars we dont need. I dont want government spying on us or suspending habeas. I dont want government dominated by religious beliefs.
Steve
A gold standard means a currency is convertible into gold. One can take their dollars to the Department of Treasury and exchange them for gold. We don’t have that system any more, and trying to define convertible currencies as something entirely different, like cheeseburgers, is just silly. Take your dollars to Treasury and demand they be converted into double whoppers, then see what happens.
Dollars under a gold standard had value because they could be converted into gold, i.e. INTRINSIC value. Your dollars today are entirely fiat: their intrinsic value is equal to monopoly money, as both are slips of paper with ink on them at best. Most of the time your dollars don’t even physically exist and therefore have an intrinsic value of zero.
Ask yourself why people accept a currency which isn’t backed by anything of intrinsic value. Why do we accept money which more often than not exists as a magnetic image on a bank’s hard drive?
Michael,
When you say,
…I think you need to read more libertarians. Libertarians were against the bailouts of the big banks and the socialization of financial sector losses from the get-go, long before it became popular on the left. It’s not libertarians who believe that “more regulation” can reign in the TBTF banks and fix the financial system. It wasn’t libertarians who came up with Dodd-Frank and subsidized the profits of the banks banks with trillions. Just sayin’.
steve,
The other side of that coin are liberals who think the system can be changed via better technocracy. I think the OWS people are part of a vanguard on the left that finally realizes that technocratic solutions don’t work in a corrupt system. The liberal/progressive solution, historically, is more technocracy but the problem with that is that people believe the government is corrupt (more on that here). So when liberals say they will save the big banks and then regulate them to make them “safe,” no one but the kool-aid drinkers on the left believes them. And why should they? Just look around you.
Not that so-called “conservatives” (who are really anything but) are any better. And that’s the problem – both sides support a corrupt system and fight against reform because that would affect their base of power.
And so, Michael, I would submit that you are not really “radicalized” until you reject that system completely. And to do that requires rejecting the liberal/progressive establishment. They are hoping your “radicalism” is just talk and they are betting that when 2012 rolls around that you’ll demure and vote for Democrats. I’d like to see you prove them wrong. Chances are, though, you’ll look at the GoP, hold your nose and vote for the Democrats anyway. Millions more on both sides will likely do the same and the system will be preserved.
@Steve
In our system of government, power is more distributed than in an authoritarian system of government, and it is more difficult to concentrate power. Power trumps money because when power cannot convince, it can coerce. Except in few cases is their a raw display of power taking money. One area is Immanent Domain. In the Kelo case, the Supreme Court upheld that the government could seize property for economic purposes. FDR’s Executive Order to seize gold was another example.
The easiest way for the government to obtain money is through taxation, and through regulation, the government can channel economic activity. The government is neither good nor evil. It is the individuals that are the problem. Through taxes and regulation, the DC based Federal government has an enormous amount of power. Power does not need a bayonet to be enforced. Levying fines is a much better method, but the government does have the power to use force if needed.
You need to define “wealthy” for me, but I suspect the individuals you have in mind will never pay their “fair share”. Most of the really wealthy pay what they choose to pay. Being able to fly to Singapore for two weeks and get paid for those two weeks, gives them options I do not have. They can get paid $20 million for two weeks, put it into a Singapore bank, use it as collateral for a $20 million dollar mortgage, and deduct the interest against their taxable income.
The people who will be taxed are the small business people. The fast-food franchise owner, the auto dealership owner, the doctors, the lawyers, and any of the S corporations. These are not the people making millions of dollars, and they have nobody looking out for them. Some in this group are clamoring for the wealthy to pay more taxes, and the irony is that they will be the ones taxed.
I would counter with the U.S., the 1800s. Or, look at any third world country.
You need to expand on the US in the 1800’s, but I would use most third world countries as examples. Countries with resources in demand are the worst. The US and other countries uses money to influence foreign countries. The money is used to purchase weapons, and the weapons are used to keep power. I think this is more true than not, but I am open to counter examples.
I would counter with the US banking system from the 1930s until 1980. However, I would agree that better regulations are superior to more regulations.
I would agree with this. The Glass-Steagall Banking Act of 1933 was probably one of the better regulations. It was not perfect, but it was well thought out. Sen. Glass and Rep. Steagall held hearings, and through subpoenas and immunity, they learned what went wrong. The resulting legislation worked fairly well. The FAA and the NRC are two other regulatory agencies that work fairly well.
Frank-Dodd was not well thought out. Frank-Dodd should be renamed the Frankenstein Act. It is a mishmash of parts, and the result will be monstrous. The solution to the repeal of Glass-Steagall is to re-enact it. In addition, include CDS/Derivatives with the commodity regulations, and raise the Fed interest rate.
More transparency would fix a lot of the problems. Knowledge is power, but the folks writing the legislation, regulations, and tax code know this. To them, using understandable language is a bug not a feature. Their power relies upon the confusion they cause us, and money influences what gets confused.
“For the Snark was a Boojum, you see.”
@Ben Wolf
Money is the value, and it has no intrinsic value. Gold has no intrinsic value when used as currency. Gold coins are a physical representation of the value of money. To coin collectors, they have an intrinsic value, and as a commodity, they have an intrinsic value to jewelers. To everybody else, they are a medium of exchange in a value for value transaction. Wealth is stored value, and this can be in money or assets.
The gold standard fixed a certain amount of gold equal to a dollar, and the Fed was required to exchange that amount of gold for a dollar. The two were interchangeable as currency, and as currency neither has any intrinsic value. The only purpose for a dollar is for an exchange of value. Gold has historically been used as currency, but it is not necessary.
The problem with the gold standard is that the Fed cannot create dollars, and therefore, they cannot create money. If every dollar issued physically or on a ledger could be redeemed for gold, the Fed would be required to have enough gold or assets to cover this amount. Fractional Reserve Banking as done by the Fed could not be done with a gold standard. By lifting this requirement, the Fed could lend dollars and purchase assets with money it did not have. The money is created by crediting accounts. In addition, gold needed to be confiscated to keep it from being used as currency. “Presidential Executive Order 6102” solved this problem.
The de facto gold standard is when gold is purchased to store the value of a dollar. One must use a gold broker instead of the Fed, but one is redeeming dollars for gold nonetheless. The reason for doing this is not a fiat currency. It is because the currency is being devalued. If people trust that the money will not be devalued, they will accept more abstract forms. In prison, dollars are exchanged for cigarettes, and cigarettes are used as currency. The difference is that the inmates do not debate the merits of debasing their currency.
You need to define “inflation”, but I assume you do not mean the government inflation rate or price index. Those additional dollars did go somewhere, and it is not necessarily where the government defines. In the 1990’s, executive pay and stock prices were avenues for those extra dollars, and housing stock and derivatives were avenues in the 2000’s. For the last two years, the price of gold has been inflating.
… Furthermore explain why inflation throughout the 90’s and 2000’s was below the post-war average while the government printed everything it spent.
This is eerily reminiscent of the logic prior to the financial meltdown. The conventional wisdom was that there could be no problem, but if there was a problem, the geniuses who created the system had accounted for it. Housing prices would always rise, and the risk was spread out to avoid a catastrophe.
“For the Snark was a Boojum, you see.”
”
… Furthermore explain why inflation throughout the 90’s and 2000’s was below the post-war average while the government printed everything it spent.
This is eerily reminiscent of the logic prior to the financial meltdown. The conventional wisdom was that there could be no problem, but if there was a problem, the geniuses who created the system had accounted for it.”
This is eerily reminiscent of someone avoiding a question they don’t like. If simply printing money sparks inflation, why didn’t it? Why have three years of trillion dollar deficits not created serious inflation? Why didn’t QE? Why didn’t pumping bank reserves up 2100%?
“The two were interchangeable as currency, and as currency neither has any intrinsic value.”
Incorrect. Take away the backing of the U.S. government and I can still sell or trade a gold coin for goods or services because it has intrinsic value based on the weight of the coin and the market price of the gold contained within. Do the same with modern fiat money and it no longer has any use other than as toilet paper.
As I wrote last night, you’d do well to ask yourself why people accept a currency which literally isn’t worth the paper it’s written on.
@Ben Wolf
To the Austrians, the increase in the money supply is inflation, and this increase will result in price increases. I do not think this is your definition of inflation, but unless you define it, I am just guessing.
My problem with this definition is that it assumes a static system. By static I mean no new type of goods (iPads, Volt, XBox 360, etc.) and services. In a static system, created money would tend to increase prices, but this would require a static supply of goods. Increased demand for the same goods will eventually result in increased production or additional production facilities. In a dynamic system, there would be additional outlets for the created money.
If it were possible to control the money supply to match the additional goods created, it would be possible to increase the money supply without increasing prices. The additional monetary value would match the additional goods value. The problem is the “control system”. The Fed tries to do this by lending money it creates, and for a long time, this was what the Fed did. I am not discussing the wisdom or folly of this.
To the Keynesians, the increase in the price of goods and services is inflation, and I suspect this is your definition. In this system, the assumption is that the goods and services will expand to meet the new demands. The money supply can be increased until it causes a problem, and inflation will signal a problem.
This has the same “control system” issues, but the Keynesians believe it is manageable. In addition, there are any number of factors that could cause the price of goods and services to rise, and this would need to be included in the inflation formula.
If the Fed were only trying to control the money supply, it might be able to do this without causing many problems, but the Fed has been tasked with additional tasks. The Fed is charged with fighting inflation, but the inflation was caused by increasing the money supply. The Fed is trying to put out the fires it started.
This is eerily reminiscent of someone avoiding a question they don’t like. …
I cannot answer a question containing undefined terms. If using the price increase definition, what is the inflation number? The government has more than one number, and all of them are self-serving. They exclude anything that would unduly increase the number. These numbers are useful as camouflage for the devaluing of the dollar.
… If simply printing money sparks inflation, why didn’t it? …
I have never stated that it did. I actually have demonstrated how the money supply could increase with no price increases.
… Why have three years of trillion dollar deficits not created serious inflation? …
This is related to the above response. This increase is inflating stock prices, commodity prices, and various financial schemes. In addition, the “to big to fail” companies are being inflated by this increased money.
… Why didn’t QE? …
QE is one of the reasons housing is being inflated. Removing QE will result in the housing market dropping. In addition, housing is going to revert back to its historic state, and QE is also contributing to the belief that housing is coming back.
… Why didn’t pumping bank reserves up 2100%?
Again, this was done to keep the banks solvent as new financial crisis emerge, and it ain’t over yet.
… Take away the backing of the U.S. government and I can still sell or trade a gold coin for goods or services because it has intrinsic value based on the weight of the coin and the market price of the gold contained within. …
This is because there is a de facto gold standard.
As I wrote last night, you’d do well to ask yourself why people accept a currency which literally isn’t worth the paper it’s written on.
As I explained last night, the form of currency is dependent upon the trust that it will not be devalued. When there is some mechanism that can provide a reasonable assurance of this, the currency will be accepted. It is not the medium but the value retention that is important. Pet Rocks could be used if they could provide this security.
“For the Snark was a Boojum, you see.”
steve, don’t go full retard…never go full retard.
Dude, what libertarian says we should,
1. Debase the currency?
2. Ignore debts, especially public debts?
3. Fail to punish financial fraud? (Keep in mind bankruptcy is a type of punishment)
4. Argue in favor of monopolies and that political influence is a good thing (vs. how many libertarians talk about rent seeking)?
In fact, lets go back to number 3. Aren’t YOU the one in favor of bailing out banks whereas many libertarians were not? Seems to me you are projecting more than anything else.
So please, don’t go full retard. And don’t worry I don’t expect are response to my 4 items above.
No, I think many libertarians would happily acknowledge that there is rent seeking and that those who benefit from are indeed acquiring unearned income. So you have a faulty premise right there. This automatically makes your conclusions suspect regarding libertarians.
Short version: Stop fucking assuming that libertarians and Republicans are the same. The word libertarian is not a fucking synonym for Republican.
Even shorter version: don’t be stupid.
I can trade dollars for gold.
Q.E.D.
Sorry Ben, see the above proof.
Steve, I don’t think Ben’s definition is so bad if you amend it to
This hearkens back to the point we’ve both been making for some time in our conversations with Ben, namely that he’s ignoring micro too much.
The word libertarian is not a fucking synonym for Republican.
And yet Ron Paul is in the Republican primary (where he regularly distinguishes himself by being the only honest man.) And there is a distinctly libertarian wing to the GOP.
@Steve Verdon
I think @Ben meant the US gold standard, and he was just using a shorthand version. At least that is what I took him to mean, but he will need to clarify.
Dave and Tasty,
I know, I was responding to the de facto response. Sure there isn’t a legal rate of exchange of gold for dollars, but there is still the option to buy gold at the prevailing market prices.
I agree with Tasty’s post up aways where he uses cheese burgers instead of gold. I don’t care about the actual bills in my pocket right now, except that they allow me to acquire real goods and services.
So in that regards, there is plenty of evidence of a “gold standard”, just not the official one we had around 100 years ago or so. And I don’t think we can have one again. James Hamilton has already described the speculative pressures any country with such a standard will come under.
So the whole gold standard thing really is irrelevant in this discussion and should be dropped, IMO.
Michael,
Yeah Ron Paul caucuses with the Republicans and even describes himself as a Republican at times, but compared to the run of the mill Republican he isn’t one of them.
And libertarians come in many forms and run the gamut from minarchists, to anarcho-capitalist, to anarcho-communists, to the more “middle of the road” libertarian who favors significant reductions in the size and scope of the government, just not what you see with the previous three categories. To lump them altogether and then further lump them with Republicans is to commit a category error only seen by people going full retard.
Ben,
I don’t know, but why does it absolutely have too? Here is the thing, all other things being equal, increasing the money supply will likely cause inflation.
When you read that I think the process goes like this….
Here is the thing, all other things being equal, increasing the money supply will likely cause inflation.
All other things being equal, increasing the money supply will likely cause inflation.
Increasing the money supply will likely cause inflation.
Increasing the money supply will cause inflation.
You are stripping away quite a bit.
Or to put it a different way, models are great to help us understand how the world around us works. However, models are only really useful when they are simplified abstractions of the world around us. That is, don’t take the model to be an accurate descriptor of the world. The quantity theory of money is handy…but it is not the entire economy…Hell it isn’t even a model of an entire economy.