Flakey way of saying it … but yes. I prefer simply “mutually beneficial trade” … whether for want or for need is immaterial.
I have a system that has a score-keeper, but not one that can be manipulated by the score keeper. A football game is a system with a score keeper but he can’t manipulate the game. The players and fans wouldn’t tolerate it. They see the points being made and can keep score themselves. Such is this case for medium of exchange and its manager.
No I don’t. I have a system where traders create “promises to exchange” out of thin error (they don’t create money out of thin air) and I keep track of those promises. Don’t jump the gun on this … you shouldn’t run before you’re capable of walking.
The players on the football field create points out of thin error. The score keeper keeps track of those points, as do the players, as do the fans.
I don’t want to move on before we agree on what is being created here. I’m saying what is created here is a promise to complete a trade. I’m saying here that documentation of that promise is created in the form of a universally recognized receipt. It looks a lot like a dollar bill or a simple accounting entry for one. It is that receipt that facilitates the exchange.This is a crucial point … not just playing with words.
If you’re ready for the “how” this receipt becomes universally recognized and useful in exchange, we can move on.
If you just want an argument, let’s quit.
You’re picking this up too slowly to move on to that yet but I’ll drop a clue: How does an insurance company know what claims will be before it contracts to cover them in exchange for a premium payment? And if it gets it wrong, what does it do about it?
I’m concerned with the adversarial way you’re exploring this but I’ll leave that to your choice and try to bear with it.
This was more of an objection: how does the score-keeping system reckon the double-coincidence of wants?(Which is why money evolves, it is not created or managed).
Who determines the ratio of ToddMarshallCurrency Units to the product of my labor?
(You keep saying thin “error”. Did you mean thin “air”?)
You’re essentially describing credit transactions, I have no objections here.
They don’t.
They use reams of historical data, combined with some calculus, to project the future. They don’t know that 1 in 12 automobiles will claim collision damage in 2009, but they assume to know it based on the experiences provided by sufficiently large historical sample. If they’re wrong (very wrong), they go kaput, and a portion of people’s claims may go unfulfilled.
You’re marching to your own drummer here. What’s your objection? I don’t want to bring Darwin into this, and I haven’t yet mentioned money … and probably won’t.
The traders. And please don’t call it ToddMarshallCurrency Units.
I’m sorry. I read it over several times too. I suppose will now have to bring Freud into this too.
You’ve made an intuitive leap. Actually, with the medium of exchange managed this way, most transactions are debit transactions … but that is immaterial.
Fine … we’ll leave those concepts aside until you’re ready for them.
A football game is a simple thing: millions of people are watching fewer than 20. In a real economy, everybody is a player. If you’re going to use anologies to justify ToddMarshalFiatBucks, at least use ones that remotely match the situation.
You’re being pretty rude. Please try to learn. Analogies and metaphors are always dangerous. And please don’t call the media ToddMarshallFiatBucks. We can simply call them bucks if you like.
Your 20-to-millions ratio may not be that far from real. Say 20 people make promises to the manager to complete trades. The manager gives them media of exchange to facilitate those trades. The manager keeps track of those media amounts and when the traders promise to be return them. When the trades are completed, the traders return the media to the manager. The manager then extinguishes the media … it has done its job … it has facilitated the trades.
In the interim (the time it takes to complete the trades), that media will make millions of exchanges … none of which the manager is concerned with.
Here again, it is important to keep the governing relation in mind: DEFAULT = INTEREST + INFLATION.
When the traders return all the media keeping their promises, DEFAULT is zero, INTEREST is zero, and INFLATION is zero … and all is well.
Let me give you an example of such a promise:
The trader wants to buy a house for 360,000 bucks and promises to return the bucks at the rate of 1,000 bucks per month for 360 months. That’s the promise. The manager gives the trader the media (360,000 bucks) and records the particulars of the promise. Each month the trader returns 1,000 bucks. The manager reduces his accounting by 1,000 bucks, and extinguishes the 1,000 bucks.
During that 360 months, those bucks remain in “circulation” facilitating other trades. The manager is not concerned with these other trades in the least. Each month, as the trader returns 1,000 of those bucks, the manager takes them out of circulation. By the end of the 360 months, none of “those” bucks remain in circulation. DEFAULT = zero; INTEREST = zero; INFLATION = zero.
In your example, the inflation is 360000 at the outset and then deflation’s 1000 every month for 30 years - assuming similar, arbitrary injections of cash, you’ve described an even worse system than modern fiat money. Besides, what would your manager charge? Commodity money poses none of these problems - at worst, long term contracts cease to specify exact amounts if they continue to exist.
I think not. INFLATION comes about only when there are DEFAULTS. You are claiming a state of DEFAULT while a trade is in progress. This is incorrect. I’ll get back to that in a moment.
First, let’s put the ball in your court for a little while. From the tone of your questions you seem to favor a commodity (or commodity backed) media of exchange. I need to explore your reasons for this to discover the root of your confusion.
Let’s begin with you choosing the “commodity” for your “money”. What commodity do you choose and, roughly, how did you decide on it?
Once chosen, I ask:
Must only one such commodity perform this service in your normative system or does your system support multiple commodities?
How does that commodity come into existence in a form suitable to be the base for trading before there is a medium of exchange?
How does that commodity come to be the universally accepted commodity?
How is the commodity (or the media it backs) put into service for trade?
What is the commodity doing when it is not in service for trade … i.e does dormant supply affect existing trading?
How is that commodity valued?
How is the commodity expanded after it becomes the base for media of exchange as numbers of traders and desires to trade increase?
What happens to trading if the commodity expansion exceeds desires to trade?
What happens if the quantity of the commodity is not sufficient to support desires to trade?
I will not proceed until you provide succinct answers to these questions and (without sending me off for further study) defend those answers yourself (as I have patiently done with you).
Do you have any conception of how the free market works?
All of your subsequent questions indicate you don’t. You don’t understand value, you don’t understand markets and you don’t understand praxeology.
But you need further study, because you are economically ignorant. No one has the time to educate you from the ground up, so that they can have an argument with you. If you will not proceed (in discussion or study) then you are choosing the path of wilfull ignorance. You’re certainly not breaking any of our hearts, since your idea for money is not very well thought out.
My questions are very simple. Every time I ask these very simple questions of a Mises Monk, I get the exact same reaction. I guess that fits the definition of insanity … trying the same thing over and over and expecting a different result?
Are you going to answer these very simple questions I pose or not? None of them should take more than one sentence. I don’t ask you to defend your answers (as you have required of me). Just answer the questions.
Please know I am widely read, including among your dogma, “Theory and History” and “The History of Money and Credit”. Both are in my library. Both are thoroughly annotated by me.
It’s funny you use the term monk. When people don’t understand things, they attach religious connotations to them. I know you are trying to communicate that people who have responded to you are dogmatic, and part of some faith, but the truth of the matter is that you are so economically ignorant, no one wants to spend the time to bring you up to speed. It’s worse than a 16 year old who wanders in here and wants to know why their school is teaching them counter-intuitive ideas. That is a fresh mind, capable of rational discourse.
You however don’t have a basic conception of market exchange or value, and yet have somehow constructed a “new monetary system” in your own mind, and are very committed to this creation, incapable of spotting its obvious flaws. I suspect, you’re too far down the road of confirmation bias to be saved.
Here is your problem.
All value is subjective. This is called the Subjective Theory of Value. If you have written anything that conflicts with a subjective theory of value, check your premises.
If that’s my problem, there is no problem. I have not written anything that conflicts with a subjective theory of value. Consider my premises checked.
Re: The inadequacy of my knowledge, I did a couple quick checks of things like praxeology, free market, money, etc. at Wikipedia. No surprises there (though several irrelevancies). So my knowledge both exists and is in agreement with at least that one source.
Further, praxeology (interestingly Mises.org’s own spell checker knows nothing of the word) as the foundation of Mises thinking must have lost its significance by the time he wrote “The Theory of Money and Credit”. He doesn’t index it. Further, he doesn’t index it in “Theory and History” until page 271 and in that work he only indexes it once.
It’s really pretty amazing how you Mises Monks declare lack of standing immediately upon being asked to address the foundations of your thesis and attacks. Actually, it’s “absolutely” amazing … and pitiful.
Man, what kind of game are we playing here? I go to Wikipedia because it’s quick:
For “Subjective Theory of Value” it says (among other things): The subjective theory of value (ortheory of subjective value) is an economic theory of value that holds that to possess value an object must be both useful and scarce,[citation needed] with the extent of that value dependent upon the ability of an object to satisfy the wants of any given individual. “Value” here is distinct from exchange value or price.
I have no dog in this fight. I don’t care what the traders choose to think of the value of the items, services, promises, or whatever is involved in their exchange. I am just offering up the amount of exchange media they have requested to facilitate that exchange. I’ve never written anything to the contrary!
For “Praxeology” Wikipedia says (among other things):
Praxeology is a framework for modeling human action. The term was coined and defined as “The science of human action” in 1890 by Alfred Espinas in the Revue Philosophique, but the most common use of the term is in connection with the work of Ludwig von Mises and the Austrian School of economics. In Sociology Pierre Bourdieu developed a “praxeology” that tries to get rid of the classic opposition between “subject” and “object”.
I have no interest in modeling human action. I don’t care why or how humans act. But when they choose to act by entering into exchange for whatever reason, a properly managed and respected media of exchange can facilitate that action. And should they choose to use that media as a facilitator, their exchange activity will be more efficient as a result.
So: you’re flippant answers to my questions mean what?
Sir (or Madam). I got into this thread by answering the question “what would happen if dollars were backed by gold”. My answer: “The economy would be strangled.” From that point on I have politely responded to questions and comments regarding that answer and have tried diligently to stay on point. As this discussion is still on exactly that point, and as the question implied the commodity of choice is gold, lets move on to the second question:
"Roughly, how did you decide on gold as the commodity’?
The presumption that Mises.org owns a proprietary spell-checker is a preposterous straw-man. In any event, these things are seldom perfect: this morning, WordPress told me that “euthanizing” was not a word (it most certainly is).
TMC only antedates Human Action (wherein Praxeology is thoroughly defined) by about four decades.
Lack of reciprocity isn’t going to get you anywhere. As long as you’re wont to call use “mises monks” I suppose we’re safe to refer to your system as ToddMarshallFiatBucks, even though you’ve politely asked (and some of us have obliged) that we refrain from doing so.
Neither is patronizing.
Neither is flippant ignorance (i.e., “INFLATION comes about only when there are DEFAULTS” which is not a theory of inflation that I’ve heard in any classroom, ever.
For the record, praxeology is a word (alt: praxiology).
First of all, there is a common consensus that if people were allowed to facilitate exchanges freely, gold would most likely arise as the money of choice. However, it doesn’t matter what money people use, as long as people aren’t coerced to use it.
Second of all, commodities as money do not cause the economy to stagnate. If there is an increase in the demand of money, it results in lower quantities of the good being used for trade. You might worry that the commodity units will be too small to trade, but at that point, people will switch (partially, perhaps wholly) to different commodities as a substitute.
Not a presumption … an observation. My spell-checker allows me to add words it doesn’t contain. If I were Mises.org, I would add that word.
Fine. But that was “liberty’s” answer to my enumerated questions … all of them. If it’s that important I would think it would be mentioned in TMC. Going to Wikipedia and their definition of it, I have no issue with it. It’s not of my concern.
Well, ok, if you’re sensitive to that I’ll refrain. The dictionary says a Monk is “: a man who is a member of a religious order and lives in a monastery” and of course you don’t live in a monastery and I suppose Mises beliefs, whatever they are, are not a religion … but the behavior of many of Mises zealots sure looks religious … i.e. quoting dogma or refusing standing for inquisitor not having read the obligatory scripture. Hmmm … amazing … the spell checker doesn’t know about Mises either. I’d get that fixed.
Ok.
Not Ok. If you only validate knowledge or ideas by what you hear in a classroom, we’ve got some serious problems here. Mises and Hayek never came up in any of my classes. Keynes of course did.
Of course praxeology is a word … but I seldom if ever hear it outside the Mises.org order. Epistemology (the spell checker knows about it by the way) was a word Ayn Rand and her disciples loved. I rarely hear it anywhere else either.
Sir (or Madam). You say that gold is the money of choice. I have illustrated in this tread that gold provides for less than one ounce per trader. Further I have illustrated that currently it’s value is about $950 (yes … $993 right now … another illustration of its problems). Further, I have illustrated that it costs about that or less to bring a new ounce of gold on line. So if we choose gold, we’re pretty much stuck with $950 per trader to trade with. I don’t know about you but I have considerably more than that in savings. And without the contrivance of fractional reserve, that would be it. With the FR contrivance, it is about 10 times that. Still $9,500 is too little to support my existing trades and savings … and mine pale in comparison to many traders I know.
Re. switching commodities: This is an attribute I would like to see unnecessary in a medium of exchange … not only unnecessary but a violation of an acceptable medium of exchange. That’s exactly why I don’t favor a commodity based media of exchange. And there’s a precedent for such a specie change in history … the Free Silver issue in the late 19th century … looked pretty messy to me. If I was there I would probably be siding with the silver guys because I think the gold guys were screwing them … you can do that with a commodity backed exchange media.
The problem would never come up with a medium of exchange managed according to the relation DEFAULT = INTEREST + INFLATION.
Frankly, a medium of exchange that allows or would require switching media (or the backing thereof) under some circumstances is just not acceptable.