73 replies to this topic

[maxwatt]

More and more, this thread belongs in the political discussion section; if requested, I will move it there.

Something I find ironic is that the best description of an actual, functioning libertarian society is Georgein Orwell's Homage to Catalonia in which he describes an anarchist society that arose in a region of Spain during the Spanish Civil War. No government, yet things functioned. Anarchists, but left-wing socialists with positions remarkably like present-day right wing libertarians, the difference being that "worker-control" was the center piece, rather than "free-markets".

The more things change, the more they remain the same.

[EmbraceUnity]

But it's obvious to me that the economy is decrepit due to years and years of central economic planning at the Federal Reserve, especially the relentless pounding of more recent history. Bernanke is making the same dumb mistakes today, except now he has very little room left, given that interest rates are literally on the floor and people worldwide are losing more and more confidence in the USD. Maybe that's the point. It would make it much easier to push for a continental or even international currency with a collapse.

At any rate, despite all my rage at the Greenspans and Bob Rubins of the world, the problems we face are systemic and not the result of intentional actions by individual actors. Natural selection and other forces occur at the level of society in the form of memes and the evolution of world-systems themselves. The systems which become dominant have traits which inherently tend them towards dominance. Fiat money and fractional reserve banking were adopted all over the world for this reason, not because some shadowy group of elites forced them to. If the gold standard caused magnificent wealth then those that have it would outcompete others.

If some empire were trying to invade us I am sure we would be glad we had fiat money to finance the war, and indeed it was war that was a main impetus for the creation of fiat money. The Fed does more than just printing money though. It also standardizes the reserve requirements. Fractional reserve banking existed long before the Federal Reserve, and it is clearly a sort of confidence scheme that requires perpetual growth to be sustainable. Yet, abolishing it, just like abolishing corporate personhood, would be a hefty feat and would by definition cause a slowdown in growth. Without monetarism, keynesianism, and corporate personhood, the modern world-system would be far less resilient. It would be much less able to replicate itself all over the world because people are too risk averse and too prone to squander during booms and hoard during recessions, and unemployment would be too high to sustain the type of growth necessitated by fractional reserve banking, the stock market, and other foundational institutions of our system.

Edited by progressive, 03 January 2010 - 02:19 PM.

[JLL]

You can't be a libertarian if you're working for the Federal Reserve. That's like a pacifist working as a mercenary.

[EmbraceUnity]

You can't be a libertarian if you're working for the Federal Reserve. That's like a pacifist working as a mercenary.

I hear he isn't a true scotsman either.

[niner]

[re: Greenspan] but don't push his shit on libertarians

Greenspan thought that rationally self-interested businessmen would do the right thing without regulation. Isn't that a fundamental tenet of Libertarianism? Greenspan later famously admitted that he had been wrong about that, after the damage was done. His monetary policy sucked, and I don't want to pin that on you guys. However, had we been on the gold standard in '08, we'd probably be experiencing a crushing depression now. There's a reason no one uses it.

[JLL]

You can't be a libertarian if you're working for the Federal Reserve. That's like a pacifist working as a mercenary.

I hear he isn't a true scotsman either.

Correct me if I'm wrong, but doesn't that particular logical fallacy only apply to cases where the attribute (e.g. being Scottish) is not 'choosable'? Meaning that, regardless of what you do in life, if you were born in Scotland, you're Scottish. Whereas, the very things that you do in life determine whether or not you're a libertarian. And what Greenspan did was not representative of the libertarian school, except perhaps under a very broad definition of the term.

However, had we been on the gold standard in '08, we'd probably be experiencing a crushing depression now. There's a reason no one uses it.

Yes, there's a reason why no one uses it, but it doesn't have to do with the gold standard causing depressions. It has to do with printing money.

The business cycles of boom and bust are caused by inflation, i.e. an increase in the money supply. Inflation, to the degree that is going on under a fiat money system, cannot happen under a gold standard. But you are correct in the sense that if one cannot print their way out of bad business decisions, the consequences will have to be suffered -- and the gold standard cannot prevent that. I would say that's a good thing!

[OneScrewLoose]

More and more, this thread belongs in the political discussion section; if requested, I will move it there.

Something I find ironic is that the best description of an actual, functioning libertarian society is Georgein Orwell's Homage to Catalonia in which he describes an anarchist society that arose in a region of Spain during the Spanish Civil War. No government, yet things functioned. Anarchists, but left-wing socialists with positions remarkably like present-day right wing libertarians, the difference being that "worker-control" was the center piece, rather than "free-markets".

The more things change, the more they remain the same.

I find that extremist ideologies that are supposedly opposites tend to be the same thing just with different buzzwords, i.e. communism and fascism. It's a really fascinating human phenomenon.

[Anthony_Loera]

Hmm...

I think most of this (not all of it) now belongs in the politics section

A

[niner]

However, had we been on the gold standard in '08, we'd probably be experiencing a crushing depression now. There's a reason no one uses it.

Yes, there's a reason why no one uses it, but it doesn't have to do with the gold standard causing depressions. It has to do with printing money.

The business cycles of boom and bust are caused by inflation, i.e. an increase in the money supply. Inflation, to the degree that is going on under a fiat money system, cannot happen under a gold standard.

See progressive's post #62 for the most fundamental reason why no one uses the gold standard any more. (i.e., it just doesn't work as well as a system for national wealth creation) Boom and bust cycles happened under the gold standard, and they were less controllable.

[EmbraceUnity]

Correct me if I'm wrong, but doesn't that particular logical fallacy only apply to cases where the attribute (e.g. being Scottish) is not 'choosable'? Meaning that, regardless of what you do in life, if you were born in Scotland, you're Scottish. Whereas, the very things that you do in life determine whether or not you're a libertarian. And what Greenspan did was not representative of the libertarian school, except perhaps under a very broad definition of the term.

Libertarianism, like Marxism, is a belief system. Does the fact that Marx worked for Horace Greeley while he was already staunchly anti-capitalist in beliefs make him a capitalist?

[JLL]

If the gold standard caused magnificent wealth then those that have it would outcompete others.

If the gold standard caused magnificent wealth to those who have the guns (the government) then it would outcompete others. But it doesn't; the fiat system does.

If some empire were trying to invade us I am sure we would be glad we had fiat money to finance the war, and indeed it was war that was a main impetus for the creation of fiat money.

Yes it was. But it wasn't invented for protection against invaders, it was invented for waging war -- which is very expensive.

But more importantly, it seems to me that you are under the illusion that fiat money is somehow wealth in itself, as if by cranking up the printing presses we could somehow create actual wealth.

It also standardizes the reserve requirements. Fractional reserve banking -- and it is clearly a sort of confidence scheme that requires perpetual growth to be sustainable.

Agreed.

Yet, abolishing it, just like abolishing corporate personhood, would be a hefty feat and would by definition cause a slowdown in growth.

In the short term, probably yes.

Without monetarism, keynesianism, and corporate personhood, the modern world-system would be far less resilient. It would be much less able to replicate itself all over the world because people are too risk averse and too prone to squander during booms and hoard during recessions, and unemployment would be too high to sustain the type of growth necessitated by fractional reserve banking, the stock market, and other foundational institutions of our system.

I disagree with the above. As I said, the kinds of booms and recessions we have now are due to the creation of money. As we we've seen, one can try to print one's way out of the very mess that printing money necessarily creates, but it's just prolonging the inevitable.

Others support prolonging the inevitable. I support cutting out the tumor now.

[JLL]

See progressive's post #62 for the most fundamental reason why no one uses the gold standard any more. (i.e., it just doesn't work as well as a system for national wealth creation) Boom and bust cycles happened under the gold standard, and they were less controllable.

Well, you can have various version of a "gold standard", as we've seen. You can, for example, as a banker say that a dollar note is equal to a 1/10th ounce of gold, and promise to exchange notes for gold anytime someone wants to do so, and then start printing more notes, hoping all your clients won't come to exchange their notes for gold at once. I wouldn't consider this a true Scotsm-- gold standard, but perhaps my definition is too strict.

Are you referring to any particular period of time in which a gold standard and boom and bust cycles existed? I'm unaware of anything as big as what we now have in the history of the gold standard, but of course I may be mistaken.

More importantly, I don't think boom and bust cycles should be controllable -- it's the control (or rather, trying to control them) that is causing the bigger problems. In free markets, if I make a bad business decision, it means losses. That's how bad investments get weeded out and good ones flourish. If I can spend money on ridiculous investments and somebody just bails me out anyway, what's there to prevent everyone from making bad investments? It's just gambling with free money.

[rwac]

I disagree with the above. As I said, the kinds of booms and recessions we have now are due to the creation of money.

You are wrong. There have been booms and busts forever. Even on the gold standard.

http://en.wikipedia....i/Panic_of_1873
http://en.wikipedia....i/Railway_Mania
http://en.wikipedia....uth_Sea_Company

The Gold Standard will only help to the extent that government is restricted from printing money, and that rule will likely be thrown out in the first big war.
Why is gold so good anyway ? Why would we give gold producing nations a big bonus for a non-productive activity ?

You are limiting the rate of economic growth to the rate at which gold is taken out of the ground. Does that strike you as being sensible ?

You are trying to use a gold standard to enforce fiscal discipline, which is like using a cannonball to swat a fly.

Edited by rwac, 04 January 2010 - 06:41 PM.

[EmbraceUnity]

If the gold standard caused magnificent wealth to those who have the guns (the government) then it would outcompete others. But it doesn't; the fiat system does.... But it wasn't invented for protection against invaders, it was invented for waging war -- which is very expensive.

However it occurs, the fact remains that this model has been adopted all over the world, and fighting against it would be as futile as fighting against the law of gravity or the law of supply and demand. It may be an institutional fact as opposed to a brute fact, but it is as entrenched of an institutional fact as property rights themselves. Abolishing property rights is possible, at least in the short run, but pretty foolish and unlikely to last in the long run.

But more importantly, it seems to me that you are under the illusion that fiat money is somehow wealth in itself, as if by cranking up the printing presses we could somehow create actual wealth.

I am under no illusions. What it does do is allow the government to spend money, and if everyone else is hoarding then this increases the consumption rate and thus creates a multiplier effect, in combination with reduced interest rates. Welfare programs like food stamps have an especially high multiplier effect since nearly all of it is spent. Public works and infrastructure programs have a slightly lower multiplier effect but are still high and are necessary for a functioning society.

As I said, the kinds of booms and recessions we have now are due to the creation of money. As we we've seen, one can try to print one's way out of the very mess that printing money necessarily creates, but it's just prolonging the inevitable.

That would be a post hoc ergo propter hoc fallacy.

The printing of money is not what causes recessions, though that can intensify them if a country is foolish enough to spend beyond its means during booms or cut back on spending during recessions (which is certainly not unheard of). Booms and recessions are a result of people who think current trends will continue indefinitely and factor that into their calculations of expected returns, thus leading to price bubbles, and when the bubble is finally exposed for what it is the market overcorrects which leads to recessions. This happened frequently and violently under the gold standard and before keynesianism.

It can get confusing though because there are many factors which can exacerbate the issue. Inaccurate, misleading, or fraudulent information about risk can also worsen things, as can perverse incentives and moral hazards. We seem to have experienced a trifecta recently, by spending beyond our means and keeping interest rates low during a boom, deregulating institutions in a way that lead to fraudulent reporting of risk, and repeatedly bailing out the perpetrators.

However, the root cause is that tendency to think things will continue on as they are, both during good times and bad times, which leads to squandering and hoarding.

Looking at the data quantitatively, it is obvious that the time lag between recessions has grown, and the length of recessions has shrunk. Back in the 19th century and early 20th century, contractions took roughly twice as long compared to today, and expansions took about half as long. (averages listed on the bottom of that link)

Edited by progressive, 04 January 2010 - 07:00 PM.