You favour "the Chicago school" but don't believe in free markets? You quote Ram Dass on seeking freedom but want to defend the control of a population through the arbitrary authority of fiat? You claim the word Money is not a noun but a verb? Are you sure you aren't just some algorithm putting together random sentences?
This is just an example of argumentum consensus gentium: appeal to traditional wisdom, and is a fallacy. The alleged inelasticity of gold as money is a fallacy. You don't need physical gold to increase and decrease in keeping with economic activity and production. If a system of real bills of exchange is allowed to operate in lieu of debt based creation of money (bonds), then the means and mechanism necessary to accommodate elasticity is solved. The argument put forward by Antal Fekete based on Menger's ideas is that real bills will spontaneously arise if free market forces were allowed to act, and with this you get a bonus in that the cost of currency ie. the discount rate (which is presently and necessarily centrally controlled by the cabal of central banks) also becomes determined by the free market. Your appeal to retain a paper based mechanism in the form of fiat - representing ever increasing and unpayable debt is a mere shadow of the circulating paper of real bills representing credit which is genuinely extinguished on a self renewing and ongoing basis. Don't believe the propaganda of those attempting to keep the can rattling down the road. Gold and what it stands for - HONESTY - is what the present establishment have an allergy to.
There are no "free markets". 'Free markets' can be as lot of things, like most terms, it has many meanings. In any sense of its use I have seen, it does not exist. If you think it does, you are being deceived. Governments spend money, and this sways the market prices. I am familiar with how social service dollars are spent, and they have a large impact on may market prices - the government is subsidizing certain businesses with welfare dollars. How can we say the market is free, when the government decides what businesses it will subsidize. As a relative term (state monopolies vs free market), then yes, relatively speaking some economies are more 'free market' than others. If you desire free markets, and think you have them, then you will never have them. Hope this helps.
You identify a fallacious point in my references - which is no indicator of falseness, only of a leap of faith. In reply you offer - your opinion. An unsubstantiated claim is fallacious. Show me this economic system in use, that validates your point, otherwise, you ask me to accept your fallacy over my own. ~ ~ Here is what I think. Wealth should be a product of effort, not ownership. Wealth from production is healthier than wealth from ownership, and no production. Now in the real world, ownership will bring wealth, it is going to happen, but needs no encouragement. In a world where the wealth of a nation is directly linked to its ownership of gold (for example), owning gold is a short cut to being a wealthy nation. Society will benefit most from an economy that is productive. It will use its productive nature to acquire the gold, or other store of wealth, of other nations, having the best of both worlds. This happens with a fiat system. In choosing the least of bad choices, I choose fiat.
Show me a free market and I will go there - that is what I said. There are none in the real world. Money will control the population. You believe otherwise? The government will control the people, regardless of monetary system. You believe otherwise? The words I posted were not my own (sorry I forgot the quotes), they were from the links I provided, to represent what I have found that in my opinion has more merit than your own. I am willing to defend against false claims against fiat, or bogus claims for competing systems. I have been considering the weakness of fiat for several decades. I do not come to my opinions lightly. That does not mean I am right, but I do have an informed opinion, as you do.
Money guides the economy, it doesn't control it. Government control over money enhances its control over people. This is a major reason why free market money is preferable to government fiat. Free market money can be many things. Historically it was gold, silver and copper. Would they continue to be so again? Perhaps. Perhaps not. But it is highly improbable that it will be fiat (or any significant FRB with central banks). Defence of fiat is a defence for government control.
Show me a "Chicago School" proponent that doesn't believe in the principles of free markets and I will show you a Keynesian. If you've been considering this for over 30 years, I suspect you would be frustrated at not being able to distinguish between contradictory concepts. Money serves those that use it, but it is debt that exerts control over people. Let me assist with a summary of the properties of money for you. A medium of exchange: It should have liquidity, and be easily tradeable, with a low spread between the prices to buy and sell, in other words, a low transaction cost. It should be easily transportable; precious metals have a high value to weight ratio. This is why oil, coal, or water are not suitable as money even though they are valuable. It should be durable. Gold or silver coins are often mixed with 10% copper to improve durability, and coins are made with ridges around the rim to prevent coin shaving or debasement. A unit of account: It should be divisible into small units without destroying its value; precious metals can be coined from bars, or melted down into bars again, with a low percentage cost. This is why leather, or live animals are not suitable as money. It should be fungible: that is, one unit or piece must be equivalent to another, which is why diamonds, works of art or real estate are not suitable as money. It must be a specific weight, or measure, or size to be verifiably countable. You must be able to weigh, measure, and count, your unit of account! A store of value: It should be long lasting, durable, it must not be perishable or subject to decay. This is why food items, expensive spices, or even fine silks or oriental rugs, are not generally suitable as money. It should have a stable value. It should be difficult to counterfeit, and the genuine must be easily recognizable. A standard of deferred payment: It should be an ultimate extinguisher of debts. Fiat currency does not meet the properties that money should have, so is not money but a derivative of money. This monetary derivative is called a "national currency" and is imposed by fiat dictate, its use demanded under threat of punishment. Just take that last point and apply your 30+ years of contemplation and consider again how a debt based fiat currency can be an extinguisher of debt. Now a thinking person might wonder, how did this fiat currency regime come into place? And the answer is slowly and by degrees. First Gold and Silver were replaced in circulation by paper depository notes for the metal held at a bank, then these paper depository notes were replaced by promissory notes when fractional reserve banking was invented, which were then replaced by completely irredeemable fiat currency with the Nixon gold shock in the early 1970's. That is how money has been successively abstracted from Gold and Silver to an irredeemable fiat currency. Each abstraction can be observed as introducing further distortion to the original nature of money, until the point is reached today where we find that the currency we hold in our wallets is officially depreciated at a constantly variable rate, is created at will by central banks as a debt to sovereign nations to be paid for by the taxation of future generations and it is inflated without limit by the fractional reserve lending of commercial banks and credit card companies. Clearly such actions have destroyed all the original characteristics of money except that of being a Unit of Account, as outlined above. Hope that helps clear up some confusion on the nature of money. And if you would like to better understand the relationship between redeemable money and freedom, as opposed to irredeemable money and bondage, you may want to read the Howard Buffett (father of Warren) essay on the subject here (.pdf).
Just to be clear, technically these are the desired properties of money as opposed to anything inherent in the thing that is used as money. As you pointed out, some things will do better for some functions than others but nothing will suit all desired properties all the time. Importantly, the storage of value is a property we want from good money but is not an inherent feature of any money. We want it simply because as individuals there is a time discrepancy between our income and our expenditures. Our ability to actually have it, however, depends on the underlying properties of the currency as well as on the economic conditions of the time. For all intensive purposes, production during any small period of time equals consumption for the economy as a whole. Your savings this month is someone else's consumption this month. Next year, the spending of your savings requires someone else to save, the value of which depends on, inter alia: - the relative supply and demand for savings at that point in time (and hence, it's value) - the amount of stuff being produced across the economy that is available for consumption. So if there is hardly anything that is available to consume because of economic collapse then - all else equal - your savings aren't "worth*" as much as if the economy had experienced a large burst of productivity and output per person has increased. Similarly, if the supply of currency had increased faster than output (ie inflation) then you have also lost purchasing power. (This is the common criticism of fiat.) Finally, if people's time preferences have changed then the relative desire for saving vs consumption has changed the value of your money (eg when the population is ageing and people have moved from net accumulators/producers of assets to net consumers/dissavers of assets). Consequently, in two of the three circumstances outlined above, all money can fail the "store of value" test. From a morality point of view, changes in the broader conditions/preferences of the economy do not steal your negative rights whilst government-enabled fiat inflation is an attack as it is theft of our current property by coercion. * You could argue that in an economic collapse scenario, "worth" can mean many things. As long as the money is still used as a medium of exchange then your savings are still "worth" something proportionate to your labour in this time and you'd be better off compared to someone else who didn't have savings. It's just that it failed to store the current value of your labour into the future.
That helps me understand what you meant. Yes, we have distorted markets with a large parasite sucking productive effort into fulfilling it's own desires. This is encouraged by government's control over money. So again, defending fiat is a defence of government. Sound money is "an instrument for the protection of civil liberties against despotic inroads on the part of governments and the banking cartel supported by the government". "Ideologically, sound money belongs in the same class with political constitutions and bills of rights." Are you defending government theft of people's rights and liberties?
Sound money has the backing of a neutral party, and is representational of 'real wealth'. Gold is not 'real wealth'. Gold has no intrinsic value. Sound money is elusive, but we can do without it. All we need is a vehicle for the transference of wealth, for rewarding labor, for the purchases of goods and services. I am surrounded by thieves. Some are in the government, some want to do away with the government. All want the benefits of my efforts. I will have a government that directly controls money, but not wealth, by the issuance of fiat, or I will have an oligarchy that controls real wealth, by ownership of what they determine is valuable. Be that food and water, or shiny metals, it is theirs for the taking. Imagine two countries in a world of economic systems with gold backed monetary systems. One is very wealthy, for all of the gold in their vaults. Lots of gold in the dirt too. The other is full of peasants. Lots of trees, base metal ores, talented craftsmen, fresh water, living animals, little or no gold, silver or diamonds. Where is the true wealth? Government is a necessary evil. The best government is that that governs the least. If fiat is not a good thing, I will not become a slave to it. I will use it for my benefit, and be done with it. I will not accumulate fiat thinking it is some store of wealth. I will not turn it over to others to do with as they please, keeping most of it for themselves if it suits their purposes. Someone is going to control the supply of money, and it will not be me. I will do my best to retain the rewards of my own efforts, regardless of economic systems. Money is the result of trust and faith. It does not matter if money is sea shells, tobacco, or gold. It all comes down to trust and faith. Gold is worth nothing, without trust and faith, just like sea shells.
Saying that something like gold has no intrinsic value is different to saying that something does not have intrinsic properties that best suit certain desires. Gold has many properties that make it very suitable to be sound money. Trying to dismiss this fact is to focus on the wrong things. As I said earlier, just let the free market determine what the market wants to use to undertake market transactions. If that means gold and if that then means certain people can best serve the market by producing and refining gold then so be it. They are performing valuable services to the market just like paper shuffling insurance salesmen or auditing and governance experts. It is a nonsense and elitist to disparage someone's comparative advantage when it is a result of voluntary transactions. Finally a minarchistic government does not have any need to control money and to do so inevitably leads to an erosion of people's freedoms.
It is good to see you persisting with your enquiry. It is good to be challenged and question things. That is one of the characteristics that makes us human after all. Of course, transcendence is dependent on recognising there is no right or wrong and that nothing has any intrinsic, independent reality. So you can take heart that while you are wrong, at the same time there is no wrong.
This has not been demonstrated, that I have seen. I see little or no benefit to expecting money to be a storage of value. Capitalists, ourselves or others, will want to take 'money' and 'invest' it, in a venture that increases its value. Money that sits, and does nothing but store value, is a useless resource. A placeholder. A zero. I may put my money in an account, and it sits from my perspective, but it is given out to others to use, to make money from my efforts and frugalness. They will earn 10%, and return 3% to me. Thievery by another name, some would say. A mutually beneficial arrangement, others would say. When the one borrowing gets to decide the rate of return (for example, banks), I must be very trusting, of one who wants to benefit from my efforts. Money that sits and is a store of value is less useful than fiat, that changes hands rapidly, to reward effort. I see the primary use of money, as a tool, to transfer wealth. As it happens, that is the way fiat functions. None of this 'This is what we want from money, but it is not an inherent feature of any money'. I would say you want to use the wrong tool, you want money to do what wealth and resources should do. When reward is given to me for effort, in the form of coupons, universally accepted in exchange for the benefit of the effort of others, it is best used by converting it, into firm services, or hard goods, not storing it. I will hire the labor of others, directly or indirectly, to benefit my situation. Or I will purchase hard goods that have value to others, who are willing to exchange what I want, for what I have. I am content to store my wealth by ownership of gold or silver, and many other things, and see no need to hold onto coupons backed by gold (currency), or to deposit them in a bank to be held for me. Why is it good from me to let others decide how my wealth will be stored? With fiat, I exchange for what I want, what I value. So, what are the good reasons for saying , 'the storage of value is a property we want from good money'? Would you say it has "stable value" ? If I am understands the position of most anti-fiats, they talk as though it does have this magical property. When push comes to shove, none of them would admit to this, and yet what they suggest presupposes it. It seems to me that the value of gold (for it to be money) has to be international, uniform across all societies/nations. It must have a stable value, even it if varies minute by minute, if you understand what I mean. Beyond that, it does need to be stable enough so that when I am rewarded on payday for my efforts, I know it is enough to pay my mortgage. I need to know that the money I will receive in December, has a buying power similar to today. With inflations, and deflation, this is not possible. You want me to guard against inflation, an unintended consequence of some usage of fiat, but how would the gold standard protect me from deflation if not with a stable value, minute to minute as well as country to country? If you want me to support the gold standard, you should be willing to show me how the value of gold will be stable, or how the economic system adjusts to a constantly changing value of gold. I assume you want for all nations to have the same basis of standard. If fiat is not good for one, it is not good for any. So, are all nations to be a 'gold standard', and not silver, platinum, oil, sugar, or even water? Who will issue the currency that represents money? If you do not want the government involved, would you suggest that private mints should be able to issue, gold currency actual gold coins? How are the gold coins I received on payday,, to be transferred to the utility company? How will the banks operate, transfer money? It it is very noticeable that those who dislike fiat never indicate that a favorable trait of money is that it is issued by governments. It seems to have no backing except itself. A self-supporting and self-regulated money system, all because of the inherent characteristics of gold? I would really like a brief overview of this non-fiat, world money system you envision.
Gino I appreciate your comments. I started the thread for dialogue, and you have helped, I hope others consider your words, and agree or not as they see fit. For myself, one more comment. If I collect dead caterpillars, it will be a time consuming endeavor, but at least I will have the intrinsic value of their worth, many man hours to be sure. How shall I redeem their value? Cost of production only has value if others are willing to pay for it. It does not put value on something. Raising costs is not increasing value. Every day people trying to sell their house want more than the market is willing to pay "But we made so many improvements, we have so much money in it....." Sorry, money down a rat hole does not increase value. Every commodity is worth to others what they will pay. This is an undeniable truism. Things change, the value of things change. I see it every day, where others only see constants.
No problem, it's always a good thing to be challenged and to hopefully learn something, especially after decades of being confused. Ultimately though, as you indicate, both of us are speaking to a wider audience and it is for the benefit of others that wrongs need correcting.
A store of value is desirable because the time profile of our expenses do not match our incomes. A simple example is our desire to save for retirement and end of life expenses. But money never "sits" even when it is a lump of gold in someone's vault. It is first and foremost a medium of exchange and a unit of account for clearing the supply side of the current economy. My "saving" is me saying that I do not want to take resources out of the economy at present and saving "money" is the complex economy equivalent of a farmer saving a portion of their grain. Unlike a farmer's grain however, whatever resources are freed up by my savings are available to other people throughout the economy to consume. The more people that are saving the more resources that are freed up and their price will fall thereby providing cheaper resources to the capitalists to fund new productivity improving investments. This is all part of the time preference signals that the Austrians and Classical economists discussed in detail. I have no idea what this part means but I suspect it is related to the misunderstanding that savings is consumption but by different parties. This is the misunderstanding. Yes, the primary use of money is to distribute the goods and services - the productive output of the economy. Fiat clearly serves the medium of exchange role well. As Gino outlined, goods perish, machines/buildings/tools decay or are superseded by technology, businesses require ongoing management and effort. Many "hard goods" are simply too bulky to allow you to store effectively. In contrast, the inherent features that make certain monies a good medium of exchange also make it suitable as a store of value. This sounds like separating a medium of exchange from a store of value idea that FOFOA push. I don't see the reason for the delineation. See above. Fiat is not stable today. Every week the prices in my local supermarkets for everyday items move by up to 50%. Petrol prices fluctuate near daily. Even the prices of large capital goods like cars and houses aren't stable month to month. The only things that are broadly "stable" are my wages (if I was a regularly employee, that is), what my coffee guy will retail his coffee for over the next year or two and any debt repayments if I fixed my interest rate (variable debt is certainly not stable). In general I can say that the average price of the broad bundle of goods and services that I buy will be relatively stable (albeit increasing by 2-6% a year). But this is simply because the average price of my bundle is - by definition - the total amount of fiat divided by the total production available for consumption. A low-inflationary fiat currency (ie not Zimbabwe, Argentina, Vietnam etc) is therefore "stable" but so too would be gold since new production is a small fraction of production. Gold does not have to be international to be money but it does require a broad enough section of people to start their own gold-based economy. For most purposes a single country would be more than big enough but so too would a state the size of New York or California or even a city the size of Sydney. Stability arises naturally from being the medium of exchange. Deflation is something to be embraced not feared. Only debtors in FRB-based fiat economies fear deflation. Absolutely not. Different people can use different currencies if they deem it in their best interests. Historically markets have naturally gravitated toward a couple of currencies rather than a single one. In the digital world there's no obvious reason why a range of crypto-currencies can't operate side by side with gold, silver and platinum based currencies. Under a Hayekian monetary system, there's no reason why an FRB based currency couldn't also operate side by side. Different market participants have different relative desires about the properties of their money (security, divisibility, long vs short distance transactions, store of value etc) so there's no reason why I'd expect there to be a single form of money. Rothbard said that FRB-based currency would be disallowed under a rights-based legal system but even he didn't pretend that gold was the be all and end all, rather that it was inherently suitable. The inherent characteristics of gold, bitcoin etc is what removes the need for placing substantial trust into the hands of others. It's lack of "backing" combined with its high cost of new production is the very strength required for sound money.
Just want to say thank you to bordsilver, Gino and BHN for their respectful debate and for making me think about things on my one day off (traditionally reserved for either not thinking much or looking at boobies, or both)
I currently think the best bet and most realistically achieved alternative is free banking (privately issued currency, no govt guarantees or deposit insurance) with gold as the base/high powered money providing the control on over issuance of currency. I'm not so sure about the practicality of real bills in this modern world (it is doen today, just called factoring accounting recievable), but the intent of real bills could be achieved by banning maturity transformation, which I'm open to as not 100% about free banking's inherent controls over excessive maturity mismatch.
