Currency question

[david_z]

@Todd Marshall

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.

Then I fail to see the problem. A hundred years ago you could get a loaf of bread for a nickel. Now it costs $3. The fact that there are now many multiples more dollars in existence has simply manifested itself in higher prices for nearly everything. Had all that money never been created, I would presume we could still obtain a loaf of bread for $.05 (or lower) and the DJIA would be less than 1,000. If prices (measured in grams or fractions thereof, in gold) were sufficiently low, there’s no reason to conclude that a single ounce (on average) per person couldn’t facilitate the sort of exchange we have grown accustomed to. Gold is rarely consumed, it’s merely circulated from one to another.

At the end of the day, I really don’t give a damn whether the market settles on gold or tobacco leaves or anything else for that matter.

There is still plenty of room for debit/credit transactions,but as production buys production someone has to bear the default risk, and that someone is the grantor of credit (FYI “grantor” is marked as misspelled word - just thought I’d point that out, since you were so keen on false positives earlier today ).

But an entire world economy can’t run on debt forever; we’ve learned (and forgotten) that lesson a half-dozen times or more in the last century alone.

@Todd Marshall

A properly managed medium of exchange requires no force.

And if my Aunt had a pecker, she’d be my Uncle.

[wilderness]

@Todd Marshall

@wilderness

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.

So in the second sentence does that mean it does have value?

@Todd Marshall

You may ask what backs it.

nah, i really didn’t. maybe that’s pertinent, but for now, take it slow. You initially said it is bad. I asked what is bad. You said something. I’m trying to find out what is bad still. I think you said it has zero value, but then equate bad with changing this zero value to having value when it should have zero value. Thus the having value is what is bad? i don’t know what you’re saying. So if you could answer my question above.

[withglee]

@David Z

@Todd Marshall

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.

Then I fail to see the problem. A hundred years ago you could get a loaf of bread for a nickel. Now it costs $3. The fact that there are now many multiples more dollars in existence has simply manifested itself in higher prices for nearly everything. Had all that money never been created, I would presume we could still obtain a loaf of bread for $.05 (or lower) and the DJIA would be less than 1,000. If prices (measured in grams or fractions thereof, in gold) were sufficiently low, there’s no reason to conclude that a single ounce (on average) per person couldn’t facilitate the sort of exchange we have grown accustomed to. Gold is rarely consumed, it’s merely circulated from one to another.

At the end of the day, I really don’t give a damn whether the market settles on gold or tobacco leaves or anything else for that matter.

There is still plenty of room for debit/credit transactions,but as production buys production someone has to bear the default risk, and that someone is the grantor of credit (FYI “grantor” is marked as misspelled word - just thought I’d point that out, since you were so keen on false positives earlier today ).

But an entire world economy can’t run on debt forever; we’ve learned (and forgotten) that lesson a half-dozen times or more in the last century alone.

@Todd Marshall

A properly managed medium of exchange requires no force.

And if my Aunt had a pecker, she’d be my Uncle.

If you don’t see the problem, you don’t see INFLATION as a problem. It would silly for me to think you don’t see INFLATION as a problem.

Re. Bearing the DEFAULT risk: It is born by that class of borrowers with a propensity to DEFAULT. It is mitigated by collection of INTEREST from this class of borrowers equal to their propensity to DEFAULT. Responsible borrowers are unaffected.

Re. Economy running on debt forever: An economy can run on debt forever as long as there is no INFLATION. There is no INFLATION when the exchange medium is managed according to the relation DEFAULT = INTEREST + INFLATION where INTEREST is collected to match DEFAULT experience.

Re. Learning from history … a half-dozen times in the last century: This is insanity, i.e. doing the same thing and expecting a different result. I know of no case where an economy has operated with a medium of exchange governed by the relation DEFAULT = INTEREST + INFLATION. I know of economies where they just create exchange media on whims. I know of economies where the creation of exchange media is throttled by commodity backing. The former leads to hyper-inflation and collapse. The latter leads to strangulation and revolt.

Re. Your aunt’s pecker: I can’t speak to that issue.

[withglee]

@wilderness

@Todd Marshall

@wilderness

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.

So in the second sentence does that mean it does have value?

TM: Not in-and-of itself.

@Todd Marshall

You may ask what backs it.

nah, i really didn’t. maybe that’s pertinent, but for now, take it slow. You initially said it is bad. I asked what is bad. You said something. I’m trying to find out what is bad still. I think you said it has zero value, but then equate bad with changing this zero value to having value when it should have zero value. Thus the having value is what is bad? i don’t know what you’re saying. So if you could answer my question above.

TM: I suspect the only answer you’ll accept for a media of exchange having value is “yes, it has value”. And I suppose you can take your praxeology theories and prove that it has value. But I would mislead if I said it had value, because in-and-of itself, it is just an accounting entry. A commodity, on the other hand, serving as a media of exchange does have value in-and-of itself.

TM: I initially said a commodity acting as a media of exchange (or backing one) is bad. I still say it is bad for the same reasons I gave earlier. It is bad because it can affect the promise to complete a trade that the media stands for. A good media of exchange should not affect the trade promise it stands for. When it does, one party in a trade gets more than he bargained for while the other party gets less … due only to the fluctuation of the commodity itself. That is unfair and thus undesirable and thus bad.

[david_z]

@Todd Marshall

If you don’t see the problem, you don’t see INFLATION as a problem. It would silly for me to think you don’t see INFLATION as a problem.

Yes, it would be silly of you. My point is this: we don’t need to increase the monetary base*, as long as prices reflect the new ratio of goods:money*.

@Todd Marshall

Re. Bearing the DEFAULT risk: It is born by that class of borrowers with a propensity to DEFAULT. It is mitigated by collection of INTEREST from this class of borrowers equal to their propensity to DEFAULT. Responsible borrowers are unaffected.

This may be a pedantic inquiry, but all consumer interest rates - even those for A-tier credit, have some default component built in to the rate. It’s smaller, the better one’s credit is.

@Todd Marshall

Re. Economy running on debt forever: An economy can run on debt forever as long as there is no INFLATION. There is no INFLATION when the exchange medium is managed according to the relation DEFAULT = INTEREST + INFLATION where INTEREST is collected to match DEFAULT experience.

you keep coming back to this equation of Default = Interest + Inflation (ALL CAPS is a lame way to emphasize things. try bold or italics if you must.) Even if I could buy in to the rest of your thesis, this equation has a serious shortcoming:

Interest is levied ex ante and default can only be measured ex post, which precludes the perfect management of such a monetary system, which would require clairvoyant omniscience.

@Todd Marshall

I know of no case where an economy has operated with a medium of exchange governed by the relation DEFAULT = INTEREST + INFLATION.

But they’re almost all debt-based money systems.

@Todd Marshall

I know of economies where the creation of exchange media is throttled by commodity backing.

Out of curiosity, which economies would these be?

@Todd Marshall

Re. Your aunt’s pecker: I can’t speak to that issue.

It was a fairly straightforward conditional: if my aunt had a dick, she’d be my uncle instead of my aunt. Nothing at all confusing about that.

This has strayed so far off-topic from the OP…

[wilderness]

@Todd Marshall

@wilderness

So in the second sentence does that mean it does have value?

*TM: Not in-and-of itself.

@Todd Marshall

*TM: I suspect the only answer you’ll accept for a media of exchange having value is “yes, it has value”.

no

@Todd Marshall

*And I suppose you can take your praxeology theories and prove that it has value.

yes, logic has value

@Todd Marshall

*But I would mislead if I said it had value, because in-and-of itself, it is just an accounting entry. A commodity, on the other hand, serving as a media of exchange does have value in-and-of itself.

ok. I don’t know why you repeat these points to me when all I asked is “What is bad?” You said it was “bad”. I want to know what this thing called “bad” is.

@Todd Marshall

*TM: I initially said a commodity acting as a media of exchange (or backing one) is bad. I still say it is bad for the same reasons I gave earlier. It is bad because it can affect the promise to complete a trade that the media stands for. A good media of exchange should not affect the trade promise it stands for. When it does, one party in a trade gets more than he bargained for while the other party gets less … due only to the fluctuation of the commodity itself. That is unfair and thus undesirable and thus bad.

How would one person get something undesirable if they free-willingly make the trade? The whole point of making a trade is because A desires what B has and so they trade.

[withglee]

@David Z

@Todd Marshall

If you don’t see the problem, you don’t see INFLATION as a problem. It would silly for me to think you don’t see INFLATION as a problem.

Yes, it would be silly of you. My point is this: we don’t need to increase the monetary base*, as long as prices reflect the new ratio of goods:money*.

TM: The monitary base is your fiction. Prices are your fiction. Money is your fiction. Now I’m sure your terms are widely used and clearly defined in some, if not most, circles. But they are irrelevant and unnecessarily inserted here. They represent issues in contexts other than I am dealing with here. You may argue they are equivalent in all contexts and exist in the context I describe. But discussion of that would just be a distraction that I don’t need and this dialog doesn’t need at this time.I speak only of a medium of exchange in which the media is promises to complete trades and management (stewardship is probably a better term) of the medium facilitates these trades by assuring the promises will be kept.

@Todd Marshall

Re. Bearing the DEFAULT risk: It is born by that class of borrowers with a propensity to DEFAULT. It is mitigated by collection of INTEREST from this class of borrowers equal to their propensity to DEFAULT. Responsible borrowers are unaffected.

This may be a pedantic inquiry, but all consumer interest rates - even those for A-tier credit, have some default component built in to the rate. It’s smaller, the better one’s credit is.

TM: If you’re proud of your knowledge, flaunt it. I have made no mention of interest rates. I only talk of DEFAULTS and collecting INTEREST equal to them. Both are absolute values. They are not rates. I prefer to frame your point as all classes of traders have some DEFAULTers and I agree. Some classes of traders have only DEFAULTERs (most governments for example). We should be covering classes of traders by now but were are moving painfully slowly.

@Todd Marshall

Re. Economy running on debt forever: An economy can run on debt forever as long as there is no INFLATION. There is no INFLATION when the exchange medium is managed according to the relation DEFAULT = INTEREST + INFLATION where INTEREST is collected to match DEFAULT experience.

you keep coming back to this equation of Default = Interest + Inflation (ALL CAPS is a lame way to emphasize things. try bold or italics if you must.) Even if I could buy in to the rest of your thesis, this equation has a serious shortcoming:

TM: I know in some contexts ALL CAPS is taken a shouting. Throughout my dialogs I have capitalized only the words DEFAULT, INTEREST, and INFLATION because they are the things that need not to be lost in the blizzard of other words. I’m not shouting. It’s my attempt to stay on point. Not all contexts in which I have dialogs support bold. Live with it.

Interest is levied ex ante and default can only be measured ex post, which precludes the perfect management of such a monetary system, which would require clairvoyant omniscience.

TM: Your use of Latin probably is pedantry. My dictionary of Latin words and phrases has neither of those terms. I’ll guess ex ante means before the trade and ex post means after the trade. If that’s not correct, please correct me and I’ll try to adopt your language. It is true that you can’t know a trader is in DEFAULT until the trading promise is broken … obviously after the trade was to have been completed. INTEREST, on the other hand may be assessed at the beginning, during, or at the end of the trading. Regardless, management of the medium means balancing the two for the entire medium for all time assuring that INFLATION is virtually zero (some times it is a tiny bit above zero, some times a tiny bit below … but never straying a significant amount from zero … we’re working with lots of traders here and things average out.) To do this fairly in real life, traders would be divided into classes according to their propensity to DEFAULT; and INTEREST would be determined and assessed within those classes such that INFLATION for the class remains at zero. In that way, irresponsible traders have no affect on responsible traders.

@Todd Marshall

I know of no case where an economy has operated with a medium of exchange governed by the relation DEFAULT = INTEREST + INFLATION.

But they’re almost all debt-based money systems.

TM: If you’re saying almost all economies are debt-based money systems, fine. That plays on my comment above not at all.

@Todd Marshall

I know of economies where the creation of exchange media is throttled by commodity backing.

Out of curiosity, which economies would these be?

TM: I suppose this is a test of my knowledge credential and not a genuine inquiry, but I’ll try to oblige. Our economy in the early 1900’s I believe was beginning to be consolidated into a commodity based (thus commodity throttled) economy. The Bretton-Woods system, I believe, was an attempt to have a workable commodity based economy. Before consolidation, throughout the regions of the USA there were various local and regional economies … some commodity based. I believe at the time of the Free Silver debates, our economy was commodity based. I believe the Spanish economy, during their years of plundering the New World was a commodity based economy.

@Todd Marshall

Re. Your aunt’s pecker: I can’t speak to that issue.

It was a fairly straightforward conditional: if my aunt had a dick, she’d be my uncle instead of my aunt. Nothing at all confusing about that.

TM: I didn’t say I was confused. I said “I can’t speak to that issue”

This has strayed so far off-topic from the OP…

TM:Perhaps. I don’t know how many conversations I have going here or who they are with. I’m just addressing objections, answering questions, and trying to clear up misconceptions and misunderstandings as they present themselves.

Returning to the original post: “What would happen if the dollar was backed by gold”. My answer: “The economy would be strangled”. Most deviations from that point lie in my difficulty in herding cats while giving them the freedom to show off.

Actually, I don’t think it’s strayed that far off topic. We’re still discussing commodity based economies and that’s what the post and my answer addressed. Now, the matter of your Aunt I do think was straying a bit.

[liberty_student]

I have no idea why you guys are still writing to Todd. He has no understanding of economics, he has no interest in economics, and he has no interest in discussing economics.

I’ve seen this before. These guys come up with crank money ideas, and they aren’t interested in debate or defending the ideas. They are here strictly for the attention. Note how he threatened to stop responding if his questions weren’t answered, but then kept on going anyway. At one point, he was pleading to me to keep responding.

You guys are needed elsewhere in other discussions. Please stop enabling this guy. It is painful to watch.

[withglee]

@wilderness

@Todd Marshall

*But I would mislead if I said it had value, because in-and-of itself, it is just an accounting entry. A commodity, on the other hand, serving as a media of exchange does have value in-and-of itself.

ok. I don’t know why you repeat these points to me when all I asked is “What is bad?” You said it was “bad”. I want to know what this thing called “bad” is.

TM: What part of the following answer to your question don’t you understand?

@Todd Marshall

*TM: I initially said a commodity acting as a media of exchange (or backing one) is bad. I still say it is bad for the same reasons I gave earlier. It is bad because it can affect the promise to complete a trade that the media stands for. A good media of exchange should not affect the trade promise it stands for. Where it does, one party in a trade gets more than he bargained for while the other party gets less … due only to the fluctuation of the commodity itself. That is unfair and thus undesirable and thus bad.

How would one person get something undesirable if they free-willingly make the trade? The whole point of making a trade is because A desires what B has and so they trade.

TM: And a key point of a medium of exchange is to assure that the context in which that trade is made doesn’t change over the course of the trade … often many years as in the case of trading a stream of payments for a house. Non-zero INFLATION, over time, changes the context in which a trade is made. Proper stewardship of the medium of exchange prevents non-zero INFLATION. This is not rocket science!

[wilderness]

Todd,

I don’t know economics that much, as I said, but I’m not inept at logic. And it’s obvious your premise needs worked upon. You stated that the trade would be undesirable/bad, but have failed to address that the two people involved in the trade by their free-will obviously DO desire the trade. With a flawed, thus, illogical premise the rest of your theory expands with perpetual distortion. Figure out liberty, the free market, and human action and then such a premise to expand upon into economics will look something like - Austrian economics. until then…

[Stolz25]

@Todd Marshall

TM: I initially said a commodity acting as a media of exchange (or backing one) is bad. I still say it is bad for the same reasons I gave earlier. It is bad because it can affect the promise to complete a trade that the media stands for. A good media of exchange should not affect the trade promise it stands for. Where it does, one party in a trade gets more than he bargained for while the other party gets less … due only to the fluctuation of the commodity itself. That is unfair and thus undesirable and thus bad.

The person wasn’t forced to make a long term trade. If he doesn’t want to, don’t. Also, most of the people here would argue for competing currencies, not a gold backed currency that still had monopoly in any particular area. This means you could try and find your non-commodity backed currency that didn’t inflate (good luck with that) to trade with if you wanted.

@Todd Marshall

TM: And a key point of a medium of exchange is to assure that the context in which that trade is made doesn’t change over the course of the trade … often many years as in the case of trading a stream of payments for a house. Non-zero INFLATION, over time, changes the context in which a trade is made. Proper stewardship of the medium of exchange prevents non-zero INFLATION. This is not rocket science!

Historically, a commodity backed money is much more stable than any fiat currency that has ever come into existence. While you could theoretically create a fiat currency that had absolutely no inflation, in practice this doesn’t happen.

[david_z]

@Todd Marshall

TM: The monitary base is your fiction. Prices are your fiction. Money is your fiction.

Everything has a price, whether its barter or in-kind or “money” or debt.

@Todd Marshall

in the early 1900’s I believe was beginning to be consolidated into a commodity based (thus commodity throttled) economy

Throttled? Despite the pernicious effects of the attempts at bi-metallism, by any objective accounts the preceding century had been a booming success. Prices declined broadly but slowly, and productivity increased significantly. America was a net creditor nation and was accepting immigrants by the millions.

@Todd Marshall

The Bretton-Woods system, I believe, was an attempt to have a workable commodity based economy.

Bretton Woods was a significant step towards severing all ties between currency, and anything tangible.

@Todd Marshall

I believe the Spanish economy, during their years of plundering the New World was a commodity based economy.

Indeed - there’s plenty of problems with the Mercantilists/Conquistadors, most the result of their rape of the new world.

@Todd Marshall

Returning to the original post: “What would happen if the dollar was backed by gold”. My answer: “The economy would be strangled”

And yet, the economy wasn’t strangled as a result of commodity money, historically speaking.

For nearly all of recorded history, currency either was in-fact gold, or backed by it. The manipulation of currency (from Diocletian through the modern Central Banks) has historically been the source of economic strangulation.

I am absolutely, 100% done discussing this topic.

[david_z]

@liberty student

You guys are needed elsewhere in other discussions.

Point me in the right direction, and I’ll be there!

[withglee]

@David Z

@Todd Marshall

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.

Then I fail to see the problem. A hundred years ago you could get a loaf of bread for a nickel. Now it costs $3. The fact that there are now many multiples more dollars in existence has simply manifested itself in higher prices for nearly everything. Had all that money never been created, I would presume we could still obtain a loaf of bread for $.05 (or lower) and the DJIA would be less than 1,000. If prices (measured in grams or fractions thereof, in gold) were sufficiently low, there’s no reason to conclude that a single ounce (on average) per person couldn’t facilitate the sort of exchange we have grown accustomed to. Gold is rarely consumed, it’s merely circulated from one to another.

TM: Well, I’m standing here with this 1oz gold piece. I had it before you diddled the prices. It used to trade for a fancy TV. Now it trades for a McLaren … you did say I could get a McLaren for an oz of gold didn’t you?

[nirgrahamUK]

@Todd Marshall

TM: Well, I’m standing here with this 1oz gold piece. I had it before you diddled the prices. It used to trade for a fancy TV. Now it trades for a McLaren … you did say I could get a McLaren for an oz of gold didn’t you?

you suffer from a failure to argue. this really is over now.

[withglee]

@nirgrahamUK

@Todd Marshall

TM: Well, I’m standing here with this 1oz gold piece. I had it before you diddled the prices. It used to trade for a fancy TV. Now it trades for a McLaren … you did say I could get a McLaren for an oz of gold didn’t you?

you suffer from a failure to argue. this really is over now.

Definition: Argue: 1 : to give reasons for or against something

I just gave a reason for why commodity backed media of exchange is bad. You sir, gave nothing. Thus, if there is an argument failure here, it is for your account.

[nirgrahamUK]

you didnt give a reason why commodity backed media of exchange is bad.

you said

@Todd Marshall

Well, I’m standing here with this 1oz gold piece. I had it before you diddled the prices. It used to trade for a fancy TV. Now it trades for a McLaren … you did say I could get a McLaren for an oz of gold didn’t you?

translation. i have a gold piece. what it could purchase has changed over time. is your implication that such a crazy madcap world is one of economic lunacy? i would say the opposite is clearly true. to believe that what one could purchase with a piece of gold would never vary through time, is sheer madness.

[withglee]

@nirgrahamUK

you didnt give a reason why commodity backed media of exchange is bad.

TM: Haven’t you been following? Of course I gave a reason … actually I’ve given several. One reason is the value of the commodity impacts on the value of the trade … especially when the trade takes place over time. A good medium of exchange does not have this characteristic. The media of exchange does not change the value of a trade for either party over time. A commodity backed medium fails on this account alone.

Further I said gold is a bad choice of a commodity in any event? Why? Because there isn’t enough of it … only about 1oz per trader … and worth about $950 at today’s exchange rates (now $1,005 … another one of gold’s problems). That’s not sufficient to backup my savings.

Someone said “no problem, make that ounce of gold worth more … i.e. a McLaren or a block of Manhattan.” The strategy is to increase the effective supply, supposedly “making it go farther” (his words), by simply changing the exchange rate. And then we moved to changing prices and how changing prices of everything is changing prices of nothing.

But here I have this 1oz gold piece. When you make this dramatic change in prices, you somehow have to reduce the amount of gold I hold in my hand. If you don’t, I trade it for a McLaren or for a block of Manhattan. Now if you want to further refine your manipulation by saying you’ll do it over time, well, that’s exactly what the Fed has done. What used to cost $4 (or 1/10oz of gold) now costs$100 (or 1/10th oz of gold) or something like that … a 20 times change in a little over 90 years. Thus, to get this 100 times change to make an oz worth today’s McLaren would take 500 years. And how would that come about? Through INFLATION … the creeping crud. The sneak thief.

And what happens when it’s all said and done? It takes the same amount of relative effort to create a new oz of gold … only now that number is $90,000 instead of $900. My original argument remains … there isn’t enough of the stuff … and for darn sure there won’t be enough 500 years from now with the exponential growth of traders we have experienced over the last 90 years.

you said

@Todd Marshall

Well, I’m standing here with this 1oz gold piece. I had it before you diddled the prices. It used to trade for a fancy TV. Now it trades for a McLaren … you did say I could get a McLaren for an oz of gold didn’t you?

translation. i have a gold piece. what it could purchase has changed over time. is your implication that such a crazy madcap world is one of economic lunacy?

TM: My implication is “I want an exchange medium that does nothing but facilitate exchange”. I don’t want an exchange medium that changes with how a commodity may be valued (i.e. what an oz of it trades for in physical goods … not bucks) over time. Some trades take a great deal of time … my trade for my house is a good example.

i would say the opposite is clearly true. to believe that what one could purchase with a piece of gold would never vary through time, is sheer madness.

Madness or not, that is what the goldbugs claim is gold’s gleaming quality.That’s why they want a gold backed currency again.

I don’t. But I don’t want this money give away (trickle down) we have now either. If I can not have what I really want (i.e. a medium of exchange governed by the relation DEFAULT = INTEREST + INFLATION) I’d rather have the money bubbled up from the bottom rather than trickled down from the top. It’s going to end up at the top anyway, but the first one to touch it gets the greatest benefit. If we have to pay for the bottom’s welfare anyway, let’s do it by changing our trickle down tendencies to bubble up tendencies.

[nirgrahamUK]

not. even. wrong.

[david_z]

@Todd Marshall

Someone said “no problem, make that ounce of gold worth more … i.e. a McLaren or a block of Manhattan.”

That is not what I said.