Political Crossfire Forums

[Atlas Bergeron]

Quote: For a couple of reasons. One, it's more convenient (think paper).
this has been prov-en numerous times.
1. You can peg gold, oil, or any other thing with actual value to paper -or- in the modern era you could easily make all transfers electronic and or digital. We are already going that direction in the market with credit cards etc.
Quote: Two, it's not a commodity, and its supply can be controlled.
The supply of real goods are also controlled--by how much of them there are. Plus, you have failed to show why this is a benefit.

Quote: Which would be fairly widely agreed-upon in short order, at which point standards would come to exist, at which point the point of using a commodity to facilitate other trades would become moot.
ok... so if it "becomes moot" then why did the government ever need to get involved? What moral authority do they have to initiate force against those who would wish to coin money if the results would be the same either way?

In essence, you are making your argument moot.

Quote: Tip: Firefox 2 has a real-time spell-check.
I'l lhvae to olook inot taht. :)

[Iriemon]

Atlas Bergeron wrote: Quote: For a couple of reasons. One, it's more convenient (think paper).
this has been prov-en numerous times.
1. You can peg gold, oil, or any other thing with actual value to paper -or- in the modern era you could easily make all transfers electronic and or digital. We are already going that direction in the market with credit cards etc.

No you can't easily peg transfers to commodities just because its electronic and digital.

Each vendors (depending upon its market power) could accept whatever commodity it wants. I go to Wal-mart, and it decides to have all its items priced in gold. Except one problem. I don't have my assets in gold I have them in silver, so I can't buy anything from Walmart without first transferring my silver assets to gold. So then we have to check the commodities exchange rate and I pay a % cut to have my silver asset exchanged to gold at the current market rate so I can buy the stuff at Wal-mart. That adds a transaction costs to every purchase I make right there. Then I have to suddenly worry about commodities futures and wonder if my silver assets are going to drop in value against the value of gold and other commodities.

Nobody is going to what to go thru that hassle so there will develop one fixed exchange commodity and that is probably gold. Saying you can use silver or oil is bulls**t because no one is going to accept them for payment.

So what you are proposing is that we back on the fixed gold standard.

Each bank will have to maintain a gold bullion reserve to protect the credit of its depositors. If you are going to have a federal insurance then the federal government will have to maintain bullion to back up its insurance. If the economy slumps there is no way to ease credit; if people hoard gold there will be massive price deflation and a depression.

It's recipe for another 1929. Since coming off the gold standard, there has never been a depression anywhere near like was experienced then. Why stop a system that has been clearly superior and return to a system that had major shortcomings that every nation in the world has abadoned, and with good reason.

[Atlas Bergeron]

Iriemon wrote: Atlas Bergeron wrote: Quote: For a couple of reasons. One, it's more convenient (think paper).
this has been prov-en numerous times.
1. You can peg gold, oil, or any other thing with actual value to paper -or- in the modern era you could easily make all transfers electronic and or digital. We are already going that direction in the market with credit cards etc.

No you can't easily peg transfers to commodities just because its electronic and digital.
I didn't say that. You were complaining how difficult they are to transfer and I was providing rebuttle. You should read the post before responding

Quote:

Each vendors (depending upon its market power) could accept whatever commodity it wants. I go to Wal-mart, and it decides to have all its items priced in gold. Except one problem. I don't have my assets in gold I have them in silver, so I can't buy anything from Walmart without first transferring my silver assets to gold. So then we have to check the commodities exchange rate and I pay a % cut to have my silver asset exchanged to gold at the current market rate so I can buy the stuff at Wal-mart. That adds a transaction costs to every purchase I make right there. Then I have to suddenly worry about commodities futures and wonder if my silver assets are going to drop in value against the value of gold and other commodities.
and this would be a problem for you no? Thus you would have a desire to wave this problem, no? If everybody else felt this way (as they probably would) then there are three possible outcomes that I can see.

1. A buisness develops which can electronically transfer these funds between differnt assets (i.e. from silver to gold) at low cost
2. Walmart and most other buisnesses accept almost any form of standard currency.
3. They don't accept any form of standard currency, and so people like you shop at stores which do. Once thier consumer base switches, stores like walmart either have to switch or loose out on a large portion of thier consumers.

Quote: Nobody is going to what to go thru that hassle so there will develop one fixed exchange commodity and that is probably gold. Saying you can use silver or oil is bulls**t because no one is going to accept them for payment.
I'm sorry, why is this again?

Quote: So what you are proposing is that we back on the fixed gold standard.
no, I am proposing that the government not interfere at all.

Quote: Each bank will have to maintain a gold bullion reserve to protect the credit of its depositors. If you are going to have a federal insurance then the federal government will have to maintain bullion to back up its insurance. If the economy slumps there is no way to ease credit; if people hoard gold there will be massive price deflation and a depression.
I have already responded to a majority of these on another post. In fact, i reposted my response. Please respond to that post.

Quote: It's recipe for another 1929. Since coming off the gold standard, there has never been a depression anywhere near like was experienced then. Why stop a system that has been clearly superior and return to a system that had major shortcomings that every nation in the world has abadoned, and with good reason.
I hardly believe that the current system is supperior to the one which existed after the 1900's. In fact, it is significantly less supperior. For one, no one really knows what the value of money is becuase it has no value.

[Free Thinkr]

Atlas Bergeron wrote: Quote: For a couple of reasons. One, it's more convenient (think paper).
this has been prov-en numerous times.
1. You can peg gold, oil, or any other thing with actual value to paper -or- in the modern era you could easily make all transfers electronic and or digital. We are already going that direction in the market with credit cards etc.
I couldn't agree more. Now, what purpose, exactly, does the gold serve?

Quote: Quote: Two, it's not a commodity, and its supply can be controlled.
The supply of real goods are also controlled--by how much of them there are.
Controlled by whom?

Quote: Plus, you have failed to show why this is a benefit.
Sorta the point of this thread!

Quote: Quote: Which would be fairly widely agreed-upon in short order, at which point standards would come to exist, at which point the point of using a commodity to facilitate other trades would become moot.
ok... so if it "becomes moot" then why did the government ever need to get involved?
In order to create a common currency for the people that govern it.

Quote: What moral authority do they have to initiate force against those who would wish to coin money if the results would be the same either way?
"They" in this case is the people who control the state; the citizens. This is like asking "what moral authority do they have to initiate force against those who wish to produce their own police badges and fight crime?"

[Free Thinkr]

Atlas Bergeron wrote: For one, no one really knows what the value of money is becuase it has no value.
Ahahah! Really, now? I, for one, have no troubles determining the value of my money. It may slowly change over time, true (which is also true of any commodity, since value is relative to other commodities), but it's value is exactly what I can exchange for it. $1.83 buys me a large Dunkin Donuts coffee, $30 buys me a pair of jeans, $3.15 buys me two double-stacks with cheese and a frosty.

[Atlas Bergeron]

Free Thinkr wrote: Atlas Bergeron wrote: Quote: For a couple of reasons. One, it's more convenient (think paper).
this has been prov-en numerous times.
1. You can peg gold, oil, or any other thing with actual value to paper -or- in the modern era you could easily make all transfers electronic and or digital. We are already going that direction in the market with credit cards etc.
I couldn't agree more. Now, what purpose, exactly, does the gold serve?
like I said before, it serves as a real value to back the currency. Fiat money is inherently fake, and inherently receives less consumer trust. The only reason it stays where it is is because of government intervention.

Also, gold (or any real value backed) money allows people to actually save. When they know their money isn't going to inflate through the roof, they can be more sure that when they accumulate capital, they won't loose a large percentage of it to inflation.

Quote: Quote: Quote: Two, it's not a commodity, and its supply can be controlled.
The supply of real goods are also controlled--by how much of them there are.
Controlled by whom?
The amount of gold in the world is controlled by... the world. There is only so much gold in the world, and the more you find, the harder it is to find.

The amount of money would be controlled by the market. As more people save, demand goes up and people switch to new currencies. As people spending the money they saved, they would go back to gold. The amount of money would always equal demand.

Quote: Quote: Plus, you have failed to show why this is a benefit.
Sorta the point of this thread!

Quote: Quote: Which would be fairly widely agreed-upon in short order, at which point standards would come to exist, at which point the point of using a commodity to facilitate other trades would become moot.
ok... so if it "becomes moot" then why did the government ever need to get involved?
In order to create a common currency for the people that govern it.
but you just said that it "would be fairly widely agreed-upon in short order, at which point standards would come to exist"!

Quote: Quote: What moral authority do they have to initiate force against those who would wish to coin money if the results would be the same either way?
"They" in this case is the people who control the state; the citizens.
yes the voters. Majority should not be given tyranny.

Quote: This is like asking "what moral authority do they have to initiate force against those who wish to produce their own police badges and fight crime?"
hehe, no. It is morally right that the government respond to force through the police. It is never right that they initiate it. If people become vigilante's, then God bless them (I believe they are called "bounty hunters"), as long as they remain within the law [what i mean is: as long as they respect people's rights].

[Free Thinkr]

Atlas Bergeron wrote: Free Thinkr wrote: I couldn't agree more. Now, what purpose, exactly, does the gold serve?
like I said before, it serves as a real value to back the currency.
Back? To what end?

Quote: Fiat money is inherently fake, and inherently receives less consumer trust. The only reason it stays where it is is because of government intervention.
Got evidence? No one I knows distrusts money; surely not less than they do the value of any commodity.

Quote: Also, gold (or any real value backed) money allows people to actually save. When they know their money isn't going to inflate through the roof, they can be more sure that when they accumulate capital, they won't loose a large percentage of it to inflation.
Not really; the value of commodities is far from static.

Quote: Quote: Controlled by whom?
The amount of gold in the world is controlled by... the world. There is only so much gold in the world, and the more you find, the harder it is to find.
So, in other words, it's not controlled at all. It's fixed, but not controlled.

Quote: The amount of money would be controlled by the market. As more people save, demand goes up and people switch to new currencies. As people spending the money they saved, they would go back to gold. The amount of money would always equal demand.
Sounds like the fiat monetary system.

Quote: Quote: In order to create a common currency for the people that govern it.
but you just said that it "would be fairly widely agreed-upon in short order, at which point standards would come to exist"!
Right. Who should regulate such standards? The state, of course. The state acts as a proxy of the people.

Quote: Quote: "They" in this case is the people who control the state; the citizens.
yes the voters. Majority should not be given tyranny.
And out goes all law. Unless, of course, you contend that all people agree on law.

Quote: Quote: This is like asking "what moral authority do they have to initiate force against those who wish to produce their own police badges and fight crime?"
hehe, no. It is morally right that the government respond to force through the police. It is never right that they initiate it. If people become vigilante's, then God bless them (I believe they are called "bounty hunters"), as long as they remain within the law [what i mean is: as long as they respect people's rights].
Most reasonable people would contend that the existence of vigilante groups is a greater threat than it is a boon to society; the same goes for alternate currencies. Hence, both are prohibited.

[Atlas Bergeron]

Free Thinkr wrote: Atlas Bergeron wrote: Free Thinkr wrote: I couldn't agree more. Now, what purpose, exactly, does the gold serve?
like I said before, it serves as a real value to back the currency.
Back? To what end?

Quote: Fiat money is inherently fake, and inherently receives less consumer trust. The only reason it stays where it is is because of government intervention.
Got evidence? No one I knows distrusts money; surely not less than they do the value of any commodity.
which do you trust more, the dollar in your pocket, or the steak on your plate?

Quote: Quote: Also, gold (or any real value backed) money allows people to actually save. When they know their money isn't going to inflate through the roof, they can be more sure that when they accumulate capital, they won't loose a large percentage of it to inflation.
Not really; the value of commodities is far from static.
correct, it is determined by the market, which tends to ocilate up and down, and also tends to eventually lead to an increase in value, which is why people do such crazy things as buy stocks and invest in oil shares (unlike the money supply)

Quote: Quote: Quote: Controlled by whom?
The amount of gold in the world is controlled by... the world. There is only so much gold in the world, and the more you find, the harder it is to find.
So, in other words, it's not controlled at all. It's fixed, but not controlled.
if you wish to make that distinction.

However, it would be limited by the market. There would only be enough to meet demand

Quote: Quote: The amount of money would be controlled by the market. As more people save, demand goes up and people switch to new currencies. As people spending the money they saved, they would go back to gold. The amount of money would always equal demand.
Sounds like the fiat monetary system.
except there is no force involved. I love it when we run full circle.

Quote: Quote: Quote: In order to create a common currency for the people that govern it.
but you just said that it "would be fairly widely agreed-upon in short order, at which point standards would come to exist"!
Right. Who should regulate such standards? The state, of course. The state acts as a proxy of the people.
why, again, is this an "of course"?

Quote: Quote: Quote: "They" in this case is the people who control the state; the citizens.
yes the voters. Majority should not be given tyranny.
And out goes all law. Unless, of course, you contend that all people agree on law.
I think our rights were quite clearly stated in the original constitution. Besides a few necessary revisions, such as the 14th amendment and women's suffrage, it was pretty darn good as it was.

If you wish to discuss the philosophy of rights, they have a forum for that. I'm even sometimes in it.

Quote: Quote: Quote: This is like asking "what moral authority do they have to initiate force against those who wish to produce their own police badges and fight crime?"
hehe, no. It is morally right that the government respond to force through the police. It is never right that they initiate it. If people become vigilante's, then God bless them (I believe they are called "bounty hunters"), as long as they remain within the law [what i mean is: as long as they respect people's rights].
Most reasonable people would contend that the existence of vigilante groups is a greater threat than it is a boon to society
as long as the police and military are there to keep them in check, then I would disagree with these groups.

Quote: ; the same goes for alternate currencies. Hence, both are prohibited.
hardly a valid argument. I thought you were pro capitalism? hmm...

[Free Thinkr]

Atlas Bergeron wrote: Free Thinkr wrote: Got evidence? No one I knows distrusts money; surely not less than they do the value of any commodity.
which do you trust more, the dollar in your pocket, or the steak on your plate?
The dollar in my pocket.

Quote: Quote: Not really; the value of commodities is far from static.
correct, it is determined by the market, which tends to ocilate up and down, and also tends to eventually lead to an increase in value, which is why people do such crazy things as buy stocks and invest in oil shares (unlike the money supply)
Not really. It's supply vs. demand. Supply for money can be controlled absolutely, unlike commodities.

Quote: Quote: So, in other words, it's not controlled at all. It's fixed, but not controlled.
if you wish to make that distinction.

However, it would be limited by the market. There would only be enough to meet demand
Yes, but both supply and demand would constantly change.

Quote: Quote: Sounds like the fiat monetary system.
except there is no force involved. I love it when we run full circle.
Well, the problem is with your notions of "force." Indeed we are back to where we started.

Quote: Quote: Right. Who should regulate such standards? The state, of course. The state acts as a proxy of the people.
why, again, is this an "of course"?
Because the state is the proxy of the people.

Quote: Quote: And out goes all law. Unless, of course, you contend that all people agree on law.
I think our rights were quite clearly stated in the original constitution. Besides a few necessary revisions, such as the 14th amendment and women's suffrage, it was pretty darn good as it was.
Well, the fact that amendments were needed shows that it wasn't perfect.

Quote: If you wish to discuss the philosophy of rights, they have a forum for that. I'm even sometimes in it.
Oh, I know. These discussions overlap quite a bit.

Quote: Quote: Most reasonable people would contend that the existence of vigilante groups is a greater threat than it is a boon to society
as long as the police and military are there to keep them in check, then I would disagree with these groups.
You mean agree?

Quote: Quote: the same goes for alternate currencies. Hence, both are prohibited.
hardly a valid argument. I thought you were pro capitalism? hmm...
This is a non-sequitur in my mind. I don't see the connection between outlawing alternate currencies and being pro-capitalism.

[Atlas Bergeron]

Free Thinkr wrote: Atlas Bergeron wrote: Free Thinkr wrote: Got evidence? No one I knows distrusts money; surely not less than they do the value of any commodity.
which do you trust more, the dollar in your pocket, or the steak on your plate?
The dollar in my pocket.
really, hmm...
you can eat money?

Quote: Quote: Not really; the value of commodities is far from static.
correct, it is determined by the market, which tends to ocilate up and down, and also tends to eventually lead to an increase in value, which is why people do such crazy things as buy stocks and invest in oil shares (unlike the money supply)
Not really. It's supply vs. demand. Supply for money can be controlled absolutely, unlike commodities.

Quote: Quote: So, in other words, it's not controlled at all. It's fixed, but not controlled.
if you wish to make that distinction.

However, it would be limited by the market. There would only be enough to meet demand
Yes, but both supply and demand would constantly change.[/quote]
as they always do in the market. If you are pro-capitalism I really don't see why this is a major problem.
Besides that, inflation often causes the amount to change anyway, except fiat money is always (or i should say almost always) inflating.

Quote: Quote: Quote: Sounds like the fiat monetary system.
except there is no force involved. I love it when we run full circle.
Well, the problem is with your notions of "force." Indeed we are back to where we started.
the initiation of force is when someone prevents someone from doing something which would not harm anyone except potentiolly those participating voluntarily in the action.

Quote: Quote: Quote: Right. Who should regulate such standards? The state, of course. The state acts as a proxy of the people.
why, again, is this an "of course"?
Because the state is the proxy of the people.
and... the people are always right?

Quote: Quote: And out goes all law. Unless, of course, you contend that all people agree on law.
I think our rights were quite clearly stated in the original constitution. Besides a few necessary revisions, such as the 14th amendment and women's suffrage, it was pretty darn good as it was.
Well, the fact that amendments were needed shows that it wasn't perfect.[/quote]
right, it wasn't perfect. Which is what I said.

Quote: Quote: Most reasonable people would contend that the existence of vigilante groups is a greater threat than it is a boon to society
as long as the police and military are there to keep them in check, then I would disagree with these groups.
You mean agree?[/quote]
no, i disagree with the groups who contend that the existence of vigilante groups is a greater threat than it is a boon to society.

Quote: Quote: the same goes for alternate currencies. Hence, both are prohibited.
hardly a valid argument. I thought you were pro capitalism? hmm...
This is a non-sequitur in my mind. I don't see the connection between outlawing alternate currencies and being pro-capitalism.[/quote]
its quite simple. Capitalism is the absense of force within a country. Forcing people not to make and/or do a certain thing when it does not harm others rights is the use of force--which would not follow the principals of capitalism.

[RueTheDay]

Atlas Bergeron wrote: RueTheDay wrote: Atlas Bergeron wrote: RueTheDay wrote:
If such a position were correct, then think for a moment about what it would mean. It would mean that if we decreased the money supply by a factor of ten tomorrow, that prices would simply adjust downward by an equivalent amount with no other impact on the economy. Likewise, if we increased the money supply by a factor of ten, prices would simply adjust upward by an equivalent amount with no other impact on the economy. We know from historical evidence that this is false. Sudden changes in the money supply in either direction have enormous impacts on the real economy - production, employment, investment, trade, etc.; it doesn't just cause a simple price adjustment. Thus we cannot simply ignore money or treat it as an abstraction.
but to me this is exactly what you want to do. You want to have a monetary unit that is "abstracted," which has no value in and of itself--has no intrinsic value--but instead has an "abstract" value, which is only related to how the consumers view its consistency.

Thus I don't really see how this is supposed to support your point.

Did you even read what I wrote? The price level does NOT simply adjust to the quantity of money. When people all of a sudden start wanting to hold more money than is needed to conduct transactions, that excess demand for money will result in a corresponding excess supply of goods.
did you read what I wrote?

Yes. I didn't find it particularly convincing though.

Quote:
Quote: Quote:
Quote: There are lot's of interpretations and misinterpretations of Say's Law out there. The most common misinterpretation is that "supply creates demand rather than vice versa". I believe that misinterpretation actually originated with Keynes.

What Say's Law actually says is that while there can be imbalances between supply and demand in individual markets, that at the aggregate level, supply and demand are always equal (because an excess supply in one market is always balanced out by the opposite in another market and vice versa) and thus, there can be no such thing as a general glut.

The rationale behind Say's Law is quite simple. Every buyer is a seller and every seller is a buyer. The laborer sells his labor so that he can buy food, clothing, and housing. The manufacturer sells finished goods so that he can purchase more inputs to make more finished goods. The butcher sells meat so that he can buy other goods he needs. So on and so forth. There are always two sides to any transaction, so in the aggregate, there can never be too little or too much in the way of overall goods and services. This is undoubtedly true in a barter economy. Introducing money changes everything. Now, instead of trading goods for goods, we trade goods for tokens (which unlike goods, have no capacity to satisfy needs and desires themselves, but do have a capacity to buy things that can). As long as people turn over the money to buy other goods and services relatively quickly, Say's Law roughly still applies. But what happens when people want to hold money rather than spend it (generally out of uncertainty for the future)? In other words, demand for money begins to exceed supply. Going back to Say's Law, that excess demand for money will be counterbalanced by an excess supply of real goods and services (including factors of production like capital and more importantly labor), in other words there will be a general glut, and it will likely include significant unemployment. Now, it's tempting to go back and simply assume that prices (not just of commodities, but also wages and interest rates) will simply fall to bring the excess demand for money back into balance with the excess supply of real goods and services. The problem is that this never actually happens in reality, and centuries of empirical data back that up. It goes to the point I made earlier - money is not just a veil over the real economy, and changes in the supply and demand for money have real impacts on the economy apart from simple adjustments in the price level.
ok... and where does this support your point? If a barter ecconomy roughly always follows supply and demand (by barter I assume you include such systems which use gold currency), then surely that would be more preferable than a system that "will likely include significant unemployment", right?

A gold economy is not a barter economy, it is a monetary economy. Again, what happens to the goods market (and the factor markets) when people all of a sudden want to hold excess gold rather than purchasing goods?

Quote:
This would support the use of gold or other currency as apposed to the abstracted currency of "money". Or am I somehow reading this wrong?

You're reading it wrong.

Money (whether backed by a commodity or fiat) is not desired for its own sake but rather for what it can buy.
This definition of money seems erronious.

Nope, it's absolutely correct.

Quote: In the past at least, you are wrong. or are you saying that Roman currency and the currency of the united states before the gold standard was not "money." It all seems like semantics to me.

It seems like you don't understand the basic issue. The Roman currencies absolutely were money, just as gold-backed US dollars were, just as current fiat US dollars are. Again, the difference between a monetary economy and a barter economy is that goods exchange for tokens rather than other goods, the tokens being desired for their purchasing power rather than their ability to actually satisfy human wants in and of themselves.

Quote:
Quote: If people suddenly desire to hold money rather than spending it, this creates an excess demand for money.
your right, and i previously adressed this. If this happened, then the market would tend to shift to a differnt standard of value. As I said, they could even use such goods as oil if it were necesssary. Read my post to see the full argument.

Except that your claim is a fantasy that never happens in reality. During the Great Inflation of the 1970's in the US, did people stop using dollars and instead switch to using a different standard of value for making payments? No.

Quote:
Quote: The excess demand for money will be counterbalanced by an excess supply of goods, services, and labor. Prices (of goods and services as well as factors of production) do not quickly adjust to changes in the quantity of money (or excess supply or demand for money).
But if the quantity of money is determine by the market, then it may adjust when there is a demand for it. You should read my other post.

I read it and found it incoherent.

Quote:
here, to help you, here is my other post

Atlas wrote: I have read up a little on Says law, and it asks the question "what if there were an excess demand for money?"

My answere would be that money's value (in this case, gold's value) would go up and those hoarding it would have more reason to spend it (while at the same time encouraging more people to mine for gold, but this is not even necessary to this discussion). It, like everything else, is a basic investment tool. If people continued to hoard it, the people of the market would desire a differnt medium of exchange which wasn't being hoarded, they could use a differnt good as a means of exchange, such as copper, silver, or even oil (if it were done electronically). This would ease the demand for gold, and the person hoarding the gold would have the same principlas as a person hoarding stocks--he could have gained money, and if he doesn't sell high, he will be forced to sell lower.

This would encourage people to spend thier money when they think it is most valuable, to make investments when gold reaches (what they think is) its peaks and thus follow the basic market cycle for all goods. I still don't see the problem here.

Your claim is full of "if this happens, then this will happen" type statements that are not borne out by the actual empirical data.

[RueTheDay]

LeopardPM wrote: RueTheDay wrote:

Did you even read what I wrote? The price level does NOT simply adjust to the quantity of money. When people all of a sudden start wanting to hold more money than is needed to conduct transactions, that excess demand for money will result in a corresponding excess supply of goods.
how do you define 'excess' here?

When people begin holding money rather than spending it on consumption goods or investing it.


Quote:
If the demand for money (whether gold or otherwise, including fiat) increases, then the demand for goods decreases and prices drop until another pricing plateau is reached

No, that is false. The demand for goods does decrease, but their prices typically do not decrease, at least not to the degree that the overall change in demand for money/goods would require. That is the heart of the problem.

Quote:
Quote: A gold economy is not a barter economy, it is a monetary economy.
Every monetary economy IS a barter economy. The fact that a particuliar good (be it unbacked paper, gold, or seashells) has a portion of its value based on its useability as a means of exchange does not change the fact that its total value is determined through barter and subjectiveness.

False. A monetary economy is not the same as a barter economy, and the value of money is not subjective. Even your hero Rothbard agrees with me on this point.

http://www.mises.org/rothbard/genuine.asp

Quote:
The best known proposal to separate money from the state is that of F.A. Hayek and his followers.[5] Hayek's "denationalization of money" would eliminate legal tender laws, and allow every individual and organization to issue its own currency, as paper tickets with its own names and marks attached. The central government would retain its monopoly over the dollar, or franc, but other institutions would be allowed to compete in the money creation business by offering their own brand name currencies. Thus, Hayek would be able to print Hayeks, the present author to issue Rothbards, and so on. Mixed in with Hayek's suggested legal change is an entrepreneurial scheme by which a Hayek-inspired bank would issue "ducats," which would be issued in such a way as to keep prices in terms' of ducats constant. Hayek is confident that his ducat would easily out- compete the inflated dollar, pound, mark, or whatever.

Hayek's plan would have merit if the thing—the commodity—we call "money" were similar to all other goods and services. One way, for example, to get rid of the inefficient, backward, and sometimes despotic U.S. Postal Service is simply to abolish it; but other free market advocates propose the less radical plan of keeping the post office intact but allowing any and all organizations to compete with it. These economists are confident that private firms would soon be able to outcompete the post office. In the past decade, economists have become more sympathetic to deregulation and free competition, so that superficially denationalizing or allowing free competition in currencies would seem viable in analogy with postal services or fire-fighting or private schools.

There is a crucial difference, however, between money and all other goods and services. All other goods, whether they be postal service or candy bars or personal computers, are desired for their own sake, for the utility and value that they yield to consumers. Consumers are therefore able to weigh these utilities against one another on their own personal scales of value. Money, however, is desired not for its own sake, but precisely because it already functions as money, so that everyone is confident that the money commodity will be readily accepted by any and all in exchange. People eagerly accept paper tickets marked "dollars" not for their aesthetic value, but because they are sure that they will be able to sell those tickets for the goods and services they desire. They can only be sure in that way when the particular name, "dollar," is already in use as money.

Read that last paragraph over and over until you understand the fact that money is not the same thing as any other commodity and that a monetary economy is not the same thing as a barter economy.

[RueTheDay]

gavnook wrote: RueTheDay wrote: Then you are making the same mistake Ricardo made when he called money nothing more than a "veil" over the real economy.

If such a position were correct, then think for a moment about what it would mean. It would mean that if we decreased the money supply by a factor of ten tomorrow, that prices would simply adjust downward by an equivalent amount with no other impact on the economy. Likewise, if we increased the money supply by a factor of ten, prices would simply adjust upward by an equivalent amount with no other impact on the economy. We know from historical evidence that this is false. Sudden changes in the money supply in either direction have enormous impacts on the real economy - production, employment, investment, trade, etc.; it doesn't just cause a simple price adjustment. Thus we cannot simply ignore money or treat it as an abstraction.

For prices to instantly adjust to such a change in the money supply, there are two requirements.
1. Perfect information/rational behavior - for people to charge/pay the adjusted price, they must understand what has just happened, and they must understand the ramifications. This would be a much bigger problem in your tenfold increase/decrease example than in any realistic scenario.
2. The decrease/increase must be proportional to a man. Otherwise, even if we assume perfect information/rational behavior, the fact that some people have relatively more money and some have relatively less changes the whole economy. In real life, money supply changes always benefit some at the expense of others. If a change in the money supply benefits steel producers at the expense of everyone else, the real demand for the factors of production of steel will increase.

Put the two together, and you have the problem of people not knowing where the money is. Faced with a dramatic change in the money supply, the entrepeneur must now not only try to figure out what prices to charge and pay, but must also determine if he's even in the right industry.

The first point is the more important one. The reason people decide to suddenly hold money rather than spending it on consumption goods or investing it is because of uncertainty about the future, specifically, to provide a sort of cushion against a potential downturn. But it is exactly this sort of behavior that CAUSES the downturns to occur because the sudden increase in demand for money is met with a corresponding decrease in demand for real goods and services.


Quote:
RueTheDay wrote:
Quote: Say's lawFrom Wikipedia, the free encyclopedia
In economics, Say’s Law or Say’s Law of Markets is a principle attributed to French businessman and economist Jean-Baptiste Say (1767-1832) stating that there can be no demand without supply. A central element of Say's Law is that recession does not occur because of failure in demand or lack of money. The more goods (for which there is demand) that are produced, the more those goods (supply) can constitute a demand for other goods. For this reason, prosperity should be increased by stimulating production, not consumption. In Say's view, creation of more money simply results in inflation; more money demanding the same quantity of goods does not represent an increase in real demand.

There are lot's of interpretations and misinterpretations of Say's Law out there. The most common misinterpretation is that "supply creates demand rather than vice versa". I believe that misinterpretation actually originated with Keynes.

What Say's Law actually says is that while there can be imbalances between supply and demand in individual markets, that at the aggregate level, supply and demand are always equal (because an excess supply in one market is always balanced out by the opposite in another market and vice versa) and thus, there can be no such thing as a general glut.

The rationale behind Say's Law is quite simple. Every buyer is a seller and every seller is a buyer. The laborer sells his labor so that he can buy food, clothing, and housing. The manufacturer sells finished goods so that he can purchase more inputs to make more finished goods. The butcher sells meat so that he can buy other goods he needs. So on and so forth. There are always two sides to any transaction, so in the aggregate, there can never be too little or too much in the way of overall goods and services. This is undoubtedly true in a barter economy. Introducing money changes everything. Now, instead of trading goods for goods, we trade goods for tokens (which unlike goods, have no capacity to satisfy needs and desires themselves, but do have a capacity to buy things that can). As long as people turn over the money to buy other goods and services relatively quickly, Say's Law roughly still applies. But what happens when people want to hold money rather than spend it (generally out of uncertainty for the future)? In other words, demand for money begins to exceed supply. Going back to Say's Law, that excess demand for money will be counterbalanced by an excess supply of real goods and services (including factors of production like capital and more importantly labor), in other words there will be a general glut, and it will likely include significant unemployment. Now, it's tempting to go back and simply assume that prices (not just of commodities, but also wages and interest rates) will simply fall to bring the excess demand for money back into balance with the excess supply of real goods and services. The problem is that this never actually happens in reality, and centuries of empirical data back that up. It goes to the point I made earlier - money is not just a veil over the real economy, and changes in the supply and demand for money have real impacts on the economy apart from simple adjustments in the price level.

I find what you're saying interesting. I don't know that I've seen your take on Say's Law before. Before I really say anything, I'd like to know more about these centuries of empirical data.

During ever recession in recorded history, prices and wages have not fallen nearly as fast as the money supply.

[Atlas Bergeron]

[quote=”RueTheDay”] It seems like you don't understand the basic issue. The Roman currencies absolutely were money, just as gold-backed US dollars were, just as current fiat US dollars are. Again, the difference between a monetary economy and a barter economy is that goods exchange for tokens rather than other goods, the tokens being desired for their purchasing power rather than their ability to actually satisfy human wants in and of themselves.[/quote]
So if a commodity (say, for instance, gold) took a higher value as a means of exchange rather than as a commodity in and of itself, and it did so automatically (i.e. by market principals), then it would work, no?

[quote=”RueTheDay”] Except that your claim is a fantasy that never happens in reality. During the Great Inflation of the 1970's in the US, did people stop using dollars and instead switch to using a different standard of value for making payments? No.[/quote]
Nope, there was a little thing called a “law” preventing them from doing so.

And things like what I have said does sometimes happen. In the beginnings of the gold rush in California, several companies would buy gold and mint coins. They did this because there was a need for a monetary unit (they were more than three thousand miles away from the nearest government mint—a long way for a covered wagon). They did this until the government came in and monopolized the process.

Quote: Quote: But if the quantity of money is determine by the market, then it may adjust when there is a demand for it. You should read my other post.
I read it and found it incoherent.
It really is quite simple. If there is a higher demand for money than there is a supply, then people will either go out trying to find more of the wealth which can be converted to money (i.e. they will mine for gold), they will convert some of their wealth into money (i.e. melt their jewelry into coins), or a company may even decide to shift to a different form of currency.

I really don’t see how this is hard to understand. When there is a high demand and low supply, the market supplies that demand. Seems like basic economics to me.

Quote: During ever recession in recorded history, prices and wages have not fallen nearly as fast as the money supply.
Just one more question. Is this good? Is it good for the economy for there to be a lack of supply in the money supply? Would you advise that the Fed increase the money supply at this point, or what would you advise?