What is there to expand upon? You don’t care why or how humans act. End of story. It’s a waste of time to discuss with you further. Austrian Econ is the praxeological school. If you don’t account for or wish to discuss human action, then you are on the wrong website, and we all might as well be speaking greek to you.
Man it’s hard to stay on point. This thread asked the question “what if the dollar was backed by gold” and that’s where I got in the act. My answer: “The economy would be strangled.” Now you come saying I have to work praxeology into that … that this is a school and that’s all the school will listen to?
Please … please expand.
When I say as the manager of the medium of exchange, I care not one wit how people act or what causes them to act that way, what volumes does that speak?
I will offer you this: I care a whole lot about their propensity to DEFAULT on their promises. But that’s all I care about.
So please … please expand. Don’t just freak out in a huff.
your answer is wrong.
if you dont care to understand human action, you have no hope of understanding money.
And the right answer is… ? Go ahead … hit me with it. If I don’t understand I’ll go back and read TMC and TaH again where you tell me that answer is found clearly explained and the indisputable truth is thus found.
Until then, I have lucidly shown how I have arrived at my answer and you come off simply as a belligerent.
haha .ok. you wont enjoy this. but i will respond to your arguments in the order you offered them.
you tell me when you have had enough and are ready to move onto whatever remaining points there are.
ok. so first off we had :
why cant i say that?
[sidebar: 80 years of following Keynes’ prescriptions, broadly, has gotten us all precisely fucked.]
I don’t validate ideas based on what I hear in a classroom, I was simply using “the classroom” as an authority above-and-beyond my own personal readings. I’ve taken a lot of economics classes. I’ve read a lot of economics - primary works - from Cournot and Marshall and Menger and Keynes (yes, that Keynes). I browse financial- and economic-oriented newspapers and websites on a daily basis, and I’ve never heard anyone (other than you) suggest that inflation is a result of default.
It costs $950 at today’s money prices, a point that you’ve continually demonstrated failure to grasp, as evidenced by the rogering you gave my inquiries (pages back) about the McLaren or the Manhattan city block, where you epic failed your way into trying to derive an arbitrage opportunity based on today’s prices juxtaposed with the hypothetical “what if 1oz of gold could buy a city block” prices. It should be clear that, if 1oz of gold was capable of buying a Manhattan city block, that you could not possibly hope to extract 1oz of gold from the earth for today’s equivalent of a 42" LCD TV.
There are valid objections to forcing people to use any given medium of exchange.
And there are valid criticisms of gold (such as: it has no income stream and is therefore impossible to “value” in a financial sense).
This argument of yours, based on total incomprehension of relative prices and the function of a freely-chosen medium of exchange (a standard denominator), however, is not one of them.
The reasons are myriad. Suppose I’m a gold mine and I’ve sold an oz of my next year’s gold output to a speculator for $950 … praxeology made me do it. You now come along and say an oz of gold is worth $10,000. Well, that speculator is going to give me $950 and I’m going to have to give him an oz. of gold. He can then turn around and sell that oz immediately for $10,000. I’m going to yell foul!
Now I may have made an intuitive leap by asserting that “you can’t just say an oz of gold is valued at $10,000 and walk away from the problem.” You obviously can just say that. But if there is force behind what you say (i.e. rather than whistling in the wind you can actually make it happen) you would be drawn and quartered before you walk very far. What you would be doing would not be fair.
Now, if you simultaneously swap all outstanding dollars 10 for 1 and rewrite all existing contracts you’ve got a better chance of surviving … but you haven’t solved the problem of too little gold chasing too many trades. And you’ve created a big mess in the process.
Of course you know FDR played this game … but he only stung the public for 10%. Ya your’s is a 10,000% sting.
wait., you start with sdome sob story about how you underrecognise the market pice of a good and then feel yourself the loser. this is called being a relatively poor entrepeneur. i care not. it is not an economic argument anyhow. its only an objection to the possibility of you doing wrong, and losing money. so what.
there is no problem of too little gold chasing too many trades. how could their be when the price of gold floats?
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I’m no fan of Keynes. He clearly didn’t get it … nor did John Law before him.
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Ok, you’ve never heard anyone suggest that INFLATION is a result of DEFAULT. But turning on your brain, can you see how that might be true?
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If you change the price of everything, you change the price of nothing. You changed the price of a McLaren from about 100 oz of gold to an oz of gold. You said nothing about changing the price of everything else simultaneously. And of course I couldn’t expect that you meant to change gold exchanges for everything else simultaneously. Obviously such action wouldn’t resolve the problem I was illustrating … it just changes it’s pitch. And you were offering a solution to the problem.
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Ok. Force away.
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Ok.
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Surely you’re not saying that if it all of a sudden it gets twice as easy to obtain new gold, there is no effect? (By the way, your sentence is very difficult to read … but I think I got it’s trivial meaning … and in fact, this argument of mine is the “most” significant of them … your insult not-withstanding).
As the price of gold floats, so floats the price of obtaining new supply of it. That is an over simplification but so is yours, If the price of gold floats because it becomes easier to obtain new supply, then the floating moves in the opposite direction to floating caused by increase in traders and/or trades. Regardless, if it floats at all, it’s bad for the medium of exchange.
What’s bad?
Edit: maybe better to ask: Why is it bad?
Todd, the proper relation is INFLATION = CREATED - DESTROYED ie the amount of money brought into circulation minus the amount removed; whether anybody defaults on his financial obligations is irrelevant as it doesn’t change the amount in circulation.
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A media of exchange having a value in-and-of itself is bad. It is bad because it can influence (change) a trade promise over time. That’s why, in the relation DEFAULT = INTEREST + INFLATION, a non-zero INFLATION number cheats someone while benefiting someone else. To be fair, it must be zero. Notice I’ve avoided confusing this issue with the myriad of definitions for inflation. I’m stating it’s meaning right here.
Precisely, so it doesn’t matter how much gold (or whatever is used as “money”) there is in the world. Prices adjust to reflect the supply.
Again, the ratio was illustrative in nature: if you could buy a McLaren F1 (or reductio ad absurdum a little further: a Manhattan city block) for 1oz of gold, and assuming anything even approaching efficient markets, that 1oz of gold would go much further than it does today, so you’re objection based on “it’s only $950” (which relies on today’s money prices) is without merit.
No, no, no, no. We don’t want to force anyone to do anything. So you can sleep soundly at night knowing that the others here will never violate you in any manner, in order to induce you to using gold (or tobacco leaves, or god-knows-what-else has been historically used as currency throughout the ages).
I’m saying nothing of the sort.
Surely you understand that in an informal medium, forums/blogging etc.,people will occasionally post a sentence that doesn’t square with Strunk & White. Get over yourself, man.
If I wanted to insult you, you’d know it. And so would everyone else. There was no insult implied or expressed, only an observation which I believe to be accurate: only someone who doesn’t understand how a freely chosen medium of exchange works in theory, would put forth such objections.
Bio Tube: By definition, the amount of media created to facilitate a trade equals the amount of media destroyed when the trade is completed. The only thing that keeps that from happening is DEFAULT on the trade. DEFAULTED media is not returned. Thus it must be recovered. The method of recovery is through INTEREST.
The amount DEFAULTed is left to circulate until recovered by INTEREST collections; thus it does affect the amount in circulation; thus it is relevant.
If the supply of the media has any effect on the value of the trade, the medium of exchange has failed in its functioning.
But as we established, if you raise all prices you change nothing. Conversely, if you lower all prices you change nothing. The gold goes no farther in either case.
Ok, then don’t force away. A properly managed medium of exchange requires no force.
I’m going to be upfront with you. I don’t know the all the nuances of economics. But are you trying to say money (the medium of exchange) should have zero value? Should cause you pointed out a “bad” and are talking about “fairness”.
In-and-of itself, of course it has zero value. But as a recognized (and backed) promise to complete a trade, it will facilitate many trades before it’s extinguished.
You may ask what backs it. The strict adherence and open exposure to the relation DEFAULT = INTEREST + INFLATION and the assurance that INFLATION remains zero allows the media to facilitate trades. I’m reluctant to say, it’s kind of like the “full faith and credit of the USA” backs our media of exchange … but we all know that that system is gamed and guarantees inflation. That’s how you get housing bubbles. Inflation makes those possible. In fact we wouldn’t even recognize the housing market without the guaranteed inflation our current system offers.
The absolute crucial task in managing any medium of exchange is to asure, guarantee, and openly verify that DEFAULT = INTEREST and therefor INFLATION = zero.