The U.S. Economy: Stand by for more worse news

[Schmelzer]

Make the basket large enough and varied enough for stability in (say) one's mortgage payment, and you will have regular money again - a fiat currency (the US dollar is backed by the US GDP, a very large and diverse - and hence as stable as possible - basket of goods).

That's quite a different thing. There is no fixed possibility to exchange a dollar into such a basket. So, your "backed" is nothing.

 

[joepistole]

And I would say you apparently don’t know what a straw man is. So what?

Yeah, “so what”, you don’t know what you are writing about, so what?

Opium too. So what is your point?

There isn’t anything wrong with fiat currency and a lot right with fiat currency and there is nothing magical about gold. The point is your beliefs with respect to gold and fiat currency are wrong and are not supported with empirical evidence. That is the point.

It is a particular nice method to steel gold from the people, replacing it with paper which can be made worthless whenever the government decides.
But the guy who has created the Liberty Dollar is in prison. For using this commodity for pressing nice coins and selling them.
Another guy has created Libertyreserve-Dollars for the internet. He is also in prison. And the US has stolen the money from all people who have bought some libertyreserve dollars.

Yeah, that is what happens to people who are convicted of fraud and counterfeiting. If Mr. von NotHaus would have made his new currency so that it didn’t resemble and could be confused with American currency he wouldn’t be a counterfeiter. If he hadn’t committed fraud, he wouldn’t have been convicted of fraud.

Privately minted silver and gold coins are routinely traded every day in the US. It isn’t illegal to mint your own coinage. It’s illegal to make them look like US currency and call them or suggest they are a US Dollar as Mr. von NotHaus did, one of “dem” minor details again. So I don’t see how that helps your case or why you find that relevant. You can walk into any American coin store today and purchase privately minted silver or gold coinage. But that coinage is sold as medallions or tokens, not currency, and they don't look like US coinage and they are not called dollars as Mr. von Nothaus represented his coinage. You may not know this but the US mints silver Liberty Dollars and it mints gold dollars and that mintage is real US currency, but are not commonly used in trade because the metal content value exceeds their value as currency.

It I wrote "No. But you seem to think that a regulated gold price and a gold backing is the same, or so."

I asked you to show what I wrote that would lead a reasoned person to that conclusion. You haven’t done it. So I have to conclude you are just making stuff up again. A regulated gold price has nothing to do with a currency being backed by gold. But they are not mutually exclusive as you seem to think.
Further, whither I think a regulated gold price is synonymous with a gold backed currency, which I don’t, is irrelevant. It’s an obfuscation, as previously noted the data doesn’t validate your belief that gold has some sort of magical store of value which is immune to inflation and if it were a currency it would prevent inflation.

Hm, let's see. I read:
"Two, were you not the guy who just a few posts ago was complaining about how the regulated price of gold could be used because it didn't reflect market conditions or values? Wow, what a turnaround." - Joe Pistole
So, you think I have made a turnaround. So, "complaining about how the regulated price of gold could be used because it didn't reflect market conditions or values", you think is something like the opposite of what I propose in the last posting. Thus, on the one hand, we have "complaining" about a "regulated gold price" is the opposite of what I propose - thus, being in favour of the regulated gold price would have to be something similar. The closest thing to supporting something similar to a "regulated gold price" is that I have made some claims that a gold-backed currency is - with some limitations - useful for preventing losses by inflation. Thus, it is quite reasonable to think that I'm in favour of a gold-backed currency. Then, if you think above things are at least quite similar, it would make sense to talk about a "what a turnaround".

And you think that makes sense? This is about your claim that gold backed currency or was immune to inflation. You argued that gold pricing was artificial during the period between 1933 and 1973 and therefore could not be used because gold pricing was set by fiat. And that was true and correct. Gold prices during that period understated the value of gold. But then when it was pointed that after pricing regulation ended, when gold was priced freely by open markets, from 1980 to today, gold has not kept pace with inflation thereby disproving your belief that gold is some sort of magical protection from inflation. Again, your beliefs are just not supported by centuries of data. But hey, you like Austrians who are not data kind of people, where data isn’t needed or wanted.

One can, of course, err about this, this is what I have indicated by "seem to" and "or so". But the arguments I have provided show that one can be in favour of a gold-backed currency, but against a regulated gold price. So, it is unjustified to suggest a turnaround if somebody would have in one posting argued against gold price regulations and in another one in favour of a gold-backed currency.

Your argument that while the price of gold was regulated it didn’t reflect market conditions was a correct argument. But your argument that because the price of gold was fixed by fiat, the currency wasn’t backed by gold was wrong. Price fixing doesn't mean the currency is back by or exchangeable or gold, because it was. When I used the unregulated price of gold over a 35 year period to prove gold hasn't offered inflation protection, you argued I should have used the regulated price of gold, the very same regulated price you had previously denounced in an earlier post. Yeah, that is a big turnaround.

Your argument that the regulated price should be used to gauge whither gold has been a store of value and a protection against inflation is simply wrong, because regulated pricing didn’t reflect market pricing. It would be like using apples and oranges. They are two different things. That is why I used 1980 pricing as a base instead of the regulated pricing of the mid 70’s.

Sorry, but 9%, even 20%, is not hyperinflation. This is within the range of price oscillations for single commodities. If it is really gold-backed, there will be other years with negative rates. For hyperinflation, the German wikipedia mentions more than 50% monthly rate (13000% per year) as a widely accepted criterion.

Well it isn’t for Mother Russia, but it is for the US. But that isn’t the point. The point is contrary to your claims gold isn’t a protection from inflation and hasn’t been a protection from inflation. The gold standard didn’t protect the US economy from inflation during the period between its founding in 1776 to 1973. That’s a fact. The highest inflation seen in the US ever occurred in the mid 1800’s when inflation rate reached 40% and under the gold standard. Nor has gold offered inflation protection after the gold standard was abandoned in 1973, as previously proven.

BTW, to name quite irrelevant numbers "unpleasant facts for you" sounds nicely, but is nothing but an empty soundbyte.

Well, just because you don’t like numbers it doesn’t make them irrelevant. But at least your are being true to your Austrian beliefs. Unfortunately for you, evidence and reason are not irrelevant sound bytes.

Some sort of protection it gives.

Oh, and what sort of protection would that be exactly? As previously proven, in the 35 year period between 1980 and today, gold didn’t keep pace with inflation.

Not against usual price oscillations, which you have decided to name "hyperinflation". This is something one could prevent using some basket instead of a single commodity. And, of course, one can never be sure that states do not stop backing their currency, completely or partially. But it helps against hyperinflation.

Well, as previously noted, these “price oscillations” goes against your notion of your earlier notion that gold has some innate consistency of value. You are contradicting yourself again. But a 35 year period isn’t an aberration. It isn’t a quirk. And now you are moving from gold to a “basket” instead of the gold you had previously advocated. What’s in this basket? Whatever commodity you put into the basket will have some price volatility.

The best solution is the solution already in place, managed fiat currencies whereby the currencies are controlled by central banks. It has worked very well. They expand the money supply as dictated by economic need and they contract the money supply as dictated by economic circumstance – it’s that old Keynesian thing. But there is no protection from human malfeasance (e.g. Mother Russia) no matter what kind of currency system is used by virtually every nation on the planet. If you are looking for some panacea which eliminates the need for responsible decision making, well that panacea just doesn’t exist. You cannot make a law or create a system which ensures people will always act responsibly. That system just doesn’t exist anywhere, it has never existed, nor will it ever exist.

 

[iceaura]

That's quite a different thing. There is no fixed possibility to exchange a dollar into such a basket.

Sure there is. That's what the full faith and credit of the US government, and "legal tender for all debts public and private", means.

It's just that the basket is so large. But that's a good thing - the smaller the basket, the more volatile and unreliable the money, the worse the "fiat". Pinning the money to one commodity, by law, is the least reliable of all - as so many governments have proved, with Spain's destruction by the discovery of Mexican gold being perhaps the quintessential Greek tragedy.

 

[Schmelzer]

There isn’t anything wrong with fiat currency and a lot right with fiat currency and there is nothing magical about gold. The point is your beliefs with respect to gold and fiat currency are wrong and are not supported with empirical evidence.

Of course, there is nothing magical about gold.
But there is something wrong with fiat currencies, namely that one needs the force of the state to establish them.

I would have no problem with a fiat currency which would be established without the use of force. That means, leaving the people the freedom to use whatever currencies they prefer, and "enforcing" the use of the states currency only via wages for those employed by the state and for receiving payments (taxes, fees) by the state.

Yeah, that is what happens to people who are convicted of fraud and counterfeiting. If Mr. von NotHaus would have made his new currency so that it didn’t resemble and could be confused with American currency he wouldn’t be a counterfeiter.

LOL. Here is how it looked like: https://en.wikipedia.org/wiki/File:Liberty_Dollar.jpeg

You can walk into any American coin store today and purchase privately minted silver or gold coinage. But that coinage is sold as medallions or tokens, not currency, and they don't look like US coinage and they are not called dollars as Mr. von Nothaus represented his coinage.

This is the very point. You are forbidden to create alternative currencies - something which could be used as a currency by those who accept it as a currency. The point is not that is looks like US coinage, it doesn't. The point is that it could be used as an alternative currency. With medaillons this would be impossible, you would always need specialists to identify what they are worth.

You may not know this but the US mints silver Liberty Dollars and it mints gold dollars and that mintage is real US currency, but are not commonly used in trade because the metal content value exceeds their value as currency.

This is a common practice, a large number of silver and gold coins have formal denominations of much lower than the real value. If some of these special coins have not been named "Wiener Philharmoniker" but also "Liberty dollar", ok, this could have been used by some filthy prosecutor to justify a "counterfeiting" accusation, but it is obviously nonsensical.

I asked you to show what I wrote that would lead a reasoned person to that conclusion. You haven’t done it.

Of course, I'm a stupid person by definition, but what was unreasonable in my stupid consideration remains your secret. Probably I'm not worth to be educated about this.

A regulated gold price has nothing to do with a currency being backed by gold. But they are not mutually exclusive as you seem to think.

Fine that we agree about this, but, no, I don't think they are exclusive. They are simply different, and one can favour one thing and be against the other without any turnover.

... data doesn’t validate your belief that gold has some sort of magical store of value which is immune to inflation and if it were a currency it would prevent inflation.

Ok, now, please, justify, in a similar way I have done, why you believe I think it would prevent inflation given that I have already repeatedly mentioned several things which can lead to increasing prices. As well why you think that I believe that gold has some sort of magical properties, despite the fact that I have often used the word "commodity" instead of gold, and see the only advantage of gold I see in its not at all magical natural properties - a high value concentrated in a small weight and volume, thus, something which can be hidden from looting policemen and other criminals and taken along when running away from persecution, low costs for storage, stability. On the other hand, gold has the disadvantage that it is very concentrated in the hand of few big players, thus, there is a large danger of speculative and political price manipulations.

Your argument that while the price of gold was regulated it didn’t reflect market conditions was a correct argument. But your argument that because the price of gold was fixed by fiat, the currency wasn’t backed by gold was wrong. Price fixing doesn't mean the currency is back by or exchangeable or gold, because it was. When I used the unregulated price of gold over a 35 year period to prove gold hasn't offered inflation protection, you argued I should have used the regulated price of gold, the very same regulated price you had previously denounced in an earlier post. Yeah, that is a big turnaround.

Sorry, but I son't remember to have not made such arguments. I remember to have objected that you have started your statistics at a sharp local maximum and at the end of your statistics there is a sufficiently strong minimum, which is not a good idea if you want to estimate average rates.

Your argument that the regulated price should be used to gauge whither gold has been a store of value and a protection against inflation is simply wrong, because regulated pricing didn’t reflect market pricing.

Ok, but I don't have made it, and wonder which of my claims could have been misinterpreted in such a way.

That is why I used 1980 pricing as a base instead of the regulated pricing of the mid 70’s.

Sorry, I have simply objected agains starting statistics with a sharp peak once the end of statistics is a low. This is what cheaters do if they want to create the impression that the average rate is low.

The point is contrary to your claims gold isn’t a protection from inflation and hasn’t been a protection from inflation.
...
Oh, and what sort of protection would that be exactly?

Ok, the I would guess fourth repetition:
It does not protect agains price oscillations usual for commodities. It does not protect against long term changes in value for technological reasons and a changes in uses. So, if gold becomes somehow necessary in a new technology, the price will raise, if it is no longer used to store value, its price will go down, and so on. It does not protect against speculative price manipulations. All this can easily give 20% rates in some years, but also -20% in other years.

It protects - up to some degree (given that governments can stop the backing whenever they want) - from loss of value by excessive money printing. Which is what Mises names inflation.

The highest inflation seen in the US ever occurred in the mid 1800’s when inflation rate reached 40% and under the gold standard. Nor has gold offered inflation protection after the gold standard was abandoned in 1973, as previously proven.

Hm, comparing
http://goldsilverworldscom.c.pressc...2/07/gold_price_chart_200_years_1800-2012.gif with
https://upload.wikimedia.org/wikipedia/commons/2/20/US_Historical_Inflation_Ancient.svg
it looks like the two peaks near 1865 are somehow related. And the question appears why there was a gold price of 50$ if gold was backed all the time by 20$? Who was so stupid to buy gold for more than 50$ if he could simply get it for 20$?

Two variants come into mind: Or there was no de-facto gold backing at that time, or the gold backing has changed.

PS: https://d1w116sruyx1mf.cloudfront.net/ee-assets/channels/article_default/140505chart1.jpg claimes "1862-1878 Paper money issued but not backed by precious metals"

 

[joepistole]

Of course, there is nothing magical about gold.

Except you believe gold offers some sort of magical protection from inflation.

But there is something wrong with fiat currencies, namely that one needs the force of the state to establish them.
I would have no problem with a fiat currency which would be established without the use of force. That means, leaving the people the freedom to use whatever currencies they prefer, and "enforcing" the use of the states currency only via wages for those employed by the state and for receiving payments (taxes, fees) by the state.

And where, other than the Mother Russia is that the case? Counterfeiting is universally illegal because it is fraudulent. People, other than those living in states like Russia have the ability to use whatever currency they wish to use for commercial transactions. They don’t have the right to commit fraud.

LOL. Here is how it looked like: https://en.wikipedia.org/wiki/File:Liberty_Dollar.jpeg

Well that is a little disingenuous or ignorant or some combination thereof. Mr. von NotHaus was not arrested and convicted for printing those paper notes…oops. He was arrested and convicted for the previously mentioned metal coins which do resemble US coins and which were taken for real US currency.

Below is a picture of the currency which got Mr. von NotHaus arrested and convicted. NotHaus was arrested and convicted of counterfeiting for his coinage, not the printed dollars you printed. That's another oops. There are coins which resemble NotHaus's coins and they are called Liberty Dollars because they picture Lady Liberty. It really is a pretty clear case of fraud and counterfeiting. That's why he is in jail.




“A federal grand jury brought an indictment against von NotHaus and three others in May 2009 in United States District Court in Statesville, North Carolina,[24] and von NotHaus was arrested on June 6, 2009. Bernard von NotHaus is charged with one count of conspiracy to possess and sell coins in resemblance and similitude of coins of a denomination higher than five cents, and silver coins in resemblance of genuine coins of the United States in denominations of five dollars and greater, in violation of 18 U.S.C.§ 485, 18 U.S.C.§ 486, and 18 U.S.C.§ 371; one count of mail fraud in violation of 18 U.S.C.§ 1341 and 18 U.S.C.§ 2; one count of selling, and possessing with intent to defraud, coins of resemblance and similitude of United States coins in denominations of five cents and higher, in violation of 18 U.S.C.§ 485 and 18 U.S.C.§ 2; and one count of uttering, passing, and attempting to utter and pass, silver coins in resemblance of genuine U.S. coins in denominations of five dollars or greater,” https://en.wikipedia.org/wiki/Liberty_Dollar#Bernard_von_NotHaus_v._the_U.S._Mint
So yeah, LOL...

This is the very point. You are forbidden to create alternative currencies - something which could be used as a currency by those who accept it as a currency. The point is not that is looks like US coinage, it doesn't. The point is that it could be used as an alternative currency. With medaillons this would be impossible, you would always need specialists to identify what they are worth.

Then how do you explain bitcoins? It’s perfectly legal in the US and many other countries to trade bitcoins. Are bitcoins not a currency? Further, why is that important? I can any day of the week buy any currency in the world and trade it. So why is that important to your beliefs with respect to fiat currencies? With a click of a few buttons I can take positions in the currency of any nation on the planet.

Ironically, you have just made the case for laws against counterfeiting and fiat currency. With fiat currency the value is always known. With medals and other non-currency mediums the value isn’t always known or easily known.

 

[joepistole]

This is a common practice, a large number of silver and gold coins have formal denominations of much lower than the real value. If some of these special coins have not been named "Wiener Philharmoniker" but also "Liberty dollar", ok, this could have been used by some filthy prosecutor to justify a "counterfeiting" accusation, but it is obviously nonsensical.
Of course, I'm a stupid person by definition, but what was unreasonable in my stupid consideration remains your secret. Probably I'm not worth to be educated about this.
Fine that we agree about this, but, no, I don't think they are exclusive. They are simply different, and one can favour one thing and be against the other without any turnover.
Ok, now, please, justify, in a similar way I have done, why you believe I think it would prevent inflation given that I have already repeatedly mentioned several things which can lead to increasing prices. As well why you think that I believe that gold has some sort of magical properties, despite the fact that I have often used the word "commodity" instead of gold, and see the only advantage of gold I see in its not at all magical natural properties - a high value concentrated in a small weight and volume, thus, something which can be hidden from looting policemen and other criminals and taken along when running away from persecution, low costs for storage, stability. On the other hand, gold has the disadvantage that it is very concentrated in the hand of few big players, thus, there is a large danger of speculative and political price manipulations.
Sorry, but I son't remember to have not made such arguments. I remember to have objected that you have started your statistics at a sharp local maximum and at the end of your statistics there is a sufficiently strong minimum, which is not a good idea if you want to estimate average rates.
Ok, but I don't have made it, and wonder which of my claims could have been misinterpreted in such a way.
Sorry, I have simply objected agains starting statistics with a sharp peak once the end of statistics is a low. This is what cheaters do if they want to create the impression that the average rate is low.
Ok, the I would guess fourth repetition:
It does not protect agains price oscillations usual for commodities. It does not protect against long term changes in value for technological reasons and a changes in uses. So, if gold becomes somehow necessary in a new technology, the price will raise, if it is no longer used to store value, its price will go down, and so on. It does not protect against speculative price manipulations. All this can easily give 20% rates in some years, but also -20% in other years.
It protects - up to some degree (given that governments can stop the backing whenever they want) - from loss of value by excessive money printing. Which is what Mises names inflation.
The highest inflation seen in the US ever occurred in the mid 1800’s when inflation rate reached 40% and under the gold standard. Nor has gold offered inflation protection after the gold standard was abandoned in 1973, as previously proven.
Hm, comparing
http://goldsilverworldscom.c.presscdn.com/wp-content/uploads/2012/07/gold_price_chart_200_years_1800-2012.gif with
https://upload.wikimedia.org/wikipedia/commons/2/20/US_Historical_Inflation_Ancient.svg
it looks like the two peaks near 1865 are somehow related. And the question appears why there was a gold price of 50$ if gold was backed all the time by 20$? Who was so stupid to buy gold for more than 50$ if he could simply get it for 20$?
Two variants come into mind: Or there was no de-facto gold backing at that time, or the gold backing has changed.
PS: https://d1w116sruyx1mf.cloudfront.net/ee-assets/channels/article_default/140505chart1.jpg claimes "1862-1878 Paper money issued but not backed by precious metals"

That is largely a bunch of nonsense and references from gold sellers who always see gold prices rising and have almost always been wrong and known for being factually incorrect are hardly convincing evidence. The unfortunate bottom line for you is that gold has never been an effective inflation hedge nor will it ever be an effective inflation hedge.

The fact you now acknowledge that gold is subject to wild variation in pricing makes gold no better and certainly a lot worse that the current system of fiat currencies. As I previously pointed out gold suffers from the same pricing variability we see in bitcoins. Fiat currencies have been and remain better stores of value than either gold or bitcoins. That is the unpleasant fact for you and those of your ilk.

Two, there is nothing wrong with the current fiat currency system where the money supply and demand is managed according to economic need. In the US and many other countries monetary policy has been entrusted with highly qualified experts and removed from or to a large degree and insulated from political manipulation and influence. And as I previously posted, there is no solution, gold or otherwise, which will protect us from human malfeasance. But you and those like you seem to think there is something magical about gold which provides some sort of protection from human malfeasance, and you have absolutely no evidence to back up that very magical belief.

 

[Schmelzer]

Well, just because you don’t like numbers it doesn’t make them irrelevant.

I'm a mathematician by education, so your guess that I don't like numbers is simply cheap rhetorics. I know how one can cheat with statistics, so I don't believe in everything sold to be "empirical data". And the focus of my remark was a different one: Your accusation that these numbers are "unpleasant facts for you", which is simply a gross distortion of what would be really unpleasant for me.

As previously proven, in the 35 year period between 1980 and today, gold didn’t keep pace with inflation.

And as previously criticized, looking at
http://goldsilverworldscom.c.pressc...2/07/gold_price_chart_200_years_1800-2012.gif it seems not a good idea to start 1980 and stop today to estimate reasonable averages.

It makes more sense to take a look at the complete history, where you can find quite large volatility, but this is an oscillation which in the long time average does not lead to large losses. But at the end, for fiat money, you see a smaller but constant loss. It is this systematic loss against which a gold-backed currency protects.
https://www.caseyresearch.com/articles/time-to-admit-that-gold-peaked-in-2011-1 nicely illustrates how this sums up.

Well, as previously noted, these “price oscillations” goes against your notion of your earlier notion that gold has some innate consistency of value.

Except that I never had it. Of course, gold has some value even if it is not used as a currency. But this basic value does not give any warranty of a constant price - which is a triviality which holds for every commodity.

But a 35 year period isn’t an aberration.

The choice of the start is an abberation. And, given that gold miners are claimed to make losses now, the actual price is an abberation too - in the other direction. What would be much more natural - omitting problems how to define averages - would be to compare a peak with a peak. What does this give? An almost ideal fit with the inflation: https://www.caseyresearch.com/articles/time-to-admit-that-gold-peaked-in-2011-1

And now you are moving from gold to a “basket” instead of the gold you had previously advocated. What’s in this basket? Whatever commodity you put into the basket will have some price volatility.

If what you care about is not the preservation of value over long periods, but volatility, then gold is certainly a bad choice. Inflation (in the meaning used by Mises) is about systematic loss of value, not about volatility. Each commodity taken alone has a large volatility (gold even greater than average), but the effect of using a basket is that the volatilities of different commodities differ and at least partially compensate each other, so that the volatility of the basket is much lower.

The best solution is the solution already in place, managed fiat currencies whereby the currencies are controlled by central banks. It has worked very well.

As long as one believes that the government will behave appropriately, and is ready to accept a 2% inflation simply as a fee for using these money, one can live with this. I would suspect that in future the role of state currencies will decrease even more. Even today it is an anachronism that one has to wait days for a money transfer instead of seconds. And in the age of the internet it will be not possible to prevent, for a long time, that people will have accounts splitted between various currencies of choice of the customer. Or, instead of currencies, to use commodities or baskets of commodities of the own choice for savings.

And imagine that I can pay in the shop with my card and the bank automatically changes the necessary part of my basket into the official currency for a negligible fee, and all my income is automatically transferred into this commodity basket, I couldn't care less about what is the official currency - at least for my savings, the inflation rate would be irrelevant.

In general, I think that the role of currencies is overestimated. If the dollar is no longer the base for international trade, this will be a serious loss for the US, and, of course, if some Ghaddafi plans an alternative gold-backed currency which is considered dangerous for worldwide dollar hegenomy, he will be killed to avoid this, but I doubt that this loss, taken alone, will be fatal for the US.

What is more fatal is that the military-industrial complex of the US is so corrupt that, with some close to 50% of the worlds military budget, it is not able to create a decisive domination against the much lower Russian budget. Which is IMHO not evidence of a super-efficiency of the Russian military, but of a super-inefficiency of the American one.

They expand the money supply as dictated by economic need and they contract the money supply as dictated by economic circumstance – it’s that old Keynesian thing.

I would formulate it differently. They know that robbing too much is killing the hen which lays golden eggs, thus, have made a decision about an inflation rate which the sheeple are ready accept. Reasonable criminals, who care about their long time income, are of course much preferable to irrational criminals. So, Obama is less evil than Mugabe. If Obama steals some 2% or so, ok, I can live with this and use the American $, if Mugabe tries to steal 98%, I have to defend myself and will not use the Simbabwe $.
Thus, the more rational criminals will not take too much. This is what dictates their choices. If there would be deflation, because of technical progress which makes not only computers but much more things much better but cheaper, they can rip a lot with a 2% inflation, if there is a crisis, they can take less, so, in this sense their takings depend on economic circumstances.

But there is no protection from human malfeasance (e.g. Mother Russia) no matter what kind of currency system is used by virtually every nation on the planet. If you are looking for some panacea which eliminates the need for responsible decision making, well that panacea just doesn’t exist.

That's really laughable - to suspect a libertarian to look for panaceas which eliminates the need for responsible decision making. You have not got a main point of libertarian ideology - namely that people should be free to make their own decisions, but responsible for the bad effects of these decisions.

It is this responsibility, which, according to libertarian ideology, makes the whole society more successful - by the natural education related with this responsibility, which hopefully happens with small money during childhood, as well as by the redistribution of power to make decisions from those who make bad decisions (and have to pay for this) to those who make better decisions.

You cannot make a law or create a system which ensures people will always act responsibly. That system just doesn’t exist anywhere, it has never existed, nor will it ever exist.

Full agreement.

 

[Schmelzer]

Except you believe gold offers some sort of magical protection from inflation.

Not magical at all. If you can really go with your dollar to the bank an buy gold for the fixed price of 20$, this protects you against inflation toward a gold price of 1000$. And even if the gold price oscillates, this protection remains.

And where, other than the Mother Russia is that the case?

Actually nowhere, Russia has also a fiat currency. Novorussia may become a difference - actually they have no official currency, and several currencies (Grivna, dollar, euro, ruble) can be used.

Below is a picture of the currency which got Mr. von NotHaus arrested and convicted. NotHaus was arrested and convicted of counterfeiting for his coinage, not the printed dollars you printed. That's another oops. There are coins which resemble NotHaus's coins and they are called Liberty Dollars because they picture Lady Liberty. It really is a pretty clear case of fraud and counterfeiting. That's why he is in jail.



“A federal grand jury brought an indictment against von NotHaus and three others in May 2009 in United States District Court in Statesville, North Carolina,[24] and von NotHaus was arrested on June 6, 2009. Bernard von NotHaus is charged with one count of conspiracy to possess and sell coins in resemblance and similitude of coins of a denomination higher than five cents, and silver coins in resemblance of genuine coins of the United States in denominations of five dollars and greater, in violation of 18 U.S.C.§ 485, 18 U.S.C.§ 486, and 18 U.S.C.§ 371; one count of mail fraud in violation of 18 U.S.C.§ 1341 and 18 U.S.C.§ 2; one count of selling, and possessing with intent to defraud, coins of resemblance and similitude of United States coins in denominations of five cents and higher, in violation of 18 U.S.C.§ 485 and 18 U.S.C.§ 2; and one count of uttering, passing, and attempting to utter and pass, silver coins in resemblance of genuine U.S. coins in denominations of five dollars or greater,” https://en.wikipedia.org/wiki/Liberty_Dollar#Bernard_von_NotHaus_v._the_U.S._Mint
So yeah, LOL...

So we see that the US imprisons even completely innocent people, using manipulation of the law.

The picture you show is clearly different from actually valid US coins. At least I find no similarity with anything at https://en.wikipedia.org/wiki/Coins_of_the_United_States_dollar So the accusation that this was counterfeiting is completely meaningless. It was obviously a currency different from the US dollar.

It is quite interesting that you publish evidence that somebody is imprisoned in the US, who is quite obviously innocent, and you LOL.

Then how do you explain bitcoins? It’s perfectly legal in the US and many other countries to trade bitcoins. Are bitcoins not a currency?

They are. The problem is that the US has no possibility to make a raid against bitcoin. As they have made it against https://en.wikipedia.org/wiki/Liberty_Reserve There is no bitcoin central you can raid, nor in the US, nor in the US colony Costa Rica, where the US can do what they like, not even in "Mother Russia", China or Northcorea.

Further, why is that important? I can any day of the week buy any currency in the world and trade it. So why is that important to your beliefs with respect to fiat currencies? With a click of a few buttons I can take positions in the currency of any nation on the planet.

I agree that the importance of currencies is decreasing. Because of the internet.

Ironically, you have just made the case for laws against counterfeiting and fiat currency. With fiat currency the value is always known. With medals and other non-currency mediums the value isn’t always known or easily known.

What is ironical here? I have no problem with laws against counterfeiting, I have only a problem with the application of this law against people who start to emit an obviously different currency. If he would really counterfeiting, you would be unable to distinguish the counterfeited money from actually used US coins by presenting a picture of them.

The aim to have money in a form which makes it easy to identify the value has always been the reason for making coins. And the states who have pressed coines have always liked the cheat. But this is, of course, no argument in favour of fiat money. Because in this question there is no difference to gold-backed money.

 

[joepistole]

I'm a mathematician by education, so your guess that I don't like numbers is simply cheap rhetorics. I know how one can cheat with statistics, so I don't believe in everything sold to be "empirical data". And the focus of my remark was a different one: Your accusation that these numbers are "unpleasant facts for you", which is simply a gross distortion of what would be really unpleasant for me.

Well if that is so, it isn’t evident in your posts. As previously noted, the people you admire, the Austrians didn’t believe economic data (i.e. big data) could be meaningfully analyzed, their preferred method was the finger in the wind prognostication, something akin to dowsing and not rooted in empirical analysis.
What you don’t believe is scientific analysis in favor of some fringe beliefs which cannot be supported empirically.

And as previously criticized, looking at
http://goldsilverworldscom.c.presscdn.com/wp-content/uploads/2012/07/gold_price_chart_200_years_1800-2012.gif it seems not a good idea to start 1980 and stop today to estimate reasonable averages.
It makes more sense to take a look at the complete history, where you can find quite large volatility, but this is an oscillation which in the long time average does not lead to large losses. But at the end, for fiat money, you see a smaller but constant loss. It is this systematic loss against which a gold-backed currency protects.
https://www.caseyresearch.com/articles/time-to-admit-that-gold-peaked-in-2011-1 nicely illustrates how this sums up.

No your belief doesn’t make sense. Thirty five years is not insufficient and you want to keep mixing regulated pricing in with free market pricing and cherry picking and inventing numbers. You cannot do that honestly if you are indeed a mathematician as you claim to be.
As previously pointed out, you are trying to cherry pick your way through history. Commerce occurs every day. When people want to buy groceries or receive medical treatments or any of the other myriad services they use daily, they cannot wait a few years or a few decades on the prayer gold might through some quirk of fate actually reach parity with gold before buying those goods and services. The unfortunate fact for you is that volatility in gold makes it unsuitable as a currency. You don’t have to be a mathematician to look at historical gold prices and come to that realization. Gold clearly doesn’t provide the protection you believe it does.
Below is the correct historical pricing of gold. Unlike your chart the one below isn’t fudged to advance an ideology.

Except that I never had it. Of course, gold has some value even if it is not used as a currency. But this basic value does not give any warranty of a constant price - which is a triviality which holds for every commodity.

There is no basic value. That’s part of your magical thinking. Gold is no different from any other commodity. It’s all supply and demand.

The choice of the start is an abberation. And, given that gold miners are claimed to make losses now, the actual price is an abberation too - in the other direction. What would be much more natural - omitting problems how to define averages - would be to compare a peak with a peak. What does this give? An almost ideal fit with the inflation: https://www.caseyresearch.com/articles/time-to-admit-that-gold-peaked-in-2011-1

Unfortunately for you, it isn’t an aberration. It’s an historical fact. As previously pointed out, consumers can’t wait several decades to buy food or other goods and services on the prayer gold may be worth what someone paid for it.

If what you care about is not the preservation of value over long periods, but volatility, then gold is certainly a bad choice. Inflation (in the meaning used by Mises) is about systematic loss of value, not about volatility. Each commodity taken alone has a large volatility (gold even greater than average), but the effect of using a basket is that the volatilities of different commodities differ and at least partially compensate each other, so that the volatility of the basket is much lower.

Well, we are talking currency and not long term investments. When people are hungry, they cannot wait a few decades to buy the food they need to sustain their bodies or pay for the energy they need to heat their homes.
Let’s talk a moment about “systematic loss of value”. That only occurs if you take your dollars and stick them in your mattress. If you invest your dollars savings account or bond investments, the interest earned covers anticipated inflation. You only risk “systematic loss of value” if you stuff your money in a mattress or make speculative investments in commodities (e.g. gold).
Interest Rate = Anticipated Inflation + Risk Premium (e.g. Default risk) + Cost of Money (i.e. Desired profit) + Transaction Costs.
So just putting your money in the bank will cover any “systematic loss of value” over any significant period of time.
“economists generally agree that the interest rates yielded by any investment take into account:

• The risk-free cost of capital
• Inflationary expectations
• The level of risk in the investment
• The costs of the transaction”

https://en.wikipedia.org/wiki/Interest_rate#Market_interest_rates
So why do you need to speculate in gold? Why do we need gold as a currency? The answer is we don’t. And that is why no serious academic or businessperson takes what you are advocating seriously.

As long as one believes that the government will behave appropriately, and is ready to accept a 2% inflation simply as a fee for using these money, one can live with this. I would suspect that in future the role of state currencies will decrease even more. Even today it is an anachronism that one has to wait days for a money transfer instead of seconds. And in the age of the internet it will be not possible to prevent, for a long time, that people will have accounts splitted between various currencies of choice of the customer. Or, instead of currencies, to use commodities or baskets of commodities of the own choice for savings.

Well it has worked well for the US for almost a century. Further, there is no 2% fee. The Federal Reserve has chosen to maintain a 2% inflation target as a hedge against deflation. Deflation is a severe and significant risk. That’s why the Fed keeps a modest hedge against deflation. The Fed wants to prevent a deflationary spiral (i.e. a death spiral). A 2% inflation rate gives them that hedge. It’s a conscious decision.
You need to consider where you live. Money transfers where I live take only minutes to a few hours. Where you live isn’t representative of the world if it takes you days to do a money transfer, you are not living in the modern world. And as I said before, it’s fairly easy to invest in currencies of choice today in a matter of seconds or minutes. I think that is a function of where you live.

I couldn't care less about what is the official currency - at least for my savings, the inflation rate would be irrelevant.
In general, I think that the role of currencies is overestimated. If the dollar is no longer the base for international trade, this will be a serious loss for the US, and, of course, if some Ghaddafi plans an alternative gold-backed currency which is considered dangerous for worldwide dollar hegenomy, he will be killed to avoid this, but I doubt that this loss, taken alone, will be fatal for the US.

LOL, except that isn’t true. As previously explained inflation rates are important and so are interest rates and the US Dollar is still the world reserve currency and used heavily in foreign trade – unlike your beloved ruble. LOL…the Dollar isn’t threatened by gold. Ghaddafi was captured and killed by his own people, not by any foreigner.

As What is more fatal is that the military-industrial complex of the US is so corrupt that, with some close to 50% of the worlds military budget, it is not able to create a decisive domination against the much lower Russian budget. Which is IMHO not evidence of a super-efficiency of the Russian military, but of a super-inefficiency of the American one.

LOL…yeah and you believe Americans caused the overthrow of Putin’s Ukrainian puppet. Yeah, I know you love Mother Putin and hate America. But that doesn’t make your machinations real.

 

[joepistole]

As I would formulate it differently. They know that robbing too much is killing the hen which lays golden eggs, thus, have made a decision about an inflation rate which the sheeple are ready accept. Reasonable criminals, who care about their long time income, are of course much preferable to irrational criminals. So, Obama is less evil than Mugabe. If Obama steals some 2% or so, ok, I can live with this and use the American $, if Mugabe tries to steal 98%, I have to defend myself and will not use the Simbabwe $.
Thus, the more rational criminals will not take too much. This is what dictates their choices. If there would be deflation, because of technical progress which makes not only computers but much more things much better but cheaper, they can rip a lot with a 2% inflation, if there is a crisis, they can take less, so, in this sense their takings depend on economic circumstances.
That's really laughable - to suspect a libertarian to look for panaceas which eliminates the need for responsible decision making. You have not got a main point of libertarian ideology - namely that people should be free to make their own decisions, but responsible for the bad effects of these decisions.
It is this responsibility, which, according to libertarian ideology, makes the whole society more successful - by the natural education related with this responsibility, which hopefully happens with small money during childhood, as well as by the redistribution of power to make decisions from those who make bad decisions (and have to pay for this) to those who make better decisions.

That is just more typical libertarian nonsense. Libertarianism is hot mess of contradictory beliefs based on magic. Libertarianism suffers from the same maladies which affected communism. They both are based on the belief that suddenly humans will stop acting like humans. You do this and that and then suddenly magic happens. Well magic doesn’t happen and people don’t stop acting like people.

 

[Michael]

LOL, ok another straw man. Do you have a real life example of this or did you just make it up like you usually do?

As Stadiums Vanish, Their Debt Lives On

The Giants Stadium is the granddaddy of phantom facilities. Taxpayers in New Jersey, already under pressure from declining local government revenues, this year will pay $35.8 million in principal and interest on the $266 million in remaining bonds for the Meadowlands Sports Complex, which opened in 1976 and includes the Izod Center and a horse racing track. Those bonds will not be paid until 2025.
Opened: October 10, 1976
Closed: January 3, 2010 (final game)
Demolished: February 4, 2010 - August 10, 2010

So, tell me Joe, why does a 19 year old kid, barely making ends meet, barely getting by in life, working in 2015 'owe' a portion of their labor towards a Stadium they'll never see, never used, probably never wanted to use, never had a vote on and is nothing but a distant memory in the minds of their decrepit Baby-Generation Grandparents? Explain to me the 'owing' part.

In the REAL world, some 19 year old is being forced to pay for something she never used and may have never wanted to use. She's paying more for her University and receiving LESS in return for her money. Why? Because your generation thought they'd sell Bonds against her labor so you could enjoy yourself when you were 19. And, worse still, you're sick-enough-in-the-head such that you'd happily send the BlueKluxKlan over to shoot her in the face if she refused to pay YOUR bill.
That's sick Joe.
A mental sickness.
You're mentally deranged.

Of course, you were made to think this way (Thank you Government Schools - you did get one thing to work).

Well, one day will come (perhaps in your lifetime, or perhaps not) when a 'vote' will be taken to 'sell Bonds' against your current assets. Then the BlueKluxKlan will come over and evacuate you from what was your home (which has been sold off to a Chinese family to pay for your new home, a Government-run Soylent Home). And, if you refuse, you'll be shot in the face. Just like that 19 year old you think 'owes' you something for having the misfortune of being born in the same town as you.

THIS is the society your generation built for us. It's the one we all have to live in now. And the State has no qualms against murdering its tax-chattel right - the USSA does run the largest Prison Industrial complex in human history.

As an aside, do you see "The" Trump's political success? See how people are waving the flag for Bernie "Redistribution" Sanders. Good, then you understand that others are watching and watching closely. The USA is ripe for a demagogue and it's a story as old as time. I give it 30 - 40 years and Muricans will happily sign over what little rights they have left for a piece of the redistribution pie.

 

[Michael]

Venezuela's Hyperinflation Crack-Up Boom On Its Way To Outer Space
07/25/2015

There's nothing 'magical' about gold, silver or other commodities as money. That's WHY they make good currencies. There's no need to use violence against people in order to coerce them into using them as currency. They are derived naturally - through voluntary agreement. I'd add, in the digital age, new currencies can be developed similarly. Therefor they are moral as a medium of exchange.

Fiat currency OTOH is based on violence. And is inherently immoral and often goes hand in glove with nationalism. It brings out the very worse aspects of society. Often selling one generation a mindful of doublespeak in order to talk them into selling out their own children. And, history shows, ALL fiat currencies go to zero when the violence used to maintain them collapses in on it's oxymoronic self.

 

[Michael]

That is just more typical libertarian nonsense. Libertarianism is hot mess of contradictory beliefs based on magic. Libertarianism suffers from the same maladies which affected communism. They both are based on the belief that suddenly humans will stop acting like humans. You do this and that and then suddenly magic happens. Well magic doesn’t happen and people don’t stop acting like people.

Stawman much?

"Libertarianism" is based on the use of sound money derived naturally, Law that protects private property and upholds contract and the freedom to trade with people in said money within said law. There's nothing 'magical' about it and it is the basis of society.

Keynesianism on the other hand is an Economic Death Cult. It's even named after a man just like the founder of any other subjective belief system. This pseudo-religious soft science is full of 'magic' thinking. You'll hear these crackpot Central Bankers referring to how "the markets" 'feel worried' or "the markets" have 'confidence' and etc.... They're completely full of nonsense. Markets do not collectively 'feel' anything. They are constantly missing their own predictions. All they can do is attempt to manipulate the masses and use the Police State to force people into particular behaviors (see: tax breaks, tax penalties and the Prison Industrial Complex). It's why there's not a QE1 but a QE1, QE2, Operation Twist, QE3, and soon QE4.... and etcetera.

 

[iceaura]

There's nothing 'magical' about gold, silver or other commodities as money.

That's what people have been trying to tell you. All money is fiat money, and it all requires a State. Otherwise, you are just bartering commodities, and you will never build an industrial economy on barter of commodities.

There's no need to use violence against people in order to coerce them into using them as currency. They are derived naturally - through voluntary agreement.

All money is established and defended by State edict and State violence, usually at the request of the people who need money - long range traders, manufacturers, stadium builders, etc.

The Giants Stadium is the granddaddy of phantom facilities.

The Giant's Stadium was contracted and financed in US dollars under the gold standard - the dollar was not taken off of gold until 1976.

There is no substitute for good government, no magic bullet that will prevent corrupt and incompetent and power-hungry government from wrecking people's lives.

Venezuela? An example of the effect of tying one's currency and economy to a single commodity, in this case oil: https://en.wikipedia.org/wiki/Dutch_disease

And of course another casualty of the Reagan Era - as with so many other North and South American countries, including the US, Venezuela's currency and economic health were pretty good until sometime in the early 1980s.

 

[joepistole]

Stawman much?

"Libertarianism" is based on the use of sound money derived naturally, Law that protects private property and upholds contract and the freedom to trade with people in said money within said law. There's nothing 'magical' about it and it is the basis of society.

Keynesianism on the other hand is an Economic Death Cult. It's even named after a man just like the founder of any other subjective belief system. This pseudo-religious soft science is full of 'magic' thinking. You'll hear these crackpot Central Bankers referring to how "the markets" 'feel worried' or "the markets" have 'confidence' and etc.... They're completely full of nonsense. Markets do not collectively 'feel' anything. They are constantly missing their own predictions. All they can do is attempt to manipulate the masses and use the Police State to force people into particular behaviors (see: tax breaks, tax penalties and the Prison Industrial Complex). It's why there's not a QE1 but a QE1, QE2, Operation Twist, QE3, and soon QE4.... and etcetera.

LOL...truth isn't a straw man Michael. It's just the truth. Keynes general theory is supported with centuries of data unlike libertarian beliefs.

It is a fact, that like communism, libertarian theology is based on naive, overly simplistic and blatantly false beliefs about human behavior and thus are heavily dependent on magic.

How about some honesty and rational thought from you Michael?

 

[iceaura]

I would have no problem with a fiat currency which would be established without the use of force. That means, leaving the people the freedom to use whatever currencies they prefer, and "enforcing" the use of the states currency only via wages for those employed by the state and for receiving payments (taxes, fees) by the state.

That's how the US dollar works.

But all money is established by a State and defended by State violence - by fiat, in your terms.

It makes more sense to take a look at the complete history, where you can find quite large volatility, but this is an oscillation which in the long time average does not lead to large losses. But at the end, for fiat money, you see a smaller but constant loss. It is this systematic loss against which a gold-backed currency protects.

Small, steady loss is much better for prosperity than boom and bust. That's why so many countries quit or reduced backing their money with some commodity, like gold, in the wake of the Great Depression - a painful lesson in the "gold standard", among other underappreciated hazards (such as unregulated moneylenders).

For a full generation, 50 years, as long as adults who remembered the Great Depression were alive and running things, most of the Western world's currencies were stable. Then came Reaganomics, America's gift to world via the wingnut Chicago School, and the benighted Austrians.

 

[Michael]

That's what people have been trying to tell you. All money is fiat money, and it all requires a State.

No it's not and no it does not "require" a State. Explain to me how bitcoin 'requires' a State. Explain to me how bitcoin is 'fiat'. It's not fiat and it does not require a State. Trade in natural money predates the development of States.

A State is a geopolitical area of land within which a group of people called 'the government' are legally allowed to initiate violence against other innocent humans. Why you seem so enamored with such a concept is beyond me. The USA was founded on the principle of a LIMITED government. And let's be clear - that was a fluke. A one off. We are now returning to the norm: Statism. The USSA is the largest government in the history of humanity. With people like yourself leading the charge to enlarge it more.

 

[Michael]

Small, steady loss is much better for prosperity than boom and bust. That's why so many countries quit or reduced backing their money with some commodity, like gold, in the wake of the Great Depression - a painful lesson in the "gold standard", among other underappreciated hazards (such as unregulated moneylenders).

The Great Depression was caused by the Central Reserve Bank. It had nothing to do with the gold standard.

You are making a supposition that violence is 'required' to create a currency - and you're wrong. Fiat currency and the State's that make them will not last another 100 years. Technology will supersede them both. While we'll always need money - we will not always need fiat currency. Thus, we WILL be moving past the use of violence against innocent groups of humans, dragging you kicking and screaming into the future, whether you like it or not. How? At some point we will simply have nothing to do with you.

....even if it means we simply wait you out - you'll die off eventually.

 

[Michael]

Venezuela? An example of the effect of tying one's currency and economy to a single commodity, in this case oil: https://en.wikipedia.org/wiki/Dutch_disease

Oh really? Explain Finland.

 

[Michael]

LOL...truth isn't a straw man Michael. It's just the truth. Keynes general theory is supported with centuries of data unlike libertarian beliefs.

It is a fact, that like communism, libertarian theology is based on naive, overly simplistic and blatantly false beliefs about human behavior and thus are heavily dependent on magic.

How about some honesty and rational thought from you Michael?

You asked for an example of Bonds being repaid and I gave it to you. There's MANY more where that came from. So, we have an example of a worker being forced to repay Bonds on something their Grandparents generation enjoyed, but that they themselves never even saw, let alone used or voted on.

So, tell me why a 19 year old 'owes' money on something she's never seen, used, wanted to use or maybe even heard of. Why does she have to pay YOUR generations' bills Joe?

Oh, and get this, she's also locked out of most of the markets through regulation your generation enacted ensuring she'll never afford a family of her own and if she has asshole parents and moves out, it'll be to pay your generation of Baby-SlumLord's rent. How benevolent you Progressives are.