I take a high school economics class and today my teacher was talking about the benefits of the Fed cutting interest rates because it would “boost demand.” I tried to explain to him that these inflationary tactics may lead to short term booms but inevitably create long term busts. He’s a moron so he couldn’t comprehend this. I then mentioned the gold standard and he looked at me like I had two heads. He preceded to argue against the gold standard for the following reasons:
The transition from our current situation to the gold standard would be incredibly rocky.
How would banks make loans to people? Our economy runs on credit and under a gold standard credit and lending would disappear.
What if there was a National defense emergency and the gov’t couldn’t afford to defend the country because no money could be printed?
There you have it. I am still learning austrian economics, so I had a difficult time defending the gold standard from those three points. However, I’m sure this is a piece of cake for some of you out there. Please, please, please prove these three points wrong and help me shut up my socialist economics teacher once and for all!
#1 is based, no doubt, on gold standard measures that Mises attacks here:
#2 is bizarre. ‘The’ gold standard coexists with FRB, the source of extravagant credit (such as people write scary books like A Bubble that Broke the World on).
#3 justifies anything. For instance, it would justify having a gold standard wherein all the physical gold is held by the state – which can, in a ‘natonal defense emergency’, quietly do its own fractional-reserve banking.
At least you have an economics class in high school–my high school never had such a class.
I doubt that anything you say will shut up your Econ teacher, so a better approach would be to ask tough questions instead of trying to lecture him.
For example, where does your Econ teacher expect people to come up with the money to purchase the increased production based upon the “boosted demand”? Did building too many houses increase housing sales, or just increase unsold houses?
As opposed to the smooth and lovable boom-bust cycle and occasional mass depression, not to mention the inevitable foreign policy problems associated with exporting inflation. Of course what he’s really saying is the correction for the decades old screw up of monetary manipulation will be too painful, therefore we may as well just keep screwing up. This same logic says that after a McDonald’s addict gets his first heart attack he should keep stuffing the Big Macs down his throat because actually learning from his mistake and going through the real but temporary pain of changing his ways is just too much of a hassle.
This is just plain idiocy and there’s really no way to address it. Credit would not disappear. Like other exchanges it would be balanced on marginal basis, not offered wholesale to any idiot with an ounce of collateral and a snow ball’s chance in hell of repaying.
Again, complete idiocy. The ability to print money and expand credit does not increase the amount of total resources in the economy, it just allows one to redirect them, which one could just as easily do through direct legislation. If the majority of the population truly felt the need and saw the danger as clear and present, the ability to mobilize resources to deal with an emergency, either voluntarily or through sunsetted legislation, would not be a problem. The real problem, and your teacher’s real objection that he’s too nutless to voice or too arrogantly thick to even notice, is what happens when twits like him want to spend boatloads of money but can’t convince anyone to give it to them voluntarily? In that case, since your teacher and his ilk clearly know better than everyone else in society how they should be allocating their resources, control over the monetary system is ‘necessary’ so they can accomplish a nice gentle form of theft and get what they want under cover of inflation. All for everyone else’s own good of course.
Absolutely correct. Trying to explain Austrian theory to a high school teacher is not going to work and all of your classmates will simply be put-off from your ideas because there is no way that your teacher will give you the time to fully flesh out the theory. It will be only partly explained and thus appear to have significant holes that your teacher (or a bright student) will be able to easily point out and, in a highschool environment, now the battle is lost. They will just appeal to ridicule, and make Austrianism into wild-eyed crankry. Like the saying goes, it is much easier to tear down than to build up.
You should critique the fallacies your teacher will inevitably advance, but don’t expect to convince your classmates on your own theories unless the topic is extremely limited. And, trust me, if you convince them on one thing, you will still face an uphill battle on every other topic. They have been trained for years now to ignore dissent and treat the teacher as the final authority - shaking them of that is not an easy task.
one more point for saving your breath with many a teacher - their requiring to stick to lessons already approved for the curriculum, where significant deviation is not tolerated … so that knowing where their bread is buttered, any logic to the contrary must be filtered and discarded (this is much less so at the university level, at least when I went).
It’s funny that you used Mcdonald’s as an example – I too used McDonald’s in a similar fashion when talking to the same econ teacher. He claimed that the current sub-prime lending disaster is due solely to the unforgiveable greed of the lending companies. I responded “What if someone ate McDonald’s every day for ten years and got a heart attack. Would you blame that person or the ‘greedy’ corporation?”
Get this: He responded “Your metaphor doesn’t work because McDonald’s would never sell someone a hamburger if they didn’t have then money to pay for it.”
That’s because McDonalds is in the business of selling hamburgers, not money! A bank wouldn’t sell you a hamburger even if you had the money!!
God, I get so frustrated when dealing with socialists.
Not true, there have been countless book written about how to make a smooth transition, including a book by Ron Paul. Besides, this is a moronic argument. The transition from monarchy to democracy in America took a revolution, a declaration of independance, and lots of wars with England. Does that mean it wasn’t worth it and that Americans should have stayed as slaves to the English monarchy?
Simple. You have two different accounts. One account is a current account, another is an Investment and loans account. When you sign your contract with a bank, the contract mentions that the bank may loan out your money for upto a certain time period without your notification, and that during this time period (say a year), you cannot retrieve your money, because it is in use by someone else. To reward you, you gain interest rates (while to sustain your current account, you simply pay a fee to the bank for their service of holding your money).
You could also include a claus in the contract, saying that if the bank receives a lucrative request for a loan, it can contact you, and act as an intermediary when arranging a contract between you and the person loaning the money, for example for long-term loans.
There’s something called government treasury bonds. Change that from a bond to a loan, and there you have it. I’m sure the citizens would not mind loaning their money to their government during a war, though any prudent government would set funds aside in case of wars in advance.
In fact, most of the US national debt is held by American citizens in the form of treasury bonds, so the system is already in place.