And we are back to the same Keynesian assertion: That more money is better than less money. Please elaborate.
Try to not get sidetracked into a counterfactual history of the stability of banking systems.
Of course, the Mises-Hayek theory is founded on the belief that FRB allows for the creation of fiduciary media which presupposes an artificial suppression of the money/market rate of interest below the natural rate, causing massive booms, and inevitably, massive busts. Mises called for a 100% gold reserve, and explained, in detail, why the currency school and Wicksell got it wrong, or didn’t go far enough. He also explained that the mechanincal view of quantity theory is wrong, and that an increase in the money supply by 50% doesn’t mean an increase in inflation by 50%. Inflation could out-pace money growth, but it doesn’t have to. Mises completely rejected “velocity of circulation” since it’s no different than T, or transactions. Money is never exchanged for just money, banks don’t do this, people don’t do this, and firms don’t do this. The commodity traded in capital markets is time, that is, current goods against future goods.
“In analyzing the equation of exchange one assumes that one of its elements–total supply of money, volume of trade, velocity of circulation–changes, without asking how such changes occur. It is not recognized that changes in these magnitudes do not emerge in the Volkswirtschaft [political economy, or more loosely `economy’] as such, but in the individual actors’ conditions, and that it is the interplay of the reactions of these actors that results in alterations of the price structure. The mathematical economists refuse to start from the various individuals’ demand for and supply of money. They introduce instead the spurious notion of velocity of circulation fashioned according to the patterns of mechanics.” (Human Action, p. 399)
You didn’t read Roger Garrison, did you?
Like my quote from Garrison alluded to. When the demand for money shifts, so should the supply of money so as not to have radical fluctuating prices based only on monetary fluctuations. It isn’t about price stability, it’s about trying to get money to be as close to neutral as possible. Like Mises and Hayek knew, inflation isn’t good because it takes the economy out of equilibrium. Why would it be any different for deflation?
No. The Mises-Hayek theory is based on the idea that when money goes out of equilibrium, the economy fluctuates leading people to mismanage their funds. When the quantity of money increases past equilibrium, you get a boom that must be liquidated. When the quantity of money decreases past equilibrium, you get a dreaded cycle of depression. It’s about equilibrium, not gold worship.
Fractional reserve banking allows the market rate of interest to equal the natural rate of interest thereby avoiding booms and busts.
garrison might be a free banker… but he is still pro-gold !
A gold base money standard.
The dishonesty of some people here is staggering. For the record, free banking assumes
- underlying commodity money
- no regulations
- courts that enforce property rights.
Today we have
- fiat money
- total cartelization of the system through central banking
- monopolistic provision of ‘justice’ - that is the courts are a mafia working for the state and against property rights.
- wholly socialist ‘deposit insurance’
Despite all that some people here babble macroeconomic nonsense about ‘equilibrium’ and the wonderful efficiency of the banking mafia. Sickening.
sound money
One quote from Mises/Hayek which would back this claim up.
Way to ignore all of my points, once again.
That sounds non-sense. The market rate of interest is never equal to the natural rate of interest.
I do not agree with a lot of the posters supporting FRB, but I do not think it violates property rights or natural contract law. Secondly, no one is supporting the banking mafia we have now, that would be sickening - I am a supporter of a currency backed standard and I think that would be a dominant currency in a free market. I am only supporting libertarian principles by stating that a FRB could legaly (not efficiently) exist in a anarcho-capitalist society.
So… Aside from us being apart of the mafia, insurance is socialism now? My goodness! That’s why they changed the name to Blue Sickle, Blue Hammer. [8-)]
you think the FDIC is a free market scheme and not socialist?
It does, but the mechanisms are more subtle and harder to grasp. At any rate, it should be clear that FRB relies heavily on misrepresentation, i.e. fraud. And transfers of property using fraudulent means sound like a violation of property rights to me.
Some people are. They lie about FRB and constantly invoke the current system to illustrate aspects of FRB, as if the current system was a free-market system. They defend theoretical ‘free-banking’ and they think that what the banking mafia does today is not really different from free-banking - so they defend the banking mafia’s activities - right now.
The legality of it is highly debatable. But it’s really a secondary point. The main issue is the claim that FRB would be the dominant system cause it’s not only ‘legal’, it’s superior to honest dealing…
http://mises.org/journals/qjae/pdf/qjae8_2_4.pdf <—a personal fave of an article for me.
our dynamic dou strike again!
That was great. Thanks!!!
I am reading the journal article right now. I have read most of Walter Blocks works on FRB and agree 100% on the economics - my only problem is with the way he sees the property transfer as more of a warehouse as opposed to a on demand loan.
I have a quick question. Would it be fraudulent on the part of the debtor for two people (one a debtor, the other a creditor) to engage in a redeemable on demand loan and then for the debtor to spend such that if the creditor were to ask for the money right then he would be unable to pay (thus breaching the contract), but at some miniscule time in the future would have the proper funds in order to pay? I guess the question happens to be: in a redeemable on demand loan would the debtor have to be able to pay back the loan at all times until the creditor calls in the loan?