By saying that certain things have intrinsic value it seems that Gary North is suggesting that "good money" has objective value, in which case he is wrong. Gresham's Law does suggest that in a government-regulated parallel monetary system bad money drives out good money, but the fact remains that bad money and good money are as such due to subjective values. This is true even if it's also true that money is "valuable" only because a large group of people subjectively believe that it's valuable (like gold).
The reason why Gresham's Law works the way it does is because what's the use of using a better quality coin if the government guarantees the value of the shoddy coin? It has nothing to do with intrinsic value. The person has subjectively decided what is the coin worthwhile to keep and what is the coin worthwhile to spend.
Tags should be comma separated. As you have your tags now, it is all just one big run on tag that no one will ever search for. I suggest you edit it.
And this is the source article mentioned in the OP.
http://www.lewrockwell.com/north/north771.html
Jonathan M. F. Catalán:By saying that certain things have intrinsic value it seems that Gary North
Gary North did not speak of intrinsic value, some keynesians and chicagoites that the OP referred to did.
Where there is no property there is no justice; a proposition as certain as any demonstration in Euclid
Fools! not to see that what they madly desire would be a calamity to them as no hands but their own could bring
Value in this case is just sneaked in, similar to the case of fiat currency.
Bank notes, which were initially backed by some commodity, were valued for both their role as medium of exchange and intrinsic value(of the commodity backing the bank note). This was the time when people actually knew what their bank note represented, and how they could ask for redemption of the commodity that backs it.
But as times went by, people started valuing the unbacked notes, because they get into the illusion that the bank note has value in itself. At this point, the bank note is valued for it's role as a medium of exchange, not for it's economic character as a commodity(paper).
nirgrahamUK: Gary North did not speak of intrinsic value, some keynesians and chicagoites that the OP referred to did.
Oh I see, I read that wrong. I apologize.
Prashanth Perumal: Value in this case is just sneaked in, similar to the case of fiat currency. Bank notes, which were initially backed by some commodity, were valued for both their role as medium of exchange and intrinsic value(of the commodity backing the bank note). This was the time when people actually knew what their bank note represented, and how they could ask for redemption of the commodity that backs it. But as times went by, people started valuing the unbacked notes, because they get into the illusion that the bank note has value in itself. At this point, the bank note is valued for it's role as a medium of exchange, not for it's economic character as a commodity(paper).
Makes no sense. If people value it then it has value.
scineram:Makes no sense. If people value it then it has value.
Yes, right. My point being, value in this case is just sneaked in.
You give me an ounce of gold and I give you a note that you can use as money and redeem it for the ounce of gold any time. Once more people start depositing their gold with me and start trusting the note I give in return, there is every chance for people in the market to value also the counterfeits that I print. Value in this case is just sneaked in.
I don't get it. You do redeem the notes. What counterfeits?
The notes become counterfeited as a matter of course in the following way: the bank realizes after a little while, that all the depositors aren't likely to show up at the same time. So they issue more, identical, notes. They are gambling--usually correctly--that they won't all be redeemed at once. These notes are essentially counterfeited, as there are more notes in circulation than gold in the warehouse.
Oh, that's funny, because I didn't realise people actually take Gary North seriously when it comes to economics.
"You don't need a weatherman to know which way the wind blows"
Bob Dylan
scineram:I don't get it. You do redeem the notes. What counterfeits?
Say I am the only banker in a village, and people deposit all gold they have with me; say 100 ounces. So I am legally permitted to print 100 ounces worth of bank notes. People can obviously redeem these notes to get the gold from me.
Now suppose I become a very trustable guy, and people don't really care to redeem gold for the bank notes they possess. This gives me every chance to print bank notes from thin air and spend it my way or loan it to people. These counterfeir bank notes which I print will be accepted as an equivalent to any other bank note that is actually backed by real gold.
The counterfeit notes, in this case, possess value not because of the gold backing it. It gets it's value from the illusionary belief that something actually backs it. If people were to know that these counterfeits represent nothing but pieces of paper, they sure wouldn't value it. That's what I call value is being sneaked in.
Prashanth Perumal: scineram:I don't get it. You do redeem the notes. What counterfeits? Say I am the only banker in a village, and people deposit all gold they have with me; say 100 ounces. So I am legally permitted to print 100 ounces worth of bank notes. People can obviously redeem these notes to get the gold from me. Now suppose I become a very trustable guy, and people don't really care to redeem gold for the bank notes they possess. This gives me every chance to print bank notes from thin air and spend it my way or loan it to people. These counterfeir bank notes which I print will be accepted as an equivalent to any other bank note that is actually backed by real gold. The counterfeit notes, in this case, possess value not because of the gold backing it. It gets it's value from the illusionary belief that something actually backs it. If people were to know that these counterfeits represent nothing but pieces of paper, they sure wouldn't value it. That's what I call value is being sneaked in.
scineram will have you believe in some illogical ultra-subjectivist theory in order to justify his counterfeiting scheme. You will not be able to have a rational argument with him on this issue.
GilesStratton: Oh, that's funny, because I didn't realise people actually take Gary North seriously when it comes to economics.
There are a lot of things you don't realize. And little of it is funny.
Why, because we havent seen him post an op-ed in the New York Times yet?
You're becoming obnoxious about 'reputation'.