I am reading a rather excellent book right now, Niall Ferguson's The Ascent of Money: A Financial History of the World. (See "FEATURED RECOMMENDATIONS" on the right.) Following is a brief excerpt relevant to today's post, about the connection between precious metals and money in the Victorian era.
"Precious metals alone are money," declared one City grandee, Baron Overstone. "Paper notes are money because they are representative of Metallic Money. Unless so, they are false and spurious pretenders. One depositor can get metal, but all cannot, therefore deposits are not money." Had that principle been adhered to, and had the money supply of the British economy genuinely hinged on the quantity of gold coin and bullion in the Bank of England's reserve, the growth of the UK economy would have been altogether choked off, even allowing for the expansionary effects of new gold discoveries in the nineteenth century.
The above passage is not intended as music for the ears of monetary goldbugs, also known as moldbugs. Rather, it highlights the direct connection between money supply and economic "growth": the two are directly and proportionately related. (I am using quotation marks to highlight the difference between quantitative and qualitative aspects of economic activity.)
It is, therefore, a given that in order to rapidly establish a Sustainable Economy we have to radically transform our present monetary system which is geared exclusively towards the ever-expansionary Permagrowth Economy. This is crucial: no matter how many wind turbines we install and how much organic food we eat, we must also design and install the proper monetary apparatus if sustainability is to work.
Let's begin with what is going on right now in response to the credit crisis. Monetary authorities and politicians are working up a lather, pumping as much fresh state-sponsored liquidity into a rapidly draining cesspool of private debt gone horribly bad. They are doing so because they cannot for a moment imagine a non-inflationary world of falling and ultimately stable prices caused by a zero growth economy. To them, schooled as they are in "modern" academic economics, such a development would be an abomination; and even talking about it would be equivalent to heresy punishable by burning at the stake.
Their actions are entirely wrong and counter to our best interests - at least the "other" 99.9% of us that do not qualify as yacht-haves. Just like the Spanish Inquisition, they are unlikely to go down in history as enlightened financial progressives, despite the thin veil of populist Keynesianism with which they are attempting to cover the absence of originality in their thinking.
Attempting to salvage a corrupted, unsustainable financial edifice by issuing trillions of dollars in newly minted IOUs carrying the blessing of the state reminds me of the infamous Catholic indulgences, the written pardons marketed in the thousands by some Popes to raise money for the Vatican. They even had a jingle: "As soon as a coin in the coffer rings, a soul from purgatory springs". Well, we know how all that ended..
Absolution from sins, circa 1521Carrying the theological parallel a bit further, I should point out that our present monetary system is based solely on faith. After all, the word "credit" derives from credo, i.e. faith. When those responsible for acting in the most moral and responsible manner possible, instead debase our trust (fides, and thus fidelity) why do they expect us to believe?
I will not be surprised at all to see a modern-day Martin Luther posting his Theses on some central bank's doors one of these days.
In the meantime, vade in pace (go in peace) - at least for the weekend...
I will not be surprised at all to see a modern-day Martin Luther posting his Theses on some central bank's doors one of these days.
In the meantime, vade in pace (go in peace) - at least for the weekend...
Hell,
ReplyDeleteI agree with your post. However, I have a few questions:
1. Do you have any specific recommendations for transitioning to a new monetary system that is not based on the Permagrowth model?
2. Since there's a huge mass of inertia and vested interest in keeping the current monetary system going, can you also comment on what it would take to get people to transition to your proposed new model?
3. You seem to be making fun of the goldbugs/moldbugs. So I have to ask, in the current fiat system where all central banks are responding to the financial crisis by monetizing bad debts and extending more credit in a frantic attempt to re-inflate assets, how can an individual best protect their savings?
4. As a follow-up to the last question, what's wrong with buying precious medals to protect ones savings, especially gold?
Thanks, as always, for your perceptive and entertaining commentary.
Michael
Same question as Michael and the same view.
ReplyDeleteI do not care you dismiss the brilliant Von Mises, our national Jacques Rueff and al...
But I'll quote the old Jacques anyway in the epilogue of it very gallic "monetary sin of the West".
Not available in his home country by the way, my thanks to the open US economic debate.
"Let us hope that before it is too late we will entrust again to monetary mechanisms the task that the feeble hands and vacillating minds of men are unable in the present circumstances to assume"
Jacques - politically instrumental during 40 years - had a view on the compromissions of a soft currency. He was certainly a bit early in his calls. But not a fonctionnaire making money...
All US-educated - and British ones by the way - show disdain for hard currencies. For some reasons.
But I have pretty much the same need concerning my savings (not made at finance - tough earning them...).
I would certainly accept a decent alternative to gold. Other than shorting asset markets.
In fact my money has been out of equity markets into gold and cash as soon as I felt the crisis, by the beginning of 2007.
The way "liquidities" are handled by central bankers, especially Asian and US ones is a great display of contempt for private savers.
A careful saver.
sacrebleu
ReplyDeleteI just CANNOT write proper English! Just hope you caught the intent.
Possibly a bit rough. This is not intended and, to a large extent, a consequence of my diminutive language skills.
Dear Michael & Daniel,
ReplyDeleteAnswering as best as I can...
1. Yes. Search for "Greenback" in my previous posts.
2. Nothing would change, except for the rate of money supply growth.
3. Sorry, no personal investment advice forthcoming.
4. Ditto.
Regards,
H.
Full PBS program The Ascent of Money online
ReplyDeleteMichael or Daniel:
ReplyDeleteCould one of you explain to me the difference between Von Mises Libertarian economic theory and the Chicago school Libertarian economic theory. I know there is a difference, but I just don't know what it is. I am a Keynesian, in general; so I can't really tell the difference.
As for what is wrong with gold: gold is merely a commodity. While it may be a popular one, there simply never was, is nor will be enough gold to trade as a medium of exchange. There are not enough precious metals combined for a medium of exchange. The problem with "goldbugs" is that there thinking is too concrete. As such, inefficiencies that are created by such thinking can be exploited by those who understand higher math. Paper money is much cheaper to produce, is lighter and easier to transport. There is nothing wrong with paper currency.
If you write a check, it is the same as paper money. If you give someone a credit or debit card, it is the same as paper money -- because it is a promise to pay an amount certain (which represents a value for the goods or services received).
The real problem in recent times has to do with the misallocation of capital and the extreme disparity of wealth between peoples (and the two are correlated).
Ugh "there thinking" should be their thinking. And the first sentence should be a question.
ReplyDeleteDear O.L.,
ReplyDeleteNope, I don't know enough about Von Mises and the Chicago school to explain any differences (or similaries, for that matter!) between the two.
A good introduction to the Austrian school is "Economics for Real People" by Gene Callahan. For a specific discussion of Austrian monetary theory, try "The Monetary Elite Vs. Gold's Honest Discipline" by Vincent R. Locascio.
Concerning your comment that there is not enough gold to serve as money, I think that the Austrians would counter that there is enough gold, but that as the economy grew prices would fall to be in line with the total amount of gold; in other words, deflation. Deflation is a problem for us only because in our debt-based, fiat currency system, it means that people will default on their loans, causing havoc in the financial system and the broader economy.
Austrians aren't tied to using gold as money. Market participants collectively decide what commodity will serve as money. When governments and banks are in charge of the money supply, they manipulate it to serve their own interests.
Concerning deflation, I don't know if it is a problem are not in a system that does not depend on service debt. Hell's Greenback model would expand the monetary base in proportion to the increase in green energy production. This would keep the monetary supply in line with the real economy, growing and contracting along with the economy and thus avoiding both inflation and deflation.
Finally, thanks for the link to the PBS video. I will definitely watch it. I think monetary theory is an important and fascinating topic. Our current monetary system is way out of whack and puts all of us at economic risk. That's why people like me look for investment advice on how to protect our savings. Of course, I understand why Hell would demur on that point.
Thanks,
Michael
This comment has been removed by the author.
ReplyDeleteHellasious & everyone, precisely your thoughts on a green economy and sound money are covered in the film "Zeitgeist: Addendum"
ReplyDeleteYou can view it for free: http://video.google.com/videoplay?docid=7065205277695921912
I have never understood and will never understand the idea that a backed currency creates an artificial constraint on the growth of an economy, especially one in which fractional reserve banking is still allowed. (Frankly I think I'd rather have a fiat currency and no f.r.b., but that's a different argument.)
ReplyDeleteIf an economy is growing, goods and services should be getting CHEAPER. This means that it takes less money to buy any given good or service. The only real problem is that the amount of currency in circulation is inadequate because the denominations are too large. Start denominating your currency in grams or micrograms of gold. Or use a basket of backing commodities. We have computers and databases now. You can adjust the backing rate in real freaking time, if you must. But no backing means unlimited printing power and eventual hyperinflation. It's mathematically inescapable.
An adjustable backing rate has the same potential downfall but has the benefit of transparency. "The government printed twenty billion dollars today" is meaningless to the average person anymore. "The government decreased the value of the dollars in your wallet by reducing the gold backing them" might still mean something.
Anonymous, you have it backwards: in a growing economy everything will get more expensive, not cheaper. With a growing economy, demand is increasing, which will make existing goods and services more rare to each potential customer.
ReplyDeleteThink of it this way: do stocks get cheaper or more expensive as the economy grows? (i.e. Do stock prices go up (more expensive) or down (cheaper) as the economy grows?)
How ironic that Hell's post was made today when paper gold broke through resistance to the upside.
ReplyDeleteOh, yes, the pound is sinking, and the rest of the fiats, versus gold anyway, are taking on water.
Okie lawyer wrote:
"Gold is merely a commodity."
At best this is a half truth. Paper money is a commodity, gold is money and a commodity. In time, for your sake, I hope you'll come to understand this. That there isn't enough for us all to carry around in our pockets for the purposes of exchange is a red herring.
Higher math, equally, has nothing to do with the issue at hand. Dodgy math on the other hand has much to do with why the world's financial system is terminally ill, and had gold been employed properly, no dodgy math would have been possible. I do have to wonder if any of you nay sayers (and name callers), have ever read Antal Fekete, for example, or if he just simply doesn't compute. Pity.
To the extent that Milton Friedman is a product of The Chicago School, one key difference between his brand of libertarianism and Von Mises should be obvious. In Von Mises world view, in order for the citizenry to not be stealthily enslaved and/or beggared, gold must play a key role in a nation's monetary system. This was decidedly not the view of Milton Friedman.
Okie, you know I agree with you that at some level gold is an illusion (though I am increasingly agreeing with Edwardo that for a while, Gold may re-take its value temporarily as (enough) people lose faith in the ability of your Keynsians to make the tough choices necessary to spend their money efficiently... for make no mistake, the government spending does need to be spent well or the Keynesian's plan will fail in the end and from what I have read so far, things are not completely encouraging- we just keep spoiling that commons!). Discipline is very hard to forge with a blank check (as our health care system has proven) and our current government is suggesting it might have the fed take the place of those bond vigilantes Clinton hated so much.
ReplyDeleteBut I think you are wrong on the notion that there is not enough gold in the world to be of practical use as a medium of daily exchange.
There is approximately 2 olympic swimming pools full of gold in all the world (which is 5,000,000 liters volume). If you were to assume an even distribution of gold to each of the world's 6 billion people (admittedly an absurd assumption, especially coming from me who believes Pareto wealth and income distributions are as immutable as gravity, just as they are as immutable in the econ blogosphere) there would be 0.8 cc or 15.4 grams of gold per person to use on this planet.
A modern quarter weighs 5.67 grams so assuming a similar weight coin, there is enough gold for a few coins per person, which should be more than enough for daily commerce (actually in some ways much easier).
OL "Could one of you explain to me the difference between Von Mises Libertarian economic theory and the Chicago school Libertarian economic theory"
ReplyDeleteThis is a great article by Murry Rothbard contrasting these two economic views. I keep it saved so I can reference it.
http://www.lewrockwell.com/rothbard/rothbard43.html
As for gold as money, I can't imagine anything else that has worked as well for 5000 years. Gold does a better job of keeping its "value" relative to other commodities than anything else. For example 1 oz. of gold bought a very nice tailored suit in the 1700's as it does today.
From an international trade perspective, gold would not allow for the manipulation currently practiced by many countries. As wealthy countries collected more gold for their exports (trade surplus), prices for products and labor within the exporting country would rise. The importing countries, who were buying products with gold would see their prices decline as less and less gold was available. This would shift the balance to the low cost production importer. Kind of a crude example.
In the 70's all we did was swap a gold back currency for an oil one. This is all unraveling now.
re: gold as a commodity
ReplyDeleteStrictly speaking gold is NOT a commodity, at least not in the same league as corn, oil or copper. It has very few productive uses.
Mostly it acts as a storehouse for the intangible idea of "VALUE", i.e. it exhibits one of the important requirements of "MONEY".
"Rather, it highlights the direct connection between money supply and economic "growth": the two are directly and proportionately related."
ReplyDeleteWhat is the evidence for this claim?
Today's misnomers from a longer view:
ReplyDeleteThat’s because they have been raised solely within the neoclassical approach to economics, which has dominated the academic discipline of economics since the mid-1970s. They have been trained to uncritically believe in models of the economy based on the fantasies of hyper-rational individuals (who can predict the future), markets that are always in equilibrium, and a world in which money is simply a veil over barter. By and large, they don’t even acknowledge that we exist. One excellent question that was put to James by Henry Blodget is worth quoting in its entirety. Blodget quite justifiably expressed the belief that in their training economists look at history – a statement that shows he didn’t himself do an economics degree, because one of the first subjects that neoclassical economists eliminated to make way for their obsessions with “microeconomics” and “econometrics” was economic history: Blodget: But obviously in training economists, especially academics who go through an incredible period where they’re learning and studying history, and you look back over history where you’ve had many of these complete crashes that were unforeseen at the time. How does academia deal with that? Is the story always told that “Oh yes, but we were stupid and unsophisticated then, and now we’re smart and therefore we’ll see it”? How do people explain that?
James’s reply was:
Galbraith: That’s an excellent question, but the reality is that training in economics does not involve coming to grips with history. Economic history is barely taught in graduate economics departments, and the history of economic thought isn’t taught at all. So figures that have been fundamental to understanding phenomena like the Great Depression–or for that matter the Great Crash–are simply not in the curriculum.
Keynes, who taught my father John Kenneth Galbraith–who understood the Great Depression as well as any figure in the 20th century–… you won’t find them on the reading lists. That is in some sense the shocking commentary on the intellectual direction that the profession has taken.
As for me the the study of capital and labor have defined relationships "or lack off" given the true context of years let's say to the break down which distills to regard to others in the excess of avarice. I am spending some time reading Alfred Marshall who was Keynes Professer.
I think there typical to any regard but there times where difficult given context of the time "Empire" which is crucial and would posit that there primary intent was to the common man which hinges to Lord Acton to what I see. Given the reality we are not hidebound to any one given the liberty we still have I defer to Thucyclides " Those who really deserve praise are the people who, while human enough to enjoy power, nevertheless pay more attention to justice than they are compelled to do by their situation." Winston Churchhill knew after all else fails we Americans will do the right thing. As a taxpayer there is nothing new under the sun and working corporate for 30 plus years get your duck's in a row. Of course we knew what happened. We have the history which is economics. Men are only separated by information "ability" and to predicated cycles of cultures we do business in. Has not Christ taught us anything? A man was blind and he made him see. He asked what do you see. His reply was I see trees, walking. Jesus laid his hands on his eyes and then he seen clearly. Then he sent him home "Do not even go into the village". Mark conveys this truth which is not always percieved clearly at first. As for me this apply's. Work for the common good since it is the best path. You people bring up sound priciples but really for a moment do you think they listen? I agree read more talk less and I really enjoy input here.....
Hell, absolutely FANTASTIC post in my view, and totally up my alley, as you already know, on a topic that no one else is commenting on here, so here goes :
ReplyDeleteThe problem with the gold/paper money debate is that gold, and paper money are equivalent to the extent that they are both ONLY SYMBOLS of what constitutes WEALTH or value for any given society...
A symbol is only a symbol my friends, and the ultimate nature of a symbol is to be ARBITRARY, and to not contain WITHIN ITSELF the wealth that it symbolizes/represents. We are forgetting this with globalization.
So, why am I mentioning this ?
In the American Indian museum this summer, I learned the real story behind the glass beads propaganda that we were fed as children, propaganda that had the ultimate effect of making the Indians sound really dumb for trading away their gold for glass beads.
But...
The glass was MURANO glass, my friends...
So, who's to say that Murano glass is not worth more than gold ? In WHOSE EYES ?
Very good point about the indulgences, Hell.
Which brings to my mind the fact that Luther was probably more incensed about the indulgences than anything else. Why shouldn't he have been ?
The indulgences were already evidence of the corruption that currency had introduced into human exchanges. Exchanging salvation for a money sum ?
That sure as hell gives an enormous credit to the already burgeoning monetary system in the Western world, doesn't it ?
And Hell, have you heard of "Coin" Harvey ? (cited in Henry Miller's "The Air-Conditioned Nightmare" which I have already cited on this blog).
I would like to get my hands on his analysis of the history of interest.
Anyone know how I can do this ?
It is ironic that Luther's rage at indulgences should result in a "faith" whose materialism is so much more degrading than the Catholic faith's...
Yes, the ultimate question is one of who/what you put your faith, and trust in...
And also, that any economic system only works to the extent that what is exchanged is CIRCULATING, and continuing to be shared among the members of any given society.
When things stops circulating (and when symbols stop circulating, too), then the ills start...
I am terribly excited that you talk of reforming the monetary system. Does that mean reforming money as a symbol too ?
H:
ReplyDeleteIt has very few productive uses.
Mostly it acts as a storehouse for the intangible idea of "VALUE",
If that is true, then its value is psychological. In that case, it really has no "true" value at all.
The technicals say that it could run up to $1000, and I'll probably trade it; but it sure does seem like a lot of risk for the amount invested.
In response to the person who said that gold cannot be manipulated: have you ever heard of the Hunt brothers?
Cycles in the Western world
ReplyDeletehttp://www.lewrockwell.com/rothbard/rothbard183.html
Decent start here linked above.
"Could one of you explain to me the difference between Von Mises Libertarian economic theory and the Chicago school Libertarian economic theory. I know there is a difference, but I just don't know what it is. I am a Keynesian, in general; so I can't really tell the difference."
OL "If that is true, then its value is psychological"
ReplyDeleteOkie, it is wonderful to watch (read?) your mind evolve on this issue over time buddy.
Why does Debra say "money as a symbol"? Why do I talk about "trust"? Why does Cottonbloggin talk about "values"?
Why does Hell say "Mostly it acts as a storehouse for the intangible idea of "VALUE", i.e. it exhibits one of the important requirements of "MONEY".
Money is a promise on future labor.
Savers are almost by definition anxious and conservative. They save so they will have something tomorrow because they never know what tomorrow will bring.
If they fear the safety of their future labor promises, they will "protect" their savings and move it somewhere they think it will be "safe" (it is all psychological).
This is why currency black markets always pop up in centralized economies or countries that try to play with their currency. I have changed dollars for pesos numerous times with black market peso vendors in Tijuana.
I noticed Jesse's latest subtitle is "IT ISN'T THAT THEY CAN'T SEE THE SOLUTION. IT IS THAT THEY CAN'T SEE THE PROBLEM." G. K. CHESTERTON
Hell, I tip my stethoscope in complement of your tutelage. For people like me, who tend to see most events as the consequence of a series of nudges, as opposed to the mindless control of a rotting fish heads ;-) , I think I see your lessons imprinting on us all.
Thanks for sharing.
HA !!
ReplyDeleteI just took a little peek on Wikipedia for fun on the history of usury and I found that the first theologian to admit the principle of interest/usury (i.e. participating in profits without participating in risks, the definition of investment...) was...
Rolling of drums, please.
John Calvin.
And that the PROTESTANT banks took it up quickly.
All of our civilization has issued from theological questions and debate. Our science has laboriously evolved trying to separate itself from theological questions.
But they just seem to keep coming back, don't they ? lol
Thai, unfortunately, money is much more than a promise on future labor. The relationship between money and labor is very complicated for psychological reasons.
ReplyDeleteIt is complicated because money as a symbolic system has managed to usurp, and shove out any other intangible values that could begin to compete with it at this time. (Yes, I do hold that money is also an intangible and arbitrary value, but we have illusions about it because we can COUNT it...)
Questions to nuance this : is WORK defined exclusively by the fact that one receives money for it ? What about VOLUNTEER work ? Is that work ? Most of us would say that it is.
Is it worth something even if we don't receive money for it ? Is it worth as much ? More ? Less ?
Does money PAY FOR work ? Cancel out a "debt" that work creates ? (If there is a debt ? But who says so ?)
These are not nit-picking questions. They are fundamental ones. And you can see the answers that our society is giving to them, if you are observant...
Ugh, someone not knowing the difference between the Austrian school and Chicago school on an economics blog is slightly disturbing.
ReplyDeleteFor your sake, you probably shouldn't read the Von Mises or Rothbard, as your head might explode upon reading they recommend the abolition of the Fed and a true free market in money.
Also, it makes sense that a Keynesian would not understand the value of gold as many Keynesians don't understand the subjective theory of value posited by the Austrian school.
For a good read, google search the predictions made by Keynesians about what shouldve happened to the gold price in 1971 when the government got rid of the $35 peg. Spoiler: They were totally wrong.
Deb, I agree I am simplifying it and that it is more than labor, but I think you too are caught in a frame of reference error. It is not labor that is significant to you, it is labor that is significant to the collective. You and I are both prisoners of the collective whether we see it or not.
ReplyDeleteI understand you don't 'like' money, and seem to want to change it for some other point of reference we all rally around (and if I understand you correctly, and I fully admit I may not, this point of origin has a natural environment component?), but I might also suggest that if we did get rid of money, and all move to your new standard, our society would still look exactly the same as it does today, and that only the point of origin we all rally around would have changed.
And since all this moving from point A to point B is so very much work, and we will still end up exactly where we started, why not just 'reform' the system we have to make it look a little more the way you want?
Please 'trust' that I am a big believer in the power of cooperation and that most of us really want the same things in life.
Anonymous:
ReplyDeleteUgh, someone not knowing the difference between the Austrian school and Chicago school on an economics blog is slightly disturbing.
That shouldn't be surprising as I am not a Libertarian. This is a fight generally between two separate factions of Libertarian economic thought.
For your sake, you probably shouldn't read the Von Mises or Rothbard, as your head might explode upon reading they recommend the abolition of the Fed and a true free market in money.
It's not that I am opposed to reading an article on the differences, but I seem to remember once following a link to his site and reading some virulent anti-Semitic article. I will not patronize those who advocate such hatred.
In fact, I have found a disturbing trend on traditionally progressive blogs lately being more than critical of Israel.
Also, it makes sense that a Keynesian would not understand the value of gold as many Keynesians don't understand the subjective theory of value posited by the Austrian school.
As I said, I am not a Libertarian. Therefore I am not going to be well-acquainted with their ideology. Here is what Answers.com says: subjective theory of value Although I don't know why it is so important.
And read again what I wrote: I said I was a Keynesian in general. What I mean by that is that I believe that a government should use deficit spending during severe recessions and then pay off the debt during the boom years. That's what I meant by "Keynesian." The idea is to flatten out the economic cycles.
For a good read, google search the predictions made by Keynesians about what shouldve happened to the gold price in 1971 when the government got rid of the $35 peg. Spoiler: They were totally wrong.
That contains both a conclusory statement and fallacious ones. Your statement about Keynesians is a hasty generalization. I doubt that all Keynesians got it wrong.
And I doubt that Googling it will give me a wide selection of opinions, for that matter. So that won't help me much.
Hellasious: rather than transitioning to a new monetary system, what are your thoughts on adopting complementary currencies, as proposed by Bernard Lietaer on his Crisis 2008 site:
ReplyDeletehttp://www.lietaer.com/
Can you envision (eg) the Greenback existing alongside the current dollar economy?
Anonymous: "Ugh, someone not knowing the difference between the Austrian school and Chicago school on an economics blog is slightly disturbing."
ReplyDeleteMichael: Can't we keep the discourse civil?
OL: "But I seem to remember once following a link to his site and reading some virulent anti-Semitic article."
Michael: I, too, have noticed anti-Semitic, anti-feminist and anti-gay comments on certain Austrian/libertarian websites. However, I think the Austrians make a lot of valid points, especially concerning fractional reserve banking and monetary theory. It's just a matter of separating the wheat (economic theory) from the chaff (bigoted opinion). Also, you can chose to patronize Austrian-slanted websites that do NOT contain any bigoted material, such as Mike Shedlock's blog at http://globaleconomicanalysis.blogspot.com/.
OL: "In fact, I have found a disturbing trend on traditionally progressive blogs lately being more than critical of Israel."
Michael: James Howard Kunstler has an interesting post on this topic at http://www.kunstler.com/. Scroll down to his January 12 post in the "The Clusterfuck Nation Chronicle". Kunstler's thesis is that whenever things go seriously wrong in the financial system, Jew's get blamed (even though there are plenty of WASPy money managers on Wall Street).
Finally, thanks to Allen E. for the link to Lietaer's website. I really enjoyed reading his book "The Future of Money". He takes a very different approach to monetary theory as compared to the Austrians. I'm glad to see that he is commenting on the financial crisis of 2008. I look forward to reading the white papers that he has posted on his website.
Michael, I completely agree. Thanks
ReplyDeleteOkie, I totally agree with your comments on the very real tendency of some progressive blogs towards anti-semitism, etc...
But your Keynesian optimism has a high hurdle to overcome. We didn't save during the good times before so why would we save during the next ones to pay ourselves back?
Take my favorite subject, health care, we just keep spending more and more money per person despite strong evidence to suggest that every additional dollar we spend on health care actually worsens our median national longevity as it crowds out other types of spending. We may literally be killing ourselves and yet we still we can't cooperate enough to figure out how to create limits on our behavior.
And in the same way the bankers in power yesterday had the ear of our last president, the current medical establishment in power has the ear of our current president.
We just keep moving from bank robber to bank robber and as a collective refuse to put boundaries on the absolute level of robbing anyone is allowed.
We just keep compartmentalizing consumption into different buckets and then pretend to ourselves one bucket is completely separate from another and therefore we refuse to admit the fundamental truth that consumption is consumption regardless of which bucket it is from and that some people are heavy consumers in EVERY SINGLE BUCKET and are sinking the collective ship.
Massachusetts spends more money per person than any other state in the union on health care, and despite this very real truth, they keep saying "we want more" and the rest of us in the collective be dammed as we have to continue to work longer and longer to support their consumption. Aren't they more or less ALL supposed to be liberal in Massachusetts? Doesn't this mean they are supposed to be more compassionate and conscientious about the effects of the consumption than (say) heartless conservatives or let the future be damed libertarians? By their own actions, they seem to be saying they could care less about the rest of us in this collective... And don't even get me going on what the residents of Long Island and New York are doing to the rest of us.
They refuse to fire all their neurosurgeons, etc... that remove (say) the brain tumors of their moms and dads with metastatic lung cancer so they can have another 3 months of quality life at a cost of $200,000 per month of life extended while the children of (say) Oklahoma don't even get a decent enough education to make good health decisions in the first place.
The people in power refuse to admit the fact that every time a gunshot goes off on the streets of D.C., an entire elementary school of 300 kids budget for a week was just spent. And whose fault, no one's fault, all the politicians stand up and have yet another bizarre discussion of handgun controls as if we are all hamsters on a collective wheel.
Where is the reduction in consumption coming from? Where?
I see we are going into a deep philosophical discussion pertaining to the question of what is value and what is money. This is admirable, and unfortunately where commerce is concerned, unless one wants to have a barter economy, there must exist a monetary medium/and or anchor. When you find a monetary medium/anchor that functions better than gold has over the entire history of human civilization call me.
ReplyDeleteOkie Lawyer, the key point about the Hunts and their attempt at manipulation is that a.) Bunker Hunt tried to corner silver, not gold, and b.) the attempt failed.
You are correct though, Gold can be manipulated. The paper gold market is massively manipulated, but upon cursory examination that proves more about the corruption of the fiat forces arrayed against Gold then anything else.
However, the long standing endeavor to suppress gold is in the process of failing spectacularly. And this leads me to one of the best, if not the best argument in favor of gold acting as money, which is that no nation or government has a monopoly on gold. This stands in stark contrast to the condition of every fiat.
Michael:
ReplyDeleteI used to be a regular reader of Michael Shedlock (I have him linked on my blog); but as with all ideologues, I think he is too rigid in his beliefs, so I don't read him as much, anymore.
I agree with Barry Ritholtz (www.ritholtz.com/blog) "strong positions, weakly held."
Interesting that you bring up Kunstler. I sent an e-mail to him January 12 expressing my support. I know I had said the same thing to someone else before that. But I can't remember who. (Thai, was it you?) He wrote back and said that he does get a lot of hate mail. He and I seem to think a lot alike. I told him I think that might mean I need to have my head examined.
Of course, I could say the same thing about President Obama. In fact, I was thinking about writing an article to be posted called "A President Just Like Me."
Thai:
We didn't save during the good times before so why would we save during the next ones to pay ourselves back?
I'm pretty sure that I made that very point on here (or maybe it was at Barry Ritholtz's site). But I know that I have previously said that I thought that that was a practical weakness of Keynesianism. In theory though, it still would be the correct action.
I'm not sure I agree with you (or Krugman, or Michael Moore) in regards to Sanjay Gupta. I think Dr. Gupta was, on the whole, a good choice. The policy will be made by President Obama. Dr. Gupta will have input, to be sure; but I feel confident that Obama will take in more relevant information.
Edwardo:
Expand the Hunts into entire nations or blocs of nations and you might end up in scenarios playing out like Michael Klare's book. Personally, I would rather have oil than gold. Oil has real utility.
Okie, I hope he is a president 'just like you', but I have been hearing this a lot lately and Pew just came out with a study pointing out there is an element of statistical impossibility to the whole thing.
ReplyDelete... Kind of reminds me of the studies showing 95% of all physicians secretly feel they are better doctors than their colleagues. Luckily it is no secret with me, I just know I am ;-)
Thai, I think that I am fully aware of the fact that we are social animals, and that the "collective" aspect of our existence is so much a part of us that even though we rather pridefully imagine ourselves to be individuals, I am not so sure just how individual we really are...
ReplyDeleteSymbols, and symbolic systems are like civilizations. They are born, they flourish, they go into decline, and then they die.
If economists really had more insight into history, they would have realized this long ago.
Money is a symbolic system. That means that it, too, is mortal.
I have no claims of coming up with anything better than money.
But many of us are already going "back" to bartering, or should we say, exchange of services.
It took me a long time to realize the way "ideals" worked : the more power an ideal has to make men LIVE, the more power the same ideal has to make them DIE.
This means that any "solution" that we find ALREADY contains within itself the seeds of its own perversion. The Christian Churches' ideals have been corrupted, just like the founding fathers' ideals have been corrupted. (I think so, at any rate...)
Does that mean that we sit down on our collective asses and say that we will not try anything else because we know it will be corrupted ?
Of course not, I hope.
We invent and create while knowing that our ideas and ideals will be corrupted.
And I maintain that we need to do this now.
After seriously taking a look at the history of the monetary system as it appears in Western civilization, and while taking into account the vital philosophical (and theological ?) considerations that are an intricate part of any symbolic system.
Which is a way of saying to you what you have already said on this blog : get rid of the little boxes (Woody Guthrie) that we have stuck our thoughts into in order for us to enable THEM to circulate too.