Gold and Economic Freedom

[Maverick]

Grun,

Don't bother. miko isn't going to listen to anyone that doesn't share his paranoid fantasy. He still cannot understand that ALL financial dealings backed or unbacked by anything are ALL synthetic manipulations. Any object is only worth whatever you are willing to pay or sacrifice to obtain it. If you feel it is worthless, then it is. Same for the reverse as well. Best example, how much is gold worth to a drowning man? A life vest, however, would be worth his life.

[Holden McGroin]

It all started by a shepherd trading a fisherman wool and mutton for cod, and then the fisherman trading the wool to the spinner twice as much wool as he needed for a sweater.

Then one day, someone showed a totally worthless piece of gold  to the shepherd (it was just a shiny hunk of stuff... only later, too late for the shepherd, was it found useful in dentistry and electronics)

When shown the hunk of stuff, the shepard decided it was worth half his flock.  This set the original price.

The value of gold, like any other commodity, is set by those who desire it.  If many choose to desire 1 oz Au more than $400, the price goes up past $400.  If they choose to value it less, the price goes down.

If all the refined gold in the world were put in one place, it would form a cube on the order of 100'.  Far tool little on which to base the value of the world economy.

I believe it was Marx who said the total value of anything is the labor that goes into it.

[miko2d]

GRUNHERZ: Miko the simple fact in US history is that backing currency to gold is unworkable.

 Sure - backing a fiat money by any commodity and then expanding it's supply is unworkable. The new recepients of money get claim for existing resources, the holders debt and money get the corresponding value stolen from them and the purchasing power of money falls.
 As Alan Greenspan explained, robbing people through inflating the money and backing it up with anything is unworkable.

 What he and I are talking about is using commodity (gold) as money again, not backing up a fiat currency. We are certainly not talking about coming back to 1971 or 1913 versions of "backed" money or even 1865 fractional reserve money but 1800 100% commodity money. Huge difference.

 If you think we are talking about "matching currency" to a commodity or do not understand a distinction between commodity backed money and commodity money, you will keep talking about a different thing from what I am talking about.


Maverick: He still cannot understand that ALL financial dealings backed or unbacked by anything are ALL synthetic manipulations.

 What a meaningless set of words. Commerce is an exchange of products using money as a medium of exchange - a facilitator. It has nothing to do with value.


Holden McGroin: If all the refined gold in the world were put in one place, it would form a cube on the order of 100'. Far tool little on which to base the value of the world economy.

 The amount of monetary commodity does not matter at all. In old times there was some pgysical constraint on the smallest and largest size of useable coins. With paper notes and electronic clearing, a few grams of gold or other commodity could work exactly as well as your 100' cube.
 Why do you care if your 1 dollar bank note says "100 ounces of gold" or "1000 atoms of gold" - as long as the amount of gold in the world is relatively constant and nobody counterfeits the notes?

I believe it was Marx who said the total value of anything is the labor that goes into it.

 Yes, Labor theory of value - and its idiocy is obvious to any literate person.
 Even Maveric subscribes to the Austrican School "Subjective theory of value", first elaborated by Carl Menger and developed by Bohm-Baverk and Mises!

 How much value is there in a product that used a lot of labor but nobody wants?
 Even taking Mav's example with a life vest - it certainly worth more than the world's supplies of gold to the person while little to a pedestrian. Imagine now that the drowning person has just got the life vest.
 How much value is the second life vest to him? Obviously not much. He would probably opt for some gold instead - not too much though, he still has to float. Did it took less labor to produce the second life vest?

 Anyway, value of goods is measured against other goods and money just facilitates the exchange of them, so the origin of value has nothing to do with the nature of money.

 miko

[miko2d]

GScholz: Labor is a commodity too, but no more, or less, valuable than what the marked decides...

 As long as youa re interested, I'll have correct you. Labor is an "economic good" but it does not necessarily fall under a strict difinition of a "commodity". Commodity is a uniform product that you can get from various sources in similar quality. Grain is a commodity, water is a commodity, orange juice and steel are commodity - except for exotic and specialised kinds. Unqualified labor is a commodity.

 Most of the skilled labor is not a commodity. You cannot substitute one person for another in many places and expect similar results.


Hmmm, now money itself is a commodity too.

 The other way around. Money originated as a commodity - it had to have intrinsic value (separate from it's role as medium pf exchange) and be uniform in quality from multiple sources, easily divisible, etc.
 Gold/silver were the most common examples. You could deal in weight without regard which shape they came from. Foreign gold coin was as good as domestic one, etc.

 Now money is not a commodity - it has no intrinsic value - there is no use for it other then as money. It cannot be easily exchanged or substituted with the money of another country, etc.
 Also, there is a scarcity of any commodity while modern money can be created at will - and usually is.

 The downfall of most of empires and major states can be traced to their debasement of their money - Rome the most obvious one. The only notable exception is Bisantium - they never screwed up with their money and that allowed them to survive for over 1100 years.

 miko

[StSanta]

This is very interesting stuff. Think I'll just lurk for a bit.

Oddly enough I don't see Miko's views as paranoid or fanatic. There's a logic to it and it can (and probably has in various papers) be backed up by empirical evidence.

And this stuff is a good weapon to have when I face the socialists around me who see the 1930s as an example of capitalisms evil, rather than the evil of government intervention.

Thanks Miko, you just repaired a dent in my armour

[Frogm4n]

last i checked the great depression happened because of 0 government intervention..


using gold as currency is sooooo 1700's. economys are a tad more diverse today for that kind of crap miko.
plus what happens to a country when they find a huge gold reserve. the rest of the worlds currency is devalued and theirs goes up. im sure that wouldnt start any wars.

oh and did they put any thought into what happens when some dorks in texas fooling around with a supercollider start makeing gold?

Relying on a natural resourse to use as your monetary source is quite reckless and not very foward looking.

[GRUNHERZ]

But frogman miko is beyond help on this issue, the gold thing is pet fantasy and the pet fantasy of a number of wacko libertarians.  He's trying to justify it by posting an article by Alan Greenspan written in 1966. I dont pretend toknow what Greenspans motives were for writing that but the 1960s were the era when the gold backed fixed exchange system was destroying itself and making it neccesary for govts to rething the monetary system.Abd indeed by the late 1960s and early 1970s nixon adminstration had abolished gold supported US currency...

But hell this is the BBS and miko can say whatwever he wants - lets just all remember this is a man who thinks, theoretically or otherwise,  it would be more economically efficent if there was no official police forces and they were replaced by everyone of us citizens choosaing to pay for or not to pay for our own private security forces...

[miko2d]

Frogm4n: last i checked the great depression happened because of 0 government intervention..

 Simply not true. The fact that government was controlling and creating oversupply of money since 1913 is not government intervention? The fradulent and economic-cycle-inducing fractional reserve system promoted by the government ldecades before that is not government intervention? The Smoot-Hawley tariff act that threw a huge monkey-wrench into the world economic order is not government intervention? The combination of steeply-progressive tax system with built-in inflation that pushed economy up the Laffer curve is not government intervention? The wage and price controls that stopped economy by preventing its natural adjustment to reduced money supply is not government intervention? Confiscation of all gold in private posession at below-market rates is not government intervention?
 Stop arguing out of ignorance.

using gold as currency is sooooo 1700's. economys are a tad more diverse today for that kind of crap miko.

 Simply not true. The issue of money has nothing to do with deviersity or technology.  But I would love to hear your arguments how diversity and technology necessitated government control of the money anyway.
 
 This is an issue of political power - who controls/owns money - government or free market. Do you also think freedom and democracy were only viable in pre-industrial society and are obsolete in this age of technology and diversity? It's exactly the same issue.

 "Paper" fiat money was not a novelty but well known evil in the Founding Fathers time. Even the writers of The Federalist Papers mentioned many times that paper money is evil and destructive and must never be allowed. The constitution specifically says that Congress has the right to "coin" money - not issue or print or create but just convert money - raw gold - into standard coin for private individuals - and regulate denominations (weights) of standard coins. Those guys were well more educated in economic matters than most of you, guys.

plus what happens to a country when they find a huge gold reserve.

 That will cause some financial upheaval. How many times did that happen over the last 500 years compared to the number of financial disasters wreaked by the governmental control of the money? Have you ever checked by how much US money supply grows?

the rest of the worlds currency is devalued and theirs goes up.

 This statement tells me you have no idea what you are talking about. You are talking about gold-backed currency while I am talking about commodity (gold) money. Those two have very little in common.

oh and did they put any thought into what happens when some dorks in texas fooling around with a supercollider start makeing gold?

 You do not need supercollider - you can mine gold at about $300/ounce.

Relying on a natural resourse to use as your monetary source is quite reckless and not very foward looking.

 That's the whole point - who is the one doing the looking forward - the free market or a government.
 Do you rely on government to select a wife for yourself and have children or do you pame your personal plans? How about your biology/genetics or language? Did government design those? Why do you think natural spontaneous free-market process would do any worse job than an arbitrary government decision-maker?

 GRUNHERZ: but the 1960s were the era when the gold backed fixed exchange system was destroying itself and making it neccesary for govts to rething the monetary system...

 But the "backed fixed exchange system" was not gold money and itw as bound to crumple - just like any other fiat monetary system is bound to crumble.

it would be more economically efficent if there was no official police forces and they were replaced by everyone of us citizens choosaing to pay for or not to pay for our own private security forces...

lets just all remember this is a man who thinks, theoretically or otherwise, it would be more economically efficent if there was no official police forces and they were replaced by everyone of us citizens choosaing to pay for or not to pay for our own private security forces...

 You are lying, as you often do lately. I could not have said that - first, because police forces are under local jurisdiction and there is nothing in libertarian philosophy that conflicts with the right of people to have whatecer local arrangements they choose - including communes.
 Second, my local NY City police is my private security force as far as you are concerned and I am paying for that. I do not care to pay for federally-conducted drug war that adds nothing to my safety and other programs. Dropping those would certainly be cost efficient but that's another topic.


StSanta: And this stuff is a good weapon to have when I face the socialists around me who see the 1930s as an example of capitalisms evil, rather than the evil of government intervention.
Thanks Miko, you just repaired a dent in my armour

 You are welcome. I suggest you check works of Murray Rothbard, Jude Wannisky (though he concentrates more on taxes than monetary policies), Mises and Hayek for  explaining ruinous effects of government intervention and socialist policies.

 Mises Institute http://www.mises.org has full works available online, if you cannot afford a few hundred dollars to equip yourself with a decent library.

 Austrian School theory of trade cycle is completely based on government or government-supported overexpansion of money supply causing unsupportable "boom" and misallocation of resources and them inevitably leading towards the corrective "bust".

 miko

[miko2d]

P.S. The assertion of ignorant people of how "the new technology" makes old concept of money not applicable reminds me the common widespread american view that new technology will soon obsolete the physical law of conservation of energy - so much so that they are ready to start building hydrogen economy now.

@ We will get energy/hydrogen from water.

-  But water does not have any more chemical energy thatc an be retrieved - it is just hydrogen that has burned already! You need to add more energy to the water in order to get hydrogen out of it than you get back from hydrogen!

@ That's OK - the new technology will improve efficiency (of what?!) and will allow us to do that any day now....
Oh, yeah - and if we all photocopy whatever money we have, we will all become richer, somehow....
 
 miko

[Montezuma]

Despite all the big words and apparent grasp of basic monetary policy, this is still missing the big picture.   Money has a profound psychological aspect, and any treatise that completely explains the nature of money would win a Nobel prize.  

Rational people and institutions are still willing put up money to earn 3% on U.S. Government 'paper' debt, backed only by the government's full faith and credit.

[Frogm4n]

the free market does not exsist because it failed get over it . are you familiar with keynes already and choose to ignore what he taught or have you never studied why we need a mixed economy.

[Holden McGroin]

Originally posted by miko2d
so the origin of value has nothing to do with the nature of money.
 miko

I think your statement just shot down your own argument.

[GRUNHERZ]

Yea miko you did say that. I dont remeber the exat wording so I'm having trouble findind the thread but what I summarized was the gist of it. You betrayed by mentiong commununes - IIRC one of the things you argued for, theoratrically or not,  was isolated fenced off outposts with no law enforcement in between them or something like that. Anyway I clearly remember you saying just saomething like that - so dont try to weazel out of it now.

[miko2d]

Frogm4n: the free market does not exsist because it failed get over it . are you familiar with keynes already and choose to ignore what he taught or have you never studied why we need a mixed economy.

 As long as we are just throwing a round unsubstatiated statements,
 1. free market does exist in a lot of places if not everywhere and there ised to be more of it at some times.
 2. not only did it not fail, all the progres and wealth we have is due to it.

 I am quite familiar with Keynes, having studied his "General Theory" and other works. He is wrong, he was proven wrong by history and theory and even about the very inflationary policy that we consistently pursue claiming his advice, he was very explicit that it's a trick that can only work for a short time (which it does not really).

 Did you know that simultaneously growing inflation and unemployment are absolutely impossible under Keynesian theory? Have you missd the 70s?


miko: so the origin of value has nothing to do with the nature of money.
Holden McGroin: I think your statement just shot down your own argument.

 You mean the use you make out of your house or any other posession suddenly be directly affected because someone conducts a monetary reform elswhere?
 How about a glass of water in the desert? How is its value related to any monetary considerations?


 GRUNHERZ: Yea miko you did say that. I dont remeber the exat wording so I'm having trouble findind the thread but what I summarized was the gist of it....

 Not only you keep thinking in communist catergories, you cannot imagine others not thinking in them too.
 Libertarian philosophy is freedom from coercion by the government. It is you and your ilk argue every idea with an underlying assumption that whatever the result, it must be enforced on everybody by the government - not libertarians.

 As a libertarian, I never claim any right to dictate people how to live and arrange their affairs and security. I can give someone an advice - sure.
 I certainly argued that I would be OK living with private security enforcement.
 I never made a case that any other single person must be forced by the government to live according to my preferences.

 So, I never said whay you must do - only what I wish to do and what others may wish to consider - voluntarily. Bid difference and it only sounds the same to me because of your authoritarian mindset.

 I did not argue for forcing anyone into communes - just that idiots must be allowed to congregate into communes if they wanted to while I should be allowed to live in an radically individualistic (opposite to commune) arrangenment.

 Why the heck it does it bother you so much if I and like-minded people choose to opt out of your police scheme and devise our own? Or out of your fradulent social security and finance my own retirement plan?
 I would never argue against your right to keep any hare-brained arrangement you prefer. Or money for that matter. You can print your own paper and try to pass it on - it's your right in my view, just like it's anyone's right to refuse to accept it.

 I only demand that communists like you who stumble on some bright idea did not enact laws that prevent other people from freely excercising their choices and do not confiscate our property at a drop of a hat. The money - gold - was confiscated by the government in 1933, the right to defend ourselfs is being actively denied us now, the ownership of businesses and propertires is being stolen by restrictions on their use - on somebody's idea that he has a better way and everybody must fall in line or be punished.
 And federal ban on private issue of money enacted in 1913 and confiscation of gold in 1933 is just one instrument of oppression and arbitrary governmental control.

 Some of my ideas might be wrong. Arguably, I may be worse off with a private security than you in your police state. That does not meant that I must be forced to live according to your rules. If I try something and fail while another tries a different way and succeeds, a lesson will be learned and that is the way of a free market.

 Whether my argument is right or wrong, it would be my personal business and my presoncibility in a free state.
 Whether your argument is right or wrong, you support government coercing people to abide by it.

 miko

[Holden McGroin]

Originally posted by miko2d

You mean the use you make out of your house or any other posession suddenly be directly affected because someone conducts a monetary reform elswhere?
 How about a glass of water in the desert? How is its value related to any monetary considerations?

 miko [/B]

My point is that value fluctuates with the emotional view of the buyer and seller.  Whether we are talking about gold or water it does not matter.

There is an old (is it a sort of parable?) where someone is in a public restroom, and finds out he is out of paper.  He asks the guy in the next stall if there is any over there, and the guy says no.  Then the first guy asks, "Got change for a twenty?"

The relative value of money versus toilet paper just fluctuated wildly, and it had nothing whatsoever to do with the world spot market price of Gold.

If the dollar were backed up by 1/400th of an oz of gold, it would not make any difference.

In the old California and Alaska/Yukon gold rush days, with the dollar on the gold standard, and the local economies dealing with gold dust instead of paper money, price stability was unheard of.  The price of a bath or a meal would swing wildly.

Gold is just another commodity.

edit> probably better or at least more stable than pork bellies, but then there are those who bought gold at $800/oz, who lost thier shirts too...