Irredeemable Currency Session 1, 1/2

Posted by dbhalling 9 years, 4 months ago to Economics
51 comments | Share | Flag

Keith Weiner Economist and Objectivists talks about our monetary system - video.
SOURCE URL: https://www.youtube.com/watch?v=Qrsbr8HQLGY


Add Comment

FORMATTING HELP

All Comments Hide marked as read Mark all as read

  • Posted by j_IR1776wg 9 years, 4 months ago
    MikeMarotta posted this "The US Mint will trade you gold and silver for your Federal Reserve Notes on demand at the market price." How generous the Mint is. Some necessary facts - In 1913, the price of gold was $18.92 according to http://www.nma.org/pdf/gold/his_gold_pri...
    According to this site, the dollar is now worth $0.04 compared to 1913. http://www.comparegoldandsilverprices.co...
    So if the spot price of gold is prox. $1193.00 http://www.kitco.com/charts/livegold.htm...
    and I take my one dollar to the Mint, and one troy ounce contains 31.103 grams, will they really give me $1/$1193 X 31.103 = 0.02607 grams of gold? I guess if you cannot dazzle them with your brilliance, you will have to baffle them with your bullshit. Minus 1 for you Mike.
    Reply | Mark as read | Best of... | Permalink  
    • Comment hidden by post owner or admin, or due to low comment or member score. View Comment
    • Posted by Robbie53024 9 years, 4 months ago
      What's your point? If you get spot, you're doing better than at a dealer where you will only got spot+.
      Reply | Mark as read | Parent | Best of... | Permalink  
      • Posted by j_IR1776wg 9 years, 4 months ago
        The essence of the crime of counterfeiting currency is theft. This fake money, whether coined, printed, or digitized, waters down the value of the existing real money by reducing the amount of goods that real money can buy. The Federal Reserve Bank has reduced the value of the dollar by 96% since 1913.Mike seems to think this is no problem. Do you???
        Reply | Mark as read | Parent | Best of... | Permalink  
        • Comment hidden by post owner or admin, or due to low comment or member score. View Comment
        • Posted by Robbie53024 9 years, 4 months ago
          And the money pumping has driven up the stock market.

          While I agree that inflation makes the value of a later sum of currency less than a current sum this has been relatively modest as of the past several years. And in the past year or so, the value of gold compared to the dollar has gone down. Thus, your hard currency has "inflated" more than has the actual dollar lately.

          The money supply needs to increase at the rate of the economic activity. If it increases more, that will lead to inflation. That's not good. If it does not increase at the rate of economic activity, then further growth will be stymied. The benefit of a hard currency like gold is that it is relatively stable, and as it increases in value, it incentivizes the mining of more, and as it decreases, it disincentivizes mining. This is natural regulation. What the Fed does is artificial and is used to benefit those who don't deserve it, and punish those who don't deserve to be punished.

          I don't know whether MM feels this is not a problem or that it is. What I know is that this isn't an easy issue and there isn't a clear cut course to take to unravel this without extreme pain.
          Reply | Mark as read | Parent | Best of... | Permalink  
          • Posted by j_IR1776wg 9 years, 4 months ago
            `Complicated indeed Robbie. The pumped up stock market has been caused by the the Federal Reserve Bank's stimulus program which is really Keynesian "priming the pump" as partially described here...
            "...So there's a vicious circle at work here: people hoard money in difficult times, but times become more difficult when people hoard money.

            The cure for this, Keynes said, was for the central bank to expand the money supply. By putting more bills in people's hands, consumer confidence would return, people would spend, and the circular flow of money would be reestablished. Just that simple! Too simple, in fact, for the policy-makers of that time.

            If this is the proposed definition and cure for recessions, then what about depressions? Keynes believed that depressions were recessions that had fallen into a "liquidity trap." A liquidity trap is when people hoard money and refuse to spend no matter how much the government tries to expand the money supply. In these dire circumstances, Keynes believed that the government should do what individuals were not, namely, spend. In his memorable phrase, Keynes called this "priming the pump" of the economy, a final government effort to reestablish the circular flow of money... "
            http://www.huppi.com/kangaroo/Keynesiani...
            The ability to expand the money supply without limits or any discipline coupled with unpayable runaway debt means that this will unravel with great pain. Its only a question of when and how bad.
            Reply | Mark as read | Parent | Best of... | Permalink  
            • Comment hidden by post owner or admin, or due to low comment or member score. View Comment
            • Posted by Robbie53024 9 years, 4 months ago
              Complicated indeed. I've been scratching my head over the past few years as to why we haven't been experiencing higher inflation. I think that Keith has part of the answer. It doesn't explain why gold/silver have been sliding of late. I wish I had an answer. I've not understood the fundamentals of the stock market that would keep things going up - other than that there's continually more money that's going into it. Likewise, I don't see why gold/silver have been falling - doesn't jibe with the overall economic environment. Everything seems to be upside down. This seems to be a consequence of Fed manipulation. To which I've made the call here for a lawyer to sue the Fed for losses on shorts that should have happened, but which the Fed has intentionally countered and manipulated the market. This market manipulation is going to lead to ruination, but not until after those who are "in the know" have sucked out all they can.
              Reply | Mark as read | Parent | Best of... | Permalink  
              • Posted by j_IR1776wg 9 years, 4 months ago
                +1 for you. I think we've all been scratching our heads on the flat inflation rate. I'd like your take on these possibilities.

                1) Could the debt be holding down the inflation rate?

                2) If the central bankers conspire to increase their money supplies at the same rate and keep their interest rates near zero, might that have a dampening effect on inflation? And might this also be keeping gold and silver trading in a narrow range?
                Reply | Mark as read | Parent | Best of... | Permalink  
  • Posted by $ MikeMarotta 9 years, 4 months ago
    Oh, come on! If I were not in a good mood tonight, I would give you a point down for not thinking about the empirical facts. The US Mint will trade you gold and silver for your Federal Reserve Notes on demand at the market price. If you don't like their prices, you can go to any coin store - I recommend ANA member dealers - and buy gold and silver coins or bars or rounds or whatever at the market price. So what if the US government is printing money? Everyone accepts it. And everyone knows what inflation is and adjusts accordingly.

    In point of fact, in 2009, I had a graduate class in international economics taught by a committed Marxist. He put up a graph of the Bush-Obama Bailouts. The money supply was tripling! He asked me and another (and better) conservative about the consequences and in 25 words or less we said that prices would triple. Here we are in 2014. Have prices tripled versus 2008?

    The fact that the US Dollar is accepted makes it good. That is the unplanned order of the free market. If you want to refuse dollars, you can. If you want me to document your software for your users, you can pay me in hard money. But I also take FRNs.
    Reply | Mark as read | Best of... | Permalink  
    • 10
      Posted by LetsShrug 9 years, 4 months ago
      Who grocery shops at your house?
      Reply | Mark as read | Parent | Best of... | Permalink  
      • Posted by edweaver 9 years, 4 months ago
        Some people walk around blind. They think the US is invincible. The dollar will always be the world currency. We are too good to fail. Shall I go on? It will be people like you & I that will have to cover the others asses when it does fail because we have taken steps to prepare. Wonder if we will help??
        Reply | Mark as read | Parent | Best of... | Permalink  
      • Posted by $ MikeMarotta 9 years, 4 months ago
        I do the shopping usually, unless we do it together, like a date. Prices are rising because of inflation. They have not tripled since 2009. Also, I charge more for my labor than I did in 2009, but not triple. That is the empirical test.

        (I also do most of the daily housework from cooking and dishes to vacuuming and ironing, and have for 38 years. My wife does a lot of things well. I fetched and carried for her when we built a deck on one house. We are building a home security system now. She likes to bake breads and desserts. She just does not find housework and homemaking satisfying. I do.)
        Reply | Mark as read | Parent | Best of... | Permalink  
        • Posted by LetsShrug 9 years, 4 months ago
          I don't give a shit who cleans your house.. I asked about grocery shopping.
          So...inflation doesn't devalue the dollar?
          Reply | Mark as read | Parent | Best of... | Permalink  
          • Posted by johnpe1 9 years, 4 months ago
            and beware -- who issues the inflation data? do we
            trust anything from the liars in this administration??? -- j

            Reply | Mark as read | Parent | Best of... | Permalink  
            • Comment hidden by post owner or admin, or due to low comment or member score. View Comment
            • Posted by Robbie53024 9 years, 4 months ago
              Prices have certainly gone up, and more than the official numbers, but what MM was describing is that the money supply has tripled, but prices have not tripled (thus, maintaining an even amount of purchasing per number of dollars). That would indicate that the economy has grown to offset the additional number of dollars - that clearly isn't the case. The other alternative is that someone is holding those dollars so that they aren't actually in circulation. We see that bank reserves have gone up - check. We also see that nations like China are holding dollars. Will they continue to do so? We better hope that they do. Should the banks reduce their reserves or other nations decide to switch from dollars to some other currency, we will be facing horrendous inflation. There's no way that the economy could grow and/or destroy that many dollars quickly enough not to have hyper-inflation.

              As for gold. If you could trade your dollars for a hard currency, then you would be protecting your purchasing power into the future, so why wouldn't you do so? A $20 gold coin from the 1800's could buy you a very nice suit. That same coin would still buy you a very nice suit today. Value has been retained, regardless of the exchange rate into our fiat currency.
              Reply | Mark as read | Parent | Best of... | Permalink  
    • Posted by $ blarman 9 years, 4 months ago
      One point to make here: most of that printed money never made it into the money supply. It was created by the Federal Reserve and used solely by the Federal Reserve to pay off its own debts!

      If all that printed money actually had hit the open market, you can bet you would have seen prices triple.
      Reply | Mark as read | Parent | Best of... | Permalink  
      • Posted by edweaver 9 years, 4 months ago
        IMHO, you are 100% correct. And the feds are going to have to take it back deflating currency or inflation will be rampant. Starting to see the effect right now. No win situation that is unless you enjoy stealing from you children and grandchildren via inflation.
        Reply | Mark as read | Parent | Best of... | Permalink  
    • Posted by coaldigger 9 years, 4 months ago
      I think that the dollar is good currently, despite our best efforts, because oil is only traded in dollars. An economic attack on the US would be to threaten that relationship, however since we are the greatest consumers of world production of almost everything, that would be suicidal. Of course, there are terrorists that think suicide is a virtue. Ultimately, I think the US dollar is backed by US nukes and we could effect some market corrections if more people realized it. That we could be the force of the greatest good on the planet does not mean that we could not also be equivalent in evil should our nice lives be threatened.
      Reply | Mark as read | Parent | Best of... | Permalink  
      • Posted by khalling 9 years, 4 months ago
        that is getting ready to change. Russia and China have formed a partnership saying they will not pay for oil in dollars anymore.
        Reply | Mark as read | Parent | Best of... | Permalink  
        • Comment hidden by post owner or admin, or due to low comment or member score. View Comment
        • Posted by Robbie53024 9 years, 4 months ago
          Ah, but your source of supply is the one who sets the terms, ultimately. As much as Venezuela hates the US, I doubt that they are going to accept the Ruble. The Yuan, perhaps.
          Reply | Mark as read | Parent | Best of... | Permalink  
    • Posted by Lucky 9 years, 4 months ago
      Another interesting MM post, many good ideas so I give 1p.
      But the central theme is wrong, -that- if you know inflation will happen you can plan for it. You can predict inflation, but not quantify it. My experience in corporate/economic planning is ok if it is very low, say under 1%. Inflation is a sort of animal with a life of its own, it is inevitable that people plan conservatively so anticipate high inflation, the outcome is that the inflation rate escalates and there is then the danger of currency and economic collapse. So, government takes some action, the public panic the other way, the economy swings into depression.
      The libertarians say that only governments cause booms and busts, I doubt that, but they certainly make them more frequent and probably more severe.

      The point about trading at the market price -yes but- consider Soros trading currency but government is bigger even than Soros, so the concept of market price with one enormous buyer/manipulator is hardly valid.
      Maybe this is a mis-statement of the proposition from Lets Shrug- inflation must increase at the rate at which money is created, well there may be some manipulation in definition, but it does not happen as blarman etc explain, and remember technological productivity is still working to reduce prices, the question is, how long can inflationary governments expect that productivity will continue to enable them to pull these counter-inflationary rabbits out hats?
      Reply | Mark as read | Parent | Best of... | Permalink  
      • Comment hidden by post owner or admin, or due to low comment or member score. View Comment
      • Posted by Robbie53024 9 years, 4 months ago
        Austrians believe that booms/busts are part of the business cycle, and meddling with the economy exacerbates those cycles. Trying to eliminate the busts just ends up making them even worse.
        Reply | Mark as read | Parent | Best of... | Permalink  
  • Posted by Herb7734 9 years, 4 months ago
    I've read all the comments, and while I consider myself to be a pretty bright guy, -- you've lost me. Rand was once asked to explain the essence of her philosophy while standing on one foot. She did so with alacrity. Can anyone here do the same with the economics of this discussion thread?
    Reply | Mark as read | Best of... | Permalink  
    • Posted by 9 years, 4 months ago
      I am not sure what you question is. But I thought the most interesting part was the explanation of how the US dollar became the world's reserve currency. This has been a huge advantage for the US, but it is likely to end within the next decade. When this occurs there are likely to be a lot of extra dollars no one wants anymore.
      Reply | Mark as read | Parent | Best of... | Permalink  
  • Comment hidden by post owner or admin, or due to low comment or member score. View Comment
  • Posted by Robbie53024 9 years, 4 months ago
    While I think that Keith has many good points, he is mistaken in a couple - had to get to part 2 to find them.
    1) Arbitrage compresses the spread not as he says, but because as a seller agrees to a contract he then reestablishes a new Ask at the Bid price, and as a buyer agrees to a contract he then reestablishes a new Bid at the Ask price. The other buyers/sellers then see these new prices and adjust accordingly.
    2) The cause of inflation relative to gold (or other commodity) is the relative amounts of each. It is because there are so many dollars compared to gold that the number of dollars required to purchase gold goes up. Yes, I agree with the mechanism of desirability of gold that causes the demand in the first place, but the amount of inflation will be dictated by the number of dollars available.
    Reply | Mark as read | Best of... | Permalink  
  • -2
    Posted by $ MikeMarotta 9 years, 4 months ago
    Kurt Weimar's mythological Eden Story about the origins of money is the same one that Karl Marx told. Ludwig von Mises also subscribed to it. Mises, of course, as a rationalist did not feel a need for empirical research. Marx was wrong, but at least he dug for empirical facts while at the British Museum reading books. Mises just invented (or borrowed, actually), a story that he felt was "consistent."

    That story does not explain why fiduciary contracts for future delivery of commodities were invented 2000 years _before_ "money". It does not explain why coins were not invented until 2000 years after silver and wheat were declared to be "money" (equally) in the time of Hammurabi but gold was not. It does not explain why when silver was the preferred and common medium across the Greek matrix c. 400 BCE, the soldiers in The Anabasis were happy to be paid in Kyzikenes, artificial electrum "staters" (about 1/2 a modern ounce). Those Kyzikenes were modern to them, but echoic of a payment common to mercenaries for 200 years - again, even after silver (primarily) and gold (secondarily) were struck.

    It is true that we live in a "winner take all" society where first place is valued disproportionately to second, third, etc. And it is true that societies have all manner of such norms in food, clothing, language, etc., which come and go in fashion.

    However, if it is _absolutely_ true as Kurt Weimar claims, then the US Dollar has been rationally chosen by most people in most places today to be at least one of the leading forms of money, if not the top if the heap.
    Reply | Mark as read | Best of... | Permalink  
  • -3
    Posted by $ MikeMarotta 9 years, 4 months ago
    When inflation is predictable, it can be calculated in advance. Catastrophic inflation is a different problem. It is highly predictable that winter is colder than summer. The recent snowstorm that slammed much of the northeast was a singular event, though, again, we know very well that these things happen every winter.

    Everyone talks about Weimar and the man with the wheelbarrow. Germany's money was worthless because Germany's gold went to England, France, et alia, to pay for all the civilian damage of World War One. When that happened, the people fell back on the silver and gold coins they had hoarded, and communities and others created their own ad hoc "Notgeld".

    On the other hand, Turkey just went to a "New Lira" (2005) at a million to one against the old. Unlike the other losers in World War One and then again in WW Two - and unlike modern Israel - Turkey did not demonetize its old currency. Inflation was a predictable factor in their economy. The same was true of Italy, Portugal, Spain, and some other poor nations. In Africa, many nations formed small currency associations and/or pegged their common issues to the French franc. The old Hong Kong Dollar was pegged to the US Dollar. And, of course, after losing World War Two big time, Japan kept its yen. Once equal in gold to a US gold dollar, the yen fell to more than 300 to the dollar. But Japan kept their "worthless" yen, honored their commitments, and worked their way out. It is now about 118 in the industrial nations and just under 100 in the "developing economies" where it is somewhat more highly valued. So, yes, the USA could do the same thing - and without the catastrophic and radical remedies advocated in the video.

    If government money were not any good, no one would take it. We would fall back to silver and gold or to other kinds of alternative currencies. This happened several times in the past. It goes on now with Time Dollars and Bay Bucks and maybe a dozen more that come and go. Nice as they are, they are emotional expressions, economic curios.

    As a numismatist I know quite well what money buys and bought -- and what forms money may have in the future. I have published on all of those topics. And I live in the USA. I mean, really, Halling, why should you care about the dollar? You do not even live here. You are an ex-patriot.
    Reply | Mark as read | Best of... | Permalink  
    • Posted by 9 years, 4 months ago
      Mike whether you can calculate inflation is irrelevant. What matters is that it is theft from every person who gets paid in dollars and has savings in dollars.
      Reply | Mark as read | Parent | Best of... | Permalink  
      • Posted by $ blarman 9 years, 4 months ago
        And the additional downstream effects. Businesses can no longer maintain even sales volumes and stay on an even keel. Inflation devalues buying power, so employees (rightfully-so) petition for raises at a minimum to counteract the inflation. This in turn necessitates growth in the business just to account for inflation - way before even accounting for raises, additional capital investments, etc.

        Inflation is a universally BAD idea. It devalues existing capital unnecessarily and the cascading effects only drive MORE inflation. It's also what leads to borrowing as an investment strategy, because you can use someone else's money more cheaply than your own!
        Reply | Mark as read | Parent | Best of... | Permalink  
        • Posted by $ jbrenner 9 years, 4 months ago
          Inflation is only a BAD idea for us. It empowers people who don't produce and save (i.e. people who mooch), and it empowers people who wish to be our overlords (i.e. people who loot). It is a particularly insidious weapon they can use against us. What I am writing reminds me of Francisco's conversation with Rearden during the money speech.
          Reply | Mark as read | Parent | Best of... | Permalink  
        • Comment hidden by post owner or admin, or due to low comment or member score. View Comment
        • Posted by Robbie53024 9 years, 4 months ago
          Likewise, unions are inherently inflationary. They petition for higher wages without corresponding increases in efficiency (in fact, they fight against increased efficiency, seeking to keep the maximum number of workers employed). This causes the costs of goods to rise, which causes an increase in prices.

          For a free-market business, increased productivity allows more to be produced with the same resources which lowers the costs of goods. This allows the business to pay their more productive employees more without causing inflationary pressure.
          Reply | Mark as read | Parent | Best of... | Permalink  
    • Posted by khalling 9 years, 4 months ago
      The currency we use is intricately tied to teh value of the US dollar. Furthermore, we are US citizens, we work and trade value for value in US dollars everyday.
      Reply | Mark as read | Parent | Best of... | Permalink  
    • Comment hidden by post owner or admin, or due to low comment or member score. View Comment
    • Posted by Robbie53024 9 years, 4 months ago
      How do you "predict" inflation and be correct? It used to be that the best that we could do was predict a general level of inflation - mild, average, high, hyper - but even that has been thrown into disarray lately. We "should" be facing high, maybe even hyper, inflation now, but we are at mild to avg. Makes no sense.
      Reply | Mark as read | Parent | Best of... | Permalink  
      • Posted by $ blarman 9 years, 4 months ago
        That is because most of the currency which got printed never made it into the market. They just used it to buy more currency. And yes, that last sentence describes not only EXACTLY what they did, but the absurdity of it as well.
        Reply | Mark as read | Parent | Best of... | Permalink  

FORMATTING HELP

  • Comment hidden. Undo